September 2024 Medicaid Rebate Final Rule: Key Issues for Manufacturers

On Thursday, September 26, 2024, the Centers for Medicare and Medicaid Services (CMS) published in the Federal Register the Medicaid Drug Rebate Program (MDRP) final rule titled “Medicaid Program; Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program” (CMS-2434-F) (the Final Rule).¹ The Final Rule’s provisions will generally take effect on November 19, 2024, with the exception of two provisions in the standard Medicaid managed care contract requirement section, which will take effect for the first rating period for contracts with Medicaid managed care plans beginning on or after November 19, 2025.²

This Advisory provides a summary of several key provisions in the Final Rule, including those addressing drug classification and penalties for misclassification, the definition of a “covered outpatient drug” (COD), the definition of an “internal investigation,” the definition of the “market date,” a new 12-quarter deadline for manufacturer audits or disputes of invoiced rebate units, revisions to the regulatory patient support program exclusions, and a revision to Medicaid managed care standard contract requirements. In addition, this Advisory identifies proposals listed in the May 26, 2023 proposed rule (the Proposed Rule)³ that were not finalized, including those addressing the definition of a “manufacturer,” surveys of manufacturer and wholesaler pricing information, stacking, and the definition of a “vaccine.”

Contents

I. Drug Classification; Oversight and Enforcement of Manufacturer’s Drug Product Data Reporting Requirements — Proposals Related to the Calculation of Medicaid Drug Rebates and Requirements for Manufacturers (89 Fed. Reg. at 79021, 79024, 79038-40, 79049-55)

II. Modification of the Definition of COD to Clarify When a Payment for the Drug is Considered Direct Reimbursement (89 Fed. Reg. at 79022, 79033-38)

III. Definition of “Internal Investigation” for Purposes of Restatements Outside the Three-Year Window (89 Fed. Reg. at 79022, 79040-43)

IV. Proposal to Establish a Definition of “Market Date” for a COD for Purposes of Determining a Base Date AMP for the Product (89 Fed. Reg. at 79022, 79043-46)

V. Establishing a 12-Quarter Rebate Dispute Time Limitation for Initiation of Manufacturer Audits of State Utilization Data (89 Fed. Reg. at 79023, 79057-61)

VI. Rescinding Revisions Made by the Vacated Accumulator Adjustment Rule to the Determination of Best Price and Determination of AMP (89 Fed. Reg. at 79048-49)

VII. Standard Medicaid Managed Care Contract Requirements (89 Fed. Reg. at 79021, 79026-33)

VIII. AMP Cap Removal (89 Fed. Reg. at 79024-25, 79055-56)

IX. Clarification of the Unit Rebate Amount Calculation for “Other Drugs” (89 Fed. Reg. at 79056-57)

X. Conditions Relating to States Claiming Federal Financial Participation for Physician-Administered Drugs (89 Fed. Reg. at 79023, 79063-65)

XI. Request for Information — Comments on Issues Relating to Requiring a Diagnosis on Medicaid Prescriptions as a Condition for Claims Payment (89 Fed. Reg. at 79025, 79065-66)

XII. Proposals Not Finalized

XIII. Proposals Not Summarized

I. Drug Classification; Oversight and Enforcement of Manufacturer’s Drug Product Data Reporting Requirements — Proposals Related to the Calculation of Medicaid Drug Rebates and Requirements for Manufacturers (89 Fed. Reg. at 79021, 79024, 79038-40, 79049-55)

In the Final Rule, CMS largely finalizes its proposals implementing the changes to the Medicaid statute introduced by the Medicaid Services Investment and Accountability Act of 2019 (MSIAA). According to CMS, the MSIAA amendments provided “new authorities to the agency to identify and correct a manufacturer’s misclassification of a drug, as well as impose other penalties on manufacturers that fail to correct their misclassifications.”⁴ To this end, the Final Rule “include[s] a new process to identify, notify and correct a manufacturer’s drug category classifications”⁵ and adds regulations governing penalties for misclassifications and failure to report pricing and product information in a timely manner.

a. Definition of “Drug Product Information” (89 Fed. Reg. at 79021, 79038-40)

CMS largely finalizes its proposed definition of “drug product information” at § 447.502 to include:

National Drug Code (NDC), drug name, units per package size (UPPS), drug category (“S”, “I”, “N”), unit type (for example, TAB, CAP, ML, EA), drug type (prescription, over-the-counter), base date AMP, therapeutic equivalent code (TEC), line extension indicator, 5i indicator, 5i route of administration (if applicable), FDA approval date, FDA application number or OTC monograph citation (if applicable), market date, and COD status.

