Model N had a fantastic visit this year to the Medicaid Drug Rebate Program Summit (MDRP) in Chicago. It is always a welcomed event to catch up with colleagues, learn from our partners, and listen to valuable up-to-the-minute information about pharmaceutical pricing.
This year, Jesse Mendelsohn, VP, Life Sciences and Dhirendra Jena, Director, Life Sciences at Model N, presented about new legislation, called the Prescription Drug Price Reduction Act or PDPRA. This is pending in the U. S Senate and could impact how pharmaceutical companies price their products for government programs as well as financial liabilities incurred. Though it’s anyone’s guess to which portions of this bill may become law, it is important for manufacturers to analyze the information, and the current direction Congress is heading in regarding drug price reform. The detailed topics include changes to Medicare Parts B and D as well as Medicaid and related programs.
In their presentation, Jesse and Dhirendra explained what the new provisions would entail. They include:
- Requiring manufacturers to pay rebates for prescription drugs and biologicals for average price increases above inflation.
- Supplying refunds for payment made to providers for unused drugs.
- Providing new details around reporting average sales price (ASP).
While there are still unanswered questions, it is important that organizations evaluate current systems, analyze updates required in ASP to exclude Medicare Part B rebates, establish a process to validate Part B drug utilization, and estimate quarterly financial obligations.
For Medicare Part D, many of the considerations should be similar. The provision would establish a mandatory rebate on branded drugs if the list price increases faster than inflation, measured by CPI-U in 2022.
Recommended preparation should include:
- Establishing a process to validate invoiced units
- Utilizing commercial rebating to validate, measure and speed the process.
- Evaluating financial obligations quarterly.
For both Part D and Part B, CMP of 125% of the rebate will be applied if the manufacture fails to pay, and additional penalties may be imposed for non-compliance. To avoid this, companies must stay ahead of the game and start making provisions now.
Additionally, the session at MDRP included details about a current hot topic in the industry – federal and state-level drug pricing transparency requirements. As we’ve seen over the past few months, this is an uncharted course, but it is imperative that manufacturers prepare for the inevitable amendments to the Social Security Act and modifications to rebate requirements.
In summary, Model N’s recommendations for manufacturers to prepare for PDPRA included:
- Take the necessary steps to evaluate financial impact.
- Connect with your vendors to understand how they can support these new requirements in your current government pricing and Medicaid rebate applications.
- Ensure your system supports the three core pillars of government pricing: Accuracy, Auditability, and Reproducibility.
If you follow these recommendations and strategies, you should be in a good place to navigate the road ahead and handle the changes to come. As always, we look forward to seeing you all at the next MDRP event! For more on the landscape ahead, be sure to follow Model N on our social channels, join the Price Transparency Group on LinkedIn, and visit to sign up for email updates.