Reducing Presciption Drug Costs - The Inflation Reduction Act
Author: Dacien Glueck, D.C. SMP Volunteer
Reducing Prescription Drug Costs - The Inflation Reduction Act Dacien Glueck, D.C. SMP Volunteer On August 16, President Biden signed the Inflation Reduction Act of 2022 (the "IRA") into law. The bill has several sections on the Medicare Program, particularly Part D.
First, the IRA required drug companies to pay the federal government if prices for certain drugs get more expensive more quickly than they should. Companies will no longer be able to raise their prices more than the inflation rate, keeping drug prices down over time.
Second, the IRA has created a "Drug Price Negotiation Program", which requires the government to negotiate prices with drug companies in order to reduce prices on some drugs. This means that these drug companies will be required to lower their prices, face higher taxes, or lose their Medicare status. The list of selected drugs will be published in September of 2023.
Third, the IRA changed the design of Medicare Part D so that there will now be a cap on the amount of money beneficiaries have to pay out-of-pocket for their prescriptions. Starting in 2024, there will be a cap of around $3,250 per year; in 2025 the IRA ads a hard cap on out-of-pocket spending at $2,000 per year.
Finally, the IRA changed the Low-Income Subsidy (LIS) Program. Under the act, individuals with incomes between 135% and 150% of the national poverty level will now be eligible for full benefits under the LIS program. This will assist an additional 400,000 people with their Part D benefits.
Through these provisions, the IRA is expected to lower Medicare Part D premiums and out-of-pocket drug costs for Medicare beneficiaries.
Source: H.R.5376 - 117 Congress (2021-2022) Inflation Reduction Act
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