Inflation Reduction Act explained

Home/Policies & Legislation | Posted 24/07/2023 post-comment1 Post your comment

The US Assistant Secretary for Planning and Evaluation’s (ASPE) ‘Medicare Part B drugs: trends in spending and utilization 2008-2021’ was published in June 2023 [1]. This outlines aspects of the Inflation Reduction Act (IRA) which is designed to address the rapid rate of increase in Part B drug spending and lower costs for Medicare enrollees.

Regulation V13H16

The publication explains that the IRA intends to change incentives for use of Part B drugs, constrain their rate of spending growth, and lower out-of-pocket costs for Part B enrollees. Specifically, the law provides the following provisions that are relevant for Part B: 

Higher Reimbursements for Biosimilars – The IRA increases the ‘add-on’ for certain qualifying biosimilars from six to eight per cent of Average Sales Price (ASP) 5 years starting in October of 2022. It is hoped that greater ASP payment will increase biosimilar adoption and increase competition in the drug market. 

Inflation Rebates – Manufacturers of single source drugs and biologicals to pay a rebate to Medicare if the drug’s price increase exceeds the quarterly rate of inflation. The report notes that Part B could have saved nearly US$3.7 billion if this provision was in effect during the three years prior to 2022. This provision took effect for Part B on 1 January 2023. Rebate-eligible drugs are single source drug or biological products that include certain biosimilars administered by physicians through infusion or injection. Some drugs, such as Part B preventive vaccines, are excluded from rebates.

Drug Price Negotiations – The IRA requires Health and Human Services (HHS) to negotiate prices for select drugs on behalf of the Medicare programme. Medicare is authorized to directly negotiate drug prices for certain high expenditure, single source Medicare Part B or Part D drugs (for which there is no generic or biosimilar competition). As was advised in the guidance [2], during the first year of the Medicare Drug Price Negotiation Program, Centres for Medicare & Medicaid Services (CMS) will select up to 10 Part D high expenditure, single source drugs for negotiation. The maximum fair prices that are negotiated for these drugs will apply from early 2026. Then, CMS will select up to an additional 15 Part D drugs for negotiation for 2027 and 2028, and up to an additional 20 Part B or Part D drugs for 2029 and subsequent years. In addition, for 2028, the selected drugs must be among the drugs with the highest total expenditures in Medicare over the most recent year under Part B and Part D and must have been approved or licensed, by the US Food and Drug Administration for at least seven years (small-molecule products) or 11 years (biologicals) at the time of selection. However, some drugs, such as certain orphan drugs and plasma-derived products are excluded.  

The publication also highlights that manufacturers of drugs selected for negotiation that do not comply with requirements of the Negotiation Program can be subject to civil penalties and/or excise taxes. However, if certain requirements are met, a manufacturer of a biosimilar may request a delay from selection for negotiation for up to two years. 

Overall, the IRA hopes to provide a variety of tools to address the rapid rate of growth in Part B drug spending to benefit the Medicare programme, taxpayers and patients in the US.

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References
1. ASPE Medicare Part B drugs:trends in spending and utilization, 2008-2021[homepage on the Internet]. [cited 2023 Jul 24]. Available from: https://aspe.hhs.gov/sites/default/files/documents/fb7f647e32d57ce4672320b61a0a1443/aspe-medicare-part-b-drug-pricing.pdf
2. GaBI Online - Generics and Biosimilars Initiative. New guidance for Medicare Drug Price Negotiation Program [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2023 Jul 24]. Available from: www.gabionline.net/policies-legislation/new-guidance-for-medicare-drug-price-negotiation-program

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Source: GADECCU

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Posted 03/08/2023 by Arnold G Vulto
Highly overpriced medicines in the USA due to broken market

The 9 June 2023 ASPE / Office of Health Policy report highlights what the rest of the world already knows for many years: US citizens have to pay way too much for their medicines due to the broken US health-market system. This market is a for-profit market and not a for-patient market.
A very recent paper from Daval and Kesselheim explains this in very clear language (JAMA Internal Medicine, published online 28 July 2023): Authority of Medicare to limit coverage of FDA-approved products; legal and policy considerations). Another recent paper in JAMA Internal Medicine (Pham et al., 183(2023)290) reflects how the rest of the world is looking upon this situation. From the 206 new US drug approvals in 2017-2020, 47 were refused for authorisation or reimbursement in other countries (like Australia, Canada, UK). In addition, in most cases these drugs had a much lower cost outside the US. It is very unfortunate that in the US healthcare system patients are being robbed because of overpriced medicines at prices that no other country is willing to pay.

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