Who-Hoo! Finally, some relief for rising prices is on the horizon. Well…don’t get too excited just yet. There are a few caveats to the “Medicare Prescription Drug Inflation Rebate Program” portion of the administration’s new Inflation Reduction Act. So let’s review exactly what this rebate program is and the parameters and timeline of this new legislation.
What is the Medicare Prescription Drug Inflation Rebate Program?
In August 2022, President Biden signed the Inflation Reduction Act of 2022 into law. Among many other provisions, the Medicare Prescription Drug Inflation Rebate Program will lower the cost of health insurance for American families and give some meaningful financial relief to 50 million seniors and people with disabilities by placing an annual out-of-pocket cap on Medicare prescription drug costs. To accomplish this goal, drug companies will be required to pay rebates to Medicare when their prescription drug prices increase faster than the rate of inflation for certain drugs dispensed to people with Medicare. This rebate is paid to Medicare and will be calculated and invoiced by the Centers for Medicare & Medicaid Services (CMS). The CMS recently released the initial guidelines detailing the requirements and procedures for the new program. Primarily, the law establishes Medicare Part B prescription drug inflation rebates for single-source drugs and biologicals with prices increasing faster than the rate of inflation, and provides for lower Part B beneficiary cost sharing on these drugs and biologicals. In addition, the law establishes Medicare Part D prescription drug inflation rebates for certain drugs and biologicals with prices increasing faster than the rate of inflation.
“There is no reason Americans should have to pay two to three times more for the same drugs than people in other countries,” said U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra. “This Administration is committed to lowering health care costs, and with President Biden’s Inflation Reduction Act, we are delivering results. We are fighting to rein in the excessive cost of skyrocketing prescription drug prices, and now drug companies that increase their prices faster than the rate of inflation will have to pay rebates back to the Medicare Trust Fund.” CMS Administrator Chiquita Brooks-LaSure said, “With today’s guidance, we are continuing to implement the Inflation Reduction Act, which lowers out-of-pocket drug costs for people with Medicare and improves the sustainability of the Medicare program for current and future generations. The Medicare Prescription Drug Inflation Rebate Program will require drug companies with excessive increases in drug prices to pay rebates to Medicare.”
What will be the parameters for this new program?
The initial guidelines released by the CMS are still under review (first detailed as of Feb. 9, 2023) and the CMS is seeking comment for the implementation of the Part B inflation rebates and Part D inflation rebates. Topics for discussion for the Part B inflation rebates include the process CMS intends to use to determine the number of drug units for calculating rebates and the process used to identify and remove units for which a Medicaid drug rebate was paid for a covered outpatient drug. Also being studied are operational considerations related to the inclusion of units furnished to beneficiaries who are enrolled in Medicare Advantage plans and the processes CMS intends to use to reduce or waive the rebate amount in the case of a drug shortage or severe supply chain disruption. Part D subjects being discussed are options to identify the Part D rebatable drug billing units on the prescription claim and PDE file to assure that manufacturers are being accurately billed for Part D drug inflation rebates and the process CMS intends to use to impose Civil Monetary Penalties (CMPs) on manufacturers that fail to pay rebates.
Public feedback is critical to the success of the Medicare Prescription Drug Inflation Rebate Program, and this initial guidance is one tool, among many, CMS will use to ensure interested parties know when and how they can make their voices heard on implementation of the new drug law. The deadline for public comment is March 11.
What will be the future timeline of events for this new program?
These dates have already passed:
- January 1, 2023 – The start of the first quarter for which drug companies will be required to pay rebates to Medicare if prices for certain Part B drugs increase faster than the rate of inflation.
- February 9, 2023 – CMS issues initial guidance with a 30-day comment period on key topics to implement the Medicare Prescription Drug Inflation Rebate Program.
These dates are the future timeline of events:
- March 11, 2023 – The 30-day comment period on key topics to implement the Medicare Prescription Drug Inflation Rebate Program closes.
- April 1, 2023 – Beginning on this date, people with Traditional Medicare and Medicare Advantage may pay a lower coinsurance for certain Part B drugs if the drug’s price increased faster than the rate of inflation in a benchmark quarter.
- Q4 2023 – CMS expects to issue revised guidance to implement the Medicare Prescription Drug Inflation Rebate Program. Timing may be adjusted as necessary.
- September 30, 2025 – The date by which CMS must invoice drug companies for the Part B inflation rebates they owe Medicare for calendar quarters in 2023 and 2024.
- December 31, 2025 – The date by which CMS must invoice drug companies for the Part D inflation rebates they owe Medicare for the 12-month periods beginning October 1, 2022 and October 1, 2023.
In a nutshell:
The Medicare Prescription Drug Inflation Rebate Program will hopefully discourage runaway price increases by drug companies. However, any penalties will go back into the “system” (i.e. Federal Supplementary Medical Insurance Trust Fund). That should lower prices for prescription drugs to Medicare in theory. Time will tell. For more information on the rebate program, go to CMS.gov/inflation-reduction-act-and-medicare.