The Inflation Reduction Act and Etanercept

Introduction

In August, the Centers for Medicare and Medicaid Services (CMS) announced a negotiated price 67% lower than the manufacturer list price for etanercept (Enbrel; Amgen). This price will go into effect in January 2026. Negotiations with the manufacturer began following passage of the Inflation Reduction Act (IRA) that allows CMS to negotiate prices for up to 20 drugs in 2025. ¹ Etanercept was one of the first 10 drugs included for negotiation for Medicare Part D. In February, CMS submitted an initial price offer to the manufacturer of etanercept to begin negotiation. The manufacturer responded with a counteroffer. Then the manufacturer and CMS conducted negotiations. In July, CMS sent a final offer to the manufacturer. In August, an agreed upon Maximum Fair Price (MFP) was reached. In January 2025, CMS released a report on how the final MFP was chosen. ² We review this report as well as publicly available information related to some redacted elements. We conclude with a look forward to lessons for the future.

The IRA's authorizing legislation established an MFP for drugs marketed for at least seven years, with MFPs varying in part based on the number of years on market. Negotiation was bound by an upper limit—the lesser of the current average net (post‐rebate) price paid by Medicare Part D plans or a percentage of non‐Federal Average Manufacturer's Prices (non‐FAMPs). Because etanercept's initial Food and Drug Administration (FDA) approval was more than 16 years ago, that statutory upper limit set for the MFP was 40% of the non‐FAMP. But non‐FAMP is lower than the list price, so the statutory ceiling was similar to the ultimately negotiated price. ¹

Section 1194(e) of the IRA requires CMS to consider 10 factors (Table 1). ¹ Certain data must be submitted by the manufacturer, and evidence must be provided about therapeutic alternatives. After entering into negotiations, etanercept's manufacturer provided CMS information on seven factors—research and development costs and recoupment, unit costs of production and distribution, prior federal financial support, patents and exclusivities, regulatory approvals, and market data and revenue and sales volume data. Most are confidential. Under CMS's final guidance, etanercept's manufacturer reported on economic implications of etanercept in settings of diverse populations and on listening communications with 20 selected stakeholder organizations. The CMS administrator stated that weighing the importance of each of these public factors could potentially yield steeper discounts. ³

Table 1.

Ten factors reportedly considered in supporting negotiation of the Maximum Fair Price

Maximum Fair Price negotiation factors
Research and development costs (redacted)
Manufacturing production and distribution costs (redacted)
Market data and revenue (mostly redacted)
Out‐of‐pocket costs (redacted)
Wholesale Acquisition Costs (some are redacted) of etanercept and therapeutic alternatives
Patents
Exclusivities
Therapeutic alternatives and comparative efficacy and safety
Special population considerations
Stakeholder considerations

For some of the factors that are confidential, complementary publicly available information that is likely to be similar (but not exactly the same) is available from other sources. These include a 2021 House Oversight Committee Staff report on etanercept pricing and revenue; a 2024 Colorado Prescription Drug Advisory Board (PDAB) review on etanercept; and a 2023 report from the Assistant Secretary of Planning and Evaluation (ASPE) report. ⁴ , ⁵ , ⁶

The House Oversight Committee Staff report noted that between 2003 and 2018, etanercept research and development expenditures were $2 billion in comparison to $58.3 billion in US net revenues. ⁴ The main research and development expenditures would have been incurred pre‐1998, when etanercept received its first FDA approval and when the manufacturer purchased etanercept's initial manufacturer for $16 billion. The House Oversight Committee Staff report noted that etanercept manufacturing costs and production costs declined from 2009 to 2018, while prices rose. The proportion of etanercept revenues accounted for by manufacturing costs was 14%.

Since FDA approval in 1998, the CMS report notes that the original manufacturer of etanercept has two main patents currently in force. The validity of each patent has been challenged in court and was upheld in district court litigation and affirmed on appeal. The 2021 House Oversight Committee Staff report explained that two competitive FDA‐approved biosimilar formulations for etanercept (from Samsung and Siemens) are legally blocked from entering the market until 2028 and 2029. ⁴ The report noted that etanercept's manufacturers had applied for 68 secondary patents and received 39 secondary patents that could block introduction of biosimilar competitors for 47.5 years.

