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Washington State plan aimed to lower Medicaid pharmacy payments is rescinded

MM Curator summary

[MM Curator Summary]: The state will not be allowed to set rates for dispensing fees pharmacists can charge, even though a state plan amendment was approved to do just that.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.



Washington State Pharmacy Association | Jul 6, 2022 | Washington

CMS rescinded approval of a Washington State Medicaid amendment that aimed to dramatically lower pharmacy reimbursement rates.



The Washington State Pharmacy Association (WSPA), the National Community Pharmacists Association (NCPA), and the National Association of Chain Drug Stores (NACDS) voiced support for the CMS decision that they say will help maintain reliable patient access to care and pharmacy viability in Washington. 

“Pharmacies provide essential care and access to medications,” WSPA CEO Jenny Arnold said. “Adequate reimbursement for safe patient care is essential. Our pharmacies should not have to choose between taking care of their patients and keeping their doors open, so we are relieved by this outcome.”

On Jan. 19, 2021, the last day of the Trump administration, the acting CMS administrator approved a plan to reimburse pharmacies for Medicaid patients far below the actual cost of dispensing prescriptions. The decision was a sharp departure from CMS’ previous position, which was that the state’s reimbursement was unlawful primarily because it failed to consider the cost of dispensing. 

WSPA, NCPA, and NACDS sued CMS, accusing CMS of violating its own rules. As a result, the Department of Justice—which represented CMS in the case—filed a motion to remand the matter back to CMS, agreeing with the pharmacy groups that the final decision approving the amendment was unsupported by the administrative record before CMS and would not survive the legal challenge. 

“This is a win for patients and pharmacies not only in Washington, but around the country,” NCPA CEO Brian Douglas Hoey said. “Unfair pharmacy reimbursement rates must not stand. We are celebrating the outcome of this fight and will continue working to protect essential health care services provided by pharmacy teams.”

CMS reconsidered the Jan. 19, 2021, decision and determined that the amendment—which would have reimbursed pharmacies of all sizes well-below cost—would be disapproved. Specifically, CMS determined that the amendment is inconsistent with the requirement that “States have a State plan that provides such methods and procedures to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available to the general population of the geographic area.” 

CMS also found that the amendment was inconsistent with federal regulations “which provide that payments for drugs are to be based on combined examination of the ingredient cost of the drug and a professional dispensing fee.” 

“Pharmacies have a vital role to play in health care delivery, and CMS’ decision will go a long way in helping to ensure that the most vulnerable Americans continue to have access to the pharmacy-based services they rely on and expect,” NACDS President and CEO Steven C. Anderson said. “We commend CMS for doing the hard but necessary work to reverse its approval of Washington State’s flawed pharmacy reimbursement plan, which has for many years jeopardized the ability of pharmacies to meet patients’ health and wellness needs. This is not only a victory for Washington pharmacies and their patients, but also for pharmacies and the vulnerable patients they serve across the nation.”

This press release was provided by the Washington State Pharmacy Association.

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Dept. of Justice: DOJ announces Mallinckrodt to pay $230 million agreement in underpayment of Medicaid drug rebates lawsuit

MM Curator summary

[MM Curator Summary]: The Questcor rebate scandal is winding down as states start to get their payout checks.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


MADISON, Wis. – Wisconsin Department of Justice (DOJ) announced today that Wisconsin has joined with 49 other states, Washington, D.C., Puerto Rico, and the federal government to settle allegations of fraud against Mallinckrodt ARD, LLC (formerly known as Questcor Pharmaceuticals, Inc.), a U.S. subsidiary of the Irish pharmaceutical company Mallinckrodt plc (collectively Mallinckrodt), which sells and markets pharmaceutical products throughout the nation. The total value of the agreement is $233,707,865.18, plus interest, to be paid over a period of seven years. Of this amount, Wisconsin will receive $1,391,803.20, plus applicable interest.

“When companies break the rules of the Medicaid system, the Wisconsin Department of Justice works to hold them accountable and get restitution for taxpayers,” said AG Kaul. “Thank you to the team in our Medicaid Fraud Control and Elder Abuse Unit whose work ensured that Medicaid dollars will be recouped.”

The agreement resolves allegations that from January 1, 2013, through June 30, 2020, Mallinckrodt knowingly underpaid Medicaid rebates due for its drug H.P. Acthar Gel (Acthar). The government alleges that Mallinckrodt’s conduct violated the Federal False Claims Act, the Wisconsin False Claims Act, Wis. Stat. § 20.931 (repealed 2015), the Wisconsin Medical Assistance Act, Wis. Stat. § 49.49(4m), and resulted in the submission of false claims to the Wisconsin Medicaid program.

Under the Medicaid Drug Rebate Program, when a manufacturer increases the price of a drug faster than the rate of inflation, it must pay the Medicaid program a per-unit rebate of the difference between the drug’s current price and the price of the drug if its price had gone up at the general rate of inflation since 1990 or the year the drug first came to market, whichever is later.

