Analyzing midyear drug list price reductions

In February, the U.S. Department of Health and Human Services issued a proposed rule that would eliminate the current safe harbor to the Anti-Kickback Statute, which allows manufacturers to provide rebates to plans and pharmacy benefit managers, and creates a new safe harbor that would force the rebates to be passed through to the point of sale.

Some manufacturers have preemptively decreased list prices on popular brand drugs. List price reductions can be effectuated in several ways, including the launch of an authorized generic, the release of a new package for an existing identical product, or a complete reduction in list price on an existing product. The structure of the Medicare Part D program produces interesting, and sometimes counterintuitive, financial outcomes when list prices are decreased and rebates are eliminated. Plan sponsors will want to consider these outcomes during bid preparation and when estimating Part D payment settlements.

In this paper, Milliman’s David Mike, Matthew Hayes, and Stephen Amend analyze the impact of midyear drug list price reductions coupled with a reduction in rebates resulting in identical net price. Their analysis addresses the impact to Part D plans, Part D beneficiaries, the federal government, and pharmaceutical manufacturer payments to plans through rebates and the coverage gap discount program.

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