Near the end of this past November President Trump issued two rules aimed at lowering prescription drug prices that affect Medicare beneficiaries. The rules followed up on executive orders that Trump signed in July.
One rule, known as “most favored nation,” would require Medicare to tie the prices it pays for drugs to those paid by other wealthy countries. The other rule would limit rebates paid to middle men (called “pharmacy benefit managers” or “PBMs”) by drug makers in Medicare.
There are two points to remember about the first rule: Medicare has always been barred from negotiating prices directly with drug companies; and other countries regulate their health care spending more heavily, including for prescription drugs.
The first new rule affects Medicare Part B drug costs, which are typically infused or injected drugs used mainly in the treatment of cancer. The intent is to cap the cost of those drugs at the lowest price that drug manufacturers receive in other countries and to pay doctors a flat fee for each dose of a drug, instead of a percentage of each drug’s cost.
The Centers for Medicare and Medicaid Services said the rule would be mandatory and will focus on 50 single source drugs and biologic drugs that comprise the largest majority of Medicare Part B drug spending.
However, one week ago a federal judge in California issued a ruling stopping the implementation of the rule because of the “government’s failure to complete the notice and comment procedures required by the Administrative Procedure Act.”
That was the second ruling in a week to delay the policy. A federal judge in Maryland had ordered on Dec. 23 that the rule, which was slated to take effect Jan. 1, be paused for two weeks.
The Health and Human Services Department finalized the policy through an interim final rule in November, meaning the agency skipped the comment period. Lowering drug costs for patients is the end goal of the policy, which the government argues justified the speedy implementation.
In his ruling the California judge admonished the federal government for skipping a key step in the rulemaking process and called the government’s reasons for doing so “contrived.”
“While there’s nothing unlawful per se about rushing to enact policy in the final days of a presidential administration (indeed, it’s a time-honored tradition), executive branch officials may not circumvent clear legal requirements in the eleventh hour to achieve goals they couldn’t accomplish in the normal course,” he said.
The judge’s order stops the implementation of the rule until the completion of the notice and comment process.
The other rule concerns drug rebates involving Medicare Part D. The Department of Health and Human Services (HHS) said that last year Part D rebates totaled $39.8 billion, representing an average discount of nearly 30% for brand drugs.
The rule would require drug companies to give Medicare beneficiaries rebates that now go to insurers and PBMs. The nonpartisan Congressional Budget Office estimates it would increase taxpayer costs by $177 billion over 10 years.
The Pharmaceutical Care Management Association, which represents pharmacy benefit managers that run the Medicare prescription drug plans targeted by the rebate rule, said at the time that it was exploring litigation.
The group said in a statement that the rule, which had been proposed and then left to languish by the administration last year after the Congressional Budget Office said it would cost taxpayers $177 billion, circumvents the regular rule-making process.