However, the government alleges that Mallinckrodt and its predecessor Questcor began paying rebates for Acthar in 2013 as if Acthar was a “new drug” just approved by the U.S. Food and Drug Administration (FDA), rather than a drug that was first introduced to market in 1952. Allegedly, this practice meant the companies ignored all pre-2013 price increases when calculating and paying Medicaid rebates for Acthar from 2013 until 2020. In particular, the government alleges that Acthar’s price had already risen to over $28,000 per vial by 2013; therefore, ignoring all pre-2013 price increases for Medicaid rebate purposes significantly lowered Medicaid rebate payments for Acthar. Under the settlement agreement, Mallinckrodt admitted that Acthar was not a new drug as of 2013 but rather was approved by the FDA and marketed prior to 1990. Mallinckrodt agreed to correct Acthar’s base date AMP and that it will not change the date in the future.

As part of the settlement, Wisconsin will receive $1,391,803.20 in restitution and other recoveries. This settlement results from a whistleblower lawsuit originally filed in the United States District Court for the District of Massachusetts. The federal government, twenty-six states, the District of Columbia, and Puerto Rico intervened in the civil action in 2020. The settlement, which is based on Mallinckrodt’s financial condition, required final approval of the U.S. Bankruptcy Court for the District of Delaware, which approved the settlement on March 2, 2022.

The Wisconsin Medicaid Fraud Control and Elder Abuse Unit, within the Wisconsin Department of Justice Division of Legal Services, receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $1,617,392 for the fiscal year 2022. The remaining 25 percent, totaling $539,126 for fiscal year 2022 is funded by the State of Wisconsin.

A team from the National Association of Medicaid Fraud Control Units participated in the litigation and conducted settlement negotiations on behalf of the states. The team included representatives from the Offices of the Attorneys General for the states of California, Florida, Massachusetts, Michigan, Nevada, New York, Texas, and Wisconsin. Wisconsin Assistant Attorney General Katie M. Wilson served as the co-team lead for the states.

The requirements of 2017 Wisconsin Act 369 do not apply because this resolution is part of a bankruptcy proceeding and is not a “compromise or discontinuance of a civil action.”


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Judge strikes down CMS’ Medicaid copay rule, handing PhRMA major win

MM Curator summary

[MM Curator Summary]: No, you can not include co-pay assistance to members in best price calculations (says the judge).


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.





A federal judge struck down a controversial rule that requires drug companies to include copay assistance like coupons into Medicaid rebates, handing the pharmaceutical industry a major win. 

The ruling, delivered Tuesday in the U.S. District Court for the District of Columbia, deals a major blow to insurers and pharmacy benefit managers (PBMs) that have adopted copay accumulator programs that limit the impact of drugmaker assistance from counting toward the deductible and out-of-pocket caps, arguing that the assistance is meant to drive patients to more expensive drugs. 

The ruling focuses on a Centers for Medicare & Medicaid Services rule finalized in December 2020 under the Trump administration. The regulation, which goes into effect next year, said that any copay assistance like coupons or other cost-sharing help must be included in the calculation of the best price of the drug. 


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Drug companies agree to offer rebates to Medicaid to get their products covered by the program. The rebate must be 23.1% of the average sales price of a brand-name drug and 13% for a generic. 

But how that average sales price is calculated has caused a major stir among payers and PBMs. 

Insurers and PBMs charge that the drug manufacturers rely on coupons and other assistance to steer patients toward more expensive and unnecessary drugs as opposed to more affordable options, according to the PBM industry group Pharmacy Care Management Association (PCMA).

“Since the use of copay coupons reduces the utilization of more affordable medication options, overall prescription drug costs will continue to increase dramatically,” PCMA said on its website. 

But the pharmaceutical industry counters the assistance is vital to ensure financial assistance for patients who may not afford certain products.

The industry group Pharmaceutical Research and Manufacturers of America (PhRMA) sued the Department of Health and Human Services (HHS) back in May 2021 over the rule, claiming it contradicts federal rebate law. HHS argued that PhRMA lacked the legal standing to sue over the regulation.

But District Court Judge Carl Nichols found that PhRMA does have the standing to sue as the rule would affect its member companies. The Trump appointee also found that HHS did not have the statutory authority to impose the rule. 

“A manufacturer’s financial assistance to a patient does not qualify as a price made available from a manufacturer to a best-price-eligible purchaser,” the ruling said. “Rather, a manufacturer’s financial assistance is available from the manufacturer to a best-price-eligible purchaser. And a patient is not a best-price-eligible purchaser.”

Nichols was also concerned that the rule would make the calculation of the best price turn on information that only insurers possess.

“Under the proposed rule, manufacturers would need to conduct transaction-by-transaction investigations into the operations of accumulator adjustment programs even though manufacturers have no control (and sometimes no information concerning) those programs,” the ruling said. 

It would make it difficult under such circumstances for drugmakers to report the best price to the federal government as the manufacturers would have to complete such investigations.

Because the rebate statute only refers to the best price made to the insurer and not the patient, the final rule contradicts the federal law and must be struck down, Nichols ruled.

HHS did not immediately return a request for comment on whether it will appeal the ruling.


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OR- New Cancer Drug Access at Risk in Oregon Medicaid Proposal

[MM Curator Summary]: You can have faster cancer drugs or cost management. Not both.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.




