At a time when pharmaceutical drug prices are at the height of political scrutiny, manufacturers can breathe a small sigh of relief as the Centers for Medicare and Medicaid Services (CMS) announced on May 15, 2024 that it will not, at this time, finalize its best price stacking provision in its May 23, 2023 Medicaid Drug Rebate Program (MDRP) proposed rule.
Medicaid “best price” was a legislated policy solution enacted more than 25 years ago to address high drug costs and make Medicaid drug spending more manageable for states. The MDRP requires manufacturers to pay rebates that ensure Medicaid programs get the lowest or “best price” and pay back any price increases higher than inflation.
Under the MDRP, “best price” (BP) is defined as “the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or government entity within the United States.” Current regulations require that manufacturers adjust BP “if cumulative discounts, rebates, or other arrangements subsequently adjust the prices available, to the extent that such cumulative discounts, rebates, or other arrangements are not excluded from the determination of best price by statute or regulation.”
At a minimum, participating manufacturers of most brand drugs pay a rebate of 23.1% of the average manufacturer price (AMP). If the BP calculation results in a discount greater than 23.1% of AMP, the net rebate would be the difference between AMP and BP. Any additional inflationary rebate would be added to the base rebate to arrive at the total rebate.
Currently, manufacturers report BP as the lowest price available to any BP-eligible entity rather than aggregated across multiple entities. In May 2023, CMS proposed, among other drug pricing reforms, that manufacturers be required to “stack all applicable discounts that they offer on a single sale of a covered outpatient drug, including discounts or rebates provided to more than one best price eligible entity.”
This change would likely have resulted in significantly increased rebate liability for manufacturers—even more so given that on January 1, 2024, the Medicaid cap that limited Medicaid rebates to 100% of a drug’s AMP was removed.
On May 15, 2024, however, CMS issued a press release stating that the agency will not finalize the best price stacking proposal. Rather, the agency intends to proceed with additional information collection from manufacturers regarding best price stacking methodologies “to better understand and inform future rulemaking.” CMS noted that it will be finalizing other components of the Proposed Rule and expects the final rule to be released next month.
Key Takeaways
Drug pricing remains a bipartisan focus, and manufacturer scrutiny is unlikely to retreat. While CMS has decided at this time not to finalize the proposed best price stacking rule, that does not mean it will not do so in the future. Accordingly, manufacturers would be well advised to continue to monitor for any further developments and publication of the final rule. Manufacturers should also strongly consider responding to any supplemental requests for comments related to best price stacking methodologies.
Morgan Lewis will continue to closely monitor the release of the final rule. It is important that manufacturers continue to carefully assess product portfolios to identify any potential issues.
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