Could GATS impact state Medicaid rebates?
As part of its WTO obligations, the United States has committed to follow GATS
rules for distribution services, which includes the retail
and wholesale distribution of pharmaceuticals. The commitment
requires government measures to be consistent with GATS
rules on Market Access and Domestic Regulation, among others.
The Market Access rule prohibits governments from setting
certain quantitative limits on distributors. PhRMA has stated
that state Medicaid Preferred Drug List programs based on price and effectiveness
are "market access barriers of concern [that] include
pricing and reimbursement practices that fail to recognize
the value of patented innovative medicines."
The GATS rule on Domestic Regulation requires government
measures to be objective and transparent. In its case against
Florida, PhRMA argued (in effect) that the state used qualification
criteria that were not transparent in the federal Medicaid
law, and therefore, HHS did not have discretion to approve
state programs. Another country could make a similar argument
under GATS. The GATS version of PhRMA’s argument might
be that HHS is not using transparent qualification criteria
when it approves expanded rebate programs, if those criteria
appear nowhere in federal law or agency rules.
WTO is also negotiating a Domestic Regulation rule that
would require government measures to be objective and
“not more burdensome than necessary to ensure the
quality of the service.” States usually balance
a range of criteria to decide which drugs to include on
the PDL. These criteria usually include cost, safety,
efficacy and consumer preferences. Such a balancing test
is inherently subjective and possibly not consistent with
the GATS mandate to be objective. PhRMA has already argued
that criteria that emphasize cost over efficacy are burdensome. GATS also parallels PhRMA’s argument where the rule
on Domestic Regulation requires state measures to be no
more burdensome than necessary to ensure the quality of
the service. By this argument, the requirement that distributors
must provide the rebate to non-Medicaid consumers would
be considered burdensome.