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House Passes Welch Legislation Closing Drug Company Loophole

December 13, 2018
Press Release

WASHINGTON, D.C. – This week, the House passed legislation introduced by Rep. Peter Welch (D-Vt.) that closes a loophole in the federal Medicaid program exploited by drug companies to minimize drug discounts required for participation in the program.

Earlier this year, Rep. Welch, joined by Rep. Kurt Schrader (D-Ore.), introduced the Medicaid Drug Rebate Accountability Act after a report by the Inspector General for the Department of Health and Human Services revealed the loophole cost state and federal governments $1 billion between 2012-2016. 

“For too long, drug companies have been ripping off the Medicaid program by misclassifying their products to limit required price discounts,” said Welch. “This commonsense legislation puts a stop to this unethical practice and ensures that all drugs covered by Medicaid are correctly classified.”

VIDEO: On House Floor, Welch Urges Colleagues to Close Billion Dollar Medicaid Loophole

Under the Medicaid Drug Rebate Program, drug manufacturers seeking to have their drugs covered by Medicaid must pay drug rebates to federal and state governments. The required rebates are higher for brand name drugs and lower for generic drugs. According to the Inspector General, hundreds of brand drugs in the rebate program are being intentionally mischaracterized by drug companies as generic.

Under the Welch-Schrader legislation, if a drug company knowingly misclassifies a brand drug as generic, the Centers for Medicare and Medicaid Services (CMS) is authorized to asses a fine equal to a doubling of rebate amount due on that drug. The legislation also beefs up CMS and congressional oversight of the Medicaid drug rebate program.

Welch is a leading advocate in the House of Representatives for cutting the price of prescription drugs and reforming the drug pricing system. He is a senior member of the powerful House Energy and Commerce Committee which has jurisdiction over the Medicaid program and the Affordable Care Act.

Sens. Ron Wyden (D-Ore.) and Chuck Grassley (R-Iowa) have introduced companion legislation in the Senate (S. 3702).