Medicare will likely focus on 38 Part D and two Part B drugs in the first three years of Medicare drug price negotiation — a provision of the Inflation Reduction Act — and these drugs combined accounted for $67.4 billion in gross Medicare spending in 2020, according to a study published in the Journal of Managed Care & Specialty Pharmacy. The authors identified 40 drugs expected to be negotiated by CMS for 2026-2028 based on “drug age, drug or biologic status, orphan drug status, Part B and Part D gross spending in 2020, and estimates of when a drug will be subject to generic or biosimilar competition.”

The 10 drugs likely to be selected for negotiation in 2026, which include several anticoagulants and cancer therapies, accounted for $33.7 billion of Medicare Part D gross spending as of 2020. The majority of insured people under Medicare formularies have plans that put these drugs under the preferred/preferred (prior authorization and/or step therapy) tier and covered/covered (PA/ST) tiers, according to data from MMIT Analytics. (MMIT is AIS Health’s parent company.) Biden administration officials said that the first 10 drugs selected for negotiation will officially be announced on Sept. 1, 2023.

CMS on March 8 submitted its lengthy Medicare Advantage and Part D final rule making policy and technical changes for 2024 to the White House Office of Management and Budget (OMB), just 23 days after the comment period closed. “Not a good sign for those who submitted comments with the expectation that CMS would fully consider their concerns and suggested alternatives to some of the proposed regulatory changes,” remarked Epstein Becker & Green’s Helaine Fingold on LinkedIn. The proposed rule, published on Dec. 27, contained multiple marketing-related provisions and featured numerous health equity components, from the incorporation of a health equity index in the Star Ratings to new requirements around information provided to enrollees. The final rule at AIS Health press time was still pending OMB review.

Most new drugs covered under Medicare Part D are subject to prior authorization (PA) requirements, largely due to their high launch prices. A recent study published in JAMA Health Forum observed that these policies are frequently inconsistent across payers and may prove too burdensome for patients and providers.

Researchers identified drugs approved between 2013 and 2017 and reviewed the 2020 formularies of the eight largest Part D payers, which cover about 90% of all Part D beneficiaries. They compared PA policies to each drug’s FDA-approved indications and noted if payers mirrored the approved labeling or were more restrictive than the drug’s label. Researchers observed substantial variation in the frequency and type of PA across payers, and they found that about 40% of the new drugs had PA criteria that went beyond the drug’s labeling.

Medicare will likely focus on 38 Part D and two Part B drugs in the first three years of Medicare drug price negotiation — a provision of the Inflation Reduction Act — and these drugs combined accounted for $67.4 billion in gross Medicare spending in 2020, according to a study published in the Journal of Managed Care & Specialty Pharmacy. The authors identified 40 drugs expected to be negotiated by CMS for 2026-2028 based on “drug age, drug or biologic status, orphan drug status, Part B and Part D gross spending in 2020, and estimates of when a drug will be subject to generic or biosimilar competition.”

The 10 drugs likely to be selected for negotiation in 2026, which include several anticoagulants and cancer therapies, accounted for $33.7 billion of Medicare Part D gross spending as of 2020. The majority of insured people under Medicare formularies have plans that put these drugs under the preferred/preferred (prior authorization and/or step therapy) tier and covered/covered (PA/ST) tiers, according to data from MMIT Analytics. (MMIT is AIS Health’s parent company.) Biden administration officials said that the first 10 drugs selected for negotiation will officially be announced on Sept. 1, 2023.

The Biden administration on Feb. 9 released the first round of guidance regarding the Medicare prescription drug inflation rebate program that’s included in the Inflation Reduction Act (IRA), which requires drugmakers to pay rebates to Medicare if they raise the price of drugs faster than the rate of inflation. One expert tells AIS Health, a division of MMIT, that the rebates should have minimal effects, if any, on premiums for Medicare Advantage (MA) plans with prescription drug coverage and stand-alone Prescription Drug Plans (PDPs), given the information that is currently available — although she observes that drugmakers may try to recoup their losses through more aggressive commercial plan rebate strategies.

The rebate program has already begun to phase in: Medicare prescription drug transactions starting in October 2022 are subject to rebates for both Part B and Part D drugs. However, CMS has yet to produce the regulations that will govern the rebate process.