Citing concerns raised by commenters, CMS removed from the end of the proposed definition the catch-all phrase: “any other information deemed necessary by the Agency to perform accurate Unit Rebate Amount calculations.”⁶ CMS states that drug product information “generally does not change once established and is tied to the drug throughout the history of that drug in the MDP system.”⁷

CMS repeats its view from the Proposed Rule that “[t]he only situation in which a drug that is produced or marketed under an NDA may be reported as a noninnovator drug is if a narrow exception was granted by CMS,”⁸ adding that the MSIAA’s drug classification amendments “confirm[ed] CMS’s pre 2016 interpretation.”⁹ Additionally, as discussed below, CMS also finalizes its definition of “misclassification” to include “drug product information,” making such information subject to the correction process and enforcement penalties described below.

b. Medicaid Drug Rebates and Penalties (89 Fed. Reg. at 79021, 79049-55)

CMS finalizes its proposals to add new requirements to address the process by which the agency would identify and correct “misclassifications” of drug pricing and product information, including new penalties added to the Medicaid statute by the MSIAA. In response to general comments that misclassification penalties should apply prospectively only from the effective date of the MSIAA in April 2019, CMS states that “there is no provision in the statute which would exempt manufacturers from their responsibility of correcting their misclassification from before 2019”¹⁰ and indicates that misclassifications would be addressed through this process for reporting periods across “the entire amount of time that the COD is reported” under the MDRP.¹¹ CMS also states that if a manufacturer does not take corrective action for pre-2019 reporting periods, the penalties contained in the Final Rule “will apply.”¹²

1. Definition of “Misclassification” (89 Fed. Reg. at 79021, 79050-51)

CMS finalizes its proposal at § 447.509(d)(1) that a misclassification occurs when a manufacturer:

(i) Reported and certified to the agency its drug category or drug product information related to a covered outpatient drug that is not supported by the statute and applicable regulations; or,

(ii) Reported and certified to the agency its drug category or drug product information that is supported by the statute and applicable regulations, but pays rebates to States at a level other than that associated with that classification.

In particular, CMS asserts its authority to include “drug product information” within the definition of misclassification,¹³ which subjects such information to CMS’ new process to “correct” reported drug product information, including the penalties described below.

2. Manufacturer Notification by the Agency of Drug Misclassification (89 Fed. Reg. at 79051)

CMS finalizes its proposal at § 447.509(d)(2) that if the agency makes a determination that a misclassification has occurred, the agency will send a written and electronic notice to the manufacturer. The manufacturer will have 30 calendar days from the date of the notice to (i) submit the corrected drug product information as well as any additional drug product and pricing information necessary to calculate its rebate obligations to the states and (ii) upon notification by CMS that the manufacturer’s information was updated in the system, certify the applicable price and drug product data. In response to commenter concerns that the 30-day period would not afford sufficient time, CMS maintains its belief that 30 days is “sufficient in most circumstances” but would entertain information extension requests in “extenuating circumstances.”¹⁴

In response to comments requesting CMS incorporate a dispute resolution process or other “collaborative” process to resolve potential misclassifications, CMS states that the “misclassification process that was established in MSIAA does not provide for a specific dispute resolution process for misclassified drugs” and that “CMS is implementing what the Congress set forth, which did not propose a dispute resolution process.”¹⁵ However, CMS indicates the agency will take the dispute resolution suggestion into consideration for future rulemaking.¹⁶

3. Manufacturer Payment of Unpaid Rebates Due to Misclassification (89 Fed. Reg. at 79021, 79051-52)

CMS finalizes its proposal at § 447.509(d)(3) that, in the event of a misclassification, a manufacturer must pay to each state an amount equal to the sum of the difference between: (i) the Unit Rebate Amount (URA) paid by the manufacturer for the COD to the state for each period during which the drug was misclassified and (ii) the URA that the manufacturer would have paid to the state for the COD for each period if the drug had been correctly classified by the manufacturer, multiplied by the total units of the drug paid. CMS finalizes that this amount must be paid within 60 calendar days of the date the notice is sent by the agency to the manufacturer indicating that the drug is misclassified.¹⁷ Further, CMS clarifies that manufacturers must accomplish these payments “separate from the normal quarterly rebate cycle.”¹⁸

