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HHS Secretary Alex Azar warns drug makers to pay full Medicaid rebate amount

Some drug companies pay less than what they would otherwise owe by introducing a new drug formulation, HHS Secretary Alex Azar says.

Susan Morse, Senior Editor

The Department of Health and Human Services on Thursday put pharmaceutical companies on notice that they are to pay the full amount of a prescription drug rebate, in a revision issued to the Medicaid drug rebate program.

"In fact, I am pleased to announce here, to all of you, that HHS is issuing a guidance today to drug manufacturers that will ensure they are paying the full Medicaid rebates they owe on certain prescription drugs," HHS Secretary Alex Azar said Thursday during the 45th American Legislative Exchange Council Annual Meeting in New Orleans.

The Medicaid drug rebate program requires prescription drug companies to pay rebates to states on drugs purchased by Medicaid, where about 10 percent of drug spending occurs.

Sometimes, drug manufacturers roll out what's called a "line extension" for a drug, such as an extended release, once-daily form of a pill they already sell and some of them have used it to reset the price that's used to calculate the inflation rebates they have to pay, Azar said.

This means they could pay less than they would otherwise owe, just by introducing a new drug formulation.

"This is the kind of abusive behavior from drug companies that this administration will not tolerate," Azar said. "Starting today, we've made clear that manufacturers must pay the full amount of rebates that they owe under the law."

Going further, HHS is working with Congress to undo a much larger giveaway for drug companies contained in the Affordable Care Act, he said. Under that policy, after a certain point, drug companies can continue raising a drug's price without paying any more in rebates to state Medicaid programs.

Another effort announced this week is allowing Medicare Advantage plans to negotiate lower drug prices by being able to choose drugs offered through both Parts B and D starting in 2019.

More than half of these savings will be passed on to patients, including, starting in 2020, through lower premiums, Azar said.

Twitter: @SusanJMorse
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