First drugs to face Medicare price penalty called

U.S. health officials released the first list of drugs paid for by the government’s Medicare insurance program whose prices rose more than inflation and will be fined under a new federal law.

The Centers for Medicare and Medicaid Services on Wednesday named 27 medications that had the big price increases, including AbbVie’s rheumatoid arthritis treatment Humira Inc.

and Yescarta Lymphoma Therapy from Gilead Sciences Inc.,

and will face the price increase penalty in the form of a discount.

According to the health officials, in 2025 the federal government will begin billing the drug companies that sell the drugs for the rebates. Companies that do not pay risk a fine of 125% of the discount amount.

Starting in April, some Medicare beneficiaries will also pay less out of pocket for one of the 27 prescription drugs they take. Beneficiaries could save $2 to $390 per average dose on their out-of-pocket costs, health officials said.

The rebate program “is a critical way to address long-term price increases by pharmaceutical companies while improving access and affordability for the millions of people with Medicare coverage,” said CMS administrator Chiquita Brooks-LaSure.

Medicare is the federal government’s health insurance program for seniors and some disabilities. According to CMS, it will have spent $378 billion on prescription drugs in 2021, up 7.8% from the previous year.

CMS will put the rebate savings into the hospital’s Medicare Trust Fund, which pays for hospital insurance and program administration.

Biden administration officials have said they believe the requirement will help reduce growth in prescription drug spending.

Under the Inflation Reduction Act passed last year, companies that raise prescription drug prices higher than inflation would have to pay the rebates, one of several provisions in the law aimed at curbing high drug costs.

The 27 therapies listed by CMS are biotech drugs covered by the agency’s Part B benefit.

Health officials are also releasing guidelines for implementing another provision in the law that gives CMS the authority to negotiate the prices of some drugs. The guidelines explain how CMS will select drugs and conduct the negotiations.

The announcements come as some congressional lawmakers are pressuring the Biden administration to quickly implement the Inflation Reduction Act rebate program.

Democratic Senator Michael Bennet of Colorado, Jon Tester of Montana, and Ron Wyden of Oregon were among lawmakers who, in a March 14 letter, urged CMS to notify beneficiaries of which medications they may be paying less coinsurance for.

Write to Stephanie Armor at and Jared S. Hopkins at

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