First Drugs Facing Medicare Price Penalty Are Named

First Drugs Facing Medicare Price Penalty Are Named

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

The Centers for Medicare and Medicaid Services on Wednesday named 27 drugs that had the large price increases, including  rheumatoid-arthritis treatment Humira from

AbbVie Inc.

and Yescarta lymphoma therapy from

Gilead Sciences Inc.,

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

The federal government will start billing the pharmaceutical companies that sell the medicines for the rebates in 2025, according to the health officials. Companies that don’t pay could face a penalty that is 125% of the rebate amount.

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

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

Chiquita Brooks-LaSure.

An AbbVie spokesman declined to comment. A Gilead spokeswoman didn’t immediately provide a comment.

Medicare is the federal government’s health-insurance program for seniors and some disabled people. It spent $378 billion on prescription drugs in 2021, up 7.8% from the previous year, according to CMS.

CMS will put the rebate savings into the hospital 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 the prices of prescription medicines 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.

The list includes five

Pfizer Inc.

products, including antibiotics Bicillin L-A and Bicillin C-R, the blood thinner Fragmin and the chemotherapy Nipent.

The drugs belong to Pfizer’s portfolio of injectable products, which usually cost less than $1 a dose and the company sells at or below the cost of making them, a Pfizer spokeswoman said.

Humira, which treats psoriasis and other autoimmune diseases in addition to rheumatoid arthritis, has been among the biggest-selling drugs in the U.S. in recent years. Its price could fall in coming years, because it has started to face competition from nearly identical copycats called biosimilars.

Yescarta is a kind of cell therapy known as CAR-T, which is made from taking a patient’s own immune cells, modifying them in a lab and then returning them to the patient to hunt down and attack their cancer.

Health officials also are releasing guidelines for implementing another provision in the law giving CMS the authority to negotiate some drugs’ prices. The guidelines lay out how CMS will select drugs and conduct the negotiations.

The announcements come as some congressional lawmakers pressure the Biden administration to swiftly implement the Inflation Reduction Act’s rebate program. 

Democratic Sens. Michael Bennet of Colorado,

Jon Tester

of Montana and

Ron Wyden

of Oregon were among lawmakers who urged CMS in a March 14 letter to notify beneficiaries what drugs they might pay less coinsurance for. 

Write to Stephanie Armour at and Jared S. Hopkins at

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Author: Shirley