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Inflation Reduction Act (IRA) Drug Rebate Program and Drug Price Negotiation

CMS has been very active in releasing significant guidance to support the Inflation Reduction Act (IRA) provisions for the Part Drug Inflation Rebate and the Drug Price Negotiation program.  Earlier this year, CMS released detailed guidance around each of these provisions to prevent drug pricing from increasing faster than inflation as well reducing the drug cost on high cost medications.  A summary of each guidance is outlined below:

Medicare Part D Drug Inflation Rebates Paid by Manufacturers

On February 9, 2023, CMS released a memo titled, Medicare Part D Drug Inflation Rebates Paid by Manufacturers: Initial Memorandum, Implementation of Section 1860D-14B of Social Security Act, and Solicitation of Comments here on how the Medicare Part D Drug Inflation Rebate program will be managed by CMS.  The guidance outlined how drug manufacturers will be penalized 125% of any costs above their calculated inflation rate.  Pharmas will have 30 days within CMS’ invoice date to issue payment into the Federal Supplementary Medical Insurance Trust Fund.  Invoicing will begin in 2025.  October 1, 2022, marked the first 12-month period in which drug companies may be subject to a rebate if the medication cost increased faster than the inflation rate.  Additionally, CMS noted that medications that cost enrollees less than $100 annually will be excluded.  CMS has asked the industry for feedback in several areas of the guidance and will likely release additional guidance in quarter 4 of this year.

Medicare Drug Price Negotiation

On March 15, 2023, CMS released a 91-page memo titled, Medicare Drug Price Negotiation Program: Initial Memorandum, Implementation of Sections 1191 – 1198 of the Social Security Act for Initial Price Applicability Year 2026, and Solicitation of Comments here regarding how Medicare will negotiate single-source brand-name Medicare Part B and Part D drugs.  Medicare will select 10 Medicare Part D drugs in 2026, which will be published in September of this year.  Medicare will expand to the number of drugs to 15 Part D drugs in 2027, 15 Part D and Part B drugs in 2028, and 20 Part D and Part B drugs in 2029 and later.  For 2026, CMS will identify the top eligible drugs by overall expenditure based on spending data from June 1, 2022, to May 31, 2023.  CMS also details exceptions to the process for Small Biotech companies which will likely include companies that make up less than 1% of the total Part D expenditure of all covered Part D drugs.  CMS details the methodology that would be considered when determining the Maximum Fair Price (MFP).  CMS will issue significant CMPs to any pharmas who fail to provide access to a price that is less than or equal to the MFP.

While CMS has provided details around the inflation rebates and drug price negotiation, they will continue to release additional guidance to support each initiative.  CMS has already noted they will be performing auditing and monitoring to ensure all parties remain in compliance with all IRA provisions.  It is essential plan sponsors review and interpret any newly released guidance and perform a full impact assessment to determine how these provisions will impact operations and enrollee population.  BluePeak reviews all documented guidance and remains integrated with the industry regarding ever-changing provisions and guidance.

BluePeak can help!

Contact us to assist your organization during this ambiguous time.  We can ensure your organization remains in compliance and understands all the risks and benefits of the IRA provisions.

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