[Senate Report 116-120]
[From the U.S. Government Publishing Office]
Calendar No. 225
116th Congress } { Report
SENATE
1st Session } { 116-120
======================================================================
THE PRESCRIPTION DRUG PRICING REDUCTION ACT OF 2019
_______
September 25, 2019.--Ordered to be printed
_______
Mr. Grassley, from the Committee on Finance,
submitted the following
R E P O R T
[To accompany 2543]
The Committee on Finance having considered an original bill
(S. 2543) to amend titles XI, XVIII, and XIX of the Social
Security Act to lower prescription drug prices in the Medicare
and Medicaid programs, to improve transparency related to
pharmaceutical prices and transactions, to lower patients' out-
of-pocket costs, and to ensure accountability to taxpayers, and
for other purposes, having considered the same, reports
favorably thereon without amendment and recommends that the
bill do pass.
CONTENTS
I. LEGISLATIVE BACKGROUND............................................1
II. EXPLANATION OF THE BILL...........................................6
III.BUDGET EFFECTS OF THE BILL.......................................49
IV. VOTES OF THE COMMITTEE...........................................49
V. REGULATORY IMPACT AND OTHER MATTERS..............................50
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............50
I. LEGISLATIVE BACKGROUND
The Committee on Finance, having considered S. 2543, as
modified, a bill that would amend titles XI, XVIII, and XIX of
the Social Security Act to lower prescription drug prices and
strengthen safeguards related to prescription drugs, and for
other purposes, reports favorably thereon that the bill as
modified by the Committee do pass.
Background on Medicare and Medicaid prescription drug coverage
Medicare is a federal program that provides health
insurance coverage for individuals aged 65 and older, certain
individuals under the age of 65 who have disabilities, and
those with end-stage renal disease (ESRD). Medicare also pays
for certain services for individuals dually eligible for both
Medicare and Medicaid. Medicare consists of four parts: Part A
covers inpatient hospital and other facility-based services;
Part B covers physician visits and other outpatient-based care,
including physician-administered prescription drugs; Part C, or
Medicare Advantage, covers the same Part A and Part B services
(and some supplemental services) through private insurance
companies; and Part D covers prescription drugs through private
prescription drug plan sponsors. Medicare pays for health care
services and items that are ``reasonable and necessary.''
Medicare pays for medically necessary prescription drugs
(and biologicals and biosimilar products) that are prescribed
and administered by a physician to a beneficiary in an
outpatient setting through Medicare Part B. These physician-
administered drugs are paid based on an average sales price
(ASP) methodology. Drug manufacturers are required by the
Medicaid Drug Rebate Program (MDRP) to report the average price
(minus rebates, discounts, and other price concessions) at
which they sold their drugs to physicians, hospitals, and
wholesalers. Medicare also provides an ``add-on'' payment,
equal to six percent of the ASP for a drug. This ASP plus six
percent amount is paid to the physician or hospital
administering the drug to cover both the cost of the drug
purchase and associated expenses. An across-the-board Medicare
payment reduction of two percent established through the Budget
Control Act of 2011 effectively reduced the payment to ASP plus
4.3 percent. In 2017, Medicare spent approximately $32 billion
on physician-administered drugs under Part B.
Medicare provides a voluntary prescription drug benefit,
known as the Part D program, in which beneficiaries can enroll
to receive covered, medically necessary outpatient drugs
prescribed by a physician or other qualified clinician. The
Part D program uses private insurers offering prescription drug
plans (PDPs) to provide prescription drug benefits to Medicare
beneficiaries. Insurers compete for enrollees based on
premiums, benefit structure, covered drugs, drug cost sharing,
pharmacy networks, and quality of services. Over 3,000
individual plans across 34 geographic areas were available in
2019. Insurers bear risk for enrollees' drug spending and, in
general, the federal government subsidizes about 75 percent of
total premium costs, with a higher subsidy for the nearly 13
million individuals who receive a Low-Income Subsidy (LIS).
Insurers manage costs, typically through contracts with
pharmacy benefit managers (PBMs), by using formularies to
negotiate the amount paid for drugs with drug manufacturers and
developing networks of preferred pharmacies to dispense drugs.
In 2018, 43.9 million beneficiaries were enrolled in a Part D
plan. In 2016, Medicare spent $146 billion on Part D drugs.
Medicaid is a joint federal-state program that finances the
delivery of primary and acute medical services, as well as
long-term services and supports, for a diverse low-income
population. Each state has a Medicaid state plan that describes
how the state will administer its program. The benefits covered
under Medicaid include both mandatory and optional services.
Mandatory services include inpatient hospital services,
outpatient hospital services, and a range of services for
infants and children under the early and periodic screening,
diagnostic, and treatment services benefit. Optional services
include certain non-mandatory categories of services, which may
include certain types of residential treatment, therapy, and
counseling services as well as other services such as
prescription drugs.
Every state Medicaid program offers a prescription drug
benefit. In 2017, net prescription drug spending totaled
approximately $30 billion after rebates. Section 1927 of the
Social Security Act (SSA) outlines the mandatory rebates that
manufacturers must provide as part of their rebate agreement
under the MDRP for coverage of a covered outpatient drugs (COD)
by a state Medicaid program to ensure Medicaid receives the
best price for such drugs from the manufacturer offered across
markets, with some exceptions. When a manufacturer participates
in Medicaid, states must make the manufacturer's drugs, with a
few limited exceptions, available to Medicaid beneficiaries.
The statutory rebates under the rebate agreement consist of a
basic rebate of the greater of 23.1 percent of average
manufacturer price (AMP) and AMP minus best price for single
source and innovator multiple source drugs, the greater of 17.1
percent of AMP and AMP minus best price for such drugs with
certain clotting factors and drugs approved for exclusively
pediatric indications, and 13 percent of AMP for non-innovator
multiple source drugs (generics). There is also an inflationary
rebate for all drugs in statute. States may also negotiate
supplemental rebates under supplemental rebate agreements.
States and the federal government have a role in ensuring the
integrity of the program and must take steps to ensure
appropriate beneficiary access to medically necessary covered
drugs.
Background on rising prescription drug prices
Prices for prescription drugs continue to rise, imposing
significant hardship on millions of Americans and straining
federal health care programs. Rising costs are due to new,
expensive drugs but also in large part to price inflation for
older drugs that have long been on the market. For example, the
price of insulin doubled between 2012 and 2016,\1\ and some
manufacturers have recently increased their insulin prices more
than 500 percent.\2\ Prices for drugs with no competition from
other products nearly doubled from 2007 to 2017,\3\ and prices
for cancer drugs rose over five times faster than inflation
from 2012 to 2017.
---------------------------------------------------------------------------
\1\Spending on Individuals with Type 1 Diabetes and the Role of
Rapidly Increasing Insulin Prices, Jean Fugleston Biniek and William
Johnson, Health Care Cost Institute, January 21, 2019, available at
https://www.healthcostinstitute.org/research/publications/entry/
spending-on-individuals-with-type-1-diabetes-and-the-role-of-rapidly-
increasing-insulin-prices.
\2\Grassley, Wyden Launch Bipartisan Investigation into Insulin
Prices, Senate Finance Committee, February 22, 2019, available at
https://www.finance.senate.gov/chairmans-news/grassley-wyden-launch-
bipartisan-investigation-into-insulin-prices.
\3\Report to the Congress: Medicare and the Health Care Delivery
System, Medicare Payment Advisory Commission, March 2019.
---------------------------------------------------------------------------
Prescription drug prices have risen faster than wages and
Social Security checks, and medications continue to take a
larger cut of Americans' income. The impact of patients'
struggles to afford medicines can severely harm their health.
The rising cost of insulin has led Americans with diabetes to
dangerously ration their supply,\4\ which can lead to serious
and sometimes fatal medical complications.
---------------------------------------------------------------------------
\4\One-quarter of people with diabetes in the U.S. are rationing
their insulin, Ed Silverman, Stat News, June 18, 2019, available at
https://www.statnews.com/pharmalot/2019/06/18/one-quarter-of-people-
with-diabetes-in-the-u-s-are-rationing-their-insulin/.
---------------------------------------------------------------------------
The Medicare Part D program as structured has been
successful in expanding beneficiary access to prescription drug
coverage and enabling patients to get needed medications. Part
D spending has been lower than projected since the benefit was
implemented in 2006. Nearly 90 percent of Part D drugs
dispensed are generic.\5\ The average Part D premium has stayed
stable over a number of years.\6\ Enrollees have a wide choice
of plans options.\7\ More than 80 percent of enrollees have a
high-level of satisfaction.\8\
---------------------------------------------------------------------------
\5\``Report to the Congress: Medicare and the Health Care Delivery
System,'' Medicare Payment Advisory Commission, March 2019, available
at http://medpac.gov/docs/default-source/reports/
mar19_medpac_entirereport_sec.pdf?sfvrsn=0.
\6\Id.
\7\Id.
\8\Id.
---------------------------------------------------------------------------
Despite these successes, Medicare Part D faces a number of
challenges for beneficiaries and taxpayers that provide
opportunity for improvement. Many Part D beneficiaries are
spending thousands of dollars out-of-pocket for their
prescriptions. Unlike the private market, Part D does not have
an out-of-pocket cap that limits how much a patient spends on
their prescriptions annually. Seniors with autoimmune diseases
and certain types of cancer can spend over $5,000 a year for a
single drug, and some could spend more than $12,000.\9\ These
costs can multiply if seniors have multiple prescriptions, and
half of seniors take four or more prescription drugs.\10\
---------------------------------------------------------------------------
\9\How Many Medicare Part D Enrollees Had High Out-of-Pocket Drug
Costs in 2017, Juliette Cubanski, Tricia Neuman, and Anthony Damico,
Kaiser Family Foundation, June 21, 2019, available at https://
www.kff.org/medicare/issue-brief/how-many-medicare-part-d-enrollees-
had-high-out-of-pocket-drug-costs-in-2017/.
\10\KFF Health Tracking Poll--February 2019: Prescription Drugs,
Ashley Kirzinger, Lunna Lopes, Bryan Wu, and Mollyann Brodie, Kaiser
Family Foundation, March 1, 2019, available at https://www.kff.org/
health-costs/poll-finding/kff-health-tracking-poll-february-2019-
prescription-drugs/.
---------------------------------------------------------------------------
Escalating costs from new, expensive therapies and cost
increases for existing medications are also placing pressure on
federal health care programs. Medicare and Medicaid together
accounted for 40 percent of retail prescription drug spending
in the United States in 2017.\11\ Medicare Part D spending,
though less costly in the early years than initially expected,
has doubled over the last decade largely in the federal
reinsurance portion of the benefit, and is projected to
increase faster than any other category of health spending over
this time period.\12\ Medicaid has also seen prescription drug
spending rise precipitously with the introduction of new
specialty drugs. For example, when the hepatitis C drug Sovaldi
was first introduced in 2014 at the price of $84,000 per course
of treatment, Medicaid prescription drug spending increased by
nearly 25 percent.\13\ The cost of Sovaldi put strain on
limited state budgets, with some states initially restricting
coverage for the curative drug.
---------------------------------------------------------------------------
\11\10 Essential Facts About Medicare and Prescription Drug
Spending, Kaiser Family Foundation, January 29, 2019, available at
https://www.kff.org/infographic/10-essential-facts-about-medicare-and-
prescription-drug-spending/.
\12\2019 Annual Report of the Boards of Trustees of the Federal
Hospital Insurance and Federal Supplementary Medical Insurance Trust
Funds, The Boards of Trustees, Federal Hospital Insurance and Federal
Supplementary Medical Insurance Trust Funds, April 22, 2019, available
at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
Trends-and-Reports/ReportsTrustFunds/Downloads/TR2019.pdf.
\13\High-Cost Hepatitis C Drugs in Medicaid, Medicaid and CHIP
Payment and Access Commission, March 2017, available at https://
www.macpac.gov/publication/high-cost-hcv-drugs-in-medicaid/.
---------------------------------------------------------------------------
Moreover, the prescription drug supply chain, which is a
complex network of financial relationships, lacks transparency
in drug prices. Middlemen like pharmacy benefit managers, or
PBMs, negotiate discounts on behalf of payers, like the federal
government, states, and health plans, as well as on behalf of
patients, but PBM discounts are not always passed on to payers
or patients at the pharmacy counter. In Medicare, seniors'
cost-sharing is based on the list price, not the PBM's
negotiated price that includes discounts. Several state
Medicaid programs found some PBMs mark up the price of drugs
paid by Medicaid--costing one state more than $200 million a
year.\14\
---------------------------------------------------------------------------
\14\Ohio ends pharmacy middlemen contracts over `spread pricing,'
The Enquirer, August 14, 2018, available at https://www.cincinnati.com/
story/news/2018/08/14/ohio-ends-pharmacy-middlemen-contracts-over-
spread-pricing/993354002/.
---------------------------------------------------------------------------
Over the past four years, the Senate Finance Committee has
worked to bring more transparency to prescription drug pricing
and hold drug companies and the supply chain accountable for
pricing practices. In 2015, Senate Finance Chairman Chuck
Grassley (then senior committee member) and Ranking Member Ron
Wyden conducted an 18-month investigation into the pricing of
Sovaldi and Harvoni, Gilead's breakthrough hepatitis C drugs.
They found Gilead set a high list price for the drug treatments
to maximize revenue and profit, while Gilead's internal
analysis showed a lower price would allow more patients to be
treated. In January 2019, Chairman Grassley and Ranking Member
Ron Wyden launched an investigation into how insulin
manufactures determine pricing for their insulin products and
pharmacy benefit managers to determine whether they have
functioned as designed and have resulted in lower drug costs
for patients. The probe is seeking information on recent price
increases of up to 500 percent or more that have led patients
to dangerously ration their insulin or buy from overseas.
In 2019, the Senate Finance Committee held three hearings
on drug pricing, bringing executives from drug companies and
PBMs to testify before Congress. On January 29, 2019, Finance
Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron
Wyden (D-OR) convened a hearing to examine existing
prescription drug pricing issues in Medicare and Medicaid. On
February 26, 2019, the Chairman and Ranking Member convened a
hearing to specifically discuss the role of manufacturers in
prescription drug pricing. On April 9, 2019, the Chairman and
Ranking Member convened the third hearing in this series to
discuss how PBMs and insurers influence prescription drug
pricing.
On July 23, 2019, Chairman Grassley released a Chairman's
Mark that contained bipartisan Finance Committee member
policies. These policies, plus additional policies and edits
contained in the July 25, 2019, Modification to the Chairman's
Mark comprise the reported bill that is described below.
II. EXPLANATION OF THE BILL
TITLE I--MEDICARE
SUBTITLE A--PART B
SECTION 101. IMPROVING MANUFACTURERS' REPORTING OF AVERAGE SALES PRICES
TO SET ACCURATE PAYMENT RATES
Current Law
Prescription drug, biological, and biosimilar manufacturers
that participate in the MDRP are required under Medicaid
statute to report to the Secretary of Health and Human Services
(HHS Secretary), through the Centers for Medicare and Medicaid
Services (CMS), certain calendar quarter drug pricing
information such as the ASP, the number of units sold, and for
some drugs, the wholesale acquisition cost (WAC) or list price.
