All branches and levels of government within the United States are focused on drug pricing issues. U.S. Congressional leaders, for example, have proposed reforms that would allow Medicare to negotiate drug prices and constrain drug price increases. State lawmakers have considered ballot initiatives and legislation to cap the amounts drug manufactures can charge to public payers and require drug manufacturers to provide advance notice and justification of price increases. Federal and state agencies are increasingly bringing enforcement actions where the targeted activity directly or indirectly centers around drug pricing. Private plaintiffs are beginning to incorporate drug pricing decisions into new litigation theories. These developments are having a wide ranging impact on the pharmaceutical and biologic industries. Sidley’s U.S. Life Sciences team has long standing and deep experience with drug pricing issues that enables us to lead our clients through this rapidly changing environment.
Global Drug Pricing
CMS Issues MDRP Release 114 for Manufacturers
September 25, 2020
On September 25, 2020, CMS issued Medicaid Drug Rebate Program (MDRP) Release No. 114 for Participating Drug Manufacturers. The release addresses manufacturer obligations under the MDRP with respect to multi-market approved (MMA) products as defined in the final guidance titled “Importation of Certain FDA-Approved Human Prescription Drugs, Including Biological Products, and Combination Products under Section 801(d)(1)(B) of the Federal Food, Drug, and Cosmetic Act” released by the FDA on September 24, 2020.
CMS Issues MDRP Release 187 for State Medicaid Programs
September 25, 2020
On September 25, 2020, CMS issued Medicaid Drug Rebate Program (MDRP) Release No. 187 for State Medicaid Programs. The release addresses implications of FDA's final rule implementing section 804(b) through (h) of the Federal Food, Drug, and Cosmetic Act (FFDCA) to allow importation of certain “eligible prescription drugs” shipped from Canada into the United States to MDRP coverage and reimbursement.
Hospital Groups Petition for Rehearing on 340B Payment Reductions
September 22, 2020
On September 14, 2020, the American Hospital Association asked the full D.C. Circuit to reconsider a panel ruling that the U.S. Department of Health and Human Services lawfully made billions of dollars in reimbursement cuts for drugs purchased through a special discount program for hospitals in low-income areas.
President Trump Issues Executive Order On Lowering Drug Prices By Putting America First
September 14, 2020
On September 13, 2020, President Trump released an executive order instructing the Secretary of Health and Human Services to implement rulemaking to test payment models whereby Medicare would pay no more than the “most-favored nation price” for certain high-cost prescription drugs and biologic products covered by Medicare Parts B and D (“the Executive Order”). Under the Executive Order, “most-favored-nation price” is defined as “the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a member country of the Organisation for Economic Co-operation and Development (OECD) that has a comparable per-capita gross domestic product.”
OIG Releases Report: Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2018 Average Sales Prices
September 2, 2020
On August 12, 2020, OIG released Report OEI-03-20-00130, quantifying the savings to Medicare and its beneficiaries that are a direct result of CMS’s price substitution policy based on 2018 average sales prices and providing support for a previous OIG recommendation for achieving additional savings.
D.C. Circuit Reverses Lower Court Decision in re American Hospital Association v. Azar
August 17, 2020
On July 31, 2020, the D.C. Circuit reversed a lower court decision enjoining the Centers for Medicare and Medicaid Services (“CMS”) from cutting Medicare Part B drug payments to hospitals that purchase drugs under the 340B Drug Discount Program. The decision comes after two years of litigation initiated by hospitals following a CMS final rule issued in November 2017 that reduced most hospitals’ reimbursement for certain 340B-purchased drugs under the Medicare hospital outpatient prospective payment system (“OPPS”) from the drug’s average sales price (“ASP”) plus 6% to ASP minus 22.5% starting January 1, 2018. A federal district court ruled in December 2018 that CMS’s reimbursement reduction was unlawful but did not vacate the rule. Instead, the court enjoined CMS’s prospective implementation of the reduction pending expedited review of the decision.
Federal Court Invalidates CMS Rule to Require Disclosure of Drug List Prices in DTC Ads
July 22, 2019
On July 8, 2019, the United States District Court for the District of Columbia invalidated the final rule issued by the Centers for Medicare and Medicaid Services (CMS) that would have required pharmaceutical manufacturers to disclose the list price of certain drug products in direct-to-consumer (DTC) television advertisements beginning on July 9, 2019 (Final Rule). Had the Final Rule gone into effect, pharmaceutical manufacturers would have been required to disclose in their DTC television advertisements the advertised product’s list price, defined as the wholesale acquisition cost, if the product was a prescription drug or biological product priced at $35 or more for a typical 30-day supply or course of treatment and directly or indirectly payable by Medicare or Medicaid.
