On December 14, 2023, the Centers for Medicare & Medicaid Services (CMS) published two revised guidance documents implementing the Medicare Part B and Part D inflation rebate provisions of the Inflation Reduction Act of 2022 (IRA). Although the overall structure of the implementation of the Part B and Part D inflation rebates remains the same, CMS did change some aspects of the programs in response to comments and intends to further revisit implementation through future rulemaking. By statute, CMS must implement the Part D inflation rebates through guidance through 2024. The IRA includes no such requirement as to Part B inflation rebates, but CMS indicates that it will rely on guidance to implement that program through 2024.
Part B Guidance
Under the Initial Guidance, drugs subject to the Part B inflation rebate are single source drugs or biologicals, excluding qualifying biosimilar biological products, paid under Part B, certain vaccines, and low Medicare spend drugs. CMS indicated it would identify these drugs by their Healthcare Common Procedure Coding System (HCPCS) codes. To support such identification, CMS indicated it would exclude drugs that are billed using a HCPCS code that represents an “unclassified,” “unspecified,” or “not otherwise classified” drug or biological. CMS indicated that HCPCS codes that describe skin substitute products would not be considered Part B rebatable drugs for a calendar quarter during 2023.
In the Final Guidance, CMS clarified that single-source drugs or biological products that were within the same billing and payment code as of October 1, 2003 are treated as multiple-source drugs and excluded from Part B inflation rebates. Additionally, HCPCS codes that describe skin substitute products are not subject to the coinsurance adjustment or Part B inflation rebates at this time while CMS further deliberates on its payment policies for these products. Also, radiopharmaceuticals are not Part B rebatable drugs on the grounds that they are not paid under section 1847A of the Social Security Act and do not report average sales price (ASP).
In the Initial Guidance, CMS indicated that it would identify 340B units for exclusion by requiring providers and suppliers to use a JG or TB 340B modifier on their Part B claims (and, for 2023, excluding all units of the subset of 340B covered entities that are not required to do so until January 1, 2024). In the Final Guidance, consistent with the CY 2024 outpatient prospective payment system final rule, CMS says hospitals may use either the JG or TB modifier to identify 340B drugs for CY 2024. For CY 2025, however, only the TB modifier will be permitted.
In the Initial Guidance, CMS indicated that units on which Part B inflation rebates would be invoiced would include units furnished to beneficiaries enrolled in MA plans, and sought comment on how to quantify those units furnished to MA enrollees, as well as how to remove from that universe those units excluded from rebate liability by statute, such as 340B and dual-eligible units. In the Final Guidance, CMS decided not to subject MA units to Part B inflation rate liability at this time because of the operational issues.
Initially, CMS said, consistent with the statute, the guidance provided 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 intended to establish by regulation a process to impose such CMPs. However in the Final Guidance, CMS states that manufacturers that fail to pay rebates owed for a calendar quarter within 30 calendar days of receiving an invoice “may be subject” to CMP penalties of at least 125% of the rebate amount.
Part D Guidance
In the Initial Guidance, CMS stated that 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. In the Final Guidance, CMS clarifies how it will calculate the rebate amount for a generic drug that meets the Part D rebatable drug definition on the first day of an applicable period but ceases to do so later during such applicable period. Specifically, CMS will use the FDA’s Orange Book to identify whether FDA has approved any generic products that are therapeutically equivalent to the generic in question. CMS will “then use the NDC Directory to determine the marketing status of such therapeutically equivalent drug and to determine whether, during the applicable period, the therapeutically equivalent drug was marketed.” Any units dispensed after the date on which the generic in question no longer meets the Part D rebatable drug definition will be excluded.
Furthermore, CMS explained in the Initial Guidance that 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, CMS proposed that the first applicable period would be truncated to the first three quarters of the first calendar year that begins after the payment amount benchmark period ends. After the first applicable period, the regular four quarter applicable period would apply. In its Final Guidance, CMS changed the applicable period for subsequently approved drugs to begin on October 1 of the year following the payment amount benchmark period. CMS notes that doing so will avoid any overlap between the payment amount benchmark period and the first applicable period.
Finally, in the Initial Guidance, CMS sought comment on whether requiring that a 340B indicator be included on the [Part D prescription drug event (PDE)] record is the most reliable way to identify drugs that are subject to a 340B discount that were dispensed under Medicare Part D. In the Final Guidance, CMS states that it will continue to evaluate different options for identifying 340B units and will finalize a policy to exclude them by 2026.