Drug Rebates

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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 1, 2021, the Senate released the legislative text of the bipartisan infrastructure bill, the “Infrastructure Investment and Jobs Act,” H.R. 3684.  The Senate is expected to vote this week, before a month-long recess beginning on August 9, 2021.  The 2,702 page legislation contains several relevant health care-related provisions, including a delay of the implementation of the rule eliminating the Anti-Kickback Statute (“AKS”) safe harbor protection for Medicare Part D rebates.

Rebate for Discarded Amounts of Medicare Part B Single-Dose Container or Single-Use Package Drugs

First, the legislation requires manufacturers of single-dose container or single-use package drugs payable under Medicare Part B to provide a rebate to the government for any discarded portion of that drug.  The rebates will be charged each quarter, beginning with the first quarter of 2023, and must be paid in regular intervals, as determined appropriate by the Secretary of the U.S. Department of Health and Human Services (“HHS”).  The legislation provides that, in order to enforce this provision, HHS will conduct periodic audits of both drug manufacturers and providers who submit claims.  For violations of this provision, HHS will impose Civil Monetary Penalties in amounts equal to the sum of the amount that the manufacturer would have paid and twenty-five percent of such amount.Continue Reading Health Care Provisions in the Infrastructure Investment and Jobs Act

CMS has put on display a proposed rule that would update Medicare Advantage (MA) and Medicare Part D prescription drug benefit policies for contract year 2021 and 2022.  CMS projects that its proposed policies would decrease federal spending by $4.4 billion over 10 years, primarily as a result of a proposal to remove outliers prior…

The Centers for Medicare & Medicaid Services (CMS) has proposed updates to its standards for health plan issuers offering plans through federally-facilitated and state-based Exchanges for 2021.  The proposed rule would, among other things:  revise the risk adjustment methodology; update issuer user fees and cost-sharing limits; amend medical loss ratio regulations (including with regard to…

The Trump Administration has decided against finalizing a controversial proposed Office of Inspector General (OIG) regulation that would have modified Federal Anti-Kickback Statute safe harbor protection for certain prescription drug rebates to health plans and pharmacy benefit managers (PBMs).  As we previously reported, the proposed rule would have (i) removed safe harbor protection for …

The House of Representatives has overwhelmingly approved H.R. 3253, the Empowering Beneficiaries, Ensuring Access, and Strengthening Accountability Act, which would finance extension of various Medicaid-related health programs by increasing manufacturer Medicaid drug rebate obligations.  In terms of health programs, the legislation also would, among other things:

  • Extend the “Money Follows The Person Rebalancing Demonstration”

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The House and Senate have both approved H.R. 1839, the Medicaid Services Investment and Accountability Act of 2019, clearing it for President Trump’s signature.  Notably, the legislation would: subject drug manufacturers to a new civil monetary penalty (CMP) for knowingly misclassifying or misreporting covered outpatient drugs under a Medicaid drug rebate agreement (such as by knowingly submitting incorrect drug product information).  The penalty would equal up to two times the difference between the rebate amount the manufacturer paid and the amount the manufacturer would have paid if the drug had been correctly classified.  The CMP would be imposed in addition to any other penalties or recoveries.  Furthermore, the legislation would strengthen requirements for recovery of unpaid rebate amounts, without regard to whether the manufacturer knowingly made the misclassification or should have known that the misclassification would be made, and it dedicates funding to improve oversight and enforcement of drug rebate obligation compliance.  These provisions would take effect on the date of enactment, and would apply to covered outpatient drugs supplied by manufacturers under rebate agreements on or after the enactment date.

The bill also would:
Continue Reading Medicaid Legislation with Medicaid Rebate Misclassification Penalty Heads to President Trump

The Centers for Medicare & Medicaid Service (CMS) has issued regulations to address revised statutory requirements related to manufacturer calculation of Medicaid drug rebates.  Specifically, CMS recently published an interim final rule with comment period that revises the regulatory text at 42 CFR § 447.509(a)(4) to reflect Bipartisan Budget Act (BBA) of 2018 language…

Late yesterday, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) released a proposed rule to amend the anti-kickback safe harbors[1] in response to perceived risks that rebates paid by pharmaceutical manufacturers to payors and pharmacy benefit managers (PBMs) may contribute to pharmaceutical list price inflation and not benefit patients and payors.  The proposed rule would (i) remove safe harbor protection for drug manufacturer rebates to Part D plans, Medicaid managed care organizations, and PBMs acting under contract with either type of entity, (ii) establish a new safe harbor protecting manufacturer “point of sale” price reductions on Part D and Medicaid managed care drug utilization, and (iii) establish a new safe harbor protecting certain service fees paid by drug manufacturers to PBMs.  The proposed rule is scheduled to be published in the Federal Register on February 6, 2019, with a 60-day public comment period.

