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August 5, 2022
Prescription Drug Pricing Reform Section of the Inflation Reduction Act of 2022
In July, the Senate Finance Committee released the legislative text here of the Prescription Drug Pricing Reform section of the Inflation Reduction Act of 2022. This is a bill that includes changes that would allow the government to negotiate drug prices and would reform the Medicare Part D benefit. The bill has changes that are similar to what was incorporated within the Build Back Better Act but also has some changes designed to get the votes needed to pass in the Senate. If this bill becomes law as currently drafted, some of the changes outlined below would significantly impact the Medicare Part D program with regards to drug costs, benefit administration, and enrollee premiums.
1. Drug Changes
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Drug Price Negotiation – Starting in 2026, 10 applicable drugs (top-spending brands and biologic drugs) would be selected and open for negotiation. The number of drugs would increase in following years and expand to include Part B drugs in 2028.
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Drug Price Increase – Starting in 2023, a rebate would be imposed on drug manufacturers who increase their drug price faster than the inflation rate. 2021 would be used as the benchmark year to determine price changes.
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Rebate rule – Repeals the Trump administration’s drug rebate rule which would apply rebates at the point-of-sale.
2. Part D Benefit Changes
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Eliminate cost-sharing above the out-of-pocket threshold – Starting in 2024, the enrollee cost-share (5%) would be eliminated above the True Out-of-Pocket threshold (TrOOP) or the catastrophic benefit. Starting in 2025, the Part D benefit would have a $2,000 out-of-pocket maximum spending cap.
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Drop in Reinsurance - Starting in 2025, the CMS reinsurance will decrease from 80% down to either 20% for applicable (i.e., branded) products and 40% for non-applicable (i.e., generic) products. This change will increase the plan liability for any products above the out-of-pocket maximum.
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Manufacture Discount Program - Starting in 2025, a new manufacture discount program will be established to apply a 10% discount before the out-of-pocket maximum and 20% after the out of-pocket maximum. There will also be a phased-in approach for certain drugs dispensed to low-income enrollees.
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Part D Vaccines – Starting in 2023, vaccines covered by the Part D benefit would be available to enrollees with no cost-share.
3. Premium Changes
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Limiting Premium Increase – Between 2024 – 2029, premiums will not be allowed to increase beyond 6% annually.
It is important to note that this bill hasn’t yet passed the Senate, though a vote may occur soon. It will require unanimous consensus among Senate Democrats to pass. If passed by the Senate, the House will have to reconvene in August and hold a vote on the bill. So, final passage of the bill is still an uncertainty. If this bill becomes law as currently drafted, the changes noted above along with several other changes outlined within the bill are likely to have a significant impact to the Medicare Part D benefit. BluePeak will continue to monitor the progress of this legislation.
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