CMS Releases Revised Guidance for Medicare Prescription Drug Inflation Rebate Program 

Under President Biden’s lower-cost prescription drug law, drug companies will pay rebates to Medicare for raising prescription drug prices faster than the rate of inflation

As a result of President Biden’s historic prescription drug law, the Inflation Reduction Act, drug companies will pay rebates to Medicare when prices of certain prescription drugs administered or dispensed to people with Medicare increase faster than the rate of inflation. In addition, people with Medicare may pay a lower coinsurance for some Part B drugs if the drugs’ prices increase faster than the rate of inflation.

Today, the Centers for Medicare & Medicaid Services (CMS) released revised guidance detailing key requirements and procedures for calculating rebates and invoicing manufacturers that owe rebates to Medicare under the Medicare Prescription Drug Inflation Rebate Program for certain drugs covered under Medicare Part B and Part D. CMS also released the list of 48 prescription drugs for which Part B beneficiary coinsurances may be lower between January 1, 2024 – March 31, 2024. Some people with Medicare who take these drugs may save between $1 and $2,786 per average dose starting January 1, 2024, depending on their individual coverage.

“The Inflation Reduction Act is making health care and prescription drugs more affordable while improving the sustainability of the Medicare program,” said CMS Administrator Chiquita Brooks-LaSure. “The Medicare Prescription Drug Inflation Rebate Program is an important tool to discourage excessive price increases and protect people with Medicare, and today’s revised guidance for the Inflation Rebate Program finalizes key requirements and outlines the process by which CMS will calculate and invoice inflation rebates beginning in 2025.”

When drug companies of certain drugs covered under Medicare Part B and Part D raise prices at a rate that exceeds the rate of inflation, these drug companies will pay rebates to the Medicare Trust Fund under the Medicare Prescription Drug Inflation Rebate Program. CMS will issue invoices to drug companies for these rebates starting in 2025, including for years 2022, 2023, and 2024. The Part D inflation rebate period began on October 1, 2022, and the Part B inflation rebate period began on January 1, 2023. In addition, CMS will continue to apply lower beneficiary coinsurances for certain Part B drugs if prices increase faster than inflation. Including the drugs announced today, CMS has lowered coinsurance for 64 drugs and biologicals.

CMS issued initial guidance on the Medicare Prescription Drug Inflation Rebate Program in February 2023 and voluntarily sought public comment on key topics. The agency received and analyzed more than 90 comments on the initial guidance from consumer and patient groups, drug companies, and other interested parties.

CMS gathered feedback on how best to address challenges drug companies are facing due to likely or actual drug shortages and severe supply chain disruptions, particularly for events outside of their control, and provides for appropriate reduced rebate amounts consistent with the Inflation Reduction Act. The revised guidance also includes guardrails to minimize incentives for drug companies to remain on a shortage list, delay resolving a severe supply chain disruption, or maintain a situation in which a generic drug would be at risk of shortage in order to avoid paying an inflation rebate. While the inflation rebates do not apply to multi-source generic drugs, which are the drugs most likely to be in shortage, the revised guidance provides a greater rebate reduction for Part D sole-source generic drugs as well as Part B and Part D plasma-derived products in shortage.

“Today’s guidance strikes a balance between discouraging large price increases by drug companies and providing appropriate relief to drug companies experiencing shortages or severe supply chain disruptions,” said Dr. Meena Seshamani, M.D., Ph.D., CMS Deputy Administrator and the Director of the Center for Medicare. “Our goal at CMS is to make sure drugs are more affordable and accessible, which includes helping to safeguard and ensure that the pharmaceutical supply chain can deliver critical medicines to providers and patients.”

Key dates for implementing the Medicare Prescription Drug Inflation Rebate Program include:

• October 1, 2022: Began the first 12-month period for which drug companies will be required to pay rebates to Medicare for raising prices that outpace inflation on certain Part D drugs.
• January 1, 2023: Began the first quarterly period for which drug companies will be required to pay rebates for raising prices that outpace inflation on certain Part B drugs.
• April 1, 2023: Some people with Traditional Medicare and Medicare Advantage started paying a lower coinsurance for certain Part B drugs with prices increasing at a rate faster than inflation.
• 2025: CMS intends to send the first invoices to drug companies for the rebates owed.

View a fact sheet on the Medicare Prescription Drug Inflation Rebate Program revised guidance.

Read the Medicare Part B Prescription Drug Inflation Rebate revised guidance.

Read the Medicare Part D Prescription Drug Inflation Rebate revised guidance.

The lower Part B coinsurance on the list of drugs will be in effect from January 1, 2024, to March 31, 2024. This coinsurance adjustment applies to certain drugs and biologicals paid under Medicare Part B. The Part B drugs impacted by this coinsurance adjustment may change quarterly.

More information about these 48 Part B drugs and biological products can be found in the quarterly Average Sales Price (ASP) public files, available here. A fact sheet is available here.

View an ASPE fact sheet on prescription drugs with reduced coinsurances in 2023.

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