The Centers for Medicare & Medicaid Services (CMS) announced on May 15, 2024 that it will not finalize, at this time, the proposed stacking provision set forth in the agency’s May 2023 Medicaid Drug Rebate Program (MDRP) proposed rule. The “stacking” issue impacts how manufacturers calculate Medicaid best price, which is a key input in determining the level of rebates manufacturers pay to Medicaid programs. In some cases, a manufacturer offers different discounts to different organizations in the supply chain on the same drug. In its proposal, CMS said that manufacturers are required to add up the discounts provided to different legal entities to determine the best price offered, contrary to the practice of some manufacturers who calculate best price as the lowest price offered to any individual purchaser.
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At a time when pharmaceutical drug prices are at the height of political scrutiny, manufacturers can breathe a small sigh of relief as CMS announced that it will not, at this time, finalize its best price stacking provision in its MDRP proposed rule. Medicaid “best price” was a legislated policy solution enacted more than 25 years ago to address high drug costs and make Medicaid drug spending more manageable for states. The MDRP requires manufacturers to pay rebates that ensure Medicaid programs get the lowest or “best price” and pay back any price increases higher than inflation.
Under the MDRP, “best price” (BP) is defined as “the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or government entity within the United States.” Current regulations require that manufacturers adjust BP “if cumulative discounts, rebates, or other arrangements subsequently adjust the prices available, to the extent that such cumulative discounts, rebates, or other arrangements are not excluded from the determination of best price by statute or regulation.”
At a minimum, participating manufacturers of most brand drugs pay a rebate of 23.1% of the average manufacturer price (AMP). If the BP calculation results in a discount greater than 23.1% of AMP, the net rebate would be the difference between AMP and BP. Any additional inflationary rebate would be added to the base rebate to arrive at the total rebate.
Currently, manufacturers report BP as the lowest price available to any BP-eligible entity rather than aggregated across multiple entities. In May 2023, CMS proposed, among other drug pricing reforms, that manufacturers be required to “stack all applicable discounts that they offer on a single sale of a covered outpatient drug, including discounts or rebates provided to more than one best price eligible entity.” This change would likely have resulted in significantly increased rebate liability for manufacturers.
However, now, the CMS press release states that the agency will not finalize the best price stacking proposal. Rather, the agency intends to proceed with additional information collection from manufacturers regarding best price stacking methodologies “to better understand and inform future rulemaking.”