Drug Pricing

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On Nov. 8, 2023, the Senate Finance Committee voted 26-0 to approve the Better Mental Health, Lower Cost Drugs, and Extenders Act. Among its other provisions, the bill, for which final legislative text has not yet been released, would, for the first time, mandate minimum prices that Medicare Part D plans, and the pharmacy…

The Inflation Reduction Act included some very significant changes to the ways in which the Medicare program handles drug pricing.

Among the changes are a redesign of the Medicare Part D (prescription drug benefit) program, as well as requirements that certain drug prices be negotiated with the Centers for Medicare & Medicaid Services and a provision that drug manufacturers pay inflation rebates to on utilization of drugs covered by Medicare Part B and Part D in certain circumstances.

To address these changes to the law, Reed Smith has put together a series of alerts and webinars on the topics.…

Continue Reading Analysis of Medicare Prescription Drug Pricing Changes in Inflation Reduction Act

On August 12, 2021, the Seventh Circuit joined the Third, Eighth, Ninth, and D.C. Circuits in holding that the “objective reasonableness” standard for determinations of scienter, as set forth by the Supreme Court in Safeco Insurance Co. of America v. Burr, 551 U.S. 47, 70 (2007), applies in the context of False Claims Act (FCA) litigation.  In doing so, the Seventh Circuit observed that, under Safeco, a defendant cannot possess the requisite scienter under the FCA if: (1) it has an objectively reasonable reading of the statute or regulation; and (2) there was no authoritative guidance warning against its view.  This case has significant implications for defendants in FCA litigation by finding that an objectively reasonable interpretation of the law will defeat allegations of false claims.

Further, the decision is the latest victory in a spate of cases brought by the plaintiffs’ bar claiming that pharmacies are required to report special prices—such as membership club prices or matched competitor prices—as their usual and customary (U&C) prices. Virtually every pharmacy that has operated a membership club has faced scrutiny through actions under the FCA and consumer-class actions. The Seventh Circuit’s decision comes in the wake of the recent jury verdict in favor of CVS in the matter of Carl Washington (formerly known as Corcoran) et al. v. CVS Pharmacy, Inc., No. 15-cv-03504 (N.D. Ca. Jun. 24, 2021).   This victory will support pharmacies’ defenses in other similar litigation alleging the submission of false U&C prices, particularly when the alleged false conduct occurred before 2016, given that the Seventh Circuit found that reporting retail prices—as opposed to special prices such as price matches—was an objectively reasonable approach to U&C reporting.

The Lower Court’s Decision: …
Continue Reading Seventh Circuit adopts Safeco objective reasonableness standard in the context of false claims act cases

The House of Representatives has approved — without objection — a series of bills intended to promote prescription drug pricing transparency and invest in the health care workforce.

With regard to drug pricing transparency, the House approved HR 2115, the Public Disclosure of Drug Discounts Act, as amended to include HR 3415, the Real-Time Beneficiary Drug Cost Bill.  The legislation would require the Secretary of Health and Human Services to make public certain aggregate information regarding rebates, discounts, and price concessions that pharmacy benefit managers (PBMs) negotiate with prescription drug manufacturers, beginning January 1, 2020.  The stated purpose of the provision is “to allow the comparison of PBMs’ ability to negotiate rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions and the amount of such rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions that are passed through to plan sponsors.”  The information must be displayed in a manner (i.e., by drug class) that prevents the disclosure of proprietary or confidential information on rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions with respect to an individual drug or an individual plan.

Furthermore, HR 2115 as approved would require the Medicare Part D program to implement by January 1, 2021 electronic, real-time benefit tools capable of integrating with prescribers’ electronic prescribing or electronic health record system and that transmit enrollee-specific, point-of-prescribing information.  Such information must include a list of any clinically-appropriate drug alternatives in the plan formulary; cost-sharing information for a drug and such alternatives; and formulary status, including any prior authorization or other utilization management requirements.  Additionally, the legislation expresses the “sense of Congress” that commercially available drug pricing comparison platforms that help patients find the lowest price for their medications at their local pharmacy “should be integrated, to the maximum extent possible, in the health care delivery ecosystem.”  Likewise, PBMs “should work to disclose generic and brand name drug prices to such platforms” so patients can benefit from the lowest available prices and “overall drug prices can be reduced as more educated purchasing decisions are made based on price transparency.”  The House approved the legislation by a vote of 403 – 0.
Continue Reading House Clears Prescription Drug Price Transparency, Health Workforce Legislation

