In this 4th edition of an ongoing blog series on the key provisions of the Inflation Reduction Act of 2022 (IRA), we have added a synopsis of the recently announced Medicare Part B drugs subject to inflationary rebates. This shows that even in an area that seems straightforward, The Centers for Medicare & Medicaid Services (“CMS”) is still ironing out the details of certain aspects of the calculations. After the list of drugs subject to inflation penalties was announced, it had to be revised despite publicly available data reinforcing the difficulty in ascertaining the impact on drug manufacturers.
We examined the key aspects of the IRA’s inflation penalty rebate Part B component’s effect on the top 50 Medicare Part B drugs. As stated in the regulations, the Part B drugs measure the difference in Average Sales Price (“ASP”) compared to inflation over certain time periods – which is like the process for Part D drugs except for the price being measured (ASP vs. annual Average Manufacturers Price for Part D drugs) and the timeframe (quarterly for Part B drugs, annually for Part D drugs). Since ASP was mandated by the Medicare Modernization Act of 2003 and came into effect in January 2005, as the primary method of reimbursement for Part B drugs, with only a small mark-up (ASP+6% but really ASP+4.3% due to sequestration), the Part B drugs have generally had smaller individual price increases (that sometimes are more frequent) so not to disrupt the reimbursement sensitive landscape. Because of this and the impact on reimbursement, we would expect to see a smaller number of Part B drugs incur inflation penalties.
Since both ASP and CPI-U inflation rates are publicly available, CMS recently announced the complete, specific methodology of the Part B inflation rebate, it was not surprising to see the initial list of 27 Part B drugs published on March 15th that were to incur the first inflation penalty based on the timeline of IRA enactment. As seen in table 1 from Fierce Healthcare website:
Table 1: Fierce Healthcare’s listing of 20 Part B drugs subject to the inflation penalty under the IRA
|DRUG NAME||USED FOR||MANUFACTURER|
|Abelcet||Invasive fungal infections||Leadiant Biosciences|
|Akynzeo||Prevention of chemotherapy-induced nausea and vomiting||Helsinn Healthcare S.A|
|Atgam||Used after kidney transplant to keep the body from rejecting the organ||Pfizer Inc|
|Aveed||Treat low testosterone in adult males||Endo International Plc|
|Bicillin C-R||Antibiotic||Pfizer Inc|
|Bicillin L-A||Antibiotic||Pfizer Inc|
|Carnitor||Carnitine deficiency||Leadiant Biosciences|
|Cytogam||Cytomegalovirus disease infection in transplant patients||Kamada Ltd|
|Flebogamma DIF||Primary immunodeficiency and autoimmune disease||Grifols SA|
|Fragmin||Treat blood clots||Pfizer Inc|
|Leukine||Blood cancer||Partner Therapeutics|
|Minocin||Anti-infective||Bausch Health Companies|
|Nipent||Blood cancer||Pfizer Inc|
|Padcev||Urothelial cancer||Seagen Inc|
|Rybrevant||Lung cancer||Johnson & Johnson|
|Signifor LAR||Acromegaly and Cushing's disease||Recordati|
|Sylvant||Multicentric Castleman's disease||EUSA Pharma (US) LLC|
|Xiaflex||Peyronie's disease||Endo International Plc|
What was a bit surprising was CMS “quietly” paring down the drugs from 27 down to 20 on March 30. According to Fierce Healthcare, “As spotted by Endpoints, the press release and accompanying guidelines released by HHS were updated with the removal of several previously listed drugs”.
These are noted in table 2 below.
Table 2: The 7 drugs removed from IRA inflation penalty according to Firece Healthcare.
|DRUG NAME||USED FOR||MANUFACTURER|
|Elzonris||Rare form of blood cancer||Menarini Group|
|Fetroja||Serious bladder or kidney infections in adults||Shionogi & Co Ltd|
|Folotyn||T-cell lymphoma||Acrotech Biopharma LLC|
|Tecartus||Blood cancer||Gilead Sciences Inc|
|Winrho SDF||Bleeding disorder||Kamada Ltd's|
|Xipere||Eye disease macular edema associated with uveitis||Bausch and Lomb's|
|Yescarta||Blood cancer||Gilead Sciences Inc|
The reason the 7 drugs were removed from the inflationary rebates was not clear but is likely a case of working out the kinks, CMS in an emailed statement said the change was a result of “standard procedure” when the agency releases the public ASP files. It is possible these drugs simply restated their ASP, which is allowed by CMS, but what is clear - there are still lingering questions about the swift implementation of the legislation and the accompanying methodologies as well as unintended consequences.
This assessment shows there is still much to be learned as more details about the IRA and its supporting methodologies are provided. The remaining details still to be worked out during the rollout of the individual components are substantial. We will further explore these topics in upcoming blog posts on the impact of the IRA.