An Oregon proposal to exclude expensive drugs that received FDA fast-track approval from Medicaid coverage is alarming advocates for patients with cancer and other life-threatening diseases.

If approved, the proposal could limit access in Medicaid to promising treatments for patients with deadly conditions, and could encourage other states to similarly attempt to restrict access to get relief from rising drug costs, advocates say.

At issue are drugs approved under the Food and Drug Administration’s accelerated approval pathway, which emerged in the 1990s during the AIDS crisis as a way of speeding access to medications for patients with serious conditions and few, if any, treatment options. The pathway has gained renewed attention from lawmakers after the FDA approved Biogen Inc.’s Alzheimer’s drug Aduhelm against the recommendation of its scientific advisers.

Accelerated approval drugs can be very expensive—many of them over $10,000 per month—and many more are in the pipeline, according to Matt Salo, executive director of the National Association of Medicaid Directors. The Oregon proposal is a sign that states are worried about how they’ll pay for such treatments, he said.

Other states will be watching the response of the Centers for Medicare & Medicaid Services to the Oregon proposal “very closely,” Salo said.

Annual Medicaid spending on accelerated approval drugs increased from $728 million in 2015 to $1.44 billion in 2020, and the percentage of program spending that went to such drugs increased from 2.3% to 4.2%, according to a 2021 study in Health Affairs.

Confirmatory Trials

Drugmakers ordinarily must show that their products produce a benefit through lengthy and costly clinical trials to win approval—meaning a favorable effect on how a patient feels, functions, or survives.

Accelerated approval removes the requirement to run clinical trials upfront. Instead, drugs are approved based on their effect on a “surrogate endpoint,” an objective indication thought likely to lead to a clinical benefit.

The result has been quicker approval of promising drugs. But Oregon’s proposal zeroes in on a frequent criticism of the accelerated approval pathway: that it removes pressure on drugmakers to run the clinical trials that are needed to show that their products do, in fact, produce a clinical benefit.

The Oregon proposal is part of the state’s application to renew and amend its Section 1115 waiver, referring to special conditions under which it runs its Medicaid program.

Section 1115 is a part of the Social Security Act that deals with Medicaid and allows the secretary of the Department of Health and Human Services to waive program requirements to allow states to test new approaches to coverage and payment.

Oregon’s current waiver is set to expire June 30. The federal comment period on the renewal proposal closed April 7.

Current Medicaid regulations generally require states to cover all drugs that have been approved by the FDA, including where the drugmaker subsequently fails to show clinical efficacy within the timelines that were imposed as a condition of accelerated approval, the Oregon renewal application said.

In return for guaranteed Medicaid coverage for their FDA-approved drugs, drugmakers are required to pay large rebates to the states. Medicaid spent about $64 billion on outpatient prescription drugs in 2017, and collected $34.9 billion in rebates, resulting in net spending of $29.1 billion, according to the Medicaid and CHIP Payment and Access Commission.

Allowing Oregon to exclude accelerated approval drugs would give drugmakers an additional incentive to complete the required clinical trials, and would ensure that states are paying only for drugs that have been proven to provide a clinical benefit, Oregon said.

That is not always the case under the current system, said Rachel Sachs, a professor at the Washington University School of Law.

“There are cases where a drug manufacturer completes the confirmatory trial on a drug that has received accelerated approval, the trial fails, and the drug stays on the market,” Sachs said. “And the FDA either can’t or won’t remove it. And that raises an important question: should the states and the taxpayers have to spend their limited resources on a product that has no demonstrated evidence of clinical benefit?”

Cancer Drugs

But those who look at the issue of accelerated approval drugs from the standpoint of patients rather than of the Medicaid program as a whole ask a different question: whether it makes sense to allow states to restrict access to lifesaving drugs for low-income patients in the name of cost savings.

“This is a matter of incredible importance for cancer patients,” said Mark Fleury, a principal on the policy development team at the American Cancer Society. “Oncology makes up the lion’s share of accelerated approvals for all drug types, and within oncology, the majority of new molecular entities that have been approved over the past three years have been via accelerated approval.”

The impact on drug availability for patients who have no other treatment options have been dramatic, he said. The accelerated approval process has reduced the time for drugs to hit the market by 3.4 years on average.

“For cancer patients, that can make all the difference,” he said. “This process really is working. It really is granting patients earlier access to life-extending and lifesaving treatments.”

Policy Proposals

The problem with the Oregon proposal is that its target is the drug companies but its victims are Medicaid enrollees in need of accelerated approval drugs, said Wayne Turner, a senior attorney in the National Health Law Program.

“This isn’t a problem for the individual states to handle through the Section 1115 waiver program,” Turner said. “This is a matter for Congress.”

A variety of policy proposals have surfaced in Congress aimed at reforming the accelerated approval pathway and pressuring drug companies to complete confirmatory clinical trials.

These include allowing the FDA to take quicker action to remove drugs from the market once they have failed to demonstrate clinical benefit, requiring drugmakers to provide a plan for confirmatory trials before obtaining accelerated approval, increasing reporting requirements related to confirmatory trials, and imposing fines on drugmakers that fail to complete the trials.

