Medicare sets next tranche of drugs to face price hike penalties
09 Jun 2023
Dive Brief:
The Biden administration on Friday said it will levy penalties on the manufacturers of 43 prescription drugs for increasing prices within Medicare faster than inflation, flexing new powers granted to it under last year’s Inflation Reduction Act.
As a result, Medicare beneficiaries will pay lower coinsurance rates for those 43 Part B medicines next quarter. The new list is larger than an initial slate of 20 published in March for last quarter, the first period in which the Centers for Medicare and Medicaid Services could lower coinsurance as a result of the law.
Many of the drugs included are older medicines, including heparin-based anticoagulants, anti-infectives and immunoglobulins. But the 43 drugs named Friday also include several cancer treatments from Amgen and Seagen, and AstraZeneca’s new asthma injection.
Dive Insight:
The IRA gave the U.S. government the power, for the first time, to negotiate the prices of certain top-selling medicines in Medicare, a provision that’s been fiercely attacked by the pharmaceutical industry. Earlier this week, Merck & Co. sued the government over the law, describing the set-out process as more akin to “extortion” rather than a good-faith negotiation.
But the IRA also gave the government other drug pricing powers, including the ability to fine companies for excessive price hikes in Medicare. Drugmakers must pay a rebate if they increase the cost of their products faster than inflation. Based on those adjustments, CMS can lower the out-of-pocket costs for Medicare beneficiaries on those drugs.
According to the agency, people who take any of the 43 fined drugs could pay between $1 and $449 less per average dose, beginning next quarter. The lower coinsurance rates announced Friday will be in effect from July through September 30.
The expected consumer savings, while in some cases small, are being touted by the Biden administration as evidence the IRA will help to bring down drug costs and curb manufacturers’ incentives to raise prices.
“The Medicare Prescription Drug Inflation Rebate Program is a critical way to address long-term price increases by drug companies, and CMS is continuing our work to make prescription drugs more affordable for people with Medicare,” said CMS Administrator Chiquita Brooks-LaSure in a statement.
Last quarter, CMS cut coinsurance on 20 drugs, trimming an initial list of 27 after recalculating the products’ average sales price. All but two of those 20 medicines remain on the slate announced Friday.
Drugmakers will be invoiced beginning in 2025 for the relevant rebates this year and next.
The U.S. Department of Health and Human Services also on Friday released a new report showing that Medicare Part B accounted for about 27% of overall Medicare drug spending in 2021. Of that amount, spending was concentrated on relatively few medicines — the top 20 drugs accounted for 53% of spending, according to the report.
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