October Congressional hearings have focused on the following health policy topics:

  • A House Ways and Means Committee hearing addressed “Investing in the U.S. Health System by Lowering Drug Prices, Reducing Out-of-Pocket Costs, and Improving Medicare Benefits.”
  • A House Energy and Commerce Committee hearing, “Sabotage: The Trump Administration’s Attack on Health Care,” featured testimony from CMS

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On September 25, 2019, the House Energy and Commerce Committee is holding a hearing entitled “Making Prescription Drugs More Affordable: Legislation to Negotiate a Better Deal for Americans.”  A background memo and text of the bills are available here.  Likewise, a second House panel – the Education and Labor Health, Employment, Labor, and Pensions…

Prior to the 4th of July break, Senate and House Committees approved more than a dozen health policy bills, covering topics including:  surprise medical bills, health pricing transparency, drug prices and competition, various Medicare policies, and public health program reauthorization, among others.  The following are highlights of recent action.  Note that none of the bills has yet been considered by the full House or Senate, and all are subject to change during the legislative process.

Senate HELP Committee

The Senate Health, Education, Labor and Pensions (HELP) Committee approved S 1895, the Lower Health Care Costs Act of 2019.  This high-profile, bipartisan legislation would hold patients harmless from “surprise” medical bills for out-of-network services provided at an in-network facility, with payment to out-of-network providers set at the median contracted rate for in-network providers in the geographic area (a controversial “benchmark rate” proposal).  The bill contains separate protections regarding costs for emergency room and air ambulance services.  Additionally, S 1895 seeks to improve health care transparency by, among other things, banning what are described as “anticompetitive” terms in contracts between insurers and providers; providing patients with additional information on out-of-pocket costs; and regulating certain pharmacy benefit manager (PBM) pricing practices.  The legislation also includes numerous provisions intended to promote generic drug and biosimilar biological product innovation; improve health information exchange and strengthen health entity cybersecurity practices; and authorize various public health programs.  The Committee approved the bill on June 26, 2019 on a vote of 20-3.  Committee Chairman Lamar Alexander expressed hope for full Senate consideration of the bill in July.

During the same markup, the HELP Committee also approved S 1173, the Emergency Medical Services for Children Program Reauthorization Act, and S 1199, the Poison Center Network Enhancement Act of 2019.

Senate Judiciary Committee

The Senate Judiciary Committee approved the following four bills that are intended to help reduce prescription drug prices:

  • S 1227, the Prescription Pricing for the People Act of 2019, which would require the Federal Trade Commission (FTC) to study the role of PBMs in the pharmaceutical supply chain and provide Congress with related policy recommendations.
  • S 440, the Preserving Access to Cost Effective Drugs Act, which would bar patent owners from asserting sovereign immunity, including the sovereign immunity accorded to an Indian tribe, in certain drug patent disputes.
  • S 1224, the “Stop STALLING Act,” to authorize the FTC to take action against entities that file “sham” citizen petitions to attempt to interfere with approval of a competing generic drug or biosimilar.
  • S 1416, Affordable Prescriptions for Patients Act of 2019, which would authorize the FTC to challenge certain brand manufacturer practices (e.g., “product hopping” and “patent thickets”) that could discourage generic drug and biological use.

House Ways and Means Committee

The House Ways and Means Committee recently passed the following health policy bills:…
Continue Reading Congressional Committees Advance Multiple Bills Addressing Surprise Medical Billing, Prescription Drug Policy, and Other Health Policy Issues

The House of Representatives has approved H.R. 987, the “Strengthening Health Care and Lowering Prescription Drug Costs Act,” which packages seven prescription drug and insurance-related bills recently approved by the House Energy and Commerce Committee.  The legislation is intended to:  increase generic drug competition; fund Affordable Care Act “Navigator” outreach and enrollment programs and…

Recent Congressional hearings and markups have concentrated on prescription drug pricing, insurance access, and other health topics.  For instance, last week the House Ways and Means Committee unanimously approved H.R. 2113, the Prescription Drug Sunshine, Transparency, Accountability and Reporting Act of 2019 (STAR Act).   The legislation would, among other things:

