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Senators Introduce Bipartisan CREATES Act to Address Part D Coverage Gap

Earlier this week, Senate Finance Committee Chairman Chuck Grassley (R-IA) and Sen. Patrick Leahy (D-VT) introduced S. 340, the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, which would promote competition in the market for drugs and biological products by facilitating the timely entry of lower-cost generic and biosimilar versions of those drugs and biological products.

The bipartisan bill currently has 27 additional cosponsors and the support of some 50 stakeholders and advocacy groups. A previous version of the CREATES Act was considered an option for brand-name drug manufacturers to pay for lowering their share of Medicare Part D coverage gap (informally known as the Medicare donut hole). The coverage gap, which Congress increased last year, is a period of consumer payment for prescription medication costs that lies between the initial coverage limit and the catastrophic-coverage threshold.

The CMS Office of the Actuary (OACT) estimates that the CREATES Act could save the federal government nearly $4 billion over 10 years. The OACT based this estimate on the Trump Administration’s proposed rule—Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees. OACT assumed that under the proposed rule, manufacturers would retain 15% of the existing Medicare Part D rebates, 75% of the remaining rebates would be applied as discounts to beneficiaries, and manufacturers would apply the remaining 25% to lower list prices. According to OACT analysis, consumer discounts provide less return on investment to drug manufacturers than rebates, and resetting the rebate system would allow manufacturers to recapture forgone revenue streams such as those that occurred from the changes in the Coverage Gap Discount Program included in the Bipartisan Budget Act of 2018.

The CREATES Act, which was read and placed on the Senate Legislative Calendar under General Orders, will likely be attached to another bill as a “pay-for.”

We will keep you updated.

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