4. Agency Authority to Correct Misclassifications and Additional Penalties for Drug Misclassification (89 Fed. Reg. at 79021, 79052-54)

CMS largely finalizes its proposal at § 447.509(d)(4) regarding CMS corrective action and penalties against manufacturers related to misclassifications. Specifically, if a manufacturer fails to (i) correct a misclassification and certify applicable pricing and drug product information within 30 calendar days after the agency notifies the manufacturer of the misclassification, and/or (ii) pay the rebates that are due to the states as a result of the misclassification within 60 calendar days of such notification, the agency may do any or all of the following:

• Correct the misclassification of the drug in the system, using any pricing and drug product information that may have been provided by the manufacturer, on behalf of the manufacturer.¹⁹ CMS expanded its proposal to clarify that the manufacturer must certify any changes made by CMS, and if it does not do so within 30 days, then CMS may “take other authorized actions against the manufacturer.”²⁰ CMS asserts the agency “may certify changes on behalf of the manufacturer and would do so in this specific situation,”²¹ although this language is not codified in the regulatory text.
• Suspend the misclassified drug, and the drug’s status as a COD under the manufacturer’s rebate agreement from the MDRP, and exclude the misclassified drug from Federal Financial Participation (FFP) in accordance with section 1903(i)(10)(E) of the Social Security Act (SSA).²² CMS provides clarifications as to the suspension penalty in its discussion of the new provisions related to the failure to report drug pricing or product information, summarized below.
• Impose a Civil Monetary Penalty (CMP) for each rebate period during which the drug is misclassified, not to exceed an amount equal to the product of (i) the total number of units paid and (ii) 23.1 percent of the AMP for the unit.²³

CMS finalizes that the agency could take these steps in addition to other actions or penalties available under the Medicaid statute, including referral to the Department of Health and Human Services Office of Inspector General (HHS OIG) and termination from the MDRP.²⁴ Specifically, CMS states that termination could occur when a manufacturer fails to correct a misclassification or has one or more drugs suspended from the MDRP.[[N: 89 Fed. Reg. at 79053; see id. 79084 (codified at 42 C.F.R. § 447.510(h)). The Final Rule codifies that “[c]ontinued suspension of the rebate agreement could result in termination for cause” for the late reporting of drug pricing and drug product information; however, similar language is not codified in the misclassification provisions.]]

5. Transparency of Manufacturers’ Drug Misclassifications (89 Fed. Reg. at 79054)

CMS finalizes its proposal at § 447.509(d)(5) that the agency would make available on a public website an annual report as required under the MSIAA on the drug(s) that were identified as misclassified during the previous year. This report would include a description of any steps taken by the agency with respect to the manufacturer to reclassify the drugs, ensure the payment by the manufacturer of unpaid rebate amounts resulting from the misclassifications, and disclose the use of the expenditures from the fund created in section 1927(b)(3)(C)(iv) of the SSA. In response to commenters’ concerns, CMS states that “[t]he report will only include items that were used in making the determination that the drug was misclassified, which will not include any proprietary or confidential pricing information.”²⁵

c. Suspension for Late Reporting of Drug Pricing and Drug Product Information (89 Fed. Reg. at 79021, 79054-79055)

CMS finalizes its proposal at § 447.510(h) that if a manufacturer fails to provide required drug pricing or drug product information, the agency will provide written notice to the manufacturer, including a deadline by which such information must be reported. If the manufacturer does not report the information within 90 calendar days after that deadline, the manufacturer’s rebate agreement will be suspended for all CODs furnished after the end of the 90-calendar-day period.²⁶ CMS would notify the states 30 calendar days before the effective date of the manufacturer’s suspension.²⁷ Further, the rebate agreement will remain suspended until such information is reported in full and certified, but not for a period of less than 30 calendar days.²⁸ Continued suspension of the rebate agreement could result in termination for cause.²⁹

