Discount Safe Harbor Proposed Rule: How Process Works and What does it mean?

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.

References

  1. Armour, Stephanie (July 11, 2019). The Wall Street Journal. Trump Administration Drops Plan to Curb Drug Rebates.

Retrieved from: https://www.wsj.com/articles/trump-administration-drops-plan-to-curb-drug-rebates-11562845155

  1. Owens, Caitlin (July 11, 2019). Axios. 1 big thing … scoop: White House kills the rebate rule.

Retrieved from: https://www.axios.com/newsletters/axios-vitals-c38101f0-76f2-46d7-a15b-52cfc8b4ae36.html

SAFE HARBOR PROPOSED RULE PROCESS

The Discount Safe Harbor Proposed Rule was issued by the Department of Health and Human Services (HHS) earlier this year, and over 25,000 comments have been submitted, and the 60-day comment period is now closed. So, what happens next? Here are some possibilities.

PROPOSED RULE PROCESS

In general, the rulemaking process across government agencies consists of the Proposed Rule being issued by an agency (in this case HHS), a public comment period, and then a Final Rule being issued, as depicted below:

According to the Office of the Federal Register’s “A Guide to the Rulemaking Process,” the public comment period is typically 30 or 60 days, with more complex rulings warranting 180 days. The Safe Harbor comment period was 60 days, which closed on April 8.

 

Public comments are important, as the Final Rule is based on the Proposed Rule, plus additional information from the public comments.  Agencies must use the public comments in formulating the Final Rule, as opposed to the volume of comments ‘For’ vs. ‘Against’ the rule as input.  Moving forward with the Final Rule ultimately depends on assessing whether or not more effective or lower cost alternatives exist, and arriving at the conclusion that the Final Rule solves the problem it initially intended to — both of which public comments help inform once they are part of the rulemaking record.  In the Discount Safe Harbor, the solution’s intent is reduction in net prices paid by beneficiaries, and greater transparency of net prices.

TIMELINE AND DATES

As noted from the timeline below, first shared by Heenal Patel, the Proposed Rule was issued on January 31, 2019.  The Public Comment period closed on April 8, 2019.  Per the process noted above, HHS is now reviewing the comments and incorporating them into the Final Rule.  The earliest expected publication date of the Final Rule was May 15, which would have been aggressive based on the number of comments.  Industry speculation had pegged July as the final rule release date. Recent developments, including a memo from CMS to insurers, and the release of the spring regulatory agenda, point to a final rule release between June 4 and November 2019.  More details on that and other factors that could impact this date include:

  • Public comments – The purpose of public comments, is to help inform the intent of the Final Rule, or introduce alternative solutions. The volume of comments can also play a role. While over 25,000 comments is significant, it is lower than the current Top 5 commented proposed rules by volume, which range from 46,000 to over 106,000 comments.
  • The annual Medicare Part D bid process – Part D Plan bids are due by June 3, so general consensus was that lawmakers would work to align the Final Rule to coincide with the Medicare Part D timeline. The Congressional Budget Office (CBO) had indicated that they did not expect any information on the Final Rule until mid-June.  The Centers for Medicare & Medicaid Services (CMS) had issued guidance related to this in an April 5 memo, stating that providers should submit bids based on the rules that are in effect at the time of submission.  In the event of a rules change, there is a brief period known as a “Formulary Update Window” (from late July to early August 2019) during which plan sponsors may adjust their bids.  Late-breaking developments have shed more light on the release date of the Final Rule.  CMS sent a May 20 memo to insurers stating that the Final Rule would not be released before June 4.  Now, with the release of the Spring Regulatory Agenda on May 22, the Final Rule is not expected until November 2019. More can be found on the Medicare Part D bid process in Brendan Flounders blog “Medicare Part D Bids and Discount Safe Harbor Timeline.”
  • CBO Score Report Results and Potential Delay – Lawmakers may request that CBO ‘score’ proposed legislation, to ensure that its budgetary impacts are in line with budget resolutions, and have done so in this case. This means that CBO will produce a Scorekeeping for Legislation report, to estimate how much savings would be realized if the rule were delayed. More can be found on this process in “Can congress delay the safe harbor proposed rule?
  • Other potential legislation – House Speaker Nancy Pelosi is currently working on drug price legislation, which includes components related to drug price negotiation, and out-of-pocket spending caps for Medicare beneficiaries. Recent negotiations, as reported by BioCentury, have broached delaying or eliminating the rebate ban in exchange for the spending cap.

As the Discount Safe Harbor Rule approaches its final stage of rulemaking, there are several factors that could affect the timing of the Final Rule. While issuance and implementation of the Final Rule are unclear, what is clear is that change is coming.  Such a change has industry support, as evidenced by recent Fortune Commentary by Sanofi CEO Olivier Brandicourt and PhRMA CEO Stephen Ubl.

A shift in thinking, along with proper planning, preparation, and flexibility are key as the industry adjusts to the impending altered landscape resulting from the Discount Safe Harbor Rule.

References

  1. 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

  1. Office of the Federal Register. (2011). A Guide to the Rulemaking Process, Prepared by the Office of the Federal Register.

Retrieved from:  https://www.federalregister.gov/uploads/2011/01/the_rulemaking_process.pdf

  1. gov. (April 2019). Fraud and Abuse Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals, Docket Folder Summary, Comments Received.

Retrieved from:  https://www.regulations.gov/docket?D=HHSIG-2019-0001

  1. gov. (May 8 2019). Your Voice in Action. Top 5 Actions Based on Comments Posted to Regulations.gov.

Retrieved from: https://www.regulations.gov/siteData:

  1. Congressional Budget Office. (2019). Products.

Retrieved from: https://www.cbo.gov/about/products

  1. Centers for Medicare and Medicaid Services. (April 2019). Guidance Regarding Part D Bids.

Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/HPMS/Downloads/HPMS-Memos/Weekly/SysHPMS-Memo-2019-Apr-5th.pdf

  1. 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-

  1. Brandicourt, Olivier and Ubl, Stephen (May 10, 2019). Fortune. Want to Lower Drug Costs for Patients? Start with Rebates.

Retrieved from: http://fortune.com/2019/05/10/trump-drug-prices-rebates-pharma/

  1. 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

  1. 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

  1. 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
  2. Centers for Medicare and Medicaid Services. (May 2019). Additional Guidance Regarding Part D Bids.Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/HPMS/Downloads/HPMS-Memos/Weekly/SysHPMS-Memo-2019-May-20th.pdf