A proposed technical fix to language defining average manufacturer price for drugs would cause manufacturers to pay an additional $2.1 billion in Medicaid rebates over 10 years, the Congressional Budget Office projects.

The proposal was included in the most recent Senate version of the American Jobs and Closing Tax Loopholes Act, H.R. 4213, also known as the "tax extenders" bill.

The bill primarily addresses benefits for the unemployed and changes to the tax code but also includes a health care section. One of the health provisions would extend the federal 340B drug discount program to drugs provided to inpatients at hospitals serving low-income populations (Also see "Inpatient Drug Discounts For 340B Providers Resurface In Jobs Bill" - Pink Sheet, 20 May, 2010.) and would also change the definition of AMP, which is used as the basis for drug rebates to Medicaid.

The House-passed version of the tax extenders bill includes the 340B inpatient drug discount but not the AMP provision.

The tax extenders bill appears to have stalled, since the Senate has failed three times to break a Republican filibuster of it, most recently on June 24. Nonetheless, the effort to include the AMP provision shows that Congress is aware of issues with the AMP language and may look for other vehicles to fix it.

The issues arise from the Patient Protection and Affordable Care Act's redefinition of how AMP should be calculated. It says AMP should use only prices paid by retail pharmacies for drugs. Since many specialty drugs are not distributed through retail pharmacies, there are questions about whether AMP for those drugs can be calculated at all under the new law (Also see "Zero Medicaid Rebate For Specialty Rx? Reform Law Puts CMS In Conundrum" - Pink Sheet, 17 May, 2010.).

Senate Finance Committee Chairman Max Baucus, D-Mont., introduced the most recent substitute version of the tax extenders bill with a section titled "treatment of certain drugs for computation of Medicaid AMP" that would tack on new language to the end of the PPACA provision that currently lists payments to be excluded from the AMP calculation. The additional proposed phrase states, "unless the drug is an inhalation, infusion, or injectable drug that is not dispensed through a retail community pharmacy," in effect removing these products from the list of exceptions.

CBO scored the provisions of the Baucus substitution and projects that the additional rebates accrued to the government as a result of the change would total $2.1 billion from 2010 to 2020,

With the future of the tax extenders bill uncertain, Congress could add the AMP language to other bills under consideration. However, CMS has said that, absent a correction from Congress, it expects to handle the AMP question for non-retail pharmacy drugs through guidance.

-Scott Steinke (s.steinke@elsevier.com)

Technical Fix For Medicaid AMP Definition Would Cost Pharma Firms $2.1 Bil. Over 10 Years, CBO Says

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