CMS Issues Proposed Rule on the Medicare Part B and Part D Inflation Rebate Program; HPM Issues Detailed Summary

Enacted in 2022, the Inflation Reduction Act (IRA) amended the Medicare provisions of the Social Security Act to impose several discount requirements on pharmaceutical manufacturers.  In addition to the widely publicized drug price negotiation program, the IRA established inflation rebate programs under Medicare Part B and Part D.  Since 1991, the Centers for Medicare and Medicaid Services (CMS) has administered inflation rebates in the Medicaid Drug Rebate Program (MDRP), but the IRA brings inflation rebates to Medicare.

The two inflation rebate programs share many features in common, with key differences.  These programs require manufacturers to pay rebates to Medicare if they raise their prices for certain Part B and Part D drugs faster than the rate of inflation.  The programs do not impose additional price reporting requirements on manufacturers; instead, CMS will determine rebates based on prices currently reported under the MDRP and Medicare Part B.  CMS will develop a new online portal for manufacturers to review their reports, submit Suggestions of Error, and make rebate payments.  CMS will provide all manufacturers of Part B and Part D rebatable drugs the respective reports, even if their rebate amount due for an applicable period is $0.  The Part B program applies to calendar quarters beginning with the first quarter of 2023, and the Part D program applies to 12-month periods beginning on October 1, 2022.  Because of the limited time between enactment and the effective dates of the inflation rebate programs, Congress directed CMS to implement these two programs initially through program guidances.  Accordingly, CMS issued first a preliminary guidance on each program, then, after a 30-day comment period, issued revised guidances on December 14, 2023.  On July 31, 2024, CMS published a proposed rule to codify its guidances, with some changes. We have drafted a memorandum that summarizes the main provisions of this proposed rule and notes where the regulation differs from the guidances.

Among other topics, the memorandum summarizes CMS’s proposed regulations for both these Part B and Part D inflation rebate programs, including:

• Key definitions;
• The drugs to which the rebates apply;
• Methods of calculating and applying rebates;
• Processes for reporting, reconciling, and paying rebates; and
• Penalties and enforcement.

We will be watching the development of these inflation rebate programs and will provide an update as the rule progresses.