Biden Administration Imposes Penalties on 43 Drugs Due to Price Hikes

 Pictured: Stack of money and drugs/DedMityay

Pictured: Stack of money next to medications/Courtesy, Adobe Stock, DedMityay

The Biden administration announced Friday it would enforce inflation penalties on 43 Medicare Part B drugs during the third quarter of 2023. The action follows the imposition of fines on 27 drugs in March as part of the administration's efforts to reduce costs for older Americans. The new list will replace the March list.

As a consequence of the Inflation Reduction Act (IRA), pharmaceutical manufacturers now must provide justifications for any price increases that exceed the inflation rate. The Centers for Medicare & Medicaid Services reviews these justifications and, if found insufficient, imposes financial penalties on the companies responsible.

Under the IRA, Medicare beneficiaries may pay a lower coinsurance for some Part B drugs if the price increases faster than the rate of inflation. CMS said its latest actions would lower costs for older Americans by as much as $449 per dose starting July 1, depending on their individual coverage. The lower Part B coinsurance on the drugs will be in effect from July 1, 2023 to September 30, 2023.

The inflation penalties are meant to discourage excessive price hikes and encourage manufacturers to align their pricing strategies with reasonable standards, according to CMS. The penalties will affect a diverse range of drugs, including both brand-name and generic products, the agency said. CMS didn’t name specific penalties for individual drugs.

Since its March announcement, the Biden administration has vowed to penalize pharmaceutical products for excessive price hikes, including AbbVie’s arthritis drug Humira and Seagen’s cancer therapy Padcev, among others.

This action comes as a response to the ever-increasing concern over rising drug prices, which have left Americans struggling to afford their medications. High drug costs have become a barrier to healthcare access, resulting in patients rationing or forgoing necessary treatments.

The CMS decision is part of a broader effort by the U.S. government to lower drug costs. The IRA, signed into law in 2022, includes various provisions to reduce out-of-pocket expenses for prescription drugs. It also grants Medicare the authority to negotiate drug prices directly with manufacturers, a significant policy change that advocates for lower drug prices have long sought.

How the industry will respond to these penalties and whether they will result in a long-term shift in pricing strategies remains to be seen. However, Tuesday, Merck filed a lawsuit against the Biden administration in the U.S. District Court for the District of Columbia, challenging the constitutionality of the IRA that deals with drug price negotiation, claiming the law violates the First and Fifth Amendments.  

Lisa Munger is a senior editor at BioSpace. You can reach her at Follow her on LinkedIn.

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