The Department of Health and Human Services (HHS) announced a highly-anticipated initial list of drugs that will be subject to price negotiation between the Centers for Medicare & Medicaid Services (CMS) and drug manufacturers. The Inflation Reduction Act of 2022 requires HHS to negotiate directly with participating manufacturers of selected drugs covered under a Medicare Part D plan (including a Medicare Advantage Prescription Drug plan under Medicare Part C) and, eventually, Medicare Part B.  LeadingAge will prepare a longer article summarizing how CMS intends to implement this program, but for today we wanted to share some high-level information with members:

What are the goals of the program?  The goals are to increase accessibility and affordability of prescription drugs for Medicare enrollees, including a reduction of out-of-pocket costs for beneficiaries, reduce the rate of growth in Medicare drug spending, and improve the financial sustainability of the Medicare program as a whole.

What drugs qualify for price negotiation? The law authorizes Medicare to directly negotiate drug prices for certain high expenditure, single-source Medicare drugs covered under either Part B or Part D, and only drugs for which there is no generic or biosimilar competition.  Members need to note that Medicare Part A drugs are not specified to be part of this program.

This Fact Sheet identifies the 10 Part D drugs selected for the first phase of the program and how CMS arrived at its decision.  These selected drugs accounted for about 20% of total Part D gross covered prescription drug costs between June 1, 2022, and May 31, 2023, which is the period used to determine which drugs were eligible for negotiation.

When will negotiations begin and when will the established prices take effect? Oct. 1, 2023, is the deadline for participating companies that manufacture the 10 Part D drugs initially selected for the negotiation program for 2026 to choose whether to sign agreements to participate in the negotiation.  The manufacturers of selected drugs that wish to do business with Medicare and Medicaid will be required to participate or face financial penalties. The negotiation period will end Aug. 1, 2024, and the negotiated maximum prices for these 10 drugs will be effective in 2026.

It remains to be seen whether all will go according to CMS’s plan, however, because several manufacturers, including several who make a drug that CMS selected for the initial list, as well as the U.S. Chamber of Commerce, have filed lawsuits challenging the legality of the negotiation program.

Will the program expand to include other Part D and Part B drugs?  Yes.  In future years, CMS will select for negotiation up to 15 more drugs covered under Part D for 2027, up to 15 more drugs for 2028 (including drugs covered under Part B and Part D), and up to 20 more drugs for each year after that, as outlined in the Inflation Reduction Act.