Inflation Reduction Act Brings Reduced Drug Prices and Enhanced Medicare Benefits

Lower prescription drug costs and more affordable healthcare are on the way thanks to President Biden’s Inflation Reduction Act. This multi-year plan will bring significant benefits to seniors across the country. Key elements include lower prescription drug prices in Medicare through price negotiation with manufacturers, a yearly cap on out-of-pocket prescription drug costs in Medicare, and expanded benefits for people with Medicare such as enhanced vaccine coverage.

Let’s take a look at some of the things to expect over the next several years:

In 2022…

• Starting October 1, Medicare will temporarily pay an add-on fee of 8% instead of 6% for qualifying biosimilars which will encourage competition, lower costs for prescription drugs, and improve patient access to biosimilars.
• Starting October 1, drug manufacturers will be required to pay rebates to Medicare if their prices for certain Part D drugs increase faster than the rate of inflation over a 12-month period.

In 2023…

• Starting January 1, people enrolled in a Medicare prescription drug plan will not pay more than $35 for a month’s supply of each insulin that they take and is covered by their Medicare prescription drug plan and dispensed at a pharmacy or through a mail-order pharmacy. Part D deductibles won’t apply to the covered insulin product.
• Starting July 1, people with Traditional Medicare who take insulin through a traditional pump will not pay more than $35 for a month’s supply of insulin, and the deductible will not apply to the insulin. This will apply to people using pumps covered through the durable medical equipment benefit under Part B.
• Starting January 1, adult vaccines recommended by the Advisory Committee on Immunization Practices, such as the shingles vaccine, will be available to people with Medicare Part D at no cost.
• Starting April 1, people with Traditional Medicare may pay a lower coinsurance for some Part B drugs if the drug’s price increased faster than the rate of inflation.

In 2024…

• Starting January 1, people with Medicare prescription drug coverage who fall into the catastrophic phase of the prescription drug benefit won’t have to pay any coinsurance or co-payments during that phase for covered Medicare prescription drugs.
• The average premium increase across most Part D plans will be limited to 6% over the previous year.
• The low-income subsidy program under Medicare Part D will be fully available to certain people with Medicare with limited resources who earn less than 150% of the federal poverty level.
• Starting July 1, there will be a cap on the Part B payment amount for new biosimilars when average sales price data is not available.
• By September 1, CMS will publish the maximum fair prices negotiated for the first 10 Medicare Part D drugs selected for negotiation, and they will go into effect in 2026.

In 2025…

• People with Medicare Part D won’t pay more than $2,000 out-of-pocket for prescription drugs and will have the option to pay out-of-pocket Part D costs in monthly amounts spread out over the year.
• Government reinsurance in the catastrophic phase of Part D will decrease from 80% to 20% for brand-name drugs, biologicals, and biosimilars. It will decrease from 80% to 40% for generics.

For a complete timeline from 2022-2029, visit https://www.cms.gov/files/document/10522-inflation-reduction-act-timeline.pdf.

For helpful FAQs, visit https://www.cms.gov/files/document/10522-external-faqs-about-inflation-reduction-act.pdf.