Therapeutic alternatives reported by CMS include methotrexate, four tumor necrosis factor inhibitors (TNFis), and 13 non‐TNFi biologics or small molecules. Clinically, etanercept use is for rheumatoid arthritis (66%), psoriatic arthritis (17%), and ankylosing spondylitis (7%). For rheumatoid arthritis, the report notes that etanercept is considered a first‐line biologic if low disease activity is not achieved. Using a longitudinal registry tracing 6,015 patients between 2012 and 2021, use of TNFis as first‐line biologic/targeted synthetic after methotrexate declined from 80% to 66%. ⁷ Although most other biologic use remained stable over methotrexate, use of disease‐modifying antirheumatic drugs (DMARDs) increased to 20%, with one to six different lines of DMARD therapy being used and 43% using at least three different therapy lines. Most persons started a TNFi either as monotherapy or with methotrexate.

The PDAB reported a separate analysis of therapeutic alternatives. ⁵ The report identified four in‐class TNFi therapeutic alternatives for rheumatoid arthritis: adalimumab (initial FDA approval, 2002), certolizumab pegol (initial FDA approval, 2009), golimumab (initial FDA approval, 2009), and infliximab (initial FDA approval, 1999). Overall, among in‐class TNFis, etanercept has received FDA approval for six indications, with one FDA approval for a pediatric diagnosis, active juvenile psoriatic arthritis in pediatric patients two years of age and older. In‐class TNFi therapeutic competitors had fewer FDA approvals than etanercept. The PDAB reported that when compared to placebo, comparative studies reported significant improvements for each of etanercept's six FDA‐approved clinical indications—supporting etanercept's role as a therapeutic advance. For some indications, the PDAB noted that etanercept and its in‐class therapeutic alternatives were associated with beneficial treatment effects versus other not‐in‐class prescription drugs.

The CMS report notes that the Wholesale Acquisition Cost (WAC) of a monthly prescription for etanercept was $609 in 2018, $1,293 in 2019, and $1,762 in 2023. The Federal Supply Schedule Service Price (for the Department of Veterans Affairs) was $1,550 in 2019 and $3,183 in 2023. The Big Four Insurers (Humana, Aetna, United Healthcare, and CVS Health) listed WACs of $1,550 in 2019 and $4,490 in 2023.

Data on revenue and sales volume were redacted from the CMS report. The 2023 report from the ASPE of the Department of Health and Human Services report includes information on revenue and sales. ⁶ During 2022, 47,000 Medicare Part D enrollees received etanercept primarily for rheumatoid arthritis, psoriasis, or psoriatic arthritis. Total out‐of‐pocket spending was $41 million. Total gross Medicare Part D spending on etanercept was $2.7 billion, with mean annual drug spending per Medicare Part D enrollee of $56,639. Mean per Medicare Part D enrollee out‐of‐pocket cost expenditures were $921.

The CMS report notes that the manufacturer submitted study findings supporting etanercept's economic value, with etanercept reportedly having the lowest cost per effectively treated rheumatoid arthritis patient compared to therapeutic alternatives. Comparing clinical costs of etanercept and three therapeutical alternatives (infliximab and adalimumab; each is a TNFi) and abatacept (an inhibitor of the interaction between CD80/CD86 and CD28 on T cells), one submitted study found that etanercept had the greatest effectiveness and lowest cost per effectively treated Medicare patient. That study reported adalimumab as being 114% more costly than etanercept for patients with rheumatoid arthritis on Medicaid. One analysis of US commercial claims found that etanercept had a lower cost per effectively treated patient compared to adalimumab, making it one of the most cost‐effective options to conventional DMARDs. In 2026, etanercept will have a lower annual Medicare Part D cost ($94,821) than those listed currently for other therapeutic TNFis equivalents: abatacept ($174,090), adalimumab ($154,540), certolizumab pegol ($236,743), golimumab ($140,651), infliximab ($185,369), and tocilizumab ($109,351), as well as for JAK inhibitor, tofacitinib ($130,501). Other analyses reportedly found that persons starting etanercept as their first biologic tended to be more persistent and switched less, suggesting improved outcomes and avoiding additional costs, disruptions, and side effects associated with switching. Among persistent patients and those who switch, patients who started with etanercept had lower one‐year total health care costs than patients who started with another biologic. With respect to safety, unlike TNFi competitors adalimumab and infliximab, the manufacturer notes that etanercept is not known to develop neutralizing antidrug antibodies. Across multiple studies, patients treated with etanercept had stable dosing of 95% compared with 66.4% to 92.2% of patients treated with adalimumab and 40.0% to 83.6% of patients treated with infliximab. This may have led to less dose escalation, with etanercept having lower annual TNFi costs, total rheumatoid arthritis–related medication costs, and total pharmacy costs. The CMS report includes data supporting etanercept as a comparatively effective option for special populations. (The CMS report's citations were redacted).

