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
| Published date | 31 December 2020 |
| Citation | 85 FR 87000 |
| Record Number | 2020-28567 |
| Section | Rules and Regulations |
| Court | Centers For Medicare & Medicaid Services |
Federal Register, Volume 85 Issue 251 (Thursday, December 31, 2020)
[Federal Register Volume 85, Number 251 (Thursday, December 31, 2020)]
[Rules and Regulations]
[Pages 87000-87104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28567]
[[Page 86999]]
Vol. 85
Thursday,
No. 251
December 31, 2020
Part IIDepartment of Health and Human Services-----------------------------------------------------------------------Centers for Medicare & Medicaid Services-----------------------------------------------------------------------42 CFR Parts 433, 438, 447, Et al.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; Final Rule
Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 /
Rules and Regulations
[[Page 87000]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 433, 438, 447, and 456
[CMS-2482-F]
RIN 0938-AT82
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
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Final rule.
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SUMMARY: This final rule will advance CMS' efforts to support state
flexibility to enter into innovative value-based purchasing
arrangements (VBPs) with manufacturers, and to provide manufacturers
with regulatory support to enter into VBPs with payers, including
Medicaid. To ensure that the regulatory framework is sufficient to
support such arrangements and to promote transparency, flexibility, and
innovation in drug pricing without undue administrative burden, we are
finalizing new regulatory policies and clarifying certain already
established policies to assist manufacturers and states in
participating in VBPs in a manner that is consistent with the law and
maintains the integrity of the Medicaid Drug Rebate Program (MDRP).
This final rule also revises regulations regarding: Authorized generic
sales when manufacturers calculate average manufacturer price (AMP) for
the brand name drug; pharmacy benefit managers (PBM) accumulator
programs and their impact on AMP and best price when manufacturer-
sponsored assistance is not passed through to the patient; state and
manufacturer reporting requirements to the MDRP; new Medicaid Drug
Utilization Review (DUR) provisions designed to reduce opioid related
fraud, misuse and abuse; the definitions of CMS-authorized supplemental
rebate agreement, line extension, new formulation, oral solid dosage
form, single source drug, multiple source drug, innovator multiple
source drug for purposes of the MDRP; payments for prescription drugs
under the Medicaid program; and coordination of benefits (COB) and
third party liability (TPL) rules related to the special treatment of
certain types of care and payment in Medicaid and Children's Health
Insurance Program (CHIP).
DATES: These regulations are effective on March 1, 2021, except for
amendatory instructions 7, 10.a., 14, 16, and 17, which are effective
on January 1, 2022, and amendatory instructions 9 and 11, which are
effective on January 1, 2023.
FOR FURTHER INFORMATION CONTACT: Ruth Blatt, (410) 786-1767, for issues
related to the definition of line extension, new formulation, oral
solid dosage form, single source drug, multiple source drug, and
innovator multiple source drug.
Cathy Sturgill, (410) 786-3345, for issues related to third party
liability.
Michael Forman, (410) 786-2666, and Whitney Swears, (410) 786-6543
for issues related to drug utilization review.
Christine Hinds, (410) 786-4578, for issues related to value-based
purchasing.
Joanne Meneeley, (410) 786-1361, for issues related to State Drug
Utilization Data (SDUD) certification.
Christine Hinds, (410) 786-4578, for issues related to authorized
generics and inflation rebates.
Charlotte Amponsah, (410) 786-1092, for issues related to
manufacturer-sponsored patient assistance programs.
SUPPLEMENTARY INFORMATION:
I. Background
Under the Medicaid program, states may provide coverage of
prescribed drugs as an optional benefit under section 1905(a)(12) of
the Social Security Act (the Act). Section 1903(a) of the Act provides
for federal financial participation (FFP) in state expenditures for
these drugs. In the case of a state that provides for medical
assistance for covered outpatient drugs (CODs), as provided under
section 1902(a)(54) of the Act, the state must comply with the
requirements of section 1927 of the Act. Section 1927 of the Act
governs the MDRP and payment for CODs, which are defined in section
1927(k)(2) of the Act. In general, for payment to be made available for
CODs under section 1903(a) of the Act, manufacturers must enter into a
National Drug Rebate Agreement (NDRA) as set forth in section 1927(a)
of the Act. See also section 1903(i)(10) of the Act. The MDRP is
authorized under section 1927 of the Act, and is a program that
includes CMS, state Medicaid agencies, and participating drug
manufacturers that helps to partially offset the federal and state
costs of most outpatient prescription drugs dispensed to Medicaid
beneficiaries. The MDRP provides specific requirements for rebate
agreements, drug pricing submission and confidentiality requirements,
the formulas for calculating rebate payments, drug utilization reviews
(DUR), and requirements for states for CODs.
The Covered Outpatient Drugs final rule with comment period (COD
final rule) was published in the February 1, 2016 Federal Register (81
FR 5170) and became effective on April 1, 2016. The COD final rule
implemented provisions of section 1927 of the Act that were added by
the Patient Protection and Affordable Care Act of 2010, as amended by
the Health Care and Education Reconciliation Act of 2010 (collectively
referred to as the Affordable Care Act) pertaining to Medicaid
reimbursement for CODs. It also revised other requirements related to
CODs, including key aspects of Medicaid coverage and payment and the
MDRP under section 1927 of the Act. The regulations implemented through
the COD final rule, and those proposed in the ``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'' proposed rule that appeared in the June 19, 2020 Federal
Register (85 FR 37256) (hereinafter referred to as the June 2020
proposed rule) are consistent with the Secretary's authority set forth
in section 1102 of the Act to publish regulations that are necessary to
the efficient administration of the Medicaid program.
A. Changes to Coordination of Benefits/Third Party Liability Regulation
Due to Bipartisan Budget Act (BBA) 2018
Medicaid is the payer of last resort, which means that other
available resources--known as third party liability, or TPL--must be
used before Medicaid pays for services received by a Medicaid-eligible
individual. Title XIX of the Act requires state Medicaid programs to
identify and seek payment from liable third parties, before billing
Medicaid. Section 53102 of the Bipartisan Budget Act of 2018 (BBA 2018)
(Pub. L. 115-123, enacted February 9, 2018) amended the TPL provision
at section 1902(a)(25) of the Act. Specifically, section 1902(a)(25)(A)
of the Act requires that states take all reasonable measures to
ascertain legal liability of third parties to pay for care and services
available under the plan. That provision further specifies that a third
party is any individual, entity, or
[[Page 87001]]
program that is or may be liable to pay all or part of the expenditures
for medical assistance furnished under a state plan. Section
1902(a)(25)(A)(i) of the Act specifies that the state plan must provide
for the collection of sufficient information to enable the state to
pursue claims against third parties. Examples of liable third parties
include: Private insurance companies through employment-related or
privately purchased health insurance; casualty coverage resulting from
an accidental injury; payment received directly from an individual who
has voluntarily accepted or been assigned legal responsibility for the
health care of one or more Medicaid recipients; fraternal groups,
unions, or state workers' compensation commissions; and medical support
provided by a parent under a court or administrative order.
Effective February 9, 2018, section 53102(a)(1) of the BBA 2018
amended section 1902(a)(25)(E) of the Act to require a state to use
standard COBs cost avoidance when processing claims for prenatal
services which now included labor and delivery and postpartum care
claims. Additionally, effective October 1, 2019, section 53102(a)(1) of
the BBA 2018 amended section 1902(a)(25)(E) of the Act, to require a
state to make payments without regard to third party liability (TPL)
for pediatric preventive services unless the state has made a
determination related to cost-effectiveness and access to care that
warrants cost avoidance for 90 days.
Section 53102(b)(2) of the BBA 2018 delays the implementation date
from October 1, 2017 to October 1, 2019 of the provision from the
Bipartisan Budget Act of 2013 (Pub. L. 113-67, enacted December 26,
2013) (BBA 2013), which allowed for payment up to 90 days after a claim
is submitted that is associated with medical support enforcement
instead of 30 days under previous law. Medical support is a form of
child support that is often provided through an absent parent's
employers health insurance plan.
Effective April 18, 2019, section 7 of the Medicaid Services
Investment and Accountability Act of 2019 (Pub. L. 116-16, enacted
April 18, 2019) (MSIAA) amended section 202(a)(2) of the BBA 2013 to
allow 100 days instead of 90 days to pay claims related to medical
support enforcement under section 1902(a)(25)(F)(i) of the Act.
B. Changes to the Calculation of Average Manufacturer Price (AMP)
Regarding Authorized Generic Drugs Due to the Continuing Appropriations
Act, 2020, and Health Extenders Act of 2019
On September 27, 2019, the President signed into law the Continuing
Appropriations Act, 2020, and Health Extenders Act of 2019 (Health
Extenders Act) (Pub. L. 116-59), which made changes to sections
1927(k)(1) and 1927(k)(11) of the Act, revising how manufacturers
calculate the AMP for a COD, for which the manufacturer permits an
authorized generic to be sold and redefines the definition of
wholesaler. Manufacturers that approve, allow, or otherwise permit any
drug to be sold under the manufacturer's own new drug application (NDA)
approved under section 505(c) of the Federal Food, Drug, and Cosmetic
Act (Pub. L. 75-717, enacted June 25, 1938) (FFDCA), shall no longer
include sales of these authorized generics in the calculation of AMP of
the brand name drug, regardless of the relationship between the brand
name manufacturer and the manufacturer of the authorized generic. That
is, a separate AMP would be calculated for the sales of the brand name
drug and the authorized generic.
Specifically, section 1603 of the Health Extenders Act of 2019
(Pub. L. 116-59, enacted September 27, 2019), which is titled
``Excluding Authorized Generic Drugs from Calculation of Average
Manufacturer Price for Purposes of the Medicaid Drug Rebate Program;
Excluding Manufacturers from Definition Of Wholesaler,'' amended the
statute as follows:
Section 1927(k)(1)(C) of the Act to replace the term
``Inclusion'' with ``Exclusion'' in the title and further amended
paragraph (C) to state that, in the case of a manufacturer that
approves, allows, or otherwise permits any drug of the manufacturer to
be sold under the manufacturer's NDA approved under section 505(c) of
the FFDCA, such term shall be exclusive of the average price paid for
such drug by wholesalers for drugs distributed to retail community
pharmacies.
The definition of wholesaler at section 1927(k)(11) of the
Act to remove references to manufacturers from the definition of
wholesaler.
Typically, an authorized generic is a product that a manufacturer
(primary manufacturer) allows another manufacturer (secondary
manufacturer) to sell under the primary manufacturer's Food and Drug
Administration (FDA) approved NDA but under a different National Drug
Code (NDC) number. The authorized generic is typically the primary
manufacturer's brand product offered at a lower price point. Primary
manufacturers may sell the authorized generic product to the secondary
manufacturer they are allowing to sell an authorized generic of their
brand product, and such sales are commonly referred to as transfer
sales, or they may allow a subsidiary manufacturer to sell the
authorized generic.
Under the amendments made to section 1927 of the Act, a primary
manufacturer that sells the authorized generic version of the brand
drug to the secondary manufacturer can no longer include the price of
the transfer sale of the authorized generic to the secondary
manufacturer in its calculation of AMP for the brand product. The
exclusion of these transfer sales from the primary manufacturer's brand
drug AMP will likely result in higher AMPs for the brand drugs and a
potential increase to a manufacturer's Medicaid drug rebates to states.
The amendments to section 1927 of the Act authorized under section
1603 of the Health Extenders Act are effective October 1, 2019.
Therefore, manufacturers must reflect the changes to the calculation of
their AMPs for rebate periods beginning October 1, 2019 (reported to
CMS no later than 30 days after the end of the rebate period). To
assist manufacturers, CMS provided guidance in Manufacturer Release
#111 \1\ and Manufacturer Release #112.\2\ Furthermore, in accordance
with 42 CFR 447.510(b), manufacturers have 12 quarters from the quarter
in which the data were due to revise AMP, if necessary. The amendments
to section 1927 of the Act have not changed the inclusion of authorized
generic drugs in best price; therefore, we did not propose any
amendments to the regulatory requirements at Sec. 447.506(c) and (d).
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\1\ https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/mfr-releases/mfr-rel-111.pdf.
\2\ https://www.medicaid.gov/prescription-drugs/downloads/mfr-rel-112.pdf.
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C. Changes as Result of the Bipartisan Budget Act of 2015
Under the Medicaid program, states may provide coverage of
prescribed drugs as an optional service under section 1905(a)(12) of
the Act. Section 1903(a) of the Act provides for FFP in state
expenditures for these drugs. Section 1927 of the Act governs the MDRP
and payment for CODs, which are defined in section 1927(k)(2) of the
Act. In general, for payment to be made available under section 1903(a)
of the Act for CODs, manufacturers must enter into an NDRA as set forth
in section
[[Page 87002]]
1927(a) and (b) of the Act. Section 1927 of the Act provides specific
requirements for rebate agreements, drug pricing submission and
confidentiality requirements, the formulas for calculating rebate
payments, and requirements for states for CODs. Section 602 of the
Bipartisan Budget Act of 2015 (Pub. L. 114-74, enacted November 2,
2015) (BBA 2015) amended section 1927(c)(3) of the Act to require that
manufacturers pay additional rebates on their non-innovator multiple
source (N) drugs if the AMPs of an N drug increase at a rate that
exceeds the rate of inflation. This provision of BBA 2015 was effective
beginning with the January 1, 2017 quarter, or in other words,
beginning with the unit rebate amounts (URAs) that are calculated for
the January 1, 2017 quarter. This additional inflation adjusted rebate
requirement for N drugs was discussed in Manufacturer Release Nos. 97
(Manufacturer Release 97) and 101 (Manufacturer Release 101).
D. Current MDRP and Value-Based Purchasing (VBP) Arrangements
In the preamble of the COD final rule, in response to a comment (81
FR 5253), we recognized the importance of VBPs, especially when such
arrangements benefit patient health care outcomes. We acknowledged
that, given the uniqueness of each VBP arrangement, we had to consider
how to provide more specific guidance on the matter, including how such
arrangements affect a manufacturer's calculation of a drug's best price
and Medicaid drug rebate obligations. Thereafter, we released a state
and manufacturer notice on July 14, 2016 (available at State Release
176 \3\ and Manufacturer Release 99 \4\) to inform states and
manufacturers on how to seek guidance from us on their specific VBP, as
well as to encourage states to consider entering into VBP as a means to
address high cost drug treatments.
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\3\ https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/state-releases/state-rel-176.pdf.
\4\ https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/mfr-releases/mfr-rel-099.pdf.
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Since the release, manufacturers and states have shown an increased
interest in VBP as a possible option for better managing and predicting
drug spending, which helps to assure that manufacturers have some
vested interest in assuring positive patient outcomes from the use of
their drugs. To this end, we have approved nine state plan amendments
(SPAs) submitted by states that allow states to negotiate supplemental
rebates under CMS-authorized rebate agreements with drug manufacturers
based on evidence-based measures or outcomes-based measures for a
patient or beneficiary based on use of the drug.
In addition, manufacturers have approached us with their issues and
questions regarding the impact of various types of VBP proposals on
their MDRP price reporting obligations (that is, AMP and best price),
as well as the regulatory challenges they encounter when structuring
and implementing VBP. Finally, manufacturers have noted MDRP reporting
challenges with VBP programs, whose evidence or outcomes-based measures
extend beyond 3 years, particularly given that manufacturers have
limited ability to make changes to reporting metrics outside the 12-
quarter MDRP reporting period. In the June 2020 proposed rule, we
addressed some of the manufacturer concerns with regards to these MDRP
requirements.
E. Definition of Line Extension, New Formulation, and Oral Solid Dosage
Form for Alternative URA
Section 2501(d) of the Patient Protection and Affordable Care Act
(Pub. L. 111-148, enacted March 23, 2010), as amended by section 1206
of the Health Care and Education Reconciliation Act of 2010 (Pub. L.
111-152, enacted March 30, 2010) (collectively referred to as the
Affordable Care Act) added section 1927(c)(2)(C) of the Act effective
for drugs paid for by a state on or after January 1, 2010. This
provision establishes an alternative formula for calculating the URA
for a line extension of a single source drug or innovator multiple
source drug that is an oral solid dosage form. We refer to the URA
calculated under the alternative formula as the ``alternative URA.''
Additionally, the Affordable Care Act defined ``line extension'' to
mean, for a drug, a new formulation of the drug, such as an extended
release formulation. Section 1927(c)(2)(C) of the Act was further
amended by section 705 of the Comprehensive Addiction and Recovery Act
of 2016 (Pub. L. 114-198, enacted July 22, 2016) (CARA) to exclude from
that definition an abuse-deterrent formulation of the drug (as
determined by the Secretary), regardless of whether such abuse-
deterrent formulation is an extended release formulation. The
determination of whether a drug is excluded because it is an abuse
deterrent formulation is explained in at Manufacturer Release 102.\5\
The CARA amendment applies to drugs paid for by a state in calendar
quarters beginning on or after the July 22, 2016 date of enactment of
CARA (that is, beginning with 4Q 2016). Finally, section 1927(c)(2)(C)
of the Act was further amended by section 53104 of the BBA of 2018,
which provided a technical correction such that the rebate for a line
extension of a single source drug or an innovator multiple source drug
that is an oral solid dosage form shall be the greater of either (1)
the standard rebate (calculated as a base rebate amount plus an
additional inflation-based rebate) or (2) the base rebate amount
increased by the alternative formula described in section
1927(c)(2)(C)(iii)(I) through (III) of the Act. We refer to the
additional inflation-based rebate as the ``additional rebate.''
Additionally, as we have used the term ``initial brand name listed
drug'' in the ``Medicaid Program; Covered Outpatient Drugs'' proposed
rule published in the February 2, 2012 Federal Register (77 FR 5318,
5323 through 5324) (hereinafter referred to as the February 2, 2012
proposed rule), the Covered Outpatient Drugs final rule with comment
published on February 1, 2016 (81 FR 5197), and Sec.
447.509(a)(4)(iii) to refer to the initial single source drug or
innovator multiple source drug, we continued to do so in the June 2020
proposed rule. The BBA of 2018 amendment applies to rebate periods
beginning on or after October 1, 2018.
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\5\ https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/mfr-releases/mfr-rel-102.pdf.
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We proposed a definition of ``line extension'' in the February 2,
2012 proposed rule (77 FR 5323 through 5324) and received numerous
comments. In the COD final rule, we did not finalize the proposed
definition and requested additional comments with a 60-day comment
period that closed on April 1, 2016. The additional comments received,
although instructive of the public's thoughts at the time, were not
informed by the then-current statutory framework. Therefore, we did not
finalize a definition of ``line extension'' in the April 1, 2019 final
rule (84 FR 12132). We reiterated in the April 1, 2019 final rule that
manufacturers are to rely on the statutory definition of ``line
extension'' at section 1927(c)(2)(C) of the Act, and where appropriate
are permitted to use reasonable assumptions in their determination of
whether their drug qualifies as a line extension. We also stated that
if we later decide to develop a regulatory definition of ``line
extension,'' we
[[Page 87003]]
would do so through our established Administrative Procedures Act (APA)
compliant rulemaking process and issue a proposed rule. In the June
2020 proposed rule (85 FR 37294 through 37296), we proposed definitions
of ``line extension'', ``new formulation'', and ``oral solid dosage
form''.
The line extension provision has been in effect since January 1,
2010, and the Drug Data Reporting (DDR) for Medicaid system was
modified in 2016 to implement the data reporting requirements for line
extensions. However, we have found that some manufacturers are unclear
about their line extension reporting obligations, for example, whether
a particular drug satisfies the statutory definition of line extension
and the identification of the initial brand name listed drug.
Therefore, in addition to proposing definitions of ``line extension'',
``new formulation'', and ``oral solid dosage form'', we provided the
clarification below regarding manufacturers' reporting obligations in
the June 2020 proposed rule (85 FR 37289).
Details regarding how to calculate the additional rebate
(calculated as a percentage of AMP) and the alternative URA can be
found in the ``Medicaid Program; Covered Outpatient Drug; Line
Extension Definition; and Change to the Rebate Calculation for Line
Extension Drugs'' final rule and interim final rule with comment period
that was published in the April 1, 2019 Federal Register (84 FR 12133)
(hereinafter referred to as the April 1, 2019 final rule). We note that
under Sec. 447.509(a)(4)(iii), manufacturers are required to calculate
the alternative URA if the manufacturer of the line extension also
manufactures the initial brand name listed drug or has a corporate
relationship with the manufacturer of the initial brand name listed
drug. As noted in the June 2020 proposed rule (85 FR 37295), although a
drug that meets the definition of a line extension should be identified
as such in DDR, a manufacturer is not required to calculate the
alternative URA unless the manufacturer of the line extension also
manufactures, or has a corporate relationship with the manufacturer of,
the initial brand name listed drug.
To apply the alternative formula described in section
1927(c)(2)(C)(iii)(I) through (III) of the Act for each line extension
and rebate period, the manufacturer must determine which NDC represents
the initial brand name listed drug that will be used to calculate the
alternative URA. First, the manufacturer must identify all potential
initial brand name listed drugs by their respective NDCs by considering
all strengths and dosage forms of the initial brand name listed drug in
accordance with section 1927(c)(2)(C)(iii)(II) of the Act.
Additionally, only those potential initial brand name listed drugs that
are manufactured by the manufacturer of the line extension or by a
manufacturer with which the line extension manufacturer has a corporate
relationship should be considered. Then, the manufacturer must evaluate
the additional rebate (calculated as a percentage of AMP) for each
potential initial brand name listed drug. The potential initial brand
name listed drug that has the highest additional rebate (calculated as
a percentage of AMP) is the initial brand name listed drug that must be
identified in DDR and used to calculate the alternative URA for the
rebate period.
Section 1927(c)(2)(C)(i) of the Act requires the manufacturer to
calculate the alternative formula for each quarter to determine the
initial drug for each quarter that has the highest additional rebate
(calculated as a percentage of AMP). Therefore, the manufacturer must
re-evaluate the additional rebate (calculated as a percentage of AMP)
for each potential initial brand name listed drug each quarter. Because
the additional rebate (calculated as a percentage of AMP) for any
potential initial brand name listed drug may change from one quarter to
the next, the initial brand name listed drug used for the alternative
URA calculation may also change from one quarter to the next.
Additionally, the NDC for the initial brand name listed drug must be
active in MDRP for the quarter, that is, an NDC that is produced or
distributed by a manufacturer with an active NDRA and the NDC does not
have a termination date that occurred in a rebate period earlier than
the rebate period for which the calculation is being performed. Because
drugs may come on and off the market, an initial brand name listed drug
that was used to calculate the alternative URA for one quarter may not
be active in MDRP for the next quarter. However, a different initial
brand name listed drug may be active in MDRP and available to use to
calculate the alternative URA for the next quarter.
F. Impact of Certain Manufacturer Sponsored Patient Assistance Programs
(``PBM Accumulator Programs'') on Best Price and AMP
Manufacturer-sponsored patient assistance programs can be helpful
to patients in obtaining necessary medications. However, PBMs contend
that manufacturer-sponsored assistance programs steer consumers towards
more expensive medications when there may be more cost saving options
available to health plans. Therefore, as a cost saving measure, PBMs
have encouraged health plans in some cases to not allow the
manufacturer-sponsored assistance provided under such programs to be
applied towards a patient's health plan deductible for a brand name
drug not on a plan's formulary. In the June 2020 proposed rule, we
provided proposed instruction to manufacturers on how to consider the
implementation of such programs when determining best price and AMP for
purposes of the MDRP.
G. State Drug Utilization Data (SDUD) Reported to MDRP
Section 1927(b)(2)(A) of the Act requires each state agency to
report to each manufacturer not later than 60 days after the end of
each rebate period and in a form consistent with a standard reporting
format established by the Secretary, information on the total number of
units of each dosage form and strength and package size of each COD
dispensed after December 31, 1990, for which payment was made under the
plan during the period, including such information reported by each
Medicaid managed care organization (MCO), and shall promptly transmit a
copy of such report to the Secretary. In accordance with this
requirement, states are required to send state drug utilization data
(SDUD) using OMB-approved Rebate Invoice Form, the CMS-R-144 (the data
fields and descriptions are included as Exhibit X in the June 2020
proposed rule) to manufacturers and transmit a copy of this report to
CMS.
While many states subject their SDUD on the CMS-R-144 to edits to
uncover outliers/inaccuracies in the invoices to manufacturers before
sending copies to CMS, some states send unedited copies of the SDUD to
CMS, resulting in discrepancies that do not conform with the statutory
requirement at section 1927(b)(2)(A) of the Act. The statute requires
such reporting to be in a form consistent with a standard reporting
format established by the Secretary, and we believe that such a copy
means that the data submitted on the invoice (CMS-R-144) to the
manufacturer must be accurate and identical to the report (copy) states
send to CMS. Further, we expect that when states send SDUD updates or
changes to manufacturers, they transmit those changes to us
concurrently in a copy to CMS. However, in some cases, states fail to
submit these updates causing the data to be mismatched. This results in
states not complying with section 1927(b)(2)(A) of the Act and CMS not
[[Page 87004]]
having an accurate account of rebates billed in the MDRP.
H. Changes Related to the Substance Use-Disorder Prevention That
Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and
Communities Act
The epidemic of opioid overdose, misuse, and opioid use disorders
is a critical public health issue that affects the lives of millions of
Americans. Research shows the opioid overdose epidemic has a
disproportionate impact on Medicaid beneficiaries and the consequences
have been tragic. In 2017, 47,600 people in America died of an opioid
overdose per the Centers for Disease Control and Prevention (CDC).\6\
Inappropriate opioid prescribing can result in costly medical
complications such as abuse, misuse, overdoses, falls and fractures,
drug to drug interactions and neonatal conditions. The use of multiple
opioids is associated with a higher risk of mortality, with mortality
risk increasing in direct relation to the number of opioids prescribed
concurrently.\7\ \8\ Beneficiaries who receive multiple opioids may
lack coordinated care and are at higher risk for opioid overdose.\9\
These complications are costly, preventable, and result in avoidable
healthcare expenditures.\10\ Moreover, according to the National
Institute on Drug Abuse (NIDA), research suggests that misuse of
prescription pain relievers may actually open the door to heroin use,
as four in five new heroin users started out misusing prescription pain
reliever.\11\ More than half of the individuals misusing prescription
opioids obtained the medication they used from a friend or relative;
\12\ this emphasizes the need for safe disposal \13\ of unused
medications, including opioids.
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\6\ https://www.cdc.gov/drugoverdose/data/statedeaths.html.
\7\ Ray WA, Chung CP, Murray KT, Hall K, Stein CM. Prescription
of Long-Acting Opioids and Mortality in Patients with Chronic
Noncancer Pain. JAMA. 2016 Jun 14; 315(22):2415-23.
\8\ Baumblatt JA, Wiedeman C, Dunn JR, Schaffner W, et al. High-
risk use by patients prescribed opioids for pain and its role in
overdose deaths. JAMA Intern Med. 2014 May; 174(5):796-801.
\9\ Bonnie, Richard J., et al. Pain Management and the Opioid
Epidemic: Balancing Societal and Individual Benefits and Risks of
Prescription Opioid Use. The National Academies Press, 2017.
\10\ Davis, Cory. ``Naloxone for Community Opioid Overdose
Reversal.'' Naloxone for Community Opioid Overdose
Reversal[bond]Public Health Law Research, Public Health Law Research
(PHLR), 22 June 2015, http://phlr.org/product/naloxone-community-opioid-overdose-reversal.
\11\ ``Opioid Addiction 2016 Facts & Figures--ASAM Home Page.''
American Society of Addition Medicine, www.asam.org/docs/default-source/advocacy/opioid-addiction-disease-facts-figures.pdf.
\12\ https://www.samhsa.gov/data/sites/default/files/cbhsq-reports/NSDUHFFR2017/NSDUHFFR2017.pdf.
\13\ https://www.fda.gov/consumers/consumer-updates/where-and-how-dispose-unused-medicines.
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Since 1993, section 1927(g) of the Act has required each state to
develop a DUR program targeted, in part, at reducing abuse and misuse
of outpatient prescription drugs covered under the state's Medicaid
Program. The DUR program operates to help ensure that prescriptions are
appropriate, medically necessary, and are not likely to result in
adverse medical events. Each state DUR program consists of prospective
drug use review, retrospective drug use review, data assessment of drug
use against predetermined standards, and ongoing educational outreach
activities.
Consistent with section 1927(g)(3)(D) of the Act, we require each
state Medicaid program to submit to us an annual report on the
operation of its Medicaid DUR program for the fee-for-service (FFS)
delivery system, including information on prescribing patterns, cost
savings generated by the state's DUR program, and the state's DUR
program's overall operations, including any new or innovative
practices. Additionally, Sec. 438.3(s)(4) and (5) require state
contracts with any MCO, prepaid inpatient health plan (PIHP) or prepaid
ambulatory health plan (PAHP) that covers CODs to require the MCO,
PIHP, or PAHP to operate a DUR program that complies with section
1927(g) of the Act and 42 CFR part 456, subpart K, and to submit
detailed information about its DUR program activities annually. For the
purposes of this final rule, managed care program (MCP) references
MCOs, managed care entities (MCEs), PAHPs and PIHPs.
The Substance Use-Disorder Prevention that Promotes Opioid Recovery
and Treatment for Patients and Communities Act (Pub. L. 115-271,
enacted October 24, 2018) (the SUPPORT Act) includes measures to combat
the opioid crisis in part by reducing opioid related abuse and misuse
by advancing treatment and recovery initiatives, improving prevention,
protecting communities, and bolstering efforts to fight deadly illicit
synthetic drugs. There are several Medicaid-related DUR provisions for
FFS and MCP pharmacy programs contained within section 1004 of the
SUPPORT Act. These provisions establish drug review and utilization
standards in section 1902(a)(85) and (oo) of the Act to supplement
existing requirements under section 1927(g) of the Act, in an effort to
reduce opioid-related fraud, misuse and abuse. State implementation of
these strategies was required by October 1, 2019, and states must
include information about their implementation in their annual reports
under section 1927(g)(3)(D) of the Act. In turn, the Secretary is
required to report to Congress on the information submitted by the
states, starting with information from states' FY 2020 reports.
Consistent with section 1927(g) of the Act, the SUPPORT Act has the
goal of improving the quality of care received by Medicaid recipients
by reducing their exposure to hazards resulting from the inappropriate
prescribing, gross overuse, or inappropriate or medically unnecessary
care. In this context, strategies to assure the appropriate use of
opioids are now being implemented in clinical settings, health care
systems and public health agencies. Efforts to prevent harms associated
with overuse and misuse of opioids must be integrated to ensure
patients are receiving appropriate pain care. Pain is a common
condition; estimates of chronic pain and high impact chronic pain in
adults 65-84 years of age were 28 percent and 11 percent respectively,
based on 2016 National Health Interview Survey Data.\14\ Estimates of
acute pain in people under 65 years range from 7 to 52 percent, with
headache, joint, and neuropathic pain commonly cited.\15\ We recognize
efforts involving multiple stakeholders including the pain management
community are needed to address the opioid crisis, to assure the health
and well-being of Medicaid beneficiaries, and decrease any related
health care expenditures. We are committed to ensuring there are basic
minimum standards implemented through Medicaid DUR programs nationwide
to help ensure that prescriptions are appropriate, medically necessary
and align with current standards of care, under our authority to
implement section 1927(g) of the Act and section 1004 of the SUPPORT
Act.
---------------------------------------------------------------------------
\14\ https://www.cdc.gov/nchs/nhis/nhis_nhsr.htm.
\15\ Ibid.
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I. Single Source Drug, Multiple Source Drug, Innovator Multiple Source
Drug
Section 6(c) of the MSIAA modified the definitions in section
1927(k) of the Act for single source drug, multiple source drug, and
innovator multiple source drug. In the June 2020 proposed rule, we
proposed to revise the definitions of these terms at Sec. 447.502 to
reflect these statutory changes.
[[Page 87005]]
II. Summary of the Provisions of the Proposed Regulations, Analysis of
and Response to Public Comments, and Provisions of the Final Rule
The following summarizes comments received in response to the June
2020 proposed rule (https://www.regulations.gov/docket?D=CMS-2020-0072)
in general, or about issues not addressed in the proposed regulations.
Comment: A few commenters expressed concern that the proposed rule
will jeopardize future drug development or enable drug manufacturers to
rush drugs to market.
Response: We understand the concern about the possible impact of a
new regulation on drug development; however, we do not believe the rule
will jeopardize future drug development or enable drug manufacturers to
rush drugs to the market. The rule, as it relates to VBP, is meant to
help improve patient access to new medications, particularly new high
cost therapies such as gene or cell therapies, by facilitating the use
of VBP arrangements when purchasing such medications. We believe this
rule helps create incentives for manufacturers to bring new drugs to
market, and depending on the nature of the VBP arrangements could also
create incentives for manufacturers to complete their clinical trials
post marketing.
We note that this rule has no impact on the processes manufacturers
must follow to bring new drugs to the market. Processes for review,
approval, and marketing of drug products are the responsibility of FDA.
Comment: A few commenters expressed concern that the proposed
changes to regulations will place additional burden on healthcare
providers and the Medicaid program which are already overburdened by
the novel coronavirus pandemic, both financially and administratively.
A few commenters specifically expressed concern that the proposed
changes will exacerbate access barriers and financial hardships for
patients who are already experiencing increased barriers to care and
financial hardship due to the coronavirus disease 2019 (COVID-19)
pandemic and did not believe that the proposed changes were appropriate
at the time of a public health emergency (PHE). The commenters
suggested that the result of this rule on patients during this time
will lead to increased healthcare costs that force patients to skip
needed healthcare and lead to increased health issues and debilitating
harms. One commenter also noted that the proposed rule was inconsistent
with the President's Executive Order 13924, ``Regulatory Relief to
Support Economic Recovery,'' that requires the heads of federal
agencies to remove regulatory barriers to support the nation's economic
recovery following the COVID-19 pandemic.
Response: We appreciate the concerns expressed by the commenters.
As noted in the ``EFFECTIVE DATE'' section of this rule, these
provisions will be effective March 1, 2021. However, we recognize that
some final policies established in this final rule will require
additional time to make necessary operational and administrative
changes in order to ensure compliance, specifically those final
policies related to the Definition of Line Extension, New Formulation,
Oral Solid Dosage Form at Sec. 447.502; Changes to Medicaid drug
rebates (MDR) at Sec. 447.509(a)(4); Changes to the Requirements for
States at Sec. 447.511 (SDUD and State Certification); Changes to
State plan requirements, findings, and assurances at Sec. 447.518(d)
(CMS-Authorized Supplemental Rebate Reporting); and therefore these
sections will not be effective until January 1, 2022. Similarly,
changes to the Determination of AMP at Sec. 447.504(c) and (e) and
determination of Best price at Sec. 447.505 (c) will not be effective
until January 1, 2023. These final policies are discussed further in
the applicable sections of this final rule.
Comment: Several commenters believed that the 30-day comment was
not sufficient for the public and industry to analyze the impact of the
policies being proposed. One commenter in particular did not agree that
it was a not an economically significant rule, and that industry have
only 30 days to comment.
Response: CMS provided a 30-day comment period, which is consistent
with the Administrative Procedure Act. CMS believes that interested
stakeholders had adequate opportunity to provide comment on the
policies established in this final rule.
Comment: A few commenters suggested that proceeding to a final rule
at this stage will raise APA issues because any final rule must be a
``logical outgrowth'' of its proposal.
Response: We disagree with the commenter that this rule raises
logical outgrowth concerns. In the proposed rule, we described the
substance and alternatives to the proposed rule and described the
subjects and issues covered by the rule. Where this final rule is
different from that discussed in the proposed rule, it does not deviate
sharply from the proposed rule. We provided adequate notice in the
proposed rule that those changes were possible. Accordingly, we
provided interested parties sufficient notice that they should have
anticipated that those changes were possible.
