Pharma Firms to Pay Medicare Rebates for Inflation-Exceeding Price Hikes

On Mar 29, 2024

TL/DR –

President Biden’s 2022 Inflation Reduction Act (IRA) aims to save money for Medicare beneficiaries by establishing the Medicare Prescription Drug Inflation Rebate Program, which could save beneficiaries between $1 and $3,575 per dose, depending on individual coverage. The Act requires drug companies to pay a rebate if their drug costs increase faster than inflation, but researchers have raised concerns about how these companies will adjust to the legislation after 2023. A study found that coverage of 10 drugs covered by Medicare Part D generally increased from 82.0% in 2019 to 91.3% in 2023, and starting January 1, 2024, high-cost Medicare Part D enrollees will have their annual out-of-pocket costs capped at about $3,500, reducing to a $2,000 cap on all Part D beneficiaries from 2025.

President Biden’s 2022 Inflation Reduction Act Impact on Medicare Beneficiaries

President Biden’s 2022 Inflation Reduction Act (IRA) is intended to save money for Medicare beneficiaries. Despite opposition from Big Pharma, the legislation’s impact on drug companies is a concern for researchers.

The Department of Health and Human Services (HHS) stated, “Due to the IRA’s lower-cost prescription drug law, the Medicare Prescription Drug Inflation Rebate Program could save Medicare users between $1 and $3,575 per average dose based on their individual coverage.”

Key Takeaways

The IRA aims to save money for Americans using Medicare insurance plans.
Researchers are worried about how manufacturers will adapt to the implications of the Inflation Reduction Act due to government pushback.

The IRA is meant to curb the rising costs of Medicare-covered prescription drugs. Companies are obligated to pay a CMS rebate if their drug costs increase faster than inflation. These rebates will be stored in the Federal Supplementary Medical Insurance Trust Fund for future Medicare benefits.

Researchers emphasize that the IRA could improve access to crucial Medicare Part B and Part D drugs. However, they are apprehensive about how drug companies will adjust to the new legislation post-2023.

A study compared the coverage of 10 drugs under Medicare Part D in 2019 and 2023. It also investigated prior authorization and accessibility without step therapy for each drug.

The study found that average drug coverage increased from 82% in 2019 to 91.3% in 2023. Coverage for three of the four least covered drugs in 2019 also improved.

Medicare Drug Costs Expected to Decrease

Medicare drug costs are predicted to drop if manufacturers raise prices faster than inflation. | Image Credit: MP Studio / stock.adobe.com

Of the 10 drugs studied, coverage percentages increased for all but 2 drugs from 2019 to 2023. Access for these two drugs, insulin aspart and sitagliptin, rose in other areas.

However, researchers are concerned about the IRA’s implications. They worry about increased utilization management and adverse tiering, which may limit access to necessary drugs. They also question how the CMS will monitor practices that might undermine drug access.

Despite the IRA’s efforts to control drug costs, insurers have the power to influence prescription drug purchases by placing specific drugs on certain pricing tiers.

Fortunately, the IRA guarantees a cap on out-of-pocket costs in the next two years. By 2024, high-cost drug users enrolled in Medicare Part D will have their annual out-of-pocket costs capped at about $3,500. In 2025, all Medicare Part D beneficiaries will benefit from a $2,000 cap on annual out-of-pocket prescription drug costs,” stated the HHS.

References

1. U.S. Department of Health and Human Services. HHS announces savings for 41 prescription drugs thanks to inflation rebates from the Biden-Harris administration’s lower-cost prescription drug law. hhs.gov. Published March 26, 2024.

2. Patterson JA, Wagner TD, O’Brien JM, Campbell JD. Medicare Part D Coverage of Drugs Selected for the Drug Price Negotiation Program. JAMA Health Forum. 2024;5(2):e235237. doi:10.1001/jamahealthforum.2023.5237

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