Drug-makers are also required to give rebates to CMS for Medicare-covered brand-name drugs with no generic equivalents that cost $100 or more per year/per person, if prices increase faster than inflation.

By Al Norman

On Aug. 16, President Joe Biden signed into law the Inflation Reduction Act (IRA), which rose from the ashes of the Build Back Better Act (BBBA), a bill that failed to pass in 2021 after it could not gather enough support in the Senate.

The BBBA was replaced with a new legislative draft in 2022, including several sections on Prescription Drug Pricing Reform of interest to the 61.55 million Americans on Medicare.

According to Congressional Research Service, the IRA requires the Centers for Medicare & Medicaid Services (CMS) to negotiate the prices of certain prescription drugs under Medicare — but not until 2026. In its first year, the law will cover only 10 brand-name drugs that don’t have other generic equivalents, and which account for the greatest Medicare spending. In 2027 and 2028, maximum prices for 15 drugs will be covered, then 20 drugs in 2029 and each year thereafter. Drug-makers must comply with negotiated caps on prices, and will receive civil penalties and pay excise taxes if they do not follow pricing negotiations.

Drug-makers are also required to give rebates to CMS for Medicare-covered brand-name drugs with no generic equivalents that cost $100 or more per year/per person, if prices increase faster than inflation.

Starting in 2024, the law eliminates Medicare beneficiary cost-sharing above the out-of-pocket spending limit on prescription drugs, and in 2025 it caps the annual out-of-pocket spending at $2,000, with annual adjustments in years after 2025. Also starting in 2025, drug companies must provide discounts to Medicare beneficiaries who incur costs exceeding the annual deductible. The IRA also creates a process beginning in 2025 that allows certain Medicare beneficiaries to have their monthly out-of-pocket costs capped, and paid for on a monthly basis.

The IRA also eliminates cost-sharing under the Medicare drug benefit for adult vaccines recommended by the Advisory Committee on Immunization Practices, and mandates coverage of such vaccines — with no cost-sharing — under Medicaid. The new law caps cost-sharing for a month’s supply of Medicare-covered insulin products at $35 for 2023 2024, and 2025. (A provision to limit monthly insulin copays for people with private insurance did not receive the 60 votes needed to remain in the bill.) Beginning in 2026, monthly insulin cost-sharing is capped at $35, or 25 percent of the government’s negotiated price, or 25 percent of the plan’s negotiated price, whichever is less.

But don’t start counting your savings yet. Fierce Pharma, which describes itself as “the pharma industry’s daily monitor,” warns: “The drug price measures will only take effect once the U.S. Department of Health and Human Services rolls out regulations on their execution. At that point, pharma companies would be free to sue.

It isn’t so much a question of if drugmakers will mount a legal counterpunch to the legislation, but when and how.” The drug companies could  sue to challenge the law, try to weaken the rulemaking process, sue CMS when it publishes regulations, and try to look for loopholes or work-arounds in the final negotiations. The drug industry “has a long history of leveraging patent thickets, pay-for-delay agreements, product hopping and more to keep hold of their product monopolies.”

The Pharmaceutical Research and Manufacturers of America (PhRMA) said the IRA is “a tragic loss for patients. This drug pricing plan is based on a litany of false promises…the bill gives the government unchecked authority to set the price of medicines [and] will lead to fewer new cures and treatments for patients battling cancer, Alzheimer’s and other diseases.” PhRMA added: “this bill provides almost no relief to millions of individuals trapped in an insurance system that discriminates against sick patients. Under this bill patients will still be forced to pay more for medicine than their insurance company pays.”

An analysis by the Kaiser Family Foundation of the drug benefits contained in the IRA concluded that the new law is “expected to lower out-of-pocket spending by people with Medicare and lower drug spending by the federal government. Prior to consideration by the Senate, Congressional Budget Office (CBO) estimated the prescription drug provisions would reduce the federal deficit by $288 billion over 10 years…A cap on out-of-pocket drug spending for Medicare Part D enrollees will provide substantial financial protection to people on Medicare with high out-of-pocket drug costs.”

That’s good news for a substantial number of elders. Next session of Congress we will fight for more gains.

Al Norman worked in the elderly home care field in Massachusetts for nearly 4 decades. He has been writing op-ed pieces for the FiftyPlus Life for almost as long.