Reed Smith In-depth

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”),1 an omnibus budget law that contains significant reforms affecting prescription drug pricing and reimbursement. This Client Alert is the second in a series addressing the IRA’s prescription drug reforms.2 Below, we describe the limits on insulin cost sharing under Medicare Parts B and D (which are the second of the reforms scheduled to take effect) and their potential implications.3
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Limits on Insulin Cost-Sharing under Medicare

The IRA limits Medicare beneficiary cost-sharing for a monthly supply of insulin to $35, with no deductible. Under Medicare Part B, this cap applies to any insulin furnished on or after July 1, 2023 through covered durable medical equipment.4 Under Medicare Part D, this cap applies, beginning in plan year 2023, to any insulin product covered under the applicable Medicare Part D plan, during all phases of the Part D benefit.5

Notably, since the beginning of 2021, cost sharing for many insulin products has been similarly capped at $35 per month, without a deductible, under a large number of Part D plans, pursuant to the Centers for Medicare and Medicaid Services’ (CMS) Medicare Part D Senior Savings Model (Model), a voluntary payment model established under section 1115A of the Social Security Act.6 However, unlike the Model and some congressional proposals,7 the IRA amendments do not contain any insulin coverage mandates for Part D plans, or any requirements for insulin manufacturers to provide price concessions in order for their products to be eligible for the $35 cap. Instead, it appears that Part D plan sponsors will only be required to include insulin products on their formularies to the extent mandated under existing CMS formulary rules, and the $35 cap will apply to any insulin product on the formulary or covered under an exception or appeal. Manufacturers will presumably continue to contract with Part D plan sponsors and their pharmacy benefit managers to pay rebates in exchange for having their products included on plan formularies.

For the first three months of 2023, the law includes a provision requiring Part D plans to reimburse enrollees within 30 days for any amount by which the cost-sharing collected at the point of sale exceeds the monthly $35 cap. This appears to allow for a transition period for plans to implement the new requirements while still giving plan enrollees the benefit of the reduced cost-sharing. Additionally, for plan year 2023, sponsors of Part D prescription drug plans and Medicare Advantage prescription drug (MA-PD) plans will receive a special subsidy from CMS equal to the amount of the “aggregate reduction in cost-sharing and deductible” provided due to the $35 cap. This presumably reflects the fact that Part D plans have already submitted their bids to CMS for plan year 2023 based upon the pre-IRA Part D plan requirements, which did not mandate a $35 per month cap on all insulin products.