Real-world evidence in US Medicare drug price negotiations
Imagine that a government finally gains the right to negotiate the prices of the medicines it pays for its citizens. This happened in the United States with the passage of the Inflation Reduction Act (IRA) in 2022. Until then, the situation was such that Medicare, the public health program for older adults, covered the cost of expensive medicines but was not allowed to directly negotiate their prices. Instead, prices were set through negotiations between private insurers, intermediaries, and pharmaceutical companies.
The IRA changed this system and allowed Medicare to begin negotiating prices for certain high-cost drugs. The first round includes ten medicines selected based on high spending and overall cost burden to the system. The implementation of the agreed “maximum fair price” (MFP) is being phased in over the years following the law’s passage.
The key question is what evidence is used to determine the value of a given drug
The standard basis for evaluation in medicine is randomized controlled trials (RCTs). In these studies, patients are randomly assigned to groups receiving either the drug or a control treatment, under strictly defined inclusion and follow-up criteria. These studies are considered the most reliable way to determine whether a drug works. For example, in RCTs, a drug such as Eliquis shows a reduction in the risk of stroke in patients with atrial fibrillation. The limitation of RCTs is that participants often do not reflect the real patient population. Older patients, people with multiple chronic conditions, or those taking multiple medications are frequently excluded. Because of this, the use of so-called real-world evidence (RWE) is increasing. RWE is based on data collected during routine clinical care, including electronic health records, administrative insurance databases, and patient registries. These data show how a drug performs in real-world conditions, across different patient groups and over longer periods of time.
The first descriptive characterization of RWE citations within the first Medicare price negotiation process
A new study examined how RWE is used in documents published by the Centers for Medicare and Medicaid Services (CMS) as part of the first round of drug price negotiations. The study titled “Real-World Evidence in the First Round of the United States Inflation Reduction Act Drug Price Negotiations: A Citation Analysis of the Centers for Medicare and Medicaid Services’ Maximum Fair Price Explanation Documents” was authored by Debra Winberg, Liping Du, and Lizheng Shi.
A total of 1,822 scientific references from these documents were reviewed. The results show that 27.6% of all cited studies were classified as real-world evidence.
The share of RWE varied significantly across drugs. For some drugs, such as Xarelto, RWE accounted for more than 40% of cited studies, while for others, such as Farxiga, the share was below 15%. This shows that there is no consistent pattern in the use of real-world data across different therapies. The most common source of RWE data was administrative insurance databases, which accounted for about 47% of the included studies, followed by electronic health records and patient registries. Although RWE is included in the documentation, available information does not make it clear how these data are actually weighted in final drug pricing decisions. In the case of a drug such as Eliquis, it is not possible from the available documents to distinguish how much of the assessment is based on clinical trials versus real-world data.
The authors of the study argue that greater transparency in how methods and evaluation standards are presented could improve understanding of the process. “Although RWE was cited across all MFP explanation documents, its prevalence and sources varied, and the evidentiary weighting remains undisclosed. As such, this study was unable to identify policy impact from the patterns of RWE citations. Greater clarity in documentation practices and the negotiation process could improve understanding of how evidence is incorporated in pricing decisions and guide future research and policy,” the authors concluded.
