Tag: Pharmacy

MM Curator summary

The current COVID relief bill still has the removal of the drug rebate cap for Medicaid drugs.

 
 

The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.

 
 

 
 

The American Rescue Plan Act of 2021, the US$1.9 trillion stimulus package expected to be passed by Congress and signed into law by President Biden by March 14, 2021, contains the first drug pricing legislative action being taken under the new Biden administration.

The American Rescue Plan Act of 2021 includes a provision that eliminates the statutory cap on rebates drug manufacturers pay to Medicaid. These rebates act as a discount off the purchase price and eliminating the cap means that drug company discounts paid to Medicaid can rise. Prior to this change, drug manufacturers could have paid up to 100 percent of the Average Manufacturer Price in rebates to state Medicaid programs for Medicaid-covered drugs.¹

Starting in January 2024, Medicaid rebates will no longer be capped at 100 percent of the Average Manufacturer Price, which means a manufacturer may in essence have to pay Medicaid when its drug is used.² The Biden administration removed the rebate cap, which had been in effect since 2010,³ despite reports that net prices for drugs are declining, and despite criticism that eliminating the cap might result in higher initial launch prices for new drugs and cost shifting to commercial insurance and to Medicare.

The removal of this overall limit on Medicaid rebate obligations—which means no ceiling on the discounts drug companies pay to the state—marks the Biden administration’s first legislative action on drug pricing. The action is in line with President Biden’s campaign proposals on drug pricing, but whether this action signals more activity at the federal level on drug pricing in 2021 remains unclear.

In 2020, most of the drug pricing activity was at the state level, as efforts by the Trump administration eventually stalled in court or were put on hold by the Biden administration, although the December 2020 COVID-19 relief package included provisions directed at increasing drug price transparency.⁴

The Medicaid Rebate Cap

The Medicaid Drug Rebate Program was created to ensure that Medicaid pays the lowest or best price a manufacturer charges other payers for the drug, and it requires manufacturers to pay set rebates off the Average Manufacturer Price (“AMP”), or the difference between the AMP and best price,⁵ whichever is greater, for brand drugs purchased by Medicaid.⁶ The AMP is the average price paid by wholesalers and by retail community pharmacies that purchase drugs directly from manufacturers.⁷

Medicaid also requires manufacturers to pay an additional rebate when the price of a drug increases faster than the rate of inflation, which acts to essentially limit price increases for Medicaid to the rate of inflation.⁸ Since 2010, pursuant to Section 1927(c)(2)(D) of the Social Security Act, the total Medicaid rebate amount a drug manufacturer was required to pay was capped at 100 percent of the AMP,⁹ so that manufacturers would never have to pay a rebate higher than the statutory average purchase price. Accordingly, once the total rebates a manufacturer pays to Medicaid for a drug reaches the 100 percent rebate cap, the manufacturer is not required to pay additional rebates if the drug price continues to outpace inflation.

Overview of the Legislative Change

The American Rescue Plan Act of 2021, in Section 9816, terminates Section 1927(c)(2)(D) of the Social Security Act at the end of 2023, which will eliminate the rebate cap of 100 percent of the AMP.¹⁰ The House Committee on Energy and Commerce proposed the new provision in the 2021 legislation as a part of its broader legislative recommendations for the Medicaid program under Congress’s budget reconciliation directive.¹¹

Implications

1. Implications of Medicaid Cap Removal

Without a cap on the rebates drug manufacturers are required to pay under Medicaid, manufacturers may be required to compensate states in an amount greater than what the state Medicaid programs pay for the drug. This could effectively mean that drug manufacturers might have to pay states for the use of certain drugs in their Medicaid programs, which already pay the lowest price across federal programs due to the effect of statutorily required rebates.¹²

The policy change will have the largest impact on brand drugs whose prices have been or will be consistently raised and have reached the 100 percent rebate cap.¹³ Former Health and Human Services (“HHS”) Secretary Alex Azar reported that in 2019 more than 2,300 drugs were at the 100 percent cap on rebates.¹⁴ When a brand drug reaches the 100 percent rebate cap, under existing law, the brand drug manufacturer is already effectively receiving zero net revenue from Medicaid use of the drug and in some instances may be providing the drug to the states for free (before considering any fees paid to pharmacies for dispensing).

Proponents view the elimination of the cap as a way not only to lower net prices for states through rebates that could potentially be greater than the purchase price, but also to deter further steep price increases.¹⁵ The Congressional Budget Office estimates that removing the cap on rebates would save the federal government approximately US$15.9 billion over the ten-year period 2021 – 2030.¹⁶ Commentators, however, doubt that removing the rebate cap will change the calculus for the broader drug market because Medicaid makes up only about ten percent of it.¹⁷

Pharmaceutical manufacturer trade groups, such as the Pharmaceutical Research and Manufacturers of America (PhRMA), have criticized the elimination of the rebate cap, highlighting reports that indicate removing the cap may lead to higher launch prices, increased costs for commercial and Medicare buyers, and decreased innovation on drugs that have high Medicaid usage.¹⁸ Further, reports have shown that the net price of drugs has declined in the last two years, while overall health care price growth has increased.¹⁹ Despite reports of a decline in net drug prices and criticism of eliminating the 100 percent rebate cap, the provision passed through the House and the Senate and is expected be approved by the House pursuant to the budget reconciliation procedure, and to be signed into law by President Biden by March 14, 2021.