ASP is defined as a manufacturer's quarterly sales of a drug to
all U.S. purchasers divided by the drug's total units sold for
the same quarter.
Medicare pays providers for most Part B drugs, biologicals,
and biosimilars based on the ASP. In general, in setting
Medicare Part B drug payment rates, CMS aggregates drug
manufacturer ASP data by Medicare billing codes, so that ASP is
the weighted average of the manufacturer ASPs for each product
classified under a Medicare billing code. Generally, there is
one billing code for single-source products, and there can be
many generic drugs that are equivalent products grouped under a
single billing code with their reference brand drug.
Provision
This provision would require prescription drug, biological,
and biosimilar manufacturers that do not have a Medicaid drug
rebate agreement to report ASP information to the HHS Secretary
that would be used to help establish Medicare payment rates.
These manufacturers would be required to report quarterly ASP
information beginning with the first calendar quarter after the
date of enactment.
SECTION 102. INCLUSION OF VALUE OF COUPONS IN DETERMINATION OF AVERAGE
SALES PRICE FOR DRUGS, BIOLOGICALS, AND BIOSIMILARS UNDER MEDICARE PART
B
Current Law
Prescription drug, biological, and biosimilar manufacturers
often provide drug coupons for specific drugs to help privately
insured patients reduce their cost-sharing obligations,
including deductibles, copayments, and coinsurance.
Manufacturers provide drug coupons for brand-name products as
well as generic and biosimilar drugs. Manufacturers use coupons
to help patients access needed medications but also to
encourage patients to continue to use to their products, which
can help generate more sales. Coupons are primarily provided to
individuals with private insurance, as the anti-kickback
statute prevents manufacturers from offering coupons for the
purchase of drugs paid for by federal health care programs,
including Medicare. Under Medicare statute, manufacturers are
directed to calculate ASP for individual prescription drugs,
biologicals, and biosimilars based on the price they sell to
purchasers net of most price concessions, including volume,
prompt-pay, and cash discounts and rebates, except Medicaid
rebates. In calculating ASP, manufacturers are not required to
include sales net of price concessions provided directly to
patients, such as through drug coupons. When the value of
patient coupons is high, ASP tends to overstate the amount drug
manufacturers are receiving for their product, effectively
resulting in higher Medicare Part B payments.
Provision
This provision would require prescription drug, biological,
and biosimilar manufacturers to exclude the value of coupons
provided to privately insured individuals from each drug's ASP,
as reported to the HHS Secretary. This provision would apply to
manufacturers' product sales for calendar quarters beginning on
July 1, 2021. This provision would define coupons to mean
financial support provided by a manufacturer directly to a
patient or indirectly to a patient through a physician,
prescriber, pharmacy, or other provider that is specific to the
manufacturer's drug and used to reduce or eliminate cost-
sharing or other out-of-pocket costs, including costs related
to a deductible, coinsurance, or copayment. Manufacturers would
not have to exclude contributions to patient assistance
programs or foundations, which are generally provided to
patients based on need and not specific to the contributing
manufacturer's drug.
SECTION 103. REDUCED WAC-BASED PAYMENTS FOR NEW DRUGS, BIOLOGICALS, AND
BIOSIMILARS
Current Law
Medicare pays providers for most Medicare Part B drugs,
biologicals, and biosimilars at 100 percent of each product's
ASP plus a 6 percent add-on payment. In certain situations,
however, Medicare may use different benchmark prices to pay
providers for drugs, biologicals, and biosimilars, such as a
drug's WAC, and also may use a different add-on payment.
Medicare statute directs manufacturers to calculate ASP for
individual prescription drugs, biologicals, and biosimilars net
of most price concessions, including volume, prompt-pay, and
cash discounts and rebates, except Medicaid rebates. WAC is a
published price that is not adjusted for discounts; as a
result, WAC is usually a higher price than ASP.
Medicare uses WAC to set the Part B drug benchmark price in
several situations. WAC is used to set the payment when the ASP
is unavailable during a product's first two quarters on the
market as manufacturers have not yet recorded sales that can be
used to determine the average price. In these situations, by
statute, the HHS Secretary may use either a WAC-based payment
methodology or a payment methodology in effect on November 1,
2003 when the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (P.L. 108-173) was enacted. Even
though the statute does not specify the add-on payment amount
when using the WAC methodology (or a payment methodology in
effect on November 1, 2003), Medicare had used a 6 percent add-
on when basing payments on WAC; CMS reduced the WAC-based add-
on to 3 percent starting on January 1, 2019 through rulemaking.
When ASP becomes available, the statute requires the HHS
Secretary to pay Medicare Part B drugs and biologicals at ASP
plus a 6 percent add-on payment.
Provision
This provision would establish a WAC add-on payment of no
greater than plus 3 percent when ASP is unavailable for new
drugs, biologicals, and biosimilars furnished on or after
January 1, 2020. This provision would comport with current
Medicare payment rules that pay WAC plus 3 percent, an amount
that CMS established using administrative authority.
SECTION 104. PAYMENT FOR BIOSIMILAR BIOLOGICAL PRODUCTS DURING INITIAL
PERIOD
Current Law
Biological products are drugs derived from living organisms
or that contain components of living organisms, whereas
conventional drugs are manufactured from chemicals. In contrast
to generic drugs, which are exact copies of brand-name chemical
drugs, biosimilar biological products are similar, but not
identical to brand-name biologicals (reference products).
Medicare pays providers for most Part B drugs, biologicals,
and biosimilars at the rate of the product's ASP plus a 6
percent add-on payment. To encourage development of lower
priced biosimilars, under Medicare statute the payment rate for
biosimilars is the ASP of the biosimilar plus an add-on payment
equal to 6 percent of the reference biological product's ASP.
Medicare statute does not specifically address the payment
rate for biosimilars during the initial product introduction
period when ASP information may be unavailable, but current
Medicare payment rules establish that biosimilars are paid at
their WAC plus 3 percent during the roughly two-quarter initial
period.
Provision
This provision would establish a payment rate for
biosimilars furnished on or after July 1, 2020 for the roughly
two-quarter initial period that would be the lesser of: (1) the
biosimilar's WAC plus 3 percent; or (2) ASP plus 6 percent of
the reference biological product.
SECTION 105. TEMPORARY INCREASE IN MEDICARE PART B PAYMENT FOR
BIOSIMILAR BIOLOGICAL PRODUCTS
Current Law
In contrast to generic drugs, which are exact copies of
brand-name chemical drugs, biosimilar biological products are
similar, but not identical to brand-name biologicals (reference
products). Medicare pays providers for most Part B drugs,
biologicals, and biosimilars at the rate of the product's ASP
plus a 6 percent add-on payment. To encourage prescribing of
lower priced biosimilar biological products, Medicare pays
physicians for biosimilar biologicals the ASP of the biosimilar
product plus an add-on payment equal to 6 percent of the
reference biological product's ASP.
Provision
This provision would increase the add-on payment for a
biosimilar biological product from 6 percent of the reference
product ASP to 8 percent of the reference product ASP for a
period of five years. The temporary add-on payment increase
would apply to a biosimilar: (1) paid by Medicare as of
December 31, 2019, for a five-year period beginning January 1,
2020; and (2) paid on or after January 1, 2020, for a five-year
period that would begin on the first day of the first calendar
quarter in which the product was paid under Medicare Part B.
This payment would not exceed the total payment amount for the
reference biological.
SECTION 106. IMPROVEMENTS TO MEDICARE SITE-OF-SERVICE TRANSPARENCY
Current Law
Medicare payments are generally determined by the type of
service and the site where it is delivered. Differences across
Medicare's payment systems have created instances where
Medicare payment rates for similar or identical services differ
depending on the site. This includes Medicare payments across
hospital outpatient departments (HOPDs), ambulatory surgical
centers (ASCs), and physician offices. Generally, beneficiaries
are responsible for a 20 percent coinsurance payment for Part B
services. Therefore, different Medicare payment rates across
sites of service result in different cost-sharing amounts for
similar or identical services depending on the site.
To facilitate price transparency, the 21st Century Cures
Act of 2015 (Public Law 114-255) required, beginning in 2018
and for each year thereafter, the HHS Secretary to make
available on a public website the Medicare estimated payment to
HOPDs under the outpatient prospective payment system (OPPS)
and ASCs under the ASC payment system as well as the estimated
beneficiary cost-sharing liability in each setting.
Provision
This provision would modify the transparency tool
established under the 21st Century Cures Act of 2015 to require
comparable information for services that can also be furnished
in a physician office. Specifically, the HHS Secretary would be
required to add the estimated payment to a physician under the
Medicare physician fee schedule (PFS) and the associated
estimated beneficiary cost-sharing liability, beginning in
2021, to allow beneficiaries to compare across the three
settings.
SECTION 107. MEDICARE PART B REBATE BY MANUFACTURERS FOR DRUGS OR
BIOLOGICALS WITH PRICES INCREASING FASTER THAN INFLATION
Current Law
No provision in current law.
Provision
This provision would require prescription drug and
biological manufacturers to pay a rebate to Medicare for the
amount that the price of their Medicare Part B drugs or
biologicals increased above the inflation rate, as measured by
the Consumer Price Index for All Urban Consumers (CPI-U).
This provision would define a ``rebatable'' drug as a
brand-name prescription drug or biological that is separately
payable under Part B, including when furnished in a physician
office, HOPD, or ASC setting. This definition of rebatable drug
would not include biosimilars or vaccines paid under Part B.
Beginning on or after January 1, 2021, the HHS Secretary
would be required within six months of the end of each calendar
quarter to provide prescription drug and biological
manufacturers with: the total number of billing units for each
rebatable drug for the quarter; the amount, if any, of the
excess ASP increase for the quarter; and the rebate amount for
the rebatable drug. The total number of billing units would
exclude: (1) units paid under the ESRD prospective payment
system (ESRD PPS); and (2) units for which a manufacturer
provides a discount under Section 340B of the Public Health
Service Act (PHSA) or a rebate under the MDRP.
Manufacturers would be required to pay the HHS Secretary
the quarterly rebate within 30 days of receiving such
information from the Secretary. Manufacturer rebates would be
deposited in the Medicare Supplementary Medical Insurance Trust
Fund. The HHS Secretary would be authorized to reduce or waive
the rebate requirements for rebatable drugs if those products
are on the Food and Drug Administration (FDA) drug shortage
list. The HHS Secretary would be required to establish
procedures for a manufacturer to request reconsideration of the
calendar quarter rebate amount.
The HHS Secretary would use the ASP payment amount for a
rebatable drug in effect for the calendar quarter beginning
July 1, 2019 (the ASP ``payment amount benchmark'') and apply
the CPI-U percentage change in each subsequent quarter to
adjust the benchmark payment amount and calculate the ASP
``inflation-adjusted payment amount''. A manufacturer would owe
a rebate in each quarter that the ASP payment amount exceeded
the inflation-adjusted ASP payment amount.
For new drugs, the Secretary would establish the payment
amount benchmark as the date that the drug is first marketed by
the manufacturer, with that payment amount benchmark being
adjusted by the CPI-U percentage change in each subsequent
quarter to arrive at the inflation-adjusted payment amount. The
initial WAC-based payment amount benchmark would be compared to
an inflation-adjusted WAC amount until an ASP-based payment
amount is established. That ASP payment amount benchmark would
then be compared to an inflation-adjusted ASP in each
subsequent calendar quarter.
The HHS Secretary would impose a civil monetary penalty
(CMP) on a manufacturer that fails to pay a required rebate
that is equal to 125 percent of the required, unpaid rebate
amount. The HHS Secretary would ensure that no payment under
Medicare Part B is available for a drug for which the
manufacturer has failed to pay a CMP imposed by the Secretary
for non-payment of a rebate. In addition, non-compliant
manufacturers could be subject to other penalties and
assessments applicable under Title XI of the SSA.
This provision would amend the definition of Medicare ASP
to exclude Medicare Part B rebatable drug rebates from the
calculation of ASP.
SECTION 108. REQUIRING MANUFACTURERS OF CERTAIN SINGLE-DOSE DRUGS
PAYABLE UNDER PART B OF THE MEDICARE PROGRAM TO PROVIDE REFUNDS WITH
RESPECT TO DISCARDED AMOUNTS OF SUCH DRUGS
Current Law
Medicare pays for most prescription drugs, biologicals, and
biosimilars covered under Medicare Part B based on a product's
ASP plus a 6 percent add-on payment. Many Medicare Part B
drugs, biologicals, and biosimilars are packaged in single-dose
containers as identified from information included in the FDA
approval, such as the label or package insert. Generally,
Medicare pays providers for the total amount of product
indicated on the single-dose package including the number of
units of any unused product as well as the number of units
administered to the patient.
To help identify and track the amount of unused Medicare
Part B prescription drugs, biologicals, and biosimilars, on
January 1, 2017 Medicare started to require providers to enter
on Part B claims the number of units of a prescription drug or
biological packaged in a single-dose that were not administered
to the patient. CMS's guidance accompanying the reporting
requirement directed providers to include a modifier,
identified as the ``JW'' modifier, on the billing claim form to
indicate the unused portion. Providers were also required to
record the amount administered in the patient medical record.
Prior to January 1, 2017, Medicare contractors had discretion
as to whether to require providers to identify the unused
portion of single-dose drugs on the claims form.
Provision
This provision would require the manufacturer of a
prescription drug, biological, and biosimilar beginning on July
1, 2021 to refund the amount of payment made to providers for
unused amounts of certain single-dose drugs that exceed a
minimum threshold.
This provision would define ``refundable'' drugs as all
drugs, biologicals, and biosimilars packaged as single-dose and
covered under Medicare Part B, except for radiopharmaceuticals
and imaging agents.
For each calendar quarter beginning on or after July 1,
2021, the HHS Secretary would be required to report to the
manufacturer the number of units of refundable drugs that were
discarded, as identified by the JW modifier that the billing
provider included on the claim form. The HHS Secretary would be
required to exclude units that are ``packaged'' and not paid
separately under Part B.
The amount that a manufacturer would owe for a refundable
drug during a quarter is: the amount by which the Medicare
payment attributed to the unused units exceeds 10 percent of
the amount Medicare paid for the total units. This formula
would ensure that a manufacturer of a refundable drug only pay
a refund if the unused units are in excess of 10 percent of the
total units. It provides an incentive for manufacturers to
produce efficient sizes while recognizing that the amount of a
drug will vary based on beneficiary characteristics and needs.
The HHS Secretary shall increase the 10 percent allowance
threshold before which a manufacturer would have to a pay a
refund through notice and comment rulemaking for refundable
drugs for which preparation instructions approved by the
include filtration during the preparation process. The
Secretary may increase the threshold through rulemaking for
other refundable drugs that have unique circumstances that
involve similar product loss.
Manufacturer refunds would be deposited in the Medicare
Supplementary Medical Insurance Trust Fund. This provision
would require the HHS Secretary to conduct periodic audits on
payment claims submitted by providers for refundable single-
dose drugs. The HHS Secretary would impose a CMP on a
manufacturer that fails to pay a required refund. The CMP would
be equal to 125 percent of the required, unpaid refund amount.
