Biden administration flags dozens of pharma companies to pay Medicare rebates for 'outrageous' price hikes

The Biden administration is cracking down on pharmaceutical companies as part of its price-fighting measures under the Inflation Reduction Act.

A dozen pharmaceutical companies will be required to pay rebates to Medicare for "outrageous price hikes" on prescription drugs that over 750,000 seniors take per year, White House officials said Thursday.

Centers for Medicare & Medicaid Services released a list of 48 prescription drugs that will have lower Part B beneficiary coinsurances in the first quarter of 2024, along with other updated guidance on Thursday.

"Starting in January, some Medicare beneficiaries who take these 48 prescription drugs – including drugs used to treat cancer and fight infections – will have lower coinsurance than what they would have paid otherwise, and their out-of-pocket costs may decrease by $1 to as much as $2,786 per average dose," White House officials said.

The Inflation Reduction Act requires drug companies to pay rebates to Medicare when prices increase faster than the rate of inflation, should they wish to participate in the program. The agency said Medicare enrollees may have begun seeing lower out-of-pocket costs for certain drugs beginning April 1, as consumers pay 20% of the inflation-adjusted payment amount.

But for the first quarter of 2024, almost 50 drugs (PDF) will have a coinsurance rate less than 20%. These drugs saw price increases that exceeded the rate of inflation during the last quarter of 2023. After that, CMS will release on its website whether coinsurance adjustments apply to a Part B drug in the following months, noting that adjustments could vary from quarter to quarter. CMS will send its first invoice to drug companies in September 2025 for Part B rebates and December 2025 for Part D rebates, with funds to be deposited in the Medicare Trust Fund.

“Today’s guidance strikes a balance between discouraging large price increases by drug companies and providing appropriate relief to drug companies experiencing shortages or severe supply chain disruptions,” said Meena Seshamani, M.D., CMS deputy administrator and the director of the Center for Medicare, in a statement. “Our goal at CMS is to make sure drugs are more affordable and accessible, which includes helping to safeguard and ensure that the pharmaceutical supply chain can deliver critical medicines to providers and patients.”

Over the last four quarters, 64 drugs in total had prices that increased faster than inflation and may be subject to inflation rebates because of the Inflation Reduction Act, according to the Biden administration. Some drugs, such as Signifor, used to treat an endocrine disorder, raised prices faster than inflation every quarter since the Inflation Reduction Act’s inflation rebate provision went into effect. Some Medicare beneficiaries who take Signifor could save $311 per monthly dose starting January because of the law.

The Dec. 14 guidance indicated CMS will reduce the inflation rebate amount for a Part B or Part D drug on the Food and Drug Administration drug shortage list based on how long the drug is in shortage with a “greater reduction for plasma-derived products and sole-source Part D rebatable drugs,” according to a fact sheet (PDF).

Related: Ahead of Medicare negotiations, White House flexes IRA's rebate powers for speedy price hikes

It also said that CMS will reduce rebate amounts in the event of a “severe” supply chain disruption, or if a Part D generic drug is likely to be in shortage. Drug companies requesting to reduce their rebate amount for a generic drug will have to submit an official request to CMS. If approved, CMS will reduce the rebate by 75% for one year, with the option of the drug company applying for an extension for a second year. The discount does not extend past two years.

CMS issued initial guidance on the program in February 2023 and received more than 90 comments from consumer groups, drug companies and other parties, according to the release. The Part D inflation rebate period began in October 2022, and the Part B inflation rebate period began in January 2023.

The Biden Administration released its list of 10 drugs on the inaugural price negotiation list in August, prompting immediate backlash from drug companies and legal challenges to boot.