HHSC Annual Performance Report for the Prescription Drug Rebate Program

 

The Annual Performance Report for the Prescription Drug Rebate Program, also referred to as the Rider 24 report, is submitted by the Health and Human Services Commission (HHSC).  The Rider 24 report details the outstanding prescription drug rebate balances for the Texas Medicaid Program, Children’s Health Insurance Program (CHIP), Department of State Health Services’ (DSHS) Kidney Health Care (KHC) Program, DSHS’ Children with Special Health Care Needs (CSHCN) Services Program and the Texas Woman’s Health Program (TWHP).  HHSC’s Vendor Drug Program (VDP) operates the formularies and oversees the contractor responsible for administration of the rebate programs for Medicaid, CHIP, KHC, CSHCN and TWHP.  This report is required by Senate Bill (S.B.) 1, 83rd Legislature, Regular Session, 2013 (Article II, HHSC, Rider 24) and is submitted to the legislature on an annual basis. 

 

The Rider 24 report includes the rebate principal and interest outstanding, age of receivables, annual collection rates, amounts billed, dollar value of pricing and utilization adjustments, and dollars collected. This report includes a separate rebate collection report for each managed care and fee-for-service rebate program.

 

For calendar years 1991 through 2014, HHSC collected a total of $14,436,283,734 (all funds) in principal in rebates and $10,973,563 (all funds) in interest – a collection rate of 99.47 percent.  In the five-year period from calendar years 2010 through 2014, HHSC collected $7,347,694,928 (all funds) in principal in rebates and $180,199 (all funds) in interest – a collection rate of 99.04 percent.

 

Over the lifespan of the HHSC rebate program, about 29 percent of the amount paid to pharmacies and other providers for rebatable products was expended from rebates billed to manufacturers. The percentage of provider payments expended from rebate revenue has increased over time. For calendar years 2010 through 2014, the percentage increased to 38 percent of expenditures. 

 

The average collection rate has increased over time, which is due in part to HHSC staff working with the contracted entity to collect on outstanding balances for rebate programs that are no longer in effect.  Other targeted collection efforts involved ensuring compliance with national drug code reporting on medical claims and encounters, which is required in order to collect rebates.

 

 

Omnibus Budget Reconciliation Act of 1990 (OBRA ’90) Rebate Programs

 

OBRA ’90 required drug manufacturers to enter into a contract known as a national rebate agreement with CMS to be added to a state’s Medicaid formulary.  Once the rebate agreement is established between the drug manufacturer and CMS, the drug manufacturer’s covered outpatient products are eligible to be added to the Texas Drug Code Formulary. 

 

As part of this agreement, contracted manufacturers report their current product and pricing information to CMS within 30 days of the end of the calendar quarter and pay the agreed-upon rebate amount on quantities of products dispensed to a Medicaid client in an outpatient setting. 

 

The rebate amount is based on the manufacturers’ reported product and pricing information.  Medicaid pharmacy programs are required to include all of the contracted manufacturers’ drug products in their Medicaid formularies and to submit invoices to manufacturers for rebate collection.  States may also collect Medicaid rebates for drugs dispensed through CMS-approved Medicaid waivers.  States share the rebate revenue with CMS at the same rate as the Federal Medical Assistance Percentage (FMAP).

 

The Affordable Care Act (ACA) requires drug manufacturers to pay rebates for drugs dispensed to Medicaid clients that receive care from Medicaid MCOs and allows Medicaid to collect supplemental rebates, which are described below, on these managed care encounters.  Senate Bill (S.B.) 7, 82nd Legislature, First Called Session, 2011, directed HHSC to include covered outpatient pharmacy benefits in the array of services provided by MCOs.  S.B. 7 also required MCOs to follow HHSC’s Medicaid and CHIP formularies and Medicaid preferred drug list (PDL).  Pharmacy services were included into the array of services provided by Medicaid MCOs starting March 1, 2012.  Rebate programs for managed care began in August 2012.

 

As a result of the shift in 2012 from a FFS to a managed care delivery model for covered outpatient drugs, the rebate amounts reported for FFS programs are decreasing as the amounts for managed care are increasing.  Currently, over 90 percent of the Medicaid population receives services through an MCO. 

 

 

In addition to the federally-mandated Medicaid OBRA ’90, rebates, Texas implemented a Medicaid supplemental rebate program in January 2004, through which drug manufacturers provide services in lieu of cash (i.e. Program Benefit Agreement) to the Medicaid program. 

Drug manufacturers enter into supplemental rebate contracts with the Texas Medicaid Program to have their products considered for preferred status on the PDL.  The HHSC Pharmaceutical and Therapeutics Committee determines which products are assigned a “preferred” or “nonpreferred” PDL status based on the safety, clinical effectiveness, and cost (including rebates) of the product. 

 

Drugs categorized as non-preferred are supplied by drug manufacturers that do not enter into supplemental rebate contracts with the Texas Medicaid Program.  As such, nonpreferred drugs require prior authorization before they can be dispensed, while preferred products do not. Non-preferred status and requiring prior authorization both serve as an incentive to encourage drug manufacturers to participate in the Medicaid supplemental rebate program.

 

HHSC invoices and collects Medicaid supplemental rebates from manufacturers for their preferred products based on pharmacy claims submitted for clients in FFS and managed care.  These rebate dollars are also shared with CMS at the FMAP rate.

 

 

CMS approved Texas’ election to add BCCP as an optional coverage group in Medicaid in 2002.   BCCP qualifies for enhanced federal match, but must be reported on federal reports differently than the EFMAP programs listed above. 

Prior to 2013, pharmacy claims were claimed at the regular Medicaid FMAP.  As a cost containment measure in 2013, the claims were separated so that the state could claim the enhanced match from CMS and a new rebate program created so that the rebate funds could be returned to CMS at the EFMAP.

 

The rebate collections totaled $2,862,744 for the BCCP pharmacy program, which is a 28.99 percent collection rate.  Last quarter, HHSC re-sent information to drug manufacturers explaining the program, and it is expected that the collection rate for this new program will increase as drug manufacturers update their systems.

 

 

HHSC has been invoicing and collecting federal Medicaid rebates for outpatient drugs provided in a physician’s office, clinic, or hospital outpatient setting since 2003.  VDP pays for pharmacy dispensed drugs, identified by their NDC. However, Texas’ acute care claims administrator vendor pays for drugs administered in an outpatient medical setting. 

 

To read more information from the Texas Health and Human Services Commission visit their website http://www.hhsc.state.tx.us/