CCF Comments to Trump Administration Medicaid Drug Rebate Rule

CCF has submitted public comments to the Centers for Medicare and Medicaid Services (CMS) on the proposed Medicaid drug rebate rule which, among other things, would change how drug manufacturers report “best price” under the effective Medicaid Drug Rebate Program.

As I have explained, the proposed rule’s best price reporting changes are intended to facilitate more widespread commercial adoption of so-called, value-based purchasing (VBP) arrangements, including arrangements that vary discounts based on patient outcomes.  State Medicaid programs already have considerable flexibility to adopt such arrangements, and a number of states have already received federal approval (without waivers) to do so.

These best price reporting changes, however, raise serious concerns because drug manufacturers are likely to game them in ways that significantly reduce or delay how much they would otherwise have to pay in rebates to state Medicaid programs.  That, in turn, would increase federal and state Medicaid prescription drug costs.

We encourage you to submit your own comments here by the July 20, 2020, 11:59 p.m. ET deadline.

Our comments make the following points:

  • The best price requirement is a critical element of the Medicaid Drug Rebate Program. According to the Medicaid and CHIP Payment and Access Commission, in fiscal year 2018, drug manufacturers paid $36.2 billion in rebates to the federal government and the states, lowering Medicaid prescription drug costs by 59.5 percent. The best price requirement is a key component of the rebate program.  Its intent is to ensure that Medicaid obtains discounts at least as large as those available to most purchasers in the commercial sector and is estimated to have produced up to $5 billion in savings (of which, roughly $2 billion are state savings) in 2015 alone.
  • The best price reporting changes could significantly weaken best price and increase federal and state Medicaid drug costs. Some drug manufacturers have pushed for legislative changes to entirely eliminate or seriously undermine the Medicaid best price requirement. They argue that the requirement poses an obstacle to adoption of VBP arrangements.  CMS’s overall approach to make regulatory changes is preferable to amending the Medicaid drug rebate statute in damaging ways supported by some manufacturers. But the specific changes to best price reporting in the proposed rule raise serious concerns.  For example, they would likely allow manufacturers to game these changes to raise their best price and lower or delay the rebates they otherwise would have to pay state Medicaid programs.  In another example, they would also appear to take away the benefits of best price set by VBP arrangements if state Medicaid programs do not also have VBP arrangements with manufacturers.  Instead, CMS should take considerably more time to substantially revise and further develop these policies before finalizing these aspects of the rule.
  • The proposed rule did not analyze or estimate the potential harmful impact of the best price reporting changes. Despite the significant risks that the proposed reporting changes pose to the Medicaid best price requirement, the proposed rule does not analyze the likely fiscal effects on state Medicaid programs if manufacturers take advantage of the reporting changes to inappropriately reduce their Medicaid rebate liability. This is inconsistent with federal requirements and is particularly striking because the intent of the best price reporting changes is clearly to benefit the commercial sector, not Medicaid.  State Medicaid programs can already adopt these arrangements without any of the changes in the proposed rule.  CMS must conduct such an impact analysis, including an examination of the effects on state Medicaid programs, as part of substantially revising and adequately developing these proposals before finalizing any rule.
  • The provisions related to treatment of “line extension” drugs under the Medicaid Drug Rebate Program are sound. The proposed rule also provides more clarification about what constitutes line extension drugs, which are subject to special treatment under the Medicaid Drug Rebate Program’s inflation-related rebates. These clarifying changes are sound because they would reduce manufacturers’ incentives to use line extensions of their drugs in ways that minimize their rebates.  The proposed rule’s line extension provisions, however, could be further strengthened.
Edwin Park
Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy.