August 16, 2023 marked the one-year anniversary of the Inflation Reduction Act of 2022 (IRA) being signed into law by President Biden. As outlined in a previous CMA Alert (March 2, 2023), the IRA law includes historic prescription drug provisions that are already providing significant benefits for Medicare beneficiaries – and is set to add more in the future.
Note that the Part D changes also generally apply to Medicare Advantage plans that provide Part D prescription drug coverage, known as Medicare Advantage Prescription Drug (MA-PD) plans. The following is a summary of some of the drug provisions in the law.
- Allows Medicare to negotiate with drug manufacturers for the price of some Part D and Part B drugs (negotiated prices effective in 2026);
- Caps beneficiary out-of-pocket Part D drugs costs at $2,000 per year (starting in 2025 – also allows spreading of costs over course of the year, aka “smoothing”); in 2024, the 5% coinsurance for Part D catastrophic coverage will be eliminated);
- Imposes checks on the annual rise in costs of drugs and Part D premiums (limitations on drug prices started in 2023, and limitations on Part D premiums start in 2024);
- Limits monthly out-of-pocket copays for insulin to $35 (started in 2023);
- Eliminates cost-sharing for adult vaccines covered under Part D (started in 2023); and
- Expands access to the Part D Low-Income Subsidy (“LIS or Extra Help”) (starting in 2024) – full LIS up to 150% of the Federal Poverty Level (FPL) with higher resource limits.
While the IRA drug provisions are already saving Medicare beneficiaries money, the provisions taking effect in 2026 allowing the Medicare program to negotiate the prices for certain drugs are projected to yield the largest amount of savings to the Medicare program itself. The negotiation process relating to what Medicare will pay for these drugs – a limited number of high-cost drugs with no competition (single source brand name biologics without therapeutically equivalent generic or biosimilar alternatives) and that have been on the market for a number of years (7 years for small molecule, or 11 years for biologics) – are also the target of the pharmaceutical industry. Several pharmaceutical manufacturers and Chambers of Commerce have already filed lawsuits attempting to block the drug negotiation provisions (see, e.g. Georgetown’s O’Neil Institute legislation tracker, here).
The IRA drug provisions are a welcome and needed threat to business as usual for the drug industry. A new factsheet from Families USA titled “The Reality of Prescription Drug Innovation: Drug Manufacturers Limit Innovation to Protect Patents and Profits” by Bailey Reavis and Hazel Law (Aug 8, 2023) highlights how the drug industry has operated up until now: “Too often, big drug companies use their immense profits to protect their drug patents — a move that ensures they do not face legitimate price competition and allows them to continue to price gouge millions of Americans who rely on prescription drugs.”
The critical negotiation provisions – as well as the rest of the IRA – must be implemented as intended, and even strengthened. As noted by the Center for American Progress in a recently published article titled “Medicare Drug Price Negotiation Will Help Millions of Seniors and Improve Health Equity” by Gillian Tisdale and Nicole Rapfogel (Jul 17, 2023), we can’t afford to let the drug industry limit Medicare’s ability to rein in excessive drug costs:
Medicare drug price negotiation will help Black and Latino people, women, LGBTQI+ people, disabled people, and others who often have trouble affording medications. Significant potential savings that accompany Medicare negotiations enabled by the Inflation Reduction Act will compound as more drugs are subject to negotiation each year. Medicare enrollees can expect improved access to and affordability of prescription drugs for years to come.
Additional Resources re: IRA Drug Provisions:
- Centers for Medicare & Medicaid Services (CMS)
- Medicare.gov webpage about the IRA changes
- New Medicare Part D Vaccines Benefit article
- New Medicare Part D Vaccines Benefit postcard for printing/posting/sharing
- Note that CMS has issued an information collection request (ICR) for the revised drug price negotiation process. CMS invites public comments on the data and information the federal government will collect for consideration if a Primary Manufacturer submits a counteroffer for a selected drug during the negotiation process. The ICR is open for public input for 30 days. The comment period will close August 24, 2023.
- Office of Assistant Secretary for Planning and Evaluation (ASPE):
- “Inflation Reduction Act Research Series: Medicare Part D Enrollee Out-of-Pocket Spending: Recent Trends and Projected Impacts of the Inflation Reduction Act” (July 6, 2023)
- State Fact Sheets: Impacts of the IRA and ACA on Lowering Health Care Costs: https://www.aspe.hhs.gov/reports/state-fact-sheets-impacts-ira-aca-lowering-health-care-costs