[co-author: Haley Jeppson]
With appreciation for feedback from Mark Fendrick, Director of the Value-Based Insurance Design (V-BID) Center at the University of Michigan, and Daneen Seekoni, Vice President of Policy and Advocacy at the Cancer Support Community
The Inflation Reduction Act (IRA) changed how drugs are covered and reimbursed in Medicare. It is anticipated that this may lead to more restrictive formularies in drug plans.
In this assessment, DLA Piper evaluates formulary coverage for the 25 drugs selected for Medicare Drug Price Negotiation (MDNP) (10 drugs in 2026 and 15 drugs in 2027). We also assess formulary coverage in Medicare Part D plans for 129 branded drugs in the same therapeutic classes as those 25 selected.
Formulary coverage assessment findings
We found that 95 percent or more Medicare drug formularies covered 22 out of 25 of the selected drugs in 2025 on an enrollment-weighted basis.[1] For the group of 25, formulary coverage stayed the same or increased for 22 selected medications between 2021 and 2025, and declined for 3 of the selected drugs in 2025. In that same time period, formulary coverage was much lower for the therapeutic alternative to the selected drugs, and more of these drugs saw a bigger decline in formulary coverage from 2021 to 2025. (Table 1)
It is unclear why coverage would be declining for a limited number of the 25 selected drugs, as the IRA requires all drugs with an MDNP to be covered once the prices are set. It could be that Part D plan administrators don’t anticipate the MDNP being enforced for an exclusion criterion – such as the presence of a marketed biosimilar or generic by implementation – or for other reasons.
Formulary coverage was lower for the 129 medications that were not selected for Medicare but were in the same therapeutic class at every time period analyzed, with 56 percent of plans covering these drugs on their formulary on average in 2025. Formulary coverage declined by 3 percent for the 129 drugs not selected from 2021 to 2025. (Table 1)
DLA Piper then examined 20 drugs with a decline of 5 percent or more in formulary coverage between 2024 and 2025. We found that 10 of these 20 drugs with the biggest loss in coverage treat serious, rare diseases and received approval with an orphan drug designation from the US Food and Drug Administration (FDA). (Table 2)
There could be clinical reasons for removing some drugs from formulary coverage, or the decline in access could be cost-focused. This trend merits further evaluation of the implications for access to treatment, particularly for rare or orphan diseases. (Table 2)
As such, policymakers may want to consider greater oversight of Medicare Part D formularies as the IRA is implemented, as well as modifications to the IRA to prevent the loss of affordable access to medications, particularly those used to treat rare diseases.
Background
When a drug is on a plan’s formulary, a beneficiary typically pays an out-of-pocket amount that counts toward the $2,000 beneficiary out-of-pocket maximum. If a drug is not on formulary, the beneficiary may have to pay the entire cost, use a different drug (if available), seek patient assistance, or forgo treatment.
When a beneficiary either forgoes a medication or gets coverage through patient assistance, this reduces Medicare part D drug plan drug costs and premiums – but can have other effects on the beneficiary’s health or future costs of care. There is competitive pressure on Part D plans to keep premiums low to attract beneficiaries. This creates an incentive for plans to become more restrictive with their formularies to keep their costs low.
The IRA directs the federal government to set the price of selected medications initially in Medicare Part D (self-administered drugs). Under the IRA, the drug must be covered on Part D plan formularies once the price is in effect, unless the product is facing bona fide marketing from a generic or biosimilar competitor, which is anticipated for some selected drugs. Beneficiaries tend to benefit from greater formulary access if a selected drug has low rates of coverage; we found most of the 25 selected drugs are already covered on 95 percent or more plan formularies.
Methodology
DLA Piper utilized data from the federal government (Centers for Medicare and Medicaid Services (CMS)) to evaluate Medicare formularies for the 25 medications selected for the MDNP and other therapies that treat the same conditions as those drugs selected for the MDNP. We assessed whether there is a change in formulary coverage as of May 2025 (after the second set of 15 drugs were selected for the MDNP), compared to May 2024 (before the first set of 10 drugs were selected for the MDNP) and May 2021 (before the implementation of the IRA).
