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How drug manufacturers can reduce revenue leakage with digital tools

February 19, 2024
Business Affairs
Angie Franks
By Angie Franks

Revenue leakage due to misapplied discounts represents a vexing problem for drug developers, creating financial pressure and barriers that make it more difficult for pharmaceutical companies to hold drug prices down.

In 2022, the gross-to-net (GTN) gap for patent-protected, brand-name drugs reached $223 billion, a 33.5% increase from 2018, according to Drug Channels. The GTN gap refers to the difference between a drug’s list price and its net price, which takes into account rebates, reductions, and price discounts. Misapplied discounts are a major contributor to the GTN gap.

In the future, the GTN gap may grow even larger. Several recent factors have intensified the impact of misapplied discounts on drug developers, including an expansion of the 340B program. The program was created by Congress in 1992 to require that manufacturers provide discounts to certain safety net providers, but has soared in popularity since 2010 when the federal government issued guidance permitting an unlimited number of contract pharmacies.

Additionally, a federal ruling this past November in a case involving Genesis Healthcare is being seen by some in the covered entity community as support for expanding the number of claims that are eligible for a 340B discount. Separately, while the Inflation Reduction Act prohibits Part B and Part D inflation rebates on the same claims that are subject to 340B discounts, the prohibition on Part D inflation rebates and 340B discount duplicates is not scheduled to take effect until 2026 due to operational challenges of identifying such discounts.

Given this new reality on the ground, key stakeholders in drug discount programs, such as manufacturers, covered entities, and state Medicaid authorities, would be wise to explore new tools that help them mitigate the growing compliance challenges presented by misapplied discounts.

Inside the problem of misapplied discounts
Duplicate, or even triplicate discounts, may result when different rebate programs intersect. For example, a duplicate discount occurs when a claim subject to the 340B program discounts overlaps with rebates from either the Medicaid Drug Rebate Program or from commercial insurance plans.

Additionally, it is possible that overlapping programs result in a triplicate discount, which may occur when a single dispensing of a drug involves a PBM rebate, a Medicaid rebate, and a 340B discount from one or more covered entities. Such possibilities can compromise the integrity of discount programs, ultimately harming patients.

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