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    1K views2 pages

    Drug Pricing High Level Overview - 11-2

    Uploaded by

    Peter Sullivan
    summary

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 2

    Prescription Drug Pricing

    Below is an overview of the agreement on prescription drugs. The policy is structured around three main
    provisions:
    1. Providing the authority, the mandate, and the tools for Medicare to negotiate drug prices outside
    their initial exclusivity period.
    2. Redesigning the Part D benefit to protect seniors from high out-of-pocket spending.
    3. Instituting rebates for drug prices that grow faster than inflation.

    Negotiation: Under this policy, Medicare will negotiate prices for a subset of drugs. The process begins
    with the Secretary of HHS selecting from a list of the highest gross spending drugs in each of the Part B
    and Part D programs that are single source drugs outside of their initial exclusivity periods – 9 years for
    small molecule drugs and 12 years for biologics – as well as insulin products.
    The proposal specifies that the Secretary will negotiate up to 10 drugs for 2025. In each following year,
    that number will increase until reaching up to 20 drugs for 2028 and beyond. CMS indicated that those
    numbers are feasible.
    After selecting the drugs for negotiation, manufacturers will submit information about the selected drug,
    such as their research & development costs, prior federal financial support, extent to which the drug
    addresses an unmet need, whether the drug represents a therapeutic advance beyond existing treatments,
    and more. The Secretary then uses this information to engage in a back and forth with the manufacturer
    to arrive at an agreed to fair price. During this process, the Secretary is explicitly directed to consider the
    innovation that the selected drug represents.

    The negotiated price cannot exceed the following:


     75% of its 2021 non-federal average manufacturer price for a small molecule drug fewer than 12
    years but more than 9 years passed initial exclusivity.
     65% of its 2021 non-federal average manufacturer price for a drug 12 – 16 years passed initial
    exclusivity.
     40% of its 2021 non-federal average manufacturer price for a drug more than 16 years passed
    initial exclusivity.

    For manufacturers that refuse to negotiate, they will be subject to an excise tax; however, CBO assumes
    this tax is never actually levied.

    When the Secretary and manufacturer arrive at an agreed to negotiated price, the Secretary will then
    require that the negotiated drug be carried on the formulary by all Part D plans so that all patients have
    access to it.

    Inflation Rebates: The base year for the inflation rebate is 2021. The rebate is calculated based on total
    drug units sold.

    Part D Redesign: The policy creates an annual out-of-pocket patient spending cap of $2,000, and
    allows those costs to be smoothed over the calendar year. Insulin co-pays are capped at $35 per month.
    In addition, the beneficiary share of costs in the initial coverage phase will be decreased from the current
    25%; lawmakers will include a placeholder reduction and work expeditiously to finalize a design to

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