OIG PBM Rebate Rule Delayed – Twice

In late November, the OIG published a final rule that excludes from the Federal healthcare program safe harbor for discounts rebates paid to Medicare Part D plans, or their PBMs (see our post here).  The rule also establishes two new safe harbors: one for rebates paid to Medicare Part D plans and Medicaid Managed Care plans, or their PBMs, if the rebates are passed through by the plan or PBM to the dispensing pharmacy; and another for service fees paid to PBMs.  Together, these safe harbor amendments were intended to force PBMs to pass manufacturer rebates through to pharmacies to lower the out‑of‑pocket costs of government beneficiaries at the pharmacy counter.  The exclusion from the discount safe harbor had a delayed effective date of January 1, 2022, while the two new safe harbors were scheduled to go into effect on January 29, 2021 (last Friday).  However, since Friday, both the discount safe harbor exclusion and the new safe harbors have now been delayed further.

On Friday, just under its deadline, the OIG issued a “correction” to the two new safe harbors delaying their effective dates until March 22, 2021.  The delay was pursuant to the regulatory freeze issued by the White House on inauguration day, which, among other things, directed federal agencies to consider delaying published rules that have not yet become effective for 60 days, and longer where necessary, to permit the agency and OMB to review factual, legal, and policy issues raised by the rule.

On Saturday — the very next day — the new discount safe harbor exclusion was also delayed, this time by court order.  Earlier this month, before the change in administration, the Pharmaceutical Care Management Association (PCMA), a trade association of PBMs, had sued HHS to vacate the rule on procedural and substantive grounds.  Saturday’s Order delayed the effective date of the exclusion one year from January 1, 2022 to January 1, 2023, “pending the duration of HHS’ review of the November 20, 2020 rule,” with the consent of the parties.

The fate of these safe harbor amendments under the Biden administration is in doubt.  As we pointed out in our previous post, the safe harbor amendments would reduce coinsurance for some federal program enrollees but would preclude PBMs from using rebates to reduce premiums across all enrollees.  The Congressional Budget Office estimated that the impact would be to increase Medicare and Medicaid spending by $177 billion over 10 years.  This Administration, like the previous one, has committed to reducing drug prices, but can be expected to favor price reduction measures that do not increase costs to the government.