CMS to Mandate Disclosure of Drug Prices in Direct-to-Consumer Television Ads
May 9, 2019
On May 8, 2019, the Centers for Medicare and Medicaid Services (CMS) released a final rule to require direct-to-consumer television advertisements for prescription drug and biological products distributed in the United States and covered by Medicare or Medicaid to include the list price of the product if the price is $35 or more based on a one-month supply or the usual course of therapy. The final rule, which is scheduled to become effective on July 9, 2019, was finalized largely as proposed with only minor modifications and technical changes.
President Signs “Right Rebate” Act Penalizing Misclassification of Drugs
April 18, 2019
On April 18, 2019, the President signed into law H.R. 1839. Section 6 of H.R. 1839 is referred to as the “Right Rebate Act” (the “Act”) and imposes new penalties on drug manufacturers that knowingly misclassify a covered outpatient drug under the Medicaid Drug Rebate Program (“MDRP”).
CMS Issues Rules Aligning Regulatory Text on Line Extensions with Statute and Existing Guidance
April 1, 2019
On March 28, 2019, the Centers for Medicare and Medicaid Services (“CMS”) released an advance print copy of a final rule and interim final rule with comment period that addresses the definition and identification of line extension drugs and the rebate calculation for line extension drugs under the Medicaid Drug Rebate Program (“MDRP”). The final rule and interim final rule with comment period were published in the Federal Register on April 1, 2019. Comments on the interim final rule are due on May 31, 2019.
House Oversight Committee Announces Investigation of Pharmaceutical Company Drug-Pricing Methods
January 16, 2019
On January 14, the House Committee on Oversight and Reform (the “Committee”) announced its investigation into the price-setting methods of twelve major pharmaceutical companies. Considering the scope of the information requested from the companies, discussed below, this development represents an important step in what is expected to be a broad inquiry by the Committee into pharmaceutical drug pricing. A hearing—the first in a series on the issue—is scheduled for January 29. The witness list has not yet been released; however, the Committee noted in its press release that it would seek testimony from experts and patients affected by rising drug prices.
Grassley, Wyden Introduce Bill to Address “Misclassified” Drugs in the Medicaid Drug Rebate Program
December 7, 2018
On December 4, the incoming Senate Finance Committee Chair, Senator Chuck Grassley (R-Iowa), and the Committee’s Ranking Member, Senator Ron Wyden (D-Or.), introduced a bipartisan bill, titled the “Right Rebate Act of 2018,” which focuses on the lawmakers’ concerns about “misclassified” drugs under the Medicaid drug rebate program (MDRP).
The bill would give the Department of Health and Human Services (HHS) new authority to address situations where a manufacturer “misclassifies” a drug in the MDRP, “such as by knowingly submitting incorrect drug category information” when completing MDRP reporting. Specifically, the bill would allow HHS to “correct” the classification of a drug, to impose civil money penalties on pharmaceutical manufacturers that are determined to have knowingly misclassified a drug, and to recoup lost Medicaid rebates as a result of the “misclassification” of a drug by a manufacturer. The bill would also add a new provision that specifically lists knowingly misclassifying a covered outpatient drug as conduct that is subject to the HHS Office of Inspector General’s (OIG’s) permissive exclusion authority. This new authority, if enacted, would be an addition to HHS’s existing ability to terminate a manufacturer’s rebate agreement for noncompliance.
HRSA Finalizes Jan. 1, 2019 Effective Date 340B Ceiling Price and CMP Rule
November 29, 2018
On November 29, 2018, the Health Resources and Services Administration (HRSA) released an advance print copy of a final rule that changes the effective date of the 340B Ceiling Price and Civil Monetary Penalties Final Rule (“Final Rule”) to January 1, 2019. Previously, the Final Rule was scheduled to take effect July 1, 2019, after being released in January 2017 and being delayed 5 times.
The advance print copy of today’s effective date change final rule is available here.
HRSA Proposed Rule Would Make 340B Ceiling Price and CMP Rule Effective Jan. 1, 2019 Not July 1, 2019
November 9, 2018
On October 31, the Health Resources and Services Administration (HRSA) released an advance print copy of a proposed rule that would move up (to an earlier date) the effective date of the 340B Ceiling Price and Civil Monetary Penalties Final Rule (“Final Rule”). Specifically, the proposed rule, if finalized, would move the effective date to January 1, 2019, instead of the currently scheduled effective date of July 1, 2019. The Final Rule was released in January 2016, but the effective date has been delayed 5 times to date. The proposed rule was published in the Federal Register on November 2 and has a short, 21-day comment period. The proposal seeks comments specifically regarding the impact of ceasing any further delay of the final rule, as well as any potential disruptions to implementation.
