Fact Sheets

Delay of Inclusion of Territories in Medicaid Drug Rebate Program; Covered Outpatient Drug Interim Final Rule (CMS 2345-IFC3)

Delay of Inclusion of Territories in Medicaid Drug Rebate Program; Covered Outpatient Drug Interim Final Rule (CMS 2345-IFC3)

On February 1, 2016, the Centers for Medicare & Medicaid Services (CMS) published the “Medicaid Program; Covered Outpatient Drug” Final Rule with Comment Period (CMS-2345-FC) in the Federal Register (81 FR 5170). As part of that final rule with comment period, we amended the regulatory definitions of “States” and “United States” to include the U.S. Territories (American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands) beginning April 1, 2017. Inclusion of the territories in the definitions of “States” and “United States” would allow them to participate in the Medicaid Drug Rebate Program (MDRP). Additionally, we indicated in the “Covered Outpatient Drug” final rule that territories are able to use existing waiver authority under Title XIX of the Social Security Act to elect not to participate in the MDRP, consistent with statutory provisions (81 FR 5170, 5204). 

On November 15, 2016, CMS published an interim final rule with comment period that amended the regulatory definitions of “States” and “United States” to include the U.S. territories beginning April 1, 2020, rather than April 1, 2017 (interim final rule).   However, based on further discussions with the U.S. territories since the publication of the first interim final rule, we have learned that, while the territories are making progress, only one territory would be prepared to implement the MDRP program by April 1, 2020.

Therefore, today, CMS issued “Medicaid Program; Covered Outpatient Drug; Further Delay of Inclusion of Territories in the Definitions of States and united States” Interim Final Rule with comment period that further delays the inclusion of the U.S. territories (American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands) in the definitions of “States” and “United States” from April 1, 2020 until April 1, 2022.  There is a 60-day comment period for this interim final rule that will end on January 24, 2020.

What’s Next for the Territories and Manufacturers?

This interim final rule with comment period will provide the U.S. territories with the additional time needed to develop systems so as to ensure interested territories are able to fully participate in MDRP.   For the U.S. territories that choose not to participate in the MDRP, the interim final rule with comment period will allow time for such territories to complete the necessary process to use existing waiver authorities available under title XIX to elect to not participate in the MDRP.  While the territories work to develop MMIS or complete the necessary waiver process, they will continue to operate their Medicaid pharmacy programs as they currently do and can continue to negotiate pricing with drug manufacturers.

The delay in effective date will provide manufacturers with additional time until April 1, 2022, to make necessary changes to their government pricing systems in order to begin including sales to the U.S. Territories in their Average Manufacture Price and best price calculations. It will likely also delay any incentive manufacturers may have to make regarding any possible changes to drug prices in the U.S. territories.

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