After consideration of public comments, we are issuing this final
rule, as discussed in greater detail in the sections that follow.
Comment: A few commenters suggested that CMS specify a later
effective date for the final rule, such as at least 4 quarters from
final rule publication to allow CMS to issue additional guidance,
manufacturers to evaluate each drug in their portfolio, and
manufacturers and state Medicaid agencies to make necessary system
changes to price and data reporting systems.
Response: We are issuing this rule with an effective date of March
1, 2021. However, certain sections of this final rule as noted above,
will not be effective until January 1, 2022 or January 1, 2023.
Comment: Several commenters expressed concern that the proposed
rule will increase outpatient prescription drug prices and out-of-
pocket costs for patients, and therefore, decrease patient access to
needed care and medications. Furthermore, commenters noted that the
regulation may intrude into the provider and patient relationship. One
commenter urged CMS to withdraw the proposed rule and reconsider the
proposed changes or include express protections to ensure that Medicaid
beneficiaries continue to have access to medically necessary outpatient
prescription drugs.
Response: We appreciate the commenters concerns regarding patient
protections, but we disagree that this rule negatively impacts access
to needed care and medications. In particular, and as discussed in the
preamble to the June 2020 proposed rule (85 FR 37288), CMS supports
manufacturer and state's use of VBP arrangements because we believe it
will assist states with providing Medicaid patients access to needed
therapies while providing a payment arrangement that allows the state
flexibility, including an option to only pay for a drug when an
evidence-based or outcomes-measures are achieved. For such arrangements
to work for Medicaid, we need to balance changes to MDRP regulations to
address manufacturers' concerns with offering such innovative payment
arrangements to Medicaid programs, while ensuring the required
economies, efficiencies, and quality of care continue to be provided
under the Medicaid program. If we do not address a number of potential
regulatory hurdles, states may not be able to provide such methods and
[[Page 87006]]
procedures relating to the utilization of, and payment for care and
services as may be necessary to safeguard against unnecessary
utilization of such care and services and assure that consistent with
section 1902(a)(30)(A) of the Act, Medicaid payments are consistent
with efficiency, economy, and quality of care (85 FR 37291).
A. Third Party Liability: Payment of Claims (42 CFR 433.139)
In 1980, under the authority in section 1902(a)(25)(A) of the Act,
we issued regulations at part 433, subpart D establishing requirements
for state Medicaid agencies to support the coordination of benefits
(COB) effort by identifying TPL. Effective February 9, 2018, section
53102(a)(1) of BBA 2018 amended section 1902(a)(25)(E) of the Act to
require states to cost avoid claims (for example, when the state
Medicaid agency has determined there is a legally liable third party
responsible for paying the claim, it will reject (``cost avoid'') the
claim) for prenatal care for pregnant women including labor and
delivery and postpartum care, and to allow the state Medicaid agency 90
days instead of 30 days to pay claims related to medical support
enforcement services, as well as requiring states to collect
information on TPL before making payments. Effective April 18, 2019,
section 7 of the MSIAA amended section 1902(a)(25)(E) of the Act to
allow 100 days instead of 90 days to pay claims related to medical
support enforcement services, as well as requiring states to collect
information on TPL before making payments.
Section 433.139(b)(2), (b)(3)(i), and (b)(3)(ii)(B) detail the
exception to standard COB cost avoidance by allowing pay and chase for
certain types of care, as well as the timeframe allowed prior to
Medicaid paying claims for certain types of care. Specifically, we
proposed to delete Sec. 433.139(b)(2). We also proposed to revise
Sec. 433.139(b)(3)(i) by removing ``prenatal care for pregnant women,
or'' from pay and chase services, and Sec. 433.139(b)(3)(ii)(B) by
removing ``30 days'' and adding ``100 days.''
The following is a summary of the public comments we received on
our proposal to revise Sec. 433.139.
Comment: One commenter requested that CMS provide guidance to
Medicaid MCOs on how they can more reliably and efficiently identify
other payers through the state Medicaid agency. The commenter stated
this will facilitate implementation of CMS' proposals to require states
to reject claims for pregnancy-related services in cases where a third
party is legally responsible for payment and to allow states a period
of 100 days to pay claims related to medical support enforcement
services.
Response: COB/TPL requirements apply in Medicaid MCOs, as well as
Medicaid FFS programs. MCOs are required to pay certain types of claims
and then seek recovery--``pay and chase''--in the same circumstances as
the SMA Medicaid FFS program is required to do so. SMAs have options
for ensuring that they meet the COB/TPL requirements in Medicaid MCOs.
Regardless of how SMAs choose to allocate responsibility for COB/TPL
activities, the contract between the SMA and the MCO must list any COB/
TPL responsibilities of the SMA and the MCO must list any COB/TPL
responsibilities of the plan see for example, 42 CFR 438.3(t). For more
information on general COBs/TPL requirements under managed care, please
see our guidance published on Medicaid.gov at https://www.medicaid.gov/medicaid/eligibility/downloads/cob-tpl-handbook.pdf.
Comment: One commenter recommended that CMS should ensure that
providers bear the responsibility of ensuring all third parties are
notified and payments are retrieved citing their belief that the burden
should be removed from the state and federal government.
Response: If there is no established liable third party, the state
Medicaid agency (SMA) may pay claims to the maximum Medicaid payment
amount establish for the service in the state plan. If the SMA later
establishes that a third party was liable for the claims, it must seek
to recover the payment. The SMA should first seek recovery from the
liable third party. If that is not feasible (for example, Medicare will
not accept a claim directly from an SMA), it may be necessary to recoup
the payment from the provider and ask the provider to rebill correctly.
Section 433.139(d)(2) states that SMAs must seek reimbursement within
sixty days from the end of the month in which it learns of the
existence of the liable third party.
Comment: One commenter expressed concern that the proposed
revisions to Sec. 433.139 will not permit states to elect to cost
avoid claims for pediatric services as allowed under the BBA 2018. The
commenter stated the BBA allows states to pursue cost avoidance for
pediatric services upon determination that cost-effectiveness and
access to care ``warrants cost avoidance for 90 days.'' The commenter
recommended that CMS revise the proposed provision to allow states to
pursue cost avoidance for pediatric care.
Response: The BBA 2018 did not eliminate pay and chase for
pediatric preventive services; The BBA 2018 amended the statute to
eliminate pay and chase for prenatal services. Therefore, this request
is outside of the scope of our regulation change authority under Sec.
433.139(b)(3)(i) and the BBA of 2018 as identified within. For
additional guidance on this change in law, please see our guidance
published on www.Medicaid.gov at https://www.medicaid.gov/federal-policy-guidance/downloads/cib111419.pdf and https://www.medicaid.gov/medicaid/eligibility/downloads/cob-tpl-handbook.pdf.
Comment: One commenter recommended that CMS provide states with an
alternative option to the required cost avoidance determinations of
cost-effectiveness and access to care. The commenter stated that
current cost avoidance determination process is burdensome for states
to perform and recommended that CMS allow an alternative option where
state Medicaid agencies may attest that their program is compliant, has
an ``exception, grievance, fairing hearing'' process, and does not have
known access issues for beneficiaries seeking pediatric preventive
services.
Response: This request is outside of the scope of our regulation
change authority under Sec. 433. 139(b)(3)(i) and the BBA 2018 as
identified within.
Comment: One commenter requested clarification from CMS on the
application of the 100-day waiting period application to preventive
pediatric services. The commenter indicated that the provision's
reference to Sec. 433.139(b)(3)(ii)(B) appears to apply to child
support enforcement services. The commenter requested CMS clarify
whether the 100-day waiting period applies to both preventive pediatric
services and child support enforcement services as it may impact
implementation and cost-effectiveness.
Response: The 100-day waiting period only applies to medical
support enforcement and not preventative pediatric services. Preventive
pediatric service claims must be ``paid and chased'' without regard to
a liable third party unless the state has made a determination related
to cost-effectiveness and access to care that warrants cost avoidance
for 90 days.
Section 53102(b)(2) of the Bipartisan Act of 2018 delayed the
implementation date from October 1, 2017 to October 1, 2109 of the BBA
2013 provision, which allowed for payment up to 90 days after a claim
is submitted that is associated with medical support enforcement
instead of 30 days under previous law.
[[Page 87007]]
Medical support is a form of child support that is often provided
through an absent parents employers health insurance plan. Effective
April 18, 2019, section 7 of the MSIAA amended section 202(a)(2) of the
BBA 2013 to allow 100 days instead of 90 days to pay claims related to
medical support enforcement under section 1902(a)(25)(F)(i) of the Act.
Additionally, effective October 1, 2019, section 53102(a)(1) of the
BBA 2018 amended section 1902 (a)(25)(E) of the Act, to require a state
to make payments without regard to TPL for pediatric preventive
services unless the state has made a determination related to cost-
effectiveness and access to care that warrants cost avoidance for 90
days.
Comment: One commenter noted that the provisions as written will
not allow a state Medicaid agency to implement a cost avoidance period
of less than 90 days. The commenter noted that their state requires a
60-day timeframe after finding that a 90-day period was not cost-
effective and that access to care issues may result from provider
abrasion. The commenter requested clarification from CMS that state
Medicaid agencies may continue to keep a shorter cost avoidance period
based on cost-effectiveness and access to care evaluations.
Response: Our November 14, 2019 \16\ guidance clarified that a
state can allow up to 100 days to pay claims related to medical support
enforcement. States are permitted the flexibility to pay and chase
medical support enforcement claims within that 100-day time period if
they have made a determination that the full waiting period creates a
cost-effectiveness or access to care issue.
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\16\ https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/cib111419.pdf.
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As background, section 53102(b)(2) of the BBA 2018 delays the
implementation date from October 1, 2017 to October 1, 2019 of the BBA
2013 provision, which allowed for payment up to 90 days after a claim
is submitted that is associated to medical support enforcement instead
of 30 days under the previous law. Medical support is a form of child
support that is often provided through an absent parents employers
health insurance plan.
Effective April 18, 2019, section 7 of the MSIAA amended section
202(a)(2) of the BBA 2013 to allow 100 days instead of 90 days to pay
claims related to medical support enforcement pursuant to section
1902(a)(25)(F)(i) of the Act. We are finalizing as proposed.
B. Changes To Address Medicaid Access to Drugs Using Value-Based
Purchasing Arrangements (VBP)
In the preamble of the COD final rule, in response to a comment (81
FR 5253), we recognized the importance of VBP especially when such
arrangements benefit Medicaid patients' access to drug treatments. We
acknowledged that given the uniqueness of each VBP arrangement, we had
to consider how to provide more specific guidance on the matter,
including how such arrangements affect a manufacturer's best price and
Medicaid drug rebate obligations. Thereafter, we released a state and
manufacturer notice on July 14, 2016 (State Release 176 and
Manufacturer Release 99) to inform states and manufacturers on how to
seek guidance from us on their specific VBPs, as well as encourage
states to consider entering into VBPs with manufacturers as a means to
address high cost drug treatments.
Since those releases, manufacturers and states have shown an
increased interest in VBP as a potential option for better managing and
predicting drug spending, which helps to assure that manufacturers have
some vested interest in assuring positive patient outcomes from the use
of their drugs. However, some manufacturers hesitate to offer VBP
arrangements to payers, including Medicaid, because of concerns that
the existing Medicaid COD statute and applicable regulations do not
specifically address, for price reporting, the rebating or discounting
of drugs based on evidence or outcomes-based measures. Specifically,
CMS had not addressed the possible impact of offering VBP arrangements
on manufacturer compliance with applicable MDRP price reporting
obligations, including best price and AMP reporting.
We support VBP because we believe it will assist states with
providing Medicaid patients access to needed therapies while providing
a payment arrangement that allows the state flexibility, including an
option to only pay when a therapy actually works. For such arrangements
to work for Medicaid, we need to consider changes to MDRP regulations
to address manufacturers' concerns with offering Medicaid such
innovative payment arrangements, while also ensuring the required
economies, efficiencies, and quality of care provided under the
Medicaid program. As discussed in the June 2020 proposed rule, if we do
not consider addressing a number of potential regulatory hurdles in
this regulation to increase patient access to new medications,
manufacturers may not be willing to offer VBP arrangements in the
marketplace to commercial payers or to states. As a result, states may
not be able to take advantage of these arrangements to afford new high
priced medications such as gene and cell therapies, among others,
limiting their availability to Medicaid patients. Subsequently, states
may not be able to provide such methods and procedures relating to the
utilization of, and payment for care and services as may be necessary
to safeguard against unnecessary utilization of such care and services,
and assure that, consistent with section 1902(a)(30)(A) of the Act,
Medicaid payments are consistent with efficiency, economy, and quality
of care.
One potential regulatory hurdle manufacturers have raised with us
is a manufacturer's quarterly best price reporting. Section
1927(c)(1)(C) of the Act defines best price in relevant part to mean
for a single source drug or innovator multiple source drug of a
manufacturer the lowest price available from the manufacturer during
the rebate period to any wholesaler, retailer, provider, health
maintenance organization (HMO), non-profit entity, or governmental
entity within the United States, with certain exclusions enumerated at
sections 1927(c)(1)(C)(i)(I) through (VI) of the Act. One of the issues
manufacturers face in determining best price with the advent of VBP
arrangements is that a manufacturer's best price can be reset based
upon the outcome of a drug treatment for one patient or one unit of the
drug because of the VBP. When this occurs, the price for that single
use of the drug during a quarter that resulted in a negative outcome
will reset the best price to a significantly lower amount, sometimes
zero, prompting a significantly higher rebate (sometimes 100 percent of
the drug's AMP) for all uses of the drug during that quarter.
This being the case, manufacturers have questioned how they should
calculate best price and account for these units when an outcome of a
VBP arrangement results in ``a lowest price available'' of zero or at a
significant discount. Manufacturers have expressed concern to CMS that
without further guidance from CMS in regulation regarding the
determination of best price in this scenario, the manufacturer could be
at risk of understating rebates and may potentially be subject to False
Claims Act liability, a risk which further diminishes manufacturer
interest in offering VBP payment arrangements in either the commercial
or Medicaid market. In turn, this may hinder Medicaid access to the
care and services
[[Page 87008]]
provided as part of these VBP arrangements (for example, to gene
therapies and potentially curative orphan drug treatments) that are
available in the general population.
In the June 2020 proposed rule, we proposed changes to the MDRP
price reporting (in particular best price) to address the changing
market atmosphere and regulatory challenges manufacturers encounter
when structuring and implementing VBP, and therefore, to give
manufacturers a greater ability to offer these programs to commercial
payers or Medicaid without the negative impact on best price or the
potential for manufacturers' non-compliance when calculating best
price.
1. Overall VBP Comments
Comment: Several commenters supported CMS' efforts to increase
adoption of, and foster more meaningful value-based payment
arrangements for, prescription drugs as a step to ensuring affordable,
high value healthcare and lowering drug prices. Commenters expressed
appreciation for efforts to relieve the regulatory requirements that
have prevented manufacturers and states from developing VBP
arrangements. A few commenters noted that manufacturers, commercial
payers, state Medicaid agencies and health plans, and other commenters
are well-suited to negotiate VBP arrangements and associated measures.
Commenters also noted that VBP arrangements:
Increase patient access to drug therapies, especially for
breakthrough, gene, and other novel therapies including therapies for
treatment of rare diseases.
Accelerate research and new treatment development while
also fostering greater patient safety.
Support manufacturer accountability as a result of a
shared-risk model.
Promote transparency in manufacturers' production
processes, costs, and the distribution of drug therapies.
Improve healthcare system sustainability by decreasing
overall treatment costs and incentivizing improved treatment
modalities.
Hold drug manufacturers liable for drug effectiveness.
Response: We appreciate these comments of support for value based
purchasing (VBP) arrangements.
Comment: Several commenters did not support the proposed rule to
accommodate VBP arrangements due to concerns of unintended consequences
on patient access to prescription drugs and on drug prices. Commenters
expressed concerns that evidence and outcomes-based contracts do not
address the underlying price of a therapy and noted the proposal does
little to ensure that the VBP arrangements incentivized by the proposed
changes to best price actually meet the objectives to increase
therapeutic value while reducing cost for consumers and insurers. A few
commenters noted that the proposed changes may allow manufacturers to
manipulate program rules to increase drug prices, and therefore,
increase their profits. Other commenters noted that they did not see
VBP arrangements as a comprehensive solution to high drug prices and
suggested that CMS reconsider the provisions in the proposed rule and
take additional actions to control drug prices. One commenter expressed
concern that the proposed rule introduced major policy changes without
articulating substantial policy justifications in the proposed preamble
text.
A few commenters also expressed concern that the VBP arrangement
proposals and the definition of such arrangements lack the requisite
clarity for manufacturers to undertake the operational overhauls
necessitated by these proposals. Commenters requested that CMS work
with commenters to develop a more specific regulatory proposal and
reissue a new proposed rule before moving forward with any changes. The
commenter requested that CMS provide additional detailed guidance
before implementing provisions of the rule.
Response: We believe that access to pharmaceutical manufacturer VBP
arrangements by both state Medicaid programs and commercial payers is
one of many negotiating tools that payers may take advantage of in
today's pharmaceutical market. We are not requiring states or payers
enter into VBP arrangements as part of this final rule. Instead, we are
clarifying and amending the regulatory framework so it is sufficient to
support such arrangements and to promote transparency, flexibility, and
innovation in drug pricing without undue administrative burden. These
rules clarify certain already established policies to assist
manufacturers and states in participating in VBP arrangements in a
manner that is consistent with the law and maintains the integrity of
the MDRP.
Comment: Many commenters expressed concerns that CMS' proposals
related to VBP arrangements may negatively impact state Medicaid
programs in several ways including compromising the integrity of the
MDRP and noting that states would likely experience smaller Medicaid
drug rebates and increased Medicaid spending as a result of the rule if
finalized. A few commenters recommended that CMS establish specific
guardrails to ensure that state Medicaid programs benefit from the
value of VBP arrangements. The commenters noted that manufacturers
could reduce their Medicaid rebate obligations by shifting their
commercial rebating strategy to VBP arrangements (sheltered from being
included in best price) by refusing to negotiate VBP arrangements with
state Medicaid programs at all.
Commenters also noted that they believe the cost savings generated
under the VBP arrangement must exceed those currently available under
the MDRP framework and be inclusive of administrative costs to
implement the VBP arrangement. Another commenter requested that CMS
provide additional guidance on how VBP arrangements might address
barriers to treatment that are unique to the Medicaid population.
One commenter expressed concern that the proposed regulations will
have serious consequences to state Medicaid programs and their ability
to provide access to vital healthcare services to the state's Medicaid
beneficiaries.
Response: The new VBP approach would build upon the approach that
exists in current law regarding how manufacturers pay rebates to states
for a dosage form and strength of a drug. Manufacturers are required to
report a best price each quarter to CMS which is used by CMS to
calculate the state's unit rebate amount (URA) for the drug, and that
reporting will continue. Under this new approach, manufacturers that
offer a value based purchasing arrangement (as defined at Sec.
447.502) to all states, may report a best price that includes varying
best price points for a single dosage form and strength as a result of
that VBP arrangement.
Otherwise, manufacturers that do not offer VBP arrangements to
states will be required to report a single best price (which would
include all prices, including applicable discounts, rebates, or other
transactions that adjust prices to the best price eligible entities,
including such transactions from VBP arrangements not offered to
states). This would address the commenters' concerns that this approach
would compromise the integrity of the rebate program, shift
manufacturer rebates to VBP programs, or allow manufacturers to not
offer these VBP programs to states. States would not be required to
participate in these arrangements, but can do so if they so choose.
Manufacturers that choose to offer their
[[Page 87009]]
VBP arrangement to the states and report multiple best prices would
continue to report a non-VBP best price for this dosage form and
strength of this drug for the quarter. States that opt not to
participate in a multiple best price arrangement that is being offered
by manufacturers would receive rebates based on the manufacturer's non-
VBP best price for this dosage form and strength of the drug.
Therefore, each state should consider the value of entering into
VBP arrangements and potential consequences, be it impact on access to
health care in their state or the administrative costs associated with
operationalizing a VBP arrangement, and make the appropriate decision
for their state.
Comment: One commenter requested that CMS maintain incentives for
providers to choose the lower-cost therapeutic option that is
clinically appropriate and for ongoing development of lower-cost
therapies, including biosimilars in addition to permitting
flexibilities around VBP arrangements.
Response: This rule does not require providers to participate in
VBP arrangements or to discontinue offering lower-cost therapeutic
options when clinically appropriate. Like states and commercial payers,
providers have the option to participate in VBP arrangements and may
choose to forgo these arrangements and avail their patients of lower
cost therapies that the provider believes may be just as effective.
Comment: A few commenters requested CMS address the potential
incentive for manufacturers to expedite market entry (VBP for
accelerated approval pathway drugs) for drug therapies that may be the
subject of a potential VBP arrangements.
Response: We believe that the commenter may be concerned that the
use of VBP may create incentives for manufacturers to attempt to use
FDA's accelerated approval pathway to bring a drug to market, and then
use a VBP approach to market the drug as payers, including state
Medicaid agencies, might not believe that the drug has a fully-
determined clinical benefit. This rule does not address drug
development and how drugs are approved for marketing in the United
States by FDA. We do not believe that manufacturers make decisions
about developing or marketing a drug based on the existence of VBP
approaches. However, we do think that accelerated approval drugs might
be good candidates for VBP, as these drugs can meet the definition of
covered outpatient drug under the Medicaid Drug Rebate Program, and
payers may want some additional evidence that they will be paying for a
drug that will provide a clinical benefit to the patient, and thus seek
a VBP arrangement from the manufacturer.
Comment: A few commenters commented on the timing of the final rule
and encouraged CMS to finalize the proposed rule this calendar year and
develop further subregulatory guidance based on their belief it will
improve access to cell and gene therapies coming to market. Another
commenter recommended that CMS work through CMS' Center for Medicare
and Medicaid Innovation (CMMI) to test broader VBP arrangements and
other payment innovations for drug therapies. A few commenters
requested that CMS clarify that existing VBP arrangements established
prior to the final rule will be grandfathered in if they are not found
to be compliant with definitions articulated in the final rule.
Response: While this rule will be effective 60 days after its
publication, we are delaying the effective date of certain amendments
in this final rule until January 1, 2022, including the policy
permitting manufacturers to report multiple best prices under a VBP
arrangement. This will allow manufacturers, states and CMS to make the
necessary system changes, and CMS to issue operational guidance
regarding the final policy permitting multiple best price reporting, as
necessary. The definition of VBP arrangement will be effective 60 days
after the rule publication in order to apply the changes made to the
bundled sales definition as discussed later in this rule.
While we appreciate the request to test these innovative payment
arrangements, we do not believe VBP arrangements need to be tested
under the CMMI authority in order to issue this final rule. Many state
Medicaid programs (nine states via CMS-authorized supplemental rebates)
and commercial payers already have VBP arrangements in place that have
provided some initial evidence about the pros and cons of these
programs. This final rule addresses potential regulatory hurdles
manufacturers and states face when choosing to offer and participate in
VBP arrangements.
Comment: A commenter was concerned that the proposals with regard
to VBP arrangements and the definition of such arrangements lack the
requisite clarity for manufacturers to undertake the operational
overhauls necessitated by these proposals. For example, the commenter
questioned whether outcomes-based measurement metrics create bundled
sales under arrangements that do not meet the proposed definition of a
VBP arrangement (including the as yet undefined requirement that the
outcomes-based measure ``substantially'' link the cost of the drug to
that of the drug's actual performance). The commenter indicated that
without further detail regarding the operation of CMS' VBP arrangement
proposals, manufacturers will lack the certainty needed to invest in
operationally-complex innovative payment arrangements.
Some commenters raised concerns about how states will become aware
that a manufacturer is in fact offering a multiple best price VBP
arrangement to states for a drug, how such information will be reported
to CMS and accessed by states, whether states and manufacturers would
have to enter into side agreements regarding the VBP arrangement, and
how such future price adjustments under the VBP program would be
reported to and made by states and manufacturers, among others.
Response: We understand that there may be unresolved issues
regarding some aspects of the VBP policies that are being implemented
in this regulation, and if necessary and appropriate, expect to address
any such issues that may arise in the future through operational
guidance.
We note that some manufacturers have been using the bundled sales
approach for VBP arrangements, under the reasonable assumption that a
VBP arrangement represents a type of performance requirement.
Regulations found at Sec. 447.502 allow manufacturers to allocate
discounts in a bundle across the entire bundle if tied to a performance
requirement. After the regulation is finalized, any VBP arrangement
would have to meet the new definition of VBP arrangement in order to
avail itself of potential regulatory flexibilities, whether the
manufacturer reports pricing using a bundled sale or multiple best
prices approach (effective January 1, 2022). To be clear, with respect
to the bundled sales approach, a manufacturer could only use the
bundled sales approach, and thus allocate any VBP discounts across the
products in the bundle, if the manufacturer's value-based payment
arrangement met the new definition of VBP arrangement, as adopted in
this final rule as discussed below.
We also believe that the commenter's reference to operational
complexity is referencing the technology and systems that may have to
be developed or modified to accommodate the necessary tracking of
patients that are enrolled in VBP arrangements. We appreciate the
[[Page 87010]]
comment, and recognize that VBP arrangements can be complex to design
and implement. However, this rule does not require manufacturers,
states or payers to enter into VBP arrangements but rather makes
changes to price reporting requirements to allow manufacturers to
report multiple best prices associated with such arrangements. We know
that some Medicaid programs are already implementing these VBP
arrangements, as are some commercial payers, so there is some
experience in the marketplace with implementation of these programs. We
also understand that state Medicaid programs, commercial payers and
manufacturers, as well as CMS, will have to make some operational
changes to accommodate the reporting of multiple best prices associated
with VBP arrangements being offered to the states.
We are also developing a new Medicaid Drug Program (MDP) system
that will replace both the current Drug Data Reporting (DDR) and
Medicaid Drug Reporting (MDR) systems, and this new system is expected
to be fully functional in July 2021. We expect that this new system
will help support the reporting by manufacturers of multiple best
prices, as well as the reporting by CMS of VBP-related unit rebate
amounts to the states, that would obviate the need for manual reporting
of these prices by manufacturers to CMS and to the states. We will need
to provide operational guidance on these and other related issues over
the next year.
For these and other reasons, the final policy permitting multiple
best prices reporting will not be effective until January 1, 2022 so
that all affected stakeholders have sufficient time to address these
operational technology and system challenges. We believe that delaying
the effective date until January 1, 2022 after the new MDP system is
expected to come on line will provide sufficient time to test the
system and assure that it can support the new multiple best price
reporting options.
2. Subpart I--Payment for Drugs (Definitions (Sec. 447.502)
a. Value-Based Purchasing (VBP) Arrangement
A VBP arrangement is not expressly defined or addressed in section
1927 of the Act or the MDRP implementing regulations. To address the
issues, we proposed a definition of VBP to apply, as appropriate, in
implementation of the MDRP. More specifically, we proposed to define
VBP at Sec. 447.502 to further clarify for manufacturers how
discounts, rebates, pricing etc. as a result of VBP arrangements should
be accounted for in a manufacturer's determination of AMP and best
price for an applicable COD.
At this time, manufacturers are permitted to make reasonable
assumptions in the absence of applicable statute, regulation or
guidance regarding how to treat pricing as a result of VBP. However,
because of the uncertainty or lack of assurances as to the propriety of
those reasonable assurances, we understand manufacturers may be
discouraged from offering VBP to payers including Medicaid. Therefore,
we proposed to define VBP as an arrangement or agreement intended to
align pricing or payments to an observed or expected therapeutic or
clinical value in a population (that is, outcomes relative to costs)
and includes (but is not limited to):
Evidence-based measures, which substantially link the cost
of a drug product to existing evidence of effectiveness and potential
value for specific uses of that product;
Outcomes-based measures, which substantially link payment
for the drug to that of the drug's actual performance in a patient or a
population, or a reduction in other medical expenses.
We have observed that some examples of evidence or outcomes-based
measures used by manufacturers in their VBP proposals may be derived by
observing and recording the absence of disease over a period of time,
reducing a patient's medical spending, or improving a patient's
activities of daily living thus resulting in reduced non-medical
spending. In response to the proposed definition of VBP, we solicited
suggestions for other measures and a rationale for the suggested
measures that could be used to reflect value from a drug therapy and
considered as we develop a final definition. We also solicited
suggestions as to how to interpret ``substantially'' as used in the
definition. That is, how much of the drug product's final cost should
be associated with the evidence or outcomes based measure in order for
the arrangement to be considered a VBP (for example, a drug product
cost with less than 90 percent of the discounts/rebates tied to the
drug's performance not be considered a VBP arrangement).
a. Definition of VBP Arrangement
Comment: Many commenters encouraged CMS to maintain a broad
definition of VBP arrangements and expand the definition to ensure that
all contracting parties have the flexibility needed to develop
arrangements that best meet their priorities for a wide range of drug
therapies, including cell and gene therapies, as well as oral small-
molecule drugs dispensed in retail settings based on their belief that
evidence and/or outcomes-based approaches can be used independent of
whether a drug is or is not classified as specialty. A few commenters
requested that CMS clarify that VBP arrangements are not limited to
one-time, high-priced therapies to enable use of these arrangements for
therapeutic areas that require recurring treatment, have a substantial
prevalence and overall disease burden to patients, and/or drive
substantial cost to Medicaid and payers (for example, chronic
condition).
However, several commenters expressed concern with CMS' proposed
definition of VBP arrangements because they noted it was not detailed
enough to operationalize and had potential for fraud, waste, and abuse.
One commenter further noted that the proposed definition does not
include any guardrails or features to ensure that VBP arrangements meet
reasonable thresholds for providing value for a drug.
A few commenters requested CMS to revise the definition to reflect
the following: ``An arrangement or agreement intended to align pricing
and/or payments to observed or expected therapeutic or clinical values
in select populations (that is, outcomes relative to costs) and
including (but not limited to): Evidence-based measures, which link the
cost of drug products to existing evidence of effectiveness and
potential value for specific uses of products included under the
arrangement; Outcomes-based measures, which link drug costs to the
actual performance (actual endpoints and direct or indirect surrogate
markers, including duration of therapy or discontinuation) in a patient
or a population, or a reduction in other medical expenses.'' One
commenter recommended that CMS review current state VBP arrangements to
refine the proposed definitions.
Several commenters emphasized the need to maintain the option for
VBP arrangements to include evidence- or outcomes-based measures to
provide maximum flexibility for payers and manufacturers when
negotiating contracts. The commenters requested that CMS include an
``or'' between the two examples of measures to make clear that both are
not required for VBP arrangements. A few commenters recommended that
CMS only consider outcomes-based measures for VBP arrangements eligible
for alternative best price calculations. One commenter noted that the
parenthetical phrase,
[[Page 87011]]
``that is, outcomes relative to costs'' is confusing and should be
removed from the definition.
One commenter recommended that CMS only allow outcomes-based VBP
arrangements to be allowed to perform alternative best price
calculations based on their belief that they are likely to have
significant best price implications from a single sale. The commenter
distinguished outcomes-based VBP arrangements from evidence-based ones
further, expressing their opinion that evidence-based contracts are
more likely to have a value-based price across multiple sales. One
commenter suggested CMS should require manufacturers to demonstrate a
drug's outcome effectiveness prior to market entry. The commenter noted
that this change will enable payers to negotiate payments based on
proven outcomes.
Response: We believe the definition of VBP arrangement is
sufficiently broad to include most VBP structures currently on the
market and would not exclude specific drugs on the market--be it highly
utilized drugs that treat large populations for chronic conditions or
one-time gene therapies that are used in small populations. Therefore,
we are maintaining a broad definition to ensure such arrangements are
recognized for purposes of determining and reporting best price and
AMP; however, we agree with commenters that the evidence or outcomes-
based measures used in a VBP arrangement should be evaluated in a
select population and are therefore adding the term ``select'' before
populations to clarify that VBP arrangements are arrangements that are
specific to select population groups using the drug therapy (for
example, gene therapy specific to a specific cancer type). We are also
adding ``and/or'' between the two measures in the definition to further
clarify that either evidence-based and/or outcomes-based measures could
be used in a VBP arrangement. Furthermore, we agree that the
parenthetical ``that is, outcomes relative to costs'' is confusing
given outcomes measures is already part of the definition of VBP
arrangement. Therefore, we are removing it to reduce redundancy. Also,
in response to commenters concerns that the drug covered by the VBP
arrangement has demonstrated effectiveness, we are clarifying that VBP
arrangements apply to CODs as defined at section 1927(k)(2) of the Act.
Comment: One commenter requested CMS to clarify the definition of
the terms ``effectiveness'' and ``performance'' within the definition
of VBP arrangement.
Response: We do not agree that the definition of VBP arrangement
should be revised to further define ``effectiveness'' or
``performance.'' Each VBP arrangement will be fact-specific to the
drug, the diagnosis it is treating, and patient population being
treated, and we expect such terms will be defined as part of the VBP
agreement itself.
Comment: A few commenters recommended that CMS use an alternative
term to ``value-based purchasing arrangements.'' Commenters recommended
that CMS use ``value-based pricing'' arrangements to reflect that VBP
arrangements can be entered into between manufacturers and customers
that do not ``purchase'' a product (for example, payers). A few
commenters recommended that CMS use ``value-based arrangements,'' or
VBAs, to reflect common industry terminology. One commenter requested
that CMS use ``value-based contracts,'' or VBCs, instead.
Response: For the purpose of this rule, we will continue to use the
term value-based purchasing (VBP) arrangement as proposed. However, we
recognize there may be arrangements already available on the market
that manufacturers may label differently, yet still align with the
definition of VBP arrangement as finalized in this rule.
Comment: One commenter recommended that CMS require VBP
arrangements to include minimum, maximum, and expected percentage
rebates that will be offered and limit permissible VBP arrangements to
drugs meeting certain characteristics, such as a floor for average
annual cost, course of treatment cost, and/or genetic therapies and
other similarly specialized drugs.
Response: CMS will not be requiring manufacturers offer specific
percentage rebates or limit VBP arrangements to only certain drugs as
part of the definition of VBP arrangement. Instead we will be
maintaining a broad definition of VBP arrangement so that manufacturers
and payers (including states) have the flexibility to design the VBP
arrangement, taking into consideration the specifics of the drug
treatment and patient population served. The final definition will
include the language that there be a substantial link between an
outcomes-based measure and the payment for the drug; or, evidence-based
measure and the cost of the drug as discussed later in this preamble.
b. Evidence-Based Measures
Comment: Several commenters either supported or did not support the
inclusion of evidence-based measures in the definition of VBP.
Commenters that supported the inclusion of evidence-based measures
noted it was sufficiently flexible to account for the breadth of
potential measures that may be considered in VBP arrangements. A few
commenters urged CMS to preserve a broad definition of evidence-based
measures to allow manufacturers and payers to identify appropriate
measures for each VBP arrangement, tailored to a particular drug
therapy and patient population. Another commenter suggested that CMS
ensure that the definition of evidence-based measures be sufficiently
broad to allow clinical endpoints and direct or indirect surrogate
endpoints to be used in VBP arrangements. Commenters also noted that
use of evidence-based measures is already allowed under current best
price reporting requirements and CMS-authorized supplemental rebate
agreements (SRAs).