We compared the Part D formulary access in May 2025 to that in May 2024 and May 2021.[2] Our evaluation encompasses all 25 selected drugs (10 from those selected for plan year 2026 and 15 from those selected for plan year 2027) and every therapeutic alternative that did not have a generic alternative and was approved by the FDA by 2021. Data was sourced from the publicly available CMS plan files and formulary files (methodology in endnotes).[3][4][5][6][7]
Table 1: Part D coverage of the selected drugs and therapeutic alternatives in our analysis (enrollment weighted average)
We then evaluated all drugs, both selected and nonselected, that have experienced decline of 5 percent or more in formulary coverage in 2025 relative to 2024.[8]
We found that out of the 154 drugs we evaluated:
- 20 drugs experienced a 5-percent or greater loss of formulary coverage in 2025 relative to 2024, or 13 percent of all drugs analyzed
- 1 of the 20 was selected for the MDNP
- 15 have more formulary coverage in integrated Medicare Advantage medical and drug plans (MA-PDs) relative to standalone Part D Prescription Drug Plans (PDPs)
- On average, there was 19 percent more formulary coverage in MA-PDs in 2025 relative to PDPs for these 20 drugs
- Of those drugs with a 5 percent or greater loss in formulary coverage:
- Half (10 drugs) treat a rare disease and are designated as an orphan drug by the FDA
- 2 combination drugs with no orphan designation share at least 1 molecule with a drug that has an orphan designation
- 8 of the 10 drugs with an orphan drug designation have more formulary coverage on MA-PDs relative to PDPs in 2025, with an average of 21 percent more formulary coverage
- Several have indications for a rare pediatric disease
Table 2: Drugs evaluated with a loss of formulary coverage in 2025 vs. 2024 of 5 percent or more
Conclusion
DLA Piper’s assessment found that drugs selected for the MDNP were well-covered on formularies in Part D plans, with only a limited number seeing a decline in formulary placement. Drugs in the same therapeutic class as drugs selected for the MDNP have lower formulary coverage and have seen a decline in formulary access in 2025 relative to 2024.
We found that 20 of the drugs we evaluated, or roughly 13 percent, experienced a decline in formulary access of 5 percent or more in 2025 compared to 2024. We found that half of those drugs received an orphan designation from the FDA for the treatment of a rare disease with serious health consequences. Of these orphan drugs, eight out of ten had greater coverage in an MA-PD plan relative to a PDP.
There may be valid clinical reasons for restricting coverage. However, this decline in formulary coverage, which may be the result of cost constraints on the plans, likely merits further evaluation – particularly because the coverage is more restricted in PDPs relative to MA-PDs, which are less available in rural areas.[10] This data suggests that beneficiaries could face challenges in obtaining their necessary medications, including beneficiaries with rare diseases, as the IRA continues to be implemented.
Policymakers and administrators at CMS may want to consider closely monitoring the evolution of formularies under the IRA and taking action to preserve beneficiary access for both selected and nonselected medications.
[1] Enrollment weighted formulary coverage in 2025 for entanercept (84 percent), deutetrabenazine (93 percent), and apremilast (69 percent) was lower than 95 percent.
[2] CMS announcement on August 15, 2024: https://www.cms.gov/newsroom/fact-sheets/medicare-drug-price-negotiation-program-negotiated-prices-initial-price-applicability-year-2026.
[3] We removed any drug that had an available generic equivalent by Q1 2025.This was done by first eliminating any drug that had prescription data from of a generic equivalent in the Medicare Part D prescription drug data file, then by reviewing the FDA orange book for the remaining selected drugs that did not have a generic equivalent by 2022 in the Medicare drug event data. When a generic drug was noted as approved in the FDA orange book, we also confirmed that it had marketing authorization. If was not available generically, the branded drug was retained. Branded drugs with generic competition are typically removed from preferred formulary placement as a beneficiary can access a generic equivalent on a low-cost tier: First Generic Drug Approvals. For the full list, click here.
[4] We collected all unique Concept Unique Identifier (RXCUI) codes, which is a system for uniquely identifying drugs, to then identify all unique National Drug Codes (NDC) codes. The NDC codes were then used to identify whether a drug is covered on a given formulary (using the plan information data and basic drugs formulary data). Useful explanation provided by NIH and Duke University, accessed: https://dcricollab.dcri.duke.edu/sites/NIHKR/KR/Using%20the%20RxNorm%20System.pdf, NDC Data.
[5] When a drug is “on formulary,” that means it is covered within the plan’s benefit and expenses for that drug count toward deductibles and other out of pocket limits. “Prior authorization” means an additional approval by the plan provider is required to receive the drug that is prescribed by the health provider. For explanation see: https://www.medicare.gov/publications/11109-Medicare-Drug-Coverage-Guide.pdf.
[6] We matched these drugs to the formulary file with National Drug Code (NDC) codes identified through Prescription Drug Data Collection Code (RxDC).
[7] We used the USP Medicare Model Guidelines 9.0 to identify the therapeutic class for each drug.
[8] Listed in https://www.accessdata.fda.gov/scripts/opdlisting/oopd/listResult.cfm. The FDA Orphan Drug Designation provides incentives to drug companies developing treatments for rare diseases including longer exclusive marketing rights, funding for research and certain tax benefits. This program is for drugs that treat diseases affecting fewer than 200,000 people in the US and is intended to overcome the lack of financial motivation for investment in drug development in these low prevalence diseases.
[9] One of these three drugs has very limited distribution through a restricted program.
[10] https://www.dlapiper.com/en-us/insights/publications/2025/01/keeping-watch-on-medicare-access-prescription-drug-plans-and-premiums.
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