The Inflation Reduction Act (IRA) has ushered in a new era of drug pricing negotiations in the US. For the first time, the Centers for Medicare & Medicaid Services (CMS) will directly negotiate prices for high-spend drugs covered under Medicare. To make these decisions, CMS will rely not only on clinical trial results but also on real-world evidence (RWE) from the very population the program serves—Medicare beneficiaries.

Why is this shift important? Because real-world effectiveness often looks very different from clinical trial efficacy. Here are five reasons why Medicare RWE is essential:

1. Clinical Trials Exclude Complex Patients
Randomized controlled trials (RCTs) are designed for internal validity, not representativeness. They often exclude older adults, people with multiple chronic conditions, or those taking many medications. Yet these are exactly the patients enrolled in Medicare. Real-world studies using Medicare data capture outcomes in this diverse and complex group, giving CMS a more accurate view of treatment value.

2. Adherence in the Real World Is Very Different
In trials, adherence is closely monitored—patients are reminded, supported, and followed intensively. In Medicare, adherence varies widely due to polypharmacy, cost-sharing, or functional limitations. Non-adherence can significantly change a drug’s effectiveness and impact downstream outcomes. Medicare data allows measurement of persistence, discontinuation, and switching in real-world practice.

3. Comorbidities Alter Treatment Outcomes
A therapy’s benefit can be muted—or amplified—by the presence of multiple chronic conditions. For example, a cardiovascular drug tested in a relatively healthy trial population may have different safety and effectiveness profiles when prescribed to Medicare patients with diabetes, kidney disease, and hypertension. Medicare claims data enables outcome analyses that account for these complexities.

4. Comparative Effectiveness in the Real World
Head-to-head trials are rare, and when they exist, they often exclude the Medicare population. With Medicare data, manufacturers and CMS can evaluate how a drug performs relative to other treatments in actual practice. These comparative effectiveness studies are critical for negotiations, as CMS will weigh the value of one therapy against alternatives when setting a fair price.

5. Capturing Outcomes That Matter to CMS
Clinical trials focus on clinical endpoints—often intermediate or surrogate measures. CMS, however, cares about outcomes that drive cost and quality in Medicare: hospitalizations, ER visits, complications, and long-term health resource use. Medicare data links drug use to these meaningful outcomes, providing a broader and more policy-relevant perspective on effectiveness.

Conclusion
The IRA requires manufacturers to demonstrate value in the very population CMS serves. That means Medicare RWE is no longer optional—it’s essential. By bridging the gap between clinical trial efficacy and real-world effectiveness, Medicare data provides the insights CMS will prioritize during price negotiations.

At ADVI, we have access to 100% Medicare data and the technical expertise to design robust RWE studies that anticipate the CMS perspective. By leveraging Medicare data strategically, manufacturers can enter IRA negotiations with stronger evidence, clearer insights, and a better chance of securing value-based outcomes.

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