In a letter to Members of Congress, ATR urged opposition to H.R. 107, legislation to lift the existing Medicaid rebate cap for outpatient drugs.

The current 100 percent rebate cap is a reasonable safeguard for manufacturers to ensure the subsidies they pay Medicaid are no higher than the price of the drug.

There are currently over 2,500 drugs that hit the cap so this legislation would create numerous instances where the manufacturer is paying Medicaid to supply the drug.

[Read the full letter here]

Lifting the cap would also likely create perverse incentives within the market.

For instance, the proposal could result in higher prices in the commercial market because manufacturers would be incentivized to reduce rebates and discounts in order to avoid further decreasing “best price.” While this would reduce the Medicaid rebate, it would increase costs for plans and consumers. In turn, this would result in new medicines being launched at higher prices due to the subsidies required by Medicaid.

Lifting the cap would also encourage gaming of the system by turning a product into a revenue stream for the federal government and the states. In fact, the bill effectively creates slush funds for the states as there are no restrictions on how they can utilize funds generated from payments above 100 percent of AMP.

ATR urges all Members of Congress to oppose this legislation as a stand-alone proposal or as part of any broader healthcare legislation.