Reconciliation Bill With Medicare Drug Price Negotiation, Out-of-Pocket and Inflation Caps Becomes Law

August 16, 2022

On August 16, President Biden signed the Inflation Reduction Act—a broad climate, tax, and healthcare reconciliation bill—into law. The law extends Affordable Care Act (ACA) tax credit subsidies, allows Medicare to negotiate prescription drug prices, places inflationary caps on price increases for Medicare Part B and Part D drugs, and limits Medicare beneficiaries’ out-of-pocket spending on Part D prescription drugs.

The Association for Clinical Oncology (ASCO) supports the intent of the law, which is to reduce the cost of prescription drugs and lower patient out of pocket spending. However, ASCO and other specialty societies are concerned that the drug price negotiation provision will negatively impact patient access to critical Part B prescription drugs and asked Congress to offset cuts to Part B reimbursement. 

Key provisions in the law that will impact cancer care include:

  • Drug Price Negotiation – The law directs the Department of Health and Human Services (HHS) to negotiate the price of a set number of drugs within Medicare Part B and Part D. The Secretary of HHS will negotiate maximum fair prices for 10 Part D drugs in 2026, 15 Part D drugs in 2027, 15 Part B or D drugs in 2028, and 20 Part B or D drugs in 2029 and beyond. These changes are not expected to affect oncology practices until 2028.
  • Prescription drug inflation rebates – The law requires manufacturers to provide rebates to the government if the price of certain drugs increase above inflation. The Part D rebates begin in October 2022, and the  Part B rebates begin in January 2023.
  • Medicare Part B coinsurance protection – An inflation growth cap for Part B beneficiary coinsurance begins in April 2023.
  • Medicare Part D – An out-of-pocket spending cap begins in 2024.  Other updates include:
    • Starting in 2024, beneficiaries will owe $0 out-of-pocket for Part D drugs in the catastrophic phase. By 2025, beneficiary out-of-pocket spending will be capped at $2,000 per year.
    • The income threshold for the Part D low-income subsidy has been expanded from 135% to 150% of the federal poverty level.
    • A redesign of program benefits will take place in 2025.
    • Premium growth will be capped at 6% per year through 2029.
    • HHS is authorized make a one-time adjustment to the beneficiary Part D premium percentage in 2030 to provide longer-term premium protection.
    • $0 cost-sharing for vaccines goes into effect in January 2023.
    • Repeal of the rebate rule begins in January 2027.
  • ACA – Premium tax credit subsidies are extended through 2025. 

The law also includes federal investments in energy security, addressing climate change, and reducing the federal deficit. These investments will be paid for with a 15% corporate minimum tax, taxes on stock buy backs, and strengthening Internal Revenue Service enforcement.

ASCO will continue to voice its concerns about the changes to Part B and Part D reimbursement that could come from drug price negotiation. The Association will also continue to work with Congress and the administration to advocate for policies that better address high drug costs without compromising patient access to cancer care.        

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