A proposal floated by MACPAC would require drugmakers to pay increased rebates for accelerated approval drugs.

But looming in the background is a more fundamental issue for Congress to address, said Salo: how to help state Medicaid programs pay for an expected flood of expensive new treatments in the coming years.

“There’s a whole world of new therapies coming our way, we’ve really made it a national priority to go ‘all in’ on innovation, but we haven’t had the follow on conversation about the cost of innovation, and how we’ll pay for it,” he said.

“You’d find a lot of agreement from the states about this: we’re probably going to need help from our federal partners to spread the cost out more broadly.”


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CMS Guidance to Drug Manufacturers Reporting Medicaid Best Price

[MM Curator Summary]: Changes to CMS drug regulations will now allow manufacturers to enter more value based arrangements with states.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.




At the end of March 2022, the Centers for Medicare & Medicaid Services (CMS) released guidance to drug manufacturers and states on reporting Medicaid Best Price under value based purchasing (VBP) arrangements (Medicaid Best Price Guidance or Guidance).  This Guidance follows CMS’ final rule issued on December 31, 2020 (Final Rule) responding to criticism that Medicaid Best Price requirements are hindering the use of VBP arrangements.  The Final Rule and Guidance will go into effect on July 1, 2022, allowing manufacturers to report multiple best prices for VBP arrangements so long as the manufacturer offers the VBP arrangement to state Medicaid programs. This blog post will begin with a “101” on the Medicaid Best Price Policy, and then delve into an overview of the Final Rule, including the surrounding criticism from stakeholders; summarize the Medicaid Best Price Guidance; and discuss the potential impact of this change on states and manufacturers.

What is the Medicaid Best Price Policy?

Medicaid Best Price rules are part of the Medicaid Drug Rebate Program (MDRP).  At its core, the Medicaid Best Price policy requires manufacturers to provide state Medicaid programs the best price it offers any other purchaser (with certain exceptions).  Under the MDRP, manufacturers must enter into a National Drug Rebate Agreement (NDRA) for their drugs to be covered by Medicare and Medicaid.  The NDRA requires manufacturers to report certain drug pricing information to CMS and to pay rebates on their products to Medicaid. 

A key piece of information reported under the MDRP is the manufacturer’s “best price,” which is defined as the:

“[T]he lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity in the United States in any pricing structure (including capitated payments) in the same quarter for which the AMP is computed.”

Key exceptions to this definition include discounts offered to Department of Veterans Affairs, the 340B drug discount program, Medicare Part D plans, including the Medicare Coverage Gap Discount Program, and Indian Health Services.

The best price is used to calculate the rebate amount owed to state Medicaid programs for brand name drugs.  Specifically, for brand name drugs, the manufacturers must pay states a rebate equal to the greater of either:

  1. 23.1% of Average Manufacturer Price (AMP) (or 17.1% of AMP for certain pediatric and clotting drugs), or
  2. the difference between AMP and “best price.” 

The rebate calculation also includes an additional inflationary component to account for rising drug prices over time.  States also have the option to negotiate supplemental rebates with manufacturers. 

How has the Medicaid Best Price Policy Impacted VBP Arrangements?

Manufacturers and other stakeholders have argued that Medicaid best price requirements (pre-Final Rule) severely hindered the use of VBP arrangements in the commercial space.  For example, if a manufacturer sought to offer a commercial plan an outcomes-based contract, where the manufacturer rebates a substantial cost of the drug to the payor in instances where the drug fails to produce a desired outcome, the manufacturer would have to offer that same substantial rebate to all states, regardless of whether the drug produces desired outcomes for Medicaid patients.

How does the Final Rule Change the Medicaid Best Price Policy’s Impact on VBP Arrangements?

Under the Final Rule, CMS allows the manufacturer to report multiple best prices for VBP arrangements, so long as the manufacturer makes the VBP arrangement available to state Medicaid programs.  CMS broadly defines “VBP arrangement” as follows:

“Value-based purchasing (VBP) arrangement means an arrangement or agreement intended to align pricing and/or payments to an observed or expected therapeutic or clinical value in a select population and includes, but is not limited to:

(1) Evidence-based measures, which substantially link the cost of a covered outpatient drug to existing evidence of effectiveness and potential value for specific uses of that product; and/or

(2) Outcomes-based measures, which substantially link payment for the covered outpatient drug to that of the drug’s actual performance in patient or a population, or a reduction in other medical expenses.”

When a manufacturer enters into a VBP arrangement with a commercial payor, it must report (i) a non-VBP arrangement price, which is the best price offered absent a VBP arrangement; and (ii) the multiple prices tied to the various outcomes of the VBP arrangement.  States then have the option to participate in that VBP arrangement.  When states enter into the VBP arrangement, it would receive a best price rebate based on the patient’s outcome.  If a state elects not to enter into a VBP arrangement, the best price used in the Medicaid rebate formula would mirror the lowest price available absent a VBP arrangement.

