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Monthly Legislative Newsletter: December 2021
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Drug Pricing Update

Included in the House version of the Build Back Better Act are a number of drug pricing provisions. The negotiated prices are to be put in place in 2025, and only Medicare Part B and Part D are eligible for these prices. There is a good chance that these provisions will change as the Senate takes up the legislation. However, because Democrats in both the House and Senate campaigned on lowering drug pricing, it is likely that some form of drug pricing negotiation will be included in the final bill.

Brief notes on the prescription drug provisions that are included in the House Passed bill are below.

Section 26001. Requirements with Respect to Cost-Sharing for Certain Insulin Products.

Requires group health plans and issuers offering group health insurance coverage to cover at least one dosage form and type of insulin under the deductible and limit cost-sharing to the lesser of $35 per month or 25 percent of the negotiated price under the plan.

Section 26002. Oversight of Pharmacy Benefit Manager Services.

Requires pharmacy benefit managers (PBMs) to provide reports in machine-readable format to sponsors of group health plans every six months. Reports required under this section must include information regarding the administration of prescription drug benefits by PBMs and detailed information regarding the rebates, fees, and other compensation paid to the PBMs.

Section 139001. Providing for Lower Prices for Certain High-Priced Single Source Drugs.

This provision adds a new Part E to Title XI of the Social Security Act which directs the Secretary of the Department of Health and Human Services (HHS) to establish a Drug Negotiation Program to reduce spending on and out-of-pocket costs for prescription drugs. The Secretary shall publish a list of selected drugs; enter into agreements with manufacturers of selected drugs; and negotiate and renegotiate maximum fair price (MFP) for each selected drug beginning in plan year 2025.

Each year, the Secretary will identify the 100 brand-name drugs that lack price competition for negotiation and for which 9 years has elapsed since the drug was first marketed for small molecule drugs and 12 years for biologicals. From that list, the Secretary will negotiate up to 10 drugs in 2025, 15 drugs in 2026 and 2027, and 20 drugs thereafter. Insulin products must also be negotiated. A drug selected for negotiation would continue to be included in the program until competition enters the market. Certain orphan drugs and drugs with Medicare Parts B and D expenditures that are less than $200 million are exempted from negotiation. Certain small biotech drugs are exempted from negotiation for initial price applicability years 2025, 2026, and 2027. Medicare Part D prescription drug plans will be required to cover selected drugs on the formulary.

Negotiation. The Secretary is required under the legislation to directly negotiate with drug manufacturers to establish a maximum fair price. The legislation also establishes a price ceiling for various categories of drugs: 75 percent of the non-Federal average manufacturer price for drugs on the market between 9 and 12 years, 65 percent of the non-Federal average manufacturer price for drugs on the market between 12 and 16 years, and 40 percent of the non-Federal average manufacturer price for drugs that have been on the market for more than 16 years.

Section 139002. Selected Drug Manufacturer Excise Tax Imposed During Noncompliance Periods.

The section also establishes an excise tax that will be levied against manufacturers during periods when the manufacturer is noncompliant with the requirements of the fair price negotiation program by adding a new section 4192 to Subchapter E of Chapter 32 of the Internal Revenue Code.

Section 139003. Funding.

This provision invests $300,000,000 for each of fiscal years 2022 through 2031 into implementation of prescription drug negotiation.

Section 139101. Medicare Part B Rebate by Manufacturers.

This provision establishes a mandatory rebate for drug manufacturers for certain Medicare Part B drugs with prices increasing faster than inflation beginning on July 1, 2023. Under this provision, the Secretary of HHS shall calculate a rebate amount based on the total number of units with respect to a Part B rebatable drug, including for the Medicare program and the commercial market, and determine the inflation-adjusted payment amount based on the percentage by which the price exceeded the inflation benchmark. Should a manufacturer not pay the mandated rebate, the manufacturer shall be subject to a civil monetary penalty equal to or at least 125 percent of the rebate amount for such calendar quarter.

Section 139102. Medicare Part D Rebate by Manufacturers.

This provision establishes a mandatory rebate for drug manufacturers for certain Medicare Part D drugs with prices increasing faster than inflation beginning in 2023. Under this provision, the Secretary shall calculate a rebate amount based on the total number of units with respect to a Part D rebatable drug, including for the Medicare program and the commercial market, and determine the inflation-adjusted payment amount based on the percentage by which the price exceeded the inflation benchmark. Should a manufacturer not pay the mandated rebate, the manufacturer shall be subject to a civil monetary penalty equal to or at least 125 percent of the rebate amount for such calendar quarter.

Section 139201. Part D Benefit Redesign.

