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Significant Recent Regulatory and Statutory Developments

October 10, 2019

New Stark
and Anti-Kickback Exceptions
: Just yesterday, the Department
of Health and Human Services issued proposed rules that have yet to be
published in the federal registry, that loosen the prohibitions in the Stark
Law and Anti-Kickback Statute to include new exceptions centered on value-based
arrangements.  The OIG drafted the proposed rule regarding the
Anti-Kickback Statute and CMS drafted the proposed rule regarding the Stark
Law.  Although there are many significant changes, one of those changes is
revising the definition of fair market value “to eliminate the connection to
the volume or value standard,” which should eliminate a lot of ambiguity in the
law. These changes are widely viewed as another push by the federal government
toward value-based payments.  To review the proposals, click here
and here.

: On October 3, 2019, President Donald Trump signed an executive
order directing the Health and Human Services Secretary to implement
wide-ranging changes to Medicare Advantage, an increasingly popular program
providing private Medicare plans for seniors.   The order aims to
provide more plan choices to seniors by encouraging innovative Medicare
Advantage benefit structures and plan designs, such as regulatory changes to
improve accessibility to Medicare Medical Savings Accounts.  The order
also calls for a payment model that adjusts supplemental Medicare Advantage
benefits to allow Medicare beneficiaries to share more directly in the savings
from the program, including cash and monetary rebates.   The order
emphasizes that Medicare FFS should not be advantaged or promoted over Medicare
Advantage with respect to its administration.  For a copy of the complete
executive order, click here.

HR 4387
Approved – This federal statute reduces drug prices under the Medicaid Drug
Rebate Program.  Some manufacturers make their own generic version of
their brand name drugs, known as “authorized generics.”  A manufacturer
can sell its authorized generic version to a secondary manufacturer for
distribution, but if that secondary manufacturer has a corporate relationship
with the brand-name drug company, the brand-name company may intentionally
charge a much lower “transfer” price than it would otherwise charge an unrelated company.
This would have the effect of reducing the Medicaid rebates the manufacturer
pays for its brand-name drug because the formula used to determine rebate
amounts is based on the Average Manufacturer Price (AMP), which incorporates
the price of authorized generics.  This bill eliminates authorized
generics from the calculation of rebates.  This is the second provision
related to the Medicaid Drug Rebate Program that was enacted this year.
In April 2019, Congress enacted H.R. 1839, which included a provision to deter
the problem of misclassification by drug manufacturers of their brand-name
drugs as generics to lower the rebates they must pay, since the minimum base
rebate for generic drugs is 13% of AMP compared to 23.1% for brand-name
drugs.  For the complete statute, click here.

We send these Alerts to our clients and friends to share our insights on new developments in the law. Nothing in this Alert should be relied upon as legal advice in any particular matter. © 2019 Riker Danzig Scherer Hyland & Perretti LLP.

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