The final rule also revised the definition of “bundled sale” to clarify that VBPs may qualify as a bundled sale, which permits manufacturers to spread out discounts resulting from a VBP arrangement over multiple units in the bundled sale, so that manufacturers may ultimately report a net discount that is a weighted average of the discounts provided based on individual patient outcomes. 

What concerns arise out of the potential impact of the new VBP Arrangement Policy?

States and patient advocacy stakeholders expressed concern with the changes enacted by the Final Rule, stating that this policy change would increase costs to state Medicaid programs.  Specifically, they argue that:

  1. State Medicaid programs do not have the staff or resources to collect the required data or otherwise administer VBP arrangements, especially during COVID.
  2. Manufacturers will move all large payors, whose arrangements currently establish the best price, to VBP arrangements.

Given financial and resource constraints, State Medicaid programs may be unable to take advantage of VBP arrangements, and associated discounted pricing. Even though the Final Rule requires that manufacturers offer states a non-VBP best price if they do not participate in a VBP arrangement, they may still end up paying higher prices, especially if the manufacturers only offer their drugs through VBP arrangements.

What additional clarifications did CMS provide in its Medicaid Best Price Guidance on VBP Arrangements?

The Medicaid Best Price Guidance provides states and manufacturers additional clarity on key operational issues of reporting and implementing VBP arrangements and their impact on Medicaid Best Price.  As part of this, CMS acknowledged and tried to address some of the stakeholder concerns discussed above. 

Of particular note, CMS provided guidance on the following issues:

  • Clarity on “Offering” VBP Arrangements to States: The Final Rule requires manufacturers offer VBP arrangements to all states.  The Guidance clarifies that the manufacturer must include a description of the VBP arrangement, the guaranteed net unit prices (GNUPs) available under the VBP arrangement for each outcome, and the manufacturer contact information in the Medicaid Drug Product (MDP) System to meet the requirements for “offering” the VBP arrangement to States.  States are then responsible for reaching out to the manufacturer to enter into a state specific agreement for the VBP arrangement.
  • States are responsible for invoicing the manufacturer for additional rebates under VBP Arrangements.  The Guidance clarifies that the MDP system will continue to generate the standard Federal rebate, based on the formula discussed above.  States will have to invoice the manufacturer for additional rebates.
  • Calculation of Non-VBP Best Price.  The Guidance clarifies that manufacturers must provide a non-VBP arrangement best price if it is also reporting multiple best prices for a VBP arrangement.  CMS recognizes that some manufacturers may not offer a product outside a VBP arrangement.  In this case, the manufacturer may use “reasonable assumptions” to approximate the non-VBP best price by “estimating a lowest price available to the payer/provider if no additional discounts based upon outcomes are made under the VBP arrangement.”
  • State Flexibilities: The Guidance notes that state Medicaid programs operate under different constraints and do not have access to the same resources as commercial payors. Thus, it encourages manufacturers to permit states the flexibility to make minor adjustments to VBP arrangements to address the specific needs of the state Medicaid program and its beneficiaries. The Guidance provides the following examples:


  • Offer the state the option of entering into a CMS-authorized supplemental rebate agreement, especially where the state is unable to enter into the manufacturer’s VBP arrangement offered on the commercial market.
  • Permit states to use existing and readily-available claims data to track outcomes for outcomes-based VBP arrangements and work with states to identify the most efficient way to track outcomes for a particular arrangement.
  • Make the VBP arrangement available to all Medicaid patients regardless of their health status, and ensure the arrangement is not used to clinically test drugs or cause health disparities for any particular population.

What are the potential impacts of the Final Rule and Medicaid Best Price Guidance?

In issuing the Final Rule and Guidance, CMS eliminated a significant barrier for manufacturers seeking to enter into VBP arrangements with commercial payors, paving the way for a likely increase in the use of VBP arrangements. Although CMS indicates that it will not get involved in the approval or review of the specifics of any VBP arrangements, it will monitor the implementation of the policy and will make referrals to the Office of Inspector General in cases when they identify concerns with manufacturer price reporting under the MDRP.  Manufacturers need to ensure that they maintain appropriate records, including records setting forth their non-VBP best price if no non-VBP best price exists, as CMS will certainly be closely monitoring manufacturers as they begin to implement this new policy.


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California investigating Centene over alleged Medicaid fraud

[MM Curator Summary]: CA begins its efforts to access the $1.2B set aside by Centene to deal with PBM spread pricing allegations.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


California regulators are investigating Centene Corp. over allegations that the company overcharged the state’s Medicaid department for drugs, according to a state Department of Health Care Services spokesperson.

DHCS did not specify which branch of Centene it was investigating. Centene subsidiaries offer Medicaid managed-care plans in California and administer the state’s Medicaid prescription drug program.

Centene receives the majority of its revenue from Medicaid managed-care contracts, and California represents its largest market with 2.14 million enrollees. In 2021, the state paid Centene $6.8 billion to manage its Medicaid program, the DHCS spokesperson said.

Centene did not respond to an interview request about the investigation.

Centene reached agreements with nine state attorneys general and has reserved $1.25 billion to settle allegations that it overcharged state Medicaid departments for medications, the insurer wrote in its annual filing with the U.S. Securities and Exchange Commission.

