Medicare Prescription Drug Inflation Rebate Program Announced by CMS

The Centers for Medicare and Medicaid Services (CMS) released the initial guidance on the Medicare Prescription Drug Inflation Rebate Program on Thursday, February 9th, 2023.[0] The new program, which was part of President Joe Biden’s 2022 Inflation Reduction Act, will require drug companies to pay rebates to the Medicare Trust Fund in cases of price increases that exceed inflation.[1] This applies particularly to brand name drugs, which make up 80% of all prescription drug spending.[2]

Under the Medicare Prescription Drug Inflation Rebate Program, CMS is seeking comments from the public 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 rebatable drugs that fail to pay rebates; and assuring accuracy of the inflation rebate payments.[3] The deadline for public comments is March 11th.[2]

The program also applies to single-source, biologic, biosimilar and generic drugs in Part D and single-source or biologics, including some biosimilars, for Part B. In addition, people with Medicare may pay a lower coinsurance for certain Medicare Part B drugs.[4]

The rebates will begin in October 2022 for Part D drugs and January 2023 for Part B drugs, with CMS sending the first invoices to drug companies in 2025.[5] Companies that don’t pay face a civil monetary penalty of $125% of the rebate amount.[3]

Health and Human Services Secretary Xavier Becerra said in a statement, “There is no reason Americans should have to pay two to three times more for the same drugs than people in other countries. This Administration is committed to lowering health care costs, and with President Biden’s Inflation Reduction Act, we are delivering results. We are fighting to rein in the excessive cost of skyrocketing prescription drug prices, and now drug companies that increase their prices faster than the rate of inflation will have to pay rebates back to the Medicare Trust Fund.”[4]

Meena Seshamani, MD, PhD, CMS Deputy Administrator and Director of the Center for Medicare, added, “Public feedback is critical to successful implementation of the new drug law.[2]

0. “Drug companies to pay rebates for prices that go higher than inflation” Healthcare Finance News, 9 Feb. 2023,

1. “HHS releases new guidance implementing key Medicare drug rebate program” FierceHealthcare, 10 Feb. 2023,

2. “CMS Unveils Guidance, Timeline for Medicare Drug Inflation Rebates” HealthLeaders Media, 9 Feb. 2023,

3. “CMS Releases Guidance on the Math Behind Part B, Part D Drug Rebates” Managed Markets Network, 10 Feb. 2023,

4. “HHS Releases Initial Guidance for Medicare Prescription Drug Inflation Rebate Program” Sierra Sun Times, 10 Feb. 2023,

5. “Medicare Drug Price Inflation Rebate Invoice Distribution Will Start In 2025, CMS Says” Pink Sheet, 10 Feb. 2023,