July 2019 Update
As first reported by The Wall Street Journal and Axios on July 11, 2019, the Trump Administration has decided to abandon implementation of the proposed Discount Safe Harbor Rule. While administration officials did not cite specific reasons for dropping the rule, industry speculation points to a combination of factors, including the increased cost to taxpayers as estimated by the CBO, the risk of increased premiums paid by Medicare beneficiaries due to the removal of rebates, and other pending drug pricing legislation that is in the works. While the expected fundamental change to drug pricing and the flow of funds will no longer be happening, the potential for change via other legislation remains significant. As noted previously, planning, preparation, and flexibility will be key for the industry to adjust to any potential regulatory changes on the horizon.
- Armour, Stephanie (July 11, 2019). The Wall Street Journal. Trump Administration Drops Plan to Curb Drug Rebates.
- Owens, Caitlin (July 11, 2019). Axios. 1 big thing … scoop: White House kills the rebate rule.
The Proposed Rule excluding rebates from Safe Harbor protection for Medicare Part D prescriptions was published on January 31, 2019. The Congressional Budget Office (CBO) estimates that implementation of the proposed rule will cost taxpayers $177 billion in additional federal spending over the next decade. This is a bit lower — but in line with — the CMS Office of the Actuary estimates, which projects $196 billion in increased federal spending over the decade to taxpayers. This additional spending burden has prompted some lawmakers to request that CBO ‘score’ the proposed legislation. What does that mean? The following sections outline the key components of this process, the role the CBO plays, and what this may mean for implementation or delay of the Safe Harbor Final Rule.
The purpose of the CBO is to provide objective support to the budget process in a nonpartisan manner. Its priorities are transparency and responsiveness. The CBO does not make policy recommendations, but rather analyzes the impact of policy to American taxpayers. To do this, it employs a range of experts, with the heaviest area of focus being on health-related expertise and analysis.
The CBO’s mission is to assist Congress in making effective budget and economic policy. As part of this, it provides information multiple times through various methods at different points throughout the legislative process, which it refers to as “products.” Two key products that pertain to the Safe Harbor Proposed Rule are Baseline Budget and Economic Projections, and Scorekeeping for Legislation.
BUDGET AND ECONOMIC PROJECTIONS
The CBO publishes “baseline projections,” which are produced numerous times per year, and begin with the assumption that current policy and spending levels will remain in place. It also incorporates the budgetary effects of some alternative policies. In most cases, these baseline budget estimates for the 10-year period are released in January as part of The Budget and Economic Outlook, and updated in March and August.
This year, CBO released an update in May, which included the impact of the Safe Harbor Proposed Rule, and analyzed the effect on taxpayers at $177 billion over 10 years.
SCOREKEEPING FOR LEGISLATION
The projected increase in spending has prompted some lawmakers to request CBO to ‘score’ the legislation. This request is to estimate the savings of delaying the Final Rule. From a process perspective, requests for Scorekeeping for Legislation are customary throughout the legislative process.
CBO is required to provide a formal estimate of each piece of legislation approved by a Congressional committee. It is also tasked with providing frequent informal projections for proposed legislation, sometimes at the time the proposal is being developed, and other times at later stages in the legislative process. These are the scorekeeping reports that inform whether or not the impact of a piece of legislation is consistent with budget resolution spending and revenue levels.
According to Inside Health Policy, legislators could plan to re-allocate the savings realized from a delay in the Safe Harbor Final Rule and use it for other legislative priorities, including the following:
- To offset infrastructure legislation
- To offset the cap in Medicare spending
- To supplement House Speaker Nancy Pelosi’s third-party arbitration drug pricing negotiation plan, to offset the cap to out-of-pocket costs in the event that the arbitration does not cover it. Negotiations between Trump Administration officials and Speaker Nancy Pelosi’s staff have heated up recently as reported by BioCentury, with a potential delay or elimination of the rebate ban happening in exchange for the spending cap on Medicare Part D beneficiaries.
Both Democrats and Republicans have expressed interest in a delay, according to sources. Republicans, though, have voiced stronger support for the ban on rebates, while Democrats have expressed skepticism that manufacturers will lower list prices.
Given the doubts that the rule will have the intended impact, Democrats are likely to support the delay and use the estimated funds elsewhere. While general consensus points to the proposed rule becoming law, the timing of implementation remains fluid, with the chance that Congress can possibly delay the Final Rule.
Originally anticipated prior to the June 3 deadline to submit Medicare Part D bids, CMS sent a memo to insurers stating that the Final Rule would not be released before June 4. Now, with the release of the Spring Regulatory Agenda, the Final Rule is not expected until November 2019. This likely means a delayed implementation date past January 2020, and gives the industry a bit more time to prepare for the potential impending changes.
- Department of Health and Human Services. (February 2019). Proposed Rule: Fraud and abuse; Removal of safe harbor protection for rebates involving prescription pharmaceuticals and creation of new safe harbor.
Retrieved from: https://www.federalregister.gov/documents/2019/02/06/2019-01026/fraud-and-abuse-removal-of-safe-harbor-protection-for-rebates-involving-prescription-pharmaceuticals
- Centers for Medicare and Medicaid Services. (August 30, 2018). Office of the Actuary. Proposed Safe Harbor Regulation.
Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/ProposedSafeHarborRegulationImpact.pdf
- Congressional Budget Office. (2019). 10 Things to Know About CBO.
Retrieved from: https://www.cbo.gov/about/10-things-to-know
- Congressional Budget Office. (2019). Products.
Retrieved from: https://www.cbo.gov/about/products
- Cohrs, Rachel and Wilkerson, John. (May 2, 2019). Inside Health Policy. Lawmakers Consider Delaying Drug Rebate Rule To Gain An Offset.
Retrieved from: https://insidehealthpolicy.com/inside-drug-pricing-daily-news/lawmakers-consider-delaying-drug-rebate-rule-gain-offset
- Cohrs, Rachel and Wilkerson, John. (February 28, 2019). Inside Health Policy. Alexander, Cassidy Take Lead on Drug Rebates; Dems Not on Board.
Retrieved from: https://insidehealthpolicy.com/inside-drug-pricing-daily-news/alexander-cassidy-take-lead-drug-rebates-dems-not-board
- Hadley, Mark P. (March 10, 2011). Congressional Budget Office. What You Should Know About Congressional Budget Scoring.
Retrieved from: https://www.gao.gov/special.pubs/appforum2011/scorekeeping_guidelines_2011.pdf
- Usdin, Steve. (May 10, 2019). BioCentury. White House, Congress considering killing Part D rebate rule, creating spending cap.
Retrieved from: https://www.biocentury.com/bc-extra/politics-policy/2019-05-10/white-house-congress-considering-killing-part-d-rebate-rule-
- Wilkerson, John. (May 21, 2019). Inside Health Policy. HHS Won’t Publish Rebate Rule Before Part D Bids Due June 3.
Retrieved from: https://insidehealthpolicy.com/inside-drug-pricing-daily-news/hhs-wont-publish-rebate-rule-part-d-bids-due-june-3
- Cohrs, Rachel (May 22, 2019). Inside Health Policy. Trump Admin Delays Next Steps For Int’l Pricing Index, Rebate Rule.
Retrieved from: https://insidehealthpolicy.com/daily-news/trump-admin-delays-next-steps-int%E2%80%99l-pricing-index-rebate-rule
- Inside Health Policy. (May 22, 2019). Agency Rule List – Spring 2019. Department of Health and Human Services. Retrieved from: https://insidehealthpolicy.com/sites/insidehealthpolicy.com/files/documents/2019/may/he2019_0543.pdf