2023 Final Rule Updates for Drug Manufacturers

Originally published March 2022; updated May 2022

UPDATE May 18, 2022

2023 was shaping up to be a year of challenging decisions for manufacturers and restricted access to critical pharmaceuticals for patients. The 2023 implementation of the proposed CMS Medicaid Best Price final rule change would have penalized drug manufacturers for offering patient assistance programs and coupon programs if manufacturers couldn’t guarantee that patients were receiving the full benefit of the program.

On May 17, 2022, The United States District Court for the District of Columbia vacated and set aside the Accumulator Adjustment Rule of 2020. Full details on the ruling can be found here.

2023 Best Price Final Rule Summary

Published March 2022

A big change to CMS’s Final Rule is right around the corner and is likely to have a major financial impact on brand drug manufacturers.

A key component of the rule change published in December 2020 focuses on patient assistance programs offered by manufacturers and their treatment in Best Price calculations as well as the impact on Average Manufacturer Price (AMP), which ultimately directly affect Medicaid rebates.

While the rule change has been a hot topic and even led to multiple lawsuits, it’s currently slated to go into effect January 1, 2023. As a brand manufacturer, you need to have a solid understanding of the pending rule change and implications to Best Price to mitigate impacts to your Medicaid rebate liabilities and bottom line in the future.


WHAT YOU NEED TO KNOW

This change is driven by the expansion of copay accumulator programs by insurers and PBMs, which are designed to remove coupon benefits from patients’ deductible and out of pocket expenses. Ultimately, this can decrease payouts for insurers while increasing patients’ out-of-pocket spend.

Beginning in 2023, manufacturers will be required to include the value of their patient/copay assistance programs in their Best Price calculations unless the manufacturer can prove, without a doubt, that the full value of the assistance goes directly to the patient and the patient only. The onus of this proof will lie solely on the manufacturer.

Historically, drug manufacturers have been able to exclude patient assistance programs and copay assistance benefits from their Best Price calculations under the assumption that the full benefit of these programs goes directly to the patient. However, to provide additional motivation for manufacturers to ensure that patients are realizing the full benefit of these programs, CMS has implemented a change to the Best Price rule.


IMPLICATIONS AND POTENTIAL CONSEQUENCE

When considering the potential impact on Medicaid rebate liability, this change could be a game changer. The Medicaid Unit Rebate Amount (URA) paid by brand manufacturers is a function of the calculated quarterly AMP value. The URA is calculated as 23.1% of AMP or AMP less Best Price; whichever is greater.

Patient assistance programs often cover a significant percentage of the cost of the drug; typically providing a greater discount to the patient than the manufacturer would offer to any customer. Therefore, the inclusion of these assistance programs in Best Price will likely set a new, much lower, Best Price for the manufacturer.

A general rule of thumb is, the lower the Best Price, the higher the rebate amount paid to Medicaid. With the introduction of this new rule, and a correspondingly lowered Best Price, this has the potential to result in significantly higher Medicaid rebate liabilities ultimately weighing on your bottom line.

REQUIRED ACTIONS

Manufacturers currently offering any type of patient assistance or copay assistance program need to have a solid strategy to address the pending CMS Final Rule change. Various options have been discussed by manufacturers to meet the new requirement within the existing ecosystem – including direct reimbursement to the patient, prepaid debit cards, excluding the patient assistance program from insurance coverage (cash only), or simply discontinuing patient assistance programs.

Contact your Government Pricing Analyst today to discuss the pending rule change and evaluate the potential ramifications to your business.

Bob Devenport

Bob Devenport,
Vice President of Government Pricing