Incyte has reached a settlement with the Centers for Medicare & Medicaid Services (CMS) regarding rebate criteria for its eczema and vitiligo treatment Opzelura, according to a securities filing (PDF).
The CMS has agreed to not classify Opzelura as a line extension of Incyte’s older drug Jakafi, which affects its rebate regulations. In exchange, the company will withdraw its lawsuit challenging the CMS’ classification of the treatment.
“The settlement was reached based on the unique facts of Opzelura and Jakafi,” Incyte wrote.
With the agreement, Incyte will record a $246 million benefit in the second quarter of this year, which reverses charges the company took in association with the potential application of the line extension regulations.
Additionally, with the resolution of the lawsuit, Incyte expects an improvement in Opzelura’s future gross-to-net price figures. The company said it will provide adjusted financial guidance in its next quarterly report.
When a brand-name drug is reformulated—as is the case with Opzelura, which uses the same ruxolitinib ingredient as Incyte’s Jakafi—the new drug is classified by the CMS as a line extension.
When a company brings on a line extension, the CMS uses a formula to ensure that the manufacturer pays higher rebates tied to the inflation rate of the original drug. Under the Medicaid Drug Rebate Program (MDRP), manufacturers are required to pay a higher inflation penalty if the price of a drug increases faster than the rate of inflation.
Opzelura and Jakafi are used in unrelated indications and administered differently as Opzelura is a topical cream and Jakafi is a pill.
Jakafi was approved in 2011, with Opzelura’s nod coming a decade later. Jakafi has been approved for myelofibrosis, polycythemia and graft-versus-host disease.