Manufacturers Must Request Small Biotech Exception by July 3: Inflation Reduction Act Updates

On June 2, 2023, the Centers for Medicare & Medicaid Services (CMS) issued instructions for the process by which a manufacturer may submit a request for a qualifying single-source drug to be considered for the Small Biotech Exception (the “Exception”).

Under the Medicare Drug Price Negotiation Program, drugs selected for the Exception—as “small biotech drugs”—are exempt from negotiations for the price applicability year (PAY). On May 26, 2023, CMS finalized the content of the information manufacturers must submit for CMS to determine whether the drug qualifies as a “small biotech drug,” which the Inflation Reduction Act (IRA)  generally defines as a drug representing (i) less than 1 percent of total expenditures for drugs under Medicare Part D (and eventually Part B), and (ii) 80 percent or more of the Medicare program expenditures for the manufacturer.

In September, CMS intends to email each manufacturer that submitted an Exception request to notify the manufacturer about whether the manufacturer’s drug received an Exception for the 2026 PAY. CMS will also include the number of drugs for which the Exception was requested and granted as part of its publication of “selected drugs” subject to negotiations for PAY 2026, which the IRA requires CMS to issue by September 1, 2023.

Key Considerations

• CMS will not accept incomplete or late Exception requests for the 2026 PAY. For practical purposes, the holiday weekend around the July 3 deadline creates an end-of-June deadline for a manufacturer’s process.
• In addition to assessing whether a drug qualifies for the Exception, manufacturers must also overcome three distinct gating issues in the extremely short timeframe to submit the Exception request and certification:

1. Creating an account in HPMS, as submissions for the Exception will only be accepted via a new Drug Price Negotiation Module in HPMS
2. Filling out the online request form for the Exception
3. Completing the high-level certification by a CEO, CFO, or equivalent, or an individual with directly delegated authority by one of those, who must have signatory access

Next Steps for Stakeholders

Submit and certify the Exception request on the HPMS website by July 3, 2023

Related Documents

• Small Biotech Exception Information Collection Request Documents (May 26, 2023)
• Instructions for Requesting the Small Biotech Exception in the Health Plan Management System
• Learn more about the Exception here.

Date of Issuance: June 2, 2023