Questions Linger About Part D Rebate Rule’s Fate, Legality

As Medicare Part D plans consider their 2022 plan year bids without the negotiating tool of manufacturer rebates, it remains to be seen whether HHS’s recently finalized rebate rule (85 Fed. Reg. 76666, Nov. 30, 2020) will take effect. Rachel Sachs, an associate professor of Law at Washington University in St. Louis, in a Nov. 23 Health Affairs blog post suggested that the Trump administration finalized the rebate rule “in a way that will create substantial legal jeopardy” and it is likely to be “invalidated on procedural grounds.”

Save for the removal of Medicaid managed care organizations from the safe harbor changes to rebates, Sachs observed that the final rebate rule is largely identical to the proposed rule and makes “no structural changes in an attempt to comply with the President’s executive order” that the HHS secretary in finalizing the rule publicly confirm that it would not raise costs. Secretary Alex Azar’s confirmation statement, she pointed out, relies partly on the expectation that manufacturers will lower list prices in response to the rule and cites a February 2019 Senate Finance Committee hearing during which several pharmaceutical executives indicated “that they would reduce their list prices only if rebates were removed from both the commercial sector and Part D.” The rule as finalized, however, removes rebates from just Part D, she noted.

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