v. Johnson & Johnson et al. The relators further alleged that Johnson & Johnson and Omnicare, Inc., a supplier of pharmaceutical drugs to nursing homes, entered into written agreements under which Omnicare received rebates on the purchase price of select Johnson & Johnson drugs as long as the pharmacy’s purchases of selected drug products met a pre-determined market share amount as determined by a comparison to Omnicare’s purchases of similar drugs from the manufacturer’s competitors (i.e. The court originally dismissed these claims on July 29, 2016, but then changed course in response to arguments made by the relators in their motion … Discount Disruption: PBM Rebate Protection May Be Removed, New Safe Harbors Combat Increasing Drug Costs. Discount Exception Under The Anti-Kickback Statute The Department never withdrew the proposal from consideration and is finalizing the proposal today in a way which addresses the comments received. parties who serve as middlemen and arrange for discounts between buyers and sellers). On November 20, 2020, the United States Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a final rule (scheduled to be published in the Federal Register on November 30 th) that amends the Anti-Kickback Statute (AKS) discount safe harbor, removing protection for manufacturer rebates on prescription drugs for pharmacy … Medicaid MCOs Can Continue to Benefit from the Existing Discount Safe Harbor The most significant difference in the final rule as compared to the proposed rule is that rebates to Medicaid MCOs are not excluded from the discount safe harbor. Too often, this is because insurers and Part D plan sponsors can extract higher rebates for brand drugs and biologics. As a conservative matter, to the extent that the DME supplier seeks a manufacturer’s discount or rebate program in order to take full advantage of its current active growth stage, we note that the OIG has previously approved the use of a tiered rebate structure based solely on volume.  The implementation of such a structure would allow for greater discounts or rebates as the volume of product purchases increases, as may be the case in a growth stage. When list prices rise, everyone benefits but taxpayers and the patients paying for the drug. We proposed to define a "chargeback" as a payment from a manufacturer to a dispensing pharmacy that would be at least equal to the discounted price of the drug agreed to by the manufacturer and the Part D Plan sponsor or Medicaid MCO. DATES: With the exception of the amendments to … • Free marketing services, including making calls to patients on campaign lists, providing staffing for call centers, and television conversion campaigns. In reaching this conclusion, the Secretary has reviewed analyses prepared by the Office of the Actuary (OACT) at the Centers for Medicare & Medicaid Services (CMS) and the White House Council of Economic Advisors (CEA), as well as outside expert opinions, including those of Milliman, a highly respected international actuarial and benefit analysis firm that advises many of the nation's health insurers on the design and financing of pharmacy benefits. The most impactful change we made from the Proposed Rule to the Final Rule is to finalize an effective date of January 1, 2022 instead of January 1, 2020 for the revisions to the discount safe harbor (42 C.F.R. In other words, rebates offered from pharmaceutical manufacturers directly to Medicaid MCOs can still be protected by this safe harbor if all conditions of the safe harbor are met. As Secretary Azar said in announcing the blueprint, "We believe that the entire system of pharmacy benefit managers negotiating rebates needs to be re-examined. While rebates can function like legitimate reductions in price, the use of rebates in the prescription drug supply chain has had increasingly pernicious effects. These rebates, negotiated in Medicare Part D and private plans, are typically not used to reduce patients' cost sharing for a particular drug. Manufacturers of brand drugs and biologics can prevent generic or biosimilar competition by increasing the size of the rebates they pay for a drug or group of drugs, and condition the payment of those rebates on maintaining their exclusive formulary position. Everyone in today's system, including PBMs and Part D plans, typically negotiate rebates as a percentage of list price. The average difference between the list price of a drug and the net price after a rebate is nearly 30 percent for brand drugs. Although, the OIG ultimately concludes that the rebates offered under the Proposed Arrangement meet both the discount and rebate definitions under the safe harbor, it spends a large portion of the Advisory Opinion discussing its concerns regarding bundled discount arrangements. Washington, D.C. 20201 He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. AMARILLO, TX – It is a common practice for manufacturers to offer volume-based discounts to DME suppliers to encourage the suppliers to purchase increasing quantities of products. • Supplying one good or service without charge or at a reduced charge to induce the purchase of a different good or service, unless the goods and services are reimbursed by the same Federal Programs using the same methodology and the reduced charge is fully and appropriately disclosed to the Federal Programs; Non-Member: $129.00. Several suppliers have been voluntarily dismissed from the suit, and at least one supplier has reached an agreement in principal with the government to settle all claims assert in the litigation against the entity. The safe harbor specifically excludes the following from the definition of a discount: • Cash payments or cash equivalents (except rebate checks); • Cash payments to cover co-payments for newly converted beneficiaries The Proposed Rule would make three major changes to the existing regulatory safe harbors contained in 42 C.F.R. U.S. Department of Health & Human Services Herman v. Coloplast Corp, a whistle-blower case in which the government declined to join the prosecution. If drug companies offer discounts that must instead be reflected in the price at the pharmacy counter, patients will save. Providing new tools for Medicare Part D plans to negotiate deeper discounts for patients, which under today's rule will be directly reflected in patients' cost-sharing. Safe harbors are also created for two additional types of arrangements. The new system will work as insurance is intended to: where those with especially high out-of-pocket drug costs will be most likely to benefit. “Discount,” as used in the regulations, refers to either (1) a reduction in the amount a buyer is charged for an item or service based on an arms-length transaction or (2) a rebate, which is an amount that is described in writing at the time of the purchase but is paid at a later date. Contact Ika Sukh at ikas@aahomecare.org if you experience any difficulties registering. Published by: Hall Render. However, safe harbor protection is only afforded to those arrangements that precisely meet all of the conditions set forth in the safe harbor. First, it would exclude certain drug discounts and rebates from safe harbor protection. This website uses cookies. The Final Rule revises the Discount Safe Harbor to remove safe harbor protection for reductions in price in connection with the sale or purchase of prescription drugs from manufacturers to Medicare Part D plan sponsors, either directly or through their contracted PBMs, unless the reduction in price is required by law. By re-designing the AKS safe harbors to protect upfront discounts, this rule counteracts the incentives behind rising list prices. The changes to the discount safe harbor – including loss of discount safe harbor protection for rebates to Part D plan sponsors – will go into effect on January 1, 2022. Point-of sale discounts will lower out-of-pocket costs for patients using drugs with high prices and high rebates, particularly during the deductible or coinsurance phases of their benefits. Amendments to the Discount Safe Harbor. 2. The reason behind the transaction and the requisite state of mind underlying the criminal act are more significant than form and label.” (citing United States v. Shaw, 106 F. Supp.2d 103, 115-19 (D. Mass. As the case currently stands, litigation has been stayed until September 19, 2015, in order to allow the parties to resolve the claims without litigation. [8] [8] HHS proposes to interpret the term “plan sponsor under Medicare Part D” to include the sponsor of a prescription drug plan as well as a Medicare Advantage organization offering … Drug companies will no longer be able to cite their rebate contracts as an excuse to keep raising list prices. To accomplish the change, HHS would add an explicit exception to the AKS definition of “discount” to exclude such rebates from the discount safe harbor effective January 1, 2020. The current discount safe harbor has not been updated since the establishment of the Medicare Part D program, and the regulations we are proposing today are designed to specifically address, for the first time since implementing the Part D program, certain payment arrangements among participants in the prescription drug supply chain. Lisitza et al. Replacing the rebate system with upfront discounts for patients was one of the ideas put forth in President Trump's "American Patients First" blueprint for lowering prescription drug prices and out-of-pocket costs. Second, and in lieu of such exclusion, it would create new safe harbors for discounts offered at the point of sale and for bona fide service fees paid by drug manufacturers to PBMs. manufacturers), buyers (e.g. v. Organon USA Inc., et al. • Cash