Biden Administration to Impose Inflation Penalties on 64 Prescription Drugs, Lowering Costs for Medicare Enrollees

The Biden administration announced today that it will be imposing inflation penalties on 64 prescription drugs for the third quarter of this year. This move is aimed at lowering costs for certain older Americans enrolled in Medicare. President Joe Biden has emphasized the reduction of U.S. drug prices as a fundamental aspect of his health-care agenda and reelection platform for 2024.

Provisions of the Inflation Reduction Act

Under the provisions of Biden’s Inflation Reduction Act, drugmakers will be required to pay rebates to Medicare, the federal health program for Americans over age 65, if they increase the price of a medication faster than the rate of inflation. This measure is distinct from another provision under the law that permits Medicare to negotiate lower prescription drug prices with manufacturers.

Impact on Patients

As a result of this announcement, some Medicare Part B patients will experience a lower coinsurance rate for the 64 drugs covered, from July 1 to Sept. 30. This adjustment is due to the fact that each drug company raised prices faster than the rate of inflation. It is estimated that some patients may save as much as $4,593 per day if they use these drugs during the quarter. More than 750,000 Medicare patients use these drugs annually, with the medications treating conditions such as cancer, certain infections, and osteoporosis.

Response from the White House

Neera Tanden, White House domestic policy advisor, remarked, “Without the Inflation Reduction Act, seniors were completely exposed to Big Pharma’s price hikes. Not anymore.”

The Centers for Medicare & Medicaid Services has outlined plans to issue the first invoices to drugmakers in 2025 for the rebates owed to the program.