2025 marks a watershed moment for U.S. healthcare. With the Inflation Reduction Act (IRA) rolling out its next phase, Medicare Part D patients now face a hard $2,000 cap on out-of-pocket drug costs - a move that radically reshapes the pharmaceutical landscape.

For patients, this is a long-overdue relief valve. For manufacturers, it’s a $10B+ liability shift as they now have a mandatory 20% Medicare rebate following a patient reaching the $2,000 out of pocket maximum. And for pharma executives? It’s a call to action.

The game has changed permanently

In 2024, Medicare patients no longer paid 5% coinsurance in the catastrophic coverage phase. That alone effectively capped annual drug spending at $3,300.

The impact was immediate: oncology prescription volumes jumped 50% year-over-year. In 2025, the cap tightens to a flat $2,000, resetting what affordability means for millions.

Make no mistake, this isn’t a temporary spike. We’re witnessing a structural break in how patients behave. Patients who once abandoned scripts due to cost are now starting, staying on, and even adding therapies. As a demonstration of how significant this trend is in oncology, between 2023 and 2024 there was a 15-fold increase in the number of patients who had $0 copays by May.

That’s a win for patients and for public health. But the bill comes due elsewhere.

Value at stake: Billions in revenue on the line

While patients pay less, pharma and insurers now pay more. Starting in 2025, drugmakers must cover 20% of drug costs in the catastrophic phase—up from 0%. Part D plans take on 60%, up from 15%.

The math gets brutal fast:

• One top-10 pharma company forecasts $1.5B in annual IRA-related losses because of shifting liabilities.
• Another reported 2024 Medicare sales doubling on a rare disease drug, only to see profits squeezed under 2025’s new liabilities.

For every revenue upside from increased utilization, there’s a reciprocal offset from mandatory discounts. Understanding true net value now requires granular product- and payer-level analysis.

For the Medicare Part D payer, this plays out at an even grander scale. For example, the sum total of increased utilization observed in oncology in 2024 combines with a fourfold increase in liability in 2025. This is not just a few drugs driving greater costs, but the entire branded universe. Broadly, this is estimated to be as high as an incremental $40-50B in liabilities – annually!

Strategic adaptations are already underway

Leading pharma companies aren’t sitting still. Here’s how they’re adjusting:

1. Redesigning patient support
   Manufacturers are tightening PAP (Patient Assistance Program) eligibility, intentionally guiding patients to use their now-affordable Part D benefits. Some even require patients to enroll in Medicare’s new monthly payment plan (M3P) to qualify for PAP support.
   
   Why? It's simple: when patients spread their $2,000 cap across the year, out of pocket exposure drops, adherence improves, and manufacturer liabilities are easier to manage.
2. Repositioning foundation support
   Charitable foundations are newly powerful. With a $2,000 cap, a fund that once helped 100 patients at $10K each can now support 500. Understanding secondary payers in Medicare Part D is now as important as it is in the commercial payer channel.
3. Rewriting the payer playbook
   As insurers absorb higher costs, they’re expected to tighten formularies. Manufacturers are proactively preparing with outcomes-based contracts and real-world evidence strategies to maintain access. The new message to payers? Improved adherence = better outcomes = system savings.
   
   Manufacturers also must reconsider the value of preferred vs. non-preferred formulary status. With patients quickly dropping to $0 out of pocket, contracting for lower copays with preferred access may not deliver the value it once did. Paying greater rebates to get lower copays when lower copays are structurally introduced from the Inflation Reduction Act changes the contracting calculus.
4. Revamping forecasting models
   Old models are breaking down. Volume jumps in 2024 blindsided forecasts with a stepwise change in the market. Many brands use linear regression-based or percentage-based forecasting that misses the impact of underlying market dynamics. Now, leading teams are re-baselining their projections with behavioral assumptions and scenario models. Companies are mapping who their patients used to be (PAP, non-adherent, Part B), what channels they’ve now entered, and how other therapeutic areas impact their patients.

The big challenges ahead

The IRA Part D cap isn’t just a financial event—it’s a behavior transformation. That brings complexity. The industry is being forced to think BIGGER than an individual brand and that stresses manufacturers who do not have enough data to understand anything more than their brand.

• Forecast uncertainty:Which utilization surges are permanent vs. one-time? Will the Medicare Payment Protection Plan (M3P) uptake grow or stagnate?
• Payer backlash: Expect rising pressure on rebates, tiering, and utilization management.
• Patient diversity: LIS vs. standard patients behave differently. Site-of-care shifts (e.g., infusion to oral) are accelerating. Will this cannibalize other products? Will this cause an unexpected surge in market dynamism?
• Compliance guardrails: Changing PAP rules or pushing M3P has legal limits. Every move must pass regulatory muster.

And perhaps most crucially: many companies still operate in functional silos, slowing coordination between finance, access, patient services, and policy teams. That’s a recipe for missed opportunities—or worse, strategic missteps. Missing core assumptions on Medicare can not only create forecast inaccuracy but also lead to missed accruals and hundreds of millions of dollars in surprise liabilities.

How executives should respond now

Pharma companies need to do five things to succeed:

1. Create an IRA task force: Cross-functional, accountable, and empowered. No more siloed decision-making.
2. Re-baseline forecasts: Don’t extrapolate from 2023. Incorporate 2024’s step-change and model scenarios for 2025–2026 and beyond.
3. Audit and optimize patient support: Are your PAP criteria still appropriate? Are M3P and foundation pathways fully utilized?
4. Strengthen payer strategy: Prepare access defense dossiers now. Use real-world evidence to justify continued access amid rising costs. Although the IRA is a key driver, there are many reasons to change historic practices.
5. Invest in analytics: You need visibility into patient journeys, i.e., who switched, why, and what it cost. This often means access to the data universe is required, not just a single brand or therapeutic class.

IQVIA helps drive clarity, confidence, and speed

At IQVIA, we’re supporting clients with end-to-end solutions to navigate this complex new landscape:

• Linked patient data to uncover hidden behavior changes (e.g., PAP-to-Part D transitions, therapy switches).
• Financial scenario models to estimate net gains or losses from the $2,000 cap at a product and portfolio level.
• Payer and policy insights to prepare for upcoming access hurdles and regulatory changes.
• Benchmarking to help clients understand whether what they’re seeing is typical or an early warning sign.
• BIGGER thinking to understand what is happening at the scale of the market, across therapeutic areas and manufacturers. Behaviors of HCPs, systems, patients, and payers are changing.

Most importantly, we’re helping executives act with speed and confidence. In this environment, timeliness is a competitive edge. Do not miss out because you were waiting for your data to see what happened.

Bottom line

Medicare’s $2,000 cap is more than a policy update. It’s a market reset, and may be the most significant near-term consequence of the Inflation Reduction Act. Pharma companies that treat it like a temporary rebate shift will be left behind. Those that engage deeply, with data, empathy, and strategic agility, will unlock new patient growth while preserving margin.

Executives should ask themselves: Are we prepared to lead in this Brave New World? The time to take action is now.

Read this previously published blog to learn about the impact of $0 cost-sharing and future projections for 2025.