The Medicare Prescription Drug Inflation Rebate Program, as directed by the Inflation Reduction Act of 2022, requires drug companies to pay rebates for prices that exceed inflation on certain Medicare Part B drugs. The inflation rebate applies to specific Medicare Part B single-source drugs and biologics, including biosimilar biologics. Vaccines (influenza, pneumococcal, hepatitis B, COVID-19) and drugs with an average total allowed charges of less than $100 per individual per year are excluded. The goals of this program are to reduce exorbitant drug price increases and lower beneficiary out-of-pocket drug costs. Thus, an inflation-adjusted payment amount will be applied to both the patient coinsurance and provider payment.
As of April 1, 2023, if the Medicare Part B payment amount for a Part B rebatable drug for a calendar quarter is higher than the inflation-adjusted payment amount, the following with be implemented:
- Patient coinsurance is based on 20% of the inflation-adjusted payment amount for the quarter and will be reflected as a percentage (that is less than 20%) of the Medicare Part B payment amount. Patients must be charged the correct coinsurance which could change quarterly.
- The Medicare portion of a provider payment will be increased for the difference between the Medicare Part B payment amount and patient coinsurance, minus any Part B deductible and sequestration.
- CMS has provided this example: if the Medicare Part B payment amount for the drug is $100 and the patient coinsurance is 18.525%, you would charge the patient $18.52. Typically, the Medicare portion of payment to practitioners for Part B drugs and biologicals is limited to 80%. When the patient coinsurance is adjusted, the percentage of the Medicare portion of payment to you will be higher. In this example, the percentage of the Medicare portion would be 81.475% or $81.48 of the Medicare Part B payment amount.
The Medicare Part B payment amounts for drugs and patient coinsurance percentages will be published in the quarterly drug pricing files for each HCPCS code to charge patients correctly. The notes column will indicate “Inflation adjusted coinsurance applied” if the coinsurance should be less than the 20% of the Part B payment amount. CMS has identified 23 drugs for April 2023 to which the inflation-adjusted coinsurance is applied.
CMS issued initial guidance on February 9, 2023, and anticipates in Q4 2023 to release revised guidance on the implementation of key topics including the process to determine the number of drug units for calculating rebates, identification and removal of 340B units for calculating rebates, and considerations of rebates in the event of drug shortages, among other topics.
- Pharmacy revenue cycle teams to internally review processes for patient coinsurance, validate patients are accurately billed, and confirm internal payments are offset by the amount of less payment made through coinsurance.