CMS launched Guidance on Negotiating IRA Prices last week. Below are some highlights on how medications will be selected.
What medications are eligible for negotiation?
- For small molecules, drugs must (i) be approved by the FDA, (ii) be approved by the FDA at least 7 years ago, and (iii) not have a generic equivalent on the market.
- For biologic molecules, drugs must (i) be approved by the FDA, (ii) be approved by the FDA at least 11 years ago, and (iii) not have any biosimilar equivalent on the market.
Combination medications that are always prescribed together will be considered as one treatment.
Drugs that are among the top 15 Part D expenses between November 1, 2023 and October 31, 2024 will be considered eligible for negotiation.
How do drugs qualify for orphan drug exclusion?
Medications should be indicated for only 1 rare condition. The CMS states that “A drug that has orphan designations for more than one rare disease or condition will not qualify for the orphan drug exclusion, even if the drug has not been approved for any indication of the disease(s) or additional rare condition(s). ).”
How do drugs qualify for the low-spend exception?
Drugs with a combined annual Medicare spend of less than $200 million will not be considered for price negotiation. The $200 includes Part B and Part D spending for the period from November 1, 2023 to the end of October 31, 2024. The $200 million threshold will be adjusted for inflation (CPI-U) in future years. Total allowable charges (i.e., Medicare, beneficiary payments, and other third-party payments) will be used to calculate whether drugs meet this threshold. If a Part B drug is included with other drugs in a single HCPCS code, CMS will use average sales price (ASP) data.
Are plasma-derived products excluded from price negotiations?
Yeah.
How do companies comply with the small biotech exception?
CMS uses two basic rules:
- Non-material share of the cost of Part D. CMS requires that a drug’s Part D spending be <1% of total CMS Part D spending. The reason is that if a small biotech has a drug that accounts for more than 1% of Part D spending, it is probably no longer a small biotech.
- Drug sales from small biotech companies account for the majority of sales.. CMS requires that at least 80% of a company’s Part D expenses be allocated to the drug in question. CMS’s logic is that if a company sells a lot of drugs, it’s probably not a small biotech. However, if a small biotech company has a lead drug and one that is just coming to market, they don’t want to penalize the small biotech company for bringing another drug to market. However, it is clear that this provision will discourage companies that bring a second (or third) drug to the market and could see small biotechnology companies creating spin-off companies for when a second and third drug comes to market.
How does CMS determine if a biosimilar is likely to enter the market?
CMS requires a biosimilar manufacturer to submit an application for this delay. The manufacturer of the biosimilar must (i) be the holder of the BLA for the biosimilar or (ii) if the biosimilar has not yet been licensed, the company must be the sponsor of the BLA that has been submitted for review by the FDA. However, CMS will not consider a biosimilar delay if the biosimilar company was granted a BLA more than a year ago but had not begun marketing the product. Furthermore, the manufacturer of the biosimilar cannot be the same manufacturer of the reference biological. To ensure that there is a high probability that a biosimilar will enter the market, CMS requires that (i) there are no patents pending, (ii) the biosimilar company provides “disclosures regarding capital investments, revenue expectations and actions consistent with the course normal business.” for the marketing of a biosimilar biological product”, (iii) has an agreement in place with the FTC to market the product, and (iv) that a manufacturing schedule has been submitted to the FDA.
