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CMS Proposes to Rescind Most Favored Nation Drug Pricing Rule

The Centers for Medicare & Medicaid Services (CMS) published a proposed rule (Proposed Rule) on 10 August 2021 that rescinds the Most Favored Nation (MFN) Model interim final rule, which was issued on 27 November 2020 (the November Rule).1 As explained in our prior alerts here and here, the November Rule would have revised Medicare Part B reimbursement methodology for certain drugs, in an effort to align drug prices in the United States with those of economically similar countries.

If the November Rule had taken effect 1 January 2021 as contemplated, it would have dramatically reduced Medicare Part B drug reimbursement. On 28 December 2020, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction, preventing the Department of Health and Human Services (HHS) from implementing the MFN Model and the November Rule due to failure to follow notice and comment procedures under the Administrative Procedure Act.2

In the Proposed Rule issued this week, CMS indicates that rescinding the November Rule would address procedural deficiencies identified by the courts and allow additional time for the agency to consider the issues raised by comments to the November Rule.

The Proposed Rule also reiterates that President Biden’s 9 July 2021 Executive Order on Promoting Competition in the American Economy, in part, directs the secretary of HHS to take steps to lower the prices of and improve access to prescription drugs and biologicals.3 The proposed rule indicates that HHS is exploring opportunities to promote value-based care; to address the high cost of Medicare Part B drugs, manufacturers’ pricing, and the resulting growth in Medicare Part B drug spending; and to modernize the Medicare program to improve the quality and cost of care.

Comments regarding the Proposed Rule must be submitted by 12 October 2021. Although arguably only comments regarding the November Rule’s withdrawal are in scope, affected parties may nevertheless deem it prudent to also submit comments regarding the lack of wisdom of any new rule that substantially reduces reimbursement for Part B drugs, which could hinder access to life saving treatments.

1 86 Fed. Reg. 43,618 (Aug. 10, 2021).

2 Order Granting Motion for Preliminary Injunction, Cal. Life Sciences Ass’n v. Azar, No. 20-cv-08603-VC (N.D. Cal. Dec. 28, 2020). 

3 Exec. Order No. 14,036, 86 Fed. Reg. 36987 (July 9, 2021), https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/

Copyright 2023 K & L GatesNational Law Review, Volume XI, Number 222

About this Author

Richard P. Church, KL Gates, abuse compliance lawyer, Healthcare self disclosures attorney

Richard Church is a co-leader of the firm’s national health care practice group. He focuses his practice on health law regulatory issues and health care joint ventures, clinical integration and mergers and acquisitions. Richard handles complex 340B structuring, enrollment and compliance matters, Medicare and Medicaid enrollment and reimbursement issues, and health care operational matters. He also handles complex affiliations and transactions between health care providers, including legal compliance, change of ownership filings, and development of post-transaction...

Leah D'Aurora Richardson Health Care Attorney K&L Gates Research Triangle Park, NC

Leah D’Aurora Richardson is a partner in the firm’s Research Triangle Park office. Ms. D’Aurora Richardson advises academic medical centers, health systems, hospitals, hospices, and ancillary service providers, such as pharmacies, and durable medical equipment suppliers and clinical laboratories, on all areas of transactional and regulatory health law, including:

  • Responding to governmental investigations related to healthcare regulatory matters, including Anti-Kickback Statute and Stark Law compliance, and complex billing matters.
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Elaine C. Naughton Healthcare Lawyer KL Gates Nashville

Elaine Naughton is an associate at the firm’s Nashville office and is a member of the Health Care and FDA practice group. She provides health care regulatory counsel on compliance, operational, and transactional matters, and works with a wide range of clients in the health care industry, including hospitals, health systems, academic medical centers, hospices, home health providers, urgent care centers, ambulance providers, laboratories, and specialty pharmacies. Elaine’s compliance and operational experience includes fraud and abuse inquiries, contracting, complex licensure analyses,...