It has so far publicly disclosed paying $246.4 million to Illinois, Arkansas, Mississippi, Ohio and Kansas as part of these deals. Georgia, South Carolina and Indiana are also reportedly investigating the insurer over its now-defunct Envolve pharmacy benefit manager. The attorney general in South Carolina declined to comment, while attorneys general in Indiana and Georgia did not respond to interview requests.

California accepted new bids to run its Medicaid managed-care program until April 11, and it will announce winners in August. Centene executives are likely doing everything they can to ensure regulators are satisfied with their response, said Ari Gottlieb, a principal at A2 Strategy Group.

“It’s a highly material part of their business,” Gottlieb said. “My guess is that they’re throwing a bunch of extra resources, apologizing, really going all-in on fixing the problem.”

Existing problems in California

California’s investigation comes as state regulators withheld $3.8 million from subsidiary Magellan Health’s January contract after worker shortages left patients and providers waiting for prior authorization approvals, some of whom were on hold with the company’s call centers for eight hours at a time.

Both state regulators and Magellan Health blamed delays on contract changes, noting that a new vendor was taking over the administration of the state’s Medicaid prescription drug program for the first time. Magellan Health’s $302 million annual contract went live at the start of the year.

Rival insurers criticized the deal, saying the move would give Centene insight into their member demographics and give them a leg up when it came to bidding to run the largest Medicaid program in the nation. Centene’s pharmacy services reputation did not help: Patients and providers noted the irony of hiring a vendor that recently settled drug overcharging allegations from other state Medicaid departments.

“There’s a specter surrounding Centene and its legal troubles with regards to pharmacy benefits,” Antonio Ciaccia, president of drug pricing watchdog 3 Axis Advisors and head of 46brooklyn Research. “While their PBM has taken the disproportionate share of public lashings today, they’re not different from anybody else in this market.”

It’s hard to fault Centene when it recently acquired Magellan Health, and it hasn’t been fully integrated the businesses, Gottlieb said. California regulators approved the $2.2 billion merger two days before Magellan Health took over the state’s Medicaid prescription drug program. Moreover, delays in processing claims and prior authorization requests are common when public health programs change, and formulary updates made at the start of the year could have complicated the process, he said.

“Part of it is on the regulators, honestly, they should be doing their due diligence and readiness assessments to ensure their vendors can perform,” Gottlieb said.

DHCS said it measured the agency’s and Magellan Health’s internal capacities to administer the program prior to launch. Delays processing prior authorization requests, adjudicating provider claims and answering provider and patient calls “have stabilized and all backlogs have been cleared” since the start of the year, the spokesperson said.

Magellan Health has processed all prior authorization requests within 24 hours since February 11, and paid all pharmacy providers on time since the start of the year, a Magellan spokesperson wrote in an email. The company’s call centers levels are currently meeting their contractual requirements, the spokesperson wrote.

Long wait times disproportionately impacted–and continue to impact–the state’s safety net facilities, where up to 60% of their patients are insured through Medicaid, said Isabel Becerra, CEO of the Coalition of Orange County Community Health Centers, a not-for-profit consortium safety net clinics in southern California. While the backlog from the start of the year has been resolved, Becerra said providers are still spending more time than they had before the merger to secure care for their patients.

“It’s still not fixed,” Becerra said. “There’s still a lot of time that’s being taken with these patients.”

Delays cloud Sunshine Health Plan

California is not the only market where providers are complaining of long wait times with Centene. Lags in the company’s payment, claims adjudication and prior authorization systems have also plagued Florida, Centene’s second-largest Medicaid market with 1.78 million enrollees. The deadline to bid on continuing to run Florida’s Medicaid program is also approaching, Gottlieb noted.

In March, Florida regulators fined Centene $9.1 million and suspended enrollment in its Sunshine Health Plan after technology glitches related to its integration of insurer Wellcare led it to mistakenly deny medical claims for more than 121,100 lower-income adults and children.

In response, Sunshine Health agreed to provide a corrective action plan to the state. Since its October merger with Wellcare of Florida, 99.1% of its claims were paid within 30 days, a Sunshine Health spokesperson wrote in an email.

But hospitals and independent providers are still reporting delays, said Mary Mayhew, president and CEO of the Florida Hospital Association.

“A lot of the fallout will continue,” Mayhew said.

One provider still navigating the change in payers is Children’s Orthopaedic and Scoliosis Surgery Associates, which claims to be the state’s largest private children’s orthopedic provider. Sunshine Health Plan owes the independent practice $200,000 over improperly denied claims and prior authorizations, repricing and categorizing consults as new patient visits, administrator Carol Ittig said.

In late March, Ittig said she had a virtual meeting with Centene executives about the payment problems, telling them she would have to delay paying the practice’s physicians because of the insurer’s lag in accurately processing claims. Three days later, Ittig woke up to a $70,000 no-strings-attached loan from Sunshine Health.

“They told me to hold on to it as long as I think that there’s still issues,” she said. “I’m very grateful. But that shows that they know that there are issues, that they want to rectify it but they know that it’s gonna take them a minute to fix.”




