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HealthPlanView Perspectives

The loss of coverage for ~30 million Americans is just the tip of the iceberg.

Many believe that a repeal of the ACA is just weeks away. But the overall impact of the law’s demise has ever greater far-reaching consequences than the loss of coverage and elimination of protections for pre-existing conditions cited in the mainstream media. In particular, there are some changes that will impact the pharmaceutical industry in drastically different ways:

Repeal of Medicaid Best Price increase
The ACA reset the Medicaid Best Price rebate to 23.1% from 15.1% for brand name drugs and to 13% from 11% for generic drugs. It also expanded the rebate to include Managed Medicaid plans whereas in the past only drugs dispensed for Medicaid Fee-for-Service patients were subject to the rebate.

A repeal would result in:

  • Resetting of calculations for Medicaid rebates that would lower rebates paid
  • Exclusion of Medicaid Managed Care Rxs from the rebate calculation
  • Elimination of the line extension ‘grandfathering’ provision which prevented drug manufacturers from limiting the extent of the supplemental rebate for price inflation by creating line extensions that reset the Base Price for the Medicaid Rebate calculation

Repeal of Biosimilar Reimbursement Protection
The ACA provided for biosimilar reimbursement at the biosimilar’s Average Sales Price (ASP) plus 6% of the innovator drug’s ASP, rather than 6% of the biosimilar’s ASP. This was done to provide additional incentives for manufacturers to lower Biosimilar prices, relative to the Innovator’s ASP, and to prescribers, who would benefit from larger Buy-and-Bill profits. (Depending on the gap in prices between a Biosimilar and Innovator Biologic)
Biosimilar launches have not fared well in the United States, despite this provision. Its repeal would impose additional challenges that would not bode well for future Biosimilar uptake.

Loss of 340B Discounts to Covered Entities expanded under the ACA
Critical access hospitals, standalone cancer hospitals, community hospitals, and rural referral medical centers all received status as ‘Covered Entities’ under the ACA, allowing each to receive 340B pricing. Pharmaceutical manufacturers have long felt that these entities utilized 340B purchased drugs in their commercial patient populations to garner additional profits. Repeal of the ACA would ensure that this ‘diversion’ doesn’t occur but also negatively impact the economics of institutions that use these discounts to treat significant numbers of patients who do not have the type of insurance coverage necessary to underwrite the care necessary for complex and costly diseases, especially in oncology.

Unintended Consequences of a Medicaid Expansion Repeal
The obvious consequence of coverage losses is indisputable. But what is less obvious is the impact a repeal would have on hospital costs in states that have expanded Medicaid. For years, these costs have been lowered by the expansion of the Medicaid safety net to millions of Americans. With those Americans losing coverage because of a Medicaid repeal, an explosion in uninsured costs will be borne by private insurers and commercial patients in the form of higher premiums to offset increased costs paid to hospitals.

Reopening of the Coverage Gap
Prior to the ACA, Medicare beneficiaries who reached the “donut hole” paid the full cost of Rxs subject to this Coverage Gap. Repeal of the ACA would abolish the Coverage Gap subsidies paid by Pharma and insurers, leaving patients responsible for all Coverage Gap costs.