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How much money will IRA save Medicare? A paper by Hernandez et al. (2023) aims to answer this question. The methods they use are as follows:

For the 10 drugs likely subject to negotiation by Medicare in 2026 based on 2020 gross spending and loss of exclusivity, we extracted 2020 data from 5 sources: (1) net sales from SSR Health; (2) total units sold in the United States from IQVIA National Sales Perspective data; (3) 2020 Part D claims from a 5% sample of Medicare beneficiaries; (4) units and spending from the Centers for Medicare and Medicaid Services (CMS) spending dashboards; and (5) drug age from the US Food and Drug Administration website.

Based on this approach, the authors find that: …

Drugmakers around the globe are bracing for a major shakeup in how one of their largest customers does business. On Sept. 1, Medicare will target its first 10 drugs for historic price negotiations. The medications are sure to be among the country’s costliest and will likely include common treatments for cancer and diabetes.

The negotiations could save the federal government nearly $100 billion by 2031 and slash some prices Medicare pays by half. They are also the subject of multiple lawsuits by major drugmakers including Merck and Johnson & Johnson.

The power to negotiate prices directly with drug companies is one …