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Biden-Harris Administration Releases New Guidance on the Medicare Prescription Drug Inflation Rebate Program

The Biden-Harris Administration is continuing its efforts to lower prescription drug costs in America with the release of new guidance from the Department of Health and Human Services (HHS) outlining the implementation of the new Medicare Prescription Drug Inflation Rebate Program. This new program, part of the Inflation Reduction Act passed in August 2022, will require drug companies to pay rebates to the Medicare Trust Fund for raising prices that outpace inflation on certain Part D and Part B drugs, while also capping monthly Medicare Part D beneficiary costs at $2,000 a month and insulin costs at $35 a month.

Any price increase that is higher than inflation, particularly for more expensive brand-name medications, will be eligible for the new rebate program. It also applies to single-source, biologic, biosimilar and generic drugs in Part D and single-source or biologics, including some biosimilars, for Part B. CMS is specifically seeking public comment on the process to determine the number of drug units for rebatable drugs; reduction of rebate amounts for certain Part B and Part D rebatable drugs in shortage and in cases of severe supply chain disruptions; the process to impose civil monetary penalties on manufacturers of Part D drugs that fail to pay rebates; and assuring accuracy of the inflation rebate payments.[0]

In addition to the rebates, the program also provides Medicare Part B beneficiaries with lower coinsurance for certain drugs.[1] HHS Secretary Xavier Becerra declared that it is unacceptable for Americans to be paying double or even triple the amount for the same drugs as people in other countries.[2] The Biden Administration is devoted to reducing healthcare costs, and we are seeing positive outcomes with the passage of the Inflation Reduction Act. We are taking a stand against the unjustly high costs of prescription drugs, and now drug companies that elevate their prices at a rate higher than inflation will be required to pay refunds to the Medicare Trust Fund.

The first invoices to drug companies for the rebates will be sent in September 2025, while the first 12-month period began in October 2022, and the first quarterly period began in January 2023.[1] CMS is also giving Medicare the power to negotiate for lower prices on a small subset of drugs starting in 2026.[3] Those who fail to pay the rebate will face a penalty equaling 125% of the rebate amount.[0]

0. “CMS Releases Guidance on the Math Behind Part B, Part D Drug Rebates” AJMC.com Managed Markets Network, 10 Feb. 2023, https://www.ajmc.com/view/cms-releases-guidance-on-the-math-behind-part-b-part-d-drug-rebates

1. “HHS Releases Initial Guidance for Medicare Prescription Drug Inflation Rebate Program” EIN News, 9 Feb. 2023, https://www.einnews.com/pr_news/616165361/hhs-releases-initial-guidance-for-medicare-prescription-drug-inflation-rebate-program

2. “CMS Unveils Guidance, Timeline for Medicare Drug Inflation Rebates” HealthLeaders Media, 9 Feb. 2023, https://www.healthleadersmedia.com/pharma/cms-unveils-guidance-timeline-medicare-drug-inflation-rebates

3. “HHS releases new guidance implementing key Medicare drug rebate program” FierceHealthcare, 10 Feb. 2023, https://www.fiercehealthcare.com/payers/hhs-releases-new-guidance-implementing-key-medicare-drug-rebate-program