USA —The US Centers for Medicare and Medicaid Services (CMS) has published a list of 27 prescription drugs whose manufacturers will be penalized for exceeding the inflation rate with their pricing.
This action, which includes drugs like AbbVie’s Humira, Gilead Sciences’ Yescarta, Pfizer’s Fragmin, and Seagen’s Padcev, is expected to reduce Medicare beneficiaries’ out-of-pocket costs by US$2 to as much as US$390 per average dose.
The federal Inflation Reduction Act (IRA) introduced a provision last year that penalizes pharmaceutical companies for charging prices that increase faster than inflation for those aged 65 and over or with disabilities who are on the government’s Medicare health program.
The White House domestic policy adviser, Susan Rice, stated that “starting on April 1, Medicare beneficiaries will pay lower coinsurance for Part B drugs that raise prices faster than inflation.”
The list of drugs will be updated every quarter, and companies whose products are flagged will be required to pay Medicare the difference in the form of a rebate.
The White House fact sheet noted that the coinsurance adjustment rates for the 27 drugs ranged from approximately 14% to 20%. Companies that fail to pay the rebate will be subject to a penalty equal to 125% of the rebate amount.
While invoices may not be received until 2025, the Health and Human Services Secretary, Xavier Becerra, confirmed that the list of Part B drugs slated for rebates will be updated quarterly “from here on out.”
Medicare beneficiaries will begin seeing lower coinsurance for the 27 prescription drugs as early as next month.
Included in the list of drugs subject to penalties are Gilead’s Tecartus, Johnson & Johnson’s Rybrevant, Bausch Health’s Xipere, Helsinn’s Akynzeo, Leadiant Biosciences’ Abelcet, and Partner Therapeutics’ Leukine, along with four additional Pfizer products: Atgam, Nipent, Bicillin L-A, and Bicillin C-R.
Although the immediate impact on drugmakers appears to be minimal, Wells Fargo analyst Mohit Bansal believes the announcement sends a signal to the industry that the government is serious about curbing drug price increases.
He suggested that drug companies may become more cautious about raising prices as a result. From 2019 to 2020, half of all drugs covered by Medicare saw price increases that outpaced the 1% inflation rate for that year, with a third of those having price hikes of over 7.5%.
The announcement comes on the heels of Eli Lilly and Novo Nordisk’s recent announcement that they would lower prices for some of their insulin products.
Furthermore, the IRA empowers Medicare to negotiate lower prescription drug prices for its beneficiaries.
At the same time, CMS released draft guidance on how it will conduct this negotiation process. By September 1, the agency plans to publish the first 10 Medicare Part D drugs that will be subject to government price negotiations beginning in 2026.
Affected drugmakers must submit specific data on their product’s R&D costs and other information to Medicare by October 2.
Negotiated maximum fair prices for these drugs will be published by September 2024, and these prices will take effect at the beginning of 2026.
In subsequent years, CMS will select up to 15 more Part D drugs for 2027, up to 15 more Part B or Part D drugs for 2028, and up to 20 more Part B or Part D drugs for each year thereafter, in accordance with IRA legislation.
Medicare Part D covers most at-home medications, while Part B generally covers drugs administered in a doctor’s office.
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