Understanding the Medicare Prescription Drug Inflation Rebate Program

Some Medicare beneficiaries will soon be paying less for nearly 30 Part B prescription drugs with price increases higher than the inflation rate — thanks to the Inflation Reduction Act, which President Biden signed in August 2022.

According to the Department of Health and Human Services and the Centers for Medicare & Medicaid Services (CMS), people with Traditional Medicare and Medicare Advantage who use the 27 drugs affected may pay a reduced amount for their coinsurance during the second quarter of this fiscal year, beginning April 1 and running through June 30. Savings could be between $2 and $390 per average dose, depending on individual coverage. Drug manufacturers will be invoiced for the inflation rebates they owe Medicare beginning in 2025.

A CMS spokesperson confirmed to BenefitsPRO that people most likely to benefit are those enrolled in Traditional Medicare without such third-party coverage as Medigap, Medicaid or employer-sponsored insurance.

“The Biden-Harris Administration believes people with Medicare shouldn’t be on the hook when drug companies inexplicably jack up the prices of their drugs,” Health and Human Services Secretary Xavier Becerra said in a statement. “President Biden made lowering prescription drug costs for Americans a top priority, and we’re using every lever we have to deliver results.”

The Medicare Prescription Drug Inflation Rebate Program reduces coinsurance for some people with Part B coverage and discourages drug companies from increasing prices faster than inflation. Additionally, it requires drug companies to pay a rebate to Medicaid (calculated and invoiced by CMS) if they raise their prices too quickly. A fact sheet on the program can be found here.

Among the 27 Part B prescription drugs with adjusted coinsurance amounts are Minocin (to treat bacterial infections) and Humira (used to treat arthritis, plaque psoriasis, Crohn’s disease, and ulcerative colitis). Other impacted drugs are used by patients with cancer, acne, chronic kidney disease, blood clots, eye disease, and other conditions.

Medicare drug price negotiation program

As part of the Inflation Reduction Act, HHS (through CMS) also issued initial guidance detailing requirements and parameters for key elements of the new Medicare Drug Price Negotiation Program for 2026 — the first year negotiated prices will apply. A fact sheet on that program can be found here.

The negotiation process will focus on key questions, including but not limited to the selected drug’s clinical benefit, the extent to which it fulfills an unmet medical need, and its impact on people who rely on Medicare. As a result of negotiation, CMS officials say, people with Medicare will have access to innovative, life-saving treatments at costs that will be lower for both them and Medicare.

“Negotiation is a powerful tool that will drive drug companies to innovate to stay competitive, fostering the development of new therapies and delivery methods for the treatments people need,” Meena Seshamani, CMS Deputy Administrator and Director of the Center for Medicare, said in a statement.

This initial guidance is one of several steps CMS lays out in the Medicare Drug Price Negotiation Program timeline for the first year of negotiation, which will take place in 2023 and 2024 — resulting in prices effective in 2026.

According to the timeline, CMS will publish the first 10 Medicare Part D drugs selected for initial price applicability for 2026 under the Medicare Drug Price Negotiation Program by this Sept. 1. The negotiated maximum fair prices for these drugs will be published by Sept. 1, 2024, and prices will take effect Jan. 1, 2026.

Looking ahead, CMS will select for negotiation up to 15 more Part D drugs for 2027, up to 15 more Part B or Part D drugs for 2028, and up to 20 more Part B or Part D drugs for each year after that, as outlined in the Inflation Reduction Act.

CMS is seeking comment on several key elements of the guidance; they can be directed via email to This email address is being protected from spambots. You need JavaScript enabled to view it.. Comments received by April 14 will be considered for revised guidance. CMS anticipates issuing revised guidance for the first year of negotiation this summer.

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