Review of Draft Chapter for June Report and Recommendations on Prescription Drug Policy: Grace Period and Cap on Rebates

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April 2019

While gross Medicaid drug spending—that is, spending before rebates—has been rising since fiscal year 2014, net spending has slowed as a result of increased rebate collections. Currently, rebates are capped at 100 percent of a drug’s average manufacturer price, which can limit the effect of Medicaid’s inflationary rebate in discouraging large price increases over time.

States have expressed concern that the pipeline of new specialty drugs will continue to put additional fiscal pressures on the program. Complicating this concern is the Medicaid requirement that new drugs must be covered as soon as they enter the market, which is not enough time to assess the effectiveness of a drug, particularly when it is a first-in-class or a novel, complex treatment.

This presentation reviews a draft chapter and two recommendations on prescription drug policy for the June 2019 report to Congress. The first recommendation, approved unanimously, calls on Congress to authorize a 180-day grace period during which a state would be allowed to exclude or otherwise restrict coverage of a new drug while the state develops its coverage criteria. With regard to the second recommendation, the presentation reflects the draft recommendation presented by staff; during the discussion the Commission coalesced around a different approach.  As approved by the Commission, the language is as follows:

Congress should amend Section 1927(c)(2)(D) of the Social Security Act to remove the cap on Medicaid drug rebates.

 Recommendation 2 also was approved with no dissenting votes.

Publication Type: Presentations

From: April 2019 MACPAC Public Meeting

Tags: prescription drugs, spending