Sunset of the AMP Medicaid Rebate Cap

The Senate recently passed H.R. 1319, the much talked about $1.9T stimulus package. Amongst many changes to Medicaid there are two specific lines that could have major financial and gross to net implications for pharma manufacturers. Section 9816 states:

Section 1927(c)(2)(D) of the Social Security Act (42 U.S.C. 1396r–8(c)(2)(D)) is amended by inserting after “December 31, 2009,” the following: “and before January 1, 2024”

I will save you the googling of the Social Security Act Section 1927. Here it is:

Maximum rebate amount — In no case shall the sum of the amounts applied under paragraph (1)(A)(ii) and this paragraph with respect to each dosage form and strength of a single source drug or an innovator multiple source drug for a rebate period beginning after December 31, 2009, exceed 100 percent of the average manufacturer price of the drug.

Yes, that Maximum Rebate Amount section refers to what is commonly known as the AMP cap for URA. The Social Security Act capped the CPI-U penalty for manufacturer Medicaid rebates by limiting CPI-U penalties. Worst case scenario you would never have a rebate that exceeded your WAC. This was not always the case — prior to December 2009 manufacturers did pay rebates that were greater than WAC, if the drug was subject to pricing penalties. H.R. 1319 is bringing us back to those times making it possible that you could have to pay 200%, 300% or even more depending on the pricing actions applied to the product.

As it stands, the cap would not be removed until January 2024, and there could be many changes to the legislation between now and then. This gives manufacturers time to assess the impact on their portfolio. I would advise everyone to perform a two-step analysis. First, assess your brand's true payer mix and determine your brand's Medicaid exposure. Then, review your current URA calculations and remove the AMP cap to determine what your URA would be under this guidance. When assessing your URA, pay close attention to the current Best Price and the CPI-U penalty, because the combination of a low Best Price and a substantial CPI-U penalty could be a large hit to your Medicaid gross to net. Depending on your analysis, this may change your pricing strategy going forward.

If you have any questions on this topic or want help modeling the impact, don't hesitate to reach out to me through the site. We have already started this analysis for our clients, and will gladly help you figure out how this impacts you.

Published on March 15, 2021 by Scott Hoffman

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