Some commenters did not support CMS' inclusion of ``evidence-based
measures'' in the definition of VBP arrangements, claiming the
inclusion of such measures leaves the VBP arrangement definition
excessively broad. The commenters stated that the inclusion of
evidence-based measures is unnecessary because these measures are
currently used to negotiate regular discounts for formulary or
preferred drug list (PDL) placement between manufacturers and
commercial payers or states. Several commenters noted that including
evidence-based measures in the definition of VBP arrangements will
likely undermine best price reporting requirements and allow
manufacturers to reduce their Medicaid rebate obligations.
A few commenters opposed inclusion of evidence-based measures in
the definition of VBP arrangements because they noted that CMS did not
provide sufficient details in the proposed rule. A few commenters
expressed concern with the proposed inclusion of evidence-based
measures in the definition of VBP arrangements citing their belief that
the administrative burden associated with reporting will be
significant. One commenter noted that the inclusion of evidence-based
measures in the definition of VBP is redundant based on their belief
that external entities like the Institute for Clinical and Economic
Review (ICER) already account for evidence-based measures.
Some commenters requested that CMS clarify that evidence-based
measures may be based on a limited clinical data set, health economics,
outcomes research or other documented evidence. A few commenters also
[[Page 87012]]
encouraged CMS to clarify that clinical effectiveness is defined more
broadly than required under FDA regulatory requirements and requested
that CMS provide clarity on how clinical effectiveness will be
determined, especially for new drugs.
Other commenters requested CMS to require evidence-based measures
be developed through a patient-centered approach that requires patient
input on measure selection and desired outcomes. Several commenters
emphasized the importance of CMS' consideration of a patient-centered
approach to measuring value because they noted that they believe in the
need for patients to be involved throughout the design of VBP
arrangements, including the selection of measures that are important
and relevant to patients. A few commenters recommended that CMS include
patient-reported measures that signal improvement in patient health or
quality of life as an indicator of a drug's value. One commenter
suggested that long-term benefits for patient health, or durability,
also be considered to measure value.
One commenter encouraged CMS to provide guidance refining the
definition of evidence-based measures in the context of therapies
treating rare diseases with limited availability of data and small
target populations that require highly personalized treatment. A few
commenters noted that they believe there are often limited evidence-
based measures for rare disease groups given limited natural history
data, small patient populations and other challenges.
Response: We appreciate the comments regarding the use of evidence-
based measures as part of the definition of a VBP arrangement, but we
will not be revising the definition to provide additional refinement to
what is meant by evidence-based measures. We believe further
clarification to the term evidence-based measures will unnecessarily
limit the potential for VBP arrangements using such measures. While we
support VBP arrangements that establish evidence-based measures using
patient-centered approaches such as quality of life indicators and
believe that evidence-based measures must be based on clinical data
sets and documented evidence, we believe determining the appropriate
features of a VBP arrangement are more appropriately left to the
manufacturer and further negotiated with the payer (be it a health
plan, provider, or patient).
Comment: A few commenters noted that the proposed definition of
evidence-based measures could result in inconsistent interpretations of
requirements for best price calculations between manufacturers, which
may result in a smaller rebate obligations under VBP arrangements as
compared to current Medicaid supplemental rebate agreements (SRAs).
Response: There may be differences between rebates offered under a
CMS-authorized SRA and the VBP arrangements under the multiple best
price approach. States will be in the best position to determine which
arrangement meets the financial and patient care needs of their state's
Medicaid program. A state is not required to participate in a
manufacturer's VBP arrangement as offered on the commercial market.
They may negotiate their own arrangement under a CMS-authorized SRA,
and those arrangements do not have to meet the definition of VBP
arrangement. States may choose to negotiate participation in both types
of arrangements as well. However, a manufacturer who wishes to utilize
the multiple best price approach or the bundled sales approach must
ensure that their VBP arrangements satisfies the definition of a VBP
arrangement in this final rule, and with respect to using the best
price reporting flexibilities, offer such VBP arrangements to all
states, in order to avail themselves of such regulatory flexibilities.
Comment: One commenter requested CMS to clarify that VBP
arrangements that rely solely on evidence-based measures are sufficient
to meet the proposed definition of VBP arrangements. The commenter
further noted that there may be circumstances in which the combination
of evidence and outcome-based measures may not be feasible.
Response: VBP arrangements may be based on either evidence-based or
outcomes-based measures or both, as provided in the final definition of
a VBP arrangement.
Comment: One commenter recommended CMS clarify in the final rule
that the list of evidence-based measures in the preamble to the
proposed rule is not an exhaustive list of acceptable measures to meet
the definition of VBP arrangements.
Response: The commenter is correct that the list of examples
provided in the preamble to the proposed rule (85 FR 37292) is not an
exhaustive list of evidence-based measures and CMS does not intend to
further define or limit evidence-based measures based upon these
examples as part of this final rule. Therefore, manufacturers may make
reasonable assumptions, in the absence of any further guidance on such
measures; as part of their determinations as to whether an arrangement
satisfies the definition of a VBP arrangement and retain such documents
in accordance with recordkeeping requirements at Sec. 447.510(f).
Comment: One commenter suggested that CMS require VBP arrangements
to be either cost-based or outcomes-based unless the state Medicaid
agency finds an evidence-based VBP arrangement to be appropriate. It is
the opinion of the commenter that evidence-based measures alone are not
sufficient to ensure value.
Response: We will not be requiring the VBP arrangements be cost-
based or outcomes-based as part of this final rule. Furthermore, states
will not be required to enter into a VBP arrangement in instances when
the state does not agree with entering into an evidence-based VBP
arrangement.
c. Outcomes-Based Measures
Comment: Several commenters requested CMS provide additional
clarification regarding what is meant by outcomes-based measures in VBP
arrangements. Commenters indicated that outcomes measures should be
easily measurable, clinically relevant, and associated with clinical
and/or financial improvements and must rely on documented evidence. One
commenter expressed concern that the proposed rule did not provide
information around the process for developing performance (outcomes)
measures and how those measures will be established for new treatments.
Other commenters supported maximum flexibility in CMS' proposed
definition of outcomes-based measures to account for the breadth of
potential measures, diseases, and populations that may be considered in
VBP arrangements.
Response: We are not defining what is meant by outcomes-based
measures as part of the definition of VBP arrangement, or a process to
develop such measures. With this final rule, we intend to provide the
greatest flexibility to manufacturers and states (and other payers) to
develop and design VBP arrangements, as appropriate. We believe that a
broad definition of VBP arrangement allows manufacturers and payers to
develop, structure and implement VBP arrangements in the ever-evolving
health care environment, as well as allow manufacturers and payers to
consider future changes in the scope and nature of such arrangements.
Providing overly prescriptive performance or outcomes-based measures to
be used by manufacturers
[[Page 87013]]
and payers in these arrangements may impede this flexibility.
Comment: A few commenters recommended that CMS clarify the
difference between evidence-based and outcomes-based measures included
in the proposed definition of VBP arrangements. One commenter suggested
that the proposed definition of both measures included confounding
language based on their belief that performance measures in outcomes-
based arrangements are based on effectiveness derived from evidence.
Response: We do not believe additional clarification is necessary
to distinguish between evidence-based and outcomes-based measures
within the definition, as doing so may impede manufacturer and payers
ability to negotiate VBP arrangements. We believe that the final
definition of VBP arrangement provides manufacturers and payers
substantial flexibility to develop, structure and implement VBP
arrangements in the evolving health care environment, and the capacity
to adapt future changes in the scope and nature of these programs. An
example of an evidence-based measure is a situation where a
manufacturer may use documented evidence that its cancer drug results
in complete remission for 80 percent in a population. The manufacturer
may then negotiate with the payer that if 80 percent of the payer's
patients do not enter complete remission as based on this evidence-
based measure, the payers cost of the drug will be rebated for a
portion of their patient's population. On the other hand, an example of
an outcomes-based measure is that the manufacturer and payer agree to a
payment based upon whether or not a patient reaches an agreed upon
clinical outcome. The outcome may include a reliance upon documented
evidence or not.
Comment: One commenter recommended that CMS remove from the
outcomes-based part of the definition of VBP arrangement ``reduction in
other medical expenses'' and replace it with ``an impact to other
medical expenditures'' based on their belief that it will provide more
flexibility to payers and manufacturers.
Response: We decline to make this change as the phrase ``an impact
to other medical expenditures'' is overly broad and could be
interpreted to mean something other than decreases to medical
expenditures. For example, ``impact'' to other medical expenditures
could mean that medical expenditures could increase under a VBP
arrangement. This would seem to be counter intuitive to the use of VBP
arrangements. For example, a manufacturer may offer a VBP arrangement
for a drug that will keep the patient out of the hospital, or require
fewer emergency room visits. If the use of the drug did not reduce
these other health care expenditures, then payers may not be willing to
enter into these arrangements or discontinue participation. We believe
that the reduction in other medical expenses should be a primary
outcome of the use of VBP arrangements.
Comment: Several commenters suggested various types and
considerations for selecting outcomes-based measures, including
disease-specific measures, patient or population total cost of care,
healthcare utilization rate, clinical and direct or indirect surrogate
endpoints, biomarkers, survival and recovery, cure rate, adverse event
rates, laboratory values, quality of life, medication adherence, drug
persistence, or tied to additional doses of therapy. A few commenters
encouraged CMS to require alternative treatments to be considered when
developing VBP arrangements, in particular comparing cost and outcomes
of new treatments to existing therapies. One commenter recommended that
outcomes-based measures adhere to the HHS OIG's October 2019 proposed
rule (84 FR 55694; RIN: 0936-AA10) \17\ requiring outcome measures
grounded in legitimate, verifiable data or other information from a
credible external source (such as a medical journal, social sciences
journal, or scientific study), an established industry quality
standards organization, or results of a payor or a CMS-sponsored model
or quality program.
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\17\ https://www.federalregister.gov/documents/2019/10/17/2019-22027/medicare-and-state-healthcare-programs-fraud-and-abuse-revisions-to-safe-harbors-under-the.
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Response: We appreciate these recommendations but do not believe we
need to revise the definition of a VBP arrangement to account for these
considerations. The manufacturers will enter into these agreements with
commercial payers and state Medicaid programs, and we encourage the
manufacturers to work very closely with payers and patient groups when
developing their VBP arrangements in a process that is transparent and
free of financial conflict such that there is confidence in the
outcomes-measures chosen.
Comment: A few commenters requested that CMS allow VBP arrangements
to be evaluated with outcomes-based measures that were not included in
clinical trials and provide guidance on how manufacturers should report
initial prices under a VBP arrangement if those prices vary based on
patient outcomes that were not documented during clinical trials. The
commenter noted that narrowing VBP arrangements to evidence generated
in a limited number of single trials will limit VBP arrangements and
fail to meet desired patient outcomes.
Response: We appreciate the commenter's suggestions. We hope that
manufacturers and payers will take note of them. However, we do not
believe we need to revise the definition of a VBP arrangement to
account for these considerations. Manufacturers and payers will
determine the development and evaluation of these VBP arrangements, and
determine whether such VBP arrangements satisfy the regulatory
definition and avail themselves of the regulatory flexibilities being
finalized in this final rule, as appropriate.
Comment: A few commenters expressed concern that the proposed
outcomes-based measures included in the proposed definition of VBP
arrangements may not align well with rare diseases, especially if the
outcomes-based measure(s) is further restrictive. The commenter also
claimed that rare disease products are developed through the
Accelerated Approval Pathway, and thus limited clinical data is
available at the time when an application is reviewed and approved. One
commenter suggested that reliance solely on clinical outcome
assessments for small patient populations may obscure a therapy's true
value and patient feedback when evaluating VBP arrangements.
Response: We believe that drugs for rare diseases approved under
FDA's accelerated approval authority could make good candidates for VBP
arrangements for the very reason that the commenter mentions. FDA
approval in these instances may be dependent upon further studies to
confirm the clinical benefit of the drug. The VBP program could, for
example, have some connection to the manufacturer completing these
additional studies, or be based on the evidence from the additional
trials that the manufacturer is conducting during the period of the VBP
arrangement.
Comment: A few commenters recommended that CMS clarify in the final
rule that outcomes-based measures based upon quality of life or age are
discriminatory and devalue the lives of persons with disabilities and
older adults. Another commenter encouraged CMS to require that VBP
arrangements account for complex conditions experienced by Medicaid
beneficiaries,
[[Page 87014]]
including mental illness, and account for how those medical
comorbidities may affect outcomes.
Response: We appreciate these comments regarding outcomes-based
measures and how they should not discriminate against certain
populations. In accordance with legal obligations under section 504 of
the Rehabilitation Act, the Americans with Disabilities Act, the Age
Discrimination Act, and section 1557 of the Affordable Care Act,
manufacturers and payers, including state Medicaid agencies, may not
make use of measures that would unlawfully discriminate on the basis of
disability or age when designing or participating in VBP arrangements.
d. Defining Substantially Under VBP Arrangement Definition
Comment: A few commenters encouraged CMS to include input from
patient groups and the National Health Council (NHC) when defining the
term substantially. The commenters recommended CMS consider the NHC's
patient-centered approach to establishing criteria for
``substantially'', including the six domains of patient partnership,
transparency, representativeness, diversity, outcomes that patients
care about, and patient-centered data sources and methods.
Response: While we appreciate the recommendation, we will not
further define the term ``substantially'' as used in the definition of
VBP arrangement in this final regulation. Instead, we expect
information regarding the link between the evidence or outcomes-based
measures will be included in the VBP arrangement itself and that
manufacturers will retain records of how the measures link to the
payment/cost of the drug consistent with the recordkeeping requirements
at Sec. 447.510(f). For example, a drug sale may be subject to two
types of sales arrangements: A 5 percent discount based upon formulary
placement and 50 percent rebate linked to an outcomes-based measure.
The second arrangement would be a VBP arrangement because there is a
substantial link between the cost of the drug and the outcome. CMS may
consider providing additional examples in subregulatory guidance as
more arrangements become available and we gain more experience on the
various arrangements available or offered in the marketplace.
Comment: Several commenters recommended potential prescriptive or
percentage thresholds to define substantially or that CMS further
define the term substantially in regulation while some commenters noted
they believe a prescribed percentage would be arbitrary.
Specifically, a few commenters recommended that CMS establish a
minimum threshold at the current mandatory rebate percentages of AMP
(that is, 23.1 percent of AMP for single source or innovator multiple
source drugs or 17.1 percent of AMP for drugs for pediatric indications
or eligible clotting factors) to define substantially. The commenters
claimed this will ensure the Medicaid program is eligible to receive
larger rebates and will ensure the amount of risk and discounts during
VBP arrangement negotiations will be acceptable to payers and
manufacturers.
A few commenters recommended that CMS define ``substantially'' as a
maximum possible discount that is greater than the current minimum
mandatory rebate percentages, where the maximum possible discount
accounts for all VBP arrangement and all non-VBP arrangement best
price-eligible discounts. They noted that under the scenario where the
maximum possible discount is less than the applicable mandatory rebate
percentage of AMP, Medicaid URA calculations will align with current
statutory requirements, eliminating the need for regulatory relief to
promote VBP arrangements under the proposed rule.
A few commenters requested that CMS define ``substantially'' by
requiring a threshold average of at least 50 percent of AMP over the
life of a VBP arrangement. The commenters noted this threshold will
allow manufacturers and payers the flexibility to adjust the rebate
percentage throughout the agreement. A few commenters recommended that
CMS ensure a robust definition of substantially and apply a
``significantly high threshold.'' The commenters stated that a high
threshold will disincentivize gaming on the part of manufacturers
seeking to reduce rebate obligations.
One commenter suggested that CMS set the threshold for
``substantially'' at greater than 33-50 percent of the ingredient cost
of a drug rather than the current minimum mandatory rebate percentages.
The commenter noted this threshold will allow payers to hold
manufacturers accountable for the value of drugs. One commenter noted
that if CMS includes the term ``substantially'' in the final rule, CMS
should set the threshold at a minimum of 25-30 percent of AMP based on
their belief that it will incentivize broader uptake of VBP
arrangements. One commenter suggested that CMS define substantially
with a threshold of at least 80 percent. Another commenter requested
that CMS consider the dictionary definition of the term
``substantially'' to leverage an ordinary meaning of the term for the
final rule.
However, many commenters expressed concern with CMS' application of
a prescriptive or percentage threshold to define the term
``substantially''. Several commenters suggested that a percentage
threshold will be arbitrary and could stifle innovative contracting
arrangements and if CMS were to define examples of a VBP arrangement
narrowly, by reference to a specific or high percentage threshold,
manufacturers could be led to believe they can no longer subject VBP
arrangements that do not meet that threshold to bundled sale treatment.
A few commenters recommended that CMS delay defining
``substantially'' until after the final rule when commercial and
Medicaid payers gain additional experience with VBP arrangements.
Response: We appreciate the recommendations from commenters on how
CMS should define substantially when it comes to the manufacturer
determining if it is offering a VBP arrangement.
First, we appreciate the commenters' concern that the
manufacturer's VBP arrangement provide at least the minimum Federal
Medicaid rebate as determined in accordance with Sec. 447.509, and
that any additional VBP rebates paid to the state by a manufacturer
over time as a result of the VBP arrangement be additive to that
rebate. We want to assure states that the minimum rebate that the
states would receive in the quarter in which the drug is administered,
whether under a VBP arrangement or non-VBP program, would be the
minimum Medicaid rebate--that is, a rebate for single source/innovator
multiple source drugs, equal to the greater of the minimum 23.1 percent
of AMP or the difference between the AMP and ``best price'' in a
quarter for a dosage form and strength of a drug.
Should the state participate in a VBP arrangement for which the
manufacturer reports multiple best prices, the state will at least
receive the Federal Medicaid rebate based upon the non-VBP best price
in the quarter in which the drug is administered, and additional
rebates based upon the multiple best prices reported as a result of the
manufacturer VBP arrangement, if the state has opted to participate in
the VBP arrangement and therefore, eligible to receive such additional
rebates under the VBP arrangement.
If the state is participating in a VBP arrangement under a CMS
authorized
[[Page 87015]]
supplemental rebate program, that state-negotiated supplemental rebate
as a result of the VBP arrangement is supplemental to the Federal
Medicaid rebate, as well as exempt from AMP and best price. A VBP
arrangement offered pursuant to a CMS-authorized supplemental rebate
agreement should not be confused with a VBP arrangement that satisfies
the regulatory definition of such that is being finalized in this rule.
With respect to designating an actual rebate percentage that would
represent a ``substantial'' link to satisfy the new VBP definition,
this will likely be a function of several factors, including the number
of patients that might be enrolled in the health plan as well as the
evidence of the drug's effectiveness, among others. For a plan with a
few number of patients, for a drug with limited clinical evidence, the
threshold of a ``substantial'' link would likely be different than a
plan with a significant number of patients, for a drug with significant
clinical evidence. The amount could even be different for the same
drug. Therefore, it would be difficult to designate an amount or range
of rebates that might represent a substantial link.
After further consideration of the commenters' recommendations, we
will not be defining substantially or requiring a specific percentage
threshold to determine whether or not there is a substantial link
between the cost/payment for the drug and either of the measures in the
definition of VBP arrangement. We do not want the manufacturer and the
payer (state or otherwise) to be held to a specific threshold when
making the determination as to the link between the cost/payment for
the covered outpatient drug and outcome within the agreement and
believe the parties involved should have the flexibility to determine
the link. As stated earlier, VBP arrangements are voluntary and payers,
including states, will not be required to participate in them if they
believe the arrangement does not result in a price they are willing to
pay. Also, we provided an example in the proposed regulation that used
a 90 percentage threshold as an example of a possible ``substantial''
financial link between the expected outcome of a therapy in a patient
and the compensation that a manufacturer might be expected to provide
to a payer if the drug didn't meet the expected outcomes. That is, the
manufacturer would refund 90 percent of the initial purchase price to
the payer if the therapy failed. The 90 percent example that was
provided was an illustration of a substantial financial link for a VBP
arrangement and was not meant to be a firm regulatory threshold for the
establishment of a VBP arrangement. The example demonstrates further
that the intent of a VBP arrangement is that the cost/payment for the
covered outpatient drug is driven by the outcome in the arrangement and
that the cost/payment for a drug that is driven by other factors beyond
the outcomes or evidence-based measures would not qualify the VBP
arrangement under our definition. Therefore, manufacturers should
ensure that in order to satisfy the definition of a VBP arrangement
under our rules, any arrangement they have as a VBP arrangement with
payers, provides that the cost/payment is substantially linked to
outcomes.
Since we are not further defining ``substantially'' as part of this
final rule, manufacturers may make reasonable assumptions and should
document how its arrangement substantially links the payment/cost of
the drug to the outcome in the arrangement and therefore qualifies as a
VBP arrangement under this final rule. Manufacturers should continue to
maintain records of reasonable assumptions consistent with Federal
recordkeeping requirements at Sec. 447.510(f). We may also consider
issuing further subregulatory guidance on policy and operational issues
relating to the definition of VBP arrangement given the nature and
scope of the various arrangements coming to the market. We note that
VBP arrangements offered on the commercial market before this
regulation that do not meet the new regulatory definition of VBP
arrangement (which goes into effect within 60 days of the publication
of this final rule) will have to be restructured to meet the new
definition and requirements of this final regulation if a manufacturer
wants to take advantage of the regulatory flexibilities included in
this final rule. Since the revised definition of VBP arrangement does
not apply to arrangements negotiated under a CMS-authorized
supplemental rebate agreement, those arrangements will not need to be
restructured.
e. Other Measures of Value
Comment: A few commenters recommended CMS consider certain measures
of value such as work productivity, patient satisfaction with
treatment, and medical spending to assess a drug's value. A few
commenters suggested that CMS consider healthcare utilization like
reduction in hospitalization rates and emergency department visits as a
measure of a drug's value. One commenter noted further that a reduction
of utilization of services should be controlled for maintenance of
healthcare quality standards. A few commenters identified measures like
laboratory tests or screenings or use of electronic health records
(EHRs) as measures of a drug's value based on their belief that such
measures incentivize providers to give high quality care. A few
commenters recommended that CMS consider disease-specific measures to
measure value for patients with rare disorders, including rare cancers,
because they believe they are inherently disease-specific and highly
variable across patients.
Some commenters recommend revising the VBP arrangement definition
to include individual patient cost-limiting arrangements that reduce
pricing for an individual patient for greater-than-expected usage based
on available evidence, discounts based on the achievement of patient-
testing benchmarks, patient-reported measures that signal improvement
in patient health or quality of life as an indicator of a drug's value
and expected therapeutic, clinical, or patient-centric value in a
population.
Other commenters recommended that CMS measure the value of a
particular drug by comparing its performance to a competing therapy or
treatment option. One commenter noted that such a comparison will
facilitate the cultivation of comparative effectiveness research
available for drug therapies. One commenter recommended comparative
effectiveness of target immunomodulatory treatments in particular for
the psoriatic disease community.
Response: We appreciate the suggestions raised by the commenters
and believe that all of these measures could be used by a manufacturer
and payer as part of a VBP arrangement; however, we will not be
amending the regulatory text to further define value. While we will not
be specifically directing manufacturers to use specific measures as
part of an arrangement in order to meet the definition of VBP
arrangement, we believe these recommendations may be considered in the
structuring of VBP arrangements as manufacturers and payers negotiate
arrangements specific to a particular drug treatment. After reading all
the comments, and reflecting on the best approach to help make these
VBP arrangements succeed, we believe that the key is giving the most
flexibility to payers and manufactures in structuring these
arrangements. Each VBP arrangement is fact-specific; therefore, the
recommended measures to assess a drug's value will be driven by a
number
[[Page 87016]]
of factors including, but not limited to, the drug's indication,
patient population treated, the availability of clinical evidence for
the drug, and treatment setting. Therefore, we are not revising our
proposed definition of a VBP arrangement to require specific measures
beyond outcomes-based or evidence based measures.
Comment: Many commenters provided suggestions for other measures
that could be used to reflect the value of a drug therapy. A few
commenters recommended that CMS consider total cost of care as an
additional measure of value tied to cost savings resulting from VBP
arrangements and should involve a comparison of the total cost of care
(inclusive of medical and pharmacy costs) to a payer for a patient (or
cohort of patients) who is prescribed the contracted drug to another
patient (or cohort) with equivalent disease type and severity that is
not prescribed the drug. Another commenter further recommended that CMS
require manufacturers to report cost savings for VBP arrangements prior
to and after a VBP arrangement was implemented to promote transparency.
One commenter also noted that a reduction in total cost of care should
be controlled for maintenance of healthcare quality standards.
Several commenters encouraged CMS to provide flexibility and
finalize broad categories of measures, especially when determining the
value of drug therapies. Commenters noted that finalizing a broad
definition with broad categories of measures will provide maximum
flexibility between payers and manufacturers to specify more detailed
medical and non-medical metrics, incentivize uptake of VBP
arrangements, and avoid stifling innovation.
Response: We appreciate the commenters' suggestions for additional
measures of drug value; however, we will not be amending the regulatory
text to further define value, and we will not be requiring these
measures as part of the final definition of VBP arrangement in order to
ensure that the definition is sufficiently broad to permit flexibility
by manufacturers and payers to negotiate the specific terms of each VBP
arrangement. We encourage manufacturers and payers to consider these
measures of value as recommended by the commenters, such as a
comparison between the cost of the drug under the VBP versus other
therapies, the impact of the VBP on total cost of care, such as a
reduction in hospitalizations or other medical interventions, when
evaluating a drug's value and designing and negotiating the specific
terms of a VBP arrangement.
Comment: One commenter noted it is important that VBP arrangements
facilitate access to high-value products by appropriately accounting
for the actual clinical outcomes a specific product achieves.
Appropriate measures include primary and secondary clinical trial
endpoints, serious adverse effects avoided, total cost of care savings,
episode-based reductions in spending below established benchmarks, and
other clinically relevant measures that are substantially related to
the underlying performance of the product and the overall improvement
of the patient's health. Requiring that VBP arrangements be linked to
actual clinical outcomes will help facilitate the types of arrangements
CMS hopes to promote and limit the opportunities for gaming the
flexibilities introduced by this rule.
Response: We appreciate the suggestion that actual clinically-
relevant measures be used when measuring the performance of a drug
product in a patient. We are not providing a specific definition of
performance measure or giving specific examples of acceptable
performance measures as part of the VBP definition and instead believe
such measures may be addressed as part of the VBP agreement between the
manufacturer and the payer.
Comment: A few commenters encouraged CMS to require that measures
of value or effectiveness must be person-centered and based on
individual assessments of patient needs, excluding measures that are
discriminatory against individuals with disabilities or older adults
based upon quality of life or age. A few commenters requested that CMS
specify that VBP arrangements may not lock-in patients or prevent them
from determining the best treatment(s) in consultation with their
providers. One commenter recommended that CMS require patient
management and support services be included in VBP arrangements to
promote medication compliance and adherence. Several commenters
suggested that the proposed rule does not ensure coverage or access to
prescription drugs is preserved, especially for Medicaid enrollees,
individuals with disabilities, and patients with rare or complex
genetic disease. A few commenters suggested that CMS require VBP
arrangements to have substantive input from patients on their needs,
priorities, and desired outcomes. A few commenters requested that CMS
require a simple, transparent appeals process and patient safety
monitoring protocols that they believe could serve to inform patients
and providers of the effectiveness of a particular drug therapy.
Response: With the exception of non-discrimination obligations
required under federal civil rights law, patient protections provided
under manufacturer and payer arrangements are not a subject of this
final rule. Therefore, while we agree with the commenters that measures
adopted under VBP arrangements should not endanger certain patients,
providers, or impede access to other available medications and
treatments, or interfere with the practice of medicine generally, we
are not imposing patient protection requirements on manufacturers or
payers embarking on VBP arrangements as part of this final rule beyond
previously articulated non-discrimination obligations.
f. Transparency and CMS Oversight
Comment: Many commenters requested that CMS require certain
transparency elements in the definition of VBP arrangements.
Specifically, commenters recommend that CMS require manufacturers share
details of VBP arrangements with states and payers, including cost-
related and comparative effectiveness data and information available
prior to FDA approval. In addition, they suggest that we report on
measures included in VBP arrangements, including a description of the
measure, justification for the measure selection, and the amount of the
product's cost that is tied to the measure; and publicly release
outcomes-based data associated with VBP arrangements.
Commenters also requested CMS issue guidance on the timing of
negotiations for VBP arrangements with states, describe the process for
maintaining confidentiality, identify information manufacturers are
required to share with states and payers, establish a robust legal
framework to allow all commenters to participate in VBP arrangements.
They also requested that manufacturers be required to provide legal
details in a timely manner to minimize gaps between VBP arrangements
being implemented and a state beginning to participate in the
arrangement.
Commenters also suggested that CMS mandate that states be allowed
to participate in the VBP arrangement, that specific details of
contract structures of VBP arrangements remain confidential and
disallow direct marketing or outreach by manufacturers to patients
using manufacturer gathered data from VBP arrangements.
Response: We believe the list of suggestions for CMS requirements
on manufacturers, payers and states as they relate to transparency in
VBP
[[Page 87017]]
arrangements are good suggestions and may be considered as part of the
negotiation of a VBP arrangement between the manufacturer and payer.
However, we are not establishing them as requirements on manufacturers
and payers, including states, when participating in VBP arrangements in
this final rule and we will not revise the definition of a VBP
arrangement to specify such terms.
As further arrangements may emerge as a result of this final rule,
CMS may consider engaging states and other industry experts regarding
best practices when negotiating VBP agreements.
In order to clarify manufacturer obligations when reporting
multiple best prices, we are revising the proposed regulation text at
Sec. 447.505(a) in this final rule to state that if a manufacturer
offers a value based purchasing arrangement (as defined at Sec.
447.502) to all states, the lowest price available from a manufacturer
may include varying best price points for a single dosage form and
strength as a result of that value based purchasing arrangement.
However, states will not be required to participate in these VBP
arrangements. In addition, if a state does not participate in the VBP
arrangement, the best price that sets the rebate for that state will be
the non-VBP arrangement best price point that must also be offered by
the manufacturer and reported to CMS along with the multiple best price
points reported by the manufacturer.
Comment: Several commenters encouraged CMS to consider establishing
oversight processes for VBP arrangements. Specifically, a few
commenters suggested the Secretary of the Department of Health and
Human Services (the Secretary) should establish a pre-certification
process where outcomes-based VBP arrangements must be reviewed and
approved before implementation and a process to validate performance
measures used in VBP arrangements to ensure that measures are
meaningful and rigorous. Another commenter requested that CMS establish
a pre-certification process to ensure that manufacturers do not owe
lesser Medicaid rebates under VBP arrangements.
Response: We did not propose that we would provide specific
oversight of the nature of VBP arrangements as part of this final rule.
The federal oversight of VBP arrangements in the context of this rule
would be related to the accuracy of manufacturer government price
reporting and certification (for example, calculation and reporting of
AMP and best price as described in Sec. 447.510) and the manufacturer
payment of required Medicaid drug rebates. Therefore, manufacturers
should maintain records of their VBP arrangements as part of their
recordkeeping requirements at Sec. 447.510(f). However, while we will
not review or certify VBP arrangements offered under the multiple best
price approach, we will continue to review and approve SPAs associated
with CMS-authorized supplemental rebate agreement templates for state
arrangements with manufacturers if a state chooses to use a VBP
approach.
We also note that as discussed later in this regulation, we will
require state Medicaid programs under Sec. 447.518 that have VBP
arrangements under CMS-approved SRAs to report on a quarterly basis
certain information regarding the program, such as the drugs covered,
costs to administer the program, and savings generated. This will help
provide feedback to states and CMS on the value of these programs to
Medicaid, and the operational and policy issues that states may face
with implementation. This requirement will go into effect on January 1,
2022.
Otherwise, we will not be providing ongoing oversight or an
approval process for VBP arrangements or the agreements between a
manufacturer and payer.
g. Patient and Provider Engagement
Comment: Several commenters recommended that CMS require payers,
including states, and manufacturers to engage patients and providers
when determining outcomes-based measures and metrics for VBP
arrangements. Several commenters emphasized the importance of including
patient-reported outcomes in VBP arrangements and that there was
concern that a therapy successful in achieving outlined outcomes may
still leave a patient with significant medical needs and medical costs.
A few commenters recommended that CMS consider the National Health
Council's (NHC's) patient-centered approach when establishing criteria
for outcomes-based measures, including the six domains of patient
partnership, transparency, representativeness, diversity, outcomes that
patients care about, and patient-centered data sources and methods. A
few commenters encouraged CMS to mandate substantive input from
patients on factors like disease mitigation and management, impact on
patient out-of-pocket (OOP) costs, ease of adherence, and improved
aspects of quality of life. Another commenter noted patients, patient
advocates and physicians without financial interest in a drug therapy
must be included in the process of reviewing VBP arrangements.
Response: We appreciate the comments summarized above and agree
that patient and provider input in VBP arrangements are important, but
we are not mandating patient or provider input with respect to VBP
arrangement design or development in this final rule. We believe
commercial payers and state Medicaid programs are in the best position
to evaluate the benefits of a particular manufacturer's value-based
arrangement for their particular enrolled patient population and may
ask manufacturers to engage with patient and provider groups as part of
the VBP arrangement. We note that commercial payers generally have a
mechanism to evaluate the costs and benefits of such programs through
pharmacy and therapeutics committees, which often include health
professional participation. Furthermore, state Medicaid DUR Boards that
make coverage and criteria decisions for states may also assist states
with the evaluation of evidence-based or outcomes-based measures
associated with particular drug therapies available under VBP
arrangements, and these Boards often include providers and patients or
consumers.
h. Burden of VBP Operations and Data Collection
Comment: Many commenters expressed concern that there are
administrative burdens, operational requirements and significant costs
borne by providers, payers, and/or manufacturers to monitor patients
and collect data to evaluate VBP arrangements. A few commenters
identified patient portability, especially as a result of patients that
may move in and out of the Medicaid program, as a significant challenge
to operationalizing VBP arrangements as it may disrupt the ability to
monitor and evaluate patient outcomes over longer periods of time.
One commenter noted that manufacturers may further complicate data
collection by requiring measures that labs might be incapable of
testing and require involvement of third-party vendors and additional
costs. Another commenter noted that manufacturers may increase data
collection and monitoring burdens on providers and payers to gather
data valuable for marketing, applications for FDA approval of
supplemental indications, or post-marketing studies.
Several commenters recommended that CMS provide additional guidance
to address these operational barriers and the additional costs
associated with the adoption of VBP arrangements, including developing
internal state capacity and cross-sector, multi-payer
[[Page 87018]]
databases, and best practices for data collection and sharing. One
commenter recommended that CMS partner with FDA and the Office of the
National Coordinator for Health Information Technology (ONC) to provide
guidance addressing these challenges.
Response: We do not plan to issue guidance or best practices at
this time as to how to operationalize, evaluate, or monitor VBP
arrangements because each arrangement will have its own set of specific
facts and circumstances associated with the VBP, such as the drug, the
anticipated outcomes, and population included in the arrangement. In
other words, a one-size fits all approach to operationalizing a VBP
arrangement is not possible because of the many different arrangements
on the marketplace.
We also note that we are not requiring any entity to enter into VBP
arrangements. Therefore, any entity that wants to voluntarily
participate in a VBP arrangement (be it a provider, payer, or state)
should evaluate the complexity of entering into a specific arrangement
by noting the obligations required, such as increased data collection
responsibilities, monitoring burden, patient-specific portability
challenges, and patient monitoring associated with the outcomes or
evidence-based evaluation under the VBP arrangement. Payers, including
states, should take into consideration whether participating in these
VBP arrangements are of value to their beneficiaries and consider the
additional costs that they will likely incur for provider or other
third party services as they evaluate the final price that they may pay
for the drug being purchased under the VBP arrangement.
Comment: A few commenters questioned whether VBP discounts
(inclusive of administrative fees paid by manufacturers) are large
enough to cover the additional operational costs (that is, staff,
expertise, technical resources) to states to perform multiple and
complex outcomes analyses.
