Some Wins, Some Losses, and a Proposed Rule on Value-Based Payments for Prescription Drugs Banner Image

Healthcare Law Blog

Some Wins, Some Losses, and a Proposed Rule on Value-Based Payments for Prescription Drugs

June 25, 2020

For more information about this blog post, please contact Khaled J. KleleRyan M. MageeLabinot Alexander Berlajolli or Daniel J. Parziale.

Price Transparency Rule Upheld

In  November 2019, the Department of Health and Human Services (“HHS”) published a transparency rule in the Federal Register requiring hospitals to disclose pricing information.  The American Hospital Association and many other associations and hospital systems sued HHS arguing that HHS lacked statutory authority to require public disclosure of individually negotiated rates between commercial insurers and hospitals.  On June 23, the United States District Court for the District of Columbia granted HHS' motion for summary judgment upholding the rule.  The American Hospital Association has already stated it will appeal the decision.  The case is The American Hospital Association, et al., v. Alex M. Azar, II, Civil Action No. 1:19-cv-03619.

Court Strikes Down Wholesale Prices Rule

The U.S. Court of Appeals for the District of Columbia recently upheld a district court ruling that struck down the disclosure rule from HHS, which required drug manufacturers to put the wholesale prices of their drugs in TV ads.  In May 2019, HHS published the disclosure rule that broadly required drug manufacturers to disclose in their TV ads the wholesale acquisition cost of many prescription drugs and biological products for which payment is available under Medicare or Medicaid. HHS argued that patients deserved transparency and that forcing drugmakers to put prices in ads would incentivize them to create lower list prices. Several of the drug manufacturers challenged the rule in June 2019 arguing that it violated the APA because the rule exceeded HHS’ authority. They prevailed in district court and the Circuit Court affirmed, stating that HHS lacked the authority to establish the disclosure rule and that it acted unreasonably in doing so. The case is Merck & Co., Inc. et al v.  U.S. Department of HHS, et al. Case No 19-5222.

Proposed Federal Rule On Value-Based Payments for Prescription Drugs

On June 17, 2020, Centers for Medicare & Medicaid Services (CMS) released a proposed rule, 85 FR 37286, to remove barriers to the development of payment models based on value for innovative new therapies. Under current regulations, prescription drug manufacturers face obstacles when assessing payments under value-based arrangements with CMS.  These obstacles include requirements for payment based upon quantity of drugs sold instead of quality of drug product as well as efforts by payers to limit access to emerging treatments through management practices like prior authorization and step therapy.   Under the proposed rule, healthcare systems will pay on the basis of value instead of volume.   More specifically, the proposed rule proposes revisions to current regulations regarding: how manufacturers should calculate the average manufacturer price (AMP) of the brand name drug when there is also a sale of an authorized generic; whether manufacturers should include the value of their patient assistance programs in the calculation of “best price,” including when they are impacted by pharmacy benefit managers (PBM) accumulator programs; state and manufacturer reporting requirements to the Medicaid Drug Rebate Program (MDRP); the definitions of CMS-authorized supplemental rebate agreement; line extension, new formulation, oral solid dosage form, single source drug, multiple source drug, and innovator multiple source drug for purposes of the MDRP; payments for prescription drugs under the Medicaid program; and coordination of benefits (COB) and third party liability (TPL) rules related to the special treatment of certain types of care and payment in Medicaid and Children’s Health Insurance Program (CHIP).  Comments are due by July 20, 2020.

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