A forecasting model analysis on impact of the Inflation Reduction Act for non-insulin diabetes drugs on Louisiana Medicare costs

A forecasting study published in Pharmacoeconomics and Policy analyzes the impact of the Inflation Reduction Act (IRA) on diabetes drug costs for Medicare in Louisiana, USA. The authors found that that price negotiations for three non-insulin drugs are projected to save approximately US$400 million over five years (2026−2030). A key driver of savings is a shift in medication use, as patients are expected to switch from non-negotiated to negotiated drugs due to lower costs.

“The findings serve as a new, state-level forecast on the financial impact of a major federal policy. By modeling the effect of Medicare drug price negotiations under the Inflation Reduction Act (IRA) specifically for Louisiana, we learn that the policy's benefits can be substantial at the local level, particularly for states with high chronic disease burdens,” shares lead and corresponding author Debra Winberg.

The results also show significant savings from two combined effects: direct price discounts on negotiated drugs and a change in patient behavior. “The model anticipates that patients switch from non-IRA drugs to IRA drugs at a higher rate than inflation once lower prices are in effect. This behavioral shift is a crucial finding: it means savings are amplified beyond simple price cuts because more people use the cost-effective medications,” says Winberg,

In context, these findings shine a new light on how policy can improve an existing process of escalating drug spending. “For years, the high cost of diabetes medications has strained Medicare budgets and forced tough choices. Our model suggests that the IRA's negotiated “maximum fair price" is not just a theoretical tool but a practical mechanism that can reverse cost trends,” Winberg explains.

By 2030, the total projected costs for these drugs in Louisiana are expected to be about USD 42 million lower than they would have been without the IRA.

Notably, the new method used historical Medicare claims data from 2016−2020 to project future costs. “While simpler than some complex economic models, this approach was chosen because no direct policy precedent for the IRA exists, making more complicated models risky. The clarity of this method makes the substantial USD 400 million savings projection even more striking and understandable for policymakers,” says Winberg.

Contact author:

Debra Winberg, Department of Health Policy and Management, Celia Scott Weatherhead School of Public Health and Tropical Medicine, Tulane University, New Orleans, LA, 70112, USA. dwinberg@tulane.edu

Funder: 

This research was supported in part by the Louisiana Board of Regents Endowed Chairs for Eminent Scholars program and the Patient-Centered Outcomes Research Institute (PCORI) funding, USA (Grant No.: NEN-1508-32257).

Conflict of interest:

The authors declare that there are no conflicts of interest.

See the article: https://doi.org/10.1016/j.pharp.2025.09.002