CMS states that “regarding coverage and payment for 340B-eligible products during the period of the suspension,” manufacturers must still offer drugs through the 340B Program pursuant to § 42 U.S.C. 256b, and 340B covered entities may dispense those medications.³⁰ FFP would not be available for drugs dispensed to Medicaid patients, but states could opt to cover those claims through state-only funds.³¹ Additionally, the Final Rule provides that reimbursement for drugs under Medicare Part B would remain available; however, FFP would not be available for Part B crossover claims for dual eligibles.³²

II. Modification of the Definition of COD to Clarify When a Payment for the Drug is Considered Direct Reimbursement (89 Fed. Reg. at 79022, 79033-38)

Only a COD is subject to rebates under the MDRP. Under the “limiting definition” in SSA § 1927(k)(3), a COD does not include a drug “provided as part of, or as incident to and in the same setting as” certain specified services, including inpatient hospital services, “and for which payment may be made under [Medicaid] as part of payment for [hospital inpatient and other specified services] and not as direct reimbursement for the drug.”³³

In the Final Rule, CMS states that over the years, it has received questions about when a payment is considered a “direct reimbursement” for a drug and whether identifying a drug separately on a claim for payment can amount to “direct reimbursement” for the drug. In the Proposed Rule, CMS stated that “[i]f a drug and its cost can be separately identified on a claim for payment, it can be considered subject to direct reimbursement.”³⁴ Accordingly, CMS proposed revising the regulatory definition of COD to provide that “direct reimbursement” for a drug may include both separate reimbursement for the drug “or reimbursement for a drug plus the service, in one inclusive payment if the drug and the itemized cost of the drug are separately identified on the claim.”³⁵ CMS states in the Final Rule that the proposed changes to the definition of a COD were “not intended to be a departure from current practice or in conflict with the current regulation or statute,” but were “intended to address the fact that States are now using newer reimbursement methodologies where it is not entirely clear whether drugs reimbursed through that new methodology are CODs.”³⁶

In the Final Rule, CMS “agree[s] [with commenters] that the proposed regulatory definition may not have clearly identified those situations that will qualify as direct reimbursement.”³⁷ The Final Rule amends the COD definition at 42 C.F.R. § 447.502, in part, to add a new paragraph (4), which states:

(4) Direct reimbursement for a drug may include both:

(i) Reimbursement for a drug alone, or
(ii) Reimbursement for a drug plus the service, in a single inclusive payment if:

(A) The drug, charge for the drug, and number of units of the drug are separately identified on the claim, and
(B) The inclusive payment includes an amount directly attributable to the drug, and
(C) The amount paid that is attributable to the drug is based on a reimbursement methodology that is included in the applicable section of the State plan.³⁸

CMS explains that under the revised definition, “[A] drug that is reimbursed as part of a bundled payment under a [Diagnosis-Related Group (DRG)] or similar bundled payment methodology is not subject to rebates. However, if that drug is carved out of the bundled payment and reimbursed directly, then the drug is subject to rebates when applicable.”³⁹

The Final Rule states that “[i]f a State plan does not address a distinct reimbursement methodology for a drug included in a bundled payment, then a SPA [State Plan Amendment] would need to be submitted and approved that includes such methodology in the appropriate section of the State plan.”⁴⁰ CMS explains that to seek a rebate on a COD that is part of a bundled service, “[T]he number of units administered to the patient must be identified on the invoice for the inclusive payment and reflected in a payment methodology in the State plan.”⁴¹ The Final Rule does not explain what it means for the number of units to be “reflected in a payment methodology in the State plan.”⁴²

CMS “intend[s] to provide additional guidance to States with respect to how the interpretation of direct reimbursement may be operationalized so that States can invoice for rebates for these CODs.”⁴³ In addition, CMS notes that “States will need to determine how they instruct their providers and managed care plans to identify for rebate billing purposes those inclusive payment claims where direct reimbursement is being made for a COD.”⁴⁴ CMS states that “[t]his claim information will allow the State to provide utilization information to the manufacturer in order for the manufacturer to verify that utilization. Collection of the data and how it may be presented to manufacturers may vary by State or manufacturer.”⁴⁵

CMS recognizes that the changes to the COD definition “may increase manufacturers’ rebate liability to the States because it will clarify those CODs that could be billed for rebates.”⁴⁶ CMS, however, did not estimate the burden of the revised COD definition for manufacturers, because “[a]t this time, [CMS] … do[es] not have an estimate of the number of drugs that could potentially be billed for rebates as a result of this clarification.”⁴⁷

