For pharma marketers, the new rules could alter price negotiations and sales to customers. Industry would gain from more consistent and predictable reporting requirements and lower Medicaid rebates. Over the long run, though, more transparent information on prices and rebates will prompt Medicare plans and private payers to demand the same low prices as Medicaid.
To fix reporting and payment problems, the Centers for Medicare and Medicaid Services (CMS) is finalizing regulations (due July 1) to implement the Medicaid reform provisions of the Deficit Reduction Act of 2005 (DRA). New policies for calculating Average Manufacturer's Price (AMP), limits on state reimbursement for multisource drugs, and other changes are projected to save Medicaid more than $8 billion over five years.
AMPs exclude discounts to federal health programs and certain other customers. Now CMS proposes that AMP calculations specifically include discounts to Medicare Part D plans, PBMs, mail-order pharmacies, state pharmacy-assistance plans, and several other entities. PBMs are up in arms because manufacturers would have little incentive to grant them discounts if it means reducing prices for everyone. And while the change in AMP calculation could reduce manufacturer rebates, lower AMPs also could cut reimbursement for injectibles and other drugs covered by Medicare Part B.
In addition to PBM objections, pharmacies oppose the AMP revision because it would cut their reimbursement. The tension between pharmacists and manufacturers makes increased reliance on AMP as the basis for drug reimbursement "a very sticky situation" for CMS, comments Lauren Barnes of Avalere Health.
Improving Best Price
In its quest for clarity, CMS also spells out the specifics for calculating Medicaid best price in its new rule. Best price has long excluded discounts offered federal health programs and nominal or free goods, but it has included prices to most customers, including wholesalers, retailers, PBMs, hospitals, and HMOs. Now CMS specifies an exemption for Part D and state drug plans so that they, too, can benefit from low prices.