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UnitedHealth (UNH) Inflated Drug Costs, Louisiana AG Alleges in Suit

[MM Curator Summary]: UHC is now facing its own spread pricing allegations related to its subsidiary PBM OptumRx.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


UnitedHealth Group headquarters in Minnetonka, Minnesota.

Photographer: Mike Bradley/Bloomberg


John Tozzi

April 20, 2022, 11:09 AM CDTUpdated onApril 20, 2022, 2:04 PM CDT

UnitedHealth Group Inc. was accused by Louisiana’s attorney general of inflating prescription drug charges in the state’s Medicaid program by billions of dollars.

UnitedHealth’s pharmacy benefits manager, Optum Rx, used secret prices and the complexity of the supply chain to cause the safety-net health program “to needlessly pay billions of dollars more per year for prescription drug benefits,” according to a lawsuit from Attorney General Jeff Landry. The action was filed April 13 in state court.

UnitedHealth said in a statement that its services are performed in accordance with state regulations and the Medicaid program’s requirements outlined in its contract. “We believe this lawsuit is without merit and will defend ourselves against these unsupported allegations,” the statement said. 

Pharmacy benefits managers have come under growing scrutiny from employers and governments over how they calculate drug costs. The case is the latest attempt by state authorities to curb what they call fraudulent pricing practices by pharmacy benefits managers hired to run Medicaid drug plans. UnitedHealth rival Centene Corp. took a $1.1 billion charge last year to resolve similar claims from several states.

UnitedHealth is one of several companies Louisiana hired to administer Medicaid, the state-based insurance plan for low-income residents. Contracts require the companies to spend a minimum share of their premiums on medical care, a threshold known as the medical-loss ratio, or MLR.

UnitedHealth also owns pharmacy benefit manager Optum Rx, which contracts with its health insurance plans. The AG alleged that Optum had an incentive to pump up its drug costs to help parent UnitedHealth meet its required spending on health care.

“Since only United is required to abide by the MLR requirement, inflating the drug costs paid to Optum actually helps United meet its MLR but does not create an actual loss to their parent company,” the AG’s filing said. “Inflated payments to Optum are additional profits for United, yet are counted as costs for the purposes of meeting the MLR.”

The petition alleges that Optum overcharges the state for generic drugs; engages in spread pricing by charging the state more than it pays pharmacies to fill prescriptions; and claws back money from pharmacies without passing it back the state.

“Unregulated middlemen, cloaked in secrecy, drive up their own profits at the expense of Louisiana citizens,” Landry said in an emailed statement. He alleged that PBMs take advantage of “an unclear web of contracts” with drugmakers, health plans and pharmacies, “taking a share of profits from each entity.”

The action cites a breach of contract, violations of the Louisiana Unfair Trade Practices Act and other violations. In addition to damages, restitution, and penalties, the AG asked the court to force United to turn over documents that the state requested during its probe but was unable to obtain.

The case is State of Louisiana vs. OptumRx and United Healthcare of Louisiana Inc., C-717848, East Baton Rouge Parish.

(Updates with attorney general’s statement in ninth paragraph)




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Questcor Whistleblower Awarded 20% of $233.7 Million False Claims Act

[MM Curator Summary]: Achtar will pay $233M for hiding other cheaper prices that Medicaid could have benefitted from.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


March 18, 2022. The United States Department of Justice settled a case against Irish-American pharmaceutical manufacturer Mallinckrodt ARD LLC (formerly Questcor Pharmaceuticals, Inc.) for failing to pay the proper Medicaid Drug Rebate Program amounts to the government for its drug H.P. Acthar. Under the terms of the settlement, the drug company will pay a total of $233,707,865 to both the federal government and Medicaid participating states, all of which is considered restitution. The whistleblower who reported this conduct in 2018 was a former Mallinckrodt director of internal controls, gross-to-net accounting, and government reporting. They will be awarded 20% of the government’s recovery, almost $47 million.

Knowingly decreasing an obligation to pay money to the government constitutes a violation of the False Claims Act. According to the allegations, the pharmaceutical manufacturer knowingly underpaid Medicaid rebates for its Acthar drug. Under the Medicaid Drug Rebate Program, pharmaceutical manufacturers enter into an agreement with the government and pay inflation-based rebates to federal and state governments. The rebates constitute the “difference between the drug’s current price and the price the drug would have had if its price had increased at the rate of inflation since 1990, or the date when the drug was first marketed, whichever date is later.” These quarterly rebates are intended to insulate Medicaid beneficiaries from inflation-based drug price increases.

The pharmaceutical manufacturer allegedly misrepresented the date on which Acthar was first marketed, paying rebates beginning in 2013, “as if Acthar was a new drug first marketed in 2013.” Choosing to pay rebates in 2013 allowed Mallinckrodt to “disregard all pre-2013 price increases for Medicaid rebate purposes” and “significantly lowered Medicaid rebate payments for Acthar.” Additionally, the manufacturer increased the price of the drug from $50 per vial in 2001, to $28,000 per vial in 2013, and up to $40,000 per vial currently, leading to allegations of an “unlawful and improper windfall” for underreporting the drug’s price increases.

