Drug Rebates

Medicare Prescription Drug Price Negotiation Is Poised to Become Reality

It appears that for the first time, HHS will be able to negotiate prices of some prescription drugs in Medicare. The pharma industry has long resisted such efforts, and it remains to be seen what the impact of the legislation, if passed, will be on manufacturers’ drug discounts and rebates.
On Aug. 7, the Senate passed the Inflation Reduction Act of 2022 (IRA) 51-50 with Vice President Kamala Harris casting the deciding vote. The House is expected to vote on the bill Friday. If it passes as anticipated, President Joe Biden is projected to sign it into law shortly thereafter.

UnitedHealth Eyes No Out-of-Pocket Costs for Certain Drugs; Other Large Payers May Follow Suit

UnitedHealth Group announced on July 15 that it would eliminate out-of-pocket costs for insulin and a few other medications for beneficiaries enrolled in fully insured plans. The managed care organization expects to implement the changes starting as early as Jan. 1, 2023, pending regulatory approval.

Health and drug policy experts who spoke with AIS Health, a division of MMIT, applauded UnitedHealth’s decision, and noted it would benefit patients who struggle to pay for medications and increase adherence. They also said the move could help United financially, as members are more likely to stay out of the hospital and have better long-term health, but they said it could lead to higher premiums for employers and employees. UnitedHealth did not respond to AIS Health’s request for comment on how the company would foot the bill for implementing the zero cost-share policy.

Drug Price Reforms Return to the Senate’s Agenda

After more than a year of deliberation and false starts, Congress might finally reform pricing and federal purchasing of prescription drugs in the fall, D.C. insiders tell AIS Health, a division of MMIT. The substance of the drug pricing bill is similar to previous proposals, but the political ground inside the Democrats’ Senate caucus may have shifted enough to allow prescription drug pricing to eke through as part of a diminished catch-all spending bill that would still be the signature achievement of the beleaguered Biden administration.

Progress on the drug pricing bill resumed when Senate Majority Leader Chuck Schumer (D-N.Y.) on July 7 submitted the text of a bill to the Senate parliamentarian. The parliamentarian will deem whether the bill conforms with the Senate rules that govern the budget reconciliation process. Budget reconciliation is an arcane procedure that allows the Senate to pass legislation with a simple majority, so long as the bill in question relates largely, in the parliamentarian’s judgment, to the budget.

Payers Are Taking Steps to Manufacture Cheaper, More Accessible Generic Medications

The state of California announced last week that it would become the first state to manufacture its own insulin, while a payer-owned coalition said it would distribute its initial generic medication later this summer. Taken together, the moves show that some payers, be they the government or health insurers, are serious about reining in the costs of generics and dealing with inefficiencies in the pharmaceutical supply chain, according to health policy and drug pricing experts who spoke with AIS Health, a division of MMIT.

California Gov. Gavin Newsom (D) revealed the insulin plans on July 7 via a video on Twitter, keeping to a promise he had first made in 2019 when he was elected to office. The announcement followed the news in June that EmsanaRx became the first PBM to join CivicaScript, a company founded two years ago by a consortium of payers that is aiming to manufacture and lower the cost of generic medications in outpatient settings. In addition, Navitus Health Solutions, a startup PBM that touts a 100% pass through model, joined the CivicaScript partnership on July 13.

FTC Reveals PBM Investigation, Issues Policy Statement Targeting Rebates

As scrutiny over what Americans pay for prescription drugs continues, the Federal Trade Commission (FTC) is joining the action. In early June, the agency voted unanimously to launch an investigation of the business practices of the six largest PBMs. Then a little over a week later, it issued a statement on its enforcement policy on certain rebates and fees that manufacturers give PBMs that result in the exclusion of lower-cost drugs on their formularies. Industry experts say that PBMs should heed this “aggressive approach,” which appears to be challenging them to show that these rebates are justifiable and being passed on to patients and payers.

The focus comes after President Biden’s July 9, 2021, Executive Order on Promoting Competition in the American Economy in which he called for “a fair, open, and competitive marketplace” across numerous industries. “Americans are paying too much for prescription drugs and healthcare services — far more than the prices paid in other countries. Hospital consolidation has left many areas, particularly rural communities, with inadequate or more expensive healthcare options. And too often, patent and other laws have been misused to inhibit or delay — for years and even decades — competition from generic drugs and biosimilars, denying Americans access to lower-cost drugs.”

