Obama Seeks Rebates on Medicare Part D Drugs

by admin | September 20, 2011 8:20 pm

September 20, 2011—President Obama released a $3 trillion deficit reduction plan yesterday[1] calling for Medicaid-like rebates on Medicare Part D drugs provided to beneficiaries eligible for the program’s low-income subsidy (LIS)—a group that includes all beneficiaries dually eligible for Medicare and Medicaid. Brand-name drug manufacturers criticized the proposal as a “failed price control” that would harm Part D and lead to job losses.

The President also proposed auditing drug manufacturers’ regularly to make sure they are complying with their Medicaid drug rebate agreements and increasing civil monetary penalties on those that knowingly report false information for the calculation of Medicaid rebates. The same data are used to calculate ceiling prices for the 340B drug discount program.

The plan also would reduce the exclusivity period for biologic drugs from 12 years to seven and prohibit “pay for delay” drug patent settlements that keep generic versions of drugs off the market.

While the President’s plan does not address the 340B program directly, its provisions would touch many 340B stakeholders.

For example, the plan would slash health care providers’ Medicare reimbursement for bad debts resulting from beneficiaries’ non-payment of deductibles and co-payments. It also would reduce critical access hospitals’ (CAHs) payments for reasonable costs from 101 percent to 100 percent and remove the CAH designation for those located fewer than 10 miles from the nearest hospital. Is it unclear how many would be affected by this proposal because under present policy a CAH cannot be located more than a 35-mile drive from another hospital. In mountainous terrain or in areas with only secondary roads, the distance criterion is 15 miles.

States’ ability to tax providers as a way of increasing their federal Medicaid matching funds would be limited under the President’s plan and a single blended federal matching rate for Medicaid and CHIP would take effect in 2017. Higher-income Americans, meanwhile, would pay larger Medicare Part B and Part D premiums.

Pharmaceutical Research and Manufacturers of America (PhRMA) bashed the plan, saying it “opposes implementing Medicaid’s failed price controls in Medicare Part D.”

“Such policies,” it said, “would fundamentally alter the competitive nature of the program, undermine its success and potentially cost hundreds of thousands of American jobs.”

The American Hospital Association (AHA) criticized the President’s proposed cuts to Medicaid and Medicare, saying they would make it harder for America’s seniors to receive care and translate into at least 200,000 job losses to hospitals and the businesses they support.

All told, the President’s plan calls for $320 billion in health care savings over 10 years, $135 billion of which would come from the new Part D rebate on drugs for beneficiaries who qualify for the program’s low-income subsidy. All dual eligibles, enrollees in Medicare Savings Programs and recipients of Supplemental Security Income automatically qualify for the subsidy. Drug manufacturers paid Medicaid rebates on these drugs prior to Part D’s creation.

The Part D program currently relies on commercial plan sponsors to negotiate rebates with manufacturers. The Medicaid drug rebate, in contrast, is calculated and collected in accordance with federal law. The Department of Health and Human Services Office of Inspector General (OIG) reported last month[2] that state Medicaid agencies pay much less for brand-name drugs than Part D plan sponsors because the states’ statutorily defined rebates are “substantially higher” than those negotiated by Part D plans.

Legislation has been introduced to create the new rebates on Part D drugs for LIS recipients. The President’s own bipartisan deficit reduction commission called for the rebates in its report late last year.

Source URL: https://340bemployed.org/obama-seeks-rebates-on-medicare-part-d-drugs/

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