CMS Issues Memorandum Setting the Stage for Inflation Reduction Act Drug Price Negotiation

Earlier this month, the Centers for Medicare and Medicaid (“CMS”) released a Memorandum overviewing next steps in the federal government’s implementation of the Medicare Drug Price Negotiation Program. Though CMS has only just “set the stage” for multiple comment opportunities by pharmaceutical manufacturers, health care providers, and the like, the memorandum provides useful insight into the agency’s priorities and implementation timelines.

By way of background, the Inflation Reduction Act (“IRA”) empowers the Secretary of Health & Human Services (“HHS”) to directly negotiate certain single-source, high-spend drugs under Medicare Parts B and D. For the first year of the Negotiation Program, the Secretary will choose 10 high-cost, single-source drugs under Part D for price negotiation. The negotiated fair prices for these drugs will take effect starting in 2026. In the following years, the Secretary will select an additional 15 Part D drugs for negotiation in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and subsequent years. As a result, the IRA has significant ramifications and multibillion-dollar implications for pharmaceutical manufacturers.

Now, through this memorandum, CMS has endeavored to outline how it will approach implementation of the Negotiation Program for year-specific price applicability, including (1) engagement with the public; (2) program guidance; (3) information collection requests; and (4) key dates.

Program Guidance

With respect to program guidance, CMS has taken a decision to issue draft guidance and solicit comment to allow for public input. These topics include:

1. Terms and conditions contained in the manufacturer agreement, including the manufacturer’s and Secretary’s responsibilities;
2. Approach for considering (1) the manufacturer-reported data elements and (2) evidence about alternative treatments;
3. Process for the offer and counteroffer exchange between the Secretary and manufacturers;
4. Content of an explanation for the maximum fair price;
5. Method for applying the maximum fair price across different dosage forms and strengths of a selected drug;
6. Dispute resolution process for specific issues that are not exempt from administrative and judicial review; and
7. Processes for compliance monitoring and imposition of civil monetary penalties for violations.

Key Dates and Estimated Timeline for Implementation

Though the memorandum sets forth several key dates, by September 1, 2023, CMS will have selected and published its list of ten Part D selected drugs for initial price applicability year 2026. One month later, on October 1, 2023, manufacturers of selected drugs will meet the deadline to sign an agreement with the Secretary to conduct negotiations. As HHS and CMS ramp up rulemaking efforts around drug price negotiations, drug makers that are forced to participate must have a clear understanding of their rights and obligations under the IRA. As noted in its memo, CMS will soon seek feedback and insights from a broad range of interested parties throughout its implementation of the IRA, including implementation of the Negotiation Program. Given pioneer nature of this program, manufacturers must take advantage of the opportunity for engagement with the government in order to ensure informed rulemaking.

How Frier Levitt Can Help

If you are a pharmaceutical manufacturer subject to the IRA’s drug price negotiation provisions, Frier Levitt can ensure compliance as the law’s implementation is developed through CMS rulemaking and draft guidance. Frier Levitt has ample experience conducting policy research and drafting client-specific memoranda designed to ensure that policymakers have the information, data, and tools available to successfully design and implement regulatory policies. Contact us for more information or assistance.