Article | 24 November 2020
Administration Finalizes Medicare Drug Pricing Rules
Updates: In a court order filed Jan. 30, the Biden Administration agreed to postpone the effective date of certain provisions of the rebate rule relating to the elimination of Anti-Kickback Statute safe harbor protections for retrospective, non-POS rebates for Medicare Part D plans from Jan. 1, 2022 to Jan. 1, 2023. The Pharmaceutical Care Management Association (PCMA) and the HHS Office of Inspector General (OIG) entered into a stipulation staying the litigation brought by PCMA for a reasonable period of time while HHS OIG reviews and evaluates the rule, likely until summer 2021. In a separate court order, HHS also delayed the rule’s new safe harbor protection to permit plans, pharmacies, and PBMs to apply rebate discounts at the POS until Jan. 1, 2023 to align the effective dates of all safe harbor changes.
Separately, the Northern District Court of California granted a preliminary injunction on Dec. 28 blocking the MFN interim final rule from going into effect on Jan. 1. The order vacates the MFN rule nationwide, pending “completion of the notice and comment rulemaking process,” which closed on Jan. 26, 2021. The injunction casts significant doubt on the future of the rule as the Biden Administration is not expected to reissue it.
On Nov. 20, 2020, the U.S. Department of Health and Human Services (HHS) issued two new drug pricing rules that follow through on Executive Orders (EOs) signed by President Trump this summer. The HHS Office of Inspector General (OIG) released a prepublication version of a final rule that bans drug rebates in Medicare Part D that are not passed on to patients at the point of sale (POS). Additionally, the Centers for Medicare & Medicaid Services (CMS) released a prepublication version of an interim final rule to lower what Medicare Part B pays for certain drugs based on what other countries pay by establishing a mandatory nationwide demonstration to test a new “most favored nation” (MFN) payment model.
Drug Rebate Rule
Effective Jan. 1, 2022, the drug rebate
Initially proposed in Feb. 2019, the rule was withdrawn from further regulatory action a few months later in recognition of the negative impact on both Medicare beneficiaries and taxpayers. It was estimated the proposed rule would increase Part D premiums by approximately 25-40%. The Congressional Budget Office and CMS Office of the Chief Actuary further estimated it would result in a significant increase in federal spending over ten years ($177 billion and $196 billion, respectively), making it one of the most expensive proposed regulations in U.S. history. On July 24, 2020, President Trump signed an EO that directed HHS to complete its prior rulemaking process. The EO also included a requirement that the HHS Secretary publicly confirm that the action will not increase federal spending, Medicare beneficiary premiums, or patients’ total OOP costs prior to finalizing any rule. In tandem with the final rule’s release, Secretary Azar issued a letter asserting confirmation in which he relied on his personal experience to project that those costs would not increase.
Most Favored Nation Rule
CMS released an interim final
Participation in the MFN Model is mandatory, and will include all providers and suppliers nationwide that receive separate Medicare Part B FFS payment for a MFN Model drug, with limited exceptions. The model will have a seven-year demonstration period beginning Jan. 1, 2021.
FDA Unapproved Drugs Initiative Cancelled
In addition to the two new rules, HHS released a
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