Written statements were submitted by advocacy networks. The American Association of Retired Persons indicated that the negotiated price should take into consideration high rates of patients’ missing etanercept doses because of high out‐of‐pocket costs. A benefit of the low negotiated price is that reduction in etanercept's Medicare price should decrease out‐of‐pocket costs and improve compliance. The International Foundation for Autoimmune and Autoinflammatory Arthritis reported that from the patient perspective, patients should not be forced to disrupt continuity care and transfer to therapeutic equivalents for cost reasons. Aimed Alliance, a not‐for‐profit health policy organization, expressed concern with the CMS patient‐focused listening session process, noting that randomly selected persons might not provide a comprehensive perspective. The Arthritis Foundation reported that they had polled a network of patient advocates who noted that etanercept had been very effective, but care became challenging when patients adopted Medicare insurance and were required to switch to another biologic. Chronic Care Policy Alliance stated that CMS should ensure that its negotiation process does not disadvantage any patient with an unmet medical need and should guard against results of negotiations undercutting research or negatively impact development of other products. The National Psoriasis Foundation noted etanercept has been identified as the most effective therapy for psoriasis and that if CMS negotiated price favors etanercept over other TNFis, it may lead to unmet medical needs by not favoring the most effective alternative. The Pharmaceutical Care Management Association requested that CMS clarify information on therapeutic alternatives that Part D plans communicate to enrollees and ensure that CMS selection of therapeutic alternatives are not affected by negotiations.

Do we really know how the negotiations went?

No. Review of publicly available data for 5 of the 10 factors that CMS reportedly used as well as how CMS weighted the 10 individual data elements to negotiate the 67% discounted list price for etanercept was nontransparent. Overall, our policy consultants and clinical consultants felt that the most important factors determining the final negotiated MFP were the initial statutory ceiling price and cost information on therapeutic alternatives. Rome et al hypothesized that the initial statutory ceiling set for etanercept in 2023 was the most important factor, although their report preceded publication of the 2025 CMS report. ⁸ Although CMS probably considered the 10 factors in Table 1, it is possible that the CMS evaluation of data from the manufacturer, patients, and advocacy groups did not merit a price much lower than the initial statutory imposed ceiling.

What is the future likely to look like?

From 2026 to 2029, pricing for etanercept will be based on the negotiated MFP that will take effect in 2026. This may improve access for Medicare beneficiaries. However, commercial payers will not be bound by the MFP. There may be some competitive downward pressure on etanercept's price borne by commercial payers from adalimumab biosimilars. Etanercept may need to offer greater rebates for commercial payers to maintain formulary position if pharmaceutical benefit management program starts to prefer lower cost adalimumab formulations. Because at least two biosimilar formulations for etanercept will begin marketing in 2029 and will exert downward pricing pressures on etanercept, prices for etanercept paid for by CMS are likely to decrease in 2029.

Conclusions

In response to manufacturer concerns about nontransparent IRA drug price negotiation for etanercept and nine other drugs, CMS issued a statement that it plans to consider “opportunities to bring greater transparency to negotiations,” specifically focusing on stakeholder recommendations on ways to improve the Medicare Drug Price Negotiation Program. ⁹

AUTHOR CONTRIBUTIONS

All authors contributed to at least one of the following manuscript preparation roles: conceptualization AND/OR methodology, software, investigation, formal analysis, data curation, visualization, and validation AND drafting or reviewing/editing the final draft. As corresponding author, Dr Bennett confirms that all authors have provided the final approval of the version to be published, and takes responsibility for the affirmations regarding article submission (eg, not under consideration by another journal), the integrity of the data presented, and the statements regarding compliance with institutional review board/Declaration of Helsinki requirements.

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