Trump administration cannot proceed with pilot drug rebate program, US court rules

(In January 7 story, corrects name of Rick Pollack in paragraph 5)

By Nate Raymond

BOSTON, Jan 7 (Reuters) – The Trump administration cannot require hospitals serving low-income Americans to pay full price upfront for the first 10 medications to become subject to Medicare drug price negotiations and wait for rebates, a U.S. appeals court ruled on Wednesday.

A three-judge panel of the Boston-based 1st U.S. Circuit Court of Appeals rejected a request by President Donald Trump’s administration to put on hold an injunction a judge in Maine issued at the behest of the American Hospital Association and several healthcare providers that blocked the new program.

The panel said the Health Resources and Services Administration’s program upended a decades-long practice of providing safety-net hospitals serving rural and low-income communities with upfront discounts to buy prescription drugs.

The judges, all appointees of Democratic former President Joe Biden, pointed to a lack of evidence that the agency considered the impact the program would have on hospitals, who said the plan would saddle them with hundreds of millions of dollars in new costs. 

Rick Pollack, the head of the American Hospital Association, in a statement welcomed the ruling, saying the program “would have a devastating effect on America’s most vulnerable patients and communities, and the hospitals that serve them.”

The U.S. Department of Health and Human Services, which oversees the agency, did not immediately respond to requests for comment.

The Inflation Reduction Act, a 2022 law enacted under Biden, allowed the government to negotiate a maximum fair price that Medicare, the healthcare program for people aged 65 and older or those with disabilities, would pay for certain costly drugs.

State Medicaid programs, which provide health insurance for low-income Americans in collaboration with the federal government, receive a rebate to ensure they only pay the Medicare-negotiated price on behalf of qualifying patients.

The first 10 drugs to be subject to negotiations include the blood thinner Eliquis sold by Pfizer and Bristol Myers Squibb; Johnson & Johnson’s rival medication Xarelto; and Merck & Co’s diabetes drug Januvia.

Several of the medications were already subject to the federal 340B Drug Pricing Program, which for decades has required drugmakers seeking Medicaid and Medicare coverage for their drugs to provide upfront discounts to safety-net healthcare providers.

HRSA said its 340B Rebate Model Pilot Program, which it announced in July, was intended to help drugmakers avoid duplicate price concessions to hospitals, which they were allowed to avoid under the IRA.

Drug companies under the pilot program could charge hospitals their products’ wholesale prices and issue rebates later to reflect their ultimate discount.

The American Hospital Association sued last month, saying the pilot program was adopted in violation of the Administrative Procedure Act. U.S. District Judge Lance Walker, a Trump appointee in Maine, agreed and issued an injunction on December 29 that blocked the planned January 1 implementation.

(Reporting by Nate Raymond in Boston; Editing by Alexia Garamfalvi, Bill Berkrot and Michael Perry)