Response: Participants in VBP arrangements will need to determine
if the price for the drug, as discounted by the manufacturer, through
the VBP arrangement, will be significant enough to cover administrative
and operational costs. Both state Medicaid programs and commercial
payers should be mindful of these costs before entering into VBP
arrangements with manufacturers.
Comment: A few commenters recommended that CMS consider what state-
level coordination is needed to track health outcomes for Medicaid
beneficiaries involved in VBP arrangements. A few commenters noted that
state Medicaid agencies may not have the capacity to perform data
collection to validate performance of drug therapies under VBP
arrangements and that Medicaid agencies will need to coordinate
monitoring and data collection efforts across Medicaid managed care
plans (MCPs), as well as states. Another commenter noted that states
engaging in VBP arrangements should not impose additional data
collection and reporting requirements on hospitals and providers as a
condition of participation.
Response: As noted earlier, we are not requiring state Medicaid
agencies or their providers to enter into VBP arrangements as part of
this final rule. Therefore, states will need to determine, when
entering into VBP arrangements, if they have the capacity to
operationalize and administer the various data collection efforts that
may be required of a VBP arrangement.
States should also consider the impact of a VBP arrangement's data
collection and reporting on Medicaid MCOs and Medicaid providers
participating in these arrangements and whether or not these parties
are interested in participating. Since the provider costs associated
with a manufacturer's VBP arrangement are not reimbursable under
Medicaid (unless it is a Medicaid covered service paid for under the
state plan), providers, manufacturers and states (including Medicaid
MCOs) should evaluate the compensation offered (if available) for the
provider tasks under the arrangement and whether or not such
compensation is sufficient for the tasks to be performed.
Comment: A few commenters requested that CMS offer reimbursement to
providers when data collection is required. One commenter suggested
that CMS should not allow VBP arrangements to place burden on providers
to track and report on outcomes. One commenter noted that providers
administering drug therapies will be better suited to evaluate patient
outcomes and encouraged CMS to reimburse for monitoring and reporting
costs. One commenter expressed concern that any savings associated with
successful VBP arrangements are not shared with hospitals and
providers.
A few commenters recommended that CMS acknowledge the role of
providers in patient monitoring and performance measure reporting in
the final rule and noted that providers administering drug therapies
will be better suited to evaluate patient outcomes and encouraged CMS
to reimburse for monitoring and reporting costs. One commenter
requested CMS to clarify if savings associated with VBP arrangements
will be shared with providers through higher reimbursement rates
furnished to Medicaid beneficiaries.
Response: We understand that depending upon the VBP arrangement,
providers may have a significant role in providing or administering the
drug, evaluating of patient outcomes, and monitoring patient and other
clinical details associated with the VBP arrangement. Each VBP
arrangement will have its own set of criteria that are needed to
evaluate outcomes; therefore, it should be up to the parties
participating in the VBP arrangement to negotiate terms regarding the
source of payment or reimbursement relating to the performance of these
activities. We did not propose and is not finalizing a new payment
authority as part of this rule for Medicaid providers to perform these
activities.
i. Patient Considerations
Comment: A few commenters expressed concern that VBP arrangements
may compromise patient safety based on their belief that manufacturers
might be encouraged to bring a drug to market with potential outcomes,
not proven ones. The commenters also noted that if a drug proves to be
more effective than initially demonstrated, the manufacturer should
have the opportunity to demonstrate the increased benefit and re-apply
for payment that reflects the new outcome effectiveness.
Response: We disagree with the commenter that this rule, which
gives manufacturers and payers flexibility to enter into VBP
arrangements will allow manufacturers to market suboptimal drugs or
compromise patient safety. The safety and effectiveness of a drug is
not the subject of this final rule. And we further add that the final
definition of VBP arrangement at Sec. 447.502 is limited to covered
outpatient drugs as defined at section 1927(k)(2) of the Act which with
very limited exceptions have already been approved by FDA.
Comment: A few commenters requested that CMS prohibit manufacturers
from using data for direct marketing to patients or clinicians,
applications for FDA approval of supplemental indications, or post-
marketing studies.
Response: The proposed rule did not address the use of data by
manufacturers as part of their VBP arrangement, therefore it is not a
topic of this final rule. We believe any data use as a result of a VBP
arrangement should be negotiated between the parties of the VBP
agreement.
[[Page 87019]]
We also remind states that the use of a VBP arrangement in the
Medicaid program does not modify the Section 1927 requirements
regarding state coverage of the covered outpatient drugs of those
manufacturers that have a rebate agreement in place with the Secretary
of HHS. Moreover, we reiterate that CMS will not be overseeing the
specific VBP arrangements or the specific pricing agreements entered
into between states and manufacturers with respect to multiple best
prices. Our role will be limited to receiving best price and other
price information that manufacturers are required to send us under law
and regulation, as well as making states aware that such multiple best
prices have been reported to us for a specific drug.
Comment: A few commenters requested that CMS reject VBP
arrangements and other alternative payment arrangements that unduly
limit Medicaid enrollee access to medically necessary outpatient
prescription drugs.
Response: This rule, and the development of a various VBP
approaches under this regulation, including the multiple best price
approach, does not change state Medicaid program drug coverage
requirements under section 1927 of the Act, and therefore, we do not
believe there will be an access issue to medically-necessary covered
outpatient drugs as a result of this final rule or VBP arrangements
offered by manufacturers.
States are still required to cover drugs that satisfy the
definition of a covered outpatient drug subject to a manufacturer
rebate agreement, whether that drug is subject to a VBP arrangement or
not. If the drug is subject to a VBP arrangement and the state decides
to participate in the manufacturer's VBP arrangement, the state would
have to cover the drug under the VBP arrangement similar to how it
would cover it if it chose not to participate in the VBP. The
difference is the state would be able to collect additional rebates
based upon the VBP arrangement design and presumably, the multiple best
prices reported by the manufacturer under the VBP arrangement.
Moreover, this rule does not establish any CMS review and approval
process for VBP arrangements.
j. AMP/Best Price Reporting and MDRP
Comment: A few commenters expressed concern that manufacturers may
be able to set artificially low initial prices to delay when they have
to pay the full rebates they owe, and requested CMS clarify how
manufacturers will report their initial prices.
Response: Manufacturers that offer VBP arrangements (as defined at
Sec. 447.502) would report AMP and best price to CMS as they currently
do each quarter. They would report a best price that was not tied to a
VBP arrangement, and then report the multiple best prices for any VBP
arrangements that they are willing to offer to the states. We will
provide additional guidance to manufacturers on how such reporting
would be made, as well how we would report these non-VBP and VBP prices
to states so they can evaluate their participation.
The establishment of drug launch prices is outside the scope of
this rule. However, to the extent that manufacturers increase prices on
their products faster than the CPI-U, manufacturers would pay
additional rebates (that is, inflation penalties) as required under
section 1927(c) of the Act.
Comment: Several commenters recommended that manufacturers be
permitted to report AMP as the full price of the drug at the time the
drug is administered, even if installment payments would extend to
subsequent quarters. A few commenters recommended CMS clarify that any
installment that is forgiven under a VBP arrangement will be treated as
a lagged price concession for purposes of the AMP smoothing
methodology.
Response: Manufacturers must include the full price of the drug in
the quarter in which the drug is sold in the determination of AMP in
accordance with the definition of AMP at section 1927(k)(1) of the Act
regardless of the payment arrangements negotiated with payers. Both the
statutory and regulatory definition of AMP at Sec. 447.504(a) require
that AMP reflect ``the average price paid'' to the manufacturer for the
drug in the United States by wholesalers for drugs distributed to
retail community pharmacies and retail community pharmacies that
purchase drugs directly from the manufacturer. Installment payments do
not represent the price of the drug, but rather a partial payment of
the drug's price.
We also believe it is appropriate that an installment payment not
made because of a VBP arrangement outcome which would result in a
significant discount, be treated as a lagged price concession (as
defined at Sec. 447.502) for purposes of the determination of AMP in
accordance with Sec. 447.504(f)(3) and best price in accordance with
Sec. 447.505(d)(3).
Comment: One commenter recommended that until a manufacturer has
VBP arrangements in place that cover 50 percent of the treated disease-
state population, Medicaid should continue to exclude VBP arrangements
from the manufacturer's calculation of best price. Another commenter
recommended CMS implement standardized process for manufacturers to
correct best price data generated under a VBP arrangement.
Response: The proposed regulation did not propose that VBP
arrangements be excluded from the determination of best price.
Moreover, best price, as defined at section 1927(c)(1)(C) of the Act,
does not permit the exclusion of prices available under VBP
arrangements. Instead, we expanded Sec. 447.505(a) to revise best
price to state that a lowest price available from a manufacturer may
include varying price points for a single dosage form and strength as a
result of a VBP arrangement defined at Sec. 447.502. We further
discuss this policy in the multiple best prices section in the preamble
below.
Comment: A few commenters recommended that CMS require
manufacturers to provide separate payments for data collection and
monitoring services in VBP arrangements and to expressly characterize
them in the contract as either discounts or bona fide service fees paid
separately from the VBP contract. This separation will provide clarity
for all parties for legal and regulatory price reporting obligations
(for example, AMP and best price).
Other commenters noted that manufacturer payment to third parties
to track patient outcomes and fees associated with the administrative
services should be excluded from best price and AMP calculations and
reporting and requested CMS to provide guidance on the appropriate fair
market value reimbursement for pharmacy services provided under VBP
arrangements.
Response: We made no proposals about how manufacturers or other
parties pay for data collection and monitoring associated with VBP
arrangements in this rule. We believe payments for data collection and
monitoring services as part of a VBP arrangement should be addressed
during negotiations with the parties involved in the VBP arrangement.
Furthermore, if a manufacturer pays a fee to any entity for data
collection, administration or evaluation of a patient in a VBP
arrangement, the manufacturer should evaluate whether or not that fee
represents a fair market value for the service in accordance with the
definition of bona fide service fee at Sec. 447.502, as such fees
shall be excluded
[[Page 87020]]
from the determination of AMP and best price (see Sec. Sec.
447.504(c)(14) and (e)(5) and 447.505(c)(16)). Further discussion
regarding the definition of bona fide service fees and fair market
value is provided in the preamble (81 FR 5176 through 5181) to the COD
final rule.
Comment: One commenter requested that CMS clarify how a
manufacturer should structure rebates under VBP arrangements to account
for a delay in data for outcome measures.
Response: We understand that there may be a delay in the reporting
to a manufacturer of patient outcomes data under a VBP arrangement. We
expect that manufacturers, under a VBP arrangement that will result in
multiple best prices, will report to us a set of best prices that are
associated with outcomes or evidence based measures which will be used
for the Federal Medicaid drug rebate calculation. Based on the
agreement the state (or other payer) has with the manufacturer relative
to the VBP arrangement, states will report outcomes data to the
manufacturers when they are available, and states will receive Federal
Medicaid rebates based on the outcome measure observed in the quarter
it was measured. This means a state may experience revisions to the
initial Medicaid drug rebate paid to the state because of a failed
outcome for a patient that occurs after the drug has been administered,
and the initial rebate would need to be supplemented to account for one
of the multiple best prices as a result of the outcome of the VBP
arrangement. In other words, a prior period adjustment to a Medicaid
Federal rebate that has already been paid to the state may be
necessary.
k. Other Payment Models (Warranty, Pay-Over-Time, Subscription,
Indication-Based Pricing)
Comment: Several commenters encouraged CMS to provide that
additional innovative arrangements that could qualify under the
definition of VBP arrangements such as payment-over-time, license or
subscription arrangements, indication-based pricing, combination
pricing, warranty type models, subscription models and financial risk-
based models. One commenter suggested that CMS refine the definition of
VBP arrangements to allow payment-over-time arrangements that do not
rely on evidence- or outcomes-based measures and recommended that the
definition be revised to read: ``(1) an arrangement containing measures
(which can be outcome-based, evidence-based, or use other standards)
that link the cost of a drug product to a specific outcome in patient
or population, whether measures in health outcome, cost savings, or any
metric agreed to by the parties, or (2) payment over time arrangements
not contingent on specific health outcomes.''
Commenters also requested that ``warranty-type'' insurance models
(this model obligates a premium payment by the manufacturer to a health
plan to pay for a patient's future healthcare costs if the therapy
fails) be outside of the proposed definition of VBP and that the
revisions adding VBP arrangements to the proposed bundled sale
definition and multiple best price calculations would not apply to such
warranty models.
Some commenters suggested that some subscription models may not
meet the definition of VBP arrangements; however, those (subscription)
models that link to evidence-based or patient outcomes should be
included in the definition proposed by CMS.
Response: We recognize that there may be a variety of payment
models that industry may adopt that may, or may not satisfy the
definition of a VBP arrangement. We do not want to inadvertently narrow
the definition of VBP arrangements by identifying specific models or
structures and believe the definition of VBP arrangement in this final
rule is sufficiently broad to potentially capture the various
arrangements noted by the commenters when it would be appropriate.
We note that not all pay-over-time arrangements will meet the
definition of a VBP arrangement at Sec. 447.502. For example, while
there may be some pay-over-time arrangements that allow payers to pay
in increments based upon evidence-based or outcomes-based measures, we
do not agree that every pay-over-time or subscription model should be
considered in the definition of VBP arrangement. Some pay-over-time
measures are simply payment schedules negotiated between the
manufacturer and payer and do not have any linkage to the value of the
drug to the patient or selected population.
One of our main objectives is to ensure that any VBP arrangement
must include evidence-based measures that substantially link the cost
of a covered outpatient drug to existing evidence of effectiveness and
potential value for specific uses of that product; or, outcomes-based
measures that substantially link payment for the covered outpatient
drug to that of the drug's actual performance in a patient or a
population, or a reduction in other medical expenses. If one of these
models noted above satisfies the definition of a VBP arrangement, then
it may appropriately avail itself of applicable regulatory
flexibilities.
However, there are questions regarding whether the premiums paid by
the manufacturer to a third party can be excluded from, or included in,
best price when a manufacturer adopts a warranty-type models. Section
1927(c)(1)(C) of the Act defines best price, in part, to mean with
respect to a single source drug or innovator multiple source drug of a
manufacturer, the lowest price available from the manufacturer during
the rebate period to any wholesaler, retailer, provider, health
maintenance organization, nonprofit entity or governmental entity
within the United States, with certain exclusion applying. The
statutory definition of best price is implemented in regulation at
Sec. 447.505 and provides that a drug's best price be net of certain
transactions including incentives (see Sec. 447.505(d)(1)).
The premium paid by the manufacturer to a third party to warrant a
drug and provide benefits to payers and patients when certain clinical
or performance measures are not achieved serves as an incentive to
payers, providers, and patients to purchase the drug. Therefore, the
premium paid by a manufacturer reduces the drug's price, and must be
included in ``best price.'' However, the benefits paid by the third
party in the event the drug did not meet certain clinical or
performance measures are exempt from ``best price'' because payments
made from the third party to the payer do not represent a price
available from the manufacturer to any best price eligible entity as
provided in Sec. 447.505(a) and does not represent a manufacturer sale
to an AMP eligible entity consistent with Sec. 447.504(b) or (d).
Therefore, under this warranty model, a manufacturer would pay both
Section 1927 rebates for the drug, as well as pay for a premium for a
warranty policy, the value of which they would have to be included in
the calculation of their best price, regardless of whether the
manufacturer uses a VBP arrangement that results in multiple best
prices.
Comment: One commenter encouraged CMS to explore carving VBP
arrangements out of government price reporting metrics, while creating
a mechanism for direct payment of discounts to states could encourage
broader adoption of VBP arrangements.
Response: This comment is outside the scope of the rule.
Comment: A commenter requested clarification from CMS regarding
two-sided risk VBP arrangements and how they would operate within the
context
[[Page 87021]]
of the proposed Medicaid best price accommodations.
Response: It is not clear from the comment what is meant by two-
sided risk VBP arrangements. However, we believe that any adjustments
to the prices available from the manufacturer, including adjustments
made by the payer or manufacturer under a VBP arrangement, that adjust
the prices available from the manufacturer must be included in the
determination of best price as provided at section 1927(c)(1)(C)(ii)(I)
of the Act and Sec. 447.505(d)(3).
l. Other Concerns With VBP Arrangements
Comment: Many commenters recommended that CMS work with HHS OIG and
Office of Civil Rights (OCR) to provide guidance to address other
regulatory obstacles to uptake and operationalization of VBP
arrangements, including the Anti-kickback Statute, the Physician Self-
Referral Law (Stark Law), privacy laws (such as HIPAA), and civil
monetary penalty (CMP) rules relating to beneficiary inducements. A few
commenters suggested that CMS collaborate with HHS OIG to issue
guidance on relevant safe harbors to accommodate the collection and
sharing of patient outcomes data to evaluate VBP arrangements. A few
commenters requested that CMS clarify how safe harbors can accommodate
for, among other issues, the collection and sharing of data to
adjudicate a contract and VBP arrangements that tie payment to outcome
measures that are meaningful to manufacturers, payers, and patients but
that are not included in a drug's FDA-approved label.
Response: We appreciate the suggestions and will consider whether
additional guidance may be needed at a later date. Furthermore,
commenters concerns regarding safe harbors under HHS OIG should be
addressed directly with the OIG.
Comment: A few commenters requested CMS to clarify whether the new
flexibility for state Medicaid programs to enter into VBP arrangements
would include claims paid under, or could be applied to, Medicaid MCOs.
One commenter encouraged CMS to require Medicaid MCOs to have a VBP
agreement signed in the quarter preceding implementation based on their
belief that the requirement would address post facto adverse selection.
Response: Medicaid MCOs may enter into their own VBP arrangements
with manufacturers including the VBP arrangement offered by the
manufacturer on the commercial market. However, the prices negotiated
under those VBP arrangements would not be exempt from best price given
that the prices are not negotiated pursuant to a CMS- authorized
supplemental rebate agreement under the exclusion at Sec.
447.505(c)(7).
Comment: A commenter suggested that CMS should engage in a Request
for Information (RFI) process to gather more stakeholder feedback to
develop more detailed proposals before finalizing the proposed rule
definition of a VBP arrangement. One commenter noted that CMS' request
for public comment on additional measures to reflect value from a drug
therapy is indicative of a need for a RFI process prior to the release
of formal notice and comment rulemaking.
Response: We do not believe feedback via a RFI is necessary before
finalizing this rule as there are numerous manufacturers and payers
already involved in VBP arrangements and the goal of this rule was to
enhance flexibility around Medicaid drug rebate pricing rules for
manufacturers and payers as they enter into these arrangements. We
appreciated the suggestions that commenters gave regarding the measures
to determine a drug's value, which we hope will generate ideas and
considerations as manufacturers and payers continue participating in
VBP arrangements. CMS may consider issuing best practices in Medicaid
regarding VBP arrangements in the future based upon the experiences
realized by states, payers, and manufacturers.
Comment: A commenter recommends that CMS work with its fellow
agencies to develop and implement strategies and programs to improve
the availability, quality, and access to real-world data (RWD) for
research and other population health purposes and CMS should establish
privacy-related policy principles and recommendations to support the
use of RWD and real-world evidence to include patient-generated data
for clinical research, regulatory evaluation, and VBP decision-making.
The commenter further noted that CMS should collaborate with FDA on
ways to generate shared evidence in support of their (CMS) decisions.
Response: While the availability of data to measure and evaluate
drug therapies is an essential part of VBP arrangements, improving upon
the availability, quality and access of real world data for research
and other purposes, is outside the scope of this final rule.
Comment: One commenter recommended CMS consider creating a new type
of Healthcare Common Procedure Coding System (HCPCS) code, potentially
a modifier, associated with a gene therapy's HCPCS Level II code,
preferably issued at the time of FDA approval, which could be used to
report whether or not a health outcome was achieved to facilitate
payment and financial reconciliation of a value-based contract.
Response: The creation of new types of HCPCS codes associated with
this regulation is outside the scope of this final rule.
Comment: One commenter recommended that CMS require state Medicaid
agencies that enter into VBP arrangements to provide the manufacturers
with audit rights to any data collected for purposes of tracking
performance. The commenter noted that access to the data is important
to adjudicate the rebates associated with VBP arrangements and to
facilitate lessons learned for both parties.
Response: This final rule does not require state Medicaid agencies
provide manufacturers with the data collected for purposes of tracking
a drug's performance. This final rule focuses on providing
manufacturers and payers additional regulatory flexibility to enter
into VBP arrangements. We believe if manufacturers desire to seek audit
rights as part of the VBP arrangement, manufacturers may consider
negotiating these terms as part of the arrangement with the state.
Comment: One commenter noted the proposed rule facilitates uptake
of individual-level VBP arrangements for one-time or curative
treatments, rather than arrangements requiring population-based
approaches. The commenter also noted that without further
clarification, uptake of population-based VBP arrangements for chronic
conditions would be limited as a result of the administrative burden
born by payers and manufacturers to calculate the value of a drug at
the individual-level.
Response: We do not agree that the proposed rule facilitates only
individual level VBP arrangements for one-time or curative treatments
instead of population based approaches because the definition of VBP
arrangement does not make such limitations. We also believe that by
adopting a broad definition of VBP arrangement, manufacturers will have
the flexibility to develop VBP arrangements specific to either
individual or population-based approaches.
Comment: A few commenters expressed concern that payers may deny
coverage of FDA-approved therapies as a result of not meeting expected
outcomes for VBP arrangements, especially for gene therapies and
[[Page 87022]]
contraception. Another commenter requested CMS clarify that the lack of
a VBP arrangement does not release the state from the drug coverage
obligations of section 1927 of the Act.
Response: This final rule does not affect Medicaid coverage of
covered outpatient drugs as defined at section 1927(k)(2) of the Act.
States are required to cover all covered outpatient drugs of
manufacturers that participate in the MDRP, whether the state enters
into a VBP arrangement or not.
Comment: A few commenters recommended that CMS consider waiving
cost-sharing requirements for beneficiaries participating in VBP
arrangements or develop other approaches for sharing savings with
beneficiaries.
Response: This comment is outside the scope of this final rule.
After considering the comments received, we believe the definition
of VBP arrangement should be broad enough so that manufacturers and
payers, including states, have the flexibility to structure a VBP
arrangement specific to the drug therapy being offered. Therefore, we
are maintaining a broad definition to ensure such arrangements are
recognized for purposes of determining and reporting best price and
AMP; however, we agree with commenters that the evidence or outcomes-
based measures used in a VBP arrangement should be evaluated in a
select population and are therefore adding the term ``select'' before
populations in the definition to clarify that VBP arrangements are
specific to select population groups using the drug therapy, such as a
gene therapy specific to a patient with a particular type of cancer. We
are also adding the terms ``and/or'' between the two measures in the
definition to further clarify that either evidence-based or outcomes-
based measures could be used in a VBP arrangement. Furthermore, we
agreed with commenters concern that the parenthetical ``that is,
outcomes relative to costs'' is confusing given outcomes-based measures
are already part of the definition of VBP arrangement. Therefore, we
are removing it to reduce redundancy. Also, in response to commenters
concerns that the drug covered by the VBP arrangement has demonstrated
effectiveness, we are clarifying that VBP arrangements apply to covered
outpatient drugs; that is, products that satisfy the definition of a
covered outpatient drug, as defined at section 1927(k)(2) of the Act.
We are finalizing the definition of a VBP arrangement to mean an
arrangement or agreement intended to align pricing and/or payments to
an observed or expected therapeutic or clinical value in a select
population and includes, but is not limited to:
Evidence-based measures, which substantially link the cost
of a COD to existing evidence of effectiveness and potential value for
specific uses of that product; and/or,
Outcomes-based measures, which substantially link payment
for the COD to that of the drug's actual performance in patient or a
population, or a reduction in other medical expenses.
3. Inclusion of VBP as a Performance Requirement Under a ``Bundled
Sale''
As stated in the June 2020 proposed rule, one of the issues
manufacturers contend with in determining best price with the advent of
VBP arrangements is that a manufacturer's best price can be reset based
upon the outcome of a drug treatment for one patient or one unit of the
drug because of the VBP arrangement. When this occurs, the rebate due
for that single use of the drug during a quarter that results in a
negative outcome will reset the best price to a significantly lower
amount, sometimes zero, prompting a significantly higher rebate
(sometimes 100 percent of the drug's AMP). We have received stakeholder
comments and inquiries regarding how rebates or discounts as part of a
VBP arrangement could be considered in a bundled sale when determining
best price. Some manufacturers have made reasonable assumptions that
such discounts, as a result of a VBP, should be considered part of a
bundled sale as defined at Sec. 447.502.
In the COD final rule, we defined bundled sale at Sec. 447.502 as
any arrangement regardless of physical packaging under which the
rebate, discount, or other price concession is conditioned upon the
purchase of the same drug, drugs of different types (that is, at the
nine-digit NDC level) or another product or some other performance
requirement (for example, the achievement of market share, inclusion or
tier placement on a formulary), or where the resulting discounts or
other price concessions are greater than those which would have been
available had the bundled drugs been purchased separately or outside
the bundled arrangement. Specifically, the discounts in a bundled sale,
including those discounts resulting from a contingent arrangement, are
allocated proportionally to the total dollar value of the units of all
drugs or products sold under the bundled arrangement. Also, for bundled
sales where multiple drugs are discounted, the current definition
indicates that the aggregate value of all the discounts in the bundled
arrangement must be proportionally allocated across all the drugs or
products in the bundle. (See Sec. 447.502; 81 FR at 5182.) We noted
that we understand that based on the bundled sale definition, which
provides that the rebate, discount or other price concession is
conditioned upon the purchase of the same drug, drugs of different
types, or another product or some other performance requirement, some
manufacturers have made reasonable assumptions to take into account the
discounts from a VBP arrangement that has a performance requirement
when a measure (such as a performance-based measure) is not met. When
manufacturers recognize the VBP arrangement as a bundled sale, the
manufacturer, for example, may assume that the discount that resulted
from a performance requirement of a single unit is distributed
proportionally to the total dollar value of the units of all the drugs
sold in the bundled arrangement. This smooths out the discount over all
the units sold under the arrangement in the rebate period and does not
reset the manufacturer's best price based upon the ultimate price of
one unit of a drug.
For example, a manufacturer could structure a VBP arrangement such
that to qualify for a patient outcome rebate, the bundled sale VBP
arrangement requires the sale of 1000 units of the same drug at $200
per unit, and if one patient fails to achieve an outcomes-based
performance measure the manufacturer agrees to a $100 price concession
on that one unit. In this example, because all of the drugs in the
bundle were subject to the performance requirement, the manufacturer's
scheme qualified as a bundled sale VBP arrangement, and thus, the
manufacturer's rebate of $100 on that one unit would be allocated
across all units in that bundled sale as follows:
1000 units x $200 = $200,000-$100 price concession = ($199,900/1000
units) = $199.90.
Best price could be set at $199.90 if that $100 rebate available in
a qualifying bundled sale resulted in the lowest price available from
the manufacturer, and not at $100 ($200/unit-$100).
We agree with the applicability of the bundled sale definition in
this context because it will permit manufacturers to have a best price
that is not based upon the failure of one patient taking the drug.
Therefore, to facilitate the appropriate application of a bundled sale
offered in the context of a VBP arrangement to the best price
determination, we proposed to revise the definition of bundled sale at
Sec. 447.502 to add paragraph (3) that
[[Page 87023]]
states VBP arrangements may qualify as a bundled sale, if the
arrangement contains a performance requirement such as an outcome(s)
measurement metric. We noted that we expect manufacturers, consistent
with the manufacturer recording keeping requirements at Sec.
447.510(f), to maintain documentation of the VBP arrangement, including
documentation of how the programs meets the new definition of VBP
arrangement, to support their calculation of AMP and best price.
We received the following comments on the definition of bundled
sale in Sec. 447.502.
Comment: Many commenters expressed support for CMS' proposed
changes to the bundled sale definition which would permit manufacturers
to allocate discounts or price concessions as a result of a VBP
arrangement across a bundled sale. Several commenters expressed support
for the proposed revision to the definition of bundled sale to include
the ``performance requirement'' and that the bundled sale authority
requires a VBP with a performance requirement, like an outcomes metric,
but noted that the performance requirement does not need to be an
outcomes metric as set forth in the VBP arrangement definition. Another
commenter disagreed with the inclusion of the performance requirement
and requested that CMS consider changing the language ``if the
arrangement contains a performance requirement such as an outcome(s)
measurement metric'' to explicitly state ``a value-based purchasing
(VBP) arrangement may be treated as a bundled sale.''
Response: We appreciate the support and suggestions related to the
proposed revisions to the bundled sale definition at Sec. 447.502. We
agree with the commenters, and are revising the proposed definition to
remove ``if the arrangement contains a performance requirement such as
an outcomes measures metric'' because this phrase is redundant to the
definition of VBP arrangement defined at Sec. 447.502 which already
requires VBP arrangements include outcomes based measures. We also note
that the measures listed in the preamble to the proposed rule (85 FR
37292) are examples for manufacturers to consider and we do not intend
to limit VBP arrangements to only those examples.
Comment: A few commenters requested CMS to clarify in the
regulations that the ``VBP arrangement'' referenced in the bundled sale
proposed regulatory text is or is not associated with the proposed
definition of VBP arrangement to be codified at Sec. 447.502.
Response: The definition of VBP arrangement, as finalized at Sec.
447.502 by this final rule, will apply to the bundled sale definition.
Comment: Several commenters did not support the proposed changes to
the definition of bundled sale. One commenter noted this change would
make the best price requirement ``highly vulnerable to manufacturer
gaming and inaccurate reporting that could substantially reduce or
delay drug rebate payments.'' Another commenter opined that the
proposed changes would ``water down existing discounts, raise best
price and lower rebate amounts.'' One commenter expressed the belief
that the proposed changes would permit manufacturers to offer a low
price to commercial purchasers and payers that would not be available
to Medicaid.
Response: It is not completely clear what the commenter means by
``gaming''; however, we do not agree that this clarification to the
bundled sale definition makes it highly vulnerable to manufacturer
gaming in the context of best price or AMP that would reduce Medicaid
drug rebates. Some manufacturers have already been allocating discounts
in a bundled arrangement as a result of a performance requirement under
a VBP arrangement using reasonable assumptions and have shared those
approaches with CMS. While we have not opined on those manufacturer-
specific approaches, we have not detected any significant impact on
these manufacturers' best price or AMP, or decreases in Medicaid drug
rebates. Manufacturers continue to be potentially subject to penalties,
including CMPs, for failure to follow pricing and product reporting
requirements.
The clarification made to the definition of bundled sale was
necessary to specifically address situations when best price is reset
based upon the outcome of a drug treatment for one patient or one unit
of the drug because of the VBP arrangement. As stated in the preamble
to the proposed rule, a single use of the drug in a patient can result
in a negative outcome which will reset the best price to a
significantly lower amount, sometimes zero, prompting a significantly
higher Medicaid drug rebate for the manufacturer (sometimes 100 percent
of AMP) (85 FR 37292). We believe the impact of these significantly-
higher Medicaid drug rebate deters manufacturers from offering VBP
arrangements on the commercial market, as well as Medicaid.
Comment: A few commenters stated that manufacturers should not be
permitted to mix prices under a VBP arrangement with those under a non-
VBP arrangement. Another commenter recommended the bundled calculation
occur at the individual purchaser and individual VBP contract level and
that best price for an individual purchaser should equal the average
price paid per unit after including (or stacking) all discounts that a
purchaser received, whether the discounts were within or outside of a
VBP arrangement. One commenter requested from CMS a clearer definition
of ``proportional allocation'' of discounts within a bundled sale
arrangement with regards to VBP arrangements. Another commenter
expressed concern that the proposed rule does not adequately address
how stacked discounts would be handled in a bundled arrangement,
allowing manufacturers to use evidence-based VBP to spread stacked
discounts across all purchases, ultimately, in the commenter's opinion,
reducing Medicaid rebates.
Response: The definition of bundled sale at Sec. 447.502(1)
indicates that discounts in the bundled sale, including those discounts
resulting from a contingent arrangement, are allocated proportionally
to the total dollar value of the units of all drugs or products sold
under the bundled arrangement. The policy that is being finalized in
this rule is that VBP arrangements may qualify as a bundled sale.
Therefore, if the manufacturer determines that its VBP arrangement
qualifies as a bundled sale, the manufacturer allocates the VBP
discounts in the VBP arrangement so that it is proportional to the
total dollar value units of all drugs or products sold under the
bundled arrangement to the best price (or AMP) eligible entity. Any
discounts provided for those units sold to the best price (or AMP)
eligible entity outside of the VBP arrangement would not be part of the
allocation. Moreover any non-VBP discounts provided to the best price
(or AMP) eligible entities should be considered when determining the
actual price realized by the entity and would not be part of the
bundled sale allocation. That is, the single actual price realized by
the entity for the quarter when using a bundled sales approach for a
drug would have to be considered by the manufacturer along with any non
VBP prices for the same drug.
Comment: A commenter suggested that aggregation of sales and
discounts across purchasers under a VBP arrangement to arrive at a
bundled sales best price should only be allowed for very small
purchasers (such as when that the number of patients expected to take
the drug is extremely low). Another commenter requested that CMS change
[[Page 87024]]
the rule to require manufacturers to include all VBP rebates in the
calculation of a single best price using the bundled sale methodology.
Response: We appreciate the comments; however, we do not agree that
the bundled sales approach only applies in certain situations (for
example, drug usage in a small number of individuals) or that all
discounts of a VBP arrangement could be used in the calculation of a
single best price using the bundled sale methodology. Manufacturers may
determine that they want to work with one or more different best price
eligible entities on a VBP program using a bundled sales approach,
whether a small number or large number of patients are involved for
each best price eligible entity. Manufacturers would have a distinct
price for each entity, taking into account price concessions or
discounts inside and outside of the bundled sale arrangement available
to the entity, and compare the prices amongst all eligible entities in
a quarter to determine the product's lowest price available. That
lowest price available amongst the best price eligible entities would
presumably be the best price.
We do not believe that the statute supports the inclusion of all
VBP prices offered by a manufacturer into the calculation of a single
best price under a bundled sales methodology, as the determination of a
best price is based on a lowest price available to a specific best
price eligible entity, not a price that is an aggregation of sales/
discounts/rebates across multiple entities as suggested by the
commenter.
Comment: A few commenters expressed concern that the bundled sales
approach may not be a workable approach to determining best price
because VBP arrangements involving very small patient populations, such
as gene therapy or drug therapies that treat rare and orphan diseases,
and may not be able to take advantage of the smoothing effect of the
bundled sale methodology. Commenters requested whether manufacturers
may choose either a bundled or multiple best price approach or whether
the manufacturer may determine both depending on the preferences of
their negotiating partners and the product characteristics.
Response: We agree that the manufacturer may not want to use the
bundled sale approach based upon the characteristics of the drug, such
as drugs that treat small populations, rare and orphan disease drugs,
and certain gene therapies covered under its VBP arrangement. As
discussed in this section, the definition of bundled sale at Sec.
447.502 is being finalized to state that VBP arrangements may qualify
as a bundled sale. We believe manufacturers may choose between the
bundled sale arrangement approach to calculating best price, or use the
multiple best price reporting approach, understanding that it is
dependent upon the design of a manufacturer's VBP arrangement such as
the product and population characteristics of the drug therapy offered
under the VBP arrangement, and whether that arrangement meets the
regulatory definition of a VBP arrangement.
We believe that the concern regarding treating small populations
will be addressed by the reporting of multiple best prices approach.