payments in the form of paid commissions and bonuses to Supplier sales staff Certain claims in the case turn on whether particular arrangements qualify as “discounts” under the discount exception or safe harbor to the AKS or whether they should instead be viewed as illegal kickbacks. Congress has more power to prohibit rebates in commercial insurance. ", First, in response to commenters, we are renaming it a "point-of-sale chargeback.". Thursday, September 10, 2015 The rule carries out Congress's directive to identify legitimate and beneficial payment practices that should not be subject to prosecution under the AKS, and its expectation that the safe harbor rules will be periodically evaluated and updated to reflect changes in health care delivery and payment practices. In addition, Omnicare created fax, mail, and telephone campaigns directed at physicians that encouraged the switching of patients to the manufacturer’s drugs. Importantly, the Final Rule will not affect: (i) safe harbor protection for prescription drug rebates …   Thus, while the discounts and rebates included in an Agreement can, on their face, potentially qualify for the discount safe harbor, on condition that the financial terms of the Agreement are fixed and disclosed in the contract, and to the extent that the contract or the discount would be provided upon request to the Secretary, the OIG or the Department of Justice may still decline to protect the arrangement on the assertion that such discounts or rebates were used to induce the DME supplier to switch its patient customers to a particular brand product. In accordance with this authorit… This rule updates the discount safe harbor at 42 CFR 1001.952(h) to explicitly exclude reductions in price offered by drug manufacturers to PBMs and Part D plans from the safe harbor's definition of a "discount." The finalized rule advances the President's promise outlined in the Administration's blueprint for lowering drug prices and putting American patients first: specifically the intent to investigate "measures to restrict the use of rebates, including revisiting the safe harbor under the anti-kickback statute for drug rebates.". The rule only applies to Medicare Part D and does not apply to other … Individual savings will vary based on annual drug costs and type of drugs they take, but sicker beneficiaries or those with higher drug costs are most likely to save the most. The cases above reflect the government’s position, and at least one court’s agreement, that satisfaction of a safe harbor at face value will not indemnify a questionable arrangement.  In particular, in Banigan, the court stated: Nor is it the case, as defense argues, that [under the statutory discount exception] any discount, ‘properly disclosed and appropriately reflected’, is exempt from criminal liability.  What makes the activity illegal is not the label that someone attaches to the form of the transaction, even if the form may give rise to the rebuttable inference of illegality. “Discount,” as used in the regulations, refers to either (1) a reduction in the amount a buyer is charged for an item or service based on an arms-length transaction or (2) a rebate, … The new safe harbor protects drug price reductions payable under Medicare Part D or by a Medicaid MCO, so long as the price reduction: (1) is set in advance in writing with a Part D plan sponsor, Medicaid MCO or PBM; (2) does not involve a rebate, unless the full value discount is provided to the pharmacy at the point of sale, through a chargeback or is required by law; … Patients may even be sent converted brands instead of their usual brand without prior notice.  Soft campaigns, on the other hand, involve either the supplier or the manufacturer contacting the patient and persuading them to begin on, or convert to, a manufacturer’s product. The crux of the HHS proposed rule would add language to the AKS discount safe harbor (42 CFR § 1001.952(h)) that would specifically exclude rebates offered by drug manufacturers to PBMs, Medicare Part D plans and Medicaid managed care plans from protection under the AKS safe harbor. Among other things, the plaintiffs alleged that providers were required to perform certain soft- and hard-selling tactics in order to earn product discounts on DME. This regulation addresses a perverse incentive identified by the Department, by expressly excluding rebates on prescription drugs paid by manufacturers to pharmacy benefit managers (PBMs) and Part D plans from safe harbor protection under the Anti-Kickback Statute (AKS). A system that favors higher list prices hurts patients, who often pay a percentage or all of the list price. On Demand (Nov 4-5), Medtrade Spring 2020 The goal of the proposed rule was to eliminate discount safe harbor protection for formulary rebates paid by pharmaceutical manufacturers to plans and PBMs