As PBMs Are Under Microscope, New Suit Accuses CVS of Generics-Blocking Scheme

At a time when the federal government is clamping down on pharmacy benefit managers and seeking ways to lower prescription drug prices, a recently unsealed whistleblower complaint details how one of the three largest PBMs allegedly drove up costs for Medicare Part D beneficiaries and the federal government. In a lawsuit that CVS Health Corp. intends to fight, the False Claims Act complaint accuses the parent company of colluding with its “supposedly firewalled” entities — the SilverScript Part D subsidiary, PBM CVS Caremark and CVS pharmacies — of striking secret rebate agreements with the drug makers that required SilverScript to block substitution on its formularies of generic drugs in favor of costlier brand-name alternatives.

The U.S. Dept. of Justice chose not to intervene in the second amended complaint, which was filed in the U.S. District Court for the Eastern District of Pennsylvania in March and recently obtained by Stat. The suit was filed by relator Alexandra Miller, who worked for CVS Health for 19 years. According to Miller’s LinkedIn profile, she most recently served as senior director of Medicare Part D operations and is now senior director of member and provider experiences for Oscar Health.

Some Employers Embrace Alternate Funding Programs Despite Legal Issues

Pharmacy benefit consultants have mixed views on how many plan sponsors are turning to alternate funding programs, which aim to save on specialty drug costs by eliminating coverage for certain drugs and diverting costs to pharmaceutical companies’ patient assistance programs. But scrutiny of the programs is growing, with one major pharma company challenging the legality of these programs in court.

“A large percentage” of WTW’s employer clients now are using this strategy, Chantell Sell Reagan, Pharm.D., the national pharmacy practice clinical lead for WTW, tells AIS Health, a division of MMIT.

News Briefs: FTC Ratchets Up Regulatory Pressure on PBMs, Targeting Rebate Practices and Insulin

The Federal Trade Commission (FTC) ratcheted up regulatory pressure on PBMs once again, announcing that it will apply more scrutiny to PBMs' rebating practices, particularly regarding insulin. The move follows the agency's announcement earlier this month that it would investigate PBM business practices and consolidation. In an official policy statement, the agency wrote that “some have suggested that high rebates and fees to PBMs and other intermediaries may incentivize higher list prices for insulin” and that “rebate and fee agreements may incentivize PBMs and other intermediaries to steer patients to higher-cost drugs over less expensive alternatives.” Actions the agency said it would pursue include cracking down on exclusionary rebates and intensifying scrutiny of formulary design.

Researchers Find Overspending in Generic Drug Market, Advocate for More Transparency

Researchers from the USC Leonard D. Schaeffer Center for Health Policy & Economics are pushing for more transparency in the pharmaceutical supply chain and policy changes in the generic drug sector. Their recommendations, published in a white paper on May 31, were based on their findings that PBMs and health insurers cost patients, employers and the federal government billions of dollars per year in the generic drug market.

Karen Van Nuys, Ph.D., one of the paper’s authors and executive director of the Center’s Value of Life Sciences Innovation Project, tells AIS Health, a division of MMIT, that she recommends changes in the way pharmacies set their cash prices as well as in some formularies that favor branded drugs over generics and so-called spread pricing, where PBMs reimburse pharmacies one price, charge health plans a higher price and pocket the difference.

Judge Strikes Down ‘Accumulator Rule,’ Ending Potential Threat to Patient Assistance

A U.S. district court judge has struck down a CMS rule that would have narrowed the exclusions from Medicaid best price for manufacturer-provided patient-assistance programs. The rule, which was set to go into effect on Jan. 1, would have required drugmakers to determine exactly where their patient assistance is going. If 100% of it was not reaching the patient — particularly via copayment accumulators and maximizers when payers are taking this assistance rather than allowing it to count toward patients’ deductibles and out-of-pocket maximums — that assistance would need to have been included in Medicaid best price and average manufacturer price (AMP) calculations for prescription drugs. This decision, as well as a recent pharma lawsuit against a maximizer company, may spur more pushback against these copay programs, one industry expert tells AIS Health, a division of MMIT.

The Medicaid rebate rule allows state Medicaid programs to get the same discounts on drug prices that manufacturers offer commercial plans purchasing prescription drugs. Manufacturers pay rebates to Medicaid programs that are calculated based on drugmakers’ best price, which is the lowest price the manufacturer gives to most providers of health care services or items, including hospitals, HMOs and MCOs — but not patients. It includes any price adjustments, such as discounts and rebates, but not manufacturer-provided assistance to patients.