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Proposed Rebate Rule May Impact Commercial Coverage in Some States

Summary

While the Department of Health & Human Services (HHS) did not intend for proposed changes to Anti-Kickback Statute (AKS) regulations to impact commercial market drug negotiations, some state laws may indirectly lead to commercial market implications.

The AKS safe-harbor rule released by HHS’ Office of the Inspector General (OIG) on January 31 proposes the removal of current safe-harbor protections for prescription drug rebates in Medicare Part D and Medicaid Managed Care. In its place, OIG proposed the creation of 2 new safe harbors requiring that manufacturer price reductions be passed through to beneficiaries at the point of sale and requiring any compensation arrangements between manufacturers and intermediaries that service Part D and Medicaid managed care organizations related to distributing or contracting for drugs to be fixed and based on fair market value. The final rule on the AKS changes is anticipated in the second half of 2019. As proposed, the removal of the current rebate safe harbor would be effective on January 1, 2020.

Commercial Market Implications

Because the federal AKS statute applies to government-sponsored healthcare programs and not to the commercial markets, the HHS OIG does not have the authority to regulate potential violations in commercial coverage (individual and insured/self-insured group). As a result, HHS Secretary Azar called on Congress to pass legislation to apply similar AKS limitations to the commercial markets. There has been some—albeit limited—action on proposed legislation to make the change. In 2018, almost 200 million individuals nationwide were enrolled in commercial market coverage.

Even without legislation that is directly applicable to the commercial market, it is possible that the changes to the federal AKS rules could apply to certain commercial markets as a results of state anti-kickback or anti-remuneration laws and regulations that reference the federal AKS statute or regulations. Currently, at least 36 states and DC have enacted these types of laws, some of which explicitly cross reference or cite the federal AKS statute or regulations in their own anti-kickback laws. State anti-kickback laws may be targeted at select markets (such as Medicaid) or may be written more broadly to apply to other coverage operating in that state, such as commercial individual or group plans. Based on the wording and structure of these statutes and regulations, federal changes to the AKS could impact markets subject to these state requirements. These impacts could be felt in several large states, including California, Texas, and Florida.

The design of the state statutes will determine what effect, if any, the federal changes have on state commercial markets. The wording of those state statutes could lead to impacts only in select commercial markets in the state (such as individual and insured group markets) or could lead to broader impacts on the entire commercial market where those kickback restrictions are directed at providers or intermediaries, such as pharmacy benefit managers (PBMs) and third-party administrators.

Stakeholder Considerations

Understanding the potential commercial market implications of the proposed AKS rule will be critical to understanding the scope and potential impact for drug manufacturers, plans, PBMs and other stakeholders. Most attention has been placed on the impact of the AKS rule on Part D plan sponsors, Medicaid Managed Care Organizations, manufacturers, and intermediaries involved in the Medicare and Medicaid programs. However, manufacturers, plan sponsors and intermediaries in both the government and commercial markets will need to carefully assess the state-level implications of the proposed federal AKS changes to adapt contracting strategies, ensure contract compliance, and minimize liabilities associated with noncompliance with anti-kickback laws.

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