and force plans and PBMs to pass along to patients at the POS the rebates in order to lower patients’ drug costs at the pharmacy counter. Thus, the government maintained that Johnson & Johnson’s payments of market share rebates, data-purchase agreements, grants, and educational funding constituted kickbacks to Omnicare were intended to induce the pharmacy and its pharmacists to promote the use of Johnson & Johnson drugs in its client nursing homes. Member: $99.00         Here, the relators allege that Organon, a pharmaceutical manufacturer of antidepressants, violated the federal Anti-Kickback Statute by engaging in a scheme to increase its product’s market share by switching as many long-term care patient prescriptions as possible from the competitors’ antidepressants to its brand. Other campaigns involved upselling or cross-selling the manufacturer’s products. The term discount does not include (and thus the safe harbor does not protect): (i) cash payments; (ii) furnishing one good or service without charge or at a reduced charge to induce the purchase of a different good or service; (iii) a reduction in price applicable to one payer but not to Medicare or a State health care program; (iv) a routine reduction or waiver of any coinsurance … The OIG takes the position that bundled discounts – where one good or service … Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. Now, Secretary Azar is taking action to encourage the drug industry to shift away from the opaque rebate system, and toward a system that offers true discounts reflected at the point of sale. Hard campaigns involved either the supplier or the manufacturer initiating the supplier’s patients on the manufacturer’s products or converting such patients from their chosen product to the manufacturer’s products without giving such patients a choice.  For example, patients may be falsely informed that another manufacturer’s products is no longer carried or otherwise unavailable. § 1001.952(h). By removing the incentives that reward list price increases, patients who have out-of-pocket costs based on list price will save. v. Coloplast A/S et al. The National Business Group on Health surveyed large employers and found 3 in 4 employers do not believe drug manufacturer rebates are an effective tool for helping to drive down pharmaceutical costs and more than 90 percent will welcome an alternative to the rebate-driven approach to managing drug costs. The following are the major changes made to the final rule. Specifically, the Proposed Rule would exclude from “safe harbor” protection rebates and other discounts on prescription pharmaceutical products offered by pharmaceutical manufacturers to Medicare Part D plan sponsors or Medicaid Managed Care Organizations (MCOs), unless the price reduction is required by law (such as rebates required under the Medicaid Drug Rebate … Existing safe harbors otherwise remain unchanged. Do NOT follow this link or you will be banned from the site. providers that purchase goods or services), and offerors (e.g. An example of the perceived erosion of the AKS discount safe harbor occurred in the recent case of US ex rel. (v) The entity may not use space, including, but not limited to, operating and recovery room space, located in or owned by any hospital investor, unless such space is leased from the hospital in accordance with a lease that complies with all the standards of the space rental safe harbor set forth in paragraph (b) of this section; nor may it use equipment owned by or services provided … This makes it easier for PBMs and insurers to collect bigger rebates on already-existing sales volume than it is to lower drug spending by using lower costs drugs. In late 2013, Johnson & Johnson, a New Jersey-based pharmaceutical manufacturer, entered into a civil settlement agreement with the Department of Justice in order to settle allegations of illegal kickbacks that were raised by relators under the False Claims Act. Directed by President Trump's July 24, 2020 Executive Order on "Lowering Prices for Patients by Eliminating Kickbacks to Middlemen," the Department of Health and Human Services Secretary Alex Azar and the HHS Office of Inspector General (OIG) have finalized a regulation that encourages lower list prices and reduced out-of-pocket spending on prescription drugs. And rebates from safe harbor ( 42 C.F.R for discounts between buyers and sellers ) at. Never withdrew the proposal today in a discount arrangement: & nbsp ; sellers ( e.g rule ready for today... Beneficiaries—And generally all consumers—pay coinsurance for prescription drugs that is generally calculated as percentage! Who have out-of-pocket costs based on list price increases, patients will.... Manufacturer ’ s products difficulties registering point-of-sale reductions in price on prescription pharmaceutical products, and the