III. Definition of “Internal Investigation” for Purposes of Restatements Outside the Three-Year Window (89 Fed. Reg. at 79022, 79040-43)

Under existing regulations, manufacturers may restate pricing metrics “for a period not to exceed 12 quarters from the quarter in which the data were due” without CMS approval, except for certain enumerated reasons.⁴⁸ One of these reasons includes that “[t]he change is to address specific rebate adjustments to States by manufacturers, as required by CMS or court order, or under an internal investigation, or an OIG or Department of Justice (DOJ) investigation.”⁴⁹

In the Final Rule, CMS finalizes its definition of an “internal investigation” as proposed with a minor change of adding “possible” to characterize “fraud, abuse, or violation of law or regulation.”⁵⁰ Specifically, CMS defines an “internal investigation” as: “a manufacturer’s investigation of its AMP [Average Manufacturer Price], best price, customary prompt pay discounts, or nominal prices that have been previously certified in the Medicaid Drug Rebate Program (MDRP) that results in a finding made by the manufacturer of possible fraud, abuse, or violation of law or regulation. A manufacturer must make data available to CMS to support its finding.”⁵¹

CMS provides an example that:

[A] request by a manufacturer to restate or revise previously reported and certified pricing data outside of the 12-quarter time period based upon a mere disagreement with a prior manufacturer’s government pricing calculations and assumptions, would not be considered a valid reason to revise a prior manufacturer’s pricing outside of the 12-quarter time period. In this example, the manufacturer must make findings that include actual data from the prior manufacturer as evidence that the prior manufacturer violated statute or regulation.⁵²

In addition, in response to a comment, CMS also states, “Revisions to a manufacturer’s determination of AMP and best price because a manufacturer uncovers new information about the calculation it made 12 quarters in the past may meet the exception only if the change is to address rebate adjustments to States as directed under 447.510(b)(1)(v).”⁵³

IV. Proposal to Establish a Definition of “Market Date” for a COD for Purposes of Determining a Base Date AMP for the Product (89 Fed. Reg. at 79022, 79043-46)

One of the factors in the calculation of the Medicaid additional rebate for a drug is the base date AMP of the drug, a value that is determined based on the drug’s “market date.” The term “market date” has not previously been defined in regulations. The Final Rule adopts the definition of “market date” as proposed: “the date on which the covered outpatient drug was first sold by any manufacturer.”⁵⁴

CMS explains that this definition modifies previous agency guidance by requiring the market date to reflect “the date of first sale of the drug, rather than the date the drug was first available for sale, by any manufacturer.”⁵⁵ CMS contends this modification will “permit a manufacturer to establish and report a base date AMP based on actual sales data.”⁵⁶ The Final Rule preamble clarifies that a manufacturer that has previously reported the market date as the earliest date the drug was available for sale by any manufacturer “will not be required to change the market date to reflect the earliest date the drug was sold by any manufacturer.”⁵⁷ However, after the effective date of the Final Rule, “[M]anufacturers must use the earliest date the drug was sold as the market date for new drug products.”⁵⁸

CMS does not adopt its proposal to define “sold” to mean, for purposes of determining the market date of a drug, “that the drug has been transferred (including in transit) to a purchasing entity.”⁵⁹ In response to comments explaining that “manufacturers may identify their sale date based on commercial agreements, business practices, date of payment, date of invoice, and other determining factors,” CMS states that it will “permit manufacturers to use reasonable assumptions as to the date a sale has occurred.”⁶⁰ However, CMS states that manufacturers should not only consider “sales to purchasers that are AMP-eligible … when determining the date on which the drug was first sold” because the first date of sale “does not depend on what entity is making the purchase.”⁶¹

CMS also states in the Final Rule preamble that “a new market date cannot be established for a drug that is marketed under the same FDA-approved NDA number, ANDA number or BLA license unless the drug is a new dosage form or strength because the rebate statute requires an additional rebate amount based on the market date for each dosage form and strength of a COD. Thus, if a drug is purchased or otherwise acquired from another manufacturer, the market date should not change, and should equal the market date of the drug first marketed under the approved application.”⁶²

