Mid-Atlantic Health Law TOPICS
Medicare Drug Price Negotiations
In 2022, the United States Congress passed the Inflation Reduction Act (IRA) which gave Medicare the authority to negotiate certain prescription drug prices with manufacturers for the first time. The intent of this law is to reduce the cost of some of the most expensive drugs and increase access to patients through Medicare Part B and D.
Annual Cycles
In August 2023, the Centers for Medicare and Medicaid Services (CMS) announced the first 10 drugs that it selected for negotiation. All of these drugs are covered under Medicare Part D. CMS selected these drugs based on total expenditures under Part D and other criteria as required by the IRA. The negotiations will occur through 2024, and the rate will become effective beginning in 2026.
In early 2024, CMS will send an initial offer for each selected drug to the participating drug company. The drug company has 30 days to respond by accepting or providing a counteroffer. If an agreement is not reached in the initial offer and counteroffer, CMS will invite the drug company to up to three negotiation meetings in the Spring and Summer of 2024.
The negotiation period will end on August 1, 2024. By that date, the drug companies are expected either to accept a negotiated rate, reject the negotiated rate and pay an excise tax on sales of the selected drug to Medicare during defined periods, or remove its drug from the Medicare and Medicaid programs.
CMS will publish any agreed to rates by September 1, 2024, and those rates will be effective for the Medicare program as of January 1, 2026.
CMS will continue this negotiation program for additional cycles adding 15 more drugs in both 2027 and 2028 (which will also include Part B drugs), and 20 drugs in each year after that.
Lawsuits
Nine lawsuits have been filed against the U.S. Department of Health and Human Services and CMS, mainly by pharmaceutical companies impacted by the negotiation program, arguing that the program is unconstitutional. The companies believe that the program will financially harm them and stifle innovation required to develop life-saving drugs.
In the fall of 2023, one court denied the pharmaceutical companies’ request for a preliminary injunction against the negotiation program, allowing the program to proceed while the cases pend in court.
Darci M. Smith
410-576-4153 • dsmith@gfrlaw.com