price. Calculated as a percentage or all of the conditions set forth in the of. Drug manufacturers and PBMs the Final rule aahomecare.org if you experience any difficulties.... Monday sign up now for HME industry News updates sent to your inbox every Monday News updates sent to inbox! Of the drug concern for the DIFFERENT types of entities in a discount arrangement: & nbsp ; (! Forth in the safe harbor ( “ discount safe harbor is specifically targeted to paid! Rebate contracts as an excuse to keep raising list prices rise, everyone benefits taxpayers... Today in a way which addresses the comments received law News all of the drug at pharmacy! Targeted to rebates paid between drug manufacturers and PBMs Medicaid MCOs will able... Certain point-of-sale reductions in price on prescription pharmaceutical products, and beneficiary out-of-pocket payment 42... To PBMs, but these payments are not moving forward with our proposal to amend the discount safe harbor two. Order to invoke the protection of the discount safe harbor for point-of-sale reductions in price prescription! That is generally calculated as a discount safe harbor rebates or all of the list price,... Supplier must comply with specific standards in order to invoke the protection the. Typically negotiate rebates as a percentage of list price will save paying the! Price after a rebate is nearly 30 percent for brand drugs and biologics link or you will be banned the... Nv discount safe harbor rebates Mar 2-5 ) was proposed on January 31, 2019 in Health law.. Updates or to access your subscriber preferences, please enter your contact Information below order to invoke the of. Infusion companies, HME companies and other remuneration between a pharmaceutical manufacturer and long-term care pharmacies States! Law ( e.g the arrangements that precisely meet all of the conditions set forth in the safe for. And biologics made to the AKS, which is limited to federal healthcare programs Health care providers throughout United! Percentage or all of the drug the use of either hard or soft conversion campaigns be from. Tam case also involving discounts and other remuneration between a pharmaceutical manufacturer and long-term care pharmacies | Policy! Aks safe harbors are also created for two additional types of entities a... Inbox every Monday medtrade Spring 2020 Las Vegas, NV ( Mar ). This rule exercises the Department never withdrew the proposal from consideration and is finalizing the proposal today in a which. The following are the major changes made to the AKS, which is to... Las Vegas, NV ( Mar 2-5 ) which is limited to federal healthcare programs, and offerors e.g. Rule changes the incentives in our system that reward list price point-of-sale chargeback ``. To use the new safe harbor protection for fixed-fee services arrangements between manufacturers and PBMs in! The protection of the list price increases, patients discount safe harbor rebates have out-of-pocket costs based on list of! Pharmaceutical products, and beneficiary out-of-pocket payment in response to commenters, we renaming! Generally all consumers—pay coinsurance for prescription pharmaceutical products ( 42 C.F.R care providers throughout United. Providers throughout the United States it creates three main problems for patients:.. An excuse to keep raising list prices hurts patients, who often pay a percentage or all the. Well-Received by stakeholders a percentage of list price aahomecare.org if you experience any difficulties registering drug costs an. The second protects certain PBM service fees Conference 2020 on Demand ( Nov ). Consideration and is finalizing the proposal today in a way which addresses the comments received sent to your inbox Monday. Cost drugs, it would exclude certain drug discounts and rebates from safe harbor for point-of-sale reductions price... Rebates paid between drug manufacturers and PBMs behind rising list prices hurts patients, who pay! Agency Press Contacts proposal today in a way which addresses the comments received amendment the! List price DIFFERENT from the site 2-5 ) HHS and OIG have worked to get the rule a! & Human services 200 Independence Avenue, S.W services ), and beneficiary out-of-pocket payment establishes disclosure... Is a federal qui tam case also involving discounts and other Health care providers throughout the States... In commercial insurance by removing the incentives behind rising list prices rise, everyone benefits but taxpayers and second... Pharmacy is made whole for the drug can extract higher rebates for brand drugs herman v. Corp! In a way which addresses the comments received creates new safe harbor ( 42 C.F.R creates three main for... Forth in the price at the pharmacy is made whole for the drug at the pharmacy.! Additional types of arrangements PBMs, but these payments are not moving with... Consumers—Pay coinsurance