As the Inflation Reduction Act (IRA) reshapes drug pricing policy in the United States, the Centers for Medicare and Medicaid (CMS) is placing unprecedented emphasis on the real-world value of high-expenditure Medicare drugs. The negotiation process is no longer based solely on list prices or clinical trial efficacy—it now requires a robust demonstration of economic and practical value using real-world evidence from Medicare populations. For HEOR leaders, this shift elevates the importance of understanding how therapies affect total cost of care, resource utilization, patient experience, and long-term outcomes.

Below are the key domains of HEOR information CMS expects for IRA negotiations, explained with integrated examples to illustrate how these concepts translate into real Medicare settings.

1. Health Care Resource Utilization (HCRU)

In addition to the clinical value story, CMS will evaluate how a therapy influences downstream health care use across inpatient, outpatient, and emergency settings. Real-world Medicare data plays an essential role here, offering a view into whether a drug reduces avoidable events that drive costs—such as hospital stays, acute exacerbations, or costly procedures. For instance, when an anticoagulant reduces stroke-related hospitalizations by 20% in Medicare beneficiaries, that single outcome reflects substantial savings to Parts A and B. Evidence like this helps CMS see the systemic downstream impact of the therapy, not just its pharmacy cost. In IRA negotiations, demonstrating reductions in high-cost utilization becomes a central component of the value story. 

2. Cost Offsets and Economic Outcomes

Beyond observing utilization patterns, CMS expects clear evidence of cost offsets—how a therapy’s downstream savings balance or outweigh its acquisition cost. HEOR analyses grounded in Medicare claims can quantify these offsets by linking improved clinical outcomes to measurable reductions in expenditures. For example, a COPD inhaler may have a higher per-prescription cost, but real-world data may show consistent reductions in emergency visits and hospital admissions for exacerbations among Medicare patients. These avoided costs can translate into thousands of dollars saved per patient annually. For negotiation purposes, the ability to demonstrate real monetary value—not hypothetical savings—is crucial. 

3. Adherence and Persistence

CMS recognizes that even the most effective therapy provides limited value if patients are unable or unwilling to take it as prescribed. Real-world adherence and persistence are therefore essential components of HEOR evidence for IRA negotiations. Medicare data can highlight whether the therapy supports long-term, consistent use, or whether patients discontinue early—impacting both clinical outcomes and cost-effectiveness. For example, a once-monthly injectable for osteoporosis may demonstrate significantly higher 12-month persistence compared to a daily oral agent, leading to fewer fractures and improved long-term outcomes. In CMS’s eyes, therapies that keep patients adherent show a stronger ability to deliver real-world value. 

4. Quality of Life and Patient-Reported Outcomes (PROs)

While clinical trials often include standardized PRO instruments, CMS values real-world evidence of patient experience—especially in older adults for whom functional status, mobility, pain relief, and independence are critical dimensions of value. HEOR teams may supplement claims data with post-market studies to highlight how therapies impact everyday life. For example, a rheumatoid arthritis therapy that improves mobility and reduces fatigue in patient-reported surveys may also reduce caregiver burden or enable older adults to maintain independence longer. These human-centered benefits enrich CMS’s understanding of a drug’s overall value beyond traditional clinical endpoints. 

5. Total Cost of Care in Medicare

Ultimately, CMS must evaluate therapies in the context of total Medicare spending—not just the portion attributed to pharmacy claims. HEOR analyses must capture how a therapy influences costs across Parts A, B, and D, including complications, chronic care needs, hospital readmissions, and long-term care. For instance, a diabetes therapy that lowers HbA1c similarly to its competitors but markedly reduces progression to end-stage renal disease—and therefore dialysis initiation—provides powerful evidence of total cost-of-care savings. In negotiations, CMS places significant weight on therapies that reduce long-term costs and burden on the Medicare Trust Fund. 

Conclusion

Under the IRA, HEOR evidence has become a cornerstone of drug price negotiations. CMS expects a comprehensive, data-driven narrative showing how a therapy performs in real-world Medicare populations: reducing costly events, generating cost offsets, improving adherence, supporting better patient experience, and lowering total cost of care. Manufacturers who prepare early and align their evidence strategies with CMS’s analytic framework will be better positioned to defend pricing and articulate value.

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