Advisory Market Update

This the Advisory Market Update for February 2021 from IntegriChain. We want to keep you up-to-date with relevant, timely industry insights and regulatory updates that may impact your business. If you have questions on any of the content found in this or other newsletters, reach out to your IntegriChain Advisory Lead or and we would be happy to talk you through it.

Welcome to the first market update of 2021! This month we’ll be looking back at end of year changes in process, compliance, and government pricing and looking ahead to what we can expect in the coming year.

New News from the Biden Administration

The Biden Administration has delayed one of President Trump’s drug pricing policies for a year. The policy would prevent drug makers and middlemen from negotiating rebates on prescription drugs. This policy was planned to go into effect in January of 2022 but was agreed to be delayed until 2023. 

Given the trends we are seeing in the new administration, we believe the following may occur over the next four years:

  • The Biden Administration is planning on protecting and expanding Obamacare. For certain, he is capable of protecting the Affordable Care Act but with a slim majority in the House, he will most likely struggle to expand it. Biden also has a plan to increase coverage by lowering the age from 65 to 60 for Medicare eligibility and allowing a public option for those who are not enrolled in Medicare or Medicaid. 
  • The Biden administration has stated that they are committed to putting science first. This has the potential to drive research, science, and innovation within the life sciences industry. The new anti-fraud rules would revamp the Stark Law which does not allow physician self-referrals and Anti-Kickback which rewards federal health programs such as Medicare and Medicaid. All rules that did not take effect before Jan 20 are being reviewed by the Biden Administration. 
Links to read more:

OIG Rebate Rule Delayed Twice 

The OIG published a final rule that excludes the Federal healthcare program safe harbor for discount rebates paid to Medicare Part D plans, of their PBMS. The PBM Rebate Rule has been created to establish two new protections. First, rebates paid to Medicare Part D plans and Medicaid Managed Care plans, of their PBMs. The rebates are passed through by the plan or PBM to the dispensing pharmacy. Another is for service fees paid to PBMs. These safe harbors were met to force PBMs to pass manufacturer rebates to pharmacies in order to lower out-of-pocket costs of government beneficiaries as the pharmacy counter. The OIG Rebate Rule has now been delayed to January 1, 2023, and the two new protections have been delayed until March 22, 2021. 

Links to read more: 

ASP Alert

A recent provision has been made for the ASP reporting requirement. A manufacturer must report ASP even if it does not have a Medicaid Drug Rebate Agreement. The requirements for reporting are ASP, WAC, and sales made at a nominal price. This reporting requirement will go into effect for calendar quarters starting January 1, 2022. Failing to report the ASP for these drugs or biologicals could lead to civil money penalties. 

Link to read more: 

340B Final Rule

The U.S Department of Health and Human Services and Health Resources and Services Administration issued a regulation of interest to drug manufacturers and providers called the 340B Drug Pricing Program Alternative Dispute Resolution Final Rule (“ADA Final Rule”). The rule sets an alternative dispute resolution process that offers manufacturers and 340B covered entities a way of negotiating certain disputes in a formal setting without utilizing litigation or private arbitration. The intention is for the alternative dispute resolution process to replace the 1996 dispute resolution guidance. 

The final rule was set to go into effect on January 13. The ADR Final Rule can also come into play in connection with active 340B litigation filed by the hospital industry responding to specific drug manufacturers’ steps to limit 340B covered entities’ use of contract pharmacy arrangements. Also, the litigation looks to drive the government to complete the ADR rulemaking process to provide a forum for covered entities to bring claims against drug manufacturers.

Link to read more: 

Update on Contract Pharmacies vs. Manufacturers

Under the 340B Drug Pricing Program, drug manufacturers are required to deliver discounts on any covered outpatient drugs when contract pharmacies are acting under the 340B covered entities. Estimates can range between 25%-50% and $30 billion of drugs are sold to covered entities each year. Drug manufacturers are ensuring that they are providing the 340B discounts which are to help the unprotected populations where the program was to help benefit this population to begin. Vulnerable populations include net hospitals and community health centers. This result is because HHS has been informed that drug manufacturers are refusing to provide 340B discounts when covered entities order the drug themselves but delivered through contract pharmacies. 

Link to read more: 

Finalized HHS Formulary Rebate Rule:

The new Safe Harbor rule became effective on January 29, 2021, and the removal of the discount safe harbor has been delayed until January 2, 2022. The implementation of the Final Rule will impact the drug supply chain stakeholders under Medicare Part D. Human Health Services removed the safe harbor protection and this rule creates two new safe harbors that protect discounts that are reflected at the point of sale. This creates new safe harbor protection for fixed-fees between the PBM and manufacturer. This rule offers discounts that benefit patients by lowering out-of-pocket costs at the pharmacies. Its two main parts are to reduce the price at POS and reduce PBM service fees. The area with the most negative impact is the financial impact on PBM and health plans. PDMs are now in consideration to restructure their rebate program as it stands before the 2022 deadline. 

Link to read more:

About the Author

Brendan Crabtree

Brendan Crabtree

Government Pricing Analyst

Brendan Crabtree is an up and coming consultant on IntegriChain’s Advisory team. He serves as a trusted partner to Life Sciences manufacturers of all sizes, delivering guidance and expertise in government pricing and state pricing transparency to their Market Access teams. He earned a Bachelor’s degree in Information Technology from Penn State University.