HHS Outlines Timeline for Medicare Drug Benefits in the Inflation Reduction Act

WASHINGTON — The Inflation Reduction Act has a lot of moving parts when it comes to healthcare, but Medicare beneficiaries will start seeing some benefits from it as early as next year, HHS officials said Thursday.

On January 1, 2023, the $35 cap for a month’s supply of a covered insulin product in Part D, and the $0 out-of-pocket copay for recommended vaccines goes into effect, Meena Seshamani, MD, PhD, director of the Center for Medicare, told MedPage Today at a press briefing at HHS headquarters here.

That vaccine provision will be a real “game-changer” for beneficiaries who would otherwise have to pay out of pocket for expensive vaccines such as the shingles vaccine, said CMS Administrator Chiquita Brooks-LaSure. “A couple of weeks ago I was with beneficiaries, talking and hearing about what a difference that will make.”

On Sept. 1, 2023, Medicare will announce the first 10 drugs whose prices it will negotiate under the Medicare drug price negotiation provision of the new law, Seshamani continued. A year later, in September 2024, HHS will publish the maximum fair price that has been negotiated for the 10 drugs, and in 2025, the $2,000 out-of-pocket cap for beneficiaries’ drug costs in Medicare Part D and Medicare Advantage will take effect. Finally, in 2026, the negotiated price for the first 10 drugs will actually be implemented.

When it comes to the drug price negotiations, “We want to be as transparent as possible,” HHS Secretary Xavier Becerra said at the briefing. “We want people to look at this process, and at the end of the day, we want to see it grow, because right now it’s limited to Medicare … We want to prove it can be done, and transparency will be one of the pillars of the program.”

The IRA’s drug price negotiation provisions set out very specific criteria for which drugs Medicare will be able to negotiate prices for. For example, the list includes single-source small-molecule drugs with no generic competition — but only if the drug was approved more than 7 years ago. Similarly, Medicare also may negotiate prices for biologics with no marketed biosimilar, but only if the biologic was approved more than 11 years ago. Asked by MedPage Today whether HHS had concerns about the strictness of the criteria, Becerra said only: “We’re always happy when Congress gives us more work and lets us do something we’ve been wanting to do.”

Drug companies that refuse to accept the price negotiated by Medicare have a choice: Pay an excise tax on sales of all of their products — not just those they sell to Medicare beneficiaries — that starts at 65% and increases to 95% depending on how long they don’t comply with the negotiated price. Or, they can withdraw all of their products from both the Medicare and Medicaid programs.

Becerra was asked about a comment by Sen. Mike Lee (R-Utah) that this sort of “price control” could lead to drug shortages. “First, this isn’t price control,” Becerra said. “Secondly, I think we understand that the [first 10] drugs that would probably be covered are drugs that are not only important to the Medicare recipient, but to the industry that produces them. So what I think we’re going to find is true competition in the pricing of those medications that are used by Medicare recipients. What it should do is help drive down the cost of these drugs … There’s no reason why we should see a shortage of a drug when, in fact, it’s already being sold for less in other parts of the world.”

The secretary was also asked whether the price negotiation provision would result in new drugs being put on the market at very high prices, such as a recently approved amyotrophic lateral sclerosis drug that will cost an estimated $150,000 per year. “I think Americans are accustomed to having new drugs come in at very high prices,” said Becerra. “And that may be the best reason to have the ability for 65 million people to say, ‘Let’s get the best price.’ In other parts of the world, they’re getting a better price, so there’s no reason why we shouldn’t try to get a better price as well.”

He suggested it was up to the pharmaceutical firms to explain why their drugs are often priced so high initially.

Even with new tools like price negotiation and a requirement for drugmakers to pay Medicare a rebate if their prices rise higher than inflation, “does anyone believe that a drugmaker wants to leave the American market?” he asked. “Does anyone believe that a sure payment that comes out of Medicare is something that any vendor wants to give up? If there’s a more reliable market, more lucrative market, please point it out to me.”

“I don’t think you’re going to see a whole bunch of folks abandoning the American market when it comes to drugs, because we’re good payers,” he added. “We have a pretty solid track record of paying our bills. And at the same time, we probably utilize prescription medication at a higher rate than most. So it’s just a matter of making sure we get it right.”