Medicaid Rebate Final Rule Published in Federal Register; HP&M Issues Summary, Schedules Webinar

February 2, 2016

By Alan M. Kirschenbaum, Michelle L. Butler & David C. Gibbons

The February 1st Federal Register contains CMS’s final rule implementing changes to the Medicaid Drug Rebate Program (MDRP). The rule had been released for prepublication review on January 21. This rule, which has an effective date of April 1, 2016, will require pharmaceutical companies to make substantial changes in their MDRP policies, procedures, calculation methodologies, and systems within a very short time frame. To help our readers understand the final rule and how to implement it, HP&M today released a memorandum summarizing the rule, which is available here.

Also, in collaboration with KPMG’s government pricing leaders, HP&M will conduct a free Webinar entitled “A Practical Guide the Medicaid Rebate Final Rule” on Friday, February 19 from 1:00 to 3:00 pm EST. For information about the Webinar and how to register for it, click here.

The final rule goes a long way toward clarifying ambiguities in the Affordable Care Act amendments to the Medicaid Rebate statute and CMS’ 2012 proposed rule, and contains a number of favorable changes from the proposed rule. Among the highlights are the following (page numbers refer to our summary memorandum):

  • Wholesaler sales: For the treatment of wholesaler sales in AMP, CMS has retreated from its proposal to require a so-called buildup method, and instead is permitting manufacturers to use the traditional presumed inclusion approach. (P. 3)
  • Line Extensions: CMS has withdrawn its complex proposed methodology for determining line extensions of solid oral dosage form single source and innovator multiple source drugs, and is instead soliciting additional comments on this subject. A drug will not be considered a line extension of a drug marketed by another manufacturer unless there is a corporate relationship. (Pp. 20-21)
  • Territories: The MDRP will be extended to the U.S. Territories beginning April 7, 2017, and sales to customers located in the Territories will be includable in AMP and best price. (P. 2)
  • 5i AMP: Exclusions from AMP for 5i drugs are added to the regulation, specifically identifying government sales, bona fide service fees, and other excluded transactions. (Pp. 11-14)
  • Entities conducting business as retail community pharmacies:   CMS has withdrawn its proposal to include in AMP sales to entities that “conduct business as retail community pharmacies,” such as specialty pharmacies, home infusion pharmacies, and home health care providers. (P. 5)
  • Best price definition: CMS is narrowing the scope of customer categories included in best price so that it is consistent with the statutory definition. For example, sales to patients are not included in best price. (P. 14)
  • 340B sales and best price: All prices to 340B covered entities are excluded from best price, not just “prices charged under the 340B program,” as proposed. (P. 15)
  • “Original NDAs”: Although an “original NDA” is defined to mean an NDA as in the proposal, certain drugs approved under an NDA may be eligible for a “narrow exception” to the definition of an innovator drug, with approval from CMS. (Pp. 18-19)
  • Federal Upper Limits: FULs for multiple source drugs will be calculated as 175% of the weighted average of the A-rated drugs, as proposed, except that a FUL will not be lower than the National Average Drug Acquisition Cost (NADAC) published by CMS. (P. 26)
  • Actual acquisition cost: Beginning April 1, 2017, states must base their fee-for-service Medicaid ingredient cost reimbursement to pharmacies on actual acquisition cost, determined using pharmacy surveys or other reliable data. (P. 25)
Categories: Health Care |  Reimbursement