The Centers for Medicare and Medicaid Services (CMS) have proposed a rule to enhance transparency in prescription drug costs for Medicaid. The rule aims to provide CMS and states with better insight into drug manufacturing and distribution costs, improve transparency in drug pricing, ensure appropriate payments for high-cost drugs, and increase transparency in drug classifications. It also seeks to promote transparency in administering drug benefits within Medicaid-managed care plans. The proposed rule aligns with the Biden-Harris Administration’s efforts to reduce drug costs and protect the financial integrity of the Medicaid program.
The Centers for Medicare and Medicaid Services (CMS) have introduced a proposed rule to improve transparency regarding prescription drug costs in Medicaid. By increasing drug cost transparency, the rule seeks to support CMS in responsibly managing Medicaid funds while bolstering program integrity and the administration of pharmacy benefits for Medicaid beneficiaries. CMS Administrator Chiquita Brooks-LaSure emphasized the commitment to maintaining access to life-saving treatments and ensuring the financial sustainability of the Medicaid program, which remains crucial for millions of individuals.
The proposed rule includes provisions that would provide CMS and the state with a clearer understanding of the manufacturing and distribution costs of the most expensive drugs on the market. Through a drug price verification survey, CMS and states would gain access to greater transparency regarding drug prices set by manufacturers. This information would aid in understanding the reasons behind high drug prices for Medicaid, enabling states to negotiate more effectively and ensure appropriate payments for high-cost drugs. State Medicaid agencies can utilize this data to enhance their pharmacy programs and facilitate beneficiaries’ access to necessary medications.
Furthermore, the rule aligns with the Biden-Harris Administration’s initiatives to reduce prescription drug costs without compromising coverage for Medicaid beneficiaries. It also incorporates a provision to enhance transparency concerning the costs associated with administering drug benefits in Medicaid-managed care plans, which cover over 75 percent of Medicaid beneficiaries.
Typically, pharmacy benefit managers (PBMs) negotiate and oversee pharmacy benefits within managed care plans. However, the lack of transparency regarding the amounts paid by plans to PBMs and pharmacies has raised concerns about potential profit-maximizing strategies, such as spread pricing arrangements. These arrangements involve PBMs charging managed care plans more for drugs than what they pay pharmacies. To address this issue, the proposed provision ensures that contracts between states, managed care plans, and third-party contractors, including PBMs, require transparent reporting of drug payment information. This policy would ensure that taxpayer funds are directed toward drug costs rather than boosting PBM profits.
Additionally, the proposed rule aims to enhance transparency in drug classifications. The included provisions would assist states in verifying whether manufacturers correctly classify their drugs as brand names or generics. Consequently, this policy ensures that states receive appropriate rebates for covered outpatient drugs.
This notice of proposed rulemaking follows the launch of the Medicare Prescription Drug Inflation Rebate Program by the Biden-Harris Administration. This program mandates that drug companies pay rebates to Medicare when their prescription drug prices exceed the inflation rate.
HHS Secretary Xavier Becerra highlighted President Biden’s dedication to safeguarding Medicaid and emphasized the administration’s commitment to taking decisive actions to strengthen the program. The proposed rule represents an unprecedented effort to increase transparency in prescription drug costs, promote responsible management of the Medicaid program, and protect its financial integrity, ultimately benefiting both states and the federal government.