Implementation of the drug pricing provisions of the Inflation Reduction Act (IRA) is underway. This week, Medicare Rights submitted comments on the law’s inflation rebate programs, and CMS offered new details on how those systems will operate. The agency also released initial guidance on drug negotiation, and new reports highlight potential beneficiary cost savings.
The IRA’s Medicare Prescription Drug Inflation Rebate Program will allow Medicare to better address rising drug costs, including through financial penalties for drug companies that raise prices faster than inflation. Although full program implementation will take several years, it is expected to have an impact much sooner.
For example, CMS does not plan to invoice drug companies for Part B inflation-based rebates until 2025, but the first quarterly period for which drug companies will be required to pay those penalties began January 1. Some may have already altered behaviors and lowered prices in preparation.
In addition, beginning April 1, some people with Medicare may pay less for certain inflation-busting Part B drugs. Under the IRA, coinsurance will be based on what Medicare would have paid had the drug’s price not outpaced inflation. CMS will determine which Part B drugs are subject to this adjustment on a quarterly basis.
The agency announced the first cohort yesterday, identifying 27 drugs that will temporarily trigger lower coinsurance. CMS notes, “some people with Medicare who take these drugs may save between $2 and $390 per average dose…depending on their individual coverage.” This list, and the lower coinsurance, will apply from April 1 to June 30.
Also yesterday, CMS issued initial guidance on IRA’s Medicare Drug Price Negotiation Program. The preliminary materials detail the requirements and procedures CMS will undertake between now and 2026, the first year the negotiated prices will apply. Key implementation dates include:
CMS will select additional drugs for negotiation in future years, including up to 15 more Part D drugs for 2027, up to 15 more Part B or Part D drugs for 2028, and up to 20 more Part B or Part D drugs each year after that. Additional guidance on these out-year processes is forthcoming.
Recent reports from the HHS Assistant Secretary for Planning and Evaluation (ASPE) examine the potential savings and reach of two key IRA Medicare changes: no-cost Part D vaccines and the $35 limit on insulin.
The IRA eliminated Medicare enrollee cost-sharing for Part D-covered vaccines, effective January 1. A new ASPE report finds that in 2021, 3.4 million people received Part D vaccines, and their out-of-pocket costs were $234 million. Had the IRA been in effect, these enrollees would have saved nearly $70 each.
The IRA also reduced beneficiary exposure to insulin prices. As of January 1, out-of-pocket costs for insulin are limited to $35 per monthly prescription for Part D-covered products; a similar cap will take effect in Part B on July 1. ASPE estimates the 1.5 million Medicare beneficiaries who used insulin in 2020 would have saved $500 had these protections been in place.
Medicare Rights is encouraged by the opportunity for IRA implementation to strengthen enrollee and program finances. The nonpartisan Congressional Budget Office (CBO) is also hopeful—they expect the law to save billions of dollars for beneficiaries, taxpayers, and Medicare in the coming years. Critically, it will do so while bolstering health outcomes and program solvency. CBO notes the IRA’s lower drug costs will increase medication adherence, improving beneficiary health and reducing the need for—and Medicare spending on—more costly care. We applaud CMS’s IRA implementation efforts to date and look forward to continued work.
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