Reed Smith’s Life Sciences and Health Industry Group will be preparing a more detailed client bulletin analyzing the potential implications of the proposed rule and identifying areas for comment.  In the meantime, here are a few of our “hot takes” to consider as you review the proposal.
Continue Reading OIG’s Proposed Drug Pricing Safe Harbor Amendments: “Hot Takes”

CMS has announced final Medicare Advantage (MA) and Part D plan policies and rates for 2019. The final 2019 rule, published on April 16, 2018, implements a Comprehensive Addiction and Recovery Act (CARA) provision that allows Part D plan sponsors to establish drug management programs. Under this policy, plan sponsors may limit at-risk beneficiaries’ access to coverage of “frequently abused drugs” (opioids and benzodiazepines) to selected prescribers and/or network pharmacies, and they may use of point-of-sale claim edits, subject to various conditions.

Other policies adopted in the final rule include the following:
Continue Reading 2019 Medicare Advantage/Part D Policies Finalized, Including Comprehensive Addition and Recovery Act Drug Management Requirements

The new Bipartisan Budget Act of 2018 (the Act), recently signed into law by President Trump, includes extensive Medicare, Medicaid, and other health policy and payment provisions.  Policy changes that will be welcome to health care providers and manufacturers include:  repeal of the Independent Payment Advisory Board (IPAB); elimination of the Medicare outpatient therapy caps;…

The OIG recently issued a report evaluating the accuracy of pharmaceutical manufacturer-reported Medicaid drug rebate program data, including pricing information and FDA classification (e.g., innovator/brand or noninnovator/generic). The OIG determined that the “vast majority” of the drugs in the Medicaid rebate program were classified appropriately in 2016, but about 3% of these drugs (885 drugs)…

CMS has issued a proposed rule to update the Medicare Advantage (MA) program and Part D prescription drug benefit rules for contract year 2019.  The proposed rule would, among many other things:

  • Implement a Comprehensive Addiction and Recovery Act (CARA) provision that allows Part D plan sponsors to establish drug management programs that limit at-risk

…

CMS has announced that it is delaying until April 1, 2020 its controversial change in the definitions of “States” and “United States” included in the February 1, 2016 Medicaid covered outpatient drug final rule with comment period.  Specifically, in that rulemaking CMS defined “States” and “United States” to include the U.S. territories (American Samoa, the …

HHS has announced a series of actions to address the nation’s opioid epidemic, as Congress has cleared the Comprehensive Addiction and Recovery Act for the President’s signature. As part of the HHS activities, the Substance Abuse and Mental Health Services Administration (SAMHSA) has published a final rule to expand from 100 to 275 the number of patients that qualified practitioners may treat with buprenorphine, a medication to treat opioid use disorder. Furthermore, as noted in a separate post, the proposed 2017 OPPS rule would remove certain pain management questions from consideration for purposes of Hospital Value-Based Purchasing (VBP) Program payment adjustments “to mitigate even the perception that there is financial pressure to overprescribe opioids.” In addition, HHS announced its research priorities regarding opioid misuse and pain treatment, and the Indian Health Service adopted a requirement that prescribers and pharmacists check state Prescription Drug Monitoring Program (PDMP) databases before prescribing or dispensing opioids for pain.

These actions come as the OIG has highlighted significant Medicare Part D spending on commonly abused opioids, which the OIG estimates exceeded $4 billion in 2015. In fact, almost one in three Medicare Part D beneficiaries received a commonly abused opioid in 2015, according to the OIG. The OIG recommends that CMS take additional actions to prevent opioid abuse within the Medicare program, signaling the potential for additional policies in this area.

In another related development, this month both the House and Senate approved the conference report to accompany S 524, the Comprehensive Addiction and Recovery Act. Among many other things, the bipartisan legislation would:
Continue Reading Obama Administration, Congress Take Steps to Fight Opioid Epidemic

CMS has received questions from manufacturers regarding whether price concessions and services offered to payers within Value-Based Purchasing (VBP) arrangements in the pharmaceutical marketplace could impact their drug’s Medicaid best price and increase their Medicaid rebate obligations.  In recent guidance, CMS notes that, in general, prices included in best price include all prices, such…

The OIG recently examined how states that pay for drugs through Medicaid managed care organizations (MCOs) identify and exclude 340B drug claims when collecting Medicaid rebates, since states are prohibited from collecting “duplicate discounts” (i.e., when manufacturers pay Medicaid rebates on drugs sold at the discounted 340B price).  The OIG also reviewed potential vulnerabilities that …

After months of speculation and waiting, CMS yesterday released its final rule to revise Medicaid reimbursement for covered outpatient drugs and reform Medicaid drug rebate requirements.  While we are still digesting what the rule means for drug manufacturers and other health care providers, we promise a full analysis of the final rule, as well as…