V. Establishing a 12-Quarter Rebate Dispute Time Limitation for Initiation of Manufacturer Audits of State Utilization Data (89 Fed. Reg. at 79023, 79057-61)

CMS finalizes, as proposed, its proposal to limit the time period in which manufacturers may dispute or audit state utilization data regarding rebates, except that it replaces “the date of the State invoice” with “State invoice postmark date.” Specifically, the Final Rule adds the following paragraph to 42 C.F.R. § 447.510:

(i) Manufacturer audits of State-provided information. A manufacturer may only initiate a dispute, request a hearing, or seek an audit of a State regarding State drug utilization data, during a period not to exceed 12 quarters from the last day of the quarter from the State invoice postmark date.⁶³

The restriction applies to “any process a manufacturer is using to seek an adjustment to State drug utilization data under section 1927(b)(2)(B) of the Act.”⁶⁴ CMS clarifies that “all audits must be initiated within the 12-quarter time period, not that all disputes are resolved within this timeline.”⁶⁵ In addition, this provision “should apply to all newly initiated rebate disputes, regardless of when the claim was processed; any claim currently in the dispute resolution process would not be affected.”⁶⁶ CMS states that “having an unlimited timeframe to initiate such disputes on rebates can result in manufacturer, State, and Federal resources being spent to adjudicate excessively old data and is not an efficient use of resources.”⁶⁷ By way of example, CMS states that “if the invoice postmark date is in the fourth quarter of 2024, then the time period to initiate a dispute ends 12 quarters after the last day of the fourth quarter of 2024, which would be the last day of the fourth quarter of 2027.”⁶⁸ If a state uses electronic invoicing via email, the “postmark date” would be the date the state sends the email to the manufacturer.⁶⁹

Further, in regard to 340B duplicate discounts, CMS states:

We understand that covered entities and their contract pharmacies work with their own third-party administrators (TPAs) that help to identify prescription claims as 340B within a few days, or at most a few weeks, well within the 12-quarter timeline that was proposed. Thus, the 12-quarter timeframe should be sufficient for identification of 340B claims and any disputes that may arise.⁷⁰

The Final Rule includes no similar time limitation on CMS’ ability to audit manufacturer prior period submissions or states’ abilities to invoice rebates for past periods.

VI. Rescinding Revisions Made by the Vacated Accumulator Adjustment Rule to the Determination of Best Price and Determination of AMP (89 Fed. Reg. at 79048-49)

VII. Standard Medicaid Managed Care Contract Requirements (89 Fed. Reg. at 79021, 79026-33)

a. Requirement to Include BIN/PCN on Medicaid Managed Care Cards (89 Fed. Reg. at 79024, 79026-29)

b. Drug Cost Transparency in Medicaid Managed Care Contracts (89 Fed. Reg. at 79024, 79029-33)

VIII. AMP Cap Removal (89 Fed. Reg. at 79024-25, 79055-56)

In the Final Rule, CMS adopts its proposal to make conforming changes to 42 C.F.R. § 447.509 to reflect the removal of the maximum rebate amounts for rebate periods beginning on or after January 1, 2024. Specifically, CMS amends 42 C.F.R. § 447.509(a)(5) and (9) to state that the limit on maximum rebate amounts applies to certain time frames, which for all drugs, ends on December 31, 2023 (i.e., no maximum rebate limit applies to rebate periods beginning on or after January 1, 2024).⁸² In the Final Rule, CMS rejects a request by a commenter to recognize that “there is a separate and distinct natural limit on MDRP rebates stemming from the ordinary meaning of the term ‘rebate’ that does not permit such rebates to exceed State purchase prices.”⁸³

IX. Clarification of the Unit Rebate Amount Calculation for “Other Drugs” (89 Fed. Reg. at 79056-57)

To “align [CMS’] longstanding policy and practices of identifying ‘other drugs’ referenced in section 1927(c)(3) of the Act as N drugs, for purposes of the MDRP,” CMS finalizes its clarifications to 42 C.F.R. §§ 447.509(a)(6)-(9), (c)(4) by replacing each appearance of the term “noninnovator multiple source drug(s)” with “drug(s) other than a single source drug or an innovator multiple source drug.”⁸⁴ In the Final Rule, CMS states that this clarification is not intended to have any effect on the narrow exceptions process.⁸⁵