For example, in the event a state enters a VBP agreement with a
manufacturer and a single Medicaid beneficiary has an outcome that
results in a very high rebate under the VBP arrangement, the best price
used by the manufacturer to set the rebate for that single unit
dispensed will be based upon the VBP arrangement best price for that
specific outcome. All other Medicaid units dispensed during a quarter
that are eligible for rebates but not dispensed to Medicaid
beneficiaries enrolled in the VBP arrangement will reflect the best
price outside of the VBP arrangement.
Comment: One commenter requested CMS consider replacing the phrase
``may qualify as a bundled sale'' with ``may constitute a bundled
sale'' as it is the commenter's opinion that the term ``qualify''
appears to invite a degree of judgment on a matter where there is no
clear arbiter.
Response: Bundled sale is already specifically defined in
regulation at Sec. 447.502. We believe manufacturers will need to
determine whether or not their VBP arrangement qualifies as a bundled
sale, and do not believe the suggested regulatory text change is
necessary, as we do agree a degree of judgement is required to
determine whether a VBP arrangement should be viewed and treated as a
bundled sale.
Comment: One commenter noted VBP bundling regulations do not
address pro-rating, which may prove burdensome for manufacturers and
may increase the possibility of gaming.
Response: This comment is outside the scope of this rule.
Comment: A commenter requested CMS to clarify whether outcomes-
based measures created under bundled sales arrangements meet the
proposed definition of a VBP arrangement.
Response: A manufacturer may use a bundled sales approach if the
payer's or purchaser's rebate or discount is, among other situations,
contingent on the existence of a performance requirement. We are
finalizing in this regulation that a VBP arrangement could qualify as a
bundled sale. Going forward after the effective date of this
regulation, a VBP arrangement that does not meet the definition of VBP
arrangement in this regulation (which would include evidence and/or
outcomes-based measures) will not be recognized as part of the bundled
sale definition.
After consideration of the comments received, we are finalizing
subparagraph (3) of the definition of bundled sale to remove the phrase
``if the arrangement contains a performance requirement such as an
outcome(s) measurement metric'' and read, ``Value-based purchasing
(VBP) arrangements may qualify as a bundled sale.''
4. Definitions--Best Price (Sec. 447.505(a)) and Reporting of Multiple
Best Prices, Adjustments to Best Price (Sec. 447.505(d)(3))
In the preamble to the COD final rule (81 FR 5253), we indicated
that we recognized the value of pharmaceutical VBP arrangements in the
marketplace, and that we were considering how to give specific guidance
on this matter, including how such arrangements affect a manufacturer's
``best price.'' In addition to CMS, States, manufacturers, and
commercial payers all have an interest in making new innovative
therapies available to patients, and we have heard that there are
challenges with the current interpretation of statutes and regulations
for how ``best price'' can affect the availability of VBP arrangements.
Because the statute was drafted more than 30 years ago, when such
arrangements were not prevalent in the market, it is understandable
that such interpretations by CMS to date regarding ``best price'' have
been limited to one ``best price'' per drug.
The Medicaid statute defines best price in relevant part to mean,
for a single source drug or innovator multiple source drug of a
manufacturer, the lowest price available from the manufacturer during
the rebate period to any wholesaler, retailer, provider, HMO non-profit
entity, or governmental entity within the United States, with certain
exclusions enumerated at sections 1927(c)(1)(C)(i)(I) through (VI) of
the Act. Historically, we have interpreted this language to result in
only one best price per drug. The current Medicaid ``best price''
regulation at Sec. 447.505 generally tracks the statutory language,
but reads in relevant part that ``best price'' means, for a single
source drug or innovator multiple source drug, the lowest price
available from the manufacturer during the rebate period in any pricing
[[Page 87025]]
structure (including capitated payments), in the same quarter for which
the AMP is computed (emphasis added).
The current regulation is interpreted further in the preamble
language to the COD final rule and MDRP releases where we have
indicated that the lowest price available means the lowest price
``actually realized'' by the manufacturer or the lowest price at which
a manufacturer sells a covered outpatient drug--that is, one lowest
price available per dosage form and strength of a drug. Applied to the
VBP arrangement context, this interpretation could result in setting a
best price that is either at a greatly reduced price or possibly zero,
if a single dosage form or strength dispensed to one patient is subject
to a full or very large rebate under a VBP arrangement.
Thus, we need to reconcile the interpretation of the statute in
regulation, which currently contemplates that for any quarter, the
``best price'' is a single price for each dosage form and strength of a
drug that represents the actual revenue realized by the manufacturer
for that drug--in any pricing structure offered by the manufacturer
(such as capitated payments)--with the realities of the current
evolving marketplace which contemplate that multiple prices could be
made available by the manufacturer for a particular drug based on the
drug's performance (such as the case with VBP arrangements that use
evidence or outcomes-based measures) in a quarter.
In that regard, because VBP and other innovative payment
arrangements sometimes result in various price points for a dosage form
and strength of a single drug or therapy being available in a quarter,
we proposed to reflect this possibility in the June 2020 proposed rule.
Specifically, we proposed that a single drug may be available at
multiple price points, each of which may establish a ``best price'',
based on the relevant or applicable VBP arrangement and patient
evidence-based or outcome-based measures.
We explained in the June 2020 proposed rule that we believed we
have this authority because we previously interpreted the statutory
definition of best price at Sec. 447.505(a) to reference the best
price ``in any pricing structure,'' contemplating the possibility of
various pricing structures, such as capitated payments. With the new
VBP pricing structures that are available in the marketplace, we
believe it is appropriate and reasonable to further interpret what
pricing structures are available, and account for new VBP pricing
structures, which may include introducing the offering of a drug at
multiple price points. That is, we proposed to expand our
interpretation of ``in any pricing structure'' and also the term
``lowest price available'' by proposing that the price realized in a
VBP arrangement by the manufacturer when a measure is not met for a
single patient would not reset the best price for the drug in the
quarter. That is, a single patient failure on the drug, or lack of
attainment of an expected clinical outcome, would not result in the
manufacturer having to give that same rebate as a result of the VBP
arrangement to Medicaid for that drug as they would have to give to the
commercial plan in which that patient was enrolled. However, if a state
chooses to participate in the VBP arrangement offered by the
manufacturer, the state could receive a URA for each patient's
particular outcome that is reflective of the VBP arrangement best
price.
Rather, we proposed that, given our interpretations of the
statutory phrase ``lowest price available'', and the phrase ``in any
pricing structure'' at 42 CFR 447.505, that multiple prices could be
realized by the manufacturer for the same drug in a quarter when the
prices are tied to a particular VBP outcomes structure. Therefore,
multiple price points (price points are offered and available as a
result of a VBP program, and price points absent a VBP program) may be
reported for one dosage form and strength in a rebate period.
Manufacturers could offer the same or a different set of best price
points each quarter for a drug, and those best price points would be
applicable to the patient to whom the drug was administered in that
particular quarter. Any future best price adjustments for that patient
would be reflected in the outcomes that the patient achieves over the
period of time of the VBP arrangement, and any price adjustments due to
the state (if they participate in the VBP arrangement) would be based
on the additional best price rebates reported in that quarter by the
manufacturer in which the drug was first administered. Manufacturers
would have to make any adjustments to both sets of best prices (VBP and
non-VBP best prices) reported if any adjustments are made by the
manufacturer subsequent to the quarter in which they are reported.
As an example, when a manufacturer offers a VBP arrangement, and
the state chooses to participate, the manufacturer would report a
single best price for the drug for the quarter for sales of the drug in
that quarter (a non-VBP arrangement best price), and in addition, the
manufacturer would also report a distinct set of ``best prices'' that
would be available based on the range of evidence-based or outcomes
measures for that drug that are possible under the VBP arrangement.
The manufacturer would provide a best price rebate to the state in
the quarter in which the drug is administered, and then could offer
varying additional rebates based on a patient's response after the drug
is administered. The calculated additional MDRP rebate due to the state
using the VBP best price would be a function of whether or not the
Medicaid rebate is being paid on a unit of a drug dispensed to a
Medicaid patient that participated in a VBP, and the level of rebate
associated with that patient's outcome. The additional rebate paid for
that patient would only represent the amount of rebate due to the state
from the manufacturer for that patient, not all patients. That is, the
rebate would be specific to that patient's outcome and that price
actually realized by the manufacturer, as that price is the lowest
price available from the manufacturer based on that patient's outcomes.
Otherwise, the best price used in the Medicaid rebate formula would
mirror the lowest price available absent a VBP arrangement.
Therefore, we proposed to further interpret the regulatory language
``in any pricing structure'' to include VBP arrangements. Then, we
proposed to interpret the statutory and regulatory phrase ``lowest
price available'' as used in the definition of best price, to permit,
in the context of a VBP arrangement, to include a set of prices at
which a manufacturer makes a product available based on that pricing
structure. This being the case, we proposed that the definition of best
price be expanded at Sec. 447.505(a) to provide that a lowest price
available from a manufacturer may include varying best price points for
a single dosage form and strength as a result of a VBP (as defined at
Sec. 447.502). We noted that we understand the operational challenges
this may bring to MDRP systems and that it will take us time to make
such system changes. We solicited comments on the proposal, its impact
on the MDRP, the commercial market, and its operational implications.
Specifically, we requested comments regarding the potential impact of
these changes on supporting payment innovation and health care quality.
We also sought comment on steps which would be needed by manufacturers
and states to implement these Best Price changes, including how states
would track health outcomes for Medicaid beneficiaries to align with
the outcomes developed in a private market VBP.
[[Page 87026]]
Also, to provide consistency between AMP and best price, as we did
in the COD final rule (81 FR 5170), we proposed to revise Sec.
447.505(d)(3) to make it consistent with Sec. 447.504(f)(3). Section
447.504(f)(3) provides that the manufacturer must adjust the AMP for a
rebate period if cumulative discounts, rebates, or other arrangements
subsequently adjust the prices actually realized to the extent that
such cumulative discounts, rebates, or other arrangements are not
excluded from the determination of AMP by statute or regulation. We
proposed to add a similar qualifying phrase at the end of Sec.
447.505(d)(3) to state that the manufacturer must adjust the best price
for a rebate period if cumulative discounts, rebates or other
arrangements subsequently adjust the prices available, to the extent
that such cumulative discounts, rebates, or other arrangements are not
excluded from the determination of best price by statute or regulation.
We believe this is consistent with the requirement at section
1927(c)(1)(C)(ii)(I) of the Act, which provides that best price shall
be inclusive of cash discounts, free goods that are contingent on any
purchase requirement, volume discounts and rebates, and therefore, best
price must account for these to the extent they are not excluded by
statute or regulation.
We received the following comments on the definitions--Best Price
(Sec. 447.505(a)) and Reporting of Multiple Best Prices, Adjustments
to Best price (Sec. 447.505(d)(3)).
Comment: A few commenters expressed support for CMS' proposed
changes regarding the reporting of multiple best prices, specifically
regarding adjustments for cumulative discounts, rebates or other
arrangements. Several commenters also suggested alternative approaches
to CMS' proposals for best price and reporting of multiple best prices
such as:
Include all payments related to VBP arrangements,
including administrative fees, in the best price calculation.
Allow the discounts across various VBP agreements to be
pooled together to create an Average Best Price from the VBP agreements
or pool outcomes (both successes and failures) across all VBP
agreements and apply them to the most favorable VBP agreement to
determine a VBP Best Price.
Require manufacturers to report only one VBP best price in
any given quarter in addition to the current best price calculations.
Use CMS authority under the MDRP to provide technical
clarifications about how best price could be reasonably reported under
contracts in which discounts vary based on patients' clinical outcomes,
without eliminating or dramatically weakening the best price
requirement.
Provide incentives to manufacturers to have VBPs for all
new curative therapy drugs for a defined period (for example, 5 years)
following a drug's approval, applicable to all Medicaid recipients.
Administer value-based payments and best price as a true-
up model that would allow state Medicaid programs to continue to obtain
whatever best price was agreed to at the time a VBP was created and
that, by updating the definition of VBP and extending the Best Price
adjustment period for VBP only, they would allow for a true-up/rebate
adjustment for the MDRP.
Response: We appreciate the support for the proposed changes to
best price and the alternatives proposed by commenters, and may
consider them in future rulemaking. We are finalizing our proposal that
manufacturers be permitted to report multiple best prices based upon
commercially-available VBP arrangements made available to states that
satisfy the regulatory definition of a VBP arrangement. We believe that
we have attempted to address via this regulation technical
clarifications about how best price could be reasonably reported
without eliminating or dramatically weakening the best price
requirement. That is, by permitting manufacturers to report multiple
best prices in accordance with Sec. 447.505(a) for VBP arrangements
offered to states that satisfy the regulatory definition of a VBP
arrangement we are finalizing in this rule, it guarantees those states
that agree to participate receive the best price under the VBP
arrangement. Furthermore, as explained in section II. G. of this final
rule, we are finalizing a policy to permit manufacturers to request a
change as a result of a VBP arrangement, as defined in Sec. 447.502,
outside of the normally applicable requirement to report within 12-
quarters from the quarter in which the data were due, when the outcome
must be evaluated outside of the 12-quarter period. Otherwise, states
that do not participate will continue to receive a Medicaid rebate
based upon the non-VBP best price as reported by the manufacturer.
Comment: Several commenters did not support the proposed changes to
best price reporting and stated that these changes violate the Medicaid
rebate statute, exceed CMS's authority, and disregard Congressional
intent. A few commenters noted that the proposed MDRP best price
requirements undermine competition and recommended CMS consider
additional reforms to the MDRP to correct the impact it has had on drug
market dynamics. One commenter noted that the current Medicaid rebate
program is an effective tool for states to control drug prices, combat
inflation and egregious price increases and to allow multiple best
prices would put states at risk for incorrect price reporting. Several
commenters expressed opposition to CMS' proposed changes regarding the
language ``in any pricing structure'', and noted that CMS' proposal is
inconsistent with the Medicaid Drug Rebate statute's definition of best
price and contrary to CMS's treatment of other similar transactions in
AMP and best price. Another commenter noted that the proposal
contradicts the best price statute citing their belief that ``lowest
price'' is understood to be a single lowest price. A few commenters
noted that the proposal does not limit the number of unique VBP
arrangements a manufacturer may create, nor does it limit the number of
pricing tiers within each VBP arrangement and believes that the
segmentation this creates significantly weakens best price protection,
while one commenter stated that the proposed changes would create
higher rebates across all Medicaid units.
Response: We do not believe the policy permitting manufacturers to
report multiple best prices in accordance with Sec. 447.505(a) for VBP
arrangements offered to states that satisfy the regulatory definition
of a VBP arrangement we are finalizing in this rule weakens the best
price requirement or exceeds our authority. As discussed above,
manufacturers will be required to continue to report, and states not
participating in the VBP arrangement would be able to access, a
separate best price based upon prices available outside of the VBP
arrangement to best price eligible entities for the dosage form and
strength of the drug. If a manufacturer chooses not to offer a VBP
arrangement to states, or simply chooses not to report multiple best
price points resulting from a VBP arrangement, then manufacturer
reporting would follow all existing laws and regulations regarding the
best price determination.
We reiterate that states will not be required to participate in
these VBP arrangements and in cases when a manufacturer is reporting
multiple best prices pursuant to a VBP arrangement will receive a
Medicaid drug rebate based upon the non-VBP best price for the drug for
the quarter in which the drug is administered. The final policy simply
permits manufacturers to report
[[Page 87027]]
a distinct set of multiple best prices for a VBP arrangement (or
multiple sets if there is more than one in the marketplace), in
addition to reporting a single best price for the drug not affiliated
with a VBP arrangement. This ensures that when a state agrees to
participate in one of the manufacturer's VBP arrangements, the
additional rebates that could be paid to a state reflects the best
prices associated with the VBP arrangement. We reiterate that the
initial rebate to all states in the quarter in which the drug is
administered, under either the non VBP or VBP arrangement, will be at
least equal to the greater of 23.1 percent of the AMP or AMP minus best
price (be it a multiple best price or the non-VBP best price).
In order to report multiple best prices, the manufacturer must make
available to the states the VBP arrangement (or multiple VBP
arrangements) being offered on the commercial market. States may have
the option to participate in that VBP arrangement. Manufacturers may
also choose not to report multiple best prices approach for their VBP
program, and follow existing rules, or, as appropriate, choose another
approach to determining best price (and AMP) such as the bundled sales
approach. For example, when a manufacturer follows the bundled sales
approach, the manufacturer will not report multiple best prices
associated with the arrangement and will report one best price using
the bundled sales approach. Please see the discussion in section
II.G.3. of this final rule, for a more detailed explanation of the
bundled sales approach to VBP arrangements.
The rationale for the proposed changes is to give manufacturers the
ability to offer VBP arrangements to commercial payers and Medicaid
without having the current interpretation of best price result in
disincentives for manufacturers to offer these innovative pricing
strategies because doing so could dramatically increase their Medicaid
drug rebates based on a single sale.
The expanded interpretation of best price, such that a manufacturer
could offer multiple best prices for a single dosage form and strength
of a drug, in addition to a non-VBP best price, is consistent with the
statute, as the MDRP was structured to reduce the cost of drug
therapies to all states by allowing Medicaid to take advantage of the
negotiating abilities of the private sector. Given the evolution in the
marketplace since the original law was drafted in 1990, and the
availability of new expensive gene therapies that could have different
clinical outcomes in different patients, we believe that it is
reasonable for the agency to make an interpretation of the statute and
regulations that the ``lowest price available'' ``in any pricing
structure'' could be interpreted as a VBP arrangement under which
different prices are available based on different outcomes.
Comment: A few commenters noted the proposed changes to multiple
best price reporting structure will increase burden on manufacturers.
One commenter noted that reporting individual patient prices would not
add value to the healthcare system and would create an unnecessary
administrative burden upon both CMS and manufacturers.
Response: We do not agree that there is unnecessary burden on
manufacturers as we are not requiring manufacturers engage in VBP
arrangements or report individual patient prices under this final rule.
Instead, this rule gives manufacturers the ability to report more than
a single best price (multiple best prices), at their option, when
offering a VBP arrangement on the commercial market that they also
offer to states. State Medicaid programs will have the option to either
participate or not in the commercially available VBP arrangement.
Therefore, the change does not place any additional burden on
manufacturers or the states, but rather establishes a tool (the ability
to report more than one best price) to reduce the disincentives for
manufacturers to offer these innovative pricing strategies because
doing so could dramatically increase their Medicaid drug rebates based
on a single sale.
Comment: Some commenters noted that CMS should determine if the
proposed new options in best price reporting will complement, or
perhaps inspire, private sector innovations in reinsurance, stop-loss
protection and other business insurance products that will make VBP
arrangements feasible for payers.
Response: These comments are outside the scope of this rule.
Comment: One commenter recommended CMS remove the option to report
multiple best prices in VBP arrangements, and instead use the bundled
sale methodology to incorporate all VBP best prices into one URA, such
that commercial VBP payments are not treated differently from any other
rebate and limit the number of VBP arrangements a manufacturer may
offer.
Response: We do not believe using the bundled sale approach will be
workable for all manufacturers in all situations, which is why we
proposed the change to the determination of best price to permit
multiple best prices. Specifically, certain manufacturers of drugs
indicated for use in limited populations will not have a large number
of sales in a quarter to spread out discounts as a result of a bundled
sale. This being the case, a VBP arrangement that results in a
significant discount (for example, 75 percent discount) will impact
best price significantly if only 1-3 units are dispensed per quarter.
Comment: Several commenters requested clarifying guidance regarding
the best price and inclusion of prices from VBP arrangements, as well
as the reporting requirements, operational timelines, and the treatment
of non-VBP arrangement rebates. A few commenters recommended that CMS
update the DDR system to accommodate non-manual reporting of multiple
best prices to align with the effective date of the final policy and
ensure such system updates accommodate products with both VBP and non-
VBP arrangements. A few commenters requested more guidance on CMS' URA
reporting mechanism and methodology.
Some commenters recommended CMS not finalize the proposed change to
the definition of best price that includes a reference to ``varying
price points'' until guidance has been developed and all of the
implications on program integrity and other prices have been thoroughly
considered. Several commenters urged CMS to establish clear and
specific regulatory provisions for codification in the CFR for
manufacturers to follow in applying the multiple best prices authority
set forth in the proposed rule.
A few commenters also expressed concern regarding the operational
implications for manufacturers with CMS' proposals related to best
price reporting, as well as the possible resource constraints that, in
their opinion, may be too great to overcome. One commenter noted that
the multiple best price approach imposes an unreasonable administrative
burden on VBP arrangement participants because a drug manufacturer
would require data from PBMs and health plans with sufficient detail to
support a per product, per customer, per quarter, per unit price to
report and certify an accurate best price. Many commenters noted
additional resources, including staffing and information technology may
need to be invested by CMS, payers, and manufacturers to support the
proposed price reporting methodology, with a few commenters further
suggesting CMS utilize a single federal contractor to
[[Page 87028]]
monitor VBP arrangements available in the market and support data
collection and analysis; and allowing multi-state VBP contracts to
support pooling of state administrative resources and a larger pool of
covered lives for VBP negotiations. One commenter cautioned that the
proposal would introduce complexities that would outweigh the benefits
for states that the proposal envisions and instead proposed that CMS
adopt the weighted average multiple best price calculation as
facilitated by the revised bundled sales provision.
Response: We agree with the commenters regarding the operational
and administrative challenges for CMS, manufacturers, states and payers
and we intend to provide additional necessary technical and operational
guidance regarding various aspects of the program, such as the
reporting of multiple best prices in MDRP systems. In addition, we have
decided to delay the effective date of the revised definition of best
price at Sec. 447.505(a) until January 1, 2022, which will permit
manufacturer reporting of varying best price points for a single dosage
form and strength as a result of a value based purchasing arrangement
that meets the definition at Sec. 447.502.
The delayed effective date of this new policy is the direct result
of many commenters who described some of the implementation
complexities with this new approach. Over the next year, states, CMS,
manufacturers and payers will need to make the necessary policy,
clinical, contractual, system, and administrative modifications that
will be necessary to give the program the best chance for success. We
expect manufacturers may want to initially focus the development of
these VBP programs on those drugs and therapies that are the most
expensive to the Medicaid program, such as gene and cell therapies, and
accelerated approval drugs, so that the VBP arrangement can have the
most potential impact on making these drugs more available to Medicaid
patients.
Comment: A few commenters requested clarification as to whether the
manufacturer reporting multiple best prices is voluntary and requested
clarification that if a state does not want to track outcomes or
participate in a VBP arrangement, their best price will automatically
revert to the traditional method as calculated based on the price of
the therapy when it is sold outside of a VBP arrangement.
Response: Manufacturers that want to report multiple best prices
associated with its VBP arrangement must offer those VBP arrangements
to the states. Otherwise manufacturers will not be permitted to report
multiple best prices for their VBP arrangements. If a manufacturer does
not want to offer the VBP arrangement to the states, it will only be
permitted to report one best price for that drug or biological, and
that best price must be inclusive of any and all prices as a result of
a VBP arrangement offered on the commercial market. When manufacturers
offer the VBP arrangement to the states, states will have the option to
enter into these VBP arrangements and be guaranteed a Medicaid rebate
based upon the multiple best prices. Or, the state may opt not to
participate and continue to receive Medicaid drug rebates calculated
based on the best price of the drug outside of a VBP arrangement and
that rebate would not be impacted by the multiple best prices reported
by the manufacturer for its VBP arrangement.
States that choose not to participate in the VBP arrangement that
the manufacturer has made available under the multiple best price
approach may want to consider entering into their own CMS-authorized
VBP supplemental rebates agreement with the manufacturer. States will
need to ensure that a supplemental rebate agreement with the
manufacturer is approved by CMS via the existing SPA template process.
Rebates received as a result of the CMS-authorized supplemental rebate
agreement will be exempt from best price.
Comment: A few commenters urged CMS to clarify that states do not
need to seek SPAs to enter into VBP arrangements, whether based upon
manufacturer arrangements with commercial payers or on their own.
Response: States are not required to submit a SPA if they seek to
enter into VBP arrangements offered by manufacturers as part of the
multiple best price approach as these arrangements are not CMS-
authorized SRAs. States that wish to enter into their own VBP
arrangements with manufacturers, where such prices would be exempt from
best price, will continue to be required to submit a template that CMS
can approve as part of a SPA process.
Comment: Several commenters wanted states to be protected under the
expansion of the definition of best price. Several commenters asserted
the proposed changes could bar states from benefiting from the best
price under VBP arrangements if a manufacturer chooses to report a
range of best prices rather than through a bundled sale and if the
state's Medicaid program does not have a VBP arrangement with that
manufacturer. One commenter expressed concern that manufacturers could
potentially exclude states from a VBP arrangement by extending VBP
opportunities exclusively to private payers, leaving states subject to
only mandatory rebates on high list price products.
Response: There is no risk to states under the multiple best prices
reporting. Manufacturers that want to report multiple best prices
associated with their VBP arrangements available on the commercial
market must make these arrangements available to the states. In order
to participate in the VBP arrangement, states must meet the
requirements of the VBP arrangement as offered by the manufacturer.
While states will be given the opportunity to participate in these VBP
arrangements, they will not be required to enter into these
arrangements. States will need to assess whether or not they want to
participate in these VBP arrangements and if they do not want to
participate in the VBP arrangements using the multiple best prices
approach, they may continue to receive Medicaid drug rebates based
solely upon the best price available outside of the VBP arrangement
(even if the manufacturer offers a VBP arrangement and reports multiple
best prices to CMS) and may continue to negotiate supplemental rebates
with manufacturers under a CMS-authorized SRA, which could include
their own VBP arrangements.
Comment: Commenters expressed concern that the proposed rule will
facilitate manufacturers entering into VBP arrangements with commercial
payers and will provide little benefit to state Medicaid programs, and
stated that the proposal would increase Medicaid drug costs citing
their belief that the proposed changes would reduce the total rebates
drug manufacturers pay to Medicaid. A few commenters opined that the
proposed changes would exacerbate existing best price reporting
challenges and make it more difficult for states to ensure drug
manufacturer compliance with best price requirements. One commenter
noted the proposed changes to best price to facilitate adoption of VBP
arrangements would undermine the MDRP and enable manufacturers to
significantly reduce or delay the rebates they would otherwise have to
pay under current law, thereby increasing Medicaid drug costs.
Response: States will benefit from these multiple best price VBP
programs as this approach will allow all states to take advantage of
and participate in the VBP arrangements which manufacturers may have
been heretofore reluctant to offer because of various reasons,
including the requirement that
[[Page 87029]]
manufacturers only report one best price per quarter. For example, a
significant rebate to a commercial payer for a drug that did not
achieve its clinical objectives under a VBP arrangement could reset the
best price in Medicaid, and require the manufacturer to give that
significant rebate to all Medicaid patients, even if the Medicaid
patient taking the drug met the clinical objective.
This multiple best price approach will also protect states that do
not want to participate in VBP by requiring that, for a dosage form and
strength for a drug for each quarter, that a manufacturer report a best
price unrelated to a VBP arrangement, and such best price will reflect
the lowest price available to a best price eligible entity that is not
participating in the VBP arrangement.
This approach may also reduce the need for additional states,
beyond the nine that have approved CMS-authorized SRA VBP SPAs, to
submit a SPA to CMS to obtain approval for a template to enter into
their own CMS-authorized SRAs with a VBP arrangement. This multiple
best price approach will allow any state that wants to participate in a
manufacturer VBP arrangement to have the option to do so. As always,
states may continue to negotiate additional rebates using CMS-
authorized SRAs if they so choose.
Thus, we do not believe states will realize a reduction in the
federal Medicaid rebate with the implementation of this policy, and/or
if they decide not to participate in the VBP arrangement being offered
because in all cases the manufacturer will be required to report a
separate best price available outside of the VBP arrangement. The
separate best price will be the basis for the Medicaid drug rebates for
states that choose not to participate.
Comment: A few commenters expressed concern that the rule as
written, does not include a mechanism for states to be aware of
commercial VBP arrangements or to ensure outcomes measures in VBP
arrangements will exactly match those of any commercial payer in any
given quarter during the VBP negotiation process. One commenter noted
that states would need to know the terms of the commercial patient
outcome-based price concession arrangement to ensure Medicaid rebate
amounts are properly determined under the multiple best price approach.
Another commenter recommended requiring manufacturers to share specific
details of their VBP arrangements with CMS and to allow CMS to develop
a mechanism to share certain details with states, so the states may
consider a similar arrangement.
Response: Manufacturers that want to report multiple best prices
associated with their VBP arrangements in the commercial market will be
required to offer these arrangements to the states. We will share these
multiple best prices with states as we do other manufacturer pricing
benchmarks, such as AMP and unit rebate amounts. The mechanism of how
these arrangements will be communicated to the states will be set forth
in CMS operational guidance. We will not be a party to any of these VBP
arrangements, and therefore, will not be privy to the specifics of the
VBP arrangements (for example, the terms of the patient outcomes price
concession or responsibility of fees associated with data collection
and evaluation) negotiated between the payers, including states, and
the manufacturer.
Comment: A few commenters expressed concern that commercial VBPs
available on the market may be difficult to apply to the Medicaid
market. The commenters noted that this would result in states not being
eligible for a best price URA based on payments made under a commercial
VBPs. One commenter questioned the validity of applying VBP
arrangements from the commercial markets to a Medicaid population as
the commenter noted the measures are tied to certain evidence- or
outcomes-based measures that were carefully selected and tailored to a
specific, commercially-insured population. A few commenters requested
CMS clarify that a state Medicaid agency should have in place data
collection and adjudication processes, inclusive of dispute resolution,
that are sufficiently robust to administer the VBP arrangement to the
same degree of reliability as it is administered between a drug
manufacturer and a commercial payer.
Response: We appreciate the commenters' concerns about the
applicability of some commercial VBP arrangements to the Medicaid
population. It is our general impression that in some cases, both
Medicaid and commercial payers may have similar patient population
characteristics that would allow for the applicability of a commercial
payer VBP to Medicaid, and in other cases it may not. In those latter
cases, the state will have to determine whether it wants to participate
in the VBP arrangement that is being offered on the commercial market,
and that the manufacturer is reporting to us and offering to all
states. While we are not requiring that manufacturers design their VBP
arrangements with Medicaid in mind, we would expect that they will
consider this to avail themselves of the regulatory flexibilities being
finalized in this rule. We believe this policy will help achieve the
goal of increasing Medicaid patient access to new innovative drug
therapies.
We also believe that there may be multiple manufacturer VBP
arrangements in the market, and our policy requires that manufacturers
that want to report multiple best prices associated with their VBP
arrangements must offer them to states in order to avail themselves of
this regulatory flexibility being finalized in this rule. A state will
determine which VBP arrangements might work best with its patient
population.
Finally, states can use a CMS-approved supplemental rebate
agreement to enter into their own VBP agreements with manufacturers for
a drug if none of the multiple best price VBP arrangements reported by
manufacturers to CMS for that drug would be useful in that state's
Medicaid populations.
With respect to dispute resolution, we would expect that states and
manufacturers would continue to work cooperatively to resolve any
rebate disputes whether they are related to rebates paid under non VBP
or VBP arrangements. We have issued several guidances on dispute
resolution (see Manufacturer and State Releases \18\).
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Comment: Several commenters requested CMS provide funding for VBP
arrangements to provide state Medicaid agencies with funding for IT
infrastructure needed for performance tracking and interstate or cross-
payer interoperability. Commenters believe that the breadth of possible
VBP arrangements could pose a serious financial burden for state
Medicaid agencies to monitor and would require significant modification
of state and vendor rebate systems to incorporate multiple URAs based
on each outcome. Another commenter questioned if states are permitted
to contract with vendors to perform patient monitoring of outcomes for
VBP arrangements. A few commenters requested CMS offer forms of federal
support to help commenters build appropriate infrastructure for these
proposed arrangements.
Response: We have no plans to provide federal funding to facilitate
states' participation in VBP
[[Page 87030]]
arrangements. States are not required to participate in VBP
arrangements and will have to make those decisions based on their own
administrative and operational considerations. As stated in response to
prior comments, states will have a choice as to whether or not they
want to enter into VBP arrangements.
Comment: A few commenters suggested that CMS require manufacturers
to submit their commercial VBPs to CMS so that it can inform states of
the drugs and outcome measures in those commercial VBPs. Another
commenter suggested CMS require manufacturers to ``lock in'' an
estimated Best Price for the duration of the contract and apply a CMS-
overseen reconciliation process to protect states from the uncertainty
the proposed change may create, and that CMS could use the commercial
VBPs submitted by manufacturers to develop a VBP contract template that
states could use to ensure that they were in alignment.
Response: CMS will be looking at ways to make information regarding
manufacturer VBP arrangements that are offered on the commercial market
available to states. We will not, however, be involved in the approval
or review of the specifics of any VBP arrangements offered by
manufacturers to commercial payers; nor will we be engaged in the
negotiation of terms between manufacturers and payers or states.
Furthermore, we will not be imposing additional requirements or
requesting manufacturers change their VBP arrangements when they make
their arrangements available to the states. At a minimum, as discussed
earlier in this section, states will continue to receive the Medicaid
drug rebate for a covered outpatient drug consistent with the separate
best price reported by the manufacturer outside of the VBP.
Comment: One commenter requested clarification that the duration of
a VBP arrangement contract is a term that a state Medicaid agency would
need to adhere to in order to take advantage of the proposed multiple
best price approach, as it is central to a VBP arrangement (in the
commercial sector or otherwise).
Response: This rule does not speak to the specific terms that
should or should not be included in VBP arrangement contracts.
Comment: A commenter recommended that the VBP exemption from best
price apply only when a pharmaceutical manufacturer pays for the entire
cost of a drug during the entire length of the prescription.
Response: We assume the commenter is under the impression that the
multiple best prices as they pertain to VBP arrangement offered on the
commercial market allows the manufacturer to exempt those prices from
``best price.'' We are not exempting VBP prices from a manufacturer's
best price. Rather, we are allowing manufacturers to report both a non-
VBP best price for a drug and multiple best prices for a drug based on
a VBP arrangement when the manufacturer offers the VBP arrangement to
all states.
Comment: One commenter requested CMS clarify if manufacturers would
initially calculate the best price they report to the federal
government by looking at the expected net price under the VBP
arrangement, based on the expectations of the manufacturer and the
private purchaser using available clinical data.
Response: Manufacturers permitted to report multiple best prices
pursuant to a VBP arrangement would make two best price reports each
quarter to CMS, one that includes the best price of the drug net of any
discounts or offsets that are unrelated to the VBP arrangement, and the
other that includes the set of multiple best prices offered under the
VBP arrangement (offset by applicable discounts) based upon the
outcomes of the VBP arrangement.
Comment: One commenter urged CMS to ensure that methods other than
the bundled sale concept and the multiple best prices are available to
accommodate the unique factors associated with extremely rare
disorders.
Response: We believe that the final policies in this rule with
respect to reporting best price under a VBP arrangement will
accommodate manufacturers of covered outpatient drugs for rare diseases
because manufacturers will not face the same rebate consequences if one
patient fails on the therapy. Furthermore, the publication of this
final regulation does not mean CMS may not consider other approaches
addressing unique circumstances as part of a future rulemaking.
Comment: One commenter requested CMS mandate that a manufacturer
base its best price reporting on the lowest price available in the
marketplace, including one that arises from a VBP arrangement offered
in the commercial marketplace (either by using the bundled sale
calculation rules or reporting multiple best prices), as well as what
the manufacturer offers to any state Medicaid program or Medicaid MCO
that wishes to engage in the VBP arrangement.
