Senate Presses CMS for Updates on Pharma Price-Gouging Penalties

The IRA provisions took effect for Medicare Part B drugs on October 1, 2022, and for Part D drugs on January 1, 2023.

Senate Finance Committee Chair Ron Wyden, D-OR, wants the Biden administration to make public "when and how" price-gouging penalties on drug makers will be imposed under the Inflation Reduction Act.

"The Finance Committee will be paying close attention to how the inflation rebate provisions work to lower prices for seniors and hold manufacturers accountable if they continue to raise prices beyond the rate of inflation," Wyden wrote in a letter to Centers for Medicare & Medicaid Services Administrator Chiquita Brooks-LaSure.

In addition to giving CMS the power to negotiate some drug prices, another key component of the IRA – enacted in August, 2022 -- slaps civil penalties on drug makers whose prices for drugs supplied to Medicare Part B and Part D rise faster than inflation in the overall economy.

The law took effect for Part B drugs at the start of the federal fiscal year on October 1, 2022, and for Part D drugs on January 1, 2023.

"The information requested is critical to ensuring that Medicare beneficiaries understand the broad reach of the IRA and the inflation rebate provisions that intend to protect them," Wyden wrote. 

The Congressional Budget Office has estimated that the IRA's inflation mandates will save Medicare more than $63 billion over the next decade.

Wyden noted that drug companies have announced price increases on 872 drugs since January 1. He cited a September 2022 report from the Department of Health and Human Services which found that more than 3,000 drugs saw price hikes in 2022, and that between July 2021 and July 2022, price increases on 1,216 drugs outpaced inflation, with an average price increase of 32%.

The HHS report also found that:

• Most prescription drug price increases occur in either January or July each year, with the greatest number taking place in January. The number of increases in both months during 2022 was higher than in previous years.
   
• In January 2022, the average price increase was nearly $150 per drug (10%), and in July 2022, it was $250 (7.8%). The dollar increases were larger than for the same months in previous years.
   
• In 2022, several drugs increased their list prices by more than $20,000 or by more than 500%.  

Wyden asked Brooks-LaSure to make public how the price-gouging provisions of the IRA will be implemented, including "a distinct timeline" for both Part B and Part D drugs, how the rebates will be calculated, and the "steps CMS is taking to help ensure invoices will go out on a timely basis."

"It is my strong hope that manufacturers that increase prices above inflation will be penalized promptly," Wyden wrote.

Senate Scrutiny Intensifies

Wyden's letter was the second this week to be made public by Senators hoping to curb price-gouging and other abuses in the pharmaceutical industry.

On Monday, a bipartisan group of Senators introduced the Affordable Prescriptions for Patients Act. Sponsored by Sens. John Cornyn (R-TX) and Richard Blumenthal (D-CT), the lawmakers say their bill would lower drug prices for consumers by removing "bad actors" in the patent review process who tap arcane laws to delay market entry for cheaper generic and biosimilar alternatives, according to their joint media release.

"The pharmaceutical industry's shameless abuse of the patent system has driven costs sky-high for consumers by keeping generics off the market and stifling innovation," Blumenthal says. "Our common-sense reforms will protect competition and reduce prices at the pharmacy."

Almost all government actions to address the soaring costs of prescription drugs have overwhelming public support, regardless of political party affiliation. A Kaiser Family Foundation poll released in October 2022 found that 88% of respondents favored capping drug price hikes to no more than the rate of inflation.