ADVI Instant: Revised Part B and D Inflation Rebate Guidance and Drug Pricing Updates

On December 14, 2023, the Centers for Medicare and Medicaid Services released revised guidance on Inflation Rebates Paid by Manufacturers in Medicare Part B (link) and Part D (link). The Biden Administration also announced that ASPR is making “fair pricing” a standard part of contract negotiations, and released new reports related to the Inflation Reduction Act, Part B Inflation Rebate Reduced Coinsurances for Q1 2024, and a letter expressing concern with PBM and plan practices. 

Notable Changes/Clarifications to the Part B Guidance 

• CMS clarifies that the following products are excluded from Part B Inflation Rebates:
  • Generic drugs approved under Section 505(j) of the FDCA (i.e., those approved under Abbreviated New Drug Applications (ANDAs)) 
  • Single-source drugs or biological products within the same HCPCS code 
  • Separately payable radiopharmaceuticals 
• CMS also notes that because biosimilars are separately payable under OPPS, they will be included in Part B Inflation Rebate calculations 
• CMS clarified that rebate amounts will not be adjusted for sequestration. 
• CMS will treat drugs approved before Dec 1, 2020, with absent benchmark quarter payment amount data as subsequently approved drugs. Instead of using the Q32021 payment amounts, the benchmark quarter for these drugs will be the third full calendar quarter after the first marketed date, as reported to CMS in ASP data. 
• CMS will follow a similar approach for drugs originally billed under a grouped/not otherwise classified code, using the third full quarter after assignment of a unique HCPCS code as the payment amount benchmark quarter and the first month of the third full quarter after such assignment as the benchmark period CPI-U.  
• CMS revised its methodology to remove claims for which Medicare beneficiaries have Medicaid coverage that may provide cost-sharing assistance. 
• CMS notes it may, in future rulemaking, consider excluding discarded units for which manufacturers must pay refunds from Part B inflation rebates. 
• CMS revised its reduced rebate amount for Part B drugs in shortage or with supply chain disruptions.
  • For drugs “currently in shortage” (i.e., those on CDER/CBER shortage lists), CMS will reduce Part B rebate amounts owed by
    • 25 percent for the first four calendar quarters  
    • 10 percent for the second four calendar quarters  
    • 2 percent for all subsequent calendar quarters  
  • CMS will provide a greater reduction for plasma-derived products “currently in shortage” (75 percent, 50 percent, and 25 percent for the above-listed timeframes) 
  • For biosimilars subject to a severe supply chain disruption (e.g., natural disaster), CMS will reduce Part B rebate amounts owed by 75 percent for a limited amount of time (four to eight calendar quarters). 
• CMS removed from its report process the “true-up” which would have revised rebate amounts owed a year after the original calculation, but notes it is considering when and how to make recalculations to determine any appropriate adjustments. CMS will also provide a longer period (30 days instead of 10 days) for manufacturer reviews of the first two rebate reports (CY 2023 and CY 2024). 

CMS did not substantively change its approach to identify 340B units for exclusion or further address the exclusion of units furnished to beneficiaries enrolled in Medicare Advantage.  

Notable Changes/Clarifications to the Part D Guidance 

• CMS clarifies that the following products are excluded from Part D inflation rebates:
  • Generic drugs approved under a 505(j) ANDA are excluded from Part D inflation rebates, unless all the following criteria apply:
    • The reference listed drug and all authorized generics are no longer being marketed 
    • No other therapeutically equivalent generics are marketed 
    • The manufacturer is not a first applicant during the 180-day exclusivity period 
    • The manufacturer is not a first approved applicant for a competitive generic therapy 
  • Drugs without Medicaid Drug Rebate Program agreements 
  • Drugs that do not meet the definition of “Covered Outpatient Drugs” (e.g., vaccines) 
  • Drugs with total cost less than inflation-adjusted $100 per person per year 
• CMS revised the first applicable period for subsequently approved drugs to eliminate potential overlap with the benchmark period. 
• As in the Part B Inflation Rebate Revised Guidance, CMS will treat drugs approved before Oct 1, 2021, with absent benchmark period payment amount data as subsequently approved drugs. Instead of using the Q1 – Q32021 payment amounts, the benchmark period for these drugs will be the four calendar quarters for the entire calendar year (Jan 1 – Dec 31) after the first marketed date, as reported to CMS in the Medicaid Drug Programs system. 
• CMS notes it continues to assess options to identify 340B units and will finalize a policy by plan year 2026. 
• CMS clarified that to carry out its alternative rebate calculation for new formulations, it will use the most recently identified initial drug in the absence of one identified by the manufacturer in the last quarter of the applicable period. 
• CMS revised its reduced rebate amount for Part D drugs in shortage or with supply chain disruptions.
  • For drugs “currently in shortage” (i.e., those on CDER/CBER shortage lists), CMS will reduce Part D rebate amounts owed by
    • 25 percent for the first applicable period  
    • 10 percent for the second applicable period 
    • 2 percent for all subsequent applicable periods 
  • CMS will provide a greater reduction for plasma-derived products “currently in shortage” (75 percent, 50 percent, and 25 percent for the above-listed timeframes) 
  • For generic Part D Rebatable drugs or biosimilars subject to a severe supply chain disruption (e.g., natural disaster), CMS will reduce Part D rebate amounts owed by 75 percent for a limited amount of time (one to two applicable periods). 
  • For generic Part D Rebatable drugs that are likely to be in shortage for a subsequent applicable period, CMS will reduce Part D rebate amounts owed by 75 percent for a limited amount of time (one to two applicable periods), for the applicable period when the reduction is requested or when it is likely to be in short supply. 
• As in the Part B guidance, CMS removed from its report process the “true-up” which would have revised rebate amounts owed a year after the original calculation but notes it is considering when and how to make recalculations to determine any appropriate adjustments. CMS will also provide a longer period (30 days instead of 10 days) for manufacturer reviews of the first two rebate reports (beginning Oct 1, 2022, and Oct 1, 2023). 

Other Notable Announcements 

• CMS also released the list of Part B drugs subject to reduced coinsurance and likewise inflation rebates for Q1 2024. ADVI tracks CMS’ quarterly inflation rebate publications and subsequent corrections; please contact your ADVI account manager with any questions about this, or any previous, Part B inflation rebate announcements. 
• The Administration for Strategic Preparedness and Response (ASPR) announced (link) that it is making “fair pricing” a standard part of contract negotiations for medical products developed or purchased with ASPR funding. ASPR has already included similar language for products being developed through Project NextGen in contracts with Regeneron, CastleVax, Codagenix and Gritstone Bio. This announcement is specific to ASPR. Manufacturers that receive funding from other agencies (i.e., National Institutes of Health) will not be required to commit to “fair pricing” in contracts under this announcement.   
• The Office of the Assistant Secretary for Planning and Evaluation (ASPE) released several new reports related to the Inflation Reduction Act, including:
  • Updates to previous reports (link) on drugs selected for negotiation. Notably, the new report estimates how many selected products received federal contributions or support during drug development.  
  • A report (link) summarizing characteristics of drugs subject to inflationary rebates in 2023.  
• CMS also released a letter (link) to PBMs, Part D plans, Medicaid managed care plans, and private insurance plans expressing concern with PBM and plan practices that may limit access to care. This includes treatment of pharmacy price concessions, pharmacy steering, and inappropriate coverage denials, cost sharing, and use of utilization management. 

ADVI will continue monitoring developments and the next steps. This is a delayed release. ADVI Instant content is distributed in real-time for retainer clients. Get in touch to learn more about how we can support your commercialization, market access, and policy needs.

---