In addition, non-compliant manufacturers could be subject to
other penalties and assessments applicable under Title XI of
the SSA.
SECTION 109. CLARIFICATION OF MEDICARE ASP PAYMENT METHODOLOGY
Current Law
Medicare pays providers for most Part B drugs, biologicals,
and biosimilars at the ASP plus a 6 percent add-on fee.
Manufacturers calculate ASP for each drug, biological, and
biosimilar and are required to report to the HHS Secretary ASP
and the number of Medicare Part B units sold during a calendar
quarter.
In calculating ASP, Medicare statute directs manufacturers
to calculate their Part B drug sales net of price concessions
such as volume discounts, prompt pay discounts, cash discounts,
free goods that are contingent on purchase requirements,
chargebacks, and rebates, other than Medicaid rebates. For
sales after 2004, the HHS Secretary may include other price
concessions, as recommended by the HHS Office of the Inspector
General (OIG) which result in a reduction in cost to the
purchaser, such as physicians, hospitals, or wholesalers. Sales
transactions often include service and other fees that are
added to Part B drug purchasers' cost. Service and other fees
not deducted from ASP generally increases ASP and thereby the
cost of Part B drugs to Medicare as well as Medicare Part B
beneficiary cost sharing for Part B drugs.
Provision
This provision would establish a statutory definition of
``bona fide service fees,'' which manufacturers do not have to
include as a concession when calculating and reporting the ASP
for a drug, biological, or biosimilar. Specifically, this
provision would narrow the existing definition of bona fide
service fees that the HHS Secretary established using
administrative authority. The more narrow definition of bona
fide service fees exempt from ASP reporting would explicitly
prohibit: fees based on the percentage of sales; and fees
determined in a manner that takes into account the volume or
value of any referrals or business otherwise generated between
the parties. This provision would expand the types of fees that
manufacturers pay to wholesalers and group purchasing
organizations that must be treated as a price concession and
included in the reported ASP.
SECTION 110. ESTABLISHMENT OF MAXIMUM ADD-ON PAYMENT FOR DRUGS,
BIOLOGICALS, AND BIOSIMILARS
Current Law
Medicare pays providers for most Part B drugs, biologicals,
and biosimilars at the rate of the product's ASP plus a 6
percent add-on payment. The Medicare payment rate for
biosimilars is the ASP of the biosimilar plus an add-on payment
equal to 6 percent of the reference biological product's ASP.
Medicare payment rate for a new drug during the first two
quarters it is on the market is typically WAC plus a 3 percent
add-on.
Provision
This provision would establish $1,000 as the maximum add-on
amount that a provider can be paid for each drug, biological,
or biosimilar that is administered to a beneficiary on a
calendar date beginning on January 1, 2021. Specifically, the
provider billing for the drug would be paid the lesser of the
add-on amount that would otherwise be paid-6 percent of the ASP
for a drug or biological, 6 percent of the ASP for the
reference product for a biosimilar, 3 percent of WAC for a new
drug in the initial period-and $1,000 through December 31,
2028. For 2029 and each subsequent year, the $1,000 maximum
add-on amount would be updated by CPI-U. The provision would
apply to drugs that are separately payable under Part B,
including when furnished in a physician office, HOPD, and ASC
setting.
SECTION 111. TREATMENT OF DRUG ADMINISTRATION SERVICES FURNISHED BY AN
OFF-CAMPUS OUTPATIENT DEPARTMENT OF A PROVIDER
Current Law
Medicare Part B generally covers outpatient drugs that are
administered by health professionals in physician offices and
HOPDs. Health professionals receive a payment intended to cover
the cost of purchasing the drug and another payment for the
professional service of administering the drug to the
beneficiary. Payments are determined under the PFS or OPPS
depending on the site of service. Beneficiaries generally face
cost sharing equal to 20 percent of the Medicare payment rate
for the drug and administration of the drug.
In addition to covered drugs, some Medicare-covered
services can also be provided in a physician office, HOPD, or
ASC. The payment amount for these services is determined under
the payment system for each different site. The payment amount
typically differs for the same or similar service under the
PFS, the OPPS, and the ASC payment systems.
The Bipartisan Budget Act of 2015 (Public Law 114-74) and
the 21st Century Cures Act of 2016 (Public Law 114-255)
specified that most HOPDs off the campus of the main hospital
that had not billed Medicare under the OPPS prior to the date
of enactment (or were in the process of being built) would be
paid the lower rates under the PFS or ASC payment system,
instead of the generally higher OPPS rates. Off-campus HOPDs
paid under OPPS at the time of enactment of these laws are
excepted from the policy and continue to be paid under the
OPPS.
Provision
This provision would remove the exception for
``grandfathered'' off-campus HOPDs that was established by the
Bipartisan Budget Act of 2015 and the 21st Century Cures Act of
2015 for the service of administering a Medicare Part B drug,
beginning on January 1, 2021. Thus, payment for drug
administration services would be made at the PFS rate rather
than the OPPS rate. The HHS Secretary would be instructed not
to apply this provision in a budget neutral manner, meaning
that the reduced payments would lower federal spending and
beneficiary cost sharing.
SECTION 112. AUTHORITY TO USE ALTERNATIVE PAYMENT FOR DRUGS AND
BIOLOGICALS TO PREVENT DRUG SHORTAGES
Current Law
The Federal Food, Drug, and Cosmetic Act (FFDCA) requires
drug and biological manufacturers to submit certain drug
shortage information to FDA. Manufacturers of drugs or
biologicals that are life-supporting, life-sustaining, or are
intended for use in prevention or treatment of debilitating
diseases or conditions, are required to notify FDA of any
permanent discontinuance or temporary manufacturing
interruption that is likely to disrupt the U.S. supply.
Manufacturers are required to notify FDA at least six months
prior to manufacturing discontinuances or interruptions or as
soon as practicable. FFDCA requires the FDA to maintain an up-
to-date publicly available list of drugs identified by
manufacturers that are in shortage.
Medicare covers outpatient drugs and biologicals under
Medicare Part B. Medicare reimburses providers for most Part B
drugs and biological products at a product's ASP plus an add-on
fee of 6 percent of the product's ASP, regardless of providers'
drug acquisition cost. WAC is a published price that is not
adjusted for price concessions and as a result, WAC is usually
a higher price than ASP.
Provision
This provision would provide the HHS Secretary the
authority to use a WAC-based (or other reasonable drug price
measure) payment methodology under Medicare Part B instead of
an ASP-based methodology for drugs that are currently in
shortage and are on the FDA shortage list or for drugs which
have a declining number of manufacturers that may result in a
shortage in the future.
This provision would also require the HHS Secretary to
establish a modifier or other mechanism that hospitals would
report to CMS on claims for inpatient services that would
enable tracking of use of drugs and biologicals in shortage.
Further, it would require the HHS Secretary to issue a public
report to Congress related to shortages of generic drugs within
the Medicare program.
SECTION 113. STUDY OF AVERAGE SALES PRICE
Current Law
No provision in current law.
Provision
This provision would require the Government Accountability
Office (GAO) to study the difference between commercial and
Medicare prices reported for ASP.
SUBTITLE B--PART D
SECTION 121. MEDICARE PART D BENEFIT REDESIGN
Current Law
Medicare Part D provides outpatient prescription drug
coverage for Medicare beneficiaries and is the primary source
of drug coverage for low-income individuals enrolled in both
Medicare and the state-federal Medicaid program. Part D
coverage is voluntary and administered through private health
insurers, often referred to as plan sponsors. Congress designed
Part D as a market-oriented program in which insurers compete
for enrollees based on plan premiums and scope of benefits,
including cost-sharing amounts for enrolled beneficiaries.
Medicare pays insurers for each Medicare beneficiary who
enrolls in Part D and provides additional subsidies for low-
income individuals. Part D payment to insurers takes two
general forms: the direct subsidy under which Medicare pays a
monthly payment per enrollee calculated as 74.5 percent of the
national average of plan sponsors' bids, and the reinsurance
subsidy under which Medicare pays for 80 percent of drug
spending when an enrollee's total drug cost exceeds a
catastrophic threshold. Enrollees' premiums are 25.5 percent of
the national average of insurers' bids plus or minus any
difference between the insurer's bid for their plan benefit
package and the national average bid, which means premiums vary
by the plan selected. Medicare also pays insurers LIS to cover
all or a portion of the cost-sharing and premiums of their low-
income enrollees.
Insurers must offer ``standard coverage'' under Part D
which consists of four phases (See Figure 1.):
a deductible ($415 in 2019);
initial coverage in which the enrollee is
responsible for 25 percent of the cost of drugs (with
the plan covering the remaining 75 percent);
the coverage gap (``donut hole'') in which
the enrollee is responsible for coinsurance of 25
percent of the cost of brand-name drugs and 37 percent
of the cost of generic drugs, with insurers covering
the remaining 63 percent of generic drug costs and 5
percent of brand-name drug costs and manufacturers
providing discounts for the remaining 70 percent of
brand-name drugs; and
catastrophic coverage (reinsurance) in which
the enrollee is responsible for 5 percent of their
prescription drug costs, insurers are responsible for
15 percent of costs, and Medicare subsidizes 80 percent
of costs (the reinsurance subsidy).
Cost-sharing for Part D benefits is not capped, whereas a
cap on out-of-pocket costs is customary with private insurance.
Cost-sharing is based on insurers' negotiated prices for drugs,
which are the amounts an insurer (or PBM) and the pharmacy have
negotiated as payment for a drug. Insurers may pass on to
enrollees the full value of any rebates and discounts that they
have negotiated with manufacturers and pharmacies in the price
paid at the pharmacy counter, but the majority do not,
according to data from CMS. Most insurers use the majority of
rebates and discounts on a drug list price to lower their
premiums for Part D coverage. Although the list price may not
reflect the final amount a manufacturer receives for a drug, it
is often used as the basis for beneficiary cost sharing at the
pharmacy counter.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Note: Above the catastrophic threshold, enrollee cost
sharing is the greater of a nominal set copayment for drugs or
5 percent coinsurance. In addition to prescription cost-sharing
in the standard benefit figure, enrollees pay monthly premiums.
The Medicare Payment Advisory Commission (MedPAC) has noted
that Medicare's reinsurance payments to insurers for
catastrophic coverage are the largest and fastest-growing
component of Part D spending-increasing from 25 percent of
Medicare payments to plans in 2007 to 54 percent in 2017.
Specialty drugs are deemed as high-priced and a major driver of
spending growth in Part D. Enrollees who take expensive drugs
may face high out-of-pocket costs due to the lack of an annual
cap on enrollee out-of-pocket spending in the program.
Additionally, MedPAC analysis suggests that insurers'
limited liability for drug spending during the coverage gap and
catastrophic coverage phases of the benefit reduces their
financial incentive to steer utilization toward the lowest cost
drugs, including generic and biosimilar versions of brand-name
drugs.
Provision
This provision would make substantial changes to the
structure of the Part D benefit in order to simplify the
benefit design and realign incentives to encourage more
efficient management of drug spending. Starting January 1,
2022, it would: (1) change enrollee cost-sharing in the initial
coverage limit and the coverage gap; (2) eliminate enrollee
cost-sharing above the catastrophic out-of-pocket threshold;
and (3) change the amount of annual out-of-pocket spending
needed to trigger catastrophic coverage. In addition, the
provision would modify Part D financing mechanisms to (1) lower
federal reinsurance during the catastrophic coverage period;
(2) sunset the existing manufacturer discount program in the
coverage gap; and (3) institute a new manufacturer discount
program in the catastrophic coverage phase of the benefit. See
Figure 2.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
To simplify and reduce cost sharing for Part D enrollees,
this provision would eliminate the coverage gap and establish
25 percent cost sharing between the annual deductible and the
catastrophic threshold. It would also completely eliminate
beneficiary cost sharing during catastrophic coverage. The
catastrophic out-of-pocket threshold would be set at $3,100 in
2022 and indexed to growth in Part D spending. This amount
reflects the true out-of-pocket spending enrollees face before
reaching catastrophic coverage under Part D today.
Additionally, the provision would reduce federal reinsurance
payments so that Medicare is responsible for 20 percent and
insurers for 60 percent, respectively, of total drug spending
during catastrophic coverage. See Table 1.
Finally, this provision would sunset the current coverage
gap discount program in which manufacturers pay 70 percent of
drug costs. Instead, the provision would establish a new
manufacturer discount program in which manufacturers provide
discounts for drugs and biologicals utilized during
catastrophic coverage. Under the provision, manufacturers that
choose to have their drugs covered under Part D would enter
into agreements with the Secretary of HHS to provide 20 percent
discounts off negotiated prices during catastrophic coverage,
including for LIS beneficiaries. Insurers would subtract the
anticipated manufacturer discounts from the actuarial value of
the Part D benefit when submitting annual bids to CMS.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Manufacturers would provide catastrophic coverage discounts
to applicable beneficiaries, defined as individuals who are:
(1) enrolled in a Part D plan; (2) are not enrolled in a
qualified retiree prescription drug plan; and (3) have incurred
costs for covered part D drugs in a year that are equal to or
exceed the annual out-of-pocket threshold. The discounts would
be provided for applicable drugs, which are defined as brand-
name drugs and biologicals and biosimilars on the formulary of
a Part D plan or otherwise covered by a Part D plan, including
through an enrollee exception or appeal. The discounted prices
would be provided at the point of sale at a pharmacy or through
a mail-order service. Manufacturers would provide appropriate
data to demonstrate they comply with the program.
The catastrophic coverage discount would be administered in
the same way as the coverage gap discount program is today. CMS
would contract with one or more third parties to administer the
discounts. If a third party administrator determined a
manufacturer was not in compliance, the third party would be
required to notify the Secretary. The Secretary could collect
appropriate data from insurers in a timeframe that allowed for
discounted prices to be provided for applicable drugs.
Manufacturers would be subject to periodic CMS audits. HHS
could impose CMPs on manufacturers that failed to provide
required catastrophic coverage discounts. The penalty would be
commensurate with the sum of: (1) the amount the manufacturer
would have paid with respect to such discounts under the
agreement; and (2) 25 percent of such amount. The Secretary
could terminate a manufacturer agreement for a ``knowing and
willful violation'' of program requirements. A manufacturer
could request a hearing, which would be allowed with sufficient
time for the effective date to be repealed if determined
appropriate. A manufacturer would be allowed to terminate an
agreement to provide discounts for any reason.
SECTION 122. PROVIDING THE MEDICARE PAYMENT ADVISORY COMMISSION AND THE
MEDICAID AND CHIP PAYMENT AND ACCESS COMMISSION WITH ACCESS TO CERTAIN
DRUG PAYMENT INFORMATION, INCLUDING CERTAIN REBATE INFORMATION
Current Law
Private insurers and pharmaceutical manufacturers that
participate in Medicare Part D or the state-federal Medicaid
program must provide drug price information to HHS for use in
program payment and administration. For market competition
reasons, federal law protects the confidentiality of the data.
