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August 15, 2022
Prescription Drug Pricing Reform Section of the Inflation Reduction Act of 2022 - Updates from Final Bill
As of August 12th, both the Senate and House of Representatives passed the Inflation Reduction Act of 2022 (H.R. 5376) (the “Bill”). The text of the Bill is located here and includes changes that, among other things, would allow the government to negotiate drug prices and would reform the Medicare Part D benefit. After BluePeak published its summary of the Bill as it was drafted on Friday, August 5th, some additional changes were made to the version of the Bill that was ultimately passed by the Senate and the House of Representatives. A summary of the “Prescription Drug Pricing Reform” Section of the Bill that passed both the Senate and the House is set forth below, with the recent changes from the August 5th version indicated by bold, italicized text.
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 – Further delays (instead of repealing, as in earlier versions of the bill) to Year 2032 the Trump administration’s drug rebate rule, which will require plans to 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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Vaccines – Starting in 2023, vaccines that are recommended by the Advisory Committee on Immunization Practices (ACIP) would be available to enrollees at no cost-share. Also requires state Medicaid and CHIP programs to cover all approved vaccines at no cost-share to the enrollee.
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Cap on Insulin costs – Starting in 2023, limits monthly costs on insulin products to $35. This change will likely cause the Part D Senior Savings Model (SSM) to be discontinued.
3. Premium Changes
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Limiting Premium Increase – Between 2024 – 2029, premiums will not be allowed to increase beyond 6% annually.
Now that the Bill has passed the Senate and the House, it must be signed by President Biden to become law. President Biden has stated he intends to sign the Bill, so it is expected to become law in the near future.
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