A bill aimed at stopping biopharmaceutical companies from gaming the Medicaid drug rebate program hitched a ride on a broader piece of legislation that sped its way through the House on Dec. 11.
Congress created the Medicaid drug rebate program nearly 30 years ago as a way to leverage the large volume of medicines the government purchases on behalf of low-income beneficiaries to obtain price concessions from biopharmaceutical companies.
Under the program, participating drugmakers that want their products covered by the federal government must offer states a price that includes a minimum rebate or, if lower, the best price the manufacturers provide to private-sector purchasers, such as hospitals.
But some companies have been misclassifying their brand-name therapies as generic medicines, therefore underpaying rebates to Medicaid and overcharging states for the drugs.
Sens. Chuck Grassley, R-Iowa, the soon-to-be head of the Senate Finance Committee, and Ron Wyden, D-Ore., the panel's ranking member, introduced legislation earlier this month that would give the U.S. Department of Health and Human Services new powers to reclassify medicines in the Medicaid drug rebate program, impose civil monetary penalties and recover incorrect rebate payments.
"I've worked for years to fix this problem, and today's passage is a big step in the right direction," Grassley said in a statement to reporters.
"Misclassifying brand-name drugs as generics under the Medicaid drug rebate program is little more than a dishonest way for drug manufacturers and distributors to game the system and cheat American taxpayers out of their hard-earned money," he said.
In Grassley's current role as chairman of the Senate Judiciary Committee — a title he is giving up to take the helm of Finance in January — the Iowa senator investigated Mylan NV for misclassifying its emergency anaphylaxis medicine EpiPen as a generic rather than a brand-name medicine under the Medicaid program.
In 2017, Mylan agreed to pay $465 million to settle charges in which the U.S. Justice Department said the company had "knowingly" misclassified EpiPen.
The legislation that passed the House on Dec. 11, known as the IMPROVE Act, or H.R. 7217, also included a measure to extend the Money Follows the Person demonstration program, a Medicaid pilot established in 2005 that enables elderly and disabled beneficiaries to receive long-term care services at home or in other community settings rather than in institutions such as nursing homes. It also would authorize another $112 million for the program for fiscal 2019.
Also tucked inside the IMPROVE Act was a measure that would permit states, which manage and fund Medicaid along with the federal government, to create a Medicaid home health option specific to children with medically complex conditions — the ACE Kids Act.
While the ACE Kids Act would cost $63 million over 10 years, the Grassley-Wyden bill would save the government $52 million during the same period, the nonpartisan Congressional Budget Office said in a Dec. 10 report.
The IMPROVE Act passed the House with 400 yeas and 11 nays. All votes opposing the bill came from Republicans.
With a government shutdown looming in the U.S. if the House and Senate fail to pass a funding bill by Dec. 21, the chances of the IMPROVE Act getting through the Senate before the end of the congressional session are uncertain, noted Cowen & Co. analyst Rick Weissenstein.
There is some opposition to the rebate change as well as other parts of the IMPROVE Act, he said in a Dec. 12 research note.
"The bottom line is that the Grassley-Wyden measure is about as low hanging a fruit as you can find and it is still controversial even though it only saves $52 million over 10 years," Weissenstein said.