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The Inflation Reduction Act of 2022...Winter is Coming

Updated: Apr 3

Looking ahead to 2025 for Part D benefits, things don’t look too rosy for health plans. The Inflation Reduction Act of 2022 will be ushering in many benefit parameters which will need careful planning in anticipation of 2025. In summary:

  1. No coverage gap phase

  2. Maximum $2,000 out of pocket for members

  3. Plans are responsible for 60% payment in the catastrophic phase. (Plans pay 15% in 2023 and 20% in 2024. CMS quietly decreased its share from 80% to 20% in 2025.)

The out-of-pocket spending cap will mean that members will be utilizing more high-cost specialty drugs for longer periods of time. Utilization management criteria like step therapy and prior authorization will likely be expanded to the limits of FDA labeling and local and national coverage determination criteria. Health plans will favor formularies with lower cost generics, older brand drugs with lower list prices, biosimilars, etc. due to their 60% cost share in the catastrophic phase.

Meanwhile, back on the biggest IRA front, Medicare is negotiating prices for a certain group of drugs - a series of lawsuits filed by the pharmaceutical manufacturers and their advocacy partners are working their way through the judicial system on the premise that the law violates the Constitution’s ban on excessive fines and Medicare price controls are an unjust taking of property under the Fifth Amendment and violates speech rights. CMS plans to announce the first 10 drugs selected for negotiation by September 1, 2023. Those negotiated prices will be effective starting in 2026 (assuming no judicial decisions affecting the program).

In April 2023, CMS listed the first medications whose prices rose faster than inflation and will trigger rebates under the IRA. All of the drugs are biotech drugs covered by Medicare Part B. The brand name list includes Abelcet, Akynzeo, Atgam, Aveed, Bicillin C-R, Bicillin L-A, Carnitor, Cytogam, Flebogamma DIF, Fragmin, Humira, Leukine, Minocin, Mircera, Nipent, Padcev, Rybrevant, Signifor LAR, Sylvant, and Xiaflex.

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