AMP will exclude PBM Rebates

The treatment of PBM rebates is one of the most contentious issues in the calculation and reporting of Average Manufacturer Price (AMP).

IMHO, the political winds are now signaling that CMS will modify AMP to exclude PBM rebates. This change will neutralize a key concern of the 3000+ highly critical comments received by CMS in response to its proposed rule.

For non-AMP geeks, PBM rebates, discounts, or other price concessions provided by manufacturers will be included in the calculation of AMP under CMS’ proposed rules. Obviously, this will lower the computed AMP. Critics of CMS’ proposal -- basically everybody -- argue that these rebates do not get passed on to retail pharmacies, so that AMP will end up being an inaccurate (and artificially low) indicator of ingredient acquisition cost for a retail pharmacy.

Last week, Senator Grassley (R-IA), the Ranking Republican on the Senate Finance committee, wrote a letter to Leslie Norwalk, the current administrator of CMS. Note that Grassley is from one of the two states that have proposed topping off AMP to pharmacies.

Here is the key paragraph from Senator’s Grassley’s letter:
“For the final rule to remain consistent with congressional intent, CMS should remove PBM rebates from the calculation of the Average Manufacturer Price. Congress devoted significant time and energy to creating a reimbursement for pharmaceuticals in Medicaid reflective of actual acquisition costs. CMS should use the same standard in implementing the law. Inclusion of PBM rebates is not consistent with that standard and I urge you to act accordingly.” (emphasis added)

The wording "congressional intent” is very significant. CMS’ proposed rule states: “[H]owever, in light of our understanding of congressional intent, we believe that the definition is meant to capture discounts and other price adjustments, regardless of whether such discounts or adjustments are provided directly or indirectly by the manufacturer.” (emphasis added) Thus, Grassley’s letter is an important and unambiguous signal to CMS.

When the facts change, I change my mind. After some off-the-record conversations last week, I now believe that July 1 will be the actual implementation date, in contrast to my comments a few weeks ago. Don't worry -- I'll be sure to remind you if my prediction is accurate.