Although the U.S. Inflation Reduction Act charges the Centers for Medicare & Medicaid Services with negotiating prices of the Part B and D drugs with the highest Medicare spend, the first two rounds of negotiations will focus solely on Part D drugs, which are dispensed through pharmacies.

Topping biopharma regulatory news in 2022 was the signing of the Inflation Reduction Act (IRA), as its provisions requiring Medicare to directly negotiate certain prescription drug prices will open the door for the first time to a degree of government price controls in the U.S., affecting the bottom line of drug companies around the world.

In addition to the Medicare inflation rebate and the other pricing reforms of the Inflation Reduction Act, manufacturers of certain Part B drugs will be subject to a refund provision tucked away in the Infrastructure Investment and Jobs Act that was signed into U.S. law last year.

The U.S. Centers for Medicare & Medicaid Services is finally making a long-expected, and requested, adjustment to Medicare Part B premiums, which were raised nearly 15% for 2022 in the wake of Biogen Inc.’s initial $56,000 annual price tag for its Alzheimer’s drug, Aduhelm (aducanumab).

Pricing new drugs for the U.S. market, especially those treating rare diseases, is getting a lot more complex now that the Medicare inflation rebate is in play. The rebate provision in the newly enacted Inflation Reduction Act incentivizes companies to set higher launch prices for drugs that will be used by Medicare beneficiaries since their future price increases will be limited to the rate of inflation. Although some of the other drug pricing measures included in the new law won’t kick in for a few years, the Medicare inflation rebate is to become effective next year.

As expected, the U.S. House of Representatives passed, on a 220-207 party-line vote, a legislative package Aug. 12 that, for the first time, allows Medicare to directly negotiate some prescription drug prices, while imposing severe penalties and an excise tax on companies that refuse to negotiate or don’t comply with the government price.

Within a few weeks, government price negotiations for some prescription drugs, as well as limits on annual price increases, could be the law of the land in the U.S. With the Senate passing a slimmed-down version of H.R. 5376 through reconciliation Aug. 7, the House is expected to make a brief return Friday from its August recess to vote on the changes and conference the differences between its bill and the Senate version. Then it’s on to the president’s desk for the signature that will enact the package of health care, tax and climate provisions.