Bipartisan bill introduced in Senate to penalize pharma Medicaid gaming
- Two U.S. senators are seeking to establish monetary penalties and bolster oversight of pharmaceutical companies that purposefully misclassify their drugs within the Medicaid system.
- Sens. Chuck Grassley, R-Iowa, and Ron Wyden, D-Ore., introduced the Right Rebate Act of 2018 on Tuesday, which would amend the Social Security Act to create civil monetary penalties when a drugmaker knowingly misclassifies a drug with Medicaid. The legislation comes a little more than a year after Mylan settled a federal lawsuit for $465 million claiming the company classified its EpiPen treatment as a generic drug to avoid paying higher rebates to Medicaid.
- The act earmarks 25% of the penalty money to help improve drug data reporting and oversight of drug classification info and compliance. The bill would require yearly reports describing these misclassified drugs and related government actions.
For the industry, the question to watch will be whether this bill represents an early signal of what to expect from Congress in 2019 and beyond, or if the legislation is merely a narrow response to the Mylan scandal, which has been a particular fascination for Grassley in recent years.
Rick Weissenstein, who covers pharmaceutical policy at the Cowen Washington Research Group, does not see the bill as an indicator of future congressional cooperation on reducing drug pricing. Weissenstein stated in a Tuesday note the bill has more to do with good governance than drug pricing.
The bill still could affect hundreds of drugs. About 3% of drugs in Medicaid's rebate program, or 885 of the roughly 30,000 drugs in the system, may have been misclassified in 2016, according to a December 2017 report from the HHS Office of Inspector General. The 10 potentially misclassified drugs with the highest total reimbursement could have cost Medicaid an additional $1.3 billion from 2012 to 2016 compared to what those products would have cost if properly classified.
That report also emphasized that while CMS can ask manufacturers to change classification data, it cannot require those corrections. This bill would grant that explicit authority.
More broadly, the rhetoric from both Democratic and Republican politicians remains at a fever pitch when discussing the pharmaceutical industry. Both senators criticized pharma in written statements accompanying the bill.
Grassley derided the industry's "unnecessarily exorbitant pricing" as gouging taxpayers. Wyden said the bill targets "Big Pharma's games" that manipulate the system for profit at the expense of U.S. citizens. The Oregon Democrat added he hopes the bill becomes law by year's end and helps "set the tone" for future drug pricing work.
U may remember the Epipen fiasco in the news when the price increased by $100s which many families can't afford. 2day I introduced the RIGHT REBATE ACT w Sen Wyden which gives HHS power to enforce Medicaid rules & closes a loophole drug cos use to underpay govt & cheat taxpayers— ChuckGrassley (@ChuckGrassley) December 5, 2018
A spokesperson for PhRMA, the industry's influential trade group, said in an emailed statement to BioPharma Dive the organization is still reviewing the bill but has initial issues with it.
"We do have concerns with giving CMS authority to remove drugs from the rebate program for alleged misclassification without any process for resolving classification disputes or agency errors," the spokesperson said. "[A]llowing CMS to remove drugs from the rebate program without any transparent process could block access to these medicines for the vulnerable patients that rely on them."
Looking ahead to a Congress with a Democratic-controlled House and Republican-led Senate, drug pricing reform has been much-discussed area for potential bipartisan work. With Grassley and Wyden taking over as leadership of the Senate's Finance Committee, they could steer the group's agenda in a less pharma-friendly fashion.
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