Therapeutic Alternatives Used in the First Round of Medicare Drug Price Negotiations

ABSTRACT

The Inflation Reduction Act requires Medicare to negotiate drug prices based on several factors, including comparative cost and effectiveness with therapeutic alternatives. To understand how this requirement has been implemented, we analyzed the therapeutic alternatives considered for the first 10 negotiated drugs. We found that drugs were compared with products that were often older, in different mechanistic classes, or had generic or biosimilar versions. Therapeutic alternatives varied by indication, highlighting the complexity of using this information to inform single negotiated prices for all indications.

Am J Manag Care. 2026;32(11):606-608

doi:10.37765/ajmc.2026.90038

Takeaway Points

• Among the first 10 drugs with prices negotiated by Medicare, 65 therapeutic alternatives were considered as part of the negotiation process.
• The 10 drugs had 33 different indications, and therapeutic alternatives varied by indication.
• Most therapeutic alternatives were older than the corresponding negotiated drug, were in different mechanistic classes, or had generic or biosimilar versions.

The Inflation Reduction Act (IRA) requires CMS to consider several factors throughout the Medicare drug price negotiation program, including the cost and effectiveness of therapeutic alternatives.¹ The statute does not define therapeutic alternatives, and CMS guidance documents indicated that comparators would be identified from several sources, including clinical guidelines and literature reviews (eAppendix).² Additionally, CMS indicated that the prices of therapeutic alternatives would inform initial offers to manufacturers.² After announcing the negotiated prices for the first 10 drugs in August 2024, CMS released public explanations, including lists of relevant therapeutic alternatives for each drug.³ Given the importance of the selection of therapeutic alternatives for the negotiation process, we characterized therapeutic alternatives identified by CMS and compared them with potential alternatives compiled in the peer-reviewed literature.

METHODS

Therapeutic alternatives were identified from public CMS documents.³ For each drug, FDA approval dates and the availability of generic or biosimilar versions as of August 15, 2024 (when negotiated prices were announced) were determined using Drugs@FDA and manufacturer-reported data from the Medicaid Drug Rebate Program. Mechanistic classes were determined from FDA-approved labeling and the World Health Organization Anatomical Therapeutic Chemical classification. For each drug and indication, we identified the oldest alternative, the proportion of generic or biosimilar alternatives, and the share of alternatives in the same mechanistic class as the product under negotiation. For context, we compared the therapeutic alternatives selected by CMS with those identified in the peer-reviewed literature (eAppendix).

RESULTS

The 10 drugs selected by CMS in the first year of the IRA’s negotiation program had 33 indications (range, 1-7 per drug) and 65 therapeutic alternatives (range, 1-10 per drug). Thirty-eight (58%) alternatives received FDA approval before the negotiated drug; each negotiated drug had at least 1 therapeutic alternative with earlier FDA approval. The oldest therapeutic alternative for each negotiated drug was approved a median of 19.2 years before the product selected for negotiation (range, 0.2-57.1 years). Thirty-one (48%) therapeutic alternatives had generic or biosimilar versions; all 10 negotiated drugs had generic or biosimilar alternatives for at least 1 indication, and 6 had generics or biosimilars for all indications (Table). Twenty-four of the 33 indications (73%) had 1 or more generic or biosimilar alternatives. Twelve of the 65 therapeutic alternatives (18%) were in the same mechanistic classes as the negotiated drugs to which they were compared. Each drug was compared with therapeutic alternatives in different mechanistic classes, except for insulin aspart. Two drugs (sacubitril-valsartan and ustekinumab) had no in-class alternatives.

The therapeutic alternatives identified by CMS differed from those proposed in the literature for all drugs except for insulin aspart (eAppendix Table). In some cases, CMS did not include older generic medications as therapeutic alternatives, such as warfarin for apixaban or methotrexate and other nonbiologic disease-modifying antirheumatic drugs (DMARDs) for etanercept. In other cases, CMS included therapeutic alternatives that were not identified in research publications, such as spironolactone for sacubitril-valsartan and clopidogrel for rivaroxaban’s peripheral artery disease indication.

DISCUSSION

In the first round of Medicare drug price negotiation, the selected drugs were compared with therapeutic alternatives that were often older, in different mechanistic classes, or had generic or biosimilar competition. The selection of therapeutic alternatives is critical to the price negotiation process in determining how large a discount CMS may be able to achieve. For example, there were some notable omissions of therapeutic alternatives that had low-cost generics widely available, including warfarin for apixaban and nonbiologic DMARDs for etanercept, even though these are considered therapeutic alternatives based on rigorous clinical effectiveness reports.^4,5 Allowing older, low-cost, generic, or biosimilar therapeutic alternatives to qualify likely would have increased CMS’ ability to negotiate lower drug prices by affecting the starting point of negotiation.

This study was limited to the first 10 negotiated drugs in the first year of the drug price negotiation program; results may be different in subsequent negotiation rounds. In its public explanations, Medicare did not disclose whether negotiated drugs were deemed to have added benefits over their therapeutic alternatives, or how information about comparators was weighed against other required factors. In future years, CMS could consider additional sources to identify and compare drugs with therapeutic alternatives, including health technology assessment reports routinely published by other countries.⁶ Additionally, publicly funded comparative effectiveness studies via the Patient-Centered Outcomes Research Institute could create transparent and rigorous evidence to inform Medicare price negotiation.

Author Affiliations: Program On Regulation, Therapeutics, And Law (PORTAL), Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham and Women’s Hospital (HM, ASK, BNR), Boston, MA; Harvard Medical School (ASK, BNR), Boston, MA.

Source of Funding: Arnold Ventures, Kaiser Permanente Institute for Health Policy.

Author Disclosures: Dr Kesselheim reports personal consulting fees from Alosa Health and serving as an expert witness on behalf of a payer in a case against Teva regarding marketing of Copaxone and on behalf of a group of state attorneys general and payers in a case against multiple generic manufacturers related to alleged price fixing. Dr Rome reports grants from Elevance Health Public Policy Institute, Humana, and the Pharmaceutical Care Management Association and personal consulting fees from Alosa Health.

Authorship Information: Concept and design (HM, ASK, BNR); acquisition of data (HM, BNR); analysis and interpretation of data (HM, ASK, BNR); drafting of the manuscript (HM); critical revision of the manuscript for important intellectual content (BNR, ASK); obtaining funding (ASK); and supervision (BNR).

Address Correspondence to: Benjamin N. Rome, MD, MPH, Brigham and Women’s Hospital, 41 Ave Louis Pasteur, Suite 017B, Boston, MA 02115. Email: brome@bwh.harvard.edu.

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