Inflation Reduction Act: Impact of inflation penalty rebate on Part B drugs

15 May 2023

In this 4^th 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.

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Part 1 of the blog series provided an overview of the IRA’s key provisions

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Part 2 assessed price increase levels pre/post-2020 election through the end of 2022

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Part 3 illustrated the impact that both the IRA and the period of post-pandemic higher inflation had on January 2023 price changes, It also talked about the top 50 products accelerating price increases, and how many products stopped short of triggering the inflation penalty

In-depth analysis of Part B inflation penalty rebate

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 penalty 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
Humira	Arthritis	AbbVie Inc
Leukine	Blood cancer	Partner Therapeutics
Minocin	Anti-infective	Bausch Health Companies
Mircera	Anemia	Roche
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.