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Drugmakers Win Challenge to Medicaid Drug Price Rebate Rule

May 17, 2022, 11:14 PM

A rule issued by the Centers for Medicare and Medicaid Services that requires drugmakers to include discounts they offer directly to patients when calculating the “best price” of drugs for purposes of Medicaid’s drug rebate program exceeds the agency’s authority, a federal judge in D.C. ruled Tuesday.

The challenged rule, issued in 2020 by CMS, is inconsistent with the federal Medicaid rebate law, which requires drug producers to pay statutorily determined rates to state Medicaid programs, Judge Carl J. Nichols of the US District Court for the District of Columbia said.

Rebate rates are calculated using the lowest price at which a drugmaker sells to purchasers including wholesalers, retailers, providers, and governmental entities, known as the “best price.”

The 2020 rule requires drugmakers to calculate the best price using discounts they offer to patients to offset the out-of-pocket costs for high-priced medications.

Pharmaceutical Research & Manufacturers of America, a trade association representing drugmakers, said in their lawsuit filed May 2021 that the requirement is outside the bounds of the federal Medicaid rebate law.

Nichols rejected the government’s argument that the rule classified pre-existing requirements and didn’t create a new burden for manufacturers.

The question is whether a manufacturer’s financial assistance to a patient can count as the lowest price available from the manufacturer to a best-price-eligible purchaser, Nichols said, finding that a patient is not a best-price-eligible purchaser.

“As a result, HHS lacks the statutory authority to adopt the accumulator adjustment rule,” Nichols said.

Arnold & Porter Kaye Scholer LLP represents PhRMA. The U.S. Department of Justice represents the Department of Health and Human Services and CMS.

The case is Pharm. Research & Mfrs. of Am. v. Becerra, D.D.C., No. 1:21-cv-1395, 5/17/22.

To contact the reporter on this story: Maeve Allsup in San Francisco at mallsup@bloomberglaw.com

To contact the editor responsible for this story: Meghashyam Mali at mmali@bloombergindustry.com