by admin | November 18, 2011 8:06 pm
November 18, 2011—Congressional Democrats released a deficit reduction plan last week including a proposal to increase Medicaid rebates, which would save $20 billion over 10 years. The plan would increase the additional rebate manufacturers pay to Medicaid when a drug’s average manufacturer price (AMP) increases by more than the rate of inflation. Such an increase in Medicaid rebates could lower 340B ceiling prices, increasing 340B provider savings.
[ms-protect-content id=”2799″]The drug industry has opposed the recommendation. Matthew Bennett, senior vice president of Pharmaceutical Research and Manufacturers of America (PhRMA), told the electronic newsletter Inside Health Policy that the proposal was “unprecedented, unjustified, and punitive.”
Some think the proposal may be an effort by congressional Democrats to push an alternative to another deficit reduction suggestion floating around Washington that would extend the Medicaid rebate program to Medicare Part D. Although both proposals would use drug industry rebates to reduce the deficit, Part D rebate expansion has been estimated to save the government $120 billion over 10 years. The new proposal to increase Medicaid rebates would only save $20 billion over the same time. The drug industry has also opposed expanding the rebate program to Part D.
Inflation Penalty Might Double
Currently, manufacturers must pay state Medicaid agencies a rebate for a drug to be reimbursed by Medicaid. The rebate consists of a basic rebate amount and sometimes an additional rebate if the drug’s AMP has increased faster than the rate of inflation. The amount of the additional rebate is the difference between the drug’s actual AMP and what its AMP would have been if it had increased at the rate of inflation. The Democrats’ proposal could double the current inflationary rebate, according to congressional sources who spoke with Inside Health Policy.
Because the 340B price is tied to the Medicaid rebate, an increase in the inflationary rebate is likely to result in lower 340B ceiling prices and therefore increased savings to 340B providers. The Affordable Care Act (ACA) raised the Medicaid minimum rebate on most brand-name drugs from 15.1 percent to 23.1 percent of the AMP and increased the minimum rebate on brand-name clotting factor and pediatric drugs to 17.1 percent. It also raised the rebate on generic drugs from 11 percent to 13 percent and set rebates on new formulations of existing drugs at the higher 13 percent level.
The extent of any additional savings to 340B providers resulting from these changes was initially unclear, because the ACA also made changes to the definition of average manufacturer price (AMP), another component of the 340B ceiling price. Although implementation of the new definition of AMP is not yet complete, it appears as though 340B ceiling prices declined after the ACA’s increased rebate percentages went into effect and again when CMS made ACA-mandated changes to the definition of AMP, but have since begun to climb back.
Effects on 340B Prices
Providers first saw the effect of the increased rebates in the third quarter of last year. As theMonitor reported[1] in July 2010, 340B covered entities paid 9.44 percent less on average for prescription drugs that month than they paid in April and May due to the rebate changes that took immediate effect with enactment of the ACA in late March, according to the 340B Prime Vendor Program. From the end of the second quarter of 2010 to the early days of the third, 340B prices for brand-name drugs declined by an average of 10.43 percent. Generic drugs prices fell by 3.28 percent, oral drugs by 12.53 percent, and injectables by 7.86 percent.
Although changes to the minimum Medicaid rebate amount became effective retroactively to Jan. 1, changes to AMP did not take effect until late last year. The Centers for Medicare and Medicaid Services (CMS) withdrew its prior regulations on AMP in November 2010 and indicated it would release new guidelines for determining AMP in the near future. In the meantime, CMS instructed manufacturers required to submit quarterly AMP data to follow a new definition laid out in the ACA. Manufacturers began submitting price reports based on the new AMP starting Nov. 30.
Because there is a two-quarter lag in calculating 340B ceiling prices, the government began to calculate them using new AMP data in the second quarter of this year. At that time, reports indicated that average 340B prices decreased once again, with average 340B prices falling between the first and second quarters of the year by 3.55 percent. The average price fell again between the second and third quarters by 2.22 percent, but it then increased between the third and fourth quarters by 3.47 percent. The definition of AMP may change again when CMS published its long-awaited guidance on how manufacturers should calculate a drug’s AMP, which the drug industry is expecting at any time.[/ms-protect-content]
Source URL: https://340bemployed.org/congressional-democrats-seek-increased-medicaid-rebates/
Copyright ©2025 340bemployed.org unless otherwise noted.