CMS should rethink proposed changes to the Medicaid Drug Rebate Program

In comments submitted last week, PhRMA cautions CMS about sweeping policy changes to the Medicaid drug rebate program, many of which are not grounded in the Medicaid statute and would go beyond CMS’ legal authority. At a time when providers, pharmacies, wholesalers and manufacturers are busy preparing for major policy changes like the average manufacturer’s price cap removal, Part D redesign, and the IRA’s price setting provisions – which all impact Medicaid – these proposed changes would be extremely disruptive if finalized.

Among the concerns outlined in our comment letter, the following rise to the top:

• The proposed "stacking” policy, which would change the calculation of best price, is inconsistent with the statute and would be operationally unworkable. The policy would require manufacturers to add up all the rebates and discounts for a unit of a medicine provided to best price-eligible entities across the entire supply chain, like pharmacies, wholesalers or providers. This new ‘best price’ based on stacking all the rebates and discounts is not a price that is actually available to any entity in the supply chain today.
• The proposed change to the “covered outpatient drug” definition would make a significant change to the Medicaid drug rebate program. Congress carefully defined covered outpatient drug when creating the Medicaid drug rebate program. This change takes the “outpatient” meaning out of “covered outpatient drug” — essentially undoing a definition that is decades old and contradicting what Congress intended.
• The proposal for a burdensome “price verification survey” does not do anything to verify the accuracy of prices reported to CMS as the rule claims. The survey would instead target manufacturers of the most innovative therapies, including cell and gene therapies, that fill a critical need in the vulnerable populations that Medicaid serves. It seeks a broad array of data – much of which is proprietary – that has nothing to do with verifying manufacturer prices reported under Medicaid. This is CMS’s not-so-veiled attempt to extract additional rebates from manufacturers without authority to do so.

The Medicaid drug rebate program plays a vital role in ensuring the financial sustainability of Medicaid and providing access to needed medicines for millions of Americans. Manufacturers pay mandatory rebates in exchange for guaranteed coverage of their FDA-approved medicines. CMS’s proposed changes far exceed the agency’s authority and jeopardize the careful balance struck by Congress in the Medicaid drug rebate statute.

Read our full comments.