Reed Smith In-depth

The recently enacted Inflation Reduction Act contains significant reforms affecting prescription drug pricing and reimbursement under federal programs. Our team will be analyzing these reforms in a series of Client Alerts over the next few weeks, followed by a multi-part webinar series in September. Among these reforms, and the one covered in this first alert, are new “inflation rebates” applicable in the context of Medicare Part B and Part D, which essentially require manufacturers to pay rebates to these programs to the extent that their prices increase faster than the rate of consumer inflation. The new law has significant implications for drug manufacturers and other industry participants with respect to drug pricing and contracting strategies.
Dozens of prescription medicine bottles in a jumble.


On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (IRA), an omnibus budget law which contains significant reforms affecting prescription drug pricing and reimbursement, including:

  • Inflation rebates for Medicare Part B and Part D drugs, beginning in the fourth quarter of 2022 for Part D and the first quarter of 2023 for Part B;
  • Limits on insulin cost sharing under Medicare Parts B and D, beginning in 2023;
  • Medicare Part D benefit redesign beginning in 2024, including new mandatory manufacturer discounts beginning in 2025; and
  • Federal price negotiation for selected drugs under Medicare Parts B and D, effective beginning in 2026.

This Client Alert is the first in a series addressing the IRA’s prescription drug reforms. Below, we describe the inflation rebate and related reimbursement provisions (which are the first of the reforms scheduled to take effect) and their potential implications.