The Biden administration on Wednesday began fleshing out how it will implement drug-pricing provisions in the Inflation Reduction Act, including a multi-step negotiation process for selected Medicare drugs starting next year.
Why it matters:
The law gave the administration discretion to work out many details of the first-ever drug price talks, which will initially cover 10 Part D drugs for which there’s no generic competition.
Details:
The guidance envisions the Centers for Medicare and Medicaid Services accepting one counteroffer from the manufacturer and holding one to three in-person or virtual meetings with the company before settling on a “final maximum fair price offer.” Negotiations would end by Aug. 1, 2024.
- The negotiated price would become effective in 2026. Companies that don’t comply will be hit by an excise tax.
What they’re saying:
“By considering factors such as clinical benefit and unmet medical need, drug price negotiation intends to increase access to innovative treatments for people with Medicare,” CMS administrator Chiquita Brooks-LaSure said in a statement.
The administration earlier on Wednesday identified 27 drugs that will trigger penalties on their manufacturers under a separate part of the IRA for having prices that rose faster than inflation. Those inflation rebates on will take effect in April.
- The medicines included AbbVie’s blockbuster anti-inflammatory drug Humira and the CAR-T cancer treatment Yescarta from Gilead.
- CMS said Medicare recipients with Part B coverage who take the drugs could save between $2 and $390 per average dose starting April 1, depending on their circumstances.
The other side: “Despite the rhetoric we always hear, the administration’s own report shows that prices for the vast majority of Part B medicines are not skyrocketing,” said Brian Newell, spokesperson for the big drug industry trade group PhRMA.
Frequently Asked Questions (FAQ)
What is Medicare drug price negotiation?
Medicare drug price negotiation is a new process created under the Inflation Reduction Act. It allows the federal government to negotiate directly with drug manufacturers to lower the cost of certain prescription medicines for Medicare beneficiaries.
When will Medicare negotiated drug prices take effect?
The first negotiated prices are scheduled to take effect in 2026. The Centers for Medicare and Medicaid Services (CMS) plans to complete negotiations by August 1, 2024.
Which drugs are included in the first round of negotiations?
Initially, Medicare will negotiate prices for 10 Part D prescription drugs that do not have generic alternatives. CMS will announce the official list before negotiations begin.
How does the Medicare drug negotiation process work?
CMS will review manufacturer offers, accept one counteroffer, and hold one to three meetings-either virtual or in person. After reviewing clinical benefits and unmet medical needs, CMS will propose a maximum fair price for each drug.
What happens if drug companies refuse to participate?
Manufacturers that fail to comply face a significant excise tax. This penalty encourages participation and supports the goal of lowering prescription costs.
Will Medicare beneficiaries save money?
Yes. Medicare recipients using certain Part B drugs could save between $2 and $390 per dose, depending on the medication and personal coverage. Additional savings may occur as more drugs enter negotiations.
What are inflation rebates under the Inflation Reduction Act?
Inflation rebates require drug companies to pay penalties if they raise prices faster than inflation. CMS recently identified 27 drugs subject to these rebates, which begin in April.
Does this affect both Part B and Part D drugs?
Yes. While negotiations focus on Part D drugs, inflation penalties apply mainly to Part B medications. Both measures aim to reduce out-of-pocket costs for Medicare patients.
Why is this change important for seniors?
High prescription costs often strain fixed incomes. Medicare drug negotiations aim to improve access to treatments, reduce financial pressure, and make healthcare more affordable for older Americans.
