The Department of Health and Human Services (HHS) is proposing to rescind a Trump era rule that would have established a “most favored nation” (MFN) model to base Medicare Part B drug payment on international prices. The Trump Administration rule had a troubled history. The idea of basing Medicare drug reimbursement on prices in foreign countries was first proposed during the Obama Administration in 2016. That proposal was withdrawn by the Trump HHS, but the notion of international reference pricing was subsequently incorporated in an October 2018 HHS Advance Notice of Proposed Rulemaking (ANPR) (see our post here). HHS took no further action on the ANPR, but two years later, in the waning days of the Trump Administration, HHS issued a final rule with comment period establishing a MFN model for Part B rate setting methodology, circumventing the usual proposed regulation stage. The MFN rule, which we summarized here, called for Part B payment for at least 50 high-expenditure drugs selected by HHS to be based on the lowest payment rate in 22 specified foreign countries, with a fixed add-on payment for drug administration. Predictably, PhRMA, BIO, and numerous provider organizations took advantage of the procedural irregularity to challenge the rule on APA grounds in three separate lawsuits, and succeeded in obtaining injunctions blocking the rule from taking effect on January 1, 2021 (as we reported here and here).
Finally, CMS released a proposed rule on August 6 seeking to rescind the interim final rule. According to CMS, the agency considered the nationwide preliminary injunction and multiple court challenges based on the rule’s procedural deficiencies, and stakeholder concerns about its start date and its far-reaching impact. According to the proposal, CMS will review the issues identified by commenters and continue to explore opportunities to address high drug costs based on stakeholder comments to the interim final rule. The proposed rule to rescind will be published in the August 10 Federal Register and comments will be due on October 9.
It is possible that CMS will issue a new proposed rule to impose international reference pricing in the future, but it is far more likely that the initiative will move to Congress. Use of international reference pricing as a target for Medicare to negotiate prices with drug manufacturers appears in H.R. 3, the “Elijah E. Cummings Lower Drug Costs Now Act,” introduced by Representative Pallone on April 22. This bill is the slightly revised and re-introduced version of the comprehensive drug pricing bill that passed the House during the last Congress, and represents the House Democrats’ drug pricing proposal. On the Senate side, a drug pricing bill being developed by Ron Wyden, Chairman of the Senate Finance Committee, has been reported by the trade press to include the use of either international or domestic prices as reference benchmarks for setting payment rates under Medicare, and perhaps even commercial insurance markets.
As always, we are following drug payment and price reduction initiatives in the Administration and Congress with great interest, and will be reporting on important developments as they occur.