Mintz IRA Update — Operationalizing the Medicare Prescription Payment Plan and Medicare Inflation Rebate Program

Medicare Prescription Payment Plan

In addition to the Part D Benefit Redesign, the IRA’s Medicare Prescription Payment Plan (MPPP) went into effect beginning January 1, 2025. The MPPP requires Part D Sponsors (PDPs) to allow Part D beneficiaries to pay for their out-of-pocket prescription drug costs in monthly capped payments over the course of a given plan year instead of at the pharmacy point-of-sale. The MPPP’s requirements apply to all Part D Sponsors, including Medicare Advantage plans (MA-PDs), stand-alone Part D plans, Employer Group Waiver Plans (EGWPs), cost plans, and demonstrations plans, but notably do not apply to Retiree Drug Subsidy plans. In our previous blog posts covering the MPPP’s Part One Guidance and Part Two Guidance for CY 2025, we summarized the guidance CMS has provided to PDPs with respect to the operational and functional updates they must make to offer and run the MPPP, as well as the outreach, communication, and education the PDP must provide to Part D beneficiaries, network pharmacies, and contracted providers. Below, we note additional clarifications that CMS has provided as PDPs roll out the MPPP.

Interaction Between the Medicare Prescription Payment Plan and Other Forms of Payment Assistance

In a Health Plan Management System (HPMS) memo released by CMS in December 2024, CMS acknowledged that Low Income Subsidy (LIS) enrollees in PDPs are generally unlikely to benefit from the MPPP since they already have the benefit of low and stable drug costs. While there are limited circumstances in which an LIS enrollee would benefit from MPPP enrollment, CMS requires PDPs to tailor their support to all enrollees based on their individual situation. PDPs should advise LIS enrollees when MPPP participation is not practical or when LIS enrollment is more advantageous than MPPP participation. CMS also notes that the MPPP has no practical implication for plans that exclusively charge $0 cost-sharing for Part D drugs. As such, PDPs offering such plans are not expected to provide informational and educational materials about the MPPP to their beneficiaries because it would only cause confusion. Finally, in another HPMS memo issued on November 15, 2024, CMS confirmed that Part D beneficiaries participating in the MPPP could continue to receive assistance with payment for covered Part D drugs or payments to PDPs from appropriate charitable assistance programs. However, any drugs that are covered through a manufacturer’s patient assistance program are not eligible for the MPPP.

PDP Reporting and Claims Processing Requirements

In order to monitor the MPPP’s efficiency, CMS modified its Medicare Advantage and Prescription Drug system (MARx) to allow PDPs to report data elements related to their MPPP, both at the beneficiary- level and the plan benefit package level. As of January 1, 2025, all PDPs must:

• Submit beneficiary-level data related to MPPP participation into the MARx system via a MARx Batch Input Transaction Data File.
• Adopt an MPPP-specific bank identification number (BIN) and processor control number (PCN) for certain MPPP transactions. Federal regulations already require the use of a BIN and PCN; however, MPPP-specific BINs and PCNs will be used to process out-of-pocket amounts for beneficiaries. The PDPs must also supply this BIN and PCN to network pharmacies.

Medicare Advantage and Part D Proposed Rule

On November 26, 2024, CMS released the CY 2026 Medicare Advantage and Part D Proposed Rule (the Proposed Rule). In the Proposed Rule, CMS proposes to codify the Part One and Part Two Guidance requirements for CY 2026 and future years of the MPPP, including modification of the list of PDP-required content to include the model and standardized materials as well as website content requirements for the MPPP. The Proposed Rule also includes several proposed modifications and new program requirements, including:

• Allowing PDPs to follow its normal processes for Part D claim adjustments and issuing refunds, but when adjustments increase the beneficiary’s balance owed, PDPs must include the additional costs in the revised out-of-pocket balance.
• Modifying the start date for the grace period to start the first day of the month following the date the initial notice of non-payment is sent.
• Creating an automatic renewal process that automatically renews a Part D beneficiary’s participation in the MPPP for the next calendar year unless the enrollee opts out.
• Requiring the effective date of voluntary termination in the MPPP to be within 24 hours of receipt of a beneficiary’s voluntary termination request.
• Requiring PDPs to ensure pharmacies can easily access information on a PDP’s enrollee’s costs incurred for prescriptions under the MPPP at the point-of-sale.

