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The Inflation Reduction Act, which President Biden signed into US law on 16 August 2022, contains bold measures to tackle climate change and reduce prescription drug costs. 1 The drug measures comprise three major reforms to Medicare—the federal health insurance programme for people aged 65 years and older.

First, starting in 2026, the federal government must negotiate with manufacturers a reasonable price for selected brand name drugs taking account of factors such as comparative safety and effectiveness and development costs. Initially, negotiated prices will be limited to 10 of the highest spend prescription drugs dispensed by pharmacies (such as the diabetes treatment sitagliptin), rising by 2029 to 20 of the highest spend drugs, including intravenous and other treatments that must be given by clinicians. Other restrictions narrow the eligible pool of drugs still further, including the requirement that small molecule and biological medicines have been approved for at least seven and 11 years, respectively. However, the federal government was not allowed to negotiate prices before the act.

Second, manufacturers will be required to provide rebates to the federal government …