CMS Releases Initial Guidance for Medicare Prescription Drug Inflation Rebate Program

The Centers for Medicare and Medicaid Services (CMS) on Thursday released the initial guidance for the Medicare Prescription Drug Inflation Rebate Program, a new law that requires drug companies to pay rebates to Medicare when their prescription drug prices increase faster than the rate of inflation for certain drugs dispensed to people with Medicare.[0] If the new prescription drug law had been in effect from July 2021 to July 2022, more than 1,200 prescription drugs potentially would have been subject to the inflation rebates, CMS said.[0]

CMS Administrator Chiquita Brooks-LaSure stated that, in accordance with the present direction, they are still enacting the Inflation Reduction Act. This Act reduces the out-of-pocket drug costs for those with Medicare, and reinforces the longevity of the Medicare program for the current and future generations.[1] Drug companies that charge excessive prices for their prescriptions will have to pay back rebates to Medicare under the Medicare Prescription Drug Inflation Rebate Program.

Under the Medicare Prescription Drug Inflation Rebate Program, rebates must be paid to the Medicare Trust Fund if the prices of certain drugs, such as brand name drugs which account for 80% of all prescription drug spending, increase more than inflation. CMS noted that rebates will begin for the first 12-month period starting on October 1, 2022 for drugs covered under Part D and for the first quarterly period starting on January 1, 2023 for drugs covered under Part B. To ensure accuracy of the inflation rebate payments, CMS is seeking comments from the public on the process to determine the number of drug units for rebatable drugs, the reduction of rebate amounts for certain Part B and Part D rebatable drugs in shortage, the process to impose civil monetary penalties on manufacturers of Part D rebatable drugs that fail to pay rebates, and assuring accuracy of the inflation rebate payments.[2]

On Thursday, President Joe Biden addressed his administration's measures to shield Medicare and reduce health care costs, this being the same day the administration disclosed draft instructions of Medicare's new plan to oversee drug costs.[3]

Dr. Meena Seshamani, M.D., Ph.D., CMS Deputy Administrator and Director of the Center for Medicare, stated that public feedback is essential for the effective execution of the new drug law.[0] Having technical knowledge and input from many different stakeholders is essential for us to effectively implement the law and guarantee access to affordable and cutting-edge treatments.[0]

0. “Drug companies to pay rebates for prices that go higher than inflation” Healthcare Finance News, 9 Feb. 2023,

1. “HHS Releases Initial Guidance for Medicare Prescription Drug Inflation Rebate Program” EIN News, 9 Feb. 2023,

2. “CMS Releases Guidance on the Math Behind Part B, Part D Drug Rebates” Managed Markets Network, 10 Feb. 2023,

3. “Medicare releases plan for its prescription drug inflation rebate program : Shots – Health News” NPR, 9 Feb. 2023,