Insight

Revised Safe Harbor Protections for Prescription Drug Rebates

HHS final rule requires pharmacy benefit managers to pass along prescription drug rebates to patients at the point of sale

Larry Kocot

Larry Kocot

Principal, Advisory, KPMG LLP

+1 202-533-3674

On November 20, 2020, HHS and the Office of the Inspector General (OIG) released the display version of a final rule that would end regulatory safe harbor protections under the Anti-kickback Statute (AKS) for retroactive rebates currently paid by drug manufacturers to Pharmacy Benefit Managers (PBMs) on behalf of Part D sponsors (Rebate Final Rule). The official version was published in the Federal Register on November 30, 2020. In place of the current discount safe harbor, HHS has established two new regulatory safe harbors to: (1) protect discounts from manufacturers to plan sponsors if those discounts are applied to point-of-sale (POS) prices; and, (2) protect flat-rate fees paid by manufacturers to PBMs for services related to health plan clients if fully documented and disclosed. The two substantive changes from the proposed rule are the later effective date of January 1, 2022, and the removal of applicability to Medicaid Managed Care Organizations (Medicaid MCO).

The issuance of this final rule follows the controversial withdrawal of the proposed rule and the subsequent Executive Order (EO) on Part D rebates directing HHS to complete the OIG rulemaking initiated in 2019. The EO required that such rulemaking may only be issued if the HHS Secretary publicly confirms “that the action is not projected to increase Federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs”. While the Rebate Final Rule does not make this declaration, it does retain the proposed rule’s actuarial review of potential scenarios, including some behavioral assumptions modeled by Milliman under which this outcome could occur. HHS Secretary issued a confirmation statement expressing his view and reasoning that the Rebate Final Rule is not projected to increase Federal spending, Medicare beneficiary premiums, or patients' total out-of-pocket costs.


 

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