Washington Editor

WASHINGTON – Yes, Medicare Part D has produced larger than expected savings, but it might save even more if rebates on brand drugs and biologics were statutory, according to the Health and Human Services Office of Inspector General (OIG).

In a new study comparing 2009 Medicare Part D prices with Medicaid prices for 100 brand drugs, OIG found that the statutorily defined Medicaid rebates "substantially" exceeded Part D rebates, which are negotiated between drugmakers and Part D sponsors.

While state Medicaid agencies and Part D sponsors paid pharmacies similar amounts for most of the 100 brand drugs, Medicaid collected nearly two-thirds as much as Part D in rebates ($2.9 billion vs. $4.5 billion), despite having only about one-fourth of the expenditures ($6.4 billion vs. $24 billion).

A major driver for the difference in rebates is the statute that requires additional Medicaid rebates when prices for brand drugs increase faster than inflation, OIG said in the report. That provision helps protect Medicaid from increased costs when manufacturers raise drug prices.

However, the law establishing the Part D program prohibits the government from instituting a drug price structure.

Overall, rebates reduced Part D expenditures in 2009 by 19 percent for the 100 brand drugs, from $24 billion to $19.5 billion. The Medicaid rebates reduced spending by 45 percent, from $6.4 billion to $3.5 billion.

The savings varied from drug to drug. Manufacturers paid at least twice as much per unit in Medicaid rebates as compared with Part D rebates for nearly 70 percent of the drugs. In fact, Medicaid unit rebates were more than 10 times greater than Part D rebates for 10 drugs.

Manufacturers for an additional eight brand drugs did not provide any Part D rebates in 2009, but the Medicaid rebates for those drugs ranged from 16 percent to 54 percent of the unit costs.

Part D unit rebate amounts exceeded Medicaid rebates for just five of the drugs in the study.

OIG expects that differences between the two programs could grow in the future as provisions in the Affordable Care Act kick in that will increase rebates in the Medicaid program.

While OIG stopped short of recommending changes in how Part D rebates are set, it urged the Centers for Medicare & Medicaid Services (CMS) to continue to examine differences in how the programs collect rebates.

Legislation has been introduced in both the House and Senate to bring the Medicare rebates more in line with those available under Medicaid. Under the Medicare Drug Savings Act, H.R. 2190 and S. 1206, biopharma companies with drugs covered by Part D would be required to pay the difference between the average rebates made to private Part D drug plans and 23.1 percent of the average manufacture price (AMP). They would be subject to additional rebates if drug prices increase faster than inflation. (See BioWorld Today, June 20, 2011, and July 18, 2011.)

Part D is not the only Medicare program coming under scrutiny. OIG also is monitoring the reimbursement paid under Part B for physician-administered drugs and some self-administered cancer drugs.

OIG has found that CMS could save millions of dollars a year in Part B reimbursements if it expanded and implemented a price substitution policy when the average sales price (ASP) of a covered drug exceeds the AMP by 5 percent.

CMS proposed price substitution rules last month that are expected to be finalized in November, but they would only apply when complete AMP data are available. CMS should consider expanding the policy to include certain HCPCS codes with partial AMP data, OIG said.

It also recommended that CMS seek legislation requiring all manufacturers of Part B-covered drugs to submit both ASPs and AMPs. Meanwhile, CMS should continue to evaluate and pursue appropriate actions against manufacturers that fail to comply with price-reporting requirements, OIG said.

SEC's New Whistleblower Rules Take Effect

A word to the wise: The SEC's new whistleblower rules just kicked in, and the Office of the Whistleblower is officially open for business.

A one-stop-shop for would-be whistleblowers, the office has a user-friendly website with all the forms, award information and encouragement employees need to report the potential financial misdeeds of their employers.

Besides offering informers the chance at 10 percent to 30 percent of money collected, the SEC casts whistleblowing as a patriotic duty.

"Securities fraud is not a victimless crime. That's why it is so important for people to step forward when they witness an ongoing securities fraud or learn about one that has taken place or is about to occur," Sean McKessy, chief of the whistleblower office, said in a press release.

The new rules, adopted in May, went into effect Friday, implementing provisions of the Dodd-Frank Act, which expanded the commission's whistleblower program. Prior to Dodd-Frank, the SEC only had authority to reward whistleblowers in insider trading cases. (See BioWorld Today, May 27, 2011.)

Since the awards offered in the new program are retroactive to actions taken since July 21, 2010, when Dodd-Frank became effective, the SEC said it has seen an increase in the quality and timeliness of tips that it has been receiving.

Once the SEC takes action that could result in an award, it will post it on the whistleblower website, along with the 90-day deadline for filing a claim, which can be completed online.

The site currently includes an alphabetized list of 170 actions it's taken since July 21, 2010, that may be subject to whistleblower awards.

Most of the companies and individuals on the list are from financial services, but it does include the $70 million settlement the SEC reached with Johnson & Johnson in April. That settlement, one of the larger on the list, resolved Foreign Corrupt Practices Act charges stemming from allegations that the drugmaker bribed public doctors in several European countries and paid kickbacks to Iraq to obtain business.

The website also includes links to other government whistleblower programs, such as the Justice Department's False Claims Act site.

Facebook no Longer Biopharma Friendly

Some biopharma companies may be feeling Facebook withdrawal pangs this week as they pulled their softly branded and corporate pages from the social network site rather than give in to its demands to get more social. Effective Monday, the pages had to accept "likes" and "comments" – or be banished from the space. Because of the regulatory problems third-party comments could create, some companies opted to pull their pages rather than invest in the cost of monitoring them. (See BioWorld Today, June 1, 2011.)