Taxpayer funded healthcare programs are not intended to be a profit center for pharmaceutical manufacturers; they are supposed to support poor and vulnerable members of society and spend taxpayer funds wisely. “[This] settlement vindicates the interests of the American taxpayer by ensuring that no pharmaceutical manufacturer can illegally boost its profits at the expense of state Medicaid programs, and the people and families those programs serve. This company unlawfully siphoned money out of the Medicaid program which poor people depend on for their medical care,” said a United States Attorney connected to the case. Medicaid rebates are supposed to mitigate the cost of pharmaceuticals for Medicare beneficiaries, and those rebates are dependent upon pharmaceutical manufacturers transparently reporting drug prices and manufacture dates.

The whistleblower raised concerns for the warnings the pharmaceutical manufacturer received from the Centers for Medicare and Medicaid Services in 2016-2019, but their concerns were met with inaction, leading to the whistleblower’s resignation, and filing a qui tam lawsuit.


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Mallinckrodt inks $260M settlement with US to resolve Medicaid underpayment and kickbacks allegations


MM Curator summary

[MM Curator Summary]: The drug company depressed rebates it should have paid to Medicaid and set up a foundation to cover member copays when it shouldn’t have.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


A month after a U.S. bankruptcy court signed off on Mallinckrodt’s reorganization plan, the company has agreed to a $260 million settlement to resolve claims by the Department of Justice surrounding its management of its controversial Acthar Gel drug.

The U.S. said that Mallinckrodt underpaid Medicaid rebates and used a foundation to pay illegal copay subsidies, violating an anti-kickback statute by inducing patients to use the treatment.

The settlement resolves separate cases brought by the government following whistleblower complaints in 2019 and 2020, both involving the popular drug used to curb seizures in children.

The settlement was hastened by the recent decision on Mallinckrodt’s financial condition, which was determined in bankruptcy court in Delaware.

“Mallinckrodt illegally reduced the amounts it paid to state Medicaid programs by improperly calculating the rebates it owed,” U.S. attorney Rachael Rollins said in a statement. “The company unlawfully siphoned money out of the Medicaid program which poor people depend on for their medical care.”

The company resolved (PDF) the Medicaid rebates claim for $234.7 million and took (PDF) care of the kickback claim for $26.3 million. Progressive payments will be spread over seven years.  

“We disagree categorically with the government’s characterizations, but are pleased to have these matters behind the company and note that the settlements contain no admissions of wrongdoing,” a Mallinckrodt said in an emailed statement.

Late last month, the bankruptcy court signed off on a $65.75 million settlement between Mallinckrodt and investors who claimed that the company concealed its reliance for federal reimbursements for Acthar Gel.

In 2020, the drug drew scrutiny from Congress after its price skyrocketed over the last two decades—from $50 per vial to $40,000. Mallinckrodt picked Acthar Gel up in 2014 when it paid $5.8 billion to acquire the drug’s original developer, Questcor Pharmaceuticals.

The Medicaid rebate claims against Mallinckrodt spanned from 2013 to 2020, when the company allegedly underpaid rebates based on its claim that Acthar Gel was a new drug in 2013 when it actually entered the market decades earlier.

The kickback claims spanned from 2010 to 2014, when Questcor was alleged to have partnered with the Chronic Disease Fund to subsidize Medicare copayments to market the drug as “free” while increasing its price.

As part of the settlement, Mallinckrodt will enter a five-year corporate integrity agreement (CIA) that contains unique drug price transparency and monitoring provisions focused on Medicaid and patent assistance program activities.

Mallinckrodt entered bankruptcy because of its mounting liabilities over its alleged role in contributing to the opioid crisis. It agreed to a $1.6 billion settlement to resolve those claims.


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Officials: Lab pays $4.8 million for overcharging CT Medicaid patients

MM Curator summary

[MM Curator Summary]: The lab was charging CT Medicaid4x what it was charging other payers for urine drug tests, and that’s a no-no.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


A national laboratory paid nearly $4.8 million to resolve allegations it overcharged the Connecticut Medicaid program for certain lab services over the span of several years, according to officials on Monday.

Connecticut Attorney General William Tong and other officials announced the settlement with Redwood Toxicology Laboratory on Monday, alleging that the lab violated the state’s “Most Favored Nation” regulation.

The regulation indicates that clinical labs should not seek payment from Connecticut Medicaid for services at a price higher than the lowest price the lab charges for the same or similar services from other third parties.

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The lab, based in Santa Rosa, Calif., offers lab testing services like urine drug testing services for substance abuse patients in the Connecticut Medicaid program.

Specifically, officials said, the lab regularly accepted payments from Connecticut Medicaid for specific urine drug tests at a rate of $38 per test. However, the lab was charging other third parties from $2 to $10.50 for the same or similar tests, officials said.

The lab agreed to pay $4,797,578 to cover claims submitted to the Connecticut Medicaid program from Jan. 1, 2015, through Feb. 24, 2018.

Anyone who suspects health care fraud is encouraged to report it by calling 1-800-HHS-TIPS.


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