Throughout the course of his administration, President Trump and the Department of Health and Human Services (HHS) have set their sights on drug pricing, cutting regulatory red tape and value-based care. While some efforts have advanced, many of the key policies that were included in the President’s 2018 American Patients First, a blueprint to lower drug prices and reduce out-of-pocket costs, and HHS’s 2019 proposed reforms to the Stark Law and Anti-Kickback Statute had not yet come to fruition until late last month.
On November 20—just two months before the start of the next Presidential term—there was a wave of press releases and Federal Register notices indicating an effort by the Trump Administration to finalize several outstanding policy goals. Specifically, HHS made five critical announcements—two final rules and a notice seeking to reduce drug prices, and two final rules to support modernized and coordinated care.
Given the late hour, one might ask: will these regulations stand, or will they change once the administration changes in January?
Wave of pricing reform rules
HHS and the Centers for Medicare & Medicaid Services (CMS) issued an interim final rule that would implement the “Most Favored Nation Model” (MFN Model), limiting what Medicare Part B pays for 50 prescription drugs to the lowest price paid by countries with similar gross domestic products as the United States. While the rule is effective November 27, it would have a significant impact on how hospitals and other providers are reimbursed for certain prescription drugs starting January 1, 2021—the start of the first performance year of the MFN Model.
Hospitals, providers and pharmaceutical manufacturers have criticized the MFN Model, noting concerns that it does not actually reduce drug prices, but instead reduces how much Medicare will pay for the drugs—leaving providers to figure out how to account for any difference between acquisition costs and reimbursement.
Looking to Part D, HHS and the Office of Inspector General (OIG) surprised many when it revitalized a final rule that changes how pharmacy benefit managers (PBMs) can use rebates, aiming to pass any savings directly on to consumers at the point-of-sale. It finalizes an earlier proposed rule released and withdrawn in 2019 due to concerns about the potential for increasing Medicare Part D premiums and increased federal spending. The final rule is effective January 29, 2020.
Both PBMs and insurers have raised significant concerns about the rule, arguing that the changes will remove the flexibilities that are used to structure agreements with health plans.
Finally, HHS issued a notice to withdraw guidance for the Food and Drug Administration’s (FDA) Unapproved Drug Initiative (UDI) as a means to lower drug costs and prevent shortages. While the program was intended to learn whether older, commonly used drugs were safe and effective, it has instead become an avenue for some drug manufacturers to gain exclusivity and increase the price of older, commodity drugs.
A Vizient® analysis estimated that eliminating the program could save the U.S. between $7.52 and $26.59 billion in health care spending. Vizient shared the analysis with HHS and FDA earlier this year, urging the agency to consider reforming or eliminating the program.
Rules to support modernized and coordinated care
HHS and CMS finalized and issued a final rule effective January 19, 2021, to modernize the physician self-referral laws (Stark Law) and a final rule that expands safe harbors under the Anti-kickback Statute and Civil Monetary Penalty Rule to promote greater care collaboration and coordination. Combined, these final rules are designed to allow hospitals and other providers greater latitude to establish value-based arrangements without fear of violating the complicated rules and facing significant penalties.
Earlier this year, Vizient joined other hospital groups encouraging the administration to finalize the rules as soon as possible to foster collaboration and innovation among health care stakeholders, especially as the health care system is increasingly focused on coordination and payment for value.
Are storms ahead?
As I mentioned, with President-elect Biden slated to take office on January 20, 2021, you may wonder if this wave of Trump Administration regulations will be washed away. Well, not quite. Unlike Executive Orders, which can be neatly retracted with a stroke of a pen by an incoming President when they officially take office, the process is more complex for rules and regulations.
Since the MFN Model, Stark Law and Anti-kickback rules will have taken effect before January 20, 2021, President-elect Biden’s administration cannot simply freeze, withdraw or postpone them. Generally, for a rule to be rescinded, notice and comment rulemaking would be required. However, there are some exemptions to the notice and comment rulemaking requirements, including rules for which the agency finds “good cause” that “notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” Meaning, there are justifications and arguments that could be made to stray from traditional rulemaking processes to more quickly address regulatory concerns.
For agency guidance, such asthe UDI notice, agencies are granted fairly broad latitude to repeal guidance, agency manuals or interpretive bulletins so long as the action isn’t “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law.”
Finally, unique to the upcoming transition, due to the COVID-19 Public Health Emergency, HHS has additional authorities, including the ability to temporarily waive certain regulatory requirements.
The PBM rebate rule is effective after President-elect Biden takes office, so its effective date could be delayed while a new rule could be proposed. However, it is unclear at this point how President-elect Biden’s administration would treat the rule.
In addition, looming over all these technical regulatory considerations is the almost certain specter of lawsuits from stakeholders challenging everything from the legal authority to move forward with the regulation under existing statute, to the process used to finalize these rules. Most notably, it seems the rush to publish an interim final rule on the controversial MFN Model makes it more vulnerable to legal challenges, among other concerns. It’s expected that the PBM rebate rule also will face a legal challenge. As a result, in the short term, the future of these rules may hinge on court decisions.
The wave of regulations that rolled out on November 20 are certainly gaining significant attention; however, key differences in the circumstances of their release may impact their future and the implications for hospitals.
About the author: Jenna Stern currently serves as Vizient’s senior regulatory affairs and public policy director. In this role, she identifies and responds to legislative and regulatory developments of most interest to Vizient’s members. Medicare reimbursement and drug policy are among the topics which Jenna focuses on at Vizient. Prior to joining Vizient, Jenna was the director for health policy at the American Pharmacists Association and a senior associate with Avalere Health, a health care consulting firm in Washington, DC. In her previous roles, she specialized in regulatory affairs, strategy, policy and data analysis for life sciences, health plans and providers. Jenna has also worked at various non-profit organizations focusing on public health and patient advocacy. Her educational background includes a Bachelor of Science in Health Sciences (Hons.) from Brock University and a Juris Doctor with a concentration in health law from Case Western Reserve University. She is admitted to the Maryland bar.