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Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals

The proposed rule put forward by HHS on January 31, 2019 would, for the Medicare Part D and Medicaid managed care programs, remove the safe harbor exemption for rebates applied after the point-of-sale and establish a new safe harbor that would enable a pharmaceutical manufacturer to offer reduced prices on a prescription pharmaceutical product (referred to as chargeback discounts) when they are applied at the point-of-sale. This rule would significantly alter payments across many stakeholders in the prescription drug market. In this memorandum, we summarize the estimated impacts of this proposal on both Medicare and Medicaid. Based on guidance from HHS, we understand that there would be no direct change to requirements in the private market, although we have modeled the indirect effects.

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