Medicare Takes on Drug Price Increases

The program aims to lower drug costs and improve affordability for Americans with Medicare.

The Centers for Medicare & Medicaid Services (CMS) has released initial guidance on the Medicare Prescription Drug Inflation Rebate Program, and is seeking public comment on key topics, including how to determine the number of drug units for rebate-able drugs, reducing rebate amounts for certain Part B and Part D rebate-able drugs in cases of supply shortages or disruptions, imposing civil monetary penalties on manufacturers that fail to pay rebates, ensuring accuracy of rebate payments, and other related areas. The public’s input will help shape the program’s final regulations and implementation.

The new Program will require drug companies to pay rebates to the Medicare Trust Fund if their brand-name prescription drug prices increase faster than the rate of inflation for certain drugs dispensed to people with Medicare, as part of President Biden’s Inflation Reduction Act. The U.S. Department of Health and Human Services (HHS) has announced the next steps for implementing the program, and CMS has released initial guidance on the requirements and procedures for the program, which will lower drug costs for millions of Americans.

Brand-name drugs account for 80 percent of all prescription drug spending, and increased spending per prescription has been a primary driver. By requiring rebates for price increases above inflation for drugs already on the market, the program aims to lower drug costs and improve affordability for Americans with Medicare.

Comments received by March 11 will be considered for the revised guidance. CMS anticipates issuing revised guidance later in 2023.