The Inflation Reduction Act (IRA) of 2022 has introduced major changes in healthcare regulation, particularly in the areas of medication pricing and reimbursement. This post will focus on these specific provisions of the IRA.
One of the most significant changes is the establishment of a Drug Price Negotiation Program by the Secretary of Health and Human Services (HHS). This program allows Medicare to negotiate directly with pharmaceutical manufacturers for the first time, with the aim of achieving maximum fair prices for drugs. The program will cover a range of drugs, including single-source drugs that were among the top-50 expenditure drugs for Medicare Part B or D in the previous year, FDA-approved drugs without generics, and FDA-approved biologics without biosimilars. However, certain drugs such as qualifying orphan drugs and low-spend Medicare drugs are excluded from the program.
The first list of 10 products subject to price negotiation was published on August 29, with subsequent lists to be published on February 1 each year. The negotiation process aims to achieve the lowest maximum fair price, taking into account factors such as research and development costs, production and distribution costs, and alternative treatment options. Manufacturers who do not comply with the negotiation timelines may face significant excise taxes, starting at 65% of all US drug sales and increasing to 95% for continued noncompliance.
The IRA also introduces drug inflation rebates for certain single-source drugs. Manufacturers will be required to issue rebates to HHS for Medicare Part B and D expenditures on drugs that increase in price faster than the Consumer Price Index for all Urban Consumers (CPI-U). The rebates will be excluded from government price reporting.
Additionally, the IRA delays the implementation of the pharmacy benefit manager (PBM) safe harbor rebate rule until January 1, 2032. This rule, originally intended to go into effect in January 2021, aims to remove discount safe harbor protections for pharmaceutical products adjudicated through PBMs.
Furthermore, the IRA temporarily increases physician payments for biosimilar biologics under Medicare Part B. The add-on payment for biosimilars, traditionally 6% of the reference product’s average sales price (ASP), is increased to 8% under the IRA. However, physician payment sequestration of 2% still applies, resulting in an add-on payment of 6.272%.
The implications of these provisions for life sciences companies are significant. The Medicare Drug Negotiation Program is expected to have a substantial impact on blockbuster medications, lowering their net prices. The inflation-based rebates and delay of the PBM rebate rule also affect pricing and reimbursement strategies for pharmaceutical manufacturers. Furthermore, the increased physician reimbursement for biosimilar drugs aims to promote their adoption.
Overall, the IRA brings about substantial changes in medication pricing and reimbursement, with the goal of making healthcare more affordable and accessible. These reforms have the potential to reshape the pharmaceutical industry and impact the pricing strategies of life sciences companies.
Original Story at www.managedhealthcareexecutive.com – 2023-09-13 18:41:36
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