2. Looking Forward on Drug Pricing Regulation Under the Biden Administration

Elimination of the Medicaid rebate cap provision is the first legislative measure under the Biden administration on drug pricing.

Lowering drug prices was a key policy goal of the Trump administration; however, the administration largely failed to achieve its objectives. Notably, President Trump issued four executive orders in the last months of his term that made headlines as they focused on reducing the cost of insulin and injectable epinephrine to low-income individuals, allowing importation of drugs from other countries at lower prices, eliminating the anti-kickback safe harbor protections for rebates paid to pharmacy benefit managers and insurers but allowing rebates to consumers at the point of sale, and establishing a most favored nation (“MFN”) pricing model for Medicare drug payments based on international drug prices.²⁰

Each of these executive orders reached the rulemaking stage in the waning days of the Trump administration but received criticism and concern from major industry stakeholders and ultimately stalled.²¹ The rules relating to the rebate safe harbor, the MFN model, and drug importation faced numerous legal challenges from industry trade groups, with courts delaying implementation of the rebate rule and enjoining implementation of the MFN rule.²² President Biden paused the rulemaking procedure for all four late-issued rules from the Trump administration until March 22, 2021.²³

While it remains to be seen whether the Biden administration will go forward with any of the rules begun under the Trump administration, or with any other initiatives on drug pricing advanced by the previous administration, drug pricing and lowering health care costs were a central point of the Biden campaign. President Biden has said that he supports several proposals to address public concern about high drug pricing, including requiring manufacturers to pay a Medicaid-style inflationary rebate for Medicare, allowing Medicare to negotiate rebates directly with manufacturers, and international reference pricing for newly launched specialty drugs.²⁴

Further, while the CARES Act was silent on drug pricing and instead focused on the drug supply chain,²⁵ the COVID-19 relief package passed in December of 2020 contained provisions related to drug pricing transparency, including reporting by health plans on the cost of their highest-spend drugs and the impact manufacturer rebates have on premiums.²⁶ The Medicaid rebate provision in the American Rescue Plan Act goes a step further by acting to regulate rebates paid by manufacturers.

 
 

Clipped from: https://www.lexology.com/library/detail.aspx?g=91155dd2-193e-4333-b0e4-32eca3bcbfc2

 
 

 
 

MM Curator summary

 
 

Under the current bill, Medicaid will get $350B (18%) of the pandemic relief package. Vaccines and testing will get 3%.

The bill would also change the cap on drug prices used in Medicaid rebate calculations.

 
 

The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.

 
 

Major changes to Medicaid are included in the House Energy and Commerce Committee’s stimulus proposal. State and local governments will receive $350 billion in aid, according to a draft of a stimulus bill. House Democrats have budgeted for commodity purchases to help U.S. farms. President Joe Biden backed a proposal for quicker phase-outs of planned $1,400 stimulus checks. House and Senate Democrats are clashing on the design of expanded support for the unemployed, an early sign of the intra-party squabbling in the $1.9 trillion pandemic relief bill in the coming weeks.

The debate comes as the House continues to release elements of the bill. A dozen different House committees are working on the specific components of Biden’s plan and releasing their portions as they go along.

The House aims to vote on the full bill during the week of Feb. 22. House Speaker Nancy Pelosi has pledged to secure congressional passage by the mid-March expiration of enhanced jobless benefits approved in the December aid package.

Bill Envisions Big Changes to Medicaid Program (11:19 p.m.)

The House Energy and Commerce Committee’s stimulus proposal would make big changes to Medicaid. It offers states more money to expand their public health insurance programs for the poor and gives them the ability to claw back money from price increases of certain drugs.

The plan, released late Tuesday night, would end Medicaid drug rebate caps, which are currently set at 100% of a drug’s average manufacturer price, for certain medicines. Once that cap is reached, drug makers can raise their prices without increasing the net rebates that must be paid. A congressional advisory committee warned in 2019 that ending the rebate cap could prompt drug companies to leave the Medicaid program or reduce research.

The legislation would also permit states to restart Medicaid benefits for people in prison 30 days before their release, making it easier to extend addiction treatment and other services, and to extend the program to women for a year after they’ve given birth.

The plan has $14.2 billion for vaccines-related activities. Community health centers also would receive $7.5 billion and $6 billion goes to tribal health centers. The legislation has $7.5 billion for the expansion of internet access. Chairman Frank Pallone’s draft would also provide $46 billion for Covid-19 testing, tracing, monitoring and mitigation. The committee has planned a Thursday vote on the provisions. – Alexander Ruoff and Erik Wasson

Democrats Back $350 Billion for State, Local Governments (9:44 p.m.)