This provision caps the costs for prescription drugs by setting the annual out-of-pocket limit at $2,000 beginning in 2024 and lowers beneficiary coinsurance in the initial coverage phase to 23 percent. The section reduces from 80 percent to 20 percent the government reinsurance in the catastrophic phase of Part D coverage for applicable brand drugs and for non-applicable drugs, government reinsurance is 40 percent in the catastrophic phase. The provision also converts the current coverage gap discount program into a benefit-wide responsibility, requiring manufacturers of branded drugs to contribute to payments in both the initial (10 percent) and catastrophic phases (20 percent) of the benefit, and allowing for a discount phase-in for certain drug manufacturers.

Section 139202. Maximum Monthly Cap on Cost Sharing Payments Under Prescription Drug Plans and MA-PD Plans.

This provision allows Part D plans to spread out the out-of-pocket costs for beneficiaries over the plan year.

Section 139301. Prohibiting Implementation of Rule Relating to Eliminating the Anti-Kickback Statute Safe-Harbor for Prescription Drug Rebates.

This provision prohibits the implementation after January 1, 2026, of the final rule entitled “Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Services Fees” that was published by the Office of the Inspector General of HHS on November 30, 2020.

Section 139401. Appropriate Cost-Sharing for Certain Insulin Products Under Medicare Part D.

This provision limits cost-sharing for insulin products under Medicare Part D to be no higher than $35.

Section 139402. Coverage of Adult Vaccines Recommended by the Advisory Committee on Immunization Practices Under Medicare Part D.

This provision requires that zero coinsurance apply for vaccines recommended by the Advisory Committee on Immunization Practices under Medicare Part D.

Section 139403. Payment for Biosimilar Biological Products During Initial Period.

This provision revises payments beginning on July 1, 2023, for new biosimilars under Medicare Part B to be the lesser of the 103 percent of the biosimilar’s wholesale.

For Build Back Better Act bill text click HERE.
For a section by section of the Build Back Better Act click HERE.

Appropriations Update

On December 3, 2021, a short term measure to fund federal agencies and initiatives is set to expire. Congress must work to adopt an additional spending fix or risk a government shutdown. On September 30, 2021, Congress passed a continuing resolution to issue a short term extension for funding with the provision that the legislation would not raise the debt limit to appease Republicans. Senate Minority leader Mitch McConnell (R-KY) felt this was an issue for Democrats and urged Republicans in refusal to assist in raising the debt limit. It is likely Congress will issue another continuing resolution to fund the government through early 2022 in order to give Congress time to finalize the 2022 appropriation bills.

The delay in appropriations legislation consideration is due to Senate Majority Leader Chuck Schumer determining that the Senate will complete the National Defense Authorization Act and the Build Back Better Act before moving forward with the appropriations process. Once those two pieces of legislation are completed, appropriations will take center stage.

Advanced Research Projects Agency for Health (ARPA-H) Comparison

In the President’s budget, President Biden proposed the establishment of a new federal agency, the Advanced Research Projects Agency for Health (ARPA-H). According to the President’s budget, ARPA-H will be tasked with building high-risk, high-reward capabilities (or platforms) to drive biomedical breakthroughs—ranging from molecular to societal—that would provide transformative solutions for all patients.

There is still much debate as to how ARPA-H will be funded, where it will be housed, and how oversight will be conducted. PRG has created a comparison chart that details all of the ARPA-H proposals side-by-side.

View the comparison document HERE.

Cures 2.0

On November 15, 2021, Representatives Diana DeGette (D – CO) and Fred Upton (R – MI) introduced the Cures 2.0 Act, building off President Biden’s Advanced Research Projects Agency for Health (ARPA-H) proposal. This legislation would provide $6.5 billion to create an entire new agency with the goal of ending some of the most profound diseases, such as Cancer, Diabetes, Alzheimer’s and ALS. Housed within the National Institute of Health (NIH), ARPA-H would be responsible for finding cures and treatments for deadly diseases such as cancer. Cures 2.0 will also provide new funding for programs at the US Food and Drug Administration and Centers for Medicare and Medicaid Services. The legislation would also:

  • Transform how Medicare covers innovative new treatments and technologies to make those new discoveries available to patients sooner.
  • Increase access to telehealth services for Medicare and Medicaid patients, including those covered under the Children’s Health Insurance Program, known as CHIP, to ensure more Americans are getting the help they need, when they need it. 
  • Provide training and educational programs for at-home caregivers – including family members with no prior health care experience to help them better care for loved ones when they are home.
  • Require more diversity in clinical trials to ensure any new drugs and treatments approved for use in the U.S. are both safe and effective for a greater – and more representative – portion of the population.
  • Provide patients more information about the illness they face and the treatment options available to them to make them a more integral part of the decision-making process.

The legislation would also take steps to address the ongoing COVID-19 pandemic, including requiring the Department of Health and Human Services to:

  • Conduct a nationwide study on the implications of long COVID; and 
  • Develop a nationwide testing and vaccine distribution strategy to be used in future pandemics. 

View Cures 2.0 bill text HERE.
View the Cures 2.0 Section by Section HERE.