Impact of Drug Shortages on Medicare Part D Prescription Drugs Inflation Rebates

The Inflation Reduction Act requires drugs whose prices rise faster than inflation to pay a rebate to Medicare Part D, with a waiver for drugs in shortage. This study estimates, as a preimplementation baseline, the magnitude of Medicare Part D inflation rebates that would have been owed under Inflation Reduction Act rules in a prepolicy applicable period and the share attributable to drugs experiencing Food and Drug Administration-listed shortages and therefore potentially eligible for the Inflation Reduction Act shortage exemption.

We examined price increases among Medicare Part D drugs between October 1, 2019, and September 30, 2020, using a benchmark period of January 1 to September 30, 2018, from a 20% national sample of Medicare Part D beneficiaries. We quantified the inflation rebates for drugs that experienced price increases, identifying those also experiencing shortages.

We found that 49% of drugs (2684 of 5465) had price increases faster than inflation, and 38% (2087 of 5465) would be required to pay the rebate. Shortages were recorded in 4.7% of the drugs in the study sample (N = 257). Of these, 43 would have been required to pay the rebate. The total rebate was $8.8 billion. For shortage drugs, the rebate was $14.2 million.

Monitoring shortages is critical to address potential incentives the Act's provisions might unintentionally create.