Under current law, Part D insurers must provide information
as the HHS Secretary determines is necessary to calculate and
administer payments (such as direct subsidies and reinsurance
payments). During each plan year, CMS makes monthly prospective
payments to insurers, based on cost and revenue estimates in
their annual bids to provide benefits. Six months after the end
of each year, CMS reconciles the projected payments with actual
plan costs, based on updated data including actual enrollment,
LIS eligibility, enrollee health risk scores, and prescription
drug price data. Information disclosed or obtained pursuant to
the drug data reporting requirements may be used by HHS to
administer the program and conduct oversight, evaluation, and
enforcement. The data may also be provided to the Department of
Justice and the U.S. GAO for oversight.
Under current law, manufacturers must provide price data
necessary to allow HHS to implement the Medicaid drug rebate
program. Under the program, manufacturers that want to sell
covered outpatient drugs, including biologicals and insulin, to
state Medicaid agencies must enter into rebate agreements with
the Secretary. The agreements require manufacturers to provide
state Medicaid programs with rebates on drugs purchased for
Medicaid beneficiaries and to ensure that Medicaid receives the
lowest or best price for which the manufacturer sold the drug
during the previous quarter. The price information is
confidential and may not be disclosed by the Secretary in a
form that reveals the identity of a specific manufacturer or
wholesaler, or prices charged for drugs by such manufacturer or
wholesaler, except: as the Secretary determines to be necessary
to administer the program; to the GAO and Congressional Budget
Office (CBO) for review; to states to administer Medicaid; and
for display on the HHS website in the form of a weighted
average of the most recently reported monthly average price and
retail survey price data.
Provision
This provision would allow the HHS Secretary to share
Medicare Part D and Medicaid drug price and rebate data with
the executive directors of MedPAC and the Medicaid and CHIP
Payment and Access Commission (MACPAC) for purposes of
monitoring, program recommendations, and analysis of the
Medicare Part D and Medicaid programs and the State Children's
Health Insurance Program (CHIP).
MedPAC and MACPAC would be barred from disclosing
information about the specific amounts or identity of the
source of rebates, price concessions, and other forms of direct
or indirect remuneration (DIR) negotiated by insurers or price
information submitted as part of an insurer's annual bid to
offer program benefits. MedPAC and MACPAC could not publicly
disclose data in a form that identified a specific manufacturer
or wholesaler or prices charged for drugs by such manufacturer
or wholesaler. This provision would be effective immediately.
SECTION 123. PUBLIC DISCLOSURE OF DRUG DISCOUNTS AND OTHER PHARMACY
BENEFIT MANAGER PROVISIONS
Current Law
Health insurers typically contract with, or own, pharmacy
benefit managers (PBMs) that perform a range of services
including design of health plan formularies (or lists of
covered drugs); set up of contracted networks of retail
pharmacies that dispense drugs to enrollees; and drug price
negotiation with pharmaceutical manufacturers, including up-
front discounts and rebates after the point of sale. PBMs
generally negotiate prices for drugs provided in retail
pharmacies, but in some cases PBMs dispense drugs from their
own mail-order or specialty pharmacies.
The terms of contracts between PBMs and insurers, and
information about net drug prices negotiated by PBMs generally
are confidential in order to preserve competition for drug
price concessions. For this reason, it is difficult to monitor
and assess the impact of the role of PBMs in managing Part D
drug spending. PBMs and insurers are required to report some
data about prescription drug sales and prices under Medicare
Part D and Qualified Health Plans (QHPs) sold on the health
insurance exchanges. (QHPs are individual health insurance
plans that undergo an additional certification process by HHS,
compared to other health insurance products sold to
individuals.) PBMs that manage prescription drug coverage under
Part D or for a QHP report the following data to the HHS
Secretary each year:
The percentage of prescriptions provided
through retail pharmacies compared to mail order
pharmacies;
The percentage of prescriptions for which a
generic drug was available and dispensed by a pharmacy;
The aggregate amount of rebates, discounts,
or price concessions (excluding certain bona fide
service fees), negotiated by a PBM on behalf of
insurers; the aggregate amount of rebates, discounts,
or price concessions negotiated by PBMs and passed on
to insurers; and the total number of prescriptions
dispensed; and,
The aggregate amount of the difference
between what insurers pay a PBM, and what a PBM pays
retail pharmacies and mail-order pharmacies, and the
number of prescriptions dispensed.
The reported data are confidential, and may not be
disclosed by the Secretary or an insurer, with limited
exceptions. Only the Secretary may disclose information--if in
a form that does not disclose the identity of a PBM or insurer,
or prices charged for individual drugs--in order to administer
specific provisions of law, or for review by congressional
agencies, such as the GAO and CBO. PBMs and insurers that do
not comply with the provisions or that provide false
information are subject to penalties.
Prescription drug price concessions that are not passed on
to enrollees at the point of sale are reported to CMS as direct
and indirect remuneration (DIR). DIR includes discounts,
chargebacks or rebates, cash discounts, free goods contingent
on a purchase agreement, up-front payments, coupons, goods in
kind, free or reduced-price services, grants, or other price
concessions or similar benefits from manufacturers, pharmacies
or similar entities obtained by a PBM or intermediary
organization with which the Part D plan sponsor has contracted.
Plans must submit detailed DIR reports to CMS within six months
after the close of a plan year.
Provision
This provision would require HHS to make public on its
website, beginning on July 1, 2022, data that has been reported
under this section, which includes information on aggregate
price concessions (including rebates and discounts), the
aggregate amount of the difference between what an insurer pays
a PBM and what a PBM pays retail and mail order pharmacies, and
the number of prescriptions dispensed. The Secretary would
ensure information is displayed in a manner that prevents the
disclosure of price concessions with respect to an individual
drug or an individual plan in order to preserve competition for
lower drug prices.
Additionally, this provision would require Part D insurers
to conduct, beginning January 1, 2022, financial audits of data
related to their PBM contracts. The purpose is to ensure Part D
insurers--large and small--monitor PBM compliance with contract
terms, including with respect to accounting for the net price
of Part D covered drugs. The audits would be conducted at least
every two years by an independent third party. Insurers would
require PBMs to make their rebate contracts with drug
manufacturers available for review during the audits and data
available within 45 days of the audit request. PBMs that do not
comply with insurers' audit requests would be reported to the
Secretary and upon confirmation the Secretary may impose CMPs
on PDP sponsors or MA organization up to $10,000 per day.
Audits would be subject to confidentiality agreements to
prevent disclosure of confidential information. Audit reports
would be submitted to the Secretary within 30 days and reviewed
to determine the extent to which net price transparency between
Part D insurers and PBMs occurs for each drug.
Beginning in plan year 2022, Part D insurers would also be
required to report to pharmacies any post-point-of-sale
adjustments for price concessions or incentive payments for
covered Part D drugs, including those made by a PBM, at least
annually. These payment adjustments would be reported or
approximated at the claim level. This provision also would
require Part D insurers to report annually to the Secretary any
statements of conflicts of interest from the members of
pharmacy and therapeutics (P&T) committees used by the insurer.
Finally, this provision would require Part D insurers to
report, beginning in plan year 2022, actual and projected DIR
amounts in their bids for Part D coverage, including those
related to pharmacies. The purpose is to ensure that projected
remuneration related to pharmacies and manufacturers is based
on actual remuneration in a prior year.
SECTION 124. PUBLIC DISCLOSURE OF DIRECT AND INDIRECT REMUNERATION
REVIEW AND AUDIT RESULTS
Current Law
Under Medicare Part D, enrollee cost sharing for drugs
dispensed by network pharmacies is based on insurers'
negotiated prices for covered drugs. The negotiated price, as
defined by CMS, is the payment network pharmacies have
negotiated to receive from Part D insurers for dispensing a
covered drug, inclusive of all pharmacy price concessions
except those that cannot reasonably be determined at the point
of sale. Negotiated prices generally include pharmacy
dispensing fees. Negotiated prices may not be rebated back to
the insurer in full or in part. Insurers may pass on to
enrollees the full value of any rebates and discounts
negotiated with manufacturers and pharmacies in the price paid
at the pharmacy counter, but the majority do not, according to
data from CMS. Most insurers use the majority of rebates and
discounts to lower their premiums for Part D coverage.
Drug price concessions that are not passed on to enrollees
at the point of sale are reported to CMS as DIR. DIR includes
discounts, chargebacks or rebates, cash discounts, free goods
contingent on a purchase agreement, up-front payments, coupons,
or other price concessions or similar benefits from
manufacturers, pharmacies or similar entities obtained by an
intermediary organization with which the Part D insurer has
contracted, such as a PBM. Plans must submit detailed DIR
reports to CMS within six months after the close of a plan
year.
Medicare provides subsidies for each enrollee in a Part D
plan that equal 74.5 percent of average, standard coverage. Six
months after the end of each year, CMS reconciles the projected
payments with actual plan costs based on updated data including
enrollment, low-income subsidy eligibility, health risk, and
drug cost data from prescription drug event (PDE) and DIR
reports. The final reconciled payments are also subject to
Medicare risk corridors that limit a plan's overall losses or
profits.
Federal regulations give HHS and GAO, or their designees,
the right to audit, evaluate and inspect any books, contracts,
records, computers, or other electronic systems, including
medical records and documentation involving transactions
related to CMS contracts with Part D sponsors. These rights
continue for 10 years from the final date of the contract
period or the date of audit completion, whichever is later.
Provision
This provision would require the Secretary to publicly
report on discrepancies related to DIR information submitted by
plans, demonstrating the accuracy with which insurers report
DIR. This would include the number of potential errors CMS
identified for plan review, the extent to which plans
resubmitted reports making changes to past contract years, and
the extent to which errors in DIR reports resulted in an
increase or decrease in DIR for a past year. The Secretary
shall exclude Program for All-Inclusive Care for the Elderly
(PACE) organization and Retiree Drug Subsidy Program
information in calculating publicly available information.
The Secretary would also be required to publicly report the
results of the independent third party financial audits of
plans conducted under current law, which includes DIR
information, beginning in 2020. The report shall include
information including the number of audits that: were closed
without further action; prompted a corrective action plan; and
resulted in an adverse opinion. It shall also include the
number of plans for which a previously closed reconciliation
was reopened and the extent to which the reopening of a
reconciliation resulted in recoupment of an overpayment or
issuance of an underpayment.
SECTION 125. INCREASING USE OF REAL-TIME BENEFIT TOOLS TO LOWER
BENEFICIARY COSTS
Current Law
Under Medicare Part D, insurers and other plan sponsors
enter into annual contracts with CMS to provide a defined
package of outpatient drug benefits. There is no federally
required formulary in Part D, except insurers must cover at
least two drugs in each class and category and substantially
all drugs in six protected classes. There is wide variation
among Part D insurers with respect to their benefits offered,
including drugs covered on formularies, prescription cost-
sharing amounts, and utilization management requirements (e.g.,
prior authorization or quantity limits). While variation in
benefit design provides plan choice for beneficiaries, it can
be difficult for clinicians to sort through the information
with their patients at the point of prescribing.
Part D insurers are now required to support an electronic
prescription (e-prescribing) program, which enables
transmission of prescription information between a clinician,
pharmacy, PBM, and/or health plan, either directly or through
an intermediary, such as an e-prescribing network. Technical
transmission requirements for e-prescribing networks are based
on standards set by the National Council for Prescription Drug
Programs (NCPDP SCRIPT) and other outside organizations. While
e-prescribing is optional for physicians and pharmacies, if
they choose to transmit e-prescriptions and related
communications then Part D insurers must comply with CMS
standards. CMS also requires Part D insurers and prescribers to
convey electronic formulary and benefits information amongst
themselves using NCPDP Formulary and Benefits Standard
Implementation Guides, referred to as F&B.
Part D e-prescribing standards are updated periodically to
take into account new technology or to respond to statutory
requirements. In May 2019, CMS issued final regulations
requiring Part D insurers, no later than January 1, 2021, to
implement one or more electronic real-time benefit tools
(RTBT). According to CMS, the existing NCPDP SCRIPT standard
allows prescribers to conduct electronic prescribing, while the
F&B standard allows prescribers to see what drugs are on a
plan's formulary. However, neither of these standards provides
patient-specific, real-time cost or coverage information, such
as formulary requirements or utilization management data, at
the point of prescribing.
The Office of the National Coordinator for Health
Information Technology (ONC) has the authority to establish a
voluntary certification program for health information
technology (HIT) developers to certify their HIT products are
in compliance with specified certification criteria. Use of
certified EHR technology is a requirement under the CMS
Medicare Promoting Interoperability Program (formerly the EHR
Incentive Program). The ONC established this voluntary
certification program in 2011 (the ``ONC Health IT
Certification Program''). The Secretary has the authority,
through rulemaking, to require specified conditions of
certification and maintenance of certification requirements for
the Program, including that an HIT developer does not take any
action that constitutes information blocking, among others.
Provision
This provision would require Part D insurers to provide for
a real-time benefit tool (RTBT) that enables electronic
transmission of eligibility, formulary, and benefit information
to each enrollee's prescribing clinician, using technology that
integrates with clinicians' electronic prescribing and EHR
systems. Information transmitted would include a list of any
clinically-appropriate alternatives to a drug included on the
formulary of such plan; information relating to cost sharing;
pharmacy options (including the individual's preferred pharmacy
and other retail pharmacies and a mail-order pharmacy, as
applicable); and the formulary status and any applicable prior
authorization or other utilization management policies applied
by insurers. Plans would be required to implement this
provision no earlier than standards are adopted by the
Secretary.
To be considered a RTBT, the electronic transmissions would
have to comply with technical standards adopted by the HHS
Secretary in consultation with the ONC; standard-setting
organizations including NCPDP and others determined appropriate
by the Secretary; and stakeholders including Part D insurers,
health care professionals, and HIT software vendors. RTBT data
would be used in conjunction with existing systems to provide a
more complete view of a Medicare beneficiary's Part D drug
benefit.
This provision would also add a requirement for EHRs used
by clinicians. That is, qualified EHRs under the ONC Health IT
Certification Program also must include an RTBT that conveys
patient-specific cost and coverage information as well as the
Part D information specified in this provision. The Secretary
would implement the EHR requirements through notice and comment
rulemaking, but not before standards for RTBTs for Part D plans
have been adopted. Nothing in this section would prohibit
implementation of RTBT requirements for Part D plans that have
been set out through regulation.
In addition, this provision would enable physicians to get
credit for using a RTBT in the Medicare PFS Merit-based
Incentive Payment System (MIPS) by adding it to the menu of
practice improvement activity options.
SECTION 126. IMPROVEMENTS TO PROVISION OF PARTS A AND B CLAIMS DATA TO
DRUG PLANS
Current Law
Private insurers offering Medicare Part D benefits through
stand-alone plans that cover only prescription drugs generally
do not have access to medical claims data collected under
Medicare. Such data could provide more comprehensive
information about an enrollee's medical condition and current
treatments and enable Part D insurers to design formularies
that reflect total costs of care. Under the Bipartisan Budget
Act of 2018, Congress required HHS to establish a process, by
2020, under which a Part D insurer could request Medicare Parts
A and B medical claims data for enrollees in their drug plan.
