On August 21, 2023, the Centers for Medicare & Medicaid Services (CMS) released draft guidance, pursuant to the Inflation Reduction Act (IRA), to implement the Medicare Prescription Payment Plan, a new program to help Medicare Part D beneficiaries more easily afford their out-of-pocket (OOP) costs for prescription drugs. The IRA, among other provisions aimed at lowering prescription drug costs for Medicare beneficiaries, requires, starting in 2025, that Medicare Part D plan sponsors offer beneficiaries the option to pay their OOP costs for prescription drugs monthly over a year instead of at the point of sale. Under the new program, referred to as the Medicare Prescription Payment Plan, Part D sponsors must pay the pharmacy the OOP cost-sharing that beneficiaries would have paid if they were not in the program. Part D plan sponsors then will bill beneficiaries monthly for their OOP responsibility.

The draft guidance for comment — the first of two guidances CMS will issue to implement the new program — outlines the requirements and procedures for certain aspects of the Medicare Prescription Payment Plan. The guidance provides information on topics such as identifying Medicare Part D enrollees likely to benefit from the program, the opt-in process for Part D enrollees, program participant protections, and the data collection needed to evaluate the program. It also includes instructions for Part D plans to handle monthly billing requirements and reimbursement to pharmacies in addition to calculations for the monthly payment amounts. Part D sponsors may not exclude any covered Part D drugs.

According to the draft guidance, Part D plans must notify pharmacies if a beneficiaries’ cost sharing for their covered drugs exceeds a certain dollar threshold based on either an individual prescription or all prescriptions filled on a single day. CMS provided a threshold estimate between $400-$700; the IRA mandates an annual cost threshold for Medicare beneficiaries of $2,000 for Medicare Part D covered drugs starting in 2025.  Although the program is available to all Medicare Part D beneficiaries, those incurring high OOP costs earlier in the plan year are more likely to benefit.

Part D beneficiaries can opt into the program by contacting their plan to complete the Medicare Prescription Payment Plan election process. Part D sponsors must process the election within 24 hours to prevent drug dispensing delays. The guidance proposes protections for participants including requirements to issue timely notices for missed payments and a grace period of at least two months if a program participant fails to pay a monthly billed amount. Although this program doesn’t reduce Medicare beneficiaries’ OOP expenses for Part D covered drugs, it will be available to help enrollees spread costs out throughout the plan year.

CMS plans to release part two of the program implementing guidance for comment in early May 2024 which is expected to focus on Medicare Part D enrollee outreach and education, Medicare Part D plan bid information, and program monitoring and compliance.