On Tuesday, May 17, 2022, the U.S. District Court for the District of Columbia issued a decision granting the Pharmaceutical Research and Manufacturers of America’s (PhRMA)’s motion for summary judgment and vacating the Centers for Medicare & Medicaid Services’ (CMS’s) final rule regarding accumulator adjustment programs (Final Rule). The Final Rule amended the Best Price (BP) and Average Manufacturer Price (AMP) exclusions for manufacturer financial assistance programs under the Medicaid Drug Rebate Program (MDRP), in particular as they relate to pharmacy benefit manager (PBM) “accumulator” programs, effective January 1, 2023. The court vacated the Final Rule on the grounds that it violates the text of the Medicaid rebate statute.
More on Decision
CMS issued the Final Rule in December 2020 to address so-called PBM “accumulator” programs and their potential interface with the MDRP. The Final Rule amended the BP and AMP regulatory exclusions for a manufacturer’s financial assistance program to require that the manufacturer “ensures” that program benefits are provided entirely to the patient as a condition of the respective exclusions applying. PhRMA filed a lawsuit challenging the Final Rule on the ground that it violates the Administrative Procedure Act because it conflicts with the text and purpose of the Medicaid rebate statute.
In its decision, the court holds that the Final Rule violates the text of the Medicaid rebate statute and is therefore invalid. The Medicaid rebate statute defines BP as the “lowest price available from the manufacturer . . . to any [BP-eligible entity],” which includes wholesalers, retailers, providers, health maintenance organizations, nonprofit entities, and governmental entities, but, notably, does not include patients. The court states that the question in this case “is whether a manufacturer’s financial assistance to a patient—at least in the context of an accumulator adjustment program—can count as the ‘lowest price available from the manufacturer . . . to any [BP-eligible entity]?’ The answer is no.”
The court held that manufacturer assistance is a price made available from a manufacturer to the patient, and not from the manufacturer to a BP-eligible entity. The court further rejected the government’s broad reading of the BP regulation and noted that the Final Rule would make it infeasible for manufacturers to comply with the Medicaid rebate statute. The court also rejected the government’s claim that PhRMA lacked standing to challenge the Final Rule. The court accordingly granted PhRMA’s motion for summary judgment and vacated and set aside the Final Rule. CMS will need to decide in the near term whether it will appeal this decision, and whether to seek to stay the decision pending resolution of an appeal.