Drug Price Hikes Exceeding Inflation Tapped for Medicare Rebates

Drug companies that raised the price of 48 prescription medications used by more than 750,000 seniors could be forced to pay rebates to Medicare in the first quarter of 2024, the Biden administration announced Thursday.

The price hikes violate terms of the Inflation Reduction Act, which requires companies to reimburse Medicare when the price of “Part B” drugs, which are administered in doctor’s offices and hospital settings, increase faster than the rate of inflation.

The inflation rebate applies to Medicare single-source Part B drugs and biological products, including some biosimilar biological products.

President Joe Biden will make the announcement during a visit on Thursday to the National Institutes of Health Clinical Center near Washington. It will mark the fourth quarterly update of Part B drugs subject to the inflation rebate provision.

Thursday’s announcement is the latest in the administration’s continuing push to make prescription drugs more affordable. The IRA gave Medicare the authority to negotiate drug prices with pharmaceutical companies. It also capped the cost of insulin at $35 for Medicare beneficiaries, saving an estimated 1.5 million seniors $500 on average in 2023.

In January, Medicare beneficiaries who use the 48 drugs will have lower coinsurance payments, and their out-of-pocket costs could decrease by anywhere from $1 to $2,786 per average dose, depending on the medication.

Among the drugs targeted for inflation rebates are: Leadiant BioSciences’ Abelcet drug for fungal infections; Amgen’s osteoporosis drug, Prolia; Dr. Reddy’s multiple myeloma treatment, Bortezomib; and Teva’s Fosaprepitant for treatment associated with chemotherapy.

“Seniors are benefiting from the fact that companies will slow their prices because they will want to basically avoid the rebate itself,” said Neera Tanden, White House Domestic Policy Advisor, during a call with reporters on Wednesday.

“We blazed a trail to transform how much people with Medicare pay for their prescriptions,” Chiquita Brooks-LaSure, administrator for the Centers for Medicare & Medicaid Services, said in the same call.

“CMS is tackling the cost of prescription drugs and delivering meaningful savings to people across this country,” Brooks-LaSure said.

PBM Letter

The CMS also sent a letter Thursday to pharmacy benefit managers, Medicare Part D plans, Medicaid Managed Care plans, and private insurance plans after hearing concerns about practices threatening pharmacies and health care providers.

The CMS encouraged PBMs and insurers to engage in sustainable and fair practices with all pharmacies, make necessary cash flow arrangements with network pharmacies, and to check their processes and systems to ensure they are providing full coverage, without cost sharing, of preventive services, as required by law, according to the letter.

The letter comes as the agency encourages the public to get vaccinated against influenza, Covid-19, and RSV, with CMS expressing concern about the “payment practices that may impede access to recommended vaccinations.”

The agency’s finalized rule (RIN 0938-AU30) for beneficiaries in private Medicare Advantage plans and Medicare Part D prescription drug plans will require Part D plans to apply all price concessions they receive from network pharmacies at the point of sale, which should reduce beneficiary cost-sharing.

The policy will take effect on Jan. 1, 2024.