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CMS Ends Uncertainty on Rx Drug Reimbursement Policy

By Mari Serebrov
Washington Editor

WASHINGTON – After coming under fire for delaying rulemaking on prescription drug reimbursement, the Centers for Medicare & Medicaid Services (CMS) has proposed a rule to implement provisions of the 2010 Affordable Care Act (ACA) relating to manufacturer rebates and alignment of pharmacy reimbursement rates for covered outpatient prescription drugs.

The ACA called for an increase in manufacturers' rebates for prescription drugs covered under Medicaid and required rebates for drugs dispensed to individuals enrolled in a Medicaid managed-care organization.

It also revised the pharmacy reimbursement formula for generic and multiple-source drugs in the Medicaid program by using the average manufacturer price (AMP) to set federal upper limits. And it required the agency to implement a "smoothing process" for the AMP as it calculated reimbursements.

By shifting more of the cost to drugmakers and pharmacies, the agency claims the rule will save nearly $18 billion in government spending on prescription drugs over the next five years. The rule "puts in place simple measures that will cut costs, increase transparency and benefit consumers," CMS Acting Administrator Marilyn Tavenner said in a statement.

CMS announced the proposed rule Friday, several days ahead of its Feb. 2 scheduled publication in the Federal Register. Comments are due by April 2.

Earlier Friday, several lawmakers sent the agency a letter critical of its delay in beginning the rulemaking on the ACA provisions. The year-long delay has caused unnecessary regulatory uncertainty, according to the letter signed by 25 members of the Senate Finance Committee and the House Energy and Commerce Committee.

The "delays and selective implementation of the law have created unnecessary confusion across the country," the letter said. "Due to the lack of clarity on the AMP calculation, manufacturers, pharmacists and states have been forced to guess the intent of CMS when performing tens of billions of dollars in calculations."

Japan Trade Agreement Eases Drug Lag

Biopharma is one of the industries benefiting from new developments in the U.S.-Japan Economic Harmonization Initiative.

Under the initiative, Japan has improved access to U.S. pharmaceuticals "by shortening the lag by several months between the time regulatory approval is sought and a final decision is made for a range of products," the U.S. Trade Representative (USTR) said in a statement.

For instance, Japan's Ministry of Health, Labour and Welfare has streamlined its two-step drug review process, which required new drugs approved by the Committee on Drugs to then be reviewed in the Pharmaceutical Affairs Council. "Under the new system, only the Committee on Drugs is required to recommend approval of new drugs, thus shortening total drug approval times by approximately one month," USTR said.

In another sign of improvement, Japan's Pharmaceuticals and Medical Devices Agency reported last year that it exceeded its goal of reducing standard and priority drug review times in fiscal 2010. Compared with fiscal 2009, drug review periods in 2010 decreased by 4.5 months to 14.7 months for standard products and by 2.7 months to 9.2 months for priority products.

Japan also has made progress in its drug pricing. Its pilot premium pricing rule "has made a considerable contribution to the development of both new drugs and additional indications for existing drugs in need," according to the USTR. The Japanese government is considering whether to make the rule permanent.

The goal of the economic initiative is to contribute to economic growth in both Japan and the U.S. by harmonizing approaches to facilitate trade, address business climate and individual issues, and advance coordination on regional issues.

Siga's SBIR Grants Questioned

Rep. Renee Ellmers (R-N.C.) is stepping up her request for an investigation into potential abuses in the Small Business Innovation Research (SBIR) program, citing the millions of dollars Siga Technologies Inc. has received in SBIR grants for the development of its smallpox drug.

"At the time of the awards, it appears Siga was not a small business," Ellmers said in a letter last week to Daniel Levinson, the inspector general of the Department of Health and Human Services.

As chairwoman of the House Subcommittee on Healthcare and Technology, Ellmers asked Levinson to investigate the "alleged SBIR abuses." If the New York-based Siga was not a small business at the time, Ellmers wants Levinson to determine whether the grant money should be returned.

Ellmers had questioned the potential impropriety in the procurement of the smallpox drug in a separate letter last month.

Siga's current $433 million government contract to develop and provide 1.7 million doses of its smallpox drug ST-246 to the national stockpile recently came under fire by members of the House Energy and Commerce Committee. Unlike Ellmers, they weren't concerned about SBIR funding. Instead, they questioned the plausibility of a smallpox threat and the government's strategy to combat it. (See BioWorld Today, Dec. 27, 2011.)