Why We’re Already Thinking Ahead to 2028 Part B Drug Price Negotiations

With all the attention around the Medicare Part D provisions in the Inflation Reduction Act (IRA), it’s easy to overlook the upcoming Part B drug price negotiations (just kidding, we haven’t forgotten).

Part B spending is relatively concentrated to a small number of covered drugs, though 15 products will be the subject of government scrutiny and negotiations in 2028. These will include single-source branded products or biologics without an approved generic or biosimilar, as well as small-molecule drugs that have been on the market for at least 9 years and biologics that have been licensed for at least 13 years.¹

Manufacturers will need to offer the newly negotiated maximum fair price (MFP) to Medicare beneficiaries, with Medicare reimbursing pharmacies and providers for selected drugs based on the MFP + 6% (currently, Medicare reimburses Part B drugs at the rate of the average sales price [ASP] + 6%). The MFP is expected to be considerably lower than the ASP, translating to significantly lower reimbursements for providers and a smaller margin between acquisition cost and reimbursement.²

So, with Part B negotiations still a few years away, what’s there to think about? As part of the IRA, drug companies must pay rebates to Medicare when prices increase faster than the rate of inflation for certain drugs. This could slow the rate at which drug prices—and consequently coinsurance amounts—rise. Since coinsurance is 20% of the drug price, slower price increases mean more predictable and manageable out-of-pocket costs for beneficiaries.

The US Department of Health and Human Services (HHS) has already implemented price controls for manufacturers as part of the broader IRA. Recently, HHS lowered the coinsurance rate for Medicare beneficiaries for drugs that have risen faster than the overall inflation rate. This was expected to save beneficiaries anywhere between $1 and $3575 per average dose, depending on their individual coverage.³

In anticipation of the 2028 Part B negotiations, manufacturers might be incentivized to offer more favorable pricing terms to maintain market competitiveness and avoid penalties. This proactive approach could lead to more competitive and lower ASPs by then, benefitting the Medicare program and its beneficiaries.

Understanding the upcoming changes in buy and bill reimbursement will enable providers to adapt their patient care strategies, ensuring they continue delivering high-quality care, remain compliant with regulations, and effectively communicate the potential cost implications to patients.

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References

1. Cubanski J, Neuman T, Freed M. Explaining the prescription drug provisions in the Inflation Reduction Act. KFF. January 24, 2024. Accessed July 16, 2024. https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/#bullet01

2. Seshamani, M. US Department of Health and Human Services. Medicare Part B drug inflation rebates paid by manufacturers: revised guidance, implementation of section 1847A(i) of the Social Security Act. December 14, 2023. Accessed July 16, 2024. https://www.cms.gov/files/document/medicare-part-b-inflation-rebate-program-revised-guidance.pdf

3. US Department of Health and Human Services. HHS announces savings for 41 prescription drugs thanks to inflation rebates from the Biden-Harris Administration’s lower cost prescription drug law. March 26, 2024. Accessed July 16, 2024. https://www.hhs.gov/about/news/2024/03/26/hhs-announces-savings-41-prescription-drugs-thanks-inflation-rebates-from-biden-harris-administrations-lower-cost-prescription-drug-law.html