Response: Manufacturers are already required to report the lowest
price available to most entities on the commercial market, as included
in the definition of best price at Sec. 447.505(a). This rule does not
change that, but rather allows manufacturers to report varying best
price points for a single dosage form and strength when it offers a VBP
arrangement to all states. If the VBP arrangement is not offered to
states, the manufacturer will report one best price for the dosage form
and strength of the drug which would include any and all prices and
rebates, and subsequent adjustments, associated with the manufacturer
VBP arrangements in accordance with the best price requirements at
Sec. 447.505.
Comment: Some commenters noted that CMS should clarify that ``any
pricing structure'' in the definition of best price is inclusive of any
and all pricing structures.
Response: We do not believe it is necessary to further clarify the
regulatory language ``any pricing structure'' as used in 42 CFR
447.505(a). We are expanding the definition of best price to allow
manufacturers to include the lowest price available from a manufacturer
to include varying best price points for a single dosage form and
strength as a result of a VBP arrangement. The reference to any pricing
structure in this case is made to indicate that we consider a VBP
arrangement to be a form of a pricing structure.
Comment: A commenter suggested that for a patient to be deemed to
have participated in a VBP, the patient must be a patient covered by a
state that has an executed, signed agreement with the manufacturer
setting forth the same terms and conditions set forth in the
corresponding commercial VBP on which the multiple best prices are
based.
Response: Manufacturers will be required to offer the same terms
and conditions to states as set forth in its corresponding commercial
VBP that is used to set its multiple best prices.
Comment: A few commenters noted that expanding the definition of
best price to provide that a lowest price available from a manufacturer
may include varying best price points for a single dosage form and
strength as a result of a VBP could allow pharmaceutical companies to
raise the prices of life indispensable medications. One commenter
requested CMS clarify the proposal citing their concern that a single
best price for a less effective dosage form and strength could limit
the ability of coming to VBPs for other dosages.
Response: We do not believe that this regulation encourages
pharmaceutical
[[Page 87031]]
companies to raise prices for a single dosage form and strength of a
drug. The current Medicaid drug rebate regulation continues to include
an inflation penalty in the form of an additional rebate if AMP for the
dosage form and strength of a drug increases at a rate greater than
inflation (as measured by the consumer price index for all urban
consumers--United States average) (see sections 1927(c)(2) and
(c)(3)(C) of the Act and Sec. 447.509(a)(2) and (7)). These would
apply to drugs that are included under a VBP arrangement. Therefore,
the Medicaid drug rebate calculation continues to include a
disincentive to manufacturers increasing drug prices.
Comment: One commenter recommended excluding any price concessions
received under a VBP arrangement from the best price calculation citing
their belief that this would increase the adoption of VBP arrangements.
Response: Section 1927(c)(1)(C)(ii) of the Act provides that the
term best price shall be inclusive of cash discounts, free goods that
are contingent on any purchase requirement, volume discounts, and
rebates (other than rebates under section 1927 of the Act). Therefore,
manufacturers must include all discounts available, including discounts
as a result of a VBP arrangement in best price. This rule did not
propose to add an exclusion of all prices as a result of a VBP
arrangement when determining best price. Instead, it allows
manufacturers to report multiple best prices associated with a VBP
arrangement to reflect the discounts/prices available under these
arrangements. Manufacturers must make adjustments to best price for a
drug (either for a single reported best price or multiple best price
arrangement) as a result of any subsequent discounts or price
concessions that may occur.
Comment: One commenter requested guidance on how multiple best
prices will be audited, especially if predicated on the attainment of
patient-specific outcomes that rely on personal health information that
may need to be protected under the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104-191, enacted August 21, 1996)
(HIPAA) and/or other law or regulation.
Response: We will not audit how multiple best prices will be
determined or how the parties participating in the VBP arrangements
will measure patient-specific outcomes using potentially protected
health information under HIPAA. However, parties participating in these
VBP arrangements should be aware of potential HIPAA requirements when
patient-specific data is used to measure outcomes. Manufacturer
information reported under section 1927 of the Act for purposes of the
Medicaid rebate (for example, AMP and best price) is subject to audit
by the Inspector General of the Department of Health and Human Services
in accordance with section 1927(b)(3) of the Act.
Comment: A few commenters urged CMS to safeguard proprietary
pricing information, such as the multiple best prices under a VBP
arrangement, the terms of which are confidential between the state or
payer and manufacturer.
Response: Information disclosed by manufacturers to CMS in
accordance with manufacturer reporting requirements set forth at
section 1927(b)(3) of the Act, including pricing information related to
the reporting of multiple best prices, will be subject to the
confidentiality of information requirements at section 1927(b)(3)(C) of
the Act.
Comment: One commenter noted the proposed rule does not explain how
manufacturers will report initial prices under a VBP arrangement if
those prices vary based on anticipated patient outcomes.
Response: Manufacturers will submit a non-VBP best price following
the methodology for determining best prices in accordance with Sec.
447.505. We intend to have the manufacturer report the multiple best
prices as a separate file in MDRP systems which we will grant access to
states that choose to participate in the manufacturer's VBP
arrangement. More information regarding the reporting of multiple best
prices in our system will be provided in operational guidance.
Comment: One commenter recommended the Medicaid rebate amount true-
up process could utilize one of two existing Reconciliation of State
Invoice (ROSI) functionalities: A ROSI functionality applicable to SRA
or a ROSI functionality applicable to ``extra rebates.''
Response: We will take this recommendation and welcome additional
recommendations regarding the intersection between multiple best prices
and the functionality of the ROSI.
Comment: A commenter recommended that CMS require manufacturers to
pay interest fees based on the statutory late payment penalty rate in
the event that evaluation of outcomes-based measures causes rebates to
be delayed.
Response: In accordance with the NDRA, manufacturers will continue
to be responsible for timely payment of applicable rebates within 30
days so long as the state invoice contains, at a minimum, the number of
units paid by NDC under the state plan in accordance with section
1927(b)(1)(A) of the Act. Manufacturers that do not pay rebates in
time, regardless of the reason, must follow existing operational
guidance relating to interest application found in various Program
Releases, including State Releases #29, and #166, as well as
Manufacturer Release #7. Program Releases are here--Medicaid Program
Releases.
Comment: One commenter recommended CMS consider coupling this final
rule with an OIG proposed rule to create a safe harbor for VBP
arrangements for medical products or pursuing future rule-making to
produce a new safe harbor from the Anti-Kickback Statute, which might
consider manufacturers' data monitoring and outcome tracking activities
as unlawful inducement.
Response: This regulation is specific to the impact of VBP
arrangements on price reporting associated with the MDRP. We will not
be providing guidance to manufacturers regarding how their particular
VBP arrangements, including data monitoring and tracking activities,
may violate the Anti-kickback statute.
Comment: Many commenters requested clarification of the impact of
the proposed multiple best price approaches to AMP, average sales price
(ASP), and 340B ceiling price. Several commenters urged CMS to issue
additional rulemaking before allowing 340B covered entities to leverage
VBP-associated prices and clarify the best price to be used when
calculating 340B ceiling price as well as ASP. A few commenters
requested that HRSA and Medicare Part B be involved so that CMS can
carefully examine the impact of VBP agreements on state budgets, safety
net provider participation in the 340B program and other government
pricing programs such as Part B (including calculation of ASP). Several
commenters recommended that CMS consider revising its proposed approach
to VBP arrangements to exclude the arrangements from required
government price reporting metrics. The commenter noted this is
necessary to incentivize broader adoption of VBP arrangements.
Another commenter expressed their belief that that it is essential
to exclude drugs purchased through VBPs from ASP determinations.
Commenters expressed concern that outcomes-based price discounts made
for VBP arrangements could lower the Medicare Part B Drug ASP, reducing
ASP-based reimbursements to providers or pharmacies that purchase the
drug therapy. The commenters noted that
[[Page 87032]]
discounts under VBP arrangements are granted to payers while providers
and pharmacies would experience reduced revenue.
Another commenter requested CMS address the uncertainty VBP
arrangements may have on 340B ceiling prices, as well as AMP. Another
commenter requested that CMS consider the scope of the discounts that
could be included in a bundled sale under the proposed change and what
the impact would be on Medicaid rebates and, by extension, the 340B
program.
Response: While this regulation allows manufacturers to report
multiple best prices associated with their VBP arrangements,
manufacturers will continue to be required to report a best price for
each dosage form and strength of a drug paid for outside of the VBP
arrangement (non-VBP best price). Therefore, the 340B ceiling price
will continue to reflect a Medicaid drug rebate based upon the non-VBP
best price.
Also, while we do not anticipate that this rule will reduce a
drug's AMP, manufacturers should also consider the effects of their VBP
arrangements on payment amounts that are determined for use in other
parts of Medicare, for example the effects of VBP arrangements on AMP
if AMP is used to determine payment allowance for a drug in Part B as
authorized in section 1847A(d) of the Act.
In consideration of comments received, specifically those comments
that requested clarification regarding the manufacturer's allowance to
report multiple best prices, we are revising the definition of best
price at Sec. 447.505(a) to state that if a manufacturer offers a
value based purchasing arrangement (as defined at Sec. 447.502) to all
states, the lowest price available from a manufacturer may include
varying best price points for a single dosage form and strength as a
result of that value based purchasing arrangement. However, in order to
address the operational and administrative challenges facing CMS,
states, and manufacturers, as noted in the comments, we are delaying
the effective date of this final policy at Sec. 447.505(a) such that
the revised definition of best price to permit multiple best price
reporting will not be effective until January 1, 2022.
C. Changes to Update Definitions in Sec. 447.502 To Reflect Recent
Statutory Changes Made by the MSIAA, BBA 2018 and the Affordable Care
Act
1. Innovator Multiple Source Drug
The MSIAA clarified the definition of innovator multiple source
drug at section 1927(k) of the Act by removing the phrase ``an original
new drug application'' and inserting ``a new drug application,''
removing ``was originally marketed'' and inserting ``is marketed,'' and
inserting, ``, unless the Secretary determines that a narrow exception
applies (as described in Sec. 447.502, Code of Federal Regulations (or
any successor regulation))'' before the period. Section
1927(k)(7)(A)(ii) of the Act now defines innovator multiple source drug
to mean a multiple source drug that is marketed under a NDA approved by
the FDA, unless the Secretary determines that a narrow exception
applies (as described in Sec. 447.502 (or any successor regulation)).
To align the regulatory definition with the definition in the statute,
as clarified by the MSIAA, we proposed to define innovator multiple
source drug in Sec. 447.502 as a multiple source drug, including an
authorized generic drug, that is marketed under a NDA approved by FDA,
unless the Secretary determines that a narrow exception applies (as
described in the section). We noted that the proposal also included a
drug product marketed by any cross-licensed producers, labelers, or
distributors operating under the NDA and a COD approved under a
biologics license application (BLA), product license application (PLA),
establishment license application (ELA) or antibiotic drug application
(ADA).
We have received the following comments regarding the proposed
definition of innovator multiple source drug:
a. Prospective Application
Comment: One commenter requested that CMS revise their proposed
definition of innovator multiple source drug to only apply
prospectively from October 2019 forward, citing their belief that since
this is the date the Congress amended the MDRP statute, it would be in
accordance with the recent ruling in the United States District Court
for the District of Columbia case of STI Pharma, LLC v. Azar.
Response: The revision to the definition of innovator multiple
source drug is to conform the rule with the amended statute. Our
longstanding interpretation of the statute (both before and after the
2019 amendments) is that an innovator multiple source drug is a drug
approved under an NDA, and noninnovator drugs are those approved under
an ANDA. We believe STI Pharma, LLC v. Azar was wrongly decided. Prior
to the 2016 COD final rule, there was no narrow exception to that
general rule. Therefore, any drug approved under an NDA that is
reported as a noninnovator multiple source drug for quarters prior to
2Q2016 is improperly categorized and the drug manufacturer should
request a drug-category change or risk enforcement action.
b. Narrow Exception
Comment: One commenter recommended that CMS maintain and codify the
current factors used to determine if a product meets the narrow
exception citing their belief that this would provide clarity to both
current and future manufacturers, helping to ensure these products are
available and do not go into shortage, and therefore, are available to
the patients who need them.
Response: We do not agree that we should codify the factors used to
determine if a drug qualifies for a narrow exception to the rule that
drugs marketed under an NDA should be reported to us as a single source
drug or an innovator multiple source drug. Each request for a narrow
exception is evaluated individually and we consider many factors in
determining whether to use our discretion to grant such an exception.
When reviewing a request for a narrow exception, we may reach out to
the manufacturer to request additional information to aid in the review
of the request, thereby ensuring that we are making decisions based on
all of the information pertinent to the request. We are finalizing the
definition of innovator multiple source drug as proposed.
2. Line Extension, New Formulation, and Application of Oral Solid
Dosage Form Requirement
Section 1927(c)(2)(C) of the Act defines line extension to mean,
for a drug, a new formulation of the drug, such as an extended release
formulation, but does not include an abuse-deterrent formulation of the
drug (as determined by the Secretary), regardless of whether such abuse
deterrent formulation is an extended release formulation. As discussed
in the June 2020 proposed rule (85 FR 37288 through 372289), we
proposed to define line extension in the February 2, 2012 proposed
rule, but did not finalize a definition in the COD final rule or the
April 1, 2019 final rule. We reiterated in the April 1, 2019 final rule
that manufacturers are to rely on the statutory definition of line
extension at section 1927(c)(2)(C) of the Act, and where appropriate
are permitted to use reasonable assumptions in their determination of
whether their drug qualifies as a line extension (81 FR 5265).
[[Page 87033]]
As discussed in the June 2020 proposed rule (85 FR 37294), after
several years of experience with manufacturers self-reporting their
line extensions, and numerous inquiries from manufacturers regarding
the identification of drugs as line extensions, we have noted
inconsistency among manufacturers in their identification of drugs as
line extensions. In addition, we expressed concern that manufacturers
may have a financial incentive to be underinclusive in their
identification of drugs as line extensions because a drug identified as
a line extension may be subject to a higher rebate. We noted that if
manufacturers underreport their line extensions, rebates may be
calculated incorrectly and underpaid.
To ensure that section 1927(c)(2)(C) of the Act is fully
implemented and the universe of line extensions is comprehensively
identified, we proposed to provide further interpretation of the
statute in the June 2020 proposed rule.
Based on the definition of line extension that was included in the
Affordable Care Act, we believed that the statute gives us discretion
and authority to interpret the term ``line extension'' broadly. We
expressly solicited comments on our proposed definitions of ``line
extension'' and ``new formulation,'' specifically on whether these
terms should be interpreted more narrowly. Moreover, if commenters
believed that a narrower interpretation is appropriate, we solicited
comments on how to identify those drugs that constitute a line
extension and a new formulation to apply the alternative URA
calculation when required by statute. The comments we received in
response to this solicitation are addressed in section II.C. of this
final rule.
In the June 2020 proposed rule (85 FR 37294), we proposed that only
the initial single source drug or innovator multiple source drug (the
initial brand name listed drug) must be an oral solid dosage form. In
the 2012 proposed rule (77 FR 5338, 5339), we proposed that both the
initial brand name drug and the line extension drug had to be an oral
solid dosage form. However, as noted in the June 2020 proposed rule, we
did not finalize a regulatory definition of line extension, and
instructed manufacturers to make ``reasonable assumptions'' regarding
whether a drug is a line extension (81 FR 5265). The statute states
that the alternative calculation must be performed in the case of a
drug that is a line extension of a single source drug or an innovator
multiple source drug that is an oral solid dosage form. Upon further
evaluation of this statutory language, we believed that the statutory
text can be reasonably construed to provide that only the initial
single source drug or innovator multiple source drug must be an oral
solid dosage form. We believed this interpretation is appropriate
because the alternative construction (requiring both the line extension
and the initial single source drug or innovator multiple source drug to
be an oral solid dosage form) may inappropriately limit the universe of
line extension drugs in a manner which would allow a manufacturer to
circumvent rebate liability when creating a line extension and to
potentially avoid inflation-based additional rebates, in cases where
such rebates should apply. Therefore, we proposed that when determining
whether a drug is a line extension, only the initial single source drug
or innovator multiple source drug must be an oral solid dosage form.
That is, we proposed that the line extension of the initial brand name
listed drug does not need to be an oral solid dosage form. We believed
this is consistent with the statutory language and will assist in
appropriately identifying drugs that may be line extension drugs.
Therefore, we proposed to amend Sec. 447.509(a)(4)(i) and (ii) to
refer to ``a drug that is a line extension of a single source drug or
an innovator multiple source drug provided that the initial single
source drug or innovator multiple source drug is an oral solid dosage
form,'' and Sec. 447.509(a)(4)(i)(A) and (a)(4)(ii)(A) to refer to ``a
single source drug or an innovator multiple source drug'' in the
regulatory text that describes the alternative rebate calculation.
We received the following comments regarding our proposal that when
determining whether a drug is a line extension, only the initial single
source drug or innovator multiple source drug must be an oral solid
dosage form:
Comment: A few commenters disagreed with the proposal to require
that only the initial single source drug or innovator multiple source
drug be an oral solid dosage form when determining whether a drug is a
line extension because they claim the proposal does not align with
Congressional intent. They stated that the legislative history shows
that Congress intended that the line extension provision applies only
to drugs that were ``slight alterations'' of the previous drug, and
that a change from an oral solid dosage form to a different dosage form
is a significant alteration. A few commenters stated that if the change
requires submission of clinical data to FDA, it would be a significant
alteration. Some commenters, in discussing fixed-dose combination
tablets in treating diseases such as HIV, noted that innovations that
improve patient compliance provide significant improvements that
benefit patients.
Response: We believe that our proposal is consistent with section
1927(c)(2)(C) of the Act. Additionally, the statute does not require
that in order for a drug to be a line extension, the change to a drug
must be a slight alteration. Had Congress intended to limit the
definition of line extension to only those drugs for which a slight
alteration had been made, we believe they would have included that
requirement in the statute. Notably, the example of a new formulation
that Congress provided in the statute is ``an extended release
formulation.'' The change from an immediate release formulation to an
extended release formulation may be considered more than a slight
alteration. We agree with commenters that innovations that improve
patient compliance provide significant improvements that benefit
patients and believe this may include extended release formulations.
Had Congress intended to limit the line extension provisions to drugs
that were only slight alterations, we believe they would have provided
an example of a less significant change than ``an extended release
formulation.''
Comment: A few commenters stated that requiring that only the
original single source drug or innovator multiple source drug be an
oral solid dosage does not align with the statute. One commenter stated
that in the statutory language, in the case of a drug that is a line
extension of a single source drug or an innovator multiple source drug
that is an oral solid dosage form, Congress plainly intended for the
phrase ``that is an oral solid dosage form'' to modify the term ``line
extension.'' They stated that because Congress directly addressed this
issue, the agency lacks discretion to define ``line extensions'' to
include products that are not oral solid dosage forms.
Response: As stated in the June 2020 proposed rule, we believe that
the statutory text can be reasonably construed to provide that only the
initial single source drug or innovator multiple source drug must be an
oral solid dosage. We disagree that the statutory language clearly
indicated that the phrase ``that is an oral solid dosage form''
modifies the term ``line extension.'' Although the structure of the
sentence does not make it clear which subject is modified by ``that is
an oral solid dosage form,'' we believe that
[[Page 87034]]
the better reading is that the phrase modifies ``a single source drug
or an innovator multiple source drug'' because it appears directly
following that subject.
Comment: A few commenters stated that the proposal to require that
only the original single source drug or innovator multiple source drug
be an oral solid dosage form is contrary to prior guidance and that the
existing interpretation is more reasonable and should be retained.
Several commenters agreed with CMS' proposal that the line extension of
the initial brand name listed drug does not need to be an oral solid
dosage form. A few commenters noted that these definition
clarifications will expand the universe of drugs that can be line
extensions. One commenter noted that requiring that only the initial
drug must be an oral solid dosage form would prevent manufacturers from
switching forms to avoid higher inflation-related rebates.
Response: We do not agree that our proposal is less reasonable than
the interpretation we discussed in the COD final rule. We acknowledge
that in the February 2, 2012 proposed rule, we proposed that both the
initial brand name listed drug and the drug that is a line extension
were required to be an oral solid dosage form in order for the
alternative rebate calculation to be required. However, that proposal
was not finalized in the COD final rule. Instead, we stated that we
will continue to consider the issues and may consider addressing the
issues in future rulemaking (81 FR 5265). We are doing so in this final
rule.
After consideration of public comments, we are finalizing our
proposal that only the initial single source drug or innovator multiple
source drug be an oral solid dosage form when determining whether a
drug is a line extension. While we initially proposed amending Sec.
447.509(a)(4)(i) and (ii), we are making a technical change to that
proposal to more accurately reflect the prospective applicability of
the revised policy. In addition, as discussed in section II.C. of this
final rule, we are finalizing that the definitions of line extension,
new formulation, and oral solid dosage form, as well as the requirement
that only the initial brand name listed drug must be an oral solid
dosage form, are effective beginning on January 1, 2022. For prior
periods, manufacturers should continue to rely on the statutory
definition of line extension and may continue to make reasonable
assumptions to determine whether their drug is a line extension. We are
amending Sec. 447.509(a)(4)(ii) to change ``beginning on or after
October 1, 2018'' to ``beginning on October 1, 2019 through December
31, 2021'', redesignating Sec. 447.509(a)(4)(iii) as Sec.
447.509(a)(4)(iv) and adding Sec. 447.509(a)(4)(iii).
3. Definition of Line Extension
In response to requests to provide more specific guidance on how to
identify a line extension drug, we proposed to define ``line
extension'' and ``new formulation'' at Sec. 447.502. Specifically, we
proposed that as provided in section 1927(c)(2)(C) of the Act, the term
``line extension'' means, for a drug, a new formulation of the drug,
but does not include an abuse-deterrent formulation of the drug (as
determined by the Secretary).
Most of the comments we received regarding our proposed definition
of ``line extension'' more accurately pertain to our proposed
definition of ``new formulation,'' and therefore, we will discuss those
comments in section II.C.4. of this final rule. We received the
following comment regarding our proposed definition of ``line
extension'':
Comment: One commenter supported CMS' proposal to exclude abuse-
deterrent formulations from the proposed definition of line extension,
citing their belief that this exclusion aligns with the
Administration's public health goals, as well as other efforts to
reduce rates of opioid abuse in communities.
Response: We thank the commenter for the support and note that
section 1927(c)(2)(C) of the Act requires that we exclude abuse
deterrent formulations from the definition of ``line extension''.
After consideration of public comments, we are finalizing the
definition of ``line extension'' as proposed. In addition, as discussed
in section II.C. of this final rule, we are finalizing that the
definitions of line extension, new formulation, and oral solid dosage
form, as well as the requirement that only the initial brand name
listed drug must be an oral solid dosage form, are effective beginning
on January 1, 2022. For prior periods, manufacturers should continue to
rely on the statutory definition of line extension and may continue to
make reasonable assumptions to determine whether their drug is a line
extension.
4. Definition of New Formulation
Additionally, we proposed to define ``new formulation'' to mean,
for a drug, any change to the drug, provided that the new formulation
contains at least one active ingredient in common with the initial
brand name listed drug. As discussed in the June 2020 proposed rule (85
FR 37295), new formulations (for the purpose of determining if a drug
is a line extension) would not include abuse deterrent formulations but
would include, but would not be limited to: Extended release
formulations; changes in dosage form, strength, route of
administration, ingredients, pharmacodynamics, or pharmacokinetic
properties; changes in indication accompanied by marketing as a
separately identifiable drug (for example, a different NDC); and
combination drugs, such as a drug that is a combination of two or more
drugs or a drug that is a combination of a drug and a device. We
requested comments about whether a drug approved with a new indication
that is not separately identifiable should be considered a new
formulation and, if so, how such a drug could be identified in DDR for
purposes of calculating the alternative URA.
We received the following comments regarding our proposed
definition of ``new formulation''.
Comment: We received many comments that provided general support
for our proposed definition of new formulation. Commenters noted that
the proposed definition will help ensure that manufacturers identify
all their drugs that are line extensions and will prevent manufacturers
from circumventing inflation-based rebates. One commenter stated that
the current ambiguity has allowed manufacturers to use ``product
hopping'' strategies for financial gain and blocking generic
competition.
Response: We appreciate the support from the commenters.
Comment: We received several comments generally opposing the
proposed definition. Some commenters generally disagreed with any
expansion of the definition of line extension. One commenter opposed
any measure that expands rebates because it distorts market dynamics
and pushes costs onto every other payer. Another commenter stated that
CMS was proposing an expansive change to line extension policies
without providing context for the programmatic purpose and goals for a
substantial change in disposition impacting many products. One
commenter stated that the proposed language is filled with
inconsistencies that make the proposals impossible to operationalize.
Response: As explained in the June 2020 proposed rule (85 FR
37294), we have noted inconsistency among manufacturers in their
identification of drugs as line extensions. In addition, we expressed
concern that manufacturers may have a financial incentive to be under-
inclusive in their identification of drugs as line extensions because
they
[[Page 87035]]
may be able to avoid some of the inflation-based rebates they had
incurred because of the increases in the price of the original drug
that exceeded the rate of inflation. By making certain changes to the
original drug, they were often able to establish a new baseline AMP for
the line extension drug and essentially start fresh, without the burden
of the inflation-based rebates on the original drug. By proposing a
definition which clarifies the attributes of a drug that make it
qualify as a line extension drug, we believe manufacturers will have a
clearer explanation about how to identify their drugs that are line
extensions. We disagree that any measure that expands rebates distorts
market dynamics and pushes costs onto other payers and the commenter
did not substantiate that assertion. We do not believe that that the
definitions we are finalizing in this rule contain inconsistencies, and
CMS staff is available to assist manufacturers with any operational
questions.
a. Statutory Concerns
Comment: We received one comment stating that our proposed
definition is grounded in statute.
We received many comments stating that our proposed definition of
new formulation exceeds statutory authority because it is too broad or
exceeds what Congress authorized (that is, slight alterations). A few
commenters stated that CMS exceeds reasonable statutory interpretation
by including several product categories clearly not within the common
understanding of new formulation.
A few commenters stated that our use of the term ``any change'' is
inconsistent with statute. They stated that because the statute
provides an example of a change that is a new formulation (that is, an
extended release formulation), that only a change in formulation that
is similar to an extended release formulation can qualify as a line
extension. A few commenters cited the principle of ejusdem generis,
stating that per that principle, a general term that follows an
enumerated list of more specific terms should be interpreted to cover
only matters similar to those specified. One commenter stated that the
subset of drugs that can be a new formulation must be directly tied to
the physical formulation of the two products.
Response: We disagree that our proposed definition of new
formulation exceeds statutory authority or that it is not reasonable.
The statute does not define new formulation and it provides only one
example of a new formulation, that is, an extended release formulation.
The example provided does not expressly limit the types of new
formulations that are to be treated as line extensions; rather, using
the term ``such as,'' Congress provided one example of a new
formulation. Had Congress intended to limit the definition to certain
types of changes to a drug, it could have done so in the statute.
Regarding our proposed use of the phrase ``any change'', that
phrase was followed by specific inclusions and exclusions so that the
final definition did not state that any change to a drug qualified the
drug as a new formulation. However, the definition we are finalizing in
this rule does not contain that phrase.
We disagree that the principle of ejusdem generis applies because
Congress did not provide a list of types of changes to a drug that
should be considered a new formulation. Had they provided a list of
changes to a drug that all had similar attributes, then it possibly
could be interpreted that a new formulation must have a similar
attribute to the types of changes in that list. Additionally, the
general term (new formulation) precedes the more specific term
(extended release formulation), further indicating that ejusdem generis
is not applicable here. We do not believe that the language Congress
selected limits the definition of new formulation to include only an
extended release formulation of the original drug or a change that is
closely related to an extended release formulation. Congress merely
provided one example of a new formulation, that is, an extended release
formulation.
b. Congressional Intent
Comment: A few commenters stated the proposed definition of new
formulation is consistent with the intent of Congress. One commenter
stated that the intent was to provide protection to taxpayers from drug
company pricing practices which are the primary factors in spending
increases and that the proposed definition furthered that intent.
Another commenter stated that if Congress wanted a more limited
definition, it would have included that in the statute; however, it
left the interpretation to the Administration. The commenter noted that
committee reports show that Congress knew there were multiple ways that
a drug could be modified to avoid additional rebate obligations.
Response: We thank those commenters who agreed that our proposed
definition is not contrary to Congressional intent. We believe that our
proposal is consistent with section 1927(c)(2)(C) of the Act. We do not
believe that the modification has to have been made for the purpose of
avoiding inflation-based rebates. Rather, the alternative rebate
calculation would result in a unit rebate amount that is higher than
the standard unit rebate amount when price increases of the initial
brand name listed drug exceed the rate of inflation regardless of the
reason for the modification.
Comment: Many commenters stated that the proposed definition
disregards the intent of Congress and the legislative history.
Commenters stated that Congressional intent was to capture slight
alterations of existing drugs and the legislative history mandates a
narrow reading of the statute. One commenter stated that the
legislative history makes it clear that a new formulation is only a
slight alteration in an existing drug where no additional studies are
required by FDA but the proposed definition captures more than slight
alterations. Commenters stated that Congress did not intend to include
innovative products and new formulations that provide significant
benefits to patients in the definition of line extension. One commenter
stated that even after CMS recognized that many combination drugs are
not slight alterations, we nonetheless included them in the proposed
definition.
Response: We disagree that our proposed definition exceeds what
Congress intended in the line extension provisions. We are aware that
there have been discussions about slight alterations made to a drug and
those alterations permitted a manufacturer to mitigate the effect of
inflation-base rebates on the original drug, however, Congress chose
not to include that language, or any similar language, when
constructing the statutory language. Additionally, Congress did choose
to include an example of one change that is a new formulation. The
example given is an extended release formulation, which in general is a
change to a drug for which FDA requires additional studies and may be
considered a significant change to an original drug. Had Congress
intended that the change be slight in order to be considered a new
formulation, it could have stated so. The change from an immediate
release drug to an extended release drug is not a slight change; there
may be significantly different technology involved. Therefore, as
Congress had considered slight alterations to a drug in their
discussions of line extensions, but chose not to include that
limitation in statute, and, as Congress ultimately included a more
complex change (that is, an extended release formulation) as an
[[Page 87036]]
example of a new formulation, we believe that section 1927(c)(2)(C) of
the Act is not limited to only slight alterations.
Similarly, Congress could have included language that excluded new
formulations that were innovative or provided significant benefits to
patients. However, not only was such language not included in the
statute, but the only example of a new formulation that was provided
(that is, extended release formulation) can provide significant
benefits to patients.
c. Prior Guidance
Comment: Several commenters pointed out that some parts of the
proposed definition of new formulation conflicts with prior guidance.
One commenter stated that prior guidance provided that both the
original drug and the line extension drug must be an oral solid dosage
form for the application of the alternative rebate formula to be
required and that manufacturers have been relying on that guidance for
a long time. The commenter stated that the prior guidance is reasonable
and appropriate.
Several commenters noted that in the COD final rule, CMS stated
that a new strength is not a line extension and provided rationale that
the statute did not contemplate that it is. A few stated that our
reversal of that position is being done without adequate justification
and is arbitrary and capricious.
A few commenters stated that prior guidance instructed
manufacturers to rely on the statutory definition to determine if a
drug is a line extension and that they may use reasonable assumptions
to make that determination.
Response: In the COD final rule, we advised that we were not
finalizing a definition of line extension at that time and we
reiterated that manufacturers are to rely on the statutory definition
of line extension and where appropriate are permitted to use reasonable
assumptions in their determination of whether their drug qualifies as a
line extension drug. We also stated that if we later decide to develop
a regulatory definition of line extension drug, we will do so through
our established Administrative Procedures Act compliant process and
issue a proposed rule. We have done so by issuing the June 2020
proposed rule and this final rule. We have 10 years' experience with
various aspects of the line extension provisions that were enacted in
the Affordable Care Act and are using our experience to develop a
definition of new formulation that we believe is supported by the
statute, and supports the MDRP. We do not believe that any changes we
have made to prior guidance conflict with the statute or are
unreasonable or unjustified in light of the proposed changes.
d. Effect on Patients
Comment: We received many comments that the proposed definition of
new formulation would negatively affect patients. Several commenters
stated that patients might be denied access to drugs that are line
extensions, as designating some of these new drugs as line extensions
might create disincentives for manufacturers to develop such new
formulations. Several commenters stated that the proposals will cause
states to change their preferred drugs list which will cause changes in
patients' drug regimen, resulting in increased medical and drug
expenditures due to health consequences of medication changes. Some
commenters stated that manufacturers would be less likely to make drugs
that would be subject to the alternative rebate calculation, thereby
decreasing patients' access to innovative drugs that may benefit them
in terms of compliance or side effects. Some commenters stated that
this would lead to poorer health outcomes. One commenter stated that
the broad definition would impact its ability to provide discounts
outside of the Medicaid program that aid patients in other safety-net
programs.
Response: We do not agree with the commenters who stated that
patients would be harmed because manufacturers will not have incentive
to research and develop innovative alternatives that may be considered
new formulations and therefore subject to the alternative rebate
calculation. Based upon the comments received in response to the
proposed definition of line extension and new formulation, the
definition was further refined to limit the scope of drugs that are new
formulations and thereby subject to the alternative rebate calculation.
Because we are not finalizing that certain changes to a drug result in
a new formulation, as described later, there is a significantly smaller
universe of drugs that will be subject to the alternative rebate
calculation. We believe that with the exclusion of these proposed
changes from the final definition of line extension, that we have
maintained incentives for manufacturers to bring such advances to the
market.
Market forces and competition may help determine whether such new
formulations are in fact significant clinical advances, given that
payers are likely to impose utilization restrictions around their use
if they are not. Manufacturers' decisions regarding those drugs to
research and market depend on multiple factors, including clinical
significance of the drug, prescriber and patient demand, costs of
research and development, and possible revenues generated. Whether the
drug is a line extension, which could subject it to the alternative
rebate calculation, is only one factor in these decisions. The
financial effect of the alternative rebate calculation would only be
applicable in the Medicaid program, and the new drug may have only
limited use in Medicaid. For these and other reasons, we believe that
it will continue to be in the interest of a manufacturer to broaden the
use of its existing drugs in the form of line extensions, which will
lead to increased revenue for the manufacturer.
For those drugs that have a broader use in Medicaid, such as HIV
combination drugs, we note that we have decided at this time not to
include new combinations in the final regulatory definition of new
formulation. We also point out again, that the development of a new
formulation does not automatically mean that a manufacturer will be
penalized by the alternative rebate calculation for marketing that new
formulation. There would only be an alternative inflation penalty on
the new formulation to the extent that the increase in price on the
initial drug was greater than inflation. Thus, manufacturers that have
excessively inflated the price of their older existing drugs, and
attempt to market a new formulation to avoid paying inflation penalties
on those older existing drugs, may have to pay the alternative
inflation penalty on the new formulation. The possibility of paying
this penalty would be one consideration that manufacturers would have
to take into account when developing a new formulation of an existing
oral solid drug, but any increase that they would have to pay over the
standard rebate amount would be a result of an increase in prices
faster than inflation on these drugs.
We believe that the existence of the alternative inflation
calculation requirement can also help serve the interests of the
broader population with respect to drug pricing. A manufacturer that
knows that an intended new formulation could be subject to an
alternative inflation penalty if it excessively inflates the price of
its initial oral solid drug, could limit price increases on the initial
drug.
We understand that states may wish to reevaluate their preferred
drug lists if manufacturers alter their existing state
[[Page 87037]]
supplemental rebate agreements. However, we understand that such
reevaluation by states occurs on a regular basis, as it does with non-
Medicaid insurers. We are confident that state Medicaid programs can
continue to effectively manage shifting preferred drug lists and
provide appropriate, cost-effective therapies to their beneficiaries as
they have been doing. As a result of possible potential increases in
the net cost of drugs that are line extensions to a state due to loss
of rebates, the state may prefer a drug that is not a line extension.
