MACPAC calls for Congress to eliminate the drug rebate cap

In a bid to help states address growing drug prices, Congress should eliminate the cap on drug rebates paid to state Medicaid programs, the Medicaid and CHIP Payment and Access Commission (MACPAC) recommended during its meeting Thursday. 

The savings from higher rebates would allow states to provide the same level of drug coverage at lower costs and continue to exert downward pressure on price increases, they said. If enacted, the change could save the federal government between $15 billion and $20 billion over 10 years, the Congressional Budget Office (CBO) estimated. 

MACPAC, which is the nonpartisan committee that advises Congress on Medicaid, also recommended Congress allow states to restrict coverage of new drugs or new drug formulations for up to 180 days after they have been approved by the Food and Drug Administration. 

RELATED: PCMA report says HHS rebate rule would significantly boost drug, Part D spending

Medicaid drug rebates are capped at 100% of a drug's average manufacturer price (AMP). Once a drug hits the cap, drugmakers can raise prices without increasing the net rebates that must be paid to Medicaid.

MACPAC commissioners originally considered raising the cap to 125% of AMP. The CBO estimated states would see savings from higher rebates of between $2 billion and $5 billion. 

While beneficiaries would not be expected to see a measurable impact from this change, it could lead to cost shifting by drug manufacturers as well as higher launch prices. 

180-day grace period

Commissioners said a 180-day grace period would provide clear guidance to states as to what is permissible.

It could also improve beneficiary safety while relieving states' administrative burden as they review drugs and develop coverage decisions. Finally, they said, it would allow the Centers for Medicare & Medicaid Services to issue subregulatory guidance to provide expectations that states publish coverage criteria at the end of the grace period.

Payers such as Medicaid Part D and plans on healthcare exchanges currently have up to 180 days to make a coverage decision.

Medicaid, however, must generally cover a drug as soon as it enters the market. Commissioners said it does not give states sufficient time to assess a new drug and develop coverage criteria. In some states', authorization policies prior to review by pharmacy and therapeutics committee processes may be excluding coverage. 

The CBO estimates federal savings of less than $25 million over 10 years.