When Congress passed the Inflation Reduction Act in 2022, it required U.S. drugmakers to pay a rebate to Medicare if the price of their drugs rises faster than the rate of inflation.

Former President Biden’s signature piece of legislation had initially called on the same rebates for inflation-busting prescriptions for enrollees of commercial health plans, but that got scrapped as a political compromise to get the act through Congress.

A new study by Stanford researchers shows that extending the inflationary rebate program to commercial plans could save those companies more than $8 billion, or 4.1% of the annual spending on retail prescription drugs.

The researchers concede there’s an administrative burden involved in collecting these rebates. As it stands, policymakers would have to conduct evaluations of over 1,800 drugs to then seek rebates from 1,100 drugs.

“It might help convince lawmakers to pass legislation covering commercial plans if this burden could be eased,” said Marissa Reitsma, PhD, an assistant professor of health policy and lead author of the study published in Health Affairs. “So, we set out to see if there were a more efficient policy design that would still capture most of the savings from the Inflation Reduction Act's approach.”

Reitsma and colleagues analyzed 130 million prescription drug claims from 11 million commercially insured people and estimated that inflationary rebates like those required for Medicare could have yielded as much as $8.1 billion in savings if applied to all commercial plans in 2021. And they found that in the commercial market, most of the savings from the Inflation Reduction Act rebate design would accrue from a small number of drugs with high total spending.

The researchers identified several efficient design options. Levying inflationary rebates on only the top 150 drugs by total spending, for example, would require assessment of 93% fewer drugs, yet capture 72% of potential savings. Or policymakers could cut the number of drugs they have to evaluate in half and still achieve 96% of the savings that the Inflation Reduction Act's approach nets. Restricting eligibility for rebates to drugs with high total spending would ease the burden of state or federal agencies when administering inflationary rebate schemes for commercial plans without substantial loss of savings.

“We hope that our study will provide a blueprint for Congress and state legislatures to piggyback on the gains that the Inflation Reduction Act has won for the Medicare program,” said Michelle Mello, JD, PhD, a professor of health policy and of law, and senior author of the study.