Supplemental Rebates for Medicaid Drugs Enacted with New York Budget

On Thursday, April 20, the Governor Andrew Cuomo signed into law New York’s 2017-18 budget.  The budget adds a new section 280 to the New York Public Health Law which requires the Commissioner of Health to set an aggregate Medicaid drug spending growth threshold for 2017 and 2018, and allows the Commissioner to refer drugs to the Drug Utilization Review Board for pricing reviews when the state is projected to exceed the threshold.  These projections are to be assessed on a quarterly basis.  Importantly, the legislation sets very few standards for the selection of drugs for referral to the DURB.  The Department of Health only needs to “consider” the drug’s cost to the state and “whether the manufacturer . . . is providing significant discounts relative to other drugs covered by the Medicaid program.”

If the Commissioner refers a drug to the DURB, the DURB may then recommend that DOH seek further price reductions through supplemental rebates.  Failure to negotiate a rebate with the DOH triggers three separate sets of potential penalties.  First, if the manufacturer and the DOH fail to negotiate a rebate of at least 75% of the target rebate set by the DURB, the Commissioner may waive certain pharmacy coverage requirements applicable to managed care providers as well as certain “prescriber prevails” provisions.

Secondly, if the Department cannot reach a “satisfactory” rebate agreement with a drug manufacturer, the manufacturer must report certain drug-specific categories, including advertising and marketing expenditures, prices charged to non-US purchasers, and projected profit margins.  Unlike legislation introduced this year in some other states, the new New York law does have certain confidentiality requirements for information reported, including the protection of data disclosures that identify a specific manufacturer or product-specific pricing.

Lastly, if after all supplemental rebates are taken into account projected Medicaid drug expenditure growth remains above the target, the Commissioner may take further action such as subjecting to prior approval (using current procedures) all drugs of a manufacturer that did not enter into a supplemental rebate agreement as required.

Notably, the drug pricing provisions enacted in the budget proposal are applicable only to drugs in Medicaid.  Another pending NY bill, S.2544, would enact reporting requirements for all drugs available in New York that experience WAC increases above certain thresholds.  That legislation is currently before the Senate Finance Committee.

Leave a Reply

Your email address will not be published.