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June 26, 2018

MACPAC to Congress: Change how the Medicaid drug rebate program works

Daily Briefing

    The Medicaid and CHIP Payment and Access Commission (MACPAC) in its annual report asked Congress to introduce changes to the Medicaid drug rebate program in an effort to lower the program's drug spending.

    Report details

    MACPAC in the report recommended Congress alter the Medicaid drug rebate program by eliminating the statutory ability of drug companies to calculate the average manufacturer price (AMP) of drugs using the prices for both brand-name drugs and so-called "authorized" generic drugs. According to Modern Healthcare, authorized generics are produced by the brand-name drugmaker and are identical to the brand name formulation. The drugs' lower pricing also can substantially reduce the amount of rebates a drugmaker must pay when included in the AMP calculation, Modern Healthcare reports.

    MACPAC in its report said the proposal would ensure manufacturer-paid rebates are established based on the prices available to pharmacies and wholesalers. The Congressional Office has estimated such a move would reduce federal spending by up to $50 million in the first year and slightly below $1 billion over five years.

    MACPAC also recommended that Congress give the HHS secretary the authority to impose financial sanctions on drug manufacturers that do not provide accurate drug classification data. CMS uses that data to determine the rebate a drugmaker pays for a drug. For example, drugmakers pay a lower rebate for non-innovator products, such as a generic, than when a drug is classified as innovator product, such as a brand-name drug.

    In addition, MACPAC in the report recommended Congress amend a statutory provision that prohibits state Medicaid programs from paying the lowest price for some drugs.

    The report also calls on Congress to clarify regulations regarding patient privacy, such as the rules determining when a provider treating a patient with a substance use disorder can share the patient's information with the patient's other physicians.

    MACPAC said more education, guidance, and technical assistance is required "to help providers, payers, and patients understand their legal rights and obligations and opportunities for information sharing that would facilitate integration of care."

    MACPAC in the report also wrote, "While the institutions for mental diseases [IMD] exclusion often is cited as a barrier to paying for residential services, states can cover residential services under some conditions now through Section 1115 demonstrations and managed care. Eliminating the IMD exclusion would not address other coverage gaps or low participation of SUD … treatment providers in Medicaid."


    Kristi Martin, senior vice president at consulting firm Waxman Strategies, said the proposal to change how drug manufacturers calculate the AMP of drugs is essential for improving the integrity and operation of the Medicaid drug rebate program. "Manufacturers have used the rebate program to introduce an authorized generic with a lower required rebate, allowing them to maintain their monopoly position," Martin said. "The proposal would ensure that the (average manufacturer price) is reflective of the actual price of brand-name innovator drug products available to wholesalers and that the rebate is appropriately applied."

    Tiernan Meyer, a senior manager at Avalere Health, said it remains unclear whether the HHS secretary could penalize drugmakers that submit inaccurate drug classification data with intermediate sanctions without reducing access to a drug. Meyer said the HHS secretary is allowed to stop Medicaid coverage for all of a manufacturer's drugs, but the secretary has avoided taking that step because it would take away treatments from Medicaid beneficiaries. Meyer said of MACPAC's proposal, "The idea is to offer more moderate options" (Dickson, Modern Healthcare, 6/19; Connole, Provider Magazine, 6/15).

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