However, per section 1927(d)(4)(D) of the Act, the state plan is
required to cover a non-preferred drug pursuant to a prior
authorization program that is consistent with section 1927(d)(5) of the
Act.
e. Effect on Innovation
Comment: We received many comments addressing the effect that the
proposed definition of new formulation will have on innovation. A few
commenters stated that they believed the broad definition would be
unlikely to have a negative effect on innovation. A few commenters
stated that the proposed definition would encourage ``true innovation''
and discourage manufacturer's incentive to ``product hop'' or to seek
approval for so-called ``me too'' or patent-extending formulations.
We received many comments discussing that the proposed definition
will have a negative effect on innovation by discouraging,
disincentivizing or penalizing innovation. In addition, one commenter
stated that CMS should not disrupt the innovation cycle that allows
manufacturers to take on the challenges of innovation. One commenter
stated that the proposed definition could make innovation financially
untenable for manufacturers. Several commenters discussed that reducing
incentives for innovation, research and development, which are long-
term, high-risk and expensive investments, will affect clinical
outcomes. A few commenters expressed concern that the proposed
definition will stifle the development of new and innovative therapies
with particular concern for drugs that treat rare diseases. One
commenter stated that the proposed definition distorts incentives to
innovate because new active ingredients would be incented over other
changes, even though new uses, dosage forms, and combination drugs
require significant innovation and may lead to important advancements.
Several commenters stated that the proposed definition undermines, or
is inconsistent with FDA policies and incentives that encourage
innovation.
One commenter stated that the proposed definition of new
formulation will result in higher rebates for drugs that are line
extensions and because of the higher rebates, 340B prices will be
decreased. They stated that lower 340B prices will lead to less
incentive for manufacturers to invest in research and development.
Response: We disagree that the definition of new formulation
penalizes innovation. If the alternative calculation for a drug that is
a line extension results in a higher URA than the standard rebate
calculation, it is because the original drug was subject to inflation-
based penalties. Therefore, the most important variable that determines
if the applicable URA is based on the alternative rebate calculation,
rather than the standard calculation, is whether the original drug
increased faster than the rate of inflation. The perceived ``penalty''
for a drug that is a line extension is not a penalty on the new drug,
rather it is a continuation of the ``penalty'' on the original drug. We
agree that the treatment of a line extension drug may result in a URA
that is greater than the standard rebate amount, however we do not
believe that this treatment would prevent a manufacturer from pursuing
innovation. The fact that the innovation may lead to a higher rebate
obligation for a drug that is a line extension is not the result of the
innovation. Manufacturers will continue to have incentives to innovate
based on multiple factors, as noted in the previous response to a
comment. In addition to previously described factors, we understand
various FDA policies encourage innovation. We do not believe the
proposed definition of new formulation changes those FDA policies and
incentives.
Regarding the comments that Medicaid rebates will increase and 340B
prices will decrease, it is important to note that the alternative
calculation does not categorically result in a higher URA for a drug,
as there are many factors that enter into the calculation. One of the
most important factors in the calculation is the inflation-based rebate
that is applied to the initial brand name listed drug for the rebate
quarter being calculated. Regardless of the price of the new
formulation, if the initial brand name listed drug did not increase in
price in excess of the rate of inflation, then the alternative rebate
calculation for the line extension should not result in a higher URA
than the standard calculation for the drug that is a line extension.
However, even in the event that the definition of new formulation
results in a decrease to a 340B price, we believe our proposed
definition is consistent with section 1927(c)(2)(C) of the Act. We do
not believe that decreases in 340B prices will lead to less research
and development for same reason that we believe that URA increases will
not lead to less innovation.
f. Effect on Manufacturers
Comment: A few commenters described the negative effects that the
proposed definition of new formulation will have on manufacturers. A
few commenters stated that the proposal would reduce revenue for
manufacturers, including decrease revenue due to reduction in 340B
prices. One commenter stated that the proposed definition is
unnecessarily burdensome on manufacturers. One commenter stated that
the proposed definition will cause manufacturers to use existing
rebates from the original drug that could be years old.
Response: Applying the alternative rebate calculation should not
categorically lead to decreased revenue for a manufacturer; rather, it
continues to apply the inflation-based rebate that applies to the
initial brand name listed drug. The alternative rebate calculation
limits the ability of a manufacturer to negate those inflation-based
rebates. We understand that if the alternative rebate calculation leads
to a URA that is higher than the standard URA for a new formulation, a
manufacturer may not ultimately attain the same revenue as if the
alternative rebate calculation was not required. However, by
interpreting the statutory definition, and providing this clarification
to manufacturers, we are assisting manufacturers in ensuring their
compliance with section 1927(c)(2)(C) of the Act.
g. Effect on States
Comment: A few commenters pointed out that any increase in rebates
due to the alternative rebate calculation for drugs that are line
extensions are offset to the federal government. The commenters stated
that states would likely suffer a loss because of the offset and
because manufacturers that were providing supplemental rebates to the
states for these drugs would likely discontinue those supplemental
rebates. Commenters stated that this change in supplemental rebates
would lead to the states having to reevaluate their preferred drug
lists to ensure that preferred drugs are most cost-effective.
One commenter noted that if the definition was enacted
retroactively, it would create an administrative burden for the states
and that states would owe money to CMS back to 2011.
[[Page 87038]]
Response: The statute provides that any increase in rebates
resulting from the alternative calculation for drugs that are line
extensions are to be treated as an offset to federal financial
participation provided to a state as specified at section 1927(b)(1)(C)
of the Act. We understand that states may wish to reevaluate their
preferred drug lists if manufacturers alter their existing state
supplemental rebate agreements. However, we understand that such
reevaluation by states occurs on a regular basis, as it does with non-
Medicaid insurers. We are confident that state Medicaid programs can
continue to effectively manage shifting preferred drug lists and
provide appropriate, cost-effective therapies to their beneficiaries as
they have been doing.
The definitions of line extension, new formulation, and oral solid
dosage form being finalized in this rule will be effective beginning on
January 1, 2022 and will therefore not result in states owing money to
CMS for retrospective application.
h. Recognizing Benefits of New Formulations
Comment: A few commenters stated that the proposed definition of
new formulation fails to take into account the value of improvements
and innovation. One commenter stated that the policy explicitly fails
to differentiate between innovation and non-substantive formulation
changes. A few commenters stated that CMS fails to recognize the effort
and expense that go into developing new formulations and combinations
drugs.
Response: We do not believe that the statute requires that the
treatment of a drug that is a line extension is dependent on the extent
of the improvements, the value of the innovation, or the expense that
manufacturers incur when developing new formulations. If Congress had
intended these factors to limit the scope of drugs that are line
extensions, it would have provided as much in statute. While CMS
recognizes the value of innovation and improvements, we also recognize
the importance of giving full effect to the statute.
i. New Combination Drugs and Drug/Device Combinations
The statutory definition of line extension does not expressly
exclude new combination drugs, such as a drug that is a combination of
two or more drugs or a drug that is a combination of a drug and a
device, and, as noted in the June 2020 proposed rule (85 FR 37295), our
proposed definition of new formulation includes new combination drugs
provided that the new formulation contains at least one active
ingredient in common with the initial brand name listed drug. It also
provided that a drug/device combination is a new formulation.
As noted in the COD final rule (81 FR 5197, 5265 through 5267), we
received numerous comments regarding our proposal in the February 2,
2012 proposed rule to include combination drugs in the definition of
line extension. In particular, commenters were concerned that our
proposal required sharing of proprietary pricing information with
competitors. We believed that the commenters' concerns have been
mitigated by Sec. 447.509(a)(4)(iii), which requires the additional
rebate to be calculated only if the manufacturer of the line extension
also manufactures the initial brand name listed drug or has a corporate
relationship with the manufacturer of the initial brand name listed
drug. Therefore, in the June 2020 proposed rule, we clarified that
while our proposed definition of new formulation includes combination
drugs, the alternative URA calculation is only required under Sec.
447.509(a)(4)(iii) for a rebate period if the manufacturer of the line
extension also manufactures the initial brand name listed drug or has a
corporate relationship with the manufacturer of the initial brand name
listed drug.
Furthermore, we noted that in the event that the initial brand name
listed drug is a combination drug, neither the statutory definition of
line extension nor our proposed definitions of line extension or new
formulation exclude new formulations of combination drugs. For example,
if an initial brand name listed drug is a combination drug consisting
of an approved drug plus a new molecular entity, and FDA subsequently
approves a new drug consisting only of the new molecular entity, then
we would consider the new drug to be a new formulation of the initial
brand name listed drug because it would constitute a change to the
initial brand name listed drug and contains at least one active
ingredient in common with the initial brand name listed drug.
As previously stated, we believed we have the discretion and
authority to include a broad range of drugs as a line extension,
including combination drugs. However, we also noted that we are aware
that some combination drugs appear to be slightly different from an
existing drug while other combination drugs are very different drugs
than the initial brand name listed drug. For example, if a new
combination drug contains a new molecular entity in combination with a
previously approved drug, the resultant new combination may appear to
be very different from the initial brand name listed drug, however, we
believed that it is a new formulation of an initial brand name listed
drug. Conversely, we believed that a new combination of two previously
approved drugs, or a combination of a previously approved drug and a
non-drug product (for example, a dietary supplement or a device), may
not be a significant alteration even though it also is a new
formulation of an initial brand name listed drug. Given that different
commenters have differing thoughts on what constitutes a new
formulation of an initial brand name listed drug, and our attempt to
provide a reasonable interpretation of the statute to define or
describe what constitutes a change that should be considered a new
formulation, we solicited comments that may provide a way to define and
identify those combination drugs that should be identified as line
extensions while excluding those combination drugs that should not be
so identified.
We did not receive any comments specific to our solicitation
regarding a method to differentiate between combination drugs that
should be identified as line extensions while excluding those that
should not be so identified. However, we received the following
comments regarding our proposal to include a drug that is a new
combination in the definition of new formulation:
Comment: A few commenters supported CMS' proposal to include
combination drugs in the proposed definition of line extension citing
their belief that the proposal could incentivize investment in new drug
development rather than less innovative changes and is not expressly
excluded by statutory language. One commenter encouraged CMS to
recognize as line extensions all combination drugs that include a
previously approved drug citing their belief that this would ensure
that the Medicaid program is not unduly harmed by manufacturers'
choices in product life cycle management.
Many commenters disagreed with CMS' proposal to include combination
drugs in the proposed definition of line extension citing their belief
that it is contrary to Congressional intent, FDA policies, and statute,
minimizes the significant advancements represented by combination
drugs, undermines clinical breakthroughs/innovations, especially in the
HIV treatment arena, and could be difficult to implement.
[[Page 87039]]
One commenter noted that CMS proposes to include certain combination
drugs despite the fact that these products may offer a treatment for a
novel patient population or even include a new molecular entity.
Another commenter noted the proposal is unreasonable, stating that it
is impossible to apply the alternative URA formula to combination
products. One commenter stated that subjecting combination drugs to the
alternative rebate calculation will have unintended pricing
consequences. Several commenters disagreed with CMS' proposal to
include combination drugs because they stated that the Congress
intended the line extension rebate calculation to apply to a single
drug as demonstrated by the Congress's deliberate and intentional use
of the singular form to describe each drug subject to the line
extension drug provision. One commenter disagreed with CMS' proposed
definition of new formulation to include a drug that is a combination
of a drug and a device citing their belief that combination products,
which could include without limitation a drug/biologic active
ingredient combined with a medical device, are not similar to extended
release formulations, and therefore, cannot qualify as a line extension
under the statutory definition. One commenter expressed concern that
combination products currently account for substantial federal and
supplemental rebates and the high federal rebates on the original
products would severely weight the rebate distribution in favor of the
federal government, causing an impact to states, who may in turn move
line extension products to non-preferred status even if utilization is
high, assuming comparable clinical options exist.
Response: We believe that we have statutory authority to include
new combination drugs and drug device combinations in the definition of
new formulation; however, based on the comments, we have decided not to
include a new combination of drugs, and a drug/device combination as a
new formulation.
It is important to note that combination drugs are not necessarily
excluded from the definition of a new formulation. If an initial brand
name listed drug is a combination of two or more drugs, and then a
manufacturer begins selling a new formulation of that combination drug,
then the new drug satisfies the definition of a new formulation and
must be identified as a line extension. For example, consider two
single-ingredient drugs, Alpha and Beta. A new combination of these two
drugs, AlphaBeta, is not considered a new formulation for the purposes
of the line extension alternative rebate calculation. However, a later
developed new formulation of AlphaBeta, for example, AlphaBeta XR, is a
new formulation with AlphaBeta representing the initial brand name
listed drug.
Based on the comments received, we will not be finalizing our
proposal that a drug that is a new combination is included in the
definition of new formulation.
j. Active Ingredient
Comment: A few commenters agreed with CMS' proposal that ``the new
formulation contains at least one active ingredient in common with the
initial brand name listed drug'' citing their belief that this would
allow manufacturers and CMS to readily answer the threshold question as
to whether a product is a line extension. One commenter specifically
supported CMS's proposed use of active ingredient to identify a new
formulation.
A few commenters disagreed with CMS' proposal that ``the new
formulation contains at least one active ingredient in common with the
initial brand name listed drug'' citing their belief that comparing
active ingredients is technically complicated, the proposal is
unworkable in practice and indicative of a policy that stretches beyond
CMS' authority. One commenter expressed their belief that defining
``new formulation'' by reference to active moiety would require
manufacturers to unnecessarily expend time and resources in identifying
original drugs, when doing so could be unlikely to lead to the
application of the alternative URA formula. One commenter recommended
that CMS modify the proposed definition of new formulation to expressly
exclude combination products and clarify that a new formulation must
contain the same one active ingredient in common with the original
drug, not ``at least one.'' Another commenter requested that CMS
clarify that each line extension should have only a single original
drug, which is the drug first approved by FDA that contains the same
active ingredient as the line extension.
Response: We included the proposal that a new formulation that
contains at least one active ingredient in common with the initial
brand name listed drug because we proposed that a drug that is a new
combination should be identified as a line extension if the new
combination contained one of the same active ingredients as the initial
drug. We were using that common active ingredient to make the link
between the original drug and the drug that is a new combination. As
stated, we are not finalizing that new combinations are new
formulations and therefore we are not finalizing that the original drug
and the drug that is a new combination have an active ingredient in
common.
k. New Indication
In the February 2, 2012 proposed rule, we proposed that a drug
approved with a new indication for an already approved drug would be a
line extension (77 FR 5323). We received several comments stating that
the proposal was not feasible because the approval of a new indication
for an already approved drug may not result in a different drug product
and it would not be logical that a drug is a line extension of itself.
Additional commenters noted that it is not possible to apply the
alternative line extension calculation to rebate invoices for an NDC
only for those claims that were prescribed the newly approved
indication. In the June 2020 proposed rule, we agreed that if following
the approval of a new indication a manufacturer markets its drug in
such a way that it is not a separately identifiable drug product the
alternative URA calculation would not apply. However, if following the
approval of a new indication the manufacturer markets the drug in such
a way that it is a separately identifiable drug product, we proposed
that the alternative URA calculation would apply. Thus, as discussed in
the June 2020 proposed rule, we proposed a definition of new
formulation that included changes in indication accompanied by
marketing as a separately identifiable drug (for example, a different
NDC).\19\ We requested comments about whether a drug approved with a
new indication that is not separately identifiable should be considered
a new formulation and, if so, how such a drug could be identified in
DDR for purposes of calculating the alternative URA.
---------------------------------------------------------------------------
\19\ An NDC comprises three segments. The first segment is a
labeler code, associated with the labeler, the second segment is a
product code, which in association with a specific labeler code
identifies the product, and the third segment is a package code,
which, in association with the preceding segments, identifies the
package size and type. For purposes of reporting to the MDRP, FDA's
10-digit NDC must be converted to an 11-digit NDC. The 9-digit NDC
cited here is a combination of the labeler code plus the product
code. FDA requirements for an NDC are at 21 CFR 207.33.
---------------------------------------------------------------------------
We believed that the Congress included the alternative URA
calculation for a line extension to address changes to a drug that
allow a manufacturer to avoid inflation-based additional rebates by
establishing a new
[[Page 87040]]
market date and base date AMP for the drug. We noted that we agreed
with the comments suggesting that if there is a change to a drug but
that drug is not separately identifiable, then it is not feasible for
the manufacturer to identify the drug as a line extension and perform
an alternative URA calculation.
In response to our request for comments about whether a drug
approved with a new indication that is not separately identifiable
should be considered a new formulation and, if so, how such a drug
could be identified in DDR for purposes of calculating the alternative
URA, we did not receive specific suggestions. However, we received one
comment asking for clarification on what marketing measures, other than
a different NDC, would qualify a drug with a new indication as a new
formulation. We received the following comments regarding the inclusion
of ``new indication'' in the definition of new formulation:
Comment: Many commenters disagreed with CMS' proposal to include
``changes in indication accompanied by marketing as a separately
identifiable drug (for example, a different NDC)'' as part of the
proposed definition for new formulation citing their belief that the
proposal is overly broad, conflicts with Congressional intent, FDA
policies, and CMS' statutory authority, it would disincentivize
manufacturers to provide treatment options for rare disease patients,
the proposal does not reference the scope of the changes involved where
FDA approves a new indication, could freeze or slow research and
investment into orphan drug indications, and could adversely impact the
COVID-19 pandemic by chilling innovation. One commenter requested that
CMS not consider new or expanded indications to treat chronic
conditions such as psoriatic disease as a new formulation under the
proposed ``line extension'' definition. One commenter expressed their
belief that in the case of a new indication--the parent and child drug
are the very same drug--and applying the alternative rebate formula
will pose problems as the line extension and the parent drug would have
the same AMP, and thus, the same rebate. One commenter expressed
concern that obtaining approval for new indications of existing
therapies can require significant investments in research and
development, including new clinical studies. One commenter noted that
the introduction of a new indication can have significant benefits for
patients. Another commenter was concerned that when a drug is approved
with a new indication that is not separately identifiable, considering
it a new formulation would create a number of implications on
stakeholders throughout the drug delivery system. One commenter stated
that a new indication of a drug is not a new formulation because a
change to the label of a drug to reflect a new indication does not
change the chemical composition of a drug, even if the new indication
is marketed as a ``separately identifiable drug.'' One commenter
recommended that CMS limit the definition of ``line extension'' to
those formulations that are not legitimately distinct products.
A few commenters agreed with CMS' proposal to include ``changes in
indication accompanied by marketing as a separately identifiable drug
(for example, a different NDC)'' as part of the proposed definition for
new formulation. As stated previously, one commenter recommended that
CMS clarify what marketing measures other than a separate NDC would
qualify to minimize confusion between manufacturers and CMS.
Response: We believe that we have statutory authority to include a
drug that has been approved for a new indication in the definition of
new formulation, however, based on the comments, we have decided not to
include a new indication accompanied by marketing as a separately
identifiable drug (for example, a different NDC) in the definition.
It is important to note that drugs approved for a new indication
accompanied by marketing as a separately identifiable drug are not
necessarily excluded from the definition of a new formulation. If a
drug is approved for a new indication and is marketed as a separately
identifiable drug, and also includes one of the changes in formulation
that qualifies a drug as a new formulation, then that drug is included
in the definition of a new formulation. For example, if an initial
brand name listed drug is approved for a new indication, assigned a
different NDC, and marketed in a different dosage form than the initial
drug, such drug is a new formulation subject to the alternative rebate
calculation.
Based on the comments received, we will not be finalizing our
proposal that a change in indication accompanied by marketing as a
separately identifiable drug (for example, a different NDC) is included
in the definition of new formulation.
l. New Strengths
In the COD final rule (81 FR 5267), we indicated that we do not
consider a new strength of the same formulation of the initial brand
name listed drug to be a line extension because section 1927(c)(2)(C)
of the Act does not expressly contemplate that a new strength is a line
extension. As noted in the June 2020 proposed rule though, we did not
finalize a regulatory definition of line extension, and instructed
manufacturers to make ``reasonable assumptions'' regarding whether a
drug is a line extension. As noted in the June 2020 proposed rule (85
FR 37295), we proposed to interpret the definition of line extension
more broadly, which included proposing a much broader definition of new
formulation. The statutory definition of line extension does not
expressly exclude a new strength of a drug, and we believed a change in
strength is a relatively simple modification to a currently marketed
product. Furthermore, changing the strength of an initial brand name
listed drug allows a manufacturer to establish a new base date AMP,
thereby avoiding inflation based rebate liability, which may
incentivize a manufacturer to change the strength of a drug that is
losing its exclusivity or patent protection to prolong the lifecycle of
the drug, preventing money saving generic substitution. Therefore, we
believed that a new strength of a drug, produced or distributed at a
later time than the initial strength(s), should be identified as a line
extension and made subject to the line extension alternative URA
calculation. Therefore, as noted in the June 2020 proposed rule, we
proposed a definition of new formulation that included changes in
strength.
We received the following comments in response to including a new
strength in the definition of new formulation:
Comment: A few commenters agreed with CMS' proposal that ``a new
strength of a drug, produced or distributed at a later time than the
initial strength(s), should be identified as a line extension and made
subject to the line extension alternative URA calculation'' citing
their belief that this will expand the universe of drugs that can be
line extensions and that CMS is correct in its characterization of
manufacturer product life cycle gaming and the unintended consequences
for both patients and the Medicaid program that results from this
behavior.
Response: We appreciate the support.
Comment: Several commenters disagreed with the proposal that ``a
new strength of a drug, produced or distributed at a later time than
the initial strength(s), should be identified as a line extension and
made subject to the line extension alternative URA calculation'' citing
their belief that the
[[Page 87041]]
proposal conflicts with prior CMS guidance, statute and Congressional
intent. A few commenters stated that since CMS previously stated that
they did not believe the statute indicated that a new strength was a
line extension, and that the statute did not change, that CMS is making
a change in policy without appropriate explanation. They noted that CMS
does not provide a policy rationale for why a new strength of an
existing formulation would meet the statutory definition for a new
formulation. A few commenters pointed out that CMS stated that the
statute does not prohibit a new strength from being identified as a
line extension but that the lack of prohibition does not mean that it
is permissible or advisable.
Response: We believe that our proposed definition of new
formulation is consistent with section 1927(c)(2)(C) of the Act, and
that it give us discretion to include a new strength in the definition.
Although in the 2016 COD final rule we did not include a new strength
in the definition of line extension, our continued experience with the
application of the statutory provisions for drugs that are line
extensions resulted in a reevaluation of our prior position.
Comment: A few commenters stated that the proposed definition of
new formulation conflicts with the FFDCA and FDA regulatory
understanding of ``formulation''.
Response: FDA and CMS each have different functions and
responsibilities and we do not believe that the same terms need to be
defined or interpreted in the same manner. We note that CMS and FDA may
use the same terms differently for purposes within their own programs
and consequently do not agree that the interpretation of terms must
always be the same. Until the January 1, 2022 effective date of the
definition of new formulation, manufacturers may continue to refer to
the statutory definition of line extension and use reasonable
assumptions, if necessary, to determine if their drug is a new
formulation.
Comment: A few commenters expressed their belief that CMS does not
understand the patient needs and/or reasons that different strengths
serve, manufacturers may be discouraged from taking steps that would
expand patients' treatment options, and manufacturers may be penalized
for investing in and pursuing additional improvements to a drug. One
commenter stated that despite the proposed rule's suggestion that a new
strength is a ``simple modification,'' such a change must be supported
by data--which may require conducting clinical trials--and receive FDA
approval. One commenter suggested that a new strength might be approved
for a drug in connection with a new indication for a drug and that
would be a significant change.
Response: We disagree that we do not understand the reasons that
different strengths may be developed. We believe that the introduction
of a new strength of a drug, regardless of the reason a manufacturer
may begin marketing such new strength, is a new formulation that is
subject to the alternative rebate calculation. Although we understand
there may be a variety of reasons a manufacturer may pursue FDA
approval of a new strength of a drug, we do not believe that the reason
for creating a new strength affects whether the new strength is a new
formulation and thereby required to calculate the alternative rebate
for a drug that is a line extension.
We also do not believe that the requirement to perform the
alternative rebate calculation penalizes a manufacturer for pursuing
changes to a drug. If the initial strength(s) of the drug did not
increase in price faster than the rate of inflation, then the
alternative calculation for the new strength will generally not result
in a higher rebate than the standard calculation. Although the
alternative rebate calculation may result in a higher URA for a drug,
as compared to the standard URA, the higher URA is not due to the
innovations in the new formulation. Rather, if the alternative rebate
calculation results in a URA that is higher than the standard
calculation, it is because the original drug increased in price faster
than the rate of inflation and therefore was subject to inflation-based
additional rebates.
Thus, an alternative rebate calculation that results in a higher
rebate than the standard calculation is not a result of the improvement
to the drug, but rather the price increases on the original drug that
exceeded the rate of inflation.
Comment: A few commenters stated that the statute was focused on a
change in dosage form, and did not discuss a change in strength. A few
commenters expressed their belief that the inclusion of a new strength
in the definition of new formulation conflates the concepts of
``strength'' and ``dosage form''--concepts that the statute treats as
distinct--in a way that is contrary to Congressional intent. The
commenters point out that either a change in strength or a change in
dosage form may lead to the establishment of a new base date AMP. They
noted that since the line extension provision provides a different
dosage form as an example of a line extension (that is, an extended
release formulation), that only a change to the dosage form (that is,
not a change in strength) qualifies a drug as a line extension.
Response: We do not agree that we are conflating ``strength'' with
``dosage form.'' We agree with the commenter that a change in strength
or a change in dosage form may be reason to establish a new base date
AMP. However, the line extension provision in the statute does not rely
on whether the change to a new formulation is a reason to establish a
new base date AMP, nor does it preclude considerations of changes in
strength.
Comment: Several commenters expressed concern with operational
challenges if a new strength could be a line extension. They stated
that since one of the variables in the alternative rebate calculation
was subject to any strength of the original drug, the calculation is
difficult, illogical, or impossible.
Response: We understand that the statutory requirement to apply the
alternative rebate calculation to a drug that is a line extension may
be operationally confusing and difficult, but we do not believe that
that it is illogical or impossible. As always, CMS staff is available
to assist manufacturers with operational concerns.
Comment: A few commenters stated that CMS presupposes that a
manufacturer creates a new strength for the purpose of avoiding
inflation-based rebates, or to avoid generic competition. One commenter
stated that concerns about generic competition is irrelevant to whether
a drug is a line extension and CMS does not have authority to address
patent or generic competition issues.
Response: We do not believe that a new strength is necessarily
created for the purpose of avoiding inflation-based rebates or to
address generic competition. We also do not believe that our language
in the proposed rule concerning reasons why a manufacturer may seek
approval for a new strength is inappropriately addressing patent or
generic competition issues. Rather, we proposed a definition of new
formulation in order to provide guidance to manufacturers on how to
identify which of its drugs should be identified as a line extension,
regardless of the reasons the new formulation was developed.
We are finalizing our proposal that a new strength of a drug is
included in the definition of a new formulation.
m. Extended Release Formulation
Comment: One commenter stated that including an extended release
[[Page 87042]]
formulation in the definition would undermine the significant
improvement Long Acting Injectable (LAI) Antipsychotics offer to people
with mental illness.
A few commenters disagreed with CMS' inclusion of any new
formulation other than an extended release formulation or similar to an
extended release formulation in the proposed definition of new
formulation, citing their belief that the proposal conflicts with
statute and Congressional intent, and would undermine longstanding
statutory incentives that encourage innovation.
Response: The statute defines a line extension, in part, as a new
formulation of a drug and provides an extended release formulation as
an example. As a result, we do not believe we have discretion to
exclude an extended release formulation from the definition of new
formulation. Nevertheless, we believe that our proposed definition is
consistent with section 1927(c)(2)(C) of the Act and appropriate for
the reasons discussed in the June 2020 proposed rule. We do not agree
that the alternative rebate calculation required for a drug that is a
line extension undermines drug improvements, whether the line extension
is an extended release formulation, or any other new formulation. As
stated, the alternative calculation does not categorically result in a
higher URA for a drug as there are many factors that enter into the
calculation. If the initial brand name listed drug did not increase in
price in excess of the rate of inflation, then the alternative rebate
calculation for the line extension should not result in a higher URA
than the standard calculation for the drug that is a line extension.
The application of the alternative rebate calculation does not
nullify statutory incentives that encourage innovation as those
incentives continue to be a factor in the calculation of the URA for
the drug that is a line extension. For example, if FDA has approved a
drug exclusively for pediatric indications, or if a drug is identified
as a clotting factor, section 1927(c)(1)(B)(iii) of the Act continues
to allow for a lower percentage of AMP for the rebate calculation.
n. Change in Pharmacodynamics or Pharmacokinetic Properties
Comment: We received one comment regarding the proposal to include
changes in pharmacodynamics or pharmacokinetics in the definition of
new formulation. The commenter stated that these types of changes
involve more than a slight alteration of an existing product and may
result in changes to an active moiety such that it would be considered
a different active ingredient.
Response: After considering the comment, we concluded that using
the terminology ``pharmacodynamics or pharmacokinetics'' incorporated a
broader range of changes than we intended with this language.
Therefore, we are simplifying the language to incorporate the more
limited types of change in the drug that we intended to capture, using
less complex language. Rather than including a change in
pharmacodynamics or pharmacokinetic properties, we are modifying the
language to include a change in release mechanism. Examples of a change
in release mechanism include, but are not limited to, a change from an
immediate release formulation to a delayed release formulation, a
change from an extended release formulation to an immediate release
formulation, and a change from a non-coated tablet to an enteric coated
tablet.
After consideration of public comments, we are finalizing a
modification of our proposal. Specifically, we are including in the
definition of a new formulation a change in release mechanism, rather
than changes in pharmacodynamics or pharmacokinetic properties as
proposed.
o. Route of Administration
Comment: A few commenters disagreed with CMS' inclusion of changes
to route of administration in the proposed definition of new
formulation, citing their belief that the proposal fails to consider
the benefits of new routes of administration and conveys a lack of
recognition of the value of incremental improvements in new
formulations. One commenter also stated their belief that there would
be fewer financial incentives to develop new and improved drugs,
including highly anticipated, long-acting HIV medications for both
prevention and treatment.
Response: We believe that our proposal to include a drug with a new
route of administration in the definition of new formulation is
consistent with section 1927(c)(2)(C) of the Act. The statute does not
limit a line extension to only those drugs that do not provide
additional clinical benefits over the initial brand name listed drug.
Additionally, the statute does not direct that the new formulation of
the drug has to be administered by the same route of administration as
the original drug. Moreover, we do not agree that when determining if
the alternative rebate calculation is required for a drug that is a
line extension, it is required to consider the benefits of new routes
of administration or the benefits of any other new formulation. As
stated, the alternative calculation does not categorically result in a
higher URA for a drug as there are many factors that enter into the
calculation. If the initial brand name listed drug did not increase in
price in excess of the rate of inflation, then the alternative rebate
calculation for the line extension should not result in a higher URA
than the standard calculation for the drug that is a line extension.
After consideration of public comments, we are including a change
in route of administration in the definition of a new formulation as
proposed.
p. Recommendations for Modifications to Proposals
We received a few comments that are out of the scope of the
proposed rule and we are not addressing those comments in this final
rule.
Comment: One commenter recommended that the definition of line
extension should follow the statute exactly because it would be less
confusing.
Response: We disagree that adopting the statutory language as the
regulatory definition of line extension or new formulation would be
less confusing. One important reason is that the statute only provides
one example of a type of new formulation, that is, an extended release
product. In addition, experience has shown us that since the
publication of the 2016 final rule, there has been confusion and
questions regarding the identification of drugs that are line
extensions. In the interest of fairness to all affected parties,
including states and manufacturers, therefore, we believe a more
detailed regulatory definition, along with the information in the
preamble of this rule, will provide more clarity for manufacturers on
how to correctly identify their drugs that are line extensions.
Comment: A few commenters stated that although they support the
proposed clarification related to line extensions, they believe the
proposal could be further strengthened. One commenter recommended that
we add non-oral drugs and biosimilars to the definition. Another
commenter recommended that CMS explicitly add ``authorized generics''
to the definition of ``line extension'' for purposes of the inflation
rebate.
Response: We do not agree with the suggestion that we add
authorized generics to the definition of line extension. As discussed
in the COD final rule (81 FR 5268), we do not read
[[Page 87043]]
section 1927(c)(2)(C) of the Act as treating authorized generic
products differently.
Similarly, we do not believe it is necessary to provide separate
language regarding biosimilars and non-oral drugs because we do not
read section 1927(c)(2)(C) of the Act as treating biosimilars and non-
oral drugs differently. Both of those categories of drugs will be
treated according to the provisions set forth in this regulation.
Comment: We received a few comments that recommended that a drug
should only be identified as a line extension or new formulation if FDA
requires only bioequivalence or bioequivalence and bioavailability
studies for a drug.
Response: We disagree that we should rely on these types of
studies. We are not proposing that bioequivalence or bioavailability
are among the criteria for determining if a product is a line
extension. Therefore, these studies are not relevant to evaluating
whether a drug is a line extension.
Comment: A few commenters stated that CMS should make it clear that
the original drug must be the ``truly original drug'' and identify that
as the ``first drug approved.'' They wanted it specified that drugs
that were approved after the initial drug but before the line extension
are not to be treated as an initial brand name listed drug. One
commenter stated that the original drug should be based on the
chronology of the approval of the original drug. One commenter
recommended that it should be written into the regulatory text that a
drug must be active in the applicable quarter in order to be considered
as a potential initial brand name listed drug.
Response: We do not agree with the commenters who requested us to
clarify that the initial brand name listed drug should be limited to
the ``truly original drug,'' As stated in the preamble in the proposed
rule (85 FR 37289), ``[t]o apply the alternative formula described in
section 1927(c)(2)(C)(iii)(I) through (III) of the Act for each line
extension and rebate period, the manufacturer must determine which NDC
represents the initial brand name listed drug that will be used to
calculate the alternative URA. First, the manufacturer must identify
all potential initial brand name listed drugs by their respective NDCs
by considering all strengths of the initial brand name listed drug in
accordance with section 1927(c)(2)(C)(iii)(II) of the Act.'' (emphasis
added). In order to perform the calculation as instructed, all
strengths of potential initial drugs must be considered, regardless of
the chronology of a drug's approval, or date first marketed. Potential
initial brand name listed drugs may be excluded from consideration if
they are not manufactured by the same manufacturer of the drug that is
a line extension or by a manufacturer with which the line extension
manufacturer has a corporate relationship. Also, if a potential initial
brand name listed drug is not active in the MDRP during the quarter, it
is excluded from consideration for that quarter and we do not believe
it is necessary to include that language in the regulatory text.
Comment: A few commenters suggested that CMS revise the proposed
definition of line extension to exclude those drugs that have not been
assigned a different baseline AMP. The commenters noted that this would
minimize administrative burden and would also be consistent with
Congressional intent, which is focused on situations where a line
extension is subject to a lower additional rebate than the original
drug.
Response: We do not agree with revising the definition of line
extension or new formulation to exclude those drugs that have not been
assigned a new base AMP. The URA for a drug that is a line extension
may derive from the standard rebate calculation or the alternative
rebate calculation, and the applicable calculation may vary from
quarter to quarter. One of the required fields in the product data is
an indicator to identify whether a drug is a line extension. If a drug
is a line extension, a determination must be made every quarter whether
there is an initial brand name listed drug to report for the quarter.
