evidence: To date, Medicare has had no authority to limit annual price increases for drugs covered under Part B or Part D. In contrast, Medicaid has a rebate system that requires drug manufacturers to provide refunds if prices grow faster than inflation. Year-to-year drug price increases exceeding inflation are not uncommon and affect people with both Medicare and private insurance. Our analysis shows that half of all drugs covered by Medicare had list price increases that exceeded the rate of inflation between 2019 and 2020. A separate analysis by the HHS Office of Inspector General showed average sales price (ASP) increases exceeding inflation for 50 of 64 studied Part B drugs in 2015. The Inflation Reduction Act requires drug manufacturers to pay a rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation (CPI-U). Price changes will be measured based on the average sales price for Part B drugs and the average manufacturer price for Part D drugs. If price increases are higher than inflation, manufacturers will be required to pay the difference in the form of a rebate to Medicare. The rebate amount is equal to the total number of units sold in Medicare multiplied by the amount, if any, by which a drug’s price in a given year exceeds the inflation-adjusted price. For Part B drugs with price increases greater than inflation, beneficiary coinsurance will be based on 20% of the drug’s lower inflation-adjusted price. The base year for measuring cumulative price changes relative to inflation is 2021.