Editor’s Note: This month, we offer updates on one significant topic: Inflation Reduction Act. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.

Table of Contents:

• 2023 Pharmaceutical IRA Updates
  • The IRA Negotation Timeline & Process
  • IRA Lawsuits Against the CMS

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2023 Pharmaceutical IRA Updates

There has been much movement in the IRA space this summer – below is a summary of updates since our last recap in June 2022: 

• The first list of the top ten (10) drugs covered under Medicare Part D as Negotiation Eligible for 2026 was released. The products selected include:
  • Blockbuster diabetes drugs including Januvia and Jardiance
  • Leading heart and blood drugs including Xarelto and Eliquis
  • And a handful of other psoriasis and blood cancer therapies
• To find out more details about the first 10 drugs, you can access it here.

The IRA Negotiation Timeline & Process

The IRA negotiations will occur in 2023 and 2024 with any negotiated prices becoming effective beginning in 2026. CMS will publish any agreed-upon negotiated prices for the selected drugs by September 1, 2024. For future years, CMS will select up to 15 more drugs covered under Part D for negotiation for 2027, up to 15 more for 2028 that include drugs covered under Part B and D, and up to 20 more drugs for each year after that.

In regard to the list that was published by CMS, pharma manufacturers need to enter into an agreement to negotiate by October 1, 2023, and submit specified information by October 2, 2023. CMS will make a written offer by February 1, 2024, and will include a justification based on factors they are required to consider. The manufacturer has one month to accept or make a written counteroffer. If the counteroffer is rejected by CMS, they will intend to hold one to three meetings with the manufacturer within 30 days of receiving the counteroffer. For the initial 2026 price year, the meetings will conclude by June 30, 2024. If a meeting is held, CMS will send a manufacturer a “Notification of Final Maximum Fair Price” before negotiations are completed. This notice would be sent by July 15, 2024, and the manufacturer would have until July 31, 2024, to accept or reject the final offer and negotiations will conclude by August 1, 2024.Manufacturers whose drugs are selected for the program have the option to decline to participate only if they withdraw all of their products from the federal health care programs altogether. If manufacturers continue to participate but do not comply with the IRA’s negotiations process or maximum fair price determined through the process will face monetary penalties.

Manufacturers whose drugs are selected for the program have the option to decline to participate only if they withdraw all of their products from the federal health care programs altogether. If manufacturers continue to participate but do not comply with the IRA’s negotiations process or maximum fair price determined through the process will face monetary penalties.

IRA Lawsuits Against the CMS

Along with the publication of the first ten (10) negotiated drugs came eight (8) lawsuits against CMS from selected manufacturers, which are detailed below. The Department of Health & Human Services (HHS) lawyers pushed back on the lawsuits and requested the courts to dismiss the claims indicating “This status quo is unsustainable; the IRA seeks to correct course,” in regards to the cost of spending for drugs.

1. First Amendment – Compelled Speech. Manufacturers claim that by forcing them to agree to a process called “negotiation” to determine a maximum fair price, the IRA would be compelling their speech in violation of the First Amendment.
2.  Fifth Amendment – Uncompensated Takings. Manufacturers allege that the IRA would be violating the Fifth Amendment by requiring them to sell their patented drug products at a significant price discount under threat of coercive penalties, which amounts to the government “taking” without “just compensation.”
3. Fifth Amendment – Due Process. It’s alleged that the IRA violates the Due Process Clause by directing the HHS to set Medicare prices without proper safeguards such as administrative or judicial review.
4. Eighth Amendment – Excessive Fines. For three cases, manufacturers claim that the IRA’s excise tax provision acts as a penalty rather than a true “tax” and punishes manufacturers that don’t agree to the negotiation process or the maximum fair price. They claim the penalty is grossly disproportionate to the conduct that it punishes and is unconstitutional.
5. Non-delegation/Separation of Powers. Many plaintiffs allege that the IRA unconstitutionally transfers legislative power to CMS, an executive administrative agency, in violation of the principles of non-delegation and separation of powers.
6. No Legislative Authority. The plaintiffs allege the “excise tax” is unauthorized by any enumerated power of Congress and is unconstitutional.
7. Unconstitutional Condition on Medicare and Medicaid Participation. Alleges the IRA unconstitutionally conditions the manufacturer’s ability to participate in Medicare and Medicaid on the “relinquishment” of their constitutional rights.
8. Violation of the Administrative Procedure Act (APA) and Medicare Statute. A plaintiff has filed a complaint against the Centers for Medicare & Medicaid Services (CMS) regarding its final guidance on implementing the Program. The complaint alleges that CMS’s final guidance is a legislative rule that requires comment under the APA and Medicare statute. It imposes legally binding obligations that are enforced through the imposition of ‘excise tax’ penalties and civil monetary penalties. Since CMS issued its final guidance with sections that were not subject to a comment solicitation period, its implementation of the program will violate the APA and Medicare notice-and-comment requirements.
   • CMS has also begun publishing the list of drugs and their manufacturers that are incurring the new Part B Inflation Penalty Rebate. This new form of posting publicly could likely be expected for drugs that incur the similarly new Part D Inflation Penalty as well. As the Part D penalty is assessed annually, we will need to wait ‘[no] later than 9 months after the end of each applicable period’, which means as late as June 2024, to see if CMS continues to publish the list of offending drugs.
   • In August, CMS released draft guidance on a payment smoothing plan for Part D enrollees. The proposed guidance included more than 50 pages of details on the payment plan, but the big takeaway was that the use of the payment plan by enrollees did not affect the True Out Of Pocket (TrOOP) accumulator in any way. That is, the full out of pocket expense realized at the point of sale will apply to the TrOOP in the month it was incurred, regardless if it is then smoothed for the patient over the remaining months of the year. The plan will be responsible for covering the full cost at the point of sale and providing a statutorily defined payment plan to the enrollee. More details can be found in the draft guidance released here. 

The IRA continues to have a large and lasting impact on our industry. During IntegriChain’s upcoming Access Insights Conference in November, we will dive deep into the implications of IRA updates on pricing, data, and operations.

References:

• HHS
• JD Supra
• JD Supra
• Endpoints News
  

As always, IntegriChain continues to support pharma manufacturers in breaking down and staying ahead of new regulations. If you have any questions or concerns, please reach out to us at consulting@integrichain.com.

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