Drug companies will pay rebates to Medicare for raising prescription drug prices faster than the rate of inflation.
The Centers for Medicare & Medicaid Services (CMS) today issued revised guidance outlining 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.
The agency 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 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,” said CMS Administrator Chiquita Brooks-LaSure in an announcement.
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, CMS said 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 the 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 said it 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 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.
For more information, see the CMS fact sheet, Medicare Part B guidance, and Medicare Part D guidance.