Prescription drug costs have been a major concern for patients and healthcare providers in the United States. The rising cost of medications has made it increasingly difficult for people to access the treatments they need, leading to lower adherence rates and poorer health outcomes. In response to this issue, the U.S. government has introduced the Inflation Reduction Act, which includes Prescription Drug Changes aimed at reducing the cost of drugs and making healthcare more affordable.
In this blog post, we’ll explore the details of this new legislation and discuss how it can help to lower healthcare costs and improve access to medications for patients.
What is the Inflation Reduction Act?
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which encompasses provisions on healthcare, taxes, and climate change. The act aims to control healthcare costs and lower drug prices for Medicare beneficiaries.
One of its key provisions is the ability of Medicare to directly negotiate drug prices with manufacturers, particularly for certain high-cost brand-name drugs that do not have competition. This provision is expected to result in significant savings for Medicare beneficiaries and the government, as prices negotiated by Medicare will not be allowed to increase faster than inflation.
The Inflation Reduction Act also includes measures to expand the eligibility for low-income subsidies and eliminate cost-sharing for certain vaccines. This will help to improve access to healthcare and reduce out-of-pocket costs for millions of Medicare beneficiaries. Furthermore, the implementation of the Trump administration’s drug rebate rule will be delayed.
Under the new law, manufacturers that do not comply with the negotiation requirements will be required to pay a tax and face penalties for non-compliance. These changes are expected to benefit including 3.6 million who received Medicare drug prices, in addition to other beneficiaries who will have access to lower drug prices and improved healthcare.
What are the Prescription Drug Changes in Inflation Reduction Act?
The Federal Government to negotiate for the prices of specific high-cost drugs covered under Medicare.
Under the Inflation Reduction Act, the federal government will be able to engage in negotiations to lower the prices of certain high-cost drugs that are covered under Medicare. This measure focuses on specific drugs in Medicare Part B and Part D, which are costly for the government and don’t have generic or biosimilar alternatives.
Medicare will have the ability to directly negotiate with manufacturers for the price of certain expensive brand-name drugs in Medicare Part B and Part D that lack competition. The first 10 drugs to be subject to negotiation will be announced this year, with the negotiated prices taking effect in 2026.
- In 2025, Medicare will select and negotiate prices for 15 Part D drugs (effective in 2027),
- followed by 15 Part B and Part D drugs in 2026 (effective in 2028),
- then 20 Part B and Part D drugs in 2027 (effective in 2029).
- Starting in 2028, and every year thereafter, Medicare will select and negotiate prices for 20 Part B and Part D drugs.
Manufacturers that fail to comply with the negotiation requirements will be subject to a tax and penalties for non-compliance with other manufacturer requirements.
If drug costs increase at a rate higher than inflation, this law requires drug manufacturers pay rebates.
Over the past few years, around 50% of drugs covered by Medicare have experienced price increases exceeding the inflation rate. Approximately one-third of these drugs witnessed price hikes of 7.5% or more.
Starting from 2023, the Inflation Reduction Act will utilize the year 2021 as a benchmark for calculating price changes relative to inflation. This provision could reduce costs for people with private health insurance, if prescription drug expenses covered by private insurance decrease.
The Medicare Part D benefit will have a limit on out-of-pocket spending
In 2024, the Inflation Reduction Act will eliminate coinsurance above the catastrophic threshold. The act will also include a $2,000 cap on spending in 2025 and limit annual increases in Part D premiums from 2024 to 2030, in addition to other alterations to Part D benefits.
In 2022, the catastrophic threshold stands at $7,050. Prior to reaching the catastrophic threshold, beneficiaries must pay around $3,000 out of pocket for brand-name drugs. After reaching the threshold, they are responsible for 5% coinsurance on drugs until the year-end. Projections indicate that beneficiary out-of-pocket spending under the catastrophic threshold will increase to approximately $3,100 in 2023 and $3,250 in 2024.
The capping of out-of-pocket drug spending under Medicare Part D will be of significant advantage to those individuals who require expensive medications for diseases such as multiple sclerosis or cancer. In 2020, those on Part D without low-income subsidies spent an average of over $4,000 for Avonex, a drug for MS, and $5,000-$6,000 for cancer drugs like Imbruvica and Revlimid.
For people with Medicare, the cost-sharing for insulin will be restricted to a maximum of $35 per month under the Inflation Reduction Act.
In 2023, the government will begin aiding in the regulation of healthcare expenses for those with diabetes. Under the new rule, insulin covered by Medicare Part D and obtained through long-lasting medical devices under Medicare Part B will cost a maximum of $35 per month.
In 2020, around 3.3 million Medicare Part D subscribers spent an average of $54 for each insulin prescription. Beneficiaries of Medicare will pay lower out-of-pocket costs for insulin when certain insulin products are subject to a maximum monthly insulin copay of $35 from 2023 onwards.
The Inflation Reduction Act will eliminate the cost-sharing requirement for adult vaccines that are covered by Medicare Part D
In 2020, over 4 million individuals under Medicare were administered a vaccine covered by Part D, with the majority receiving the shingles vaccine. In 2018-2019, 25 states didn’t cover all vaccines recommended by the ACIP, and 15 out of 44 states that responded to a survey required beneficiaries to pay some cost for adult vaccines.
To tackle these problems, the Inflation Reduction Act will improve access to adult vaccines for Medicaid beneficiaries and families/children on CHIP.
Eligibility for full Low-Income Subsidies (LIS) under Part D will be extended.
People earning between 135% and 150% of the federal poverty level get some LIS benefits, but must still pay some drug coverage costs above the catastrophic threshold. These costs include the Part D premium, standard deductible, coinsurance, and copayments.
However, in 2024, low-income beneficiaries with incomes up to 150% of poverty will have an expanded eligibility for full Part D LIS. As a result, they will not have to pay any Part D premium or deductible, and will only be required to pay modest copayments for prescription drugs until they reach the catastrophic threshold. Once they reach the catastrophic threshold, they will not be subject to any cost sharing. This change could result in an average savings of $300 per year on drug prices.
The implementation of the drug rebate rule introduced by the Trump Administration has been postponed until 2032.
According to the Inflation Reduction Act, the drug rebate rule will delay until 2032. The rule eliminates anti-kickback safe harbor for prescription drug rebates in Medicare Part D, negotiated by drug manufacturers and PBMs or health plan sponsors. This delay may help to prevent potential increases in Medicare spending and premiums paid by many beneficiaries.
FAQS about Prescription Drug Changes In Inflation Reduction Act
Q: How will the Inflation Reduction Act impact Medicare beneficiaries?
A: The act will make big changes to Medicare drug coverage, such as closing the donut hole, capping prescription drug out-of-pocket costs, and providing rebates for prescription drugs.
Q: Who will benefit from the changes to Medicare prescription drug coverage?
A: The changes are designed to benefit Medicare beneficiaries by making prescription drugs more affordable and accessible.
Q: How can beneficiaries prepare for the changes?
A: Beneficiaries should check their prescription drug coverage, compare plans, and talk to their healthcare provider.
Final Word about Prescription Drug Changes In Inflation Reduction Act:
The Prescription Drug Changes in the Inflation Reduction Act have the potential to improve access to affordable prescription drugs and reduce out-of-pocket expenses for Medicare beneficiaries, while also targeting specific drugs that account for a significant portion of the government’s drug expenditure. However, the impact of these changes on individual beneficiaries will depend on factors such as their specific drug needs, income level, and healthcare coverage.
Need help? Call Brady Insurance Marketing: 801-347-2087. Our assistance is at no cost to you