Drug Manufacturers May Catch A Break On Medicaid Rebates For Opioid Treatment
Executive Summary
CMS believes a new law set to take effect this fall will prohibit Medicaid from collecting rebates on opioid use disorder treatments, Congressional offices and Medicaid stakeholders tell the Pink Sheet. Experts worry this interpretation could open the door for CMS to rule other drugs don’t qualify for rebates.
The US Centers for Medicare and Medicaid Services is soon expected to interpret a 2018 law in a way that will prevent the federal government and states from collecting rebates on drugs used to treat opioid use disorder under the Medicaid Drug Rebate Program.
The move would be positive for drug companies who manufacture these medicines, but detrimental to states and Medicaid managed care programs as well as to 340B providers at a time when data shows the pandemic may be exacerbating the addiction crisis and increased unemployment or reduced working hours is making more Americans eligible for Medicaid.
Section 1006 (b) of The SUPPORT Act of 2018 requires state Medicaid programs to cover medication-assisted treatment (MAT), including all FDA-approved drugs from October 2020 through September 2025.
Multiple Congressional offices, including Sen. Chuck Grassley, R-Iowa, and Sen. Ron Wyden’s, D-Ore., the chair and ranking member of the Senate Finance Committee, and other Medicaid stakeholders have said they are aware that CMS believes it cannot collect rebates for these drugs because the Support Act statue didn’t address the Medicaid Drug Rebate Program.
“It’s a legislative blunder and CMS legal counsel apparently doesn’t believe they can interpret it any other way,” said Matt Salo, executive director of the National Association of Medicaid Directors.
A CMS spokesperson said that the agency “does plan to implement the provision in accordance with the law and rebates are not referenced under the mandatory medication-assisted treatment (MAT) benefit.” As a matter of policy, CMS said it cannot comment on forthcoming guidance.
MAT drugs include buprenorphine, naltrexone and methadone. An April 2020 report by the Urban Institute estimated that Medicaid rebates, including penalties for raising year-over-year prices above inflation, reduced net Medicaid spending by 34 percent for buprenorphine products (39 percent for brand-name and 6 percent for generics), and 50 percent for naltrexone (54 percent for brand-names and 7 percent for generics) from 2010 to 2018. For buprenorphine this meant savings of $3.43bn over that period, and 400m in savings from naltrexone rebates.
All manufacturers of MAT medications participate in the Medicaid Drug Rebate Program, according to a January 2020 report by the Government Accountability Office. However, CMS also told GAO it was drafting guidance related to the new Support Act requirement for MAT coverage that would be communicated through a letter to state Medicaid directors to implementation of the new policy in October.
The new MAT language in the SUPPORT Act “does not tie back to existing statutory language on the Medicaid drug benefit or federally required minimum rebates under section 1927,” the section of the Social Security Act which describes the drugs covered under the Medicaid drug rebate program, explained Kip Piper, president of Health Results Group and a former senior advisor to the CMS administrator as well as a former director of the Wisconsin Medicaid program.
The SUPPORT Act also doesn’t reference section 1902(a)(12) of the Social Security Act which, discusses state plans options to cover prescription drugs. Without these cross references or other language indicating the rebate law applies “it does appear that the federal Medicaid rebate would not apply to MAT drugs,” Piper said.
Is CMS Locked In By Congress? Experts Don’t Agree
Piper notes that many states likely are already covering some MAT drugs and collecting rebates on the products, but the new MAT mandate will likely trump prior practice. However, he said states probably still could attempt to negotiate supplement-like rebates to compensate for loss of the federal rebates if CMS does interpret the SUPPORT Act as prohibiting federal rebates for MAT.
Other Medicaid experts disagreed with Piper’s interpretation of the SUPPORT Act.
“My initial take is that the legal reading” that Medicaid rebates can’t be collected “is pretty poor and inconsistent with how the Medicaid rebate program has been applied,” said Edwin Park of Georgetown’s Health Policy Institute.
“I’m kind of baffled by this,” he said, as Medicaid has allowed drugs that are part of other mandatory benefits as the MAT drugs will now be – instead of being part of the Medicaid Drug Rebate Program – to be reimbursed separately as outpatient drugs and collect the federal rebates. For example, he said states can collect rebates for physician-administered drugs or drugs dispensed in outpatient hospital settings.
“It pretty clearly wasn’t the intent of Congress when they enacted the SUPPORT Act” to not permit rebate collection, Park said.
If Congress had intended to make the rebate program not apply it should have added the MAT section of the SUPPORT Act to the limiting definition provision in the Medicaid Drug Rebate statue, which outlines what drugs don’t count as covered outpatient drugs when they are part of other Medicaid services, Park said.
Slippery Slope: Implications For Other Drug Groups?
If CMS follows through with an interpretation to not allow rebates for MAT drugs, Park said he “would be concerned” that this could open the door to new interpretations regarding the ability of states to collect rebates for physician-administered drugs and drugs administered by hospital outpatient departments.
Sara Rosenbaum, a professor of health law and policy at the George Washington University, said she thinks a reading of the SUPPORT Act that would exclude rebates is “entirely unreasonable.”
The Medicaid drug rebate program applies to all drugs unless they are specifically excepted in the law, she said.
The purpose of the MAT section of the SUPPORT Act “was to ensure state coverage of a full range of treatments, not to exempt covered treatments” falling within the meaning of the Medicaid Drug Rebate Program from those requirements, she said.
Piper said there might be “possible work-arounds” that would let CMS interpret the statue differently as Park and Rosenbaum suggest, but Piper said if CMS does interpret it differently, he believes some MAT drug manufacturers may challenge it in court.
CMS might also see if Congress can simply tweak the statue “before going out on what may be an unnecessary limb,” Piper added.
Sen. Wyden’s office said they are talking with interested parties to try and figure out next steps. Sen. Grassley’s office also said they are aware and looking into the issue.
A Congressional aide told the Pink Sheet that excluding MAT drugs from the rebate program was not Congress’ intent, and that they are worried CMS is wrongly interpreting the SUPPORT Act.
But CMS is “in a tough spot,” according to National Association of Medicaid Directors’ Salo. “They don’t want to be in the position of re-interpreting clearly written (although wrong) legislative language. They also don’t want to call attention to the problem and create panic.”
Salo said he believes CMS has genuinely been trying to come up with a way to interpret the law differently or delay interpreting the law to give Congress time to fix it.
Besides state coffers, 340B providers may also be hit by this potential interpretation, since 340B drug discounts are tied to whether a drug is part of the Medicaid rebate program.
“If they interpret it this way, it’s going to be highly problematic for 340B providers because they depend on these discounts and they serve high number of patients with substance use disorder challenges,” said Ted Slafsky, founder of Wexford Solutions and former president and CEO of 340B Health, an association of 340B hospitals.