Massachusetts Final Budget: How the Act Will Affect Pharmaceutical Companies

August 23, 2019 Alerts and Newsletters

On July 31, 2019, Governor Charlie Baker signed a $43.3 billion fiscal year 2020 budget ("General Appropriations Act"). Originating from the Conference Committee's budget, the General Appropriations Act accounts for any vetoes by the Governor and any overrides by the Massachusetts House of Representatives ("House") and Senate. The House and Senate voted in favor of the Conference Committee's budget, H. 4000, on July 22, 2019, almost unanimously. Baker signed the General Appropriations Act 31 days after the new fiscal year began. Perhaps the most significant aspect of the General Appropriations Act for pharmaceutical companies is that it provides greater authority for MassHealth, the Commonwealth's Medicaid program, to negotiate supplemental rebates directly with pharmaceutical companies. Baker's proposed budget included even stronger prescription drug price controls to reduce MassHealth's costs, but these stronger controls did not make it into the General Appropriations Act.

General Appropriations Act

The General Appropriations Act allows MassHealth to directly negotiate with pharmaceutical companies for supplemental rebates on the prices of the most expensive prescription drugs used by MassHealth based on the prescription drug's value, efficacy, and outcomes. Before entering into supplemental rebate negotiations, MassHealth must first assess, however, if the pharmaceutical company currently offers discounts to MassHealth. A pharmaceutical company may request to enter into supplemental rebate negotiations with MassHealth, but MassHealth may decline or put other supplemental rebate negotiations first. MassHealth may hold a public rate-setting hearing to create a target value for the prescription drug if supplemental rebate negotiations between MassHealth and the pharmaceutical company fail and both sides cannot agree on a price for the prescription drug post-rebate that is less than $25,000 per individual per year or that results in more than $10 million cumulatively spent by MassHealth per year. MassHealth must give at least 30 days' notice of the hearing date to the pharmaceutical company and the public. If negotiations still fail after the public rate-setting hearing, MassHealth may refer the pharmaceutical company to the Health Policy Commission for an additional review in private. Prior to October 15 each year, MassHealth must report to the clerks of the House and Senate, the Joint Committee on Health Care Financing, and the House and Senate Committees on Ways and Means on the number of supplemental rebates received from pharmaceutical companies, the number of prescription drugs receiving a supplemental rebate categorized by pharmaceutical company, and an itemization of the period of the supplemental rebates received.

For assistance with questions regarding how your pharmaceutical company can navigate these new requirements, please reach out to James Roosevelt, Andrew Rusczek, or your regular Verrill attorney.

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