On August 10, 2021, the U.S. Centers for Medicare & Medicaid Services (CMS) published a proposed rule to rescind the Medicare Most Favored Nation (MFN) Model regulation issued in the final days of the Trump Administration (Proposed Rule). The Biden Administration’s proposed withdrawal of the MFN Model regulation comes on the heels of its Executive Order on promoting competition and as Congress prepares to consider sweeping domestic spending legislation likely to include significant drug pricing provisions. Stakeholders may wish to comment on CMS’s proposed withdrawal of the MFN Model, as those comments and a final rule are both likely to impact consideration of alternative legislative and regulatory policy changes. Comments to the Proposed Rule are due by October 12, 2021.
As we reported here and here, the MFN Model regulation was published on November 27, 2020 as an interim final rule with comment period (IFC). As proposed, the MFN Model would have resulted in a significant change to Medicare Part B reimbursement for certain physician-administered drugs and biologicals for a seven-year model performance period beginning in 2021. The IFC would have phased in reductions in Medicare Part B reimbursement for the top 50 Medicare Part B drugs and biologicals to an amount based on the lowest price paid for the same drug within a group of 22 other nations. Those nations consisted of the member countries of the Organization for Economic Cooperation and Development with the highest gross domestic product per capita. MFN rates would have been subject to some additional adjustments and a flat add-on payment for drug administration.
Controversial from the moment it was released, the regulation was the subject of four legal challenges.1 On December 28, 2020, the U.S. District Court for the Northern District of California issued a preliminary injunction halting implementation of the IFC nationwide pending completion of the notice and comment process.2 In its order granting the motion for preliminary injunction, the court concluded that “[t]he plaintiffs have demonstrated that they are very likely — indeed virtually certain — to prevail on their claim that the government violated the [Administrative Procedure Act’s] notice and comment requirements” and that “the government’s argument that the good cause exception applies is flimsy . . . .”3 Sidley and co-counsel drafted the complaint and preliminary injunction briefing in the suit. The government did not appeal the preliminary injunction, which remains in place, and the MFN Model was not implemented.
The IFC reflects the most significant attempt to date in the United States to use international reference pricing to limit drug reimbursements. Despite its failed implementation to date and its proposed withdrawal now, the IFC will likely impact ongoing discussions about policy alternatives. Indeed, the Proposed Rule states that CMS intends to “further consider the issues identified by commenters [who submitted comments to the IFC].” Similarly, CMS promises to “continue to carefully consider the comments we received . . . as we explore all options to incorporate value into payments for Medicare Part B drugs and improve beneficiaries’ access to evidence-based care.” Additionally, the Proposed Rule states that the Department of Health and Human Services (HHS) is evaluating implementation of the prescription drug pricing provisions in the Executive Order on Promoting Competition in the American Economy, which we previously discussed here. Most recently, President Biden issued a Fact Sheet that calls on Congress to lower prescription drug prices, reiterating many of the same policy positions in the Executive Order.
Legislative proposals to implement international reference pricing for drugs remain under consideration by Congress. In April 2021, House Democrats reintroduced HR 3. That bill would both allow the HHS Secretary to negotiate prices directly with manufacturers of certain Medicare-covered drugs and establish an upper limit for negotiated prices tied to average prices in six specified countries. While some Senators support granting HHS authority to directly negotiate drug prices, it is unclear whether there is sufficient Senate support for international reference pricing. Because of this dynamic, Senate Finance Committee Chairman Ron Wyden, D-Ore., who is leading Senate Democrats’ development of a drug pricing policy for inclusion in the anticipated budget reconciliation bill, is reportedly considering a policy that would pair HHS direct negotiations with a domestic reference pricing mechanism.
Although a number of stakeholders have welcomed CMS’s proposed withdrawal of the MFN Model, CMS’s reversal may be followed by regulatory or legislative alternatives that present similar, or even more substantial, patient access, provider reimbursement, and other concerns. Accordingly, comments to the Proposed Rule are an important opportunity to address and attempt to shape consideration of other potential drug pricing policy changes.
1Association of Community Cancer Centers v. Azar, No. 8:20–cv–03531 (D. Md.); California Life Sciences Ass’n v. CMS, No. 3:20–cv–08603 (N.D. Cal.); Regeneron Pharmaceuticals v. HHS, No. 7:20–cv–10488 (S.D.N.Y.); andCommunity Oncology Alliance, Inc. v. HHS, No. 1:20–cv–03604 (D.D.C.).
2California Life Sciences Ass’n v. CMS, No. 3:20–cv–08603 (N.D. Cal.).
3Order Granting Motion for Preliminary Injunction at 2, California Life Sciences Ass’n v. CMS, No. 3:20–cv–08603 (N.D. Cal.).
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