Medicare Prescription Drug Inflation Rebate Program

On December 9, 2024, CMS issued the CY 2025 Physician Fee Schedule final rule (the Final Rule) effective January 1, 2025, which included a number of policies implementing the Medicare Prescription Drug Inflation Rebate Program (the Inflation Rebate Program) under the IRA. As we discussed in a previous IRA Update, the Inflation Rebate Program aims to tackle high drug prices for Medicare Part B and Part D beneficiaries by requiring drug manufacturers to pay a rebate to CMS for drugs with prices that increase faster than the rate of inflation (on a quarterly basis and annual basis, respectively). The Final Rule codified policies that were established in the revised guidance for the Medicare Part B Drug Inflation Rebate Program and the Medicare Part D Drug Inflation Rebate Program and finalized several new policies to implement the Inflation Rebate Program, including:

• Removal of 340B Units. CMS finalized its proposal to exclude 340B units of Part B rebatable drugs purchased by 340B covered entities from Part B inflation rebate calculations to prevent any duplicate discounts. However, based on stakeholder criticism and objection, CMS declined to finalize its proposed 340B estimation methodology to remove 340B units of Part D rebatable drugs from calculations for Part D inflation rebates. CMS notes that it will explore establishing a claims data repository in the future to comply with this IRA requirement, but does not articulate a timeline, leaving manufacturers in the dark as to how to prevent 340B duplicate discounts with respect to Part D drugs.
• Rebate Reconciliation. The Final Rule establishes the method and process for reconciling rebate amounts for Part B and Part D rebatable drugs to account for revised information, calculation errors, or misreporting by manufacturers, including specifying the circumstances under which automatic and discretionary reconciliations will occur. CMS also confirmed that it will exclude Part B units of single-dose container or single-use package drugs subject to discarded drug refunds during reconciliation.
• Penalties for Non-Compliance. The Final Rule establishes the process by which CMS will impose civil monetary penalties (CMP) on manufacturers of Part B or Part D rebatable drugs that fail to pay the inflation rebate amount in full by the payment deadline for the applicable calendar quarter or applicable period, including the appeal process for manufacturers. The CMP will be equal to 125% of the rebate amount.
• Part B Payment Benchmark Quarter. For Part B rebatable drugs that were approved by the FDA on or before December 1, 2020, but marketed after that date, the benchmark quarter against which CMS will measure future price changes to determine whether a rebate is owed is the third full calendar quarter after the drug’s first marketed date. For Part B rebatable drugs billed using a not otherwise classified (NOC) code in the calendar quarter starting July 1, 2021, or the third full calendar quarter after the drug’s first marketed date, whichever is later, the benchmark quarter is the third full calendar quarter after the drug is assigned a non-NOC code.
• Part D Payment Benchmark Quarter: For Part D rebatable drugs without manufacturer-reported average manufacturer price (AMP) data, CMS indicates that the benchmark quarter against which CMS will measure future price changes to determine whether a rebate is owed is the first calendar year, starting from the calendar year 2021 or later, in which at least one quarter of AMP was reported.
• Coinsurance Adjustment Criteria. As we’ve previously discussed, the IRA requires beneficiary coinsurance for a Part B drug to be reduced when its price increases faster than inflation. The Final Rule codifies the existing policy requiring CMS to compare the payment amount in its quarterly pricing files to the inflation-adjusted payment amount to determine whether the beneficiary coinsurance must be reduced.

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