How the American Rescue Plan Act of 2021 Impacts the Pharmaceutical Industry
President Biden signed the America Rescue Plan Act of 2021 (the Act) into law on March 12, 2021, allocating funds to public health programs, among other government initiatives. Not only does the Act provide significant funding for COVID-19-related vaccines, but it also provides funding for a variety of initiatives that are anticipated to support the pharmaceutical industry, such as assistance for continuous manufacturing and the resumption of timely and thorough FDA facility inspections.
Financing for COVID-19 Vaccines and Medications
One major way the pharmaceutical sector benefits from the Act is because it provides considerable extra financing for COVID-19 vaccines and medicines. According to Congress, funding will be used to purchase finished goods, as well as to improve private industry production abilities and to develop new vaccines and treatments to combat developing COVID-19 mutations. The public health-related programs and the funds allocated by the Act include the following:
- The Department of Health and Human Services (HHS) will receive $6.05 billion for the research, development, production, and procurement of vaccines and medicines to combat COVID-19, developing COVID-19 variations, and future diseases.
- The Centers for Disease Control and Prevention (CDC) will receive $750 million to tackle COVID-19 and other emerging infectious disease risks. Although the funds will be used for a variety of CDC operations, Congress has stated that the funds may be used to purchase vaccines for global immunization.
- $500 million to the FDA to support a variety of COVID-19 vaccine and treatment development projects.
Food and Drug Administration Key Priorities
Throughout 2021, the FDA's top priorities will be to ensure the efficacy of approved medicines against COVID-19 variants, as well as to promote the development of vaccine boosters and treatments to combat these variants. The Act instructs the FDA to continue to assess the performance, safety, and effectiveness of approved vaccines and treatments in the face of new variations. As part of this effort, the FDA published numerous guidance documents on February 22, 2021, to assist businesses developing COVID-19 vaccines and treatments to address existing and future viral variations:
- COVID-19: Developing Drugs and Biological Products for Treatment or Prevention
- Development of Monoclonal Antibody Products Targeting SARS-CoV-2, Including Addressing the Impact of Emerging Variants, During the COVID 19 Public Health Emergency
- Policy for Evaluating Impact of Viral Mutations on COVID-19 Tests
Elimination of Medicaid Rebate Cap in 2024
Another component of the Act calls for the elimination of the Medicaid rebate cap in 2024. Participating innovative pharmaceutical businesses in state Medicaid programs must join agreements with the Department of Health and Human Services to join the Medicaid Drug Rebate Program (MDRP). Under MDRP, companies are required to provide the following rebates:
- The higher of 23.1% of a drug's "average manufacturer price" (AMP) or the difference between the AMP and the "best price."
- The difference between the current quarter's AMP and the baseline AMP (specified as the AMP during the first full quarter following launch), adjusted for the Consumer Price Index for All Urban Consumers.
Since the Act was passed, the above-mentioned rebates are now capped at 100% of AMP. This refund ceiling will be lifted on January 1, 2024, according to the Act. As a result, starting in 2024, some medication manufacturers may have to make higher rebate payments. It should be emphasized, however, that the restriction will not be lifted for roughly three years. Pricing strategies may be impacted by potential future changes in federal or state drug pricing laws — the likelihood of such changes is difficult to predict at this time.
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