On February 9, 2023, the Centers for Medicare & Medicaid Services (CMS) published two “initial” guidance documents (Part B and Part D) implementing the Medicare Part B and Part D inflation rebate provisions of the Inflation Reduction Act of 2022 (IRA). Additionally, on February 7, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published a report outlining administrative challenges CMS may encounter in implementing and operationalizing the Part B inflation rebates. Many of the OIG’s recommendations were reflected in CMS’ initial guidance regarding implementation of the Part B inflation rebates issued on February 9.
CMS Part B Guidance
Drugs subject to the Part B inflation rebate are single source drugs or biologicals (as that term is defined by statute), excluding qualifying biosimilar biological products, paid under Part B, excluding certain vaccines and low Medicare spend drugs. CMS will identify these drugs by their Healthcare Common Procedure Coding System (HCPCS) codes. To support such identification, CMS will exclude drugs that are billed using a HCPCS code that represents an “unclassified,” “unspecified,” or “not otherwise classified” drug or biological.
Consistent with the statute, beginning April 1, 2023, beneficiaries will pay 20% of the inflation-adjusted Part B payment amount for a drug subject to a Part B inflation rebate, instead of the published Part B payment amount. Regarding estimated rebate amount, CMS will calculate this as the total number of Part B units multiplied by the amount by which the rebate quarter Part B payment rate exceeds the inflation-adjusted benchmark quarter Part B payment rate.
CMS notes it will identify 340B units for exclusion by requiring providers and suppliers to use a moider on their Part B claims. CMS will also exclude units of drugs furnished to beneficiaries eligible for both Medicare and Medicaid from the rebate calculation. CMS further indicates that units on which Part B inflation rebates may be invoiced may include units furnished to beneficiaries enrolled in MA plans, and seeks comment on how to quantify those units furnished to MA enrollees in the first instance, as well as how to remove from that universe those units, such as 340B and dual-eligible units, excluded from rebate liability by statute. Furthermore, for Part B rebatable drugs first approved or licensed after December 1, 2020, the payment amount benchmark quarter is the third full calendar quarter after the day on which the drug was first marketed. CMS will use the date of first sale as reported by CMS in average sales price (ASP) data to determine the first marketed date.
Consistent with the statute, the guidance provides that a manufacturer that fails to pay a rebate within 30 calendar days of receiving an invoice will be subject to a CMP of at least 125 percent of the rebate amount. CMS intends to establish by regulation a process to impose such CMPs.
CMS Part D Guidance
Part D rebatable drugs are all products approved under a New Drug Application or licensed under a Biologics License Application (including biosimilars), as well as certain generics that “feel like” an innovator, excluding low Medicare spend drugs. The Part D inflation rebate will be calculated as the total number of Part D units of the drug in the rebate year multiplied by the amount by which the annual manufacturer price for the rebate year exceeds the inflation-adjusted benchmark period manufacturer price.
Because the unit type reported with respect to Part D prescription drug event (PDE) units and with respect to AMP under the MDRP may be distinct, CMS “intends to compare the Part D rebatable drug units reported in the PDE record to the units reported … for the monthly AMP” and convert units as needed. CMS also seeks comment on whether “requiring that a 340B indicator be included on the PDE record is the most reliable way to identify drugs that are subject to a 340B discount that were dispensed under Medicare Part D.”
Additionally, the applicable period for Part D inflation rebates typically is a four quarter period beginning with the fourth quarter of the calendar year through the third quarter of the next calendar year. For subsequently approved drugs, the first applicable period will be truncated to the first three quarters of the first calendar year that begins immediately after the payment amount benchmark period ends. After the first applicable period, the regular applicable four quarter applicable period will apply.
The guidance also addresses the possibility of there being no sales of a subsequently approved drug for the entire payment amount benchmark period. CMS directs the manufacturer to use reasonable assumptions for the reported price in such circumstances and states the benchmark period manufacturer price will be calculated as an average of such reported price(s). If there are sales reported for some of the calendar quarters in the benchmark period, only the price(s) quarters for which sales and units are reported will be used to calculated the benchmark period manufacturer price.
OIG Guidance
On February 7, 2023, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published a report entitled, “Technical Assistance Brief: Implementation of Inflation-Indexed Rebates for Part B Drugs.” OIG had issued three earlier reports projecting how much Medicare could save if manufacturers paid rebates for Part B drugs similar to those owed under Medicaid. Following the enactment of Part B inflation-indexed rebates in the IRA, OIG is providing CMS technical assistance as it implements the process for drug manufacturers to pay quarterly rebates to HHS for certain Medicare Part B drugs and biologicals if the Part B drug payment rises more quickly than inflation.
Specifically, the report outlines the following administrative challenges CMS may encounter in implementing and operationalizing the Part B inflation rebates including, identifying: (1) products subject to inflation rebates; (2) units that would also be subject to the Medicaid Drug Rebate Program; and (3) units purchased at discount prices under the 340B Drug Pricing Program. OIG notes that the potential solutions in the report are not official recommendations to CMS, and are instead findings based on prior OIG evaluations.