Trump and HHS Announce New Drug Pricing Reforms
October 29, 2018
On October 25, 2018, President Trump announced new efforts to reduce prescription drug prices under Medicare. In particular, President Trump discussed two primary reforms:
- Permitting the Department of Health and Human Services (HHS) to allow Medicare to set the reimbursement amount for prescription drugs based on prices paid in other countries. President Trump referred to these as “favored nations clauses”.
- Reimbursing providers a flat rate for certain prescription drugs, regardless of the cost of the prescription drug, to encourage the use of lower cost prescription drugs.
Manufacturers Face Increased Congressional Scrutiny in the Government’s Ongoing Focus on Drug Pricing
October 26, 2018
Pressure from the Trump Administration and Congress on drug pricing issues continues to mount. Through requests for information, guidance statements, rulemaking activities, and legislative bills and enactments, among other activities, policy officials and lawmakers have expressed a clear focus on efforts to reduce prices for drugs and biologicals, to lower out-of-pocket costs for consumers, and to decrease spending on drugs by government programs. On both the regulatory and legislative fronts, a number of initiatives and proposals have highlighted transparency in various forms as a key mechanism to facilitate reform. (Please see our recent Sidley Update: HHS Secretary Azar Announces DTC Drug Price Transparency Proposal, Foreshadows Additional Regulatory Action to Address Drug Prices)
HHS Secretary Azar Announces DTC Drug Price Transparency Proposal, Foreshadows Additional Regulatory Action to Address Drug Prices
October 16, 2018
On October 15, 2018, Secretary of Health and Human Services (HHS) Alex Azar delivered remarks at a National Academy of Medicine event in which he provided an update on the Trump Administration’s implementation of the American Patients First Blueprint to reduce drug prices and out-of-pocket costs. Secretary Azar summarized a number of recent Administration policy changes, including proposed expanded reductions in Medicare reimbursement under the 340B drug discount program, allowing Medicare Advantage plans to incorporate step therapy for Part B drugs, and allowing Part D plans to begin implementing indication-based formulary designs, among others.
340B Drug Discount Updates: Contract Pharmacies and Congressional Activity
July 20, 2018
The past few weeks have seen significant activity regarding the 340B Drug Discount Program (the “340B Program”), suggesting that the government may be contemplating certain reforms. First, on June 28, the Government Accountability Office (GAO) released a report on the 340B Program titled “Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement.” The report (available here) found that Health Resources and Services Administration’s (HRSA’s) oversight of the 340B Program is insufficient, specifically noting deficiencies in HRSA’s ability to ensure compliance with the prohibition on duplicate discounts, to require that covered entities assess the full extent of noncompliance during an audit, and to require that covered entities provide evidence regarding corrective actions before closing an audit. The report states that “[g]iven these weaknesses, HRSA does not have a reasonable assurance that covered entities have adequately identified and addressed noncompliance with 340B Program requirements.”
CMS Approves Amendment to Oklahoma Medicaid State Plan to Authorize Value-Based Supplemental Rebate Agreements
July 2, 2018
On June 27, 2018, the Centers for Medicare and Medicaid Services (CMS) approved Oklahoma State Plan Amendment 18-0008 (OK SPA 18-0008), an amendment to Oklahoma’s Medicaid state plan that authorizes Oklahoma to negotiate value-based supplemental rebate agreements with drug manufacturers for the purchase of pharmaceuticals. Specifically, OK SPA 18-0008 permits Oklahoma to “enter into value-based contracts with manufacturers on a voluntary basis” when negotiating supplemental drug rebate agreements.
HHS Secretary Azar Details Drug Pricing Actions, Encourages Industry Feedback in New RFI
May 15, 2018
This week, Health and Human Services (HHS) Secretary Alex Azar provided a more detailed assessment of HHS’s approach to advancing the “American Patients First” blueprint (Blueprint) released on Friday, May 11. Secretary Azar’s speech preceded the release of a request for information (RFI) to be published in the Federal Register on May 16. The Blueprint and RFI (together, the Proposals) summarize the Administration’s actions to address drug pricing to date, outline near-term policy changes, and solicit stakeholder feedback on a range of proposals HHS is actively considering. The RFI comment period will remain open for 60 days.
