Mintz IRA 2024 Update: Medicare Drug Price Negotiation & More



The IRA (Individual Retirement Account) introduces several changes to the U.S. health care industry in 2024, mainly focusing on lowering drug costs and reducing out-of-pocket prescription drug costs for Medicare Part D beneficiaries. This includes initiating a Negotiation Program where the federal government can negotiate drug prices for specific high-expenditure Medicare Part D Drugs, despite facing numerous lawsuits. The IRA also restructures the Medicare Part D benefit system, introducing changes like the expansion of low-income subsidies, elimination of 5% coinsurance for beneficiaries who reach the catastrophic coverage threshold, and a cap on premium increases to not more than 6% from the prior year.

Anticipated Impact of IRA on Health Care Industry

2024 marks the implementation of key provisions of the IRA aimed at lowering drug costs and reducing out-of-pocket prescription drug costs. The focus is on enabling federal government negotiation of certain high-expenditure Medicare Part D Drugs prices (the “Negotiation Program” or “Program”) and redesigning the Part D benefit.

Medicare Drug Price Negotiation Program

The Program encountered nine lawsuits in 2023 alleging unconstitutionality or unenforceability. For more details, see our article Legal Challenges to the Medicare Drug Price Negotiation Program Continue.

Despite legal challenges, a federal court declined to block the Program’s implementation in late September 2023. The first 10 high-expenditure, single source, Medicare Part D drugs (“Selected Drugs”) were chosen for negotiation, and the negotiated price is slated to be effective from January 1, 2026.

Key dates for the negotiation process include February 1, 2024, when CMS sent initial offers to manufacturers; March 2, 2024, for counteroffer proposals; and an end to the negotiation period by August 1, 2024. CMS will publicize the negotiated maximum fair prices (MFPs) for each of the Selected Drugs by September 1, 2024, and an explanation of the negotiation process by March 2025.

Part D Benefit Redesign

From January 1, 2024, the IRA has made changes to the Medicare Part D benefit design to benefit Medicare Part D beneficiaries. These include expansion of full low-income subsidy eligibility, elimination of 5% coinsurance, and a cap on Part D premium increases at 6%.

Additional Developments

In the Medicare Prescription Drug Inflation Rebate Program, manufacturers must pay rebates to the Medicare Trust Fund if the prices of certain Part B and Part D drugs increase faster than inflation. For more insights, see our overview. Guidance for the Medicare Part B Inflation Rebate Program and Medicare Part D Inflation Rebate Program was provided by CMS in December 2023.

From July 1, 2024, for new biosimilars, Medicare Part B payment will be capped when average sales price (ASP) data is unavailable. We will continue tracking and analyzing the IRA’s impact on prescription drug coverage and pricing in 2024.

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