X. Conditions Relating to States Claiming Federal Financial Participation for Physician-Administered Drugs (89 Fed. Reg. at 79023, 79063-65)

CMS finalized its proposal to “require States to collect NDC information on all covered outpatient single and multiple source [Physician-Administered Drugs (PADs)] and to specify that States must invoice for rebates for all covered outpatient PADs to receive FFP and secure manufacturer rebates.”⁸⁶

XI. Request for Information — Comments on Issues Relating to Requiring a Diagnosis on Medicaid Prescriptions as a Condition for Claims Payment (89 Fed. Reg. at 79025, 79065-66)

In the Proposed Rule, CMS requested comment on the issues, benefits, and challenges of requiring a diagnosis code for a patient to be included on a Medicaid prescription, which the agency noted could help determine whether a drug is being used for a medically-accepted indication or qualifies as a COD.⁸⁷ CMS states in the Final Rule that it is not pursuing requiring a diagnosis code on Medicaid prescriptions at this time due to “the overwhelming number of comments that were opposed to this requirement.”⁸⁸ CMS notes that commenters raised concerns that such a requirement could lead to administrative burden, delays in care, and “manufacturers initiating unnecessary disputes.”⁸⁹ The Final Rule provides that CMS may address this issue in future rulemaking if appropriate.⁹⁰

XII. Proposals Not Finalized

CMS declined to finalize several proposals, as follows:

• Manufacturer Definition. CMS proposed to “clarify” the definition of a “manufacturer” that participates in the MDRP to include “all associated entities of the manufacturer that sell prescription drugs ….”⁹¹ In the Final Rule, CMS notes that it “appreciate[s] the thoughtful comments received on this issue,” and that CMS “determined not to finalize the proposed policy at this time.”⁹² CMS is “continuing to review the input provided by commenters, which may inform future rulemaking on this topic.”⁹³
• Vaccine Definition. For the purposes of MDRP only, CMS proposed to define a “vaccine” in part as “a product that is administered prophylactically to induce active, antigen-specific immunity for the prevention of one or more specific infectious diseases ….”⁹⁴ In the Final Rule, CMS notes that it “appreciate[s] the thoughtful comments [it] received on this issue” and determined “not [to] finaliz[e] the proposed regulatory definition.”⁹⁵ CMS is “continuing to review the input provided by commenters, which may inform future rulemaking on this topic.”⁹⁶
• Proposal to Account for Stacking When Determining Best Price. CMS had proposed to require that “cumulative discounts, rebates or other arrangements … be stacked [by the manufacturer when calculating best price], to generate a final price realized by the manufacturer for a covered outpatient drug, including discounts, rebates or other arrangements provided to different best price eligible entities.”⁹⁷ In the Final Rule, CMS notes that, based on the comments it received, it determined not to “finalize the proposal at this time.”⁹⁸ CMS is “continuing to review the input provided by commenters” and “intend[s] to collect information through a separate Paperwork Reduction Act (PRA) request to collect additional information related to manufacturers’ stacking methodologies, which may inform future rulemaking on this topic.”⁹⁹ CMS also states that it “understand[s] from a 2019 OIG report (Reasonable Assumptions in Manufacturer Reporting of AMPs and Best Prices)[] that about half of the manufacturers responding to the survey indicated that they did stack their price concessions in determining best price, but several indicated that they wanted additional guidance from CMS.”¹⁰⁰ CMS had previously signaled in a May 15, 2024 press release that it would not finalize its stacking proposal.¹⁰¹
  
• Proposal Regarding Drug Price Verification Through Data Collection. CMS had proposed “to survey manufacturers … to verify prices or charges for certain” drugs.¹⁰² In the Final Rule, CMS notes that it “appreciate[s] the thoughtful comments [it] received on this issue” and that CMS “determined not to finalize the proposed policy at this time.”¹⁰³ CMS is “continuing to review the input provided by commenters, which may inform future rulemaking on this topic.”¹⁰⁴

XIII. Proposals Not Summarized

• Modification of the Definition of “Noninnovator Multiple Source Drug” to Distinguish Between an Innovator Multiple Source Drug and a Noninnovator Multiple Source Drug (89 Fed. Reg. at 79046)
• Coordination of Benefits (89 Fed. Reg. at 79025-26)

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© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.