The data, which are to be as current as possible, may be used
by Part D insurers for specified purposes including to improve
therapeutic outcomes by improving medication use, improving
care coordination to prevent adverse outcomes such as emergency
room visits, and for other purposes approved by the Secretary.
Congress specified limitations on the use of the Parts A
and B claims data, including prohibiting use of the data to
inform Part D coverage determinations. A coverage determination
is any decision (whether an approval or denial) by an insurer
with regard to covered benefits. Examples of coverage
determinations include whether to provide or pay for a Part D
drug that an enrollee believes to be covered; a decision
concerning a request to cover a drug that is not included on an
insurer's formulary; or a decision regarding whether an
enrollee has satisfied a prior authorization or other
utilization management policy.
Provision
This provision would create an exception to the limitation
on Part D insurers' use of fee-for-service (FFS) claims data
for Part D coverage determinations. The provision would allow
insurers to use the data for Part D coverage determinations
related to approved purposes, such as to improve therapeutic
outcomes. The provision would also require claims data to be as
current as practicable, specifying options that the HHS
Secretary may use to deliver the data in the most timely and
efficient manner. This provision would go into effect January
1, 2021.
SECTION 127. PERMANENTLY AUTHORIZE A SUCCESSFUL PILOT ON RETROACTIVE
PART D COVERAGE FOR LOW-INCOME BENEFICIARIES
Current Law
There is no means test for eligibility for Medicare Part D
coverage, but individuals who meet specified income and assets
thresholds are eligible for LIS, which cover a greater share of
out-of-pocket spending, including premiums and cost sharing for
covered drugs. The actual amount of LIS varies based on an
enrollee's assets and income and whether a beneficiary is
institutionalized, or is receiving community-based care. Full-
subsidy LIS enrollees-including dual-eligible enrollees who
qualify for Medicare and full Medicaid benefits, enrollees who
qualify for Supplemental Security Income (SSI), as well as
other specified individuals--have no deductible, minimal cost
sharing for prescription drugs and a cap on annual out-of-
pocket spending. Partial-subsidy LIS enrollees--including
individuals with assets below set thresholds and income up to
150 percent of the federal poverty level (FPL)-may also qualify
for this extra benefit, but they have somewhat higher
prescription cost sharing compared to full-subsidy LIS
enrollees.
A beneficiary must first meet the income and asset
thresholds to be eligible for LIS benefits. Next, the
beneficiary must be enrolled in a Part D plan. Since inception
of Part D, there has been concern about gaps in coverage for
beneficiaries who qualify for the LIS but are not yet covered
by a Part D plan. To address this, in 2010, HHS authorized a
pilot program, the Limited Income Newly Eligible Transition (LI
NET), to provide immediate temporary Part D coverage for
certain LIS individuals. LI NET provides drug coverage for up
to two months until an LIS-eligible individual is covered in a
Part D plan, as well as up to 36 months retroactive coverage
for full-subsidy LIS dual-eligibles and SSI beneficiaries, in
cases where their dual or SSI eligibility is retroactive. LI
NET coverage, currently administered through health insurer
Humana, reimburses pharmacies for all Part D-covered drugs.
Provision
This provision would permanently authorize the LI NET
program, beginning no later than 2022. Individuals would
qualify for LI NET if they were either full or partial LIS-
eligible and a) had not yet enrolled in a Part D plan or b) had
enrolled, but coverage under the plan had not yet taken effect.
The LI NET benefit would provide transitional coverage
including immediate access to covered Part D drugs at the point
of sale starting on the first day of the month such individual
was determined to be LIS-eligible, and ending on the day Part D
coverage took effect. For LI NET-eligible individuals who are
full-benefit duals or receive SSI benefits, retroactive
coverage of covered drugs would begin on the later of a) the
date the individual was first eligible for the LIS or 2) 36
months prior to the date such individual enrolled in a Part D
plan. Retroactive coverage would end on the day Part D coverage
took effect. To the extent feasible, HHS would operate the
program through a single administrator.
HHS would ensure that LI NET coverage 1) provides access to
all covered Part D drugs under an open formulary, 2) permits
all pharmacies determined to be in good standing to process
claims, 3) operates consistent with requirements the Secretary
considers necessary to improve patient safety and ensure
appropriate dispensing, and 4) meets other requirements
established by the Secretary. The provision would waive Part D
marketing, formulary, and medication therapy management
requirements for the LI NET program and would allow the
Secretary to waive certain other requirements as may be
necessary.
SECTION 128. MEDICARE PART D REBATE BY MANUFACTURERS FOR CERTAIN DRUGS
WITH PRICES INCREASING FASTER THAN INFLATION
Current Law
As noted, under Medicare Part D, insurers submit annual
bids to CMS to offer outpatient prescription drug benefits, and
compete against each other for enrollees. Part D insurers, and
the PBMs they own or contract with, seek to control costs, in
part, by negotiating lower drug prices from manufacturers.
Lower prices primarily take the form of manufacturer rebates or
discounts off list prices for brand-name drugs and biologicals.
Insurers and PBMs are able to secure rebates from a
manufacturer in return for including a brand-name drug on a
plan formulary or by setting favorable cost sharing that leads
to higher market share for the manufacturer. The final value of
a manufacturer rebate may be tied to sales volume, bundled with
other drug products, and paid to insurers in quarterly
installments.
While there is no federally required Part D formulary, plan
sponsors must cover at least two drugs in each class or
category and substantially all available drugs in the following
six categories: immunosuppressant, antidepressant,
antipsychotic, anticonvulsant, antiretroviral, and
antineoplastic. Part D sponsors and PBMs have the most leverage
to negotiate price concessions when there are competing drugs
on the market for treating a condition. They have less ability
to negotiate price concessions for patented and sole-source
drugs with no therapeutic substitutes and for drugs in the six
protected classes (as insurers must cover all drugs).
Manufacturers' rebates have risen from 11.1 percent of Part D
prescription drug costs in 2008 to an estimated 25.3 percent in
2018.
Pharmaceutical manufacturers are not required to
participate in Part D and are not required to provide price
concessions from their list prices. Since 2011, manufacturers
that choose to participate in Part D have been required to
provide a discount on brand-name drugs (and starting in 2019,
on biosimilars) purchased by enrollees in the coverage gap.
By comparison, the state-federal Medicaid program
administers a system of statutory and voluntary rebates for
covered outpatient drugs, including biologicals and insulin, to
ensure that Medicaid receives the lowest or best price for such
drugs from the manufacturers. Medicaid drug rebates vary
depending on the specific product, including whether the
product is a brand-name drug or generic. In addition to a flat
rebate, manufacturers who choose to have their products sold
through Medicaid must also provide an additional rebate if they
increase the average price of a prescription drug faster than
the rate of retail inflation, as measured by the Consumer Price
Index for all urban consumers (CPI-U). State may also negotiate
supplemental rebates with manufacturers. Several studies by the
CBO and the HHS Office of Inspector General (OIG), based on
confidential HHS drug rebate data, have found that Part D plans
pay higher average net prices for brand-name prescription drugs
than Medicaid and that the Medicaid inflation rebate is a major
factor in the price difference.
Manufacturers set their own list prices for drugs and
biologicals sold in the U.S. List prices are generally
reflected in the WAC defined under SSA Section 1847A(c)(6)(B).
The WAC does not include rebates, prompt pay or other
discounts, or reductions in price and is reported in wholesale
price guides or other publications of drug or biological
pricing data.
Provision
This provision would establish rebates with pharmaceutical
manufacturers if they increase their list price for certain
covered Part D drugs above the rate of inflation. Beginning on
January 1, 2022, manufacturers that choose to sell their
products under Part D would provide rebates to Medicare for
each six-month period in which the list price for a rebatable
drug, as specified in the provision, increases faster than the
change in inflation measured by CPI-U for the same period. A
manufacturer's list price under this provision would be based
on a drug's WAC. Rebatable drugs would be defined as Part D-
covered products that are brand drugs (and not a generic drug)
or that are licensed as a biological (and not a biosimilar).
To determine whether the price of a rebatable drug
increased faster than inflation, and to calculate the amount of
any required rebate, HHS would determine the inflation-adjusted
average list price for each drug. The inflation-adjusted
average list price for existing drugs would be the price for a
drug at the dosage form and strength level, taking into account
each unique National Drug Code, as of July 1, 2019 (or as of
the day the drug was first marketed for newly approved drugs),
increased by the percentage change in the CPI-U. The rebate
amount would be the product of the quantity of each covered
drug dispensed during the rebate period and the amount by which
the drug's actual average list price exceeded the inflation-
adjusted list price. The inflation-adjusted average list price
for new drugs would be the price for a drug at the dosage form
and strength level, taking into account each unique National
Drug Code in the first full rebate period that begins after the
six-month initial period in which the drug is first marketed.
HHS would provide participating manufacturers with
information on rebatable covered Part D drugs, no later than
six months after the end of each rebate period. Such
information would include the number of dispensed drugs, the
excess list price increase, if any; and the amount of any
required rebate. The HHS Secretary would be allowed to reduce
or waive a required rebate in the case of a drug shortage.
A manufacturer would have 30 days from receipt of the HHS
notice to pay the required amount or request a reconsideration
of the rebate amount. Manufacturers would be subject to CMPs if
they did not comply with rebate requirements. The penalty for
failing to provide a required rebate would be the amount of the
original rebate plus 25 percent. There would be no judicial
review of the rebate amount.
Manufacturers would voluntarily enter into rebate
agreements with the Secretary for their drugs to be covered
under Part D, and would be required to provide specific
information to HHS to implement the rebate. Manufacturers would
be subject to HHS audits to ensure reporting compliance and
civil monetary penalties for noncompliance.
Information disclosed by manufacturers or wholesalers would
be confidential and could not be disclosed by the Secretary in
a form that reveals the identity of a specific manufacturer or
wholesaler, or prices charged for drugs by such manufacturer or
wholesaler, except as the Secretary determined would be
necessary to carry out this provision.
The inflation-based rebates would have no impact on
formulary design or manufacturer discounts negotiated by Part D
insurers. Rebates paid to Medicare would be deposited into the
Medicare Supplementary Medical Insurance Trust Fund.
SECTION 129. PROHIBIT BRANDING ON PART D BENEFIT CARDS
Current Law
The HHS Secretary is required to establish limitations
related to a Part D plan's use of the name or logo of a network
provider on its membership and marketing material. CMS
implementing regulations prohibit names and/or logos of co-
branded providers on the plan's enrollee ID card, unless the
provider names and/or logos are in the name of the plan name
and/or are related to an enrollee's selection of a specific
provider or provider organization.
Provision
This provision would prohibit Part D plan sponsors from
including any pharmacy branding information on the cards
provided to beneficiaries for the purpose of accessing Part D
benefits.
SECTION 130. PREVENTING FRAUD IN MEDICARE PART D
Current Law
Numerous statutory provisions aim to curb instances of
waste, fraud, and abuse within the healthcare system. The
Bipartisan Budget Act of 2018 includes a provision that
requires: the HHS Secretary to have a mechanism through which
CMS, its fraud-focused contractors, and Part D plans share
information related to waste, fraud, and abuse; and a Part D
plan to report to the Secretary suspicious activities and
actions taken related to inappropriate prescribing of opioids.
Provision
This provision would implement HHS OIG recommendations to
require Part D plan sponsors to report substantiated or
suspicious activities related to waste, fraud, and abuse. Plan
sponsors would also have to report any corrective actions taken
to address these instances.
SECTION 131. TO ESTABLISH PHARMACY QUALITY METRICS IN MEDICARE PART D
Current Law
Under current law, CMS publishes Part C and D Star Ratings
each year to promote patient-focused care. The Star Ratings
measure the quality of both Medicare Advantage Plans (Part C)
and Prescription Drug Plans (PDPs or Part D plans). Part D plan
contracts with pharmacies typically base a portion of payment
on performance on quality measures. These quality measures are
not necessarily aligned with the Star Ratings measures on which
CMS assesses and publicly posts plan performance. In addition,
measures of pharmacy performance are typically specific to the
plan, with few measures having been vetted through a multi-
stakeholder process.
Provision
This provision would require the Secretary to establish a
standardized pharmacy quality metrics program in Medicare Part
D.
SECTION 132. STAR RATING MEASURES TO ENCOURAGE BIOSIMILAR UPTAKE
Current Law
Under current law, CMS publishes Part C and D Star Ratings
each year to promote patient-focused care. The Star Ratings
measure the quality of both Medicare Advantage Plans (Part C)
and Part D plans. The 14 Part D Star Ratings quality measures
established for 2020 are below.
Appeals Auto-Forward
Appeals Upheld Measures
Complaints about the Drug Plan
Members Choosing to Leave the Plan
Drug Plan Quality Improvement
Rating of Drug Plan
Getting Needed Prescription Drugs
MPF Price Accuracy
Medication Adherence for Diabetes
Medications
Medication Adherence for Hypertension (RAS
antagonists)
Medication Adherence for Cholesterol
(Statins)
MTM Program Completion Rate for CMR
Statin Use in Persons with Diabetes
Provision
This provision would require Medicare quality measures for
Part D plan sponsors in the Star Rating system to include
assessments of plan benefit and formulary design in encouraging
patient access to biosimilars.
SECTION 133. HHS STUDY AND REPORT ON THE INFLUENCE OF PHARMACEUTICAL
MANUFACTURER DISTRIBUTION ON PROVIDER PRESCRIBING BEHAVIOR
Current Law
No provision in current law.
Provision
This provision would require HHS to conduct a study on the
influence of pharmaceutical manufacturer distribution models
that provide third-party reimbursement hub services on health
care providers who prescribe the manufacturer's drugs. The
report would seek to identify whether these hub services
influence or incentivize a provider to prescribe a drug, thus
mitigating the effectiveness of cost-control measures like
prior authorization and step therapy that a Part D plan may
utilize. The report would also seek to identify whether these
hub services violate any existing federal laws.
SUBTITLE C--MISCELLANEOUS
SECTION 141. DRUG MANUFACTURER PRICE TRANSPARENCY
Current Law
Pharmaceutical manufacturers set initial, or list, prices
for the prescription drugs and biological products they sell.
There are different published drug list prices, but one
commonly used commercial list price is the WAC, defined at SSA
Section 1847A(c)(6)(B). Pharmaceutical list prices can differ
substantially from final, net prices that manufacturers may
receive after negotiations with wholesalers, pharmacies, and
other entities along the distribution chain as well as separate
negotiations with PBMs that work for or are owned by health
plans.
Although a list price may not reflect the final payment
amount a manufacturer receives for a drug, it is often used as
the basis for consumer drug spending. Insurers may require
enrollees to pay coinsurance for prescriptions (a percentage of
the drug price) based on a list price rather than the insurer's
lower net price. Consumers may also be charged a drug's list
price if they are uninsured or have not met a health plan
deductible, which is a period during the benefit when they are
responsible for 100 percent of costs, when the deductible
covers spending on drugs as well as medical services.
