Massachusetts House Pushes Medicaid Supplemental Rebate Law in Budget

On April 11, 2019, the Massachusetts House Committee on Ways and Means released its FY 2020 budget (H.3800).  The legislation includes provisions authorizing MassHealth (the Massachusetts Medicaid program) to negotiate supplemental rebates directly with drug manufacturers, and provides for further proceedings before the Health Policy Commission for manufacturers refusing to negotiate supplemental rebates at levels satisfactory to the Commonwealth. These provisions represent amendments to a MassHealth drug pricing proposal included in Governor Baker’s FY 2020 filing in January.

Under the Ways and Means proposal, where the manufacturer declines to pay a supplemental rebate for a drug that is projected to exceed a cost per-user of $25,000 per year or a post-rebate aggregate annual cost of $10,000,000, MassHealth would be permitted to propose a value for the drug and hold public hearings on that value.  MassHealth’s value determination must take into account various publicly available sources of information including pricing in other developed countries, extent of utilization, and likelihood that the use of the drug will reduce the need for other medical care.

If the manufacturer and MassHealth are still unable to agree on a supplemental rebate after this process, MassHealth may refer the manufacturer to the Health Policy Commission (HPC) for further proceedings that would subject the manufacturer to broad pricing disclosure requirements and a public hearing at which the manufacturer must testify.  Specifically, the HPC must require the manufacturer to “disclose . . . any records that describe or relate to the manufacturer’s pricing of that drug,” and determine a proposed value of the drug based on that information.

Under the Governor’s proposal, HPC would have been able to refer any company declining to negotiate a supplemental rebate to the Attorney General for legal action under the consumer protection laws.  In an amendment to this provision, the Ways and Means proposal removes the consumer protection law penalties for non-negotiation, and instead would authorize MassHealth to apply utilization controls on the use of the drug, including prior authorization, step therapy, generic drug promotion, quantity limits and the maximum allowable cost.  However, the Ways and Means legislation maintains the provisions in the Governor’s proposal authorizing HPC to impose civil sanctions on a manufacturer, or a referral to the Attorney General for a consumer protection action, for failing to respond to, or knowingly obstructing, the HPC’s pricing determinations.

The Ways and Means budget now goes to the full House of Representatives for debate on amendments, which are available here.  The floor debate is scheduled to begin on April 22.

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