Medicaid Managed Care Organizations (MCOs)

On January 31, 2019, the Department of Health and Human Services (HHS) released a notice of proposed rulemaking (the Proposed Rule) as part of ongoing administration drug pricing reform efforts. The Proposed Rule would modify a regulatory provision that had previously protected certain pharmaceutical manufacturer rebates from criminal prosecution and financial penalties under the federal Anti-Kickback Statute.

Specifically, the Proposed Rule would exclude from “safe harbor” protection rebates and other discounts on prescription pharmaceutical products offered by pharmaceutical manufacturers to Medicare Part D plan sponsors or Medicaid Managed Care Organizations (MCOs), unless the price reduction is required by law (such as rebates required under the Medicaid Drug Rebate Program). The proposed exclusion would apply to rebates offered directly to Part D plan sponsors and Medicaid MCOs, as well as those negotiated by or paid through a pharmacy benefit manager (PBM). HHS stated that it does not intend for the revisions in this Proposed Rule to negatively impact protection of prescription pharmaceutical product discounts offered to other entities such as wholesalers, hospitals, physicians, pharmacies and third party payors in other federal health care programs. The proposed effective date of this regulatory modification is January 1, 2020, although HHS has sought comments regarding whether this allows sufficient time for parties to restructure existing arrangements.

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