In response to an executive order issued last fall, HHS recently unveiled three new prescription drug pricing models that it wants the CMS Innovation Center to test. The models — which target low-cost generics, cell and gene therapies and drugs that received accelerated approval — are likely to diverge considerably when it comes to industry reception and likelihood of speedy implementation, experts say.

“One of the things I really like about the three models that have been proposed is that they touch on really different aspects of affordability and access, and different programs that CMS oversees,” says Stacie Dusetzina, Ph.D., a health policy professor at the Vanderbilt University School of Medicine. “So it was encouraging to me to see, for example, a model that was focused on gene and cell therapies and Medicaid programs, in addition to two very different groups within the Medicare programs: one being high-cost drugs approved through accelerated approval, and the other being drugs that we typically think of as being low-cost, but that maybe we could be...making more affordable to seniors — including high-value generic drugs offered on Part D.”

On Sept. 1, CMS will publish its list of 10 Medicare Part D drugs that it has chosen for negotiations for 2026, the first year that negotiated prices will be in effect via the Inflation Reduction Act (IRA). But a lot of unknowns exist around the law, including how CMS will determine the drugs up for negotiation. During an Evercore ISI webinar held Jan. 30, analysts broke down this aspect of the IRA and shared the drugs and manufacturers they expect to be impacted.

“We are looking at an escalating number of drugs subject to negotiation starting in 2026,” noted Tobin Marcus, policy analyst at Evercore ISI. “There’s been some misunderstanding about the fact that these numbers are cumulative.” So while 2026 will have 10 drugs up for negotiation, 2027 will have an additional 15 Part D drugs for a total of 25 for the year. The following year will see an additional 15 Part D and Part B drugs, and then starting in 2029 and later years, 20 more Part D and Part B agents will be up for negotiation.

The U.S. will likely save billions of dollars in the first few years of Medicare drug price negotiation — a provision of the Inflation Reduction Act (IRA) — suggests a recent study published in JAMA Health Forum. Acting as though the IRA had been implemented from 2018 to 2020, researchers from Harvard Medical School and Brigham and Women’s Hospital created a simulation of the drug selection process, and found that Part D and Part B drug spending would have been reduced by 5% — $26.5 billion — over those three years.

Overall, 40 drugs were selected. CMS’s criteria are strict — spending on each drug must exceed $200 million in the year prior to its selection, and products must have been on the market for at least nine years (or 13, if the drug is a biologic). Selected therapies cannot have any generic or biosimilar alternatives, and orphan drugs and plasma-derived products are also ineligible. Then, the negotiated price must fall below a drug’s “ceiling price,” which is determined by the lesser of two figures: the average net price of a drug after its existing rebates and discounts, or between 40%-75% of the drug’s nonfederal average manufacturer (non-FAMP) price, depending on the drug’s age.

The pharmaceutical industry likely will continue to battle challenges posed by a variety of factors in 2023, including global economic issues, competition and the Inflation Reduction Act (IRA). The biosimilars space in particular is expected to undergo a change as the world’s top selling drug, AbbVie Inc.’s Humira (adalimumab), finally faces competition from a number of companies. But industry experts tell AIS Health, a division of MMIT, that they expect a number of positive developments in the space in 2023.

About 800,000 Medicare beneficiaries in 2024 and 200,000 in 2025 could see their out-of-pocket (OOP) medication costs exceed 10% of their annual income, even with the Part D drug benefit reforms passed via the Inflation Reduction Act (IRA), according to an Avalere analysis.

The IRA will establish a beneficiary OOP cap at the catastrophic threshold, which is estimated to be $3,233 in 2024. Avalere estimated that 1.5 million Part D enrollees without low-income subsidies (LIS) are projected to reach OOP drug spending levels above the catastrophic threshold in 2024. Among them, about 18% of beneficiaries will reach the catastrophic phase in the first three months. Greater shares of beneficiaries who are younger than 65 years old or who are Hispanic will face affordability challenges compared to the average non-LIS enrollees. The analysis also suggested that non-LIS enrollees taking asthma drugs, blood thinners, immunology therapies, cancer treatments and HIV drugs are more likely to reach the OOP cap in 2024.