Contract terms and statutory or regulatory provisions in
government health care programs generally prohibit government
agencies from publicly releasing specific information in a form
that discloses the identity of a specific manufacturer or
wholesaler, or prices charged for specific drugs by such
manufacturer or wholesaler.
Provision
The provision would add a new SSA Section 1128L, effective
July 1, 2022, requiring drug manufacturers to report to the HHS
Secretary information and supporting documentation to justify
price increases for prescription drugs and biological products,
as measured by the WAC or changes in the WAC in cases where the
Secretary determines the manufacturer's price increase met or
exceeded certain thresholds. The Secretary would be required to
publicly post the price justifications, as specified in the
provision.
The reporting requirements for applicable drugs would apply
to three categories, defined as:
1. Prescription drugs or biologicals with a list price of
at least $10 per dose and price increase:
In 2020 of at least 100 percent since
enactment of the legislation;
During 2021 of at least 100 percent in the
preceding 12 months or at least 150 percent in the
preceding 2 years;
During 2022 of at least 100 percent in the
preceding 12 months or at least 200 percent in the
preceding 3 years;
During 2023 of at least 100 percent in the
preceding 12 months or at least 250 percent in the
preceding 4 years; or,
On or after January 1, 2024, of at least 100
percent in the preceding 12 months or at least 300
percent in the preceding 5 years;
2. Prescription drugs and biologicals in the top 50 percent
of net spending (per dose) in Medicare or Medicaid in at least
one of the preceding 5 years and a list price increase:
In 2020 of at least 15 percent since
enactment of the legislation;
During 2021 of at least 15 percent in the
preceding 12 months or at least 20 percent in the
preceding 2 years;
During 2022 of at least 15 percent in the
preceding 12 months or at least 30 percent in the
preceding 3 years;
During 2023 of at least 15 percent in the
preceding 12 months or at least 40 percent in the
preceding 4 years; or,
On or after January 1, 2024, of at least 15
percent in the preceding 12 months or at least 50
percent in the preceding 5 years.
3. New prescription drugs and biologicals with a list price
established for the first time, if the list price for a year
supply or course of treatment exceeds the gross spending for
covered Part D drugs necessary to meet the annual out-of-pocket
threshold (about $10,000 in 2022).
The Secretary would notify a manufacturer within 60 days of
identifying a drug as an applicable drug. After being notified,
the manufacturer would have 180 days to provide a price
justification to the Secretary, which would be posted on the
CMS website no later than 30 days after receipt, along with a
summary written in a way that would be easily understandable to
Medicare and Medicaid beneficiaries. A price justification
would not be required if a manufacturer, after it received
notification, reduced the list price for an applicable drug so
that, for at least 6 months, it no longer met the qualifying
criteria. Drugs that qualify based on new launch price would
remain applicable drugs until the Secretary determines there is
a therapeutic equivalent.
The required information for the price justifications may
include: individual factors contributing to the price increase;
the role of each factor in the price increase; and manufacturer
spending for materials and manufacturing, patents and licenses,
or purchasing or acquiring the drug from another company, if
applicable. Manufacturers may also describe the percentage of
total research and development spending for the drug that came
from federal funds; total manufacturer research and development
spending on the drug; total revenue and net profit from the
drug each year since approval; total costs for marketing and
advertising the drug; and additional information about the
manufacturer such as total revenue and net profit for the
period of the price increase, metrics for setting executive
compensation, and other information such as total spending on
drug research and development or clinical trials on drugs that
failed to receive FDA approval.
HHS would be prohibited from publicly posting any
proprietary manufacturer information.
Drug manufacturers would be subject to current Medicare
CMPs of $10,000 per day for failing to submit a timely price
justification and up to $100,000 per false information item for
knowingly submitting false information.
SECTION 142. STRENGTHEN AND EXPAND PHARMACY BENEFIT MANAGER
TRANSPARENCY REQUIREMENTS
Current Law
Health insurers typically contract with, or own, pharmacy
benefit managers (PBMs) that perform a range of services
including design of health plan formularies (or lists of
covered drugs); set up of contracted networks of retail
pharmacies that dispense drugs to enrollees; and drug price
negotiation with pharmaceutical manufacturers, including up-
front discounts and rebates after the point of sale. PBMs
generally negotiate prices for drugs provided in retail
pharmacies, but in some cases PBMs dispense drugs from their
own mail-order or specialty pharmacies.
The terms of contracts between PBMs and insurers, and
information about net drug prices negotiated by PBMs generally
are confidential in order to preserve competition for drug
price concessions. For this reason, it is difficult to monitor
and assess the impact of the role of PBMs in managing Part D
drug spending. PBMs and insurers are required to report some
data about prescription drug sales and prices under Medicare
Part D and Qualified Health Plans (QHPs) sold on the health
insurance exchanges. (QHPs are individual health insurance
plans that undergo an additional certification process by HHS,
compared to other health insurance products sold to
individuals.) PBMs that manage prescription drug coverage under
Part D or for a QHP report the following data to the HHS
Secretary each year:
The percentage of prescriptions provided
through retail pharmacies compared to mail order
pharmacies;
The percentage of prescriptions for which a
generic drug was available and dispensed by a pharmacy;
The aggregate amount of rebates, discounts,
or price concessions (excluding certain bona fide
service fees), negotiated by a PBM on behalf of
insurers; the aggregate amount of rebates, discounts,
or price concessions negotiated by PBMs and passed on
to insurers; and the total number of prescriptions
dispensed; and,
The aggregate amount of the difference
between what insurers pay a PBM, and what a PBM pays
retail pharmacies and mail-order pharmacies, and the
number of prescriptions dispensed.
The reported data are confidential, and may not be
disclosed by the Secretary or an insurer, with limited
exceptions. Only the Secretary may disclose information--if in
a form that does not disclose the identity of a PBM or insurer,
or prices charged for individual drugs--in order to administer
specific provisions of law, or for review by congressional
agencies, such as the GAO and CBO. PBMs and insurers that do
not comply with the provisions or that provide false
information are subject to penalties.
Provision
This provision would amend SSA Section 1150A, which
requires health plans or PBMs that manage prescription drug
coverage to report aggregate information on prescriptions,
price concessions, and PBM payments to pharmacies, to include
PBMs contracting with state Medicaid programs in the types of
PBMs required to report.
It would remove the current exemption of reporting bona
fide fees from the reporting of the aggregate amount of price
concessions negotiated and reported by a PBM. This section
would also permit the HHS Secretary to share the information
submitted by a PBM with:
States in carrying out their administration
and oversight of state Medicaid programs;
The Federal Trade Commission; and
The Department of Justice.
SECTION 143. MEDICARE AND MEDICAID PRESCRIPTION DRUG PRICING DASHBOARD
Current Law
No provision in current law.
Provision
This provision would codify and build on the current CMS
practice to maintain internet website-based dashboards that
contain information on prescription drug and biological
spending and utilization in Medicare Part B, Medicare Part D,
and Medicaid.
SECTION 144. IMPROVE COORDINATION BETWEEN THE US. FOOD AND DRUG
ADMINISTRATION AND THE CENTERS FOR MEDICARE AND MEDICAID SERVICES
Current Law
No provision in current law.
Provision
This provision would require the Secretary of HHS to
convene a public meeting to discuss the challenges associated
with the next generation of treatments and therapies that will
be available to seniors. It also requires the Secretary to
publish a report on coding, coverage, and payment processes
under Medicare for new medical products.
SECTION 145. PATIENT PERSPECTIVES IN MEDICARE LOCAL COVERAGE
DETERMINATIONS AND NATIONAL COVERAGE DETERMINATIONS
Current Law
Under current law, CMS has the authority to make a national
coverage determination (NCD) of whether or not Medicare will
pay for a good or a service. If there is not an NCD, an item or
service is covered based on a local coverage determination
(LCD).
NCDs are defined in statute and involve a process that
includes: preliminary discussions, a national coverage
determination request, staff review, external technology
assessment and/or Medicare Coverage Advisory Committee, a draft
decision memorandum, a public comment period, and final
decision memorandum and implementation instructions.
LCDs are defined in statute and involve a process that
includes: informal meetings before the development of an LCD,
consultations with experts, the proposed determination, a
public comment period, the use of a Contractor Advisory
Committee, and final determination.
The 21st Century Cures Act of 2016 included changes to the
LCD process, including requiring each MAC that develops an LCD
to make it available on the both the Medicare Administrative
Contractor website and the Medicare website at least 45 days
before the effective date.
Provision
This provision would authorize the Secretary of HHS to
include patient perspectives in Medicare local and national
coverage determinations in order to mitigate barriers in
obtaining and assessing perspectives from patient and
disability groups in the determination process.
SECTION 146. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON INCREASES TO
MEDICARE SPENDING DUE TO PHARMACEUTICAL MANUFACTURER CONTRIBUTIONS TO
COPAY AND PATIENT ASSISTANCE ORGANIZATIONS
Current Law
No provision in current law.
Provision
This provision would require GAO to study the impact of
copayment coupons and other patient assistance programs on
prescription drug pricing and expenditures within the Medicare
and Medicaid programs.
SECTION 147. TO REQUIRE THE MEDICARE PAYMENT ADVISORY COMMISSION TO
SUBMIT TO CONGRESS A REPORT ON SHIFTING COVERAGE OF CERTAIN MEDICARE
PART B DRUGS TO MEDICARE PART D
Current Law
No provision in current law.
Provision
This provision would require MedPAC to issue a report no
later than June 30, 2021, describing the differences in
reimbursement for drugs under Parts B and D and the feasibility
of moving coverage of such drugs currently reimbursable under
Part B into Part D, with recommendations.
SECTION 148. TAKING STEPS TO FULFILL TREATY OBLIGATIONS TO TRIBAL
COMMUNITIES
Current Law
No provision in current law.
Provision
This provision would require GAO to conduct a study of
access to and cost of prescription drugs in Indian Country,
including: a review of what tribal communities pay for drugs
relative to other consumers; recommendations to align the value
of discounts available to the Medicaid program and discounts
available to tribal communities through the purchased and
referred care program for physician administered drugs; and an
examination of how tribal communities utilize the Medicare Part
D program and recommendations to improve enrollment among these
populations.
TITLE II-MEDICAID
SECTION 201. MEDICAID PHARMACY AND THERAPEUTICS COMMITTEE IMPROVEMENTS
Current Law
Prescription drugs are an optional Medicaid benefit, but
all states cover outpatient drugs. Since 1990, pharmaceutical
manufacturers who voluntarily agree to participate in Medicaid
are required to rebate a portion of the cost of covered
outpatient drugs back to states. When a manufacturer
participates in Medicaid, states must make the manufacturer's
drugs, with a few limited exceptions, available to Medicaid
beneficiaries. States share the manufacturer rebates with the
federal government. Beginning in 2010, drug manufacturers are
also required to pay rebates on drugs provided to Medicaid
beneficiaries enrolled in managed care.
Even though states are required to cover most drugs offered
by drug manufacturers, states are authorized to use certain
drug utilization and other tools to manage drug expenditures,
such as certain types of formularies. Under Medicaid statute,
states may establish formularies as long as they meet certain
requirements, including that the formulary was developed by a
committee--formulary committees often are referred to as
pharmacy and therapeutics committees (P&T committees)--composed
of physicians, pharmacists, and other appropriate individuals
appointed by the state governor. States must also ensure access
to medically necessary covered outpatient drugs. States may
elect for a drug use review (DUR) board to serve as a P&T
committee. Under current law, state Medicaid programs are not
required to identify, monitor, or report P&T committee member
conflicts of interest.
Under the Medicaid outpatient drug benefit statute, states
are required to have a DUR program and board. The DUR program
is required to ensure that covered outpatient drug (COD)
prescriptions are appropriate, medically necessary, and are
unlikely to result in adverse reactions. Medicaid DUR programs
must include prospective and retrospective DUR activities.
Prospective DUR requires review of Medicaid prescriptions prior
to dispensing to prevent over- or under-utilization, harmful
drug interactions, and clinical abuse or misuse. Retrospective
DUR involves review of state prescribing to identify patterns
such as gross misuse, fraud, or inappropriate or medically
unnecessary care.
Statutorily required DUR boards can be established directly
or under contract, but must include health care professionals
with recognized knowledge and expertise in appropriate COD
prescribing, appropriate monitoring of COD prescribing, drug
use review, evaluation, and intervention, and medical quality
assurance. The DUR board also must be composed of at least one-
third but no more than 51 percent licensed practicing
physicians and at least one-third licensed practicing
pharmacists.
State DUR boards are required to submit annual reports to
the state Medicaid program and state Medicaid programs are
required to submit an annual report to the HHS Secretary on the
DUR program that identifies state Medicaid prescribing
patterns, DUR cost savings, and adoption of innovative
practices. State Medicaid programs may contract with companies,
such as PBMs, and other organizations and academic institutions
to conduct DUR activities and prepare a report, but must have a
DUR board that manages or oversees the DUR contract.
Beginning October 1, 2019, Medicaid managed care
organizations with contracts to provide services to state
Medicaid programs were required to be in compliance with
statutory DUR requirements.
Provision
This provision would amend the SSA Section 1927(d)(4) to
enhance state Medicaid program requirements applicable to P&T
committees.
If a state establishes a formulary as under current law,
this provision would require state Medicaid programs to
establish P&T committees to develop and review the Medicaid COD
formularies. P&T committees would be required to include
physicians, pharmacists, and other appropriate individuals
appointed by a governor. The state would be required to
establish and implement a P&T committee conflict of interest
policy that would: be publicly accessible; require all P&T
committee members at least annually to disclose any
relationships, associations, and financial dealings that might
affect their independent judgement on committee matters; and
identify committee processes, such as recusal from voting or
discussion, for those members who report a conflict of
interest, as well as processes if a member fails to report a
conflict of interest.
States would be required to include at least one practicing
physician and one practicing pharmacist who are independent and
free of manufacturer, Medicaid plan, and PBM conflicts of
interest. The required P&T physician and pharmacist committee
members would also be required to have expertise in the care of
at least one Medicaid-specific beneficiary population, such as
elderly or disabled, children with complex medical needs, or
low-income individuals with chronic illnesses.
Under this provision, states would have the option for the
state DUR board to serve as the P&T committee as long as the
DUR board met the enhanced P&T committee requirements.
The HHS Secretary would be authorized to issue state
Medicaid program guidance on P&T committee conflict of interest
policies if GAO found or recommended, based on an investigation
required under Section 203 of the Prescription Drug Pricing
Reduction Act of 2019 that guidance was necessary related to
appropriate standards and requirements for identifying,
addressing, and reporting conflict of interest.
The provision would amend SSA Section 1903(m)(2)(A) to
require states to apply the state Medicaid program P&T
committee requirements under this provision to formularies used
by MCOs or other entities that dispensed CODs to Medicaid
beneficiaries. This provision would be effective one year after
the enactment date of this law.
