The Inflation Reduction Act had far-reaching implications for the health care industry, including the timeline Congress set for the Centers for Medicare and Medicaid Services (CMS) to start negotiating certain drug prices. The legislation allows CMS to directly negotiate drug prices for certain “high expenditure, single source Medicare Part B or Part D drugs, starting with 10 Part D high expenditure, single source drugs in 2026. Then an additional 15 Part D drugs will be selected in 2027, 15 Part B or Part D drugs selected in 2028, and 20 Part B or Part D drugs selected in 2029 and beyond.
However, the timeline to implement the legislation is “tremendously tight,” according to Jonathan Blum, CMS principal deputy administrator and chief operating officer. Under the legislation, CMS will need to begin to propose its data collection processes that are essential to carrying out the first year of the Negotiation Program in Winter 2023, and those will be made available for public comments. By Spring 2023, CMS will issue guidance for the negotiation process for the first year (2026) and request public comment on certain elements. CMS will also propose its data collection processes in Spring 2023, also seeking public input on those proposals, and in Summer 2023, CMS is expected to update its guidance as needed for the 2026 negotiation process and data collection requests.
Then, on September 1, 2023, CMS is expected to publish the list of 10 Medicare Part D drugs the agency selected for negotiation for 2026. Those companies then have until October 1, 2023, to sign agreements to participate in the negotiation process and until October 2, 2023, to submit manufacturer-specific data to CMS to consider in the negotiation of maximum fair price.
On February 1, 2024, CMS will send the initial offers fo maximum fair price (with justification) to each company and companies will have 30 days from receiving the offer to accept the offer or propose a counteroffer. On August 1, 2024, the negotiation period ends and on September 1, 2024, CMS will publish the maximum fair prices for drugs selected for negotiation for 2026.
Will There Be Legal Challenges?
Legal experts are cautious about the legislation, even though there is language included in the Inflation Reduction Act that prohibits administrative or judicial review of how Medicare determines which drugs are eligible for negotiation and the determination of maximum fair price. Some legal experts believe that either individual companies or pharmaceutical industry groups (such as PhRMA and BIO) will sue the Department of Health and Human Services over the implementation of the legislation.
Thomas Miller, senior fellow at the American Enterprise Institute, believes that even if a lawsuit is unsuccessful, it could potentially delay implementation of the negotiations while increasing leverage through political bargaining, essentially “stalling until better political winds blow in another direction.”
Margaux Hall, a partner at Ropes & Gray, LLP, noted that the use of guidance (as opposed to rulemaking) to implement the drug price negotiations could prompt legal challenges from the pharmaceutical industry, noting that it is a “potential vulnerability, especially for a program that is as sweeping in scope and is going to fundamentally overhaul the current course for Medicare reimbursement of drugs.”