House Democrats are backing Biden’s proposal for $350 billion in funding for state and local governments, according to draft stimulus legislation released Tuesday night.

House Oversight and Reform Committee Chair Carolyn Maloney’s bill, slated for committee action on Friday, sets up a new dedicated state and local fund in order to bypass the traditional appropriations process which is not eligible for budget reconciliation.

States would receive $195 billion and that money would partly be distributed based on a the share of unemployed workers. The District of Columbia would get the same share as states, unlike in last year’s relief bill. Local governments would receive $130 billion, partly based on population, with a carve-out for smaller communities. Territories would receive $4.5 billion and tribes $20 billion.

The bill also would spend $570 million to pay for 600 hours of paid leave for federal and postal workers to use for Covid quarantine or to care for infected loved ones.

“Democrats’ plan to bail out locked-down, poorly managed liberal states is unfair to American taxpayers and is ripe for waste, fraud, and abuse,” said the committee’s top Republican James Comer of Kentucky. — Erik Wasson

Farm Aid Included in Aid Plan, Through Commodity Purchases (6:54 p.m.)

Food aid for hungry Americans and commodity purchases for hurting agriculture producers topped the list of priorities within the fiscal 2021 budget reconciliation bill released by House Agriculture Committee Democrats.

The proposal would allot about $4 billion for the agriculture secretary to purchase commodities, such as fresh produce and dairy, and aid the food supply chain. There’s also more than $1 billion for the Supplemental Nutrition Assistance Program, formerly referred to as food stamps. The House Agriculture Committee will consider the proposal Wednesday.

The initiative would also set aside $1 billion for the agriculture secretary to provide outreach and technical assistance to farmers and ranchers from socially disadvantaged groups, along with grants and loans to improve land access for them. — Megan Boyanton

Biden Backs Quicker Phase-Out of Aid Checks (4:05 p.m.)

Biden said Tuesday he would support a plan from House Democrats that provides $1,400 stimulus checks to Americans earning $75,000 or under but then more quickly scales down the payments to those earning above that amount.

Biden said he could back the proposal, released Monday, during an Oval Office meeting with business leaders to gain support for his proposed $1.9 trillion stimulus plan.

A group of 10 Republican senators who met last week with Biden had advocated for $1,000 payments phased out at $50,000 in individual income. Senator Joe Manchin, a West Virginia Democrat, had advocated for starting to phase out payments at $50,000 for individuals and $100,000 for couples.

House Democrats rejected those ideas, but did lower the amounts paid out to individuals who made between $75,000 and $100,000 and married couples making between $150,000 and $200,000. Taxpayers earning above those limits wouldn’t qualify for stimulus payments. — Justin Sink

Related: Here’s How Democrats Will Cap Relief Checks at $200,000 Income

Wyden Wants Changes to House Unemployment Draft (12:04 p.m.)

Senate Finance Committee Chairman Ron Wyden said Tuesday he will fight to ensure that enhanced unemployment benefits are more generous than in the draft of those sections released by the House Ways and Means Committee on Monday.

The House bill extends unemployment for gig workers, the long term unemployed as well as a weekly supplement of $400 through Aug. 29, just five months.

“I am going to fight like hell to get six,” said Wyden, noting that is what Biden originally proposed.

Extending unemployment insurance through the end of September would align the benefits expiration with the Oct. 1 deadline to pass a new funding bill to keep the government open. The move could make it easier for lawmakers to tack on another extension of jobless benefits without a lapse.

Wyden also wants a $600 per week federal supplemental UI payment. “Nobody on UI is using it to buy fancy imported products from Europe. They buy local,” he said.

Asked if the Finance Committee will hold a formal public vote on its own version of the bill, Wyden said the plan is still being worked out. He vowed to complete the bill by early March.

The Senate on Tuesday is beginning Trump’s impeachment trial and senators will be forced to sit as jurors every afternoon until the trial is completed. — Erik Wasson

Restaurants, Small Businesses Get Fresh Relief in Draft Package (11:32 a.m.)

House Democrats have alloted $7.5 billion in additional funding for the Paycheck Program Program of forgivable loans for small businesses. The House Small Business Committee released its draft language for its elements of President Biden’s Covid-19 relief plan, one of a dozen panels working on the bill. The PPP only just reopened last month, thanks to fresh funding approved in the December aid bill. The House Small Business Committee will vote on the text Wednesday.

The new proposal creates a $25 billion program for restaurants and other food and drinking establishments. A fifth of the funding will be set aside for the smallest firms — those with 2019 revenue of less than $500,000. The grants, available in amounts as large as $10 million per entity, may be used for expenses including payroll, mortgage, rent and utilities. The new initiative would be welcome news in the hospitality industry, which has been among the hardest hit during the pandemic crisis. — Cécile Daurat

— With assistance by Erik Wasson, Cecile Daurat, Justin Sink, Megan Boyanton, and Jon Herskovitz

 
 

Clipped from: https://www.bloomberg.com/news/articles/2021-02-09/restaurants-get-25-billion-in-draft-package-stimulus-update