SECTION 202. MEDICAID DRUG USE REVIEW CONFLICT OF INTEREST AND
REPORTING REQUIREMENTS
Current Law
Medicaid statute requires state Medicaid programs to
establish state Medicaid DUR boards. DUR boards can be
established directly or under contract, but must include health
care professionals with recognized knowledge and expertise in
appropriate COD prescribing, appropriate monitoring of COD
prescribing, DUR, evaluation, intervention, and medical quality
assurance. The DUR board also must be composed of at least one-
third but no more than 51 percent licensed practicing
physicians and at least one-third licensed practicing
pharmacists.
State DUR boards are required to submit annual reports to
the state Medicaid program and state Medicaid programs are
required to submit an annual report to the HHS Secretary on the
DUR program that identifies state Medicaid prescribing
patterns, DUR cost savings, and adoption of innovative
practices. Under current law, state Medicaid programs are not
required to identify, monitor, or report DUR board member
conflicts of interest.
Provision
This provision would amend SSA Section 1927(g)(3) to
require states to establish and implement conflict of interest
policy for individuals who are members of state Medicaid DUR
boards that would: be publicly accessible; require all DUR
board members at least annually to disclose any relationships,
associations, and financial dealings that might affect their
independent judgement on board matters; and include clear
processes, such as recusal from voting or discussion, for those
members who report a conflict of interest, as well as processes
if a member fails to report a conflict of interest. DUR boards
would be required to submit to the state Medicaid program an
annual report that identified DUR board members as well as any
member conflicts of interest. This provision also would amend
SSA Section 1932(i) to require that managed care plans under
contract to state Medicaid programs comply with the conflict of
interest reporting requirements for DUR boards.
The HHS Secretary would be authorized to promulgate
regulations or guidance to establish national standards for
Medicaid FFS and managed care DUR programs in order to align
prospective and retrospective DUR reporting criteria across all
state Medicaid programs and help ensure alignment of standards
across state Medicaid FFS and managed care DUR programs.
Within 18 months of the enactment date, the HHS Secretary
would be required to issue guidance to state Medicaid programs
outlining the steps necessary for states to comply with the DUR
requirements.
The amendments made under this provision would be effective
one year after the enactment date of this law.
SECTION 203. GOVERNMENT ACCOUNTABILITY OFFICE REPORT ON CONFLICTS OF
INTEREST IN STATE MEDICAID PROGRAM DRUG USE REVIEW BOARDS AND PHARMACY
AND THERAPEUTICS COMMITTEES
Current Law
Medicaid statute does not have a current requirement for a
GAO report on state DUR Board and P&T committee conflicts of
interest.
Provision
This provision would require GAO to investigate potential
and existing state Medicaid program DUR board and P&T committee
conflicts of interest. GAO would be required to submit a report
to Congress within 24 months of the enactment date that
addressed the following:
(1) A description of state DUR board and P&T Committee
operations, including details on:
The DUR board and P&T committee structure
and operation;
states that operate separate FFS and
Medicaid managed care organization (MCO) P&T; and
states that allow Medicaid MCOs to operate
separate P&T committees and the extent to which PBMs
administer or participate in these separate P&T
committees;
(2) A description of differences between state Medicaid DUR
boards and P&T committees;
(3) A description outlining the tools P&T committees may
use to determine Medicaid drug coverage and utilization
management policies;
(4) An analysis of whether and how states or P&T committees
establish participation and independence requirements for DUR
boards and P&T committees, including with respect to entities
with connections with drug manufacturers, state Medicaid
programs, managed care organizations, and other entities or
individuals in the pharmaceutical industry;
(5) A description outlining how states, DUR boards, or P&T
committees define conflicts of interest;
(6) A description of how DUR boards and P&T committees
address conflicts of interest, including who is responsible for
implementing such policies;
(7) A description of tools states use to ensure that there
are no DUR board and P&T committee member conflicts of
interest;
(8) An analysis of state effectiveness in ensuring there
are no DUR board and P&T committee member conflicts of interest
and, applicable recommendations to improve state conflict of
interest tools;
(9) A review of state strategies to guard against DUR board
and P&T committee conflicts of interest to ensure compliance
with Medicaid and HHS requirements and access to effective,
clinically appropriate, and medically necessary Medicaid
beneficiary drug treatments, including GAO legislative and
administrative action recommendations.
SECTION 204. ENSURING THE ACCURACY OF MANUFACTURER PRICE AND DRUG
PRODUCT INFORMATION UNDER THE MEDICAID DRUG REBATE PROGRAM
Current Law
COD manufacturers that participate in the MDRP are required
under Medicaid statute to report to the HHS Secretary certain
calendar quarter drug pricing information such as the average
manufacturer price (AMP), average sales price (ASP), the number
of units sold, and when applicable, best price and the
wholesale acquisition cost (WAC) or list price. ASP is defined
as a manufacturer's quarterly sales of a drug to all U.S.
purchasers; divided by the drug's total units sold for the same
quarter. AMP is defined in Medicaid statute and generally is
the price manufacturers sold their products to retail community
pharmacies, excluding most price concessions and sales at
nominal price.
Provision
This provision would amend SSA Section 1927(b)(3) to
improve oversight of the information COD manufacturers agree to
submit when they participate in the MDRP.
This provision would require the HHS Secretary to audit the
price and drug product information reported by COD
manufacturers to ensure its accuracy and timeliness. The HHS
Secretary would be authorized to use evaluation surveys,
statistical sampling, predictive analytics, and other tools and
methods.
The HHS Secretary also would be authorized to survey
wholesalers and manufacturers, including direct seller
manufacturers, when necessary, to verify manufacturer prices,
including WAC and AMP. A direct sale occurs when a drug
manufacturer sells directly to a provider, such as a hospital
or nursing home.
In addition to other penalties as may be prescribed by law,
the HHS Secretary would be authorized to impose CMPs up to
$185,000 on wholesalers, manufacturers, or direct sellers of
CODs if those entities refused to provide information about
audit or surveyed charges or prices or knowingly provides false
information. Certain additional civil money penalties
applicable under SSA Section 1128A (other than SSA Section
1128A(a) and (b)) would also apply to entities that failed to
comply with information requests or knowingly provided false
information.
Within 18 months of the enactment date, the HHS Secretary
would be required to submit a report to the congressional
committees of jurisdiction on the need for additional
regulatory or statutory changes that might be required to
ensure accurate and timely reporting and oversight of drug
price and product information.
On at least an annual basis, the HHS Secretary would be
required to submit a report to the congressional committees of
jurisdiction summarizing the results of the drug price and
product audits and surveys. This provision identifies
requirements for the HHS Secretary's annual report to Congress
on the drug price and product audit and surveys.
In preparing annual reports to Congress, to prevent
disclosure and safeguard the information, the HHS Secretary
would be required to redact any manufacturer proprietary
information.
Out of any Treasury funds not otherwise appropriated, this
provision would appropriate $2 million for fiscal year 2020 and
each fiscal year thereafter to be used to implement this
provision.
This provision would also amend SSA Section 1927(b)(3)(C)
to increase the CMP penalties for noncompliance with COD
manufacturer reporting requirements from $10,000 per day for
required information to $50,000 for the first day information
is not reported for each drug and $19,000 for each subsequent
day per drug. CMPs for knowingly reporting false information
also would be increased from up to $100,000 to up to $500,000.
This provision would be effective on the first day of the
first fiscal quarter that begins after the date of enactment of
this law.
SECTION 205. EXCLUDING AUTHORIZED GENERICS FROM THE CALCULATION OF
AVERAGE MANUFACTURER PRICE FOR PURPOSES OF THE MEDICAID DRUG REBATE
PROGRAM
Current Law
According to the HHS OIG, an authorized generic drug is a
brand-name drug that a brand manufacturer either sells or
permits another manufacturer (referred to as the secondary
manufacturer) to sell as a generic drug. Two statutory
requirements related to calculating a brand-name drug AMP have
the effect of lowering the product's AMP, thereby decreasing
manufacturers' Medicaid rebate obligations for those products.
These include: (1) the requirement that authorized generics be
included with brand product sales and (2) the requirement that
secondary manufacturers be included as wholesalers.
Provision
This provision would amend SSA Section 1927(k)(1) to
exclude authorized generic drugs from the calculation of AMP
under the MDRP and for other purposes. In addition, this
provision would amend the statutory definition of wholesaler to
exclude COD manufacturers. The provision would be effective on
the first day of the first fiscal quarter that begins after the
enactment date.
SECTION 206. IMPROVING TRANSPARENCY AND PREVENTING THE USE OF ABUSIVE
SPREAD PRICING AND RELATED PRACTICES IN MEDICAID
Current Law
State Medicaid programs reimburse statutorily defined
retail community pharmacies (RCPs) for CODs dispensed to
Medicaid beneficiaries. Even though state Medicaid programs
make only one payment to RCPs for covered outpatient drug
payments, the payment has two components: an amount to cover
the cost of acquiring the drug (ingredient cost) and an amount
for the pharmacist's professional services in filling a
prescription (dispensing fee). States, subject to CMS approval,
determine the reimbursement amount for ingredient costs and
dispensing fees. Dispensing fees usually are a fixed amount,
but can vary depending on the drug or pharmacy. The ingredient
cost is an approximation of a drug's market price, which is the
drug's cost to the pharmacy. Medicaid statute requires CMS to
limit the maximum federal payment for certain generic drug
ingredients to no less than 175 percent of the most recently
reported national weighted average of average manufacturer
price (AMP). However, when the amount paid to RCPs is less than
the average acquisition cost for these drugs, states may base
their RCP reimbursement for these drugs on the average
acquisition cost from the current national RCP survey. The HHS
Secretary is authorized to conduct the national average drug
acquisition cost (NADAC) survey in order to provide states a
resource to determine drug costs to comply with federal maximum
payment requirements.
The ACA required drug manufacturers that participate in the
MDRP to provide rebates on covered outpatient drugs that are
dispensed to beneficiaries whose care is covered under an MCO
that contracts with the state Medicaid program. Many MCOs and
other entities that provide Medicaid prescription drug benefits
contract with PBMs to manage and administer the drug benefits.
Generally, MCOs pay PBMs for generic drugs supplied to Medicaid
beneficiaries based on a published price, such as the average
wholesale price (AWP) for all generic claims. Even though the
difference (spread) between AWP-based MCO payments to PBMs and
PBM payments to pharmacies may be small for individual drugs,
it can be substantial when aggregated for all generic drugs,
since generic drugs account for as much as 90 percent of
prescription volume.
Provision
This provision would amend the SSA Section 1927(e) to
require pass-through pricing for CODs in Medicaid including
under managed care. It would require payment for pharmacy
management services to be limited to ingredient cost and a
professional dispensing fee that is not less than the
professional dispensing fee that the State plan or waiver would
pay, passed through in their entirety to the pharmacy that
dispenses the drug, and made in a manner that is consistent
with Section 1902(a)(30)(A) and sections 447.512, 447.514, and
447.518 of title 42, Code of Federal Regulations. It would
require payment to the PBM for administrative services to be
limited to a reasonable administrative fee and require that the
entity or PBM make available to the State, and the HHS
Secretary upon request, all costs and payments related to CODs
and accompanying administrative services. It would make any
form of spread pricing unallowable for purposes of claiming
Federal matching payments under Medicaid. Such changes would be
apply to contracts that are entered into or renewed on or after
18 months after the date of enactment of this law.
The provision would also amend Section 1927(f) to require
the HHS Secretary to conduct a survey of retail community drug
prices to include the national average drug acquisition cost.
The HHS Secretary would be able to employ a vendor to contract
for services with respect to the survey. Retail community
pharmacies that receive payment related to the dispensing of
CODs to individuals receiving benefits under Medicaid would be
required to respond to the survey. Information on retail
community prices obtained through the survey would be made
publicly available and include at least the following: the
monthly response rate and the list of pharmacies out of
compliance with reporting requirements; the sampling frame and
number of pharmacies sampled monthly; characteristics of
reporting pharmacies; reporting of a separate national average
drug acquisition cost for each drug for independent retail
pharmacies and chain operated pharmacies; information on price
concessions including on and off invoice discounts, rebates,
and other price concessions; and information on average
professional dispensing fees. A pharmacy that fails to respond
to the survey or knowingly provides false information in
response to the survey could be subject to penalties in
addition to other penalties that may be imposed under law.
The HHS Secretary would also be instructed to issue a
report to Congress examining specialty drug coverage and
reimbursement under Medicaid including a description of how
State Medicaid programs define specialty drugs, how much State
Medicaid programs pay for specialty drugs, how States and
managed care plans determine payment for specialty drugs, the
settings in which specialty drugs are dispensed, whether
acquisition costs for specialty drugs are captured in the NADAC
survey, and recommendations as to whether specialty pharmacies
should be included in the survey of retail prices. The
provision would appropriate $5 million for fiscal year 2020 and
thereafter to carry out the survey and related activities.
These changes would take effect 18 months after the date of
enactment of this law.
The provision would also require manufacturers to report
wholesale acquisition cost for covered outpatient drugs and for
the Secretary to make such information available on a public
website.
SECTION 207. TRANSFORMED MEDICAID STATISTICAL INFORMATION SYSTEM DRUG
DATA ANALYTICS REPORTS
Current Law
States are required as a condition of receiving federal
financial participation (FFP), to provide for the electronic
transmission of claims data in a format specified by the HHS
Secretary and consistent with the Transformed Medicaid
Statistical Information System (T-MSIS). These systems are
capable of providing provider, physician, and patient profiles
sufficient to provide specific information as to the use of
types of services and supplies, including covered outpatient
drugs. Enhanced federal funding is available to the states for
the planning and operation of these systems.
State Medicaid programs are required to submit an annual
report to the HHS Secretary on COD payment rates, dispensing
fees, and utilization rates for generic drugs. State Medicaid
programs also are required to operate a DUR program to assure
that COD prescriptions are appropriate, medically necessary,
and unlikely to result in adverse medical results. The DUR
program is required to compare drug use to certain industry
standards. States are required to submit an annual report to
the HHS Secretary on specified DUR activities. These reports
are not submitted via T-MSIS.
The HHS Secretary is required to encourage state Medicaid
programs to implement point-of-sale claims processing
information systems to perform on-line, real time eligibility
verification, claims data capture, adjudication, and pharmacy
assistance in covered outpatient drug claim payment. All states
have implemented these systems.
Provision
The HHS Secretary would be required to publish a report on
Medicaid provider prescribing patterns for CODs for each state,
and to the extent possible, for the five U.S. territories. The
report would be required to be prepared by the CMS
Administrator, and published on the CMS website each year
beginning calendar year 2021.
The report would be required to include a comparison of
drug prescribing patterns for Medicaid CODs across the
following dimensions: (1) all forms or models of reimbursement
used under the plan or waiver; (2) within specialties and
subspecialties, as defined by the HHS Secretary; (3) by
episodes of care for (a) the 10 highest cost chronic disease
categories, as defined by the HHS Secretary, (b) procedural
groupings, and (c) rare disease diagnosis codes; (4) by patient
demographic characteristics (e.g., race (as determined by the
HHS Secretary), gender, and age); (5) by high-utilizer or high-
risk patient status; and (6) by high and low resource settings
by facility and place of service categories, as determined by
the HHS Secretary. The report would be required to include an
analysis of the differences in Medicaid prescribing patterns
for covered outpatient drugs prescribed under managed care as
compared to the FFS delivery system.
