Pharmaceutical executives who like their news sorted cleanly into good and bad piles will struggle with the Congressional Budget Office (CBO) letter that landed on July 29. Almost every finding offers something to cheer and something to dread, frequently in the same sentence, and this week we’ll work on teasing them apart.
Watchdog is pessimistic by nature, so we’ll start with the good. The Inflation Reduction Act (IRA) price “negotiations” that manufacturers spent three years dreading are clawing back less money than the forecasters promised, so the squeeze is, for now, gentler than advertised.
Now brace for the bad. Overall Part D spending has blown so far past its projections that the program is starting to feel like a budget problem in search of a villain, and the pharma industry has been assigned that role before.
A Blame Game That Pharma Can Win
CBO acknowledges that it “significantly underestimated” how much per-enrollee costs would rise once the Part D redesign took effect, and that plan bids for 2026 came in well above its estimate. Where CBO had expected costs per enrollee to rise about 5 percent (close to the program’s long-run pace), plans built their 2026 bids around a 35 percent increase.
Importantly for pharma, CBO assigns the blame elsewhere, pinning the benefit redesign rather than the negotiation program. The redesign capped what beneficiaries pay at the pharmacy counter and moved risk off the government’s old reinsurance backstop and onto the plans. When plans carry more of that risk they price it into their bids, the government’s subsidies rise to meet those bids, and utilization edges up as well, because a lower out-of-pocket ceiling is, by design, a reason to fill more prescriptions, especially for high-cost specialty drugs.