Legislation Lifting Maximum Cap on Medicaid Rebates Advances

The U.S. House Energy and Commerce Committee on Friday passed pandemic-relief legislation with language that could cause pharmaceutical manufacturers to owe states Medicaid drug rebates worth more than a drug’s average manufacturer price (AMP). It could also result in additional savings for 340B providers.

The E&C committee and 11 other House panels last week marked up their parts of the Biden administration and congressional Democrats’ COVID-19 relief agenda, written as components of fiscal 2021 budget legislation. The House Budget Committee this week is expected to weave the parts together and pass a single budget reconciliation/pandemic relief bill. Speaker Nancy Pelosi (D-Calif.) has said she aims to have full House pass the bill by the end of the month. Democrats want to get the relief bill through the Senate and on President Biden’s desk by March 14, when an estimated 11 million adults will begin losing pandemic unemployment benefits passed last year.

Under the Medicaid rebate language in the E&C committee’s budget reconciliation/pandemic relief legislation, the manufacturer of a drug with a history of price increases above the rate of inflation could owe Medicaid rebates valued above 100 percent of the drug’s average manufacturer price (AMP). Since 2010, rebates have been capped at 100 percent of AMP.

Experts with ties to the drug industry told us last week that, if the Medicaid rebate language becomes law, they expect the 340B program “penny pricing” policy will stay in place, saving manufacturers from having to pay 340B ceiling prices below AMP. Experts with ties to 340B health care providers say hospitals and others might press to have the 340B penny pricing policy lifted. This would result in significantly higher 340B discounts on some drug products.

In other E&C action on the budget/relief bill, the committee rejected a Republican amendment to appropriate $35 million for the CARES Act Provider Relief Fund, with 20 percent set aside for rural hospitals. The U.S. Senate passed a budget reconciliation bill earlier this month with the 20 percent set-aside for rural hospitals, but not the additional $35 million.

Advocates for rural hospitals say they are hopeful that, when all is said and done, the final House bill will include both the additional $35 million in provider relief and the 20 percent set-aside for rural hospitals.