  • Require drug manufacturers to report their “justification” for drug price increases that exceed certain thresholds.
  • Mandate that manufacturers of drug, biologicals, devices, and medical supplies publicly report on the Open Payments database the value and quantity of free samples given to providers.
  • Extend to manufacturers without a Medicaid rebate agreement the requirement to report average sales price for drugs covered under Medicare Part B, and authorize civil money penalties for failure to report such information or for reporting false information.
  • Direct the Secretary of Health and Human Services to publicly disclose certain rebates, discounts, and other price concessions achieved by pharmaceutical benefits managers (PBMs) and to report on drugs furnished in the inpatient hospital setting.

Earlier this month the House Energy and Commerce Committee approved 12 bills aimed at reducing prescription drug and other health care costs, including legislation intended to:  bolster generic drug competition; support Affordable Care Act insurance enrollment programs and state-based insurance marketplaces; reverse Trump Administration policies on short-term, limited duration health insurance and State Relief and Empowerment Waivers; and establish an “Improve Health Insurance Affordability Fund” to help states lower premiums in the individual health insurance market.

In addition to these markups, Congressional panels have held hearings various health policy issues, including the following:…
Continue Reading Congressional Committees Continue Focus on Prescription Drugs, Insurance Coverage Policy

Reducing prescription drug prices is a major theme in the Trump Administration’s fiscal year (FY) 2020 budget proposal, with policies intended to increase competition, encourage better negotiation, incentivize lower list prices, and cut out-of-pocket costs for beneficiaries.  The Administration’s projected savings from its designated prescription drug budget proposals top $69 billion over 10 years, although that does not include savings for provisions for which the budget impact was not available or that were included in other sections of the budget (e.g., a Medicaid State Drug Utilization Review provision within the Medicaid budget section).

We summarize below the major prescription drug pricing and related proposals in the President’s proposed budget, covering Medicare Parts B and D, Medicaid, and the 340B discount drug program.  All budget savings reflect the 10-year period of FYs 2020-2029.  Note that while most of these provisions would require legislative approval, Congressional committees have already held several hearings this year on prescription drug pricing.  Stay tuned for more action in this area.

Major Medicare Part B Proposals

The proposed Trump budget would:…
Continue Reading Trump Administrations’ Proposed FY 2020 Budget Targets Prescription Drug Prices

Federal health policy is an early focus for Congressional committees.  In addition to several hearings held in January, Congressional hearings in February have concentrated on the Affordable Care Act (ACA) and primary care, including the following:

  • A House Energy and Commerce Committee hearing on the Texas v. United States court case challenging the constitutionality

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As the new 116th Congress gets underway, four House and Senate committees are holding hearings to examine health policy issues, including two hearings focusing on prescription drug prices.  Specifically, the following hearings are all scheduled for January 29, 2019:

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The Trump Administration is considering a controversial plan, the International Pricing Index (IPI) model, which would tie Medicare Part B prescription drug payment rates to amounts paid for such drugs in other developed countries.  The Centers for Medicare and Medicaid Services’ proposed IPI model also would replace the current “buy and bill” system for…

After multiple implementation delays, the Health Resources and Services Administration (HRSA) now seeks to move up the effective date of its January 5, 2017 rule on 340B drug pricing program ceiling price calculation and civil monetary penalties (CMPs).  By way of background, HRSA most recently delayed implementation of the 2017 rule because the Trump Administration…

The House of Representatives approved two “gag clause” bills on September 25, 2018 that would prevent insurers from restricting pharmacies from informing consumers about lower cost, out-of-pocket prices for their prescriptions.  The bills were approved by the Senate earlier this month, and are now cleared for the President’s signature.

Specifically, S 2553, the Know…

On July 18, 2018, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) submitted to the Office of Management and Budget (OMB) for regulatory review a proposed rule entitled “Removal Of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor…

The Health Resources and Services Administration (HRSA) is once again delaying the effective date of its January 5, 2017 rule on 340B drug pricing program ceiling price calculation and civil monetary penalties (CMPs). Specifically, under a final rule published June 5, 2018, HRSA is pushing back the 340B ceiling price/CMP rule’s effective date for an…