On Jan. 31, the Department of Health and Human Services (HHS) proposed new rules aimed at addressing some of the Trump administration’s concerns about drug pricing. Specifically, the proposed rules would remove from the “discounts” safe harbor (DSH) of the federal anti-kickback statute (AKS) certain rebates paid by the manufacturers of pharmaceuticals to middlemen known as pharmacy benefit managers (PBMs). The proposed change would expressly remove from AKS’s DSH certain discounts, rebates, and other remuneration given by a pharmaceutical manufacturer to plan sponsors under Medicare Part D, Medicaid Managed Care Organizations (MCOs) and PBMs acting under a contract with such manufacturers. Excepted from this are rebates required under the Medicaid rebate program. The proposed rules were formally published on Feb. 6, and will be open to public comment until April 8.

AKS is contained within the Social Security Act at Section 1128B(b). In simple terms, it provides criminal and civil penalties for knowingly and willfully offering, paying, soliciting or receiving remuneration for referrals of federal health care program business. Currently, AKS has a variety of safe harbors set forth in the regulations at 42 C.F.R. Section 1001.952. An arrangement need not fall squarely within one of the stated safe harbors to be compliant with AKS, but the safe harbors offer some guidance and confidence to those who are unsure whether their business arrangement will expose them to liability. DSH is the eighth safe harbor listed in the regulations. It addresses discounts by excluding a reduction in drug price from the definition of remuneration. The definition is far more detailed than that and we encourage the reader to review it at length to better understand the proposed rule change, but a common understanding of the word “discount” is adequate for the purposes of this article. What the proposed rules intend to do is expressly remove from the DSH any discounts that pharmaceutical makers give in the situations mentioned above.

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