December 23 , 2009 – A federal judge recently ruled that the U.S. Department of Defense is entitled to retroactive rebates on prescriptions filled by pharmacies that participate in the TRICARE Retail Pharmacy Program, rebuffing a lawsuit filed by an industry group that contested the government’s right to such refunds.
This means drug manufacturers, some of whom had sought to delay payments while the lawsuit was pending, will now likely owe the government rebates for drugs sold after Jan. 28, 2008.December 23 , 2009 – A federal judge recently ruled that the U.S. Department of Defense is entitled to retroactive rebates on prescriptions filled by pharmacies that participate in the TRICARE Retail Pharmacy Program, rebuffing a lawsuit filed by an industry group that contested the government’s right to such refunds.
But the Nov. 30 ruling should have little impact on 340B pharmacies that participate in the TRICARE pharmacy network, just as they were never affected by the Defense Department rule that spawned the lawsuit.
TRICARE’s network of 60,000 retail pharmacies provides prescription drugs to more than 9 million uniformed service personnel, retirees, and military families.
340B pharmacies exempted from manufacturer rebates
The Defense Department issued regulations in March 2009, requiring manufacturers to sell all brand-name drugs dispensed by pharmacies in the TRICARE network at the federal ceiling price (FCP) – or, as an alternative, to pay the agency rebates, or “refunds” in agency lingo. Drug makers that wouldn’t offer their drugs at the deeply discounted FCP or pay the rebates would lose their “preferred status” spot on the TRICARE formula, an agency official warned last spring.
The regulations also caught the attention of 340B providers, who wondered whether they would now have to bill TRICARE at actual acquisition cost for drugs sold to patients in the network.
When billing Medicaid, covered entities often have to bill their 340B drugs at actual acquisition cost to compensate Medicaid for the loss of rebates that states are precluded from collecting to avoid a duplicate discount problem. Some 340B providers were concerned that they’d have to adjust their billing practices in a similar fashion when billing TRICARE to prevent manufacturers from giving FCP and 340B discounts on the same drugs.
But a Defense Department official said at the time that the new regulations did not affect 340B-covered pharmacies, and that those institutions should continue to bill TRICARE’s pharmacy benefits manager, Express Scripts, as they always had.
Judge: Rule invalid but rebates legal
The Coalition for Common Sense in Government Procurement sued over the TRICARE rules, arguing that the Defense Department had no right to issue a rule that would trigger a refund. The new mandate should only have been implemented after a public notice and comment rule-making process, the group said. U.S. District Judge John Bates agreed that the agency’s process was flawed, but said that federal law already required manufacturers to offer drugs to TRICARE pharmacies at FCP prices.
Retroactive rebates were therefore in order, he wrote.
Larry Allen, the coalition’s president, said his organization last week asked the court for permission to appeal Judge Bates’ ruling right away. The court ultimately did not resolve the question over rebates, he said.
“We also want to send a signal to TRICARE that this is an issue of huge interest to the companies,” Allen said. “We’re talking about millions of dollars in losses to each company.”