Connecticut Poised to Pass Drug Price Transparency Law
May 11, 2018
On May 8, 2018, the Connecticut Senate passed House Bill 5384 (HB 5384), concerning prescription drug price transparency. HB 5384 awaits the Governor’s signature, which is expected to be duly provided. Thus, Connecticut appears poised to join the growing number of states with a prescription drug price transparency law.
Trump Administration Releases Blueprint to Lower Drug Prices
May 11, 2018
On May 11, the Trump Administration released the “American Patients First” proposal, a “Blueprint” containing a number of regulatory and legislative changes aimed at reducing prescription drug prices. President Trump and Health and Human Services (HHS) Secretary Alex Azar emphasized that all stakeholders would experience changes as a result of the Administration’s proposed immediate actions. Furthermore, the Blueprint solicits stakeholder feedback on a number of issues that could result in additional policy changes moving forward. Secretary Azar is expected to provide more detailed implementation guidance in the coming days through meetings with Members of Congress and a formal announcement at HHS headquarters next week.
Nevada Legislative Commission Announces Early Review of Drug Price Transparency Regulation, Likely Speeding Adoption
May 10, 2018
The Nevada Legislative Commission (Commission) recently announced that it will hold an “early review” meeting to consider regulations the Department of Health & Human Services (DHHS) has proposed to implement SB 539, the state’s price transparency law governing prescription drugs considered “essential” to the treatment of diabetes.
HRSA Again Proposes To Delay 340B Rule Effective Date
May 7, 2018
On Friday, May 4, 2018, the Health Resources and Services Administration (HRSA) once more proposed to delay the effective date of an Obama-era 340B final rule that set forth regulations for the calculation of 340B ceiling prices and the implementation of civil monetary penalties (CMPs) for manufacturers that knowingly and intentionally charge more than the 340B ceiling price for covered outpatient drugs purchased by 340B participating entities. The final rule, which was published in the Federal Register in January 2017, has already been delayed multiple times. Currently, the final rule is scheduled to take effect July 1, 2018. In the new proposed rule, HRSA proposes to delay the effective date until July 1, 2019, “to allow a more deliberate process of considering alternative and supplemental regulatory provisions and to allow for sufficient time for additional rulemaking.” HRSA further notes that HHS is “in the process of developing new comprehensive policies to address the rising costs of prescription drugs,” including policies affecting Medicare, Medicaid, and the 340B program. HRSA does not provide a time frame for these additional regulations and policies. The proposed rule provides a short, 15-day comment period for stakeholders to provide feedback on the proposal to delay the January 2017 final rule’s effective date for an additional year, to July 1, 2019. The proposed rule is available here.
Nevada Announces Public Hearing on Proposed SB 539 Diabetes Drug Pricing Regulations
May 1, 2018
Nevada’s Department of Health & Human Services (NV DHHS) recently announced a public hearing on regulations it is proposing for the implementation of SB 539, a drug price transparency law that requires manufacturers to report detailed information about drugs NV DHHS determines are essential to the treatment of diabetes.
HHS Secretary Announces New “Drug Czar”
March 29, 2018
On Thursday, March 29, 2018, U.S. Department of Health and Human Services Secretary Alex Azar announced that Daniel Best would be the new “drug czar.” His specific title is Senior Advisor to the Secretary for Drug Pricing Reform and he is tasked with leading the initiative to lower the high price of prescription drugs. Best previously worked at CVS Caremark as corporate vice president of industry relations for the company’s Medicare Part D business. Prior to his work at CVS Caremark and affiliated companies, he worked at Pfizer for twelve years as Director of Business Development. Secretary Azar touted Best’s experience in the industry, stating “[h]e has the deep experience necessary to design and enact reforms to lower the price of medicines that help Americans live healthier and longer lives.” For more information on the U.S. Department of Health and Human Services website, please click here.
U.S. Senator Releases Report on Prescription Drug Prices Increases
March 26, 2018
On March 26, 2018, at the request of ranking member U.S. Senator Claire McCaskill, the minority staff of the Committee on Homeland Security and Governmental Affairs released a report examining the history of drug prices for the brand-name drugs most commonly prescribed for seniors. The report found that the prices for each of the top 20 most-prescribed brand-name drugs in the Medicare Part D program increased over the last five years. Specifically, the report found that, on average, the prices for these drugs increased 12% every year for the last five years; twelve of these drugs had increased their prices over 50% in the five-year period; and six of these drugs had prices increase over 100%. The report does not examine the benefits and value these drugs offer seniors or the research and development cost needed to find the next generation of breakthrough drugs. To view the report, please click here.
For more information on U.S. drug pricing updates and state transparency laws, please contact Kate Rockwell at firstname.lastname@example.org.