Administration Floats New Rules for Drug Cost Transparency

WASHINGTON — The Biden administration has proposed using new tools to monitor costs associated with prescription drugs so it can hold pharma manufacturers accountable for what Medicaid programs pay for them.

The Notice of Proposed Rule Making was made through the Department of Health and Human Services’ Centers for Medicare & Medicaid Services on Tuesday.

Officials with the department said the new rules would improve the Medicaid Drug Rebate Program by shedding light on the actual cost of drugs covered by Medicaid, and advance the goal of an executive order signed by President Joe Biden to lower prescription drug prices for all Americans.

“President Biden is not only committed to protecting Medicaid, but continues to take bold actions to strengthen the program,” said HHS Secretary Xavier Becerra in a written statement. 

“With today’s proposed rule, we are advancing unprecedented efforts to increase transparency in prescription drug costs, being good stewards of the Medicaid program and protecting its financial integrity,” Becerra continued, adding, “This proposed rule will save both states and the federal government money.”

Among other things, the proposed regulation would give state and federal governments additional tools, like a drug price verification survey, which would help Medicaid and states better negotiate what the Medicaid program pays for high-cost drugs. 

Officials said another proposed provision would enhance transparency into the costs of administering drug benefits in Medicaid-managed care plans. 

Despite the fact managed care plans cover more than 75% of Medicaid beneficiaries, there is little transparency when it comes to the amount paid to pharmacy benefits managers who often negotiate and administer the pharmacy benefit

This lack of transparency has raised concerns about pharmacy benefits managers using spread pricing arrangements to increase their profit margins by charging managed care organizations more for a drug than the amount a benefits manager pays a pharmacy. 

To address this issue, CMS is proposing that contracts between states, Medicaid-managed care plans and third-party contractors, such as pharmacy benefits managers, reflect transparent reporting of drug payment information among third-party contractors. 

Lastly, the Notice of Proposed Rulemaking includes provisions intended to prevent the potential misclassification of drugs as brand name or generic. 

These provisions are intended to ensure states would receive the appropriate rebates to which they are entitled, since states receive a higher percentage of rebate dollars for brand-name drugs compared to generics. 

With increased transparency, states would be able to determine if manufacturers appropriately classified their covered outpatient drugs, and if they did not, give CMS the ability to take action to correct the misclassification.

“This proposed rule prioritizes CMS’ role as a good steward of Medicaid dollars while also strengthening program integrity and the management of pharmacy benefits for people with Medicaid coverage,” said CMS Administrator Chiquita Brooks-LaSure in a written statement. “We’re committed to preserving access to lifesaving treatments and securing fiscal sustainability for the Medicaid program, which remains a lifeline for millions of people.”

Comments on the notice of proposed rulemaking must be submitted to the Federal Register no later than July 25, 2023.

They can be submitted in any one of the following three ways:

• Electronically via https://www.regulations.gov. Follow the “Submit a comment” instructions. 
• By regular mail by sending them to the Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-2434-P, P.O. Box: 8016, Baltimore, MD  21244-8016. 
• By express or overnight mail to Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-2434-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

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