Congress has more power to prohibit rebates in commercial insurance. The draft rule was proposed on January 31, 2019. Herman v. Coloplast Corp, a whistle-blower case in which the government declined to join the prosecution. • Cash payments to cover co-payments for newly converted beneficiaries Specifically, the Proposed Rule would exclude from “safe harbor” protection rebates and other discounts on prescription pharmaceutical products offered by pharmaceutical manufacturers to Medicare Part D plan sponsors or Medicaid Managed Care Organizations (MCOs), unless the price reduction is required by law (such as rebates required under the Medicaid Drug Rebate … § 1001.952: First, the Proposed Rule would revise the Discount Safe Harbor to explicitly exclude discounts and rebates on drug purchases made available to Medicare Part D plan sponsors, Medicaid Managed Care Organizations (MCO), and Pharmacy Benefit Managers … It creates three main problems for patients: 1. United States ex rel. As the case currently stands, litigation has been stayed until September 19, 2015, in order to allow the parties to resolve the claims without litigation. Replacing the rebate system with upfront discounts for patients was one of the ideas put forth in President Trump's "American Patients First" blueprint for lowering prescription drug prices and out-of-pocket costs. § 1001.952(h). The cases above reflect the government’s position, and at least one court’s agreement, that satisfaction of a safe harbor at face value will not indemnify a questionable arrangement.  In particular, in Banigan, the court stated: Nor is it the case, as defense argues, that [under the statutory discount exception] any discount, ‘properly disclosed and appropriately reflected’, is exempt from criminal liability.  What makes the activity illegal is not the label that someone attaches to the form of the transaction, even if the form may give rise to the rebuttable inference of illegality. AAHomecare’s Educational Webinar The rule only applies to Medicare Part D and does not apply to other … United States ex rel Herman et al. The amendment to the discount safe harbor is specifically targeted to rebates paid between drug manufacturers and PBMs. These rebates fall within the definition of kickbacks under AKS because the PBM retains, as revenue, a portion of the rebates that it negotiates for each drug, and the amount they are paid is based on how much that drug is purchased using the rebate. Will eliminate existing discount safe harbor protection for rebates to Part D plan sponsors and their PBMs, unless the rebates are price reductions required by law, effective January 1, 2022; Will create a new safe harbor protecting certain flat, fixed service fees that manufacturers pay to PBMs, effective sixty (60) days after the Final Rule is published in the … This definition ensures that the pharmacy is made whole for the difference between acquisition cost, plan payment, and beneficiary out-of-pocket payment. In addition, Omnicare created fax, mail, and telephone campaigns directed at physicians that encouraged the switching of patients to the manufacturer’s drugs. Joint Ventures and Other Arrangements with Referral Sources Discount Disruption: PBM Rebate Protection May Be Removed, New Safe Harbors Combat Increasing Drug Costs. On November 20, 2020, the United States Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a final rule (scheduled to be published in the Federal Register on November 30 th) that amends the Anti-Kickback Statute (AKS) discount safe harbor, removing protection for manufacturer rebates on prescription drugs for pharmacy … To accomplish the change, HHS would add an explicit exception to the AKS definition of “discount” to exclude such rebates from the discount safe harbor effective January 1, 2020. Thus, the government maintained that Johnson & Johnson’s payments of market share rebates, data-purchase agreements, grants, and educational funding constituted kickbacks to Omnicare were intended to induce the pharmacy and its pharmacists to promote the use of Johnson & Johnson drugs in its client nursing homes. This rule exercises the Department's regulatory authority to address arrangements subject to the AKS, which is limited to federal healthcare programs. The finalized rule advances the President's promise outlined in the Administration's blueprint for lowering drug prices and putting American patients first: specifically the intent to investigate "measures to restrict the use of rebates, including revisiting the safe harbor under the anti-kickback statute for drug rebates.". AMARILLO, TX – It is a common practice for manufacturers to offer volume-based discounts to DME suppliers to encourage the suppliers to purchase increasing quantities of products. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or jbaird@bf-law.com. Directed by President Trump's July 24, 2020 Executive Order on "Lowering Prices for Patients by Eliminating Kickbacks to Middlemen," the Department of Health and Human Services Secretary Alex Azar and the HHS Office of Inspector General (OIG) have finalized a regulation that encourages lower list prices and reduced out-of-pocket spending on prescription drugs. 2000). Importantly, the Final Rule will not affect: (i) safe harbor protection for prescription drug rebates … Specifically, the allegations included Omnicare’s instructions to its pharmacy to convert to a specified Johnson & Johnson drug product as well as meetings between Omnicare and Organon concerning plans for or hopes to drive up market share. The government further provided insight regarding its position on discounts that are linked to recommendations or purchases of certain products in its statement of interest in this case.  The United States distinguished ordinary price reductions from remuneration “for switching patients from one drug to another, and for other efforts to increase a drug’s utilization” by stating that the latter “do not qualify as protected price reductions simply because the payments are labeled as ‘rebates’ or ‘discounts’.” Rather, to determine the legality of an arrangement, the question should be “whether the reason for offering or accepting the ‘discount or other reduction in price’ was to induce referrals of or be reimbursed for federal health care business’.” Accordingly, the government argued that the arrangements in Banignon “were not mere price reductions because Organon allegedly condition the payments on Omnicare … not only purchasing its products, but also engaging in ‘therapeutic interchange programs’ or switching efforts to promote utilization of Organon’s drugs at the nursing facilities where Omnicare … filled prescription.  As such, the payments were not true price discounts, but rather were remuneration that Organon offered and paid to induce Omnicare … to recommend its products.” In its statement of interest, the government maintained that conversion requirements between a pharmacy and a manufacturer removed the arrangement from the scope of a rebate within the meaning of the safe harbor and placed the arrangement into illegal kickback considerations. 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