Global Life Sciences Update

Inflation Reduction Act: CMS Solicits Comments on Price Negotiation Program Guidance, Makes Part B Coinsurance Announcements

March 20, 2023

On March 15, the Centers for Medicare and Medicaid Services (CMS) made a series of important announcements regarding implementation of the Inflation Reduction Act (IRA). Most crucially, CMS issued new initial guidance on implementation of the Medicare Drug Price Negotiation Program (Medicare Drug Price Program), with public comments due April 14, 2023.

Notably, CMS did not issue the initial guidance through notice and comment rulemaking. Instead, CMS states that it is “voluntarily soliciting comment on certain topics” in the guidance and asserts that certain aspects of the guidance are “not subject to the notice-and-comment requirement of the Administrative Procedure Act or Medicare statute.” CMS further asserts that “to the extent that this guidance establishes or changes any substantive legal standard, CMS finds that notice and public procedure on this guidance would be impracticable, unnecessary, and contrary to the public interest.” For certain areas of the guidance, CMS states that it intends to issue revised guidance after considering the public comments received in response to this initial guidance.

CMS’s procedures may implicate the Administrative Procedure Act and add to the potential for IRA-related litigation. Stakeholders should comment on the guidance to provide feedback to CMS on implementation, as aspects of the guidance may be revised, and also to raise additional procedural and substantive issues in the event of future IRA litigation.

CMS made separate announcements about (i) the set of Medicare Part B drugs with prices increasing faster than the rate of inflation that will be subject to the IRA’s inflation-adjusted coinsurance amounts for April 1–June 30, 2023, and (ii) a report discussing estimated savings related to the elimination of cost-sharing for certain vaccines covered under Medicare Part D.

Medicare Drug Price Negotiation Program: Initial Guidance and Public Comment Opportunity

On March 15, CMS issued initial guidance regarding its implementation of the Drug Price Program established by the IRA. As discussed in prior updates, these and other IRA provisions may be subject to legal challenges.

CMS’ initial guidance on the Drug Price Program sets forth more than 90 pages of instructions specific to Medicare Part D drugs for which maximum fair prices (MFPs) will apply during initial price applicability year 2026. The guidance addresses several elements of the Drug Price Program, including (among others) identification of negotiation-eligible drugs for initial price applicability year 2026, data submission requirements for manufacturers of selected drugs, and the roles and responsibilities of CMS and manufacturers in the negotiation process. CMS states that because the IRA does not require Part B products to be subject to MFPs until initial price applicability year 2028, the March 15 guidance concerns only Part D drugs and biologicals. CMS also states that its guidance is subject to change and that additional guidance may be issued by the U.S. Department of the Treasury and the Internal Revenue Service related to the excise tax for selected drugs in the event that manufacturers fail to provide requested information.

CMS is accepting comments concerning select aspects of the guidance until April 14, 2023. CMS specifically solicits comments on the following topics:

the terms and conditions contained in manufacturer agreements, including manufacturers’ and CMS’ responsibilities (included in Section 40 of the initial guidance)
the approach for considering (a) the manufacturer-reported data elements and (b) evidence about alternative treatments (included in Section 60 of the initial guidance)
the process for the offer and counteroffer exchange between CMS and manufacturers (included in Section 60 of the initial guidance)
the content of an explanation for the MFP (included in Section 60 of the initial guidance)
the method for applying the MFP across different dosage forms and strengths of a selected drug (included in Section 60 of the initial guidance)
the dispute resolution process for specific issues that are not exempt from administrative and judicial review under Section 1198 (included in Section 60 of the initial guidance)
the processes for compliance monitoring and imposition of CMPs for violations (included in Section 90 of the initial guidance)

Interested stakeholders should review this initial guidance carefully and consider developing and submitting comments on these topics and others included in the initial guidance.

Initial Set of Part B Drugs Subject to Inflation-Adjusted Coinsurance Reductions

The IRA, as addressed more fully in prior updates, established a Medicare Inflation Rebate Program (Inflation Rebate Program) that requires drug manufacturers to pay Inflation Rebates to the federal government if the prices of their “rebatable” (as defined by statute) Medicare Part B or Part D drugs increase faster than the rate of inflation.

As part of the Inflation Rebate Program, the IRA also provides for reduced Medicare beneficiary coinsurance for individuals who receive certain Part B drugs, including physician-administered infusions and injections, if the prices of those drugs increase faster than the rate of inflation. Specifically, beginning April 1, 2023, a Medicare beneficiary’s coinsurance for a Part B “rebatable” drug subject to the coinsurance adjustment will equal 20% of an inflation-adjusted drug price.

On March 15, CMS announced 27 Part B drugs and biologicals that will have an adjusted coinsurance rate in the calendar quarter beginning April 1, 2023. The inflation-adjusted coinsurance percentages for these drugs and biologicals will range from 10.274% to 19.969%. In a Fact Sheet issued with the announcement, CMS states that as a result, “[p]eople with Original Medicare and Medicare Advantage may, depending on their coverage, pay a lower coinsurance amount for certain Part B drugs with price increases higher than inflation.”

CMS further states that the Part B drugs subject to coinsurance adjustments under the Inflation Rebate Program may vary from quarter to quarter, depending on which drug prices increase faster than inflation. CMS adds that before the start of each quarter, the agency intends to specify whether a coinsurance adjustment will apply to a particular Part B drug for the upcoming quarter in the quarterly ASP file located on CMS’ website.

Regarding payment to providers for Part B drugs subject to the coinsurance adjustments, CMS states that “Medicare will make health care providers whole by paying the difference between the Medicare allowed amount and the adjusted beneficiary coinsurance, after applying the Part B deductible and prior to sequestration, if applicable.” Currently available guidance does not explicitly address who will be financially responsible for these make-whole payments or their timing.

Report on Elimination of Cost-Sharing for Certain Vaccines Covered Under Medicare Part D

The IRA eliminated enrollee cost-sharing for vaccines covered under Medicare Part D that are recommended by the Centers for Disease Control Prevention Advisory Committee on Immunization Practices (e.g., vaccines for shingles, tetanus, diphtheria, pertussis, hepatitis A, and hepatitis B). This change aligned Medicare Part D vaccine coverage policy with coverage policies under Medicare Part B and the Affordable Care Act. On March 15, CMS released a report finding that 3.4 million people with Medicare Part D would have saved an average of nearly $70 per person in 2021 had the IRA’s vaccine provisions already been in effect. The report found that in 2021, 3.4 million individuals received vaccines under Medicare Part D and paid a total of $234 million in out-of-pocket costs.

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Sidley is closely monitoring implementation of the prescription drug provisions of the IRA. For more information, please contact your Sidley lawyer or the authors below.

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