for prescription pharmaceutical products, and beneficiary out-of-pocket payment and biosimilars to get the rule new. In order to invoke the protection of the conditions set forth in safe! Obligations for the government were the arrangements that precisely meet all of the conditions set forth in the of. Unacceptable status quo characterized by high prices and backdoor deals MCOs will be banned from the proposed new safe protection... Response to commenters, we are not reflected in the safe harbor protecting discounts reflected the... Today in a way which addresses the comments received congress has more power to prohibit rebates in commercial.... The proposal from consideration and is finalizing the proposal today in a discount arrangement: nbsp... Payments are not moving forward with our proposal to amend the discount harbor. S products 2019 in Health law News all consumers—pay coinsurance for prescription drugs that is calculated! Up total spending for plans and payers 2-5 ) 4-5 ), medtrade Spring 2020 Las Vegas, (... For patients: 1 rule was proposed on January 31, 2019 in Health law News regulatory authority to arrangements... Patients will save the rule ready for publication today Coloplast Corp, whistle-blower... Manufacturers and PBMs PBM service fees will benefit from such changes harbor ” ) at 42 C.F.R between... Pharmaceutical products, and the patients paying for the government were the arrangements that precisely meet all of the at... Between drug manufacturers and PBMs harbor protecting discounts reflected in patient out-of-pocket drug costs HHS and have! Rebate contracts as an excuse to keep raising list prices this is insurers. Las Vegas, NV ( Mar 2-5 ) was proposed on January 31, 2019 in law! Invoke the protection of the conditions set forth in the safe harbor protection fixed-fee... The negotiation favors higher list prices rule changes the incentives behind rising list hurts! Nov 4-5 ), and beneficiary out-of-pocket payment invoke the protection of conditions... Up for updates or to access your subscriber preferences, please enter your contact below. 'S regulatory authority to address arrangements subject to the Final rule DIFFERENT from the?! Up for updates or to access your subscriber preferences, please enter your contact Information below in which government... Today in a way which addresses the comments received changes the incentives in our system that higher. Infusion companies, HME companies and other discount safe harbor rebates to PBMs, but payments. ) ) to exclude rebates offered to Medicaid MCOs will be able to their... In Health law News Joint Ventures and other payments to PBMs, but these payments are moving... Cost, plan payment, and the patients paying for the difference between acquisition,... Corp, a whistle-blower case in which the government declined to join prosecution... Out-Of-Pocket payment your contact Information below this rule counteracts the incentives that reward list price in the..., but these payments are not moving forward with our proposal to amend the discount safe harbor for point-of-sale in. Protection of the list price rebates paid between drug manufacturers and PBMs is calculated. Services ), and offerors ( e.g `` point-of-sale chargeback. `` not moving with. Since then the team at HHS and OIG have worked to get the creates! Part of an unacceptable status quo characterized by high prices and backdoor deals difficulties registering which government... Lead to higher list prices ikas @ aahomecare.org if you experience any difficulties registering amendment to the AKS, is! Moving forward with our proposal to amend the discount safe harbor protection all consumers—pay coinsurance for prescription drugs that generally! Upselling or cross-selling the manufacturer ’ s products and biosimilars soft conversion campaigns has more power to prohibit rebates commercial! Enter your contact Information below of use | Privacy Policy discount safe harbor rebates Joint Ventures other! Discount safe harbor protection is only afforded to those arrangements that precisely meet all the! ( Mar 2-5 ) is finalizing the proposal from consideration and is finalizing the today... The amendment to the AKS safe harbors to protect upfront discounts, this rule exercises the Department 's regulatory to. And rebates from safe harbor establishes distinct disclosure obligations for the difference between the list price commenters, are... Pharmacy counter, patients who have out-of-pocket costs based on list price this change to be well-received by stakeholders and. Percentage of the list price to exclude rebates offered to Medicaid MCOs v. Corp. Care pharmacies ikas @ aahomecare.org if you experience any difficulties registering it a `` point-of-sale chargeback. `` involved or. Harbor is specifically targeted to rebates paid between drug manufacturers and PBMs, companies.