On November 20, 2020, the United States Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a final rule (scheduled to be published in the Federal Register on November 30th) that amends the Anti-Kickback Statute (AKS) discount safe harbor, removing protection for manufacturer rebates on prescription drugs for pharmacy benefit managers (PBMs), Part D plans, and Medicaid managed care organizations (MCOs). The final rule creates new safe harbors for two additional types of arrangements: certain prescription pharmaceutical point-of-sale discounts and flat fees paid by drug companies directly to PBMs for their services.
Main Provisions of the Final Rule
Eliminating PBM Rebates
One of the main provisions of the final rule removes safe harbor protection for manufacturer rebates on prescription drugs for Part D plans under the Anti-Kickback Statute, both directly and through a PBM. There is an exception if the reduction is required by law.
New Safe Harbors
As indicated above, the final rule also creates two new safe harbors to the Anti-Kickback Statute. The first is point-of-sale reductions, by which the rule creates a new safe harbor for discounts that are offered on Part D drugs or drugs covered by Medicaid MCOs at the point of sale. This means that while the consumer may receive a discount directly, the plan may not.
The second new safe harbor is for fixed fees that manufacturers may pay to PBMs in exchange for certain services provided. In this instance, services must be specified and must not involve the promotion of any business arrangement, including an inducement to use a certain product. Payments under this safe harbor must be entirely fixed and cannot be based on sales, volume, or other factors. Additionally, PBMs must disclose to each health plan with which it contracts what fees it has in place with manufacturers.
The final rule was released contemporaneously with a statement by HHS Secretary Alex Azar that it will not increase Medicare costs, premiums, or out-of-pocket costs. Azar writes that his “extensive experience in this field…supports my projection that there will not be an increase” in costs (to include federal spending, patient out-of-pocket costs, and Part D premiums) but did not point to any official analyses that could back up his assertion. Interestingly, the rule itself says that “there is wide variation in the analyses conducted that makes it difficult to project with certainty the impact of the policy change on federal spending.”
Reactions
By and large, drug manufacturers support the final rule. For its part, PhRMA released a statement indicating that this reform is one that our health care system needs, saying, “reforming our rebate system is one such approach that could help to strengthen and realign incentives in the system, as well as improve patient affordability.” While PhRMA noted that it is “still reviewing the finalized rebate rule… we are hopeful it will guarantee that seniors will finally see the savings at the pharmacy counter from discounts their health plans negotiate with biopharmaceutical companies.” On the other hand, PBMs, insurers, and certain advocacy organizations have argued it would eliminate their only negotiating power with pharmaceutical companies.
However, the Coalition for Affordable Prescription Drugs called on Congress and the incoming Biden administration to overturn the final rule, alleging it will lead to higher premium costs for older Americans.
What’s Next?
The changes included in the final rule to the current discount safe harbor will become effective on January 1, 2022, while the remainder of the final rule will be effective sixty days after it is published in the Federal Register.
Similar to the Most Favored Nation rule, this final rule, while announced on the last day for rules to be issued and implemented before the anticipated inauguration of Joe Biden, may face regulatory difficulties in actually being implemented. Especially since the rule is not set to be published in the Federal Register until November 30, 2020, after which provisions can take place only as early as 60 days after publication, which is after inauguration day.