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U.S. proposes new rule to increase transparency of prescription drug costs for Medicaid

(Reuters) - The U.S. health department on Tuesday proposed a rule aimed at cutting costs of prescription drugs for the Medicaid healthcare program for the poor by increasing transparency around how much those drugs actually cost.

The proposed rule would also hold drugmakers accountable for providing the correct discounts to the state-based Medicaid plans for drugs.

The Centers for Medicare and Medicaid Services (CMS) proposed that contracts between states, health insurers and third-party contractors such as pharmacy benefit managers show how much those PBMs are paying for the drugs to avoid discrepancies in what they charge Medicaid and what they reimburse pharmacies.

The agency, part of the U.S. Department of Health and Human Services that oversees the health programs, said the proposed rule follows President Joe Biden's executive order requiring all agencies to work to lower drug prices in the U.S., which are the highest in the world.

The proposal also includes provisions to ensure states receive appropriate rebates or after-market discounts to which they are entitled since they receive a higher rebate for brand-name drugs compared with the generic versions.

With increased transparency, states would be able to determine if manufacturers have appropriately classified their covered outpatient drugs, and if they have not, give CMS the ability to take action to correct the misclassification.

The proposed regulation also includes the provision for a drug price verification survey, which would result in greater transparency into manufacturers' drug prices.

(This story has been refiled to add dropped word 'rule' in the headline)

(Reporting by Mariam Sunny in Bengaluru; Editing by Caroline Humer and Anil D'Silva)