Medicare Part B

The Inflation Reduction Act (IRA) will allow Medicare to negotiate prescription drug prices, starting with a limited set of therapies in 2026. But while some aspects of the law are clear, some uncertainties around others exist. Biopharma companies need to start preparing as much as they can for some of the challenging situations that may arise, recommends one industry expert.

Josh Schimmer, an analyst at Evercore ISI, pointed out during a Nov. 17 webinar hosted by his company that the IRA has “many, many moving parts, some of which are…really quirky, some of which seem a little unsustainable in terms of the dynamic that they might have. It’s going to impact so many companies in this industry sooner or later; some might be spared. But those are probably going to be smaller companies. So the bigger you are, the more likely you are at some point to have to face the IRA.”

In an executive order released Oct. 14, the Biden administration directed the CMS Center for Medicare and Medicaid Innovation (CMMI) to “to consider additional actions to further drive down prescription drug costs,” building on the Medicare drug price negotiation stipulations of the Inflation Reduction Act (IRA). D.C. insiders tell AIS Health, a division of MMIT, that CMMI could pull old policy proposals off the shelf when it works to “test new ways of paying for Medicare services that improve the quality of care while lowering costs,” as the administration puts it.

The executive order isn’t specific about what policies the White House would prefer CMMI look into. However, the administration will know the possibilities fairly soon: CMMI will have 90 days to develop recommendations. Per a White House fact sheet, the final product will be “a formal report outlining any plans to use the Innovation Center’s authorities to lower drug costs and promote access to innovative drug therapies for Medicare beneficiaries.”

The median launch price of oncology drugs increased by over 8,000% between 2008 and 2021, according to a new report compiled by the office of Rep. Katie Porter (D-Calif.), from $2,115 to $180,087. The report, which draws mainly on data from the FDA's Center for Drug Evaluation and Research (CDER), calls for reforms to the FDA approval process and Medicare’s market access rules in order to curb or unwind launch price growth, which have made oncology drugs unaffordable for many critically ill patients.

The report calls for reforms to launch price regulations, some of which could be implemented under existing FDA authority. It also examines how launch pricing dynamics may change as the federal government prepares to implement Medicare drug price negotiation — part of this year’s blockbuster Inflation Reduction Act — which will begin in 2026. The report observes that “some health policy experts project that recently enacted reforms could even apply upward pressure on launch prices,” as pharmaceutical manufacturers seek to recoup revenue that Medicare price negotiation may tamp down.

In an executive order released Oct. 14, the Biden administration directed the CMS Center for Medicare and Medicaid Innovation (CMMI) to “to consider additional actions to further drive down prescription drug costs,” building on the Medicare drug price negotiation stipulations of the Inflation Reduction Act (IRA). D.C. insiders tell AIS Health, a division of MMIT, that CMMI could pull old policy proposals off the shelf when it works to “test new ways of paying for Medicare services that improve the quality of care while lowering costs,” as the administration puts it.

The executive order isn’t specific about what policies the White House would prefer CMMI look into. However, the administration will know the possibilities fairly soon: CMMI will have 90 days to develop recommendations. Per a White House fact sheet, the final product will be “a formal report outlining any plans to use the Innovation Center’s authorities to lower drug costs and promote access to innovative drug therapies for Medicare beneficiaries.”

After Michelle McMurray-Heath, M.D., resigned from her position as president and CEO of the Biotechnology Innovation Organization, the major industry trade group said on Oct. 11 that Rachel King, co-founder and former CEO of GlycoMimetics, Inc., agreed to serve in those roles on an interim basis while BIO searches for a permanent successor. Before her departure, McMurray-Heath was on leave following disagreements with some board members over whether BIO should engage on social issues not directly connected to health care policy, which the molecular immunologist opposed, The Wall Street Journal reported. Her exit also comes in the wake of Congress’ passage of major drug pricing reforms as part of the Inflation Reduction Act, representing a rare defeat for the powerful pharma lobby.

Now that Medicare can negotiate the price of prescription drugs it purchases, the Biden administration needs to figure out how it will hash out deals with drugmakers. Experts tell AIS Health, a division of MMIT, that implementation of the long-sought negotiation program will come with plenty of challenges and pitfalls.

The administration will have to issue new regulations, hire hundreds of staff, determine which drug prices will be negotiated first and design the criteria that will select drugs for negotiation in the future.

Now that Medicare can negotiate the price of prescription drugs it purchases, the Biden administration needs to figure out how it will hash out deals with drugmakers. Experts tell AIS Health, a division of MMIT, that implementation of the long-sought negotiation program will come with plenty of challenges and pitfalls.

The administration will have to issue new regulations, hire hundreds of staff, determine which drug prices will be negotiated first and design the criteria that will select drugs for negotiation in the future.

It appears that for the first time, HHS will be able to negotiate prices of some prescription drugs in Medicare. The pharma industry has long resisted such efforts, and it remains to be seen what the impact of the legislation, if passed, will be on manufacturers’ drug discounts and rebates.
On Aug. 7, the Senate passed the Inflation Reduction Act of 2022 (IRA) 51-50 with Vice President Kamala Harris casting the deciding vote. The House is expected to vote on the bill Friday. If it passes as anticipated, President Joe Biden is projected to sign it into law shortly thereafter.

Democrats are once again seeking to pass drug pricing reform with a new proposal published earlier this month. While the bill is similar to previous ones, most notably with having Medicare conduct drug price negotiations, it also offers some changes from past efforts, including not basing those drug prices on an international reference model. Still, many pharma stakeholders expressed disappointment over aspects of the bill, and while its odds of passing have slightly improved more recently, industry experts are somewhat divided on the bill’s chance of approval.

The newest proposal was released on July 6 after negotiations with Sen. Joe Manchin (D-W.Va.), who squelched earlier administration attempts at drug pricing reform.

As Medicare Advantage plans and their providers operate under a new normal two-and-a-half years into the COVID-19 public health emergency (PHE), CMS is resuming its regular pace of auditing MA organizations as another program audit cycle gets underway, according to compliance experts. During a June 21 session of AHIP 2022, held in Las Vegas, panelists observed that CMS continues to be focused on ensuring seniors’ smooth access to prescription drugs and emphasized the importance of audit readiness.

CMS’s audit activity was limited during the previous cycle, especially in 2020, and its latest audit report reflected that. Released in June, the 2021 Part C and Part D Program Audit and Enforcement Report said CMS imposed 16 civil monetary penalties amounting to roughly $1 million and, between 2019 and 2021, it audited about 20% of currently active sponsors representing approximately 89% of Parts C and D enrollment — which is lower than CMS’s typical goal of 95%.