CMS Releases Guidance on the Math Behind Part B, Part D Drug Rebates

CMS Thursday released draft guidance about how it will calculate drug inflation rebates in Medicare Part B and Part D as required under the Inflation Reduction Act (IRA).

Drug companies will pay rebates to the Medicare Trust Fund when their prescription drug prices increase faster than the rate of inflation for certain drugs. The guidance documents, for the implementation of the new Medicare Prescription Drug Inflation Rebate Program, seek comment on the steps CMS has outlined for drugs covered under Part B and Part D.

On a call announcing the plans, officials touted the savings impact for Medicare beneficiaries, and sidestepped questions about whether or how the guidance addresses issues raised by a report released earlier this week by the Office of the Inspector General of HHS, which discussed the challenges and possible solutions to implementing the rebates for Part B drugs.

The technical assistance report cited 3 main challenges, namely: identifying the drug products subject to Part B rebates; identifying the units on claim forms that indicate which are subject to Medicaid drug rebates, such as for dual enrollees, or for units already subject to 340B drug discounts; and oversight of the new modifiers that will be added to claims with 340B-purchased drugs starting in January 2024.

CMS officials—Administrator Chiquita Brooks-LaSure and Meena Seshamani, MD, PhD, CMS deputy administrator and director of the Center for Medicare—said the guidance documents are open for public feedback until March 11. Some of the topics CMS said it is seeking comment on include the process to determine the number of drug units for drugs that are deemed subject to the rebates; determining the reduction of rebate amounts if drugs go into shortage or have severe supply chain disruptions; ensuring the accuracy of the rebate payments; and the process to impose civil monetary penalties on manufacturers of Part D drugs that fail to pay rebates.

Manufacturers that fail to pay the rebate will face a penalty equaling 125% of the rebate amount.

Under the timeline, the first 12-month period for which drug manufacturers will be required to pay rebates for certain Part D drugs began October 1, 2022.

The first quarter under which rebate rules would kick in for certain Part B drugs is January 1, 2023, and when the first quarter ends, individuals with fee-for-service Medicare and Medicare Advantage may see a lower Part B coinsurance beginning April 1.

For Part D drugs, however, the impact on consumers may vary depending on the amount of the co-payments they have with these privately run prescription drug plans.

In 2025, CMS will send pharmaceutical manufacturers first invoices for the rebates.

“Requiring rebates for price increases above inflation for drugs already on the market will not only discourage runaway price increases, but may also help reduce future growth in prescription drug spending,” said Seshamani.