The Inflation Reduction Act (IRA) has introduced direct price negotiations between the Centers for Medicare & Medicaid Services (CMS) and drug manufacturers for high-spend Medicare therapies. While FDA approval is based on clinical trial efficacy, CMS’s focus is broader. They need to understand how therapies perform in the real-world Medicare population—older, more complex, and more diverse than the patients typically enrolled in randomized controlled trials (RCTs).

Here are five key areas of clinical evidence CMS will need:

1. Real-World Effectiveness in Medicare Patients

Clinical trials often enroll carefully selected patients, excluding many with multiple conditions or advanced age. Medicare patients, however, represent the real population paying for and using these drugs. CMS will want to know if trial efficacy translates into real-world effectiveness. For example, a heart failure drug may reduce hospitalizations significantly in RCTs, but Medicare data could reveal smaller benefits in older patients with multiple comorbidities. Evidence of real-world effectiveness ensures CMS sees the therapy’s impact where it matters most—their beneficiaries.

2. Comparative Clinical Outcomes Versus Alternatives

Price negotiations don’t occur in a vacuum—CMS will benchmark a therapy against existing options. Comparative effectiveness research using Medicare data helps highlight differences in outcomes such as survival, disease progression, or complications. For instance, among rheumatoid arthritis therapies, one drug may achieve similar disease control but demonstrate fewer corticosteroid-related hospitalizations in Medicare patients. Comparative outcomes allow CMS to judge not just whether a drug works, but whether it works better than available alternatives.

3. Subpopulation Analyses and Health Equity

Medicare covers a diverse population across age groups, races, geographies, and socioeconomic backgrounds. CMS will expect evidence on how drugs perform across these subgroups, especially in the context of health equity. A diabetes drug might be effective overall but less so in rural or minority Medicare populations, revealing important equity gaps. Subpopulation analyses help CMS align drug pricing with equitable access and outcomes.

4. Safety and Tolerability in Real-World Use

Safety in clinical trials does not always translate into real-world safety for older populations. Medicare patients are more likely to experience adverse events due to comorbidities or polypharmacy. CMS will want post-market safety evidence that reflects these realities. A cancer immunotherapy may appear tolerable in trials but show higher rates of immune-related adverse events in patients over 75 in Medicare claims. Safety and tolerability evidence ensures CMS understands the full burden of a therapy in practice.

5. Durability of Clinical Benefit

While trials often measure outcomes over one to three years, Medicare patients may remain on treatment for much longer. CMS needs to know whether benefits persist—or diminish—with chronic use. A multiple sclerosis therapy may reduce relapses in a 2-year trial, but Medicare follow-up data might reveal that the effect weakens after 5 years. Durability of benefit evidence gives CMS a long-term view of value, which is critical for price setting.

Conclusion

FDA trials open the door to market entry, but CMS must ensure drug prices reflect real-world value in Medicare patients. That requires evidence of effectiveness, comparative outcomes, equity, safety, and durability. Manufacturers that invest in this evidence will be far better prepared to defend pricing positions during IRA negotiations.

Learn More

At ADVI, we have access to 100% Medicare data and the technical expertise to design robust real-world evidence (RWE) studies that anticipate the CMS perspective. We are already supporting manufacturers with their IRA submissions, leveraging Medicare data strategically to provide stronger evidence, clearer insights, and a better chance of securing value-based outcomes in negotiations.

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