In addition, the report would be permitted to include a
State-specific comparison of prescription utilization
management tools used: (1) for populations covered under a
Medicaid Section 1115 demonstration waiver as comparted to
models applicable to non-waiver populations; (2) by Medicaid
MCOs, PBMs, and related entities within the state; (3) for each
Medicaid enrollment category; and (4) for high-utilizer or
high-risk status patients. In addition, the report may include
information about Medicaid prescription utilization management
tools under programs to provide Medicaid long-term services and
supports.
If practical, the HHS Secretary would be required to
include: (1) analyses of national, state, and local patterns of
Medicaid population-based prescribing behaviors; and (2)
recommendations for administrative or legislative action to
improve the effectiveness of, and reduce costs for, Medicaid
prescription drugs while ensuring timely beneficiary access to
medically necessary covered outpatient drugs. The reports would
be required to be prepared using data and definitions from the
T-MSIS data set that is not more than 24 months old on the date
the report is published; and as appropriate, include a
description of the quality and completeness of the data for
each state (or territory), as well as any necessary limitations
associated with the state-reported data.
The provision would appropriate $2 million to the HHS
Secretary to carry out this section for each fiscal year
beginning FY 2020.
SECTION 208. RISK-SHARING VALUE-BASED AGREEMENTS FOR COVERED OUTPATIENT
DRUGS UNDER MEDICAID
Current Law
Prescription drugs are an optional Medicaid benefit but all
states provide an outpatient drug benefit. Drug manufacturers
that voluntarily participate in the MDRP are required to offer
their products to all state Medicaid programs at their lowest
``best'' price or to pay a rebate, whichever results in a lower
price to the Medicaid program. Under the statutory terms of the
MDRP, the best price is the lowest price drug manufacturers
offer their product for sale in the United States to RCPs
during a rebate period. If a drug manufacturer sells their drug
at a low price to any buyer, it is obligated to match that
price for all state Medicaid programs. In addition, drug
manufacturers are statutorily required to pay additional
inflation rebates to the Medicaid program when they increase
the price of their drug products faster than the inflation
rate. States may also negotiate other, supplemental rebates
from drug manufacturers in exchange for a commitment to
purchase a certain drug volume or to direct all providers to
prescribe only the manufacturer's product. Under these
supplemental rebate agreements, states must make a process
available for providers to prescribe other similar medically
necessary products.
The current pipeline for new drugs includes an increasing
number of gene therapies, which may be administered once and
lead to remission of symptoms or potential genetic cures. At
present, many of these gene therapies are designated by the FDA
for rare diseases or conditions, which is one that affects less
than 200,000 individuals. The high cost of newer drugs can have
a significant impact on state Medicaid spending even with
Medicaid receiving the best price.
Under current law, states may submit state plan amendments
outlining supplemental rebate agreements, including for new
drugs. Once supplemental rebate templates are approved,
additional details are typically arranged between the state and
manufacturer. Payments under approved supplemental rebate
agreements do not trigger Medicaid's best price provision, with
savings shared between the state and federal government.
Provision
The provision would add an option for states under SSA
Section 1927 to pay for certain covered outpatient drugs
through risk-sharing value-based agreements beginning January
1, 2022. Under the option, states would be able to use the
risk-sharing value-based agreements with drug manufacturers for
CODs that are potentially curative treatments intended for one-
time use. Specifically, the CODs would be a form of gene
therapy for a rare disease that, if administered based on the
drug's label to a patient for the treatment of a serious or
life-threatening disease or condition, is expected to cure or
reduce the symptoms of the disease after not more than three
administrations.
In order for the HHS Secretary to be able to approve the
risk-sharing value-based agreement submitted by the state, the
drug manufacturer would need to have a rebate agreement that is
in effect and be in compliance with all the Medicaid
requirements. Also, the Chief Actuary of CMS would need to
certify that the agreement would not result in increased
federal Medicaid payments.
In consideration of an agreement, the HHS Secretary would
be required to treat the state's request in the same manner as
a Medicaid state plan amendment, including the timing
requirements. The HHS Secretary would be required to consult
with the FDA Commissioner, as needed, to determine whether the
relevant clinical parameters specified in the agreement are
appropriate.
The payments for the agreement would be structured as
installment-based payments with the state paying equal
installments of the total installment year amount at regular
intervals over the period of time. The first installment
payment would be made no later than 30 days after the end of
such year. The total installment year amount would be the
amount equal to the product of the unit price of the drug
charged under the agreement and the number of units dispensed
under the agreement. The period of time the state would be able
to make the installment payments would be no longer that five
years. States would have the ability to not provide an
installment payment or pay a reduced amount of the installment
payment if the covered outpatient drug fails to meet the
relevant clinical parameters of the agreement.
The manufacturer of a covered outpatient drug approved
under Section 505 of the Federal Food, Drug, and Cosmetic Act
or licensed under Section 351 of the PHSA would be required to
notify the HHS Secretary that the manufacturer is interested in
entering into an agreement not more than 90 days after meeting
with the FDA following the phase II clinical trials for such
drug. Manufacturers of such drugs that are beyond 90 days after
the phase II clinical trial meeting at the FDA as of January 1,
2022 may also notify the Secretary of their interest in
entering into a risk-sharing value-based agreement (but if
already on the market, such a drug must be approved by the
FDA). The HHS Secretary, in coordination with the CMS
Administrator and the FDA Commissioner, would be able to
provide parallel approval to a state's request for an agreement
that otherwise meets the requirements of this state option.
For Medicaid enrollees who are administered a unit of a
covered outpatient drug purchased under a risk-sharing value-
based agreement in an installment year (i.e., a 12-month period
during which a covered outpatient drug is dispensed), the state
would remain liable to the drug manufacturer for payment for
each installment year without regard to whether the enrollee
remains enrolled in Medicaid, unless the Medicaid enrollee
dies. The HHS Secretary would be required to provide guidance
to states no later than January 1, 2022 about how to establish
a process to notify the HHS Secretary when a Medicaid enrollee
ceases to be enrolled in Medicaid before the end of the
installment period. Subject to the approval of the Secretary,
the terms of a proposed risk-sharing value-based payment
agreement may provide that such requirements do not apply. The
state would not be liable for remaining payment under the
agreement if the HHS Secretary withdraws approval of the drug.
For the purposes of determining the AMP and best price for
the covered outpatient drug and the rebate period, the HHS
Secretary would treat any payment made to the drug manufacturer
under the agreement during such period in the same manner as
the prices paid under a state supplemental rebate agreement.
Payments under the agreement would be in lieu of rebates that
would otherwise be paid under the MDRP with the decision to
enter into such an agreement remaining solely within the
discretion of a state upon HHS Secretary and actuarial
certification as required under the provision.
Not later than 180 days after each assessment period of an
agreement, the HHS Secretary would be required to conduct an
evaluation of the agreement, which would include an evaluation
by the Chief Actuary of CMS to determine whether the actual
program spending aligned with the projections. If the Chief
Actuary of CMS finds the spending under the agreement is more
than what expenditures would have been under a traditional
rebate agreement including basic, additional, and any relevant
supplemental rebates, then the HHS Secretary may terminate the
agreement and would be required to conduct an evaluation of
other ongoing risk-sharing value-based payment agreements to
which the manufacturer is a party. The manufacturer would also
be required to repay the difference to the state and federal
government in a timely manner. Failure to comply with repayment
obligations would result in various actions including
termination of manufacturer risk-sharing value-based agreements
and possible suspension or termination from the program.
The HHS Secretary would be required to submit a report to
Congress with specified information no later than five years
after the first risk-sharing value-based agreement is approved
including an assessment of the impact of such agreements on
access to medically necessary covered outpatient drugs and
related treatments for Medicaid enrollees, analysis of the
impact of such agreements on overall State and Federal
spending, an impact of such agreements on drug prices, and
recommendations to Congress as appropriate.
The HHS Secretary would be required to issue guidance no
later than January 1, 2022 to states seeking to enter into a
risk-sharing value-based agreement that includes a model
template for such agreements. The HHS Secretary would be able
to share approved agreements between a state and a manufacturer
with states expressing interest in pursuing an agreement. The
HHS Secretary would also be required to consult with the HHS
OIG to determine whether there would be potential program
integrity concerns with any such agreements. All other
provisions of Section 1927 would continue to apply unless
expressly provided under the new state option.
For FY2020 and each following fiscal year, there would be
appropriated to the HHS Secretary $5 million for the purpose of
carrying out this state option.
SECTION 209. MODIFICATION OF MAXIMUM REBATE AMOUNT UNDER MEDICAID DRUG
REBATE PROGRAM
Current Law
Prescription drugs are an optional Medicaid benefit but all
states provide an outpatient drug benefit. Drug manufacturers
that voluntarily participate in the MDRP are required to offer
their products to all state Medicaid programs at their lowest
``best'' price or to pay a rebate, whichever results in a lower
price to the Medicaid program. There are two statutory Medicaid
rebates, a basic rebate and an additional rebate. The
additional rebate, also referred to as the inflation rebate, is
added to the amount of basic rebate to equal the total
statutory rebate. The inflation rebate is applied when drug
manufacturers increase product prices faster than the drug's
inflation adjusted average manufacturer price (AMP).
Drug manufacturers' Medicaid rebate obligations
attributable to the inflation rebate do not continue to
increase once a drug's AMP reaches the maximum rebate cap of
100 percent of the product's rebate period AMP. Once a drug
reaches the maximum rebate of 100 percent of the product's AMP,
additional price increases will not result in larger rebates.
Provision
This provision would revise SSA Section 1927(c)(2) by
increasing the maximum allowable Medicaid rebate permissible in
a rebate period from 100 percent of a covered outpatient drug's
average manufacturer price (AMP) to 125 percent effective for
rebate periods beginning October 1, 2022. For rebate periods
between December 31, 2009 and October 1, 2022, the maximum
allowable Medicaid rebate would remain at 100 percent of the
product's rebate period AMP.
In addition, starting in fiscal year 2022, if a
manufacturer increases their AMP for a covered outpatient drug
beyond their base year AMP trended forward by CPI-U, they would
be subject to all rebate obligations that would otherwise be
due if there was no cap on rebate obligations. Once the current
quarter AMP is in alignment with the base year AMP trended
forward by CPI-U for the covered outpatient drug, the
manufacturer may continue to increase the AMP of the drug by no
more than CPI-U with no additional rebate labiality above the
125 percent AMP rebate cap in effect as of October 1, 2022.
SECTION 210. APPLYING MEDICAID DRUG REBATE REQUIREMENT TO DRUGS
PROVIDED AS PART OF OUTPATIENT HOSPITAL SERVICES
Current Law
Medicaid covered outpatient drugs are generally FDA-
approved drugs, biologicals, other than vaccines, and insulin
available by prescription in the United States. Drugs provided
as part of or incident to and in the same setting as other
services, and where payment is made as part of the service,
rather than separately for the drug, are not considered covered
outpatient drugs such as drugs provided as part of the
following: inpatient hospital services; hospice services;
dental services, except if the state authorizes direct
reimbursement to the dispensing dentist; physician services;
outpatient hospital services; nursing facility services and
services provided by an intermediate care facility for the
mentally retarded; other laboratory and x-ray services; and
renal dialysis.
Under current law, a number of drugs are considered covered
outpatient drugs even though they are administered by
physicians in offices or in outpatient hospital outpatient
departments because the drugs are separately payable.
Increasingly, newer covered outpatient drugs could be paid for
as part of a service bundle or as part of value-based treatment
where providers are paid a single rate for a treatment that
includes the administration of drugs as well as other services
necessary to diagnose, plan treatment, and provide post-
treatment follow up. Medicaid statute requires participating
drug manufacturers to provide the Medicaid program rebates or
their best price on covered outpatient drugs.
Provision
This provision would amend the SSA Section 1927(k)(3) to
provide, at the option of a state, that the term ``covered
outpatient drug'' may include any drug, biological product, or
insulin as part of a bundled payment if it is provided on an
outpatient basis as part of, or as incident to and in the same
setting as, physicians' services or outpatient hospital
services. The provision would take effect one year after date
of enactment. The HHS Secretary would also be instructed to
issue guidance and relevant informational bulletins for States,
manufacturers and other relevant stakeholders, including health
care providers, regarding implementation of the provision.
III. BUDGET EFFECTS OF THE BILL
A. COMMITTEE ESTIMATES
In compliance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate and section 308(a)(1) of the
Congressional Budget and Impoundment Control Act of 1974, as
amended (the ``Budget Act''), the following statement is made
concerning the estimated budget effects of the revenue
provisions of the Prescription Drug Pricing Reduction Act of
2019, as reported. The spending effects of the bill will be
included in the statement from the Congressional Budget Office
that will be provided separately, as described in Part C below.
B. BUDGET AUTHORITY
In compliance with section 308(a)(1) of the Budget Act, the
Committee states that the extent to which the provisions of the
bill as reported involve new or increased budget authority or
affect levels of tax expenditures will be included in the
statement from the Congressional Budget Office that will be
provided separately, as described in Part C below.
C. CONSULTATION WITH CONGRESSIONAL BUDGET OFFICE
In accordance with section 403 of the Budget Act, the
Committee advises that the Congressional Budget Office has not
submitted a statement on the bill. The statement from the
Congressional Budget Office will be provided separately.
IV. VOTES OF THE COMMITTEE
In compliance with paragraph 7(b) of rule XXVI of the
Standing Rules of the Senate, the Committee states that, with a
majority present, the Prescription Drug Pricing Reduction Act
(PDPRA) of 2019 was ordered favorably reported by a roll call
vote of 19 ayes and 9 nays on July 25, 2019.
V. REGULATORY IMPACT AND OTHER MATTERS
A. REGULATORY IMPACT
Pursuant to paragraph 11(b) of rule XXVI of the Standing
Rules of the Senate, the Committee makes the following
statement concerning the regulatory impact that might be
incurred in carrying out the provisions of the bill.
Impact on individuals and businesses, personal privacy and paperwork
In carrying out the provisions of the bill, individuals and
businesses across the drug supply chain including drug
manufacturers, pharmacy benefit managers, health plans, and
pharmacies that provide prescription drugs to individuals with
Medicare or Medicaid coverage will be subject to new reporting
requirements under the bill. The requirements range from drug
manufacturers' reporting average sales price for all products
and justifications of their price increases for drugs sold in
the US to health plans' reporting financial audit data from
pharmacy benefit managers that negotiate price concessions on
their behalf. The new information will be reported to the HHS
Secretary and in many cases the Secretary will share the
reported information with the public.
The provisions of the bill do not impact personal privacy.
B. UNFUNDED MANDATES STATEMENT
The Committee adopts as its own the estimate of federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act of 1995 (P.L. 104-4), which will be provided separately.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In the opinion of the Committee, it is necessary in order
to expedite the business of the Senate, to dispense with the
requirements of paragraph 12 of rule XXVI of the Standing Rules
of the Senate (relating to the showing of changes in existing
law made by the bill as reported by the Committee).
[all]