The Centers for Medicare & Medicaid Services’ (CMS’) final rule advances policies to promote the efficient operation of the Medicaid Drug Rebate Program (MDRP). This includes policies to implement new statutory authorities included in the Medicaid Services Investment and Accountability Act of 2019 (MSIAA) to address situations in which manufacturers incorrectly report or misclassify their drugs in the MDRP. The final rule also enhances MDRP integrity and strengthens policies that will ensure greater consistency and accuracy of drug information reporting, timely data collection, and efficient operation of the MDRP.
Identifying and Correcting Misclassified Drug Information and Addressing Late Reporting
Manufacturers that participate in the MDRP must report certain drug-related product and pricing information upon participation in the MDRP and through required monthly and quarterly submissions to CMS. This information includes the classification of a manufacturer’s drug as a brand-name or generic drug, which helps to determine the rebates that manufacturers pay to the states for their drugs. Brand-name drugs pay a higher rate of rebates than generic drugs.
In this final rule, CMS is implementing newly granted statutory authorities to address issues related to incorrect reporting by drug manufacturers of drug product information in the Medicaid Drug Program (MDP) system, as well as the misclassification of drugs. Specifically, the regulation:
- Defines situations in which CMS would consider a drug misclassified for the purposes of the MDRP, as well as other situations in which a manufacturer is paying rebates to states that are different from the rebates that are supported by the drug data being reported to MDRP.
- Describes a process and timeline that CMS will use to notify the manufacturer that the agency has determined that a misclassification of a covered outpatient drug (COD) has occurred and the process for correcting the misclassification.
- Codifies a manufacturer’s obligation to pay unpaid rebate amounts to states due to the misclassification of CODs.
- Allows CMS to suspend the National Drug Rebate Agreement of a manufacturer for no fewer than 30 days for late reporting of drug product and pricing information as is required under the statute and the agreement.
- Implements CMS’ options under MSIAA for enforcing program requirements when a manufacturer does not correct a misclassification after being notified. These actions could include CMS correcting the misclassification, suspending the drug and/or terminating its manufacturer from the MDRP, excluding the misclassified drug from Medicaid payment, and imposing civil monetary penalties against the manufacturer.
Enhancing Medicaid Drug Rebate Program Definitions and Operations
One of CMS’ goals for this rule is to enhance MDRP operations and increase the efficiency and economy of overall operations and resources to facilitate the needs of states and Medicaid beneficiaries. Therefore, this final rule includes several provisions that ensure states can obtain the required manufacturer rebates so they can most effectively operate their pharmacy programs and enhance access to necessary prescription medications.
These provisions include providing authority to:
- Define “market date” of a drug for purposes of establishing the base date average manufacturer price (AMP) quarter, which is used to calculate the inflation rebates that manufacturers owe on their CODs.
- Limit the period for manufacturers to initiate disputes concerning state-invoiced utilization data during a period not to exceed 12 quarters from the last day of the quarter from the state invoice postmark date.
- Specify that both ingredient cost reimbursement and professional dispensing fee reimbursement, under Medicaid Fee-for-Service, must be based on pharmacy-established cost data, and market-based research does not qualify as supporting data.
- Require states to collect national drug code (NDC) information on all physician-administered drugs, and specify that states should be invoicing for rebates for all physician-administered drugs to receive federal matching funds and secure manufacturer rebates.
- Modify the definition of COD to define that “direct reimbursement” includes reimbursement for a drug that is part of an inclusive payment, when the inclusive payment includes an amount attributable to the drug, the number of units of the drug that were dispensed or administered to the patient, and 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.
- Specify the conditions that constitute an “internal investigation” of pricing data to allow the manufacturer to make changes to already reported pricing data outside the 12-quarter window.
- Specify that for the purposes of manufacturer drug rebates, the drug category “N” represents all “other drugs,” regardless of whether they satisfy the definition of a generic drug.
Improving Pharmacy Benefit Operations in Medicaid Managed Care
Over 75% of Medicaid beneficiaries receive their health care services from Medicaid managed care plans. Therefore, it is important to ensure that pharmacy benefits in these plans are operated efficiently and provide quality services to Medicaid beneficiaries.
The following requirements are finalized in this rule:
- CMS requires that states, via their managed care contracts, instruct Medicaid managed care plans to assign and exclusively use a Medicaid-specific Bank Identification Number/Processor Control Number (BIN/PCN) combination and group number on Medicaid managed care beneficiaries’ cards, to help ensure the appropriate scope of benefits are delivered and help avoid duplicate discounts under the 340B Drug Discount Program.
- CMS requires state managed care contracts that include pharmacy benefit managers (PBMs) to be transparent about spread pricing, which occurs when the PBM retains the difference between what is paid by the managed care plan and what the PBM pays a provider for the cost and dispensing of a drug.
Implementing Other Provisions Related to Legislative Changes to Medicaid Drug Rebate Cap, Court-Ordered Changes, and Third-Party Liability
- Removal of AMP Cap: The American Rescue Plan Act of 2021 removed the AMP limit (i.e., “AMP cap”) on Medicaid drug rebates (which was capped at 100% of AMP) beginning January 1, 2024. CMS is inserting a sunset date (December 31, 2023) on the maximum rebate amount for brand and generic drugs in the corresponding regulation to conform the regulatory text with this statutory change.
- Conforming Regulation to Court-Directed Decision on PBM Accumulator Programs: CMS is rescinding revisions made by the December 31, 2020, final rule (“Medicaid Program; Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and Supporting Value-Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third Party Liability (TPL) Requirements”) to the regulations for the determination of best price and AMP, consistent with a court order issued by the United States District Court for the District of Columbia, which vacated and set aside the “Accumulator Adjustment Rule” of 2020.
- Modification of Third-Party Liability Rules: CMS is modifying third-party liability rules to correct an omission in the regulation text, due to changes authorized under the Bipartisan Budget Act of 2018, and conform to the statutory exception to standard coordination of benefits cost avoidance and allow states to “pay and chase” for certain types of care.
The Final Rule can be accessed on the Federal Register: https://www.federalregister.gov/public-inspection/2024-21254/medicaid-program-misclassification-of-drugs-program-administration-and-program-integrity-updates.
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