USA Law and Practice Contributed by: Daniel Kracov, David Marsh and Alice Ho, Arnold & Porter
hospitals believed to serve safety-net func- tions) at or below a statutorily set ceiling price under the 340B Drug Pricing Programme. • Manufacturers must sell brand name drugs to four federal agencies (the Department of Vet- erans’ Affairs, the Department of Defence, the Public Health Service, and the Coast Guard) at or below “federal ceiling price” determined by a statutory formula. • Manufacturers must pay a rebate set by a statutory formula on each unit of their outpatient drugs paid for by the Medicaid programme. This is not literally “price con- trol” programme because it only controls the rebate paid to Medicaid after the drug has been dispensed or administered. As such, the price that Medicaid pays upfront to the dis- pensing pharmacy or to a physician’s office or clinic that administers a drug is not affected by the Medicaid rebate programme. 8.2 Price Levels of Pharmaceuticals or Medical Devices In the USA, companies typically set their prices based on a wide range of factors, and the price level of a pharmaceutical product or medical device does not depend on the prices for the same product in other countries. Although ref- erence-pricing schemes have previously been proposed in the USA, the provisions of the IRA described in 8.1 Price Control for Pharmaceu- ticals and Medical Devices are currently the primary vehicle for industry/government price negotiations under US law. 8.3 Pharmaceuticals and Medical Devices: Reimbursement From Public Funds The largest healthcare programme in the USA today is the Medicare programme, which pro- vides healthcare coverage for people who are 65 and older, are disabled (for two years or more),
or have end-stage renal disease. Medicare accounts for roughly 20% of US health spend- ing. Most pharmaceutical products are eligible for some form of Medicare coverage, either through: • Part B (Medicare’s traditional outpatient ben- efit, which covers a small but important set of drugs, including physician-administered drugs); • Part D (the Medicare drug benefit, which has provided broad coverage for pharmacy-dis- pensed oral drugs since 2006); or • Part A (Medicare’s inpatient benefit, which covers drugs provided as part of covered inpatient hospital stays and in certain other inpatient settings). The second-largest healthcare programme today – accounting for roughly 17% of US health spending – is the Medicaid programme, which is a joint federal–state programme providing cov- erage for certain low-income individuals (with the specific eligibility criteria varying by state). Medicaid is run chiefly by states, with federal government oversight, and state Medicaid pro- grammes generally provide broad coverage for prescription drugs. Medicaid programmes have sometimes imposed on high-cost drugs cover- age restrictions that arguably conflict with Med- icaid’s statutory obligations. At present, it is likely that there will be significant cuts to the Medicare and Medicaid programmes under the second Trump Administration. 8.4 Cost-Benefit Analyses for Pharmaceuticals and Medical Devices The process and evidence that US payors use to make decisions about pharmaceuticals and medical device coverage varies widely by payor
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