If there is more than one potential initial brand name listed drug for
the quarter, an evaluation must be conducted to determine which of the
potential initial brand name listed drugs has the highest additional
rebate (calculated as a percentage of AMP) for that quarter. That NDC
must be reported as the initial brand name listed drug for that
quarter. Using that NDC for the initial brand name listed drug, if the
alternative rebate calculation results in a higher URA than the
standard URA, then the alternative URA is used for that quarter. As
there are numerous variables considered and utilized in the calculation
of the URA for a drug that is a line extension, and the base AMP value
is only one of those variables, it is not appropriate to exclude a drug
from the definition of line extension or new formulation based only on
the base AMP value.
Comment: One commenter recommended that CMS work with FDA to create
an exceptions process for manufacturers where they develop criteria for
evaluating any petition from companies that believe their products are
not line extensions.
Response: We do not agree that we should create an exceptions
process and work with FDA to evaluate manufacturer petitions for
exceptions to the definition of line extension or new formulation. We
believe that the regulatory definition is reasonable, is consistent
with section 1927(c)(2)(C) of the Act, and will assist manufacturers in
appropriately identifying their drugs that must be reported as a drug
that is a line extension.
Comment: We received a comment suggesting that we sever the line
extension section of this rule, along with other sections that may
interfere with research and development, from the rest of the rule.
Response: We do not believe there is a reason to sever sections of
this rule. There is no evidence that the implementation of the line
extension alternative calculation, which has been in effect for 10
years now, has affected research and development. Manufacturers have
had to make determinations of which drugs constitute a line extension
based primarily on reasonable assumptions over this period. This
regulation provides more specific direction on identifying those drugs
that represent line extensions.
q. Prospective Implementation
Comment: Several commenters requested that CMS confirm that any new
regulation defining the terms should be prospective from the date of
implementation. One commenter also noted that they believe if these
definitions are applied retrospectively, this will dramatically
increase the fiscal impact to the states. One commenter requested that
CMS clarify that nothing would stop a manufacturer from voluntarily
conforming its past reporting to the new definitions. Another commenter
requested that CMS clarify that any regulatory definition of ``new
formulation'' and application of the oral solid dosage form requirement
would only apply for new products as of the effective date of this
future final rule and that manufacturers may rely on their reasonable
assumptions for existing products.
Response: The definitions of line extension, new formulation, and
oral solid dosage form finalized in this final rule will not be applied
retrospectively. These definitions become effective for all drugs in
the MDRP beginning on January 1, 2022. Prior to the effective date,
manufacturers may continue to rely on reasonable assumptions to
determine if their drug is a new
[[Page 87044]]
formulation in order to comply with the statutory requirements and to
use for potential future review of compliance prior to the effective
date. If a subsequent review by us, by the Office of the Inspector
General (OIG), or another authorized government agency determines or
reveals that additional adjustments or revisions are necessary, the
manufacturer is responsible for complying with that determination.
r. Delay Effective Date
Comment: A few commenters recommended that CMS consider narrowing
the redefinition of line extension in future rulemaking with adequate
time for commenters to consider the impact and comment, with one
commenter requesting that if that is not possible, that CMS implement
the new line extension definition with at least 12 months' notice prior
to the effective date to permit states time to make preferred drug list
decisions, notify patients, and implement changes. One commenter also
requested that CMS specify a compliance date/effective date that is at
least 4 quarters following the publication of the final rule, and that
the rule should be prospective only.
Response: Based on the comments received, we are finalizing that
the definitions of line extension, new formulation, and oral solid
dosage form, as well as the requirement that only the initial brand
name listed drug must be an oral solid dosage form, are effective
beginning on January 1, 2022. For prior periods, manufacturers should
continue to rely on the statutory definition of line extension and may
continue to make reasonable assumptions to determine whether their drug
is a line extension.
Based on the comments, we are revising the proposed definition of
new formulation to read: For a drug, a change to the drug, including,
but not limited to: An extended release formulation or other change in
release mechanism, a change in dosage form, strength, route of
administration, or ingredients. In addition, as discussed in section
II.C. of this final rule, we are finalizing that the definitions of
line extension, new formulation, and oral solid dosage form, as well as
the requirement that only the initial brand name listed drug must be an
oral solid dosage form, are effective beginning on January 1, 2022. For
prior periods, manufacturers should continue to rely on the statutory
definition of line extension and may continue to make reasonable
assumptions to determine whether their drug is a line extension.
s. Corporate Relationship
In the June 2020 proposed rule (85 FR 37295), we noted that under
Sec. 447.509(a)(4)(iii), manufacturers are required to calculate the
alternative URA if the manufacturer of the line extension also
manufactures the initial brand name listed drug or has a corporate
relationship with the manufacturer of the initial brand name listed
drug. Although a drug may satisfy the definition of line extension, and
therefore, should be identified in DDR as a line extension, a
manufacturer is not required to calculate the alternative URA unless
the manufacturer of the line extension also manufactures, or has a
corporate relationship with the manufacturer of the initial brand name
listed drug.
Although we did not propose any changes to this policy, we received
some comments that were out of the scope of the proposed rule and we
are not addressing them in this final rule.
5. Oral Solid Dosage Form
Oral solid dosage form is defined at Sec. 447.502 to mean
capsules, tablets, or similar drugs products intended for oral use as
defined in accordance with FDA regulation at 21 CFR 206.3 that defines
solid oral dosage form. As we now have more experience reviewing and
dealing with the line extension provisions from the Affordable Care
Act, we believed that manufacturers may not be interpreting the term
oral solid dosage form consistently. To mitigate any potential
confusion, we believed that manufacturers and other commenters would
benefit from a more detailed definition. In the June 2020 proposed
rule, we proposed to modify the definition of oral solid dosage form.
In the COD final rule (81 FR 5198), CMS interpreted an oral route
of administration as any drug that is intended to be taken by mouth.
Because there is potential confusion about whether a dosage form must
be swallowed, or otherwise enter the gastrointestinal tract to be
considered an orally administered dosage form, we proposed to interpret
that an oral form of a drug is one that enters the oral cavity. This
includes, but is not limited to, a tablet or film administered
sublingually and a drug that is orally inhaled. We believed that this
interpretation provides greater clarity to commenters regarding what
constitutes an oral form of a drug.
Additionally, we believed that manufacturers may not be
interpreting the term solid dosage form consistently. To mitigate any
potential confusion, we proposed to interpret that a solid dosage form
is a dosage form that is neither a gas nor a liquid.
FDA regulation at 21 CFR 206.3 defines the term ``solid oral dosage
form'' for the purpose of identifying drugs for which a code imprint is
required to permit identification of the product. The phrase
``capsules, tablets or similar drugs products'' may not encompass the
range of dosage forms that we believed should be considered for the
application of the line extension provision in the Affordable Care Act.
For example, a sublingual film is an oral solid dosage form; however,
because of the physical attributes of the dosage form, there may not be
a requirement to imprint an identifying code on the dosage form.
Another example of an oral solid dosage form is a powdered drug
administered by oral inhalation. Therefore, we proposed to modify the
definition of oral solid dosage form at Sec. 447.502 to read that it
is an orally administered dosage form that is not a liquid or gas at
the time the drug enters the oral cavity. Additionally, we noted that
an oral solid dosage form that incorporates a medical device would not
be exempt from this definition solely due to the addition of a device
to the oral solid dosage form. For example, if a manufacturer adds a
device to a tablet, the new drug would not be exempt from being a line
extension solely due to the addition of a device to the tablet.
We received the following comments regarding the definition of oral
solid dosage form:
Comment: A few commenters disagreed with CMS' proposal to expand
the definition of an oral solid dosage form citing their belief that
the expanded definition would exceed CMS' statutory or delegated
authority. A few commenters disagreed with the proposed change because
it no longer relies on an FDA definition of oral solid dosage form. One
commenter noted the current definition that properly relies on the FDA
definition has caused no practical problems. Another commenter noted
that not relying on the FDA definition would result in needless
confusion, requiring manufacturers to evaluate dosage forms under two
incongruous legal standards.
Several commenters disagreed with CMS' proposed definition of oral
solid dosage form citing their belief that modifying the definition
would result in a substantial chilling effect on drug innovation. One
commenter stated that the proposed definition fails to take into
account that oral drugs, including inhaled drugs, become the threshold
for any subsequent dose form of a particular product brought to market.
[[Page 87045]]
Several commenters supported the proposal to expand the definition
of oral solid dosage form. One commenter agreed with CMS' proposal to
include powdered inhalations and sublingual films in the proposed
definition for an oral solid dosage form and also encouraged CMS to
clearly state that liquid filled capsules are considered oral solid
dosage forms.
One commenter requested that CMS clarify that any regulatory
definition of new formulation and application of the oral solid dosage
form requirement would only apply for new products as of the effective
date of the final rule and that manufacturers may rely on their
reasonable assumptions for existing products.
Response: The commenter did not explain how our proposed definition
of oral solid dosage form would exceed our statutory or delegated
authority. Nevertheless, we believe that our proposed definition is
consistent with section 1927(c)(2)(C) of the Act and appropriate for
the reasons discussed in the June 2020 proposed rule.
We do not agree that we should retain FDA's regulatory definition
at 21 CFR 206.3 for purposes of identifying an oral solid dosage form
for the MDRP. As we stated in the proposed rule, the FDA definition at
21 CFR 206.3 is for the purposes of identifying drugs that require a
code imprint on the dosage form. Due to physical characteristics of
some oral solid dosage forms, it may be impossible to imprint a code on
them. Since FDA's regulatory definition is used for the specific
purpose of determining when a code must be imprinted on a dosage form,
and that identification bears no relationship to identifying what drugs
are subject to the alternative rebate calculation for line extension
drugs, we believe that it is reasonable to adopt a different definition
than FDA's definition for the purposes of identifying an oral solid
dosage form for the line extension provisions.
We also do not agree that modifying the definition of oral solid
dosage form will necessarily discourage innovation. As stated, the
alternative calculation does not categorically result in a higher URA
for a drug as there are many factors that enter into the calculation.
If the initial brand name listed drug did not increase in price in
excess of the rate of inflation, then the alternative rebate
calculation for the line extension should not result in a higher URA
than the standard calculation for the drug that is a line extension. We
also disagree that we failed to take into account that oral drugs
become the threshold for any subsequent dose form. The statute requires
that the initial drug is necessarily the threshold drug for any line
extension of that drug.
We appreciate the support of the commenter who agreed with our
inclusion of inhaled powders and sublingual films as an oral solid
dosage form and we do understand that adopting this interpretation
includes the possibility that an inhaled drug that is an oral solid
could be an initial brand name listed drug. We agree that liquid filled
capsules satisfy the proposed definition of oral solid dosage form
because when the liquid filled capsule enters the oral cavity, it is a
solid dosage form.
We do not agree that only products introduced on or after the
effective date of the final rule should be subject to the requirement
that only the initial brand name listed drug must be an oral solid
dosage form and the regulatory definitions of oral solid dosage form,
line extension, and new formulation. Although manufacturers will not be
required to apply the regulatory definitions and oral solid dosage form
requirement when calculating rebates for periods prior to the effective
date of the final rule, the definitions become effective for all drugs
that are on the market as of and following that effective date.
We are finalizing the definition of oral solid dosage form as
proposed. In addition, as discussed in section II.C. of this final
rule, we are finalizing that the definitions of line extension, new
formulation, and oral solid dosage form, as well as the requirement
that only the initial brand name listed drug must be an oral solid
dosage form, are effective beginning on January 1, 2022. For prior
periods, manufacturers should continue to rely on the statutory
definition of line extension and may continue to make reasonable
assumptions to determine whether their drug is a line extension.
6. Multiple Source Drug
The MSIAA clarified the definition of multiple source drug in
section 1927(k) of the Act by removing ``(not including any drug
described in paragraph (5))'' and inserting ``, including a drug
product approved for marketing as a non-prescription drug that is
regarded as a covered outpatient drug under paragraph (4),''. Section
1927(k)(7)(A)(i) of the Act now provides that the term multiple source
drug means, for a rebate period, a COD, including a drug product
approved for marketing as a non-prescription drug that is regarded as a
COD under section 1927(k)(4) of the Act for which there is at least 1
other drug product which: Is rated as therapeutically equivalent (under
FDA's most recent publication of ``Approved Drug Products with
Therapeutic Equivalence Evaluations''), except as provided in section
1927(k)(7)(B) of the Act, is pharmaceutically equivalent and
bioequivalent, as defined in section 1927(k)(7)(C) of the Act and as
determined by FDA, and is sold or marketed in the United States during
the period.
We proposed to revise the definition of multiple source drug at
Sec. 447.502 to align with the statutory definition. Specifically, we
proposed to revise the definition of multiple source drug to mean, for
a rebate period, a COD, including a drug product approved for marketing
as a non-prescription drug that is regarded as a COD under section
1927(k)(4) of the Act, for which there is at least 1 other drug product
which meets all the following criteria:
Is rated as therapeutically equivalent (under the FDA's
most recent publication of ``Approved Drug Products with Therapeutic
Equivalence Evaluations'' which is available at http://www.accessdata.fda.gov/scripts/cder/ob/).
Except as provided at section 1927(k)(7)(B) of the Act, is
pharmaceutically equivalent and bioequivalent, as defined at section
1927(k)(7)(C) of the Act and as determined by the FDA.
Is sold or marketed in the United States during the
period.
We did not receive public comments on the definition of multiple
source drug, and therefore, we are finalizing as proposed.
7. Single Source Drug
The MSIAA clarified the definition of single source drug in section
1927(k) of the Act by removing the phrase ``an original new drug
application'' and inserting ``a new drug application'', inserting ``,
including a drug product approved for marketing as a non-prescription
drug that is regarded as a covered outpatient drug under paragraph
(4),'' after ``covered outpatient drug'', inserting ``unless the
Secretary determines that a narrow exception applies (as described in
Sec. 447.502 of title 42, Code of Federal Regulations or any successor
regulation))'' after ``under the new drug application'' and adding
language to specify that such term also includes a COD that is a
biological product licensed, produced, or distributed under a biologics
license application approved by the FDA. Section 1927(k)(7)(A)(iv) of
the Act now defines a single source drug to mean a COD, including a
drug product approved for marketing as a non-prescription drug that is
regarded
[[Page 87046]]
as a COD under section 1927(k)(4) of the Act, which is produced or
distributed under an NDA approved by the FDA, including a drug product
marketed by any cross-licensed producers or distributors operating
under the NDA unless the Secretary determines that a narrow exception
applies (as described in Sec. 447.502 or any successor regulation) and
the term includes a COD that is a biological product licensed,
produced, or distributed under a biologics license application approved
by the FDA. To align the regulatory definition with the definition in
the statute at section 1927(k)(7)(A)(iv) of the Act, as clarified by
the MSIAA, we proposed to revise the regulatory definition of single
source drug at Sec. 447.502. We proposed to define single source drug
in Sec. 447.502 to mean a COD, including a drug product approved for
marketing as a non-prescription drug that is regarded as a COD under
section 1927(k)(4) of the Act, which is produced or distributed under
an NDA approved by the FDA, including a drug product marketed by any
cross-licensed producers or distributors operating under the NDA unless
the Secretary determines that a narrow exception applies (as described
in Sec. 447.502) and includes a COD that is a biological product
licensed, produced, or distributed under a biologics license
application approved by the FDA.
We received the following comments regarding the definition of
single source drug at Sec. 447.502:
Comment: One commenter requested that CMS revise their proposed
definition of single source drug to only apply prospectively from
October 2019 forward, citing their belief that since this is the date
the Congress amended the MDRP statute, it would be in accordance with
the recent ruling in the United States District Court for the District
of Columbia case of STI Pharma, LLC v. Azar.
Response: The revision to the definition of single source drug is
to conform the rule with the amended statute. Our longstanding
interpretation of the statute (both before and after the 2019
amendments) is that a single source drug is a drug approved under an
NDA, and noninnovator drugs are those approved under an ANDA. We
believe STI Pharma, LLC v. Azar was wrongly decided. Prior to the 2016
COD final rule, there was no narrow exception to that general rule.
Therefore, any drug approved under an NDA that is reported as a
noninnovator multiple source drug for quarters prior to 2Q2016 is
improperly categorized and the drug manufacturer should request a drug-
category change or risk enforcement action.
We are finalizing the definition of single source drug as proposed.
8. CMS-Authorized Supplemental Rebate Agreements (SRAs)
States may enter into separate or supplemental drug rebate
agreements as long as such agreements achieve drug rebates equal to or
greater than the drug rebates set forth under the NDRA. (See section
1927(a)(1) of the Act.) CMS approval to enter directly into such
agreements with manufacturers is required under section 1927(a)(1) of
the Act, and thus, states are required to use the SPAs process as a
means to seek CMS authorization. Supplemental rebates must be
considered a reduction in the amount expended under the state plan in
the quarter for medical assistance as provided at section 1927(b)(1)(B)
of the Act. See program guidance at https://www.medicaid.gov/federal-policy-guidance/downloads/smd091802.pdf.
The Affordable Care Act revised section 1927(b)(1)(A) of the Act to
require that manufacturers provide rebates for CODs dispensed to
individuals enrolled with a Medicaid MCO when the organization is
responsible for coverage of such drugs. At that time, states had to re-
assess whether or not to directly collect supplemental rebates related
to CODs dispensed to Medicaid managed care enrollees if the MCO was
responsible for such drug coverage. Some states required their MCOs to
collect and share supplemental rebates under the CMS-authorized SRA,
while other states permitted their MCOs to negotiate their own rebates
with manufacturers outside of the CMS-authorized supplemental rebate
agreement, allowing the MCO to keep the savings generated by the
supplemental rebates.
The Affordable Care Act amendment to section 1927(b)(1)(A) of the
Act also prompted some manufacturers to make assumptions with regard to
AMP and best price calculations. Specifically, manufacturers made
assumptions that all supplemental rebates paid by manufacturers for
prescriptions dispensed to Medicaid managed care enrollees should be
excluded from the manufacturer's determination of AMP and best price.
That included those rebates paid directly to Medicaid MCOs, even if
those rebates were not a result of a CMS-authorized SRA, and therefore,
not shared with the state or eventually used to offset state drug
expenditures prior to claiming FFP from the federal government. Since
CMS-authorized SRA is not defined as it is used at Sec. Sec.
447.504(c)(19) and (e)(9) and 447.505(c)(7), manufacturers assumed that
any supplemental rebates paid based on dispensing to Medicaid managed
care enrollees are always a part of a CMS-authorized SRA with the
states. However, rebates paid to Medicaid MCOs may be paid by
manufacturers that are not part of a CMS-authorized SRA and are not
shared with the state to offset drug expenditures prior to claiming
FFP. Therefore, to clarify that such rebates paid by manufacturers are
not part of a state's CMS-authorized SRA, in the June 2020 proposed
rule, we proposed to define CMS-authorized supplemental rebate
agreement to mean an agreement that is approved through a SPA by CMS,
which allows a state to enter into single and/or multi-state
supplemental drug rebate arrangements that generate rebates that are at
least as large as the rebates set forth in the Secretary's national
drug rebate agreement with drug manufacturers.
Furthermore, and consistent with section 1927(b)(1)(B) of the Act
which provides that the amounts received by a state under paragraph
(a)(1) (federal rebates) or an agreement under paragraph (a)(4) (the
existing state rebates) in any quarter shall be considered to be a
reduction in the amount expended under the state plan in the quarter
for medical assistance for purposes of section 1903(a)(1) of the Act.
As proposed, the definition further stated that the revenue from these
rebates must be paid directly to the state and be used by the state to
offset a state's drug expenditures resulting in shared savings with the
federal government.
We received the following comments on the proposed definition of
CMS-authorized SRA:
Comment: A few commenters requested that CMS confirm that the
proposed definition of CMS-authorized SRA permits states and
manufacturers to negotiate VBP arrangements with the state Medicaid
program's approval and in compliance with this definition, without
requiring further levels of approval or submission of a SPA. Another
commenter further requested that CMS reinforce the need for states to
obtain CMS approval prior to implementing changes to supplemental
rebate policies.
Response: The proposed definition of CMS-authorized SRA permits the
states and manufacturers to negotiate VBP arrangements; however, state
Medicaid programs must seek approval via the SPA process to enter into
a CMS-authorized SRA, including SRAs that reference VBP arrangements.
We have
[[Page 87047]]
also encouraged states and manufacturers to consider negotiating
supplemental rebates as part of VBP arrangements by directing them to
review the September 18, 2002 State Medicaid Director Letter regarding
supplemental rebates and seek authorization under section 1927(a)(1) of
the Act from CMS to ensure compliance with section 1927 of the Act when
entering directly into SRAs with manufacturers.\20\
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\20\ https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/state-releases/state-rel-176.pdf.
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Comment: One commenter requested that CMS revise the first sentence
of the definition to state that CMS-authorized SRA means an agreement
that is approved through a SPA by CMS, which allows a state to enter
into single and/or multi-state supplemental drug rebate arrangements
that may generate rebates in addition to the rebates set forth in the
Secretary's national rebate agreement with drug manufacturers. Another
commenter requested CMS to revise the definition to clarify that
rebates may fall within the definition of CMS-authorized SRA regardless
of their amount and that a SRA may be approved by CMS as long as the
combined rebate payment under the supplemental and national rebate
agreements is greater than or equal to the rebate under the national
rebate agreement alone.
Response: In the September 18, 2002 State Medicaid Director letter
regarding supplemental rebate agreements, CMS directed that states seek
CMS approval under section 1927(a)(1) of the Act to enter directly into
agreements with manufacturers and in doing so, must ensure that any
such agreement will achieve drug rebates that are at least equal to the
rebates set forth in the Secretary's rebate agreements with
manufacturers.\21\ We continue to believe this is an appropriate
interpretation of the statute, and thus, we are not revising the
definition of CMS-authorized supplemental rebate agreement as suggested
by the commenters.
---------------------------------------------------------------------------
\21\ https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/downloads/smd091802.pdf.
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Comment: A few commenters recommended CMS clarify that any VBP
arrangements that states already entered into with manufacturers will
continue to be treated as ``CMS-authorized supplemental rebate
agreements'', and therefore, exempt from Best Price and AMP
calculations. Another commenter also requested that CMS provide
confirmation that states will be permitted to use SRAs but would not be
required to use the pre-approved template. One commenter recommended
that CMS provide additional guidance to enhance SRAs to align with
flexibilities granted under the rule.
Response: States that have entered into CMS-authorized VBP SRAs
have submitted a different template through the SPA approval process
than that used under traditional non-VBP supplemental rebate
agreements. Thus, states may have both a SRA approved for a non-VBP
based template as well as a VBP-based template. Once CMS approves
either template, rebates provided for under agreements entered into
between states and manufacturers are exempt from best price. States do
not need to submit a SPA to take advantage of the multiple best price
VBP approach as described in this final regulation. However, a state
could negotiate its own VBP arrangement outcomes based rebate approach
under a CMS-authorized SRA, and those rebates would be exempt from
Medicaid best price.
Comment: A few commenters supported CMS' proposed definition of
CMS-authorized SRA with one commenter specifically recommending that
CMS require any Medicaid MCO to utilize only CMS-authorized SRAs.
Response: Medicaid MCOs may enter into their own SRAs with
manufacturers, but as noted in this rule, only prices pursuant to CMS-
authorized SRAs would be exempt from best price. If a Medicaid MCO
enters into their own SRAs with manufacturers, such prices are not
exempt from best price. This rule does not address the types of SRAs a
Medicaid MCO may enter into, and thus, a MCO is not required to only
utilize CMS-authorized SRAs.
Comment: One commenter stated that although they generally support
the proposed definition of CMS-authorized SRA, they also requested that
CMS edit the definition as follows: ``Revenue from these rebates must
be paid directly to the state under section 1927 of the Act and be used
by the state to offset a state's drug expenditures resulting in shared
savings with the Federal government.'' The commenter noted this will
ensure consistency with the existing regulations (see Sec. Sec.
447.504(c)(19) and (e)(9) and 447.505(c)(7)).
Response: We appreciate the comment but believe the phrase ``under
section 1927 of the Act'' is not necessary since it is already included
in the exclusions listed in the determination of AMP and best price
regulations at Sec. Sec. 447.504(c)(19) and (e)(9) and 447.505(c)(7).
Comment: One commenter urged CMS to expressly confirm that a
manufacturer may exclude rebates paid under a CMS-authorized SRA from
AMP and best price, without having to verify that the rebate payments
are in fact ``used by the state to offset a state's drug expenditures''
citing their belief that it would not be reasonable to hold
manufacturers accountable for how a state uses a rebate payment.
Response: We agree that it is the responsibility of the state, not
the manufacturer, to ensure that rebates paid by manufacturers under
the CMS-authorized SRA are used by the state to offset a state's drug
expenditures resulting in shared savings with the federal government.
Manufacturer rebates paid under a CMS-authorized SRA must be excluded
from AMP and best price in accordance with Sec. Sec. 447.504(c)(19)
and (e)(9) and 447.505(c)(7).
Comment: Several commenters disagreed with the language in the
proposed definition of CMS-authorized SRA that states ``Revenue from
these rebates must be paid directly to the state''. A few commenters
recommended that CMS exclude rebates that are reported by MCOs from
best price/AMP because the commenter noted rebates reported by MCOs are
factored into a state's rate setting process, and therefore, are
treated as if they had been received directly by the state.
Response: The issue is whether the rebates that are paid for these
covered outpatient drugs are paid in accordance with a CMS-authorized
supplemental rebate agreement, and thus exempt from inclusion in the
calculation of the manufacturer's AMP and best price, or paid directly
to the MCO, and are not exempt from the inclusion in the calculation of
the manufacturer's AMP and best price.
As stated in the preamble to this final rule, the definition of
CMS-authorized SRA is consistent with section 1927(b)(1)(B) of the Act
which provides that the amounts received by a state under paragraph
(a)(1) (federal rebates) or an agreement under paragraph (a)(4) (the
existing state rebates) in any quarter shall be considered to be a
reduction in the amount expended under the state plan in the quarter
for medical assistance for purposes of section 1903(a)(1) of the Act.
The proposed definition provides that these rebates must be paid
directly to the state which the states then use to offset its drug
expenditures, resulting in shared savings with the federal government.
Therefore, any manufacturer rebate revenue collected by the MCOs on
behalf of the state that are part of any
[[Page 87048]]
CMS-authorized SRAs must be shared with the state directly in
accordance with section 1927(b)(1)(B) of the Act. We also do not agree
that manufacturers should exclude rebates that are directly paid to
MCOs outside a CMS authorized supplemental rebate reported by MCOs from
AMP or best price. That is because they are not provided directly to
the state by the manufacturer under a CMS-authorized supplemental
rebate agreement.
Comment: One commenter noted that Medicaid MCOs are critical in
maintaining the cost-effectiveness and quality of care for the Medicaid
program through medication adherence, care coordination, and timely
provider interventions, and stated that it is critical that MCOs are
retained as important partners during negotiations between states and
manufacturers.
Response: This comment is outside the scope of this regulation.
In consideration of the comments received, we are finalizing the
definition of CMS-authorized SRA at Sec. 447.502 as proposed, to mean
an agreement that is approved through a SPA by CMS, which allows a
state to enter into single and/or multi-state supplemental drug rebate
arrangements that generate rebates that are at least as large as the
rebates set forth in the Secretary's national rebate agreement with
drug manufacturers. Revenue from these rebates must be paid directly to
the state and be used by the state to offset a state's drug
expenditures resulting in shared savings with the federal government.
D. Exclusion of Certain Manufacturer Sponsored Patient Assistance
Programs (``PBM Accumulator Programs'') From Determination of Best
Price (Sec. 447.505) and AMP (Sec. 447.504)
Manufacturers participating in the MDRP are required to report
certain pricing information to the Secretary, including a COD's best
price and AMP. Best price is defined at section 1927(c)(1)(C) of the
Act to mean, for a single source or innovator multiple source drug of a
manufacturer (including the lowest price available to any entity for
any such drug of a manufacturer that is sold under a NDA approved under
section 505(c) of the FFDCA), the lowest price available from the
manufacturer during the rebate period to any wholesaler, retailer,
provider, HMO, nonprofit entity, or government entity within the United
States, subject to certain exclusions. Section 1927(c)(1)(C)(ii) of the
Act further defines the term best price to be inclusive of cash
discounts, free goods that are contingent on any purchase requirement,
volume discounts, and rebates (other than rebates under this section).
The definition of best price is further defined at Sec. 447.505(a) and
includes the lowest price available from the manufacturer during the
rebate period to any provider, which is defined to mean a hospital,
HMO, MCO, or entity that provides coverage or services to individuals
for illnesses or injuries or providers services or items in the
provision of healthcare. Paragraph (b) further indicates that best
price includes all prices, including applicable discounts, rebates, or
other transactions that adjust prices either directly or indirectly to
the best price eligible entities in paragraph (a).
We have learned that some health plans (which meet the definition
of provider when determining best price) are being instructed or
encouraged by their PBMs to apply manufacturer sponsored patient
assistance programs, such as patient copay assistance programs, to the
benefit of the plan, instead of entirely to the patient. (Note that
Medicaid patients are not eligible for these manufacturer sponsored
programs, but the administration of these programs by commercial health
plans and PBMs can affect the rebates that the Medicaid program
receives from the manufacturer-sponsor of these programs.)
For example, certain PBMs have instructed health plans to not allow
the manufacturer-sponsored patient assistance to be applied towards a
patient's plan deductible for a brand name drug not on a plan's
formulary. PBMs contend that such programs steer consumers towards more
expensive medications when there may be more cost saving options, such
as generic substitution. Therefore, PBMs offer health plans that are
commonly referred to as PBM accumulator programs and tout them as cost
saving measures. For instance, using a copayment assistance card
program as an example, instead of applying the manufacturer sponsored
patient assistance program in a manner that bestows the entire benefit
of the program to the patient or consumer, and ensures no contingency
on a purchase requirement, as applicable, the PBM (on behalf of the
plan) identifies when a copayment card is used by a patient and adjusts
the beneficiary's deductible only in instances when the out-of-pocket
contribution is made by the beneficiary. As a result, the manufacturer-
sponsored assistance does not accrue towards a patient's deductible and
the patient sometimes does not realize this until the manufacturer
copayment assistance runs out and the patient receives a significantly
larger bill for the drug. This results in the health plan delaying the
application of its plan benefit to the patient to the detriment of the
patient or consumer, thus generating savings for the plan. We provide
the following example in this rule:
Example:
Assume: $2,500 Drug cost
$2,500 Patient Deductible
$10,000 Copayment Assistance Program Maximum
In the no PBM accumulator scenario below, the manufacturer's
copayment assistance accrues to the benefit of the patient because the
patient has a high deductible, which is what we believed the
manufacturer intended. In such cases, it is clear that the
manufacturer's program is directly assisting the patient's copayment/
deductible costs.
Table 1--Copay Assistance Program With No PBM Accumulator Program
----------------------------------------------------------------------------------------------------------------
Jan Feb Mar Apr May June
----------------------------------------------------------------------------------------------------------------
Plan Pays......................... $0 $2,000............... $2,000 $2,000 $2,000 $2,000
Patient Pays...................... 25 $25.................. 25 25 25 25
Manufacturer Pays................. 2,475 $475 deductible 475 475 475 475
reached.
Manufacturer only
pays $475.
----------------------------------------------------------------------------------------------------------------
In the PBM accumulator scenario in Table 2, the PBM does not apply
the manufacturer's copayment assistance to the deductible of the
patient thus delaying the patient satisfying his or her deductible,
which benefits the health plan. The patient usually is not aware of the
change until he is subject to a larger cost share of the drug when the
manufacturer's support copay benefit maximum is reached (see May
column). At that time, the patient receives a significantly a larger
bill.
[[Page 87049]]
Table 2--Copay Assistance Program With PBM Accumulator Program
----------------------------------------------------------------------------------------------------------------
Jan Feb Mar Apr May June
----------------------------------------------------------------------------------------------------------------
Plan Pays......................... $0 $0 $0 $0 $0................... $2,000
Patient Pays...................... 25 25 25 25 $2,400............... 500
Manufacturer Pays................. 2,475 2,475 2,475 2,475 100 manufacturer 0
copay benefit max.
reached.
----------------------------------------------------------------------------------------------------------------
As demonstrated in Table 2, the health plan is benefiting from the
manufacturer sponsored copay assistance program instead of the patient
(consumer). However, manufacturers, in these instances, claim they are
not aware of when these practices by the health plans take place, and
therefore, make reasonable assumptions that their discount programs
meet the criteria at Sec. 447.505(c) that exclude such programs from
best price.
Specifically, manufacturers make reasonable assumptions that their
programs meet the best price exclusions listed in Sec. 447.505(c)(8)
through (12) which provide:
Manufacturer-sponsored drug discount card programs, but
only to the extent that the full value of the discount is passed on to
the consumer and the pharmacy, agent, or other entity does not receive
any price concession (Sec. 447.505(c)(8)).
Manufacturer coupons to a customer redeemed by a consumer,
agent, pharmacy, or another entity acting on behalf of the
manufacturer; but only to the extent that the full value of the coupon
is passed on to the consumer, and the pharmacy, agent, or other entity
does not receive any price concession (Sec. 447.505(c)(9)).
Manufacturer copayment assistance programs, to the extent
that the program benefits are provided entirely to the patient and the
pharmacy, agent, or other entity does not receive any price concession
(Sec. 447.505(c)(10)).
Manufacturer-sponsored patient refund or rebate programs,
to the extent that the manufacturer provides a full or partial refund
or rebate to the patient for out-of-pocket costs and the pharmacy,
agent or other entity does not receive any price concession (Sec.
447.505(c)(11)).
Manufacturer-sponsored programs that provide free goods,
including but not limited to vouchers and patient assistance programs,
but only to the extent that the voucher or benefit of such program is
not contingent on any other purchase requirement; the full value of the
voucher or benefit of such program is passed on to the consumer; and
the pharmacy, agent or other entity does not receive any price
concession (Sec. 447.505(c)(12)).
As discussed in the June 2020 proposed rule, we understand from
some manufacturers that they do not monitor or place parameters around
how the benefits of their manufacturer-sponsored assistance programs
are applied when an individual has health plan coverage. Therefore, we
proposed to revise these paragraphs to provide expressly that the
exclusions discussed in this rule apply only to the extent the
manufacturer ensures the full value of the assistance or benefit is
passed on to the consumer or patient. We believe manufacturers have the
ability to establish coverage criteria around their manufacturer-
sponsored assistance programs to ensure the benefit goes exclusively to
the consumer or patient. We noted that nothing in the proposed change
should be construed to contradict any OIG guidance. We welcomed
comments on the proposal.
The current list of prices excluded from best price as noted in
this rule also apply to AMP as specified in Sec. 447.504(c) and (e).
As stated in the COD final rule, to provide consistency between the AMP
and best price sections, where applicable, and to help with
streamlining and clarifying a manufacturer's price reporting
responsibilities, the same methodology is applied to AMP (81 FR 5253),
and for the same reasons already discussed in this rule, we proposed
making corresponding changes for these exclusions in the context of
AMP.
Accordingly, we proposed to revise the determination of best price
Sec. 447.505 to add a requirement that manufacturers ensure that the
benefits of their assistance programs as provided at Sec.
447.505(c)(8) through (12) are provided entirely to the consumer and
proposed corresponding changes to the AMP regulations at Sec.
447.504(c)(25) through (29) and (e)(13) through (17).
We received several types of comments on the issue of whether the
manufacturer should ensure that the benefits of their assistance
programs be provided entirely to the consumer, or are actually passed
through to the patient. These comments could, in general, be grouped
into the following categories: (1) Impact on Patients; (2) Legal
Authority; (3) Existence of Mechanisms to Assist Manufacturers with
Compliance; (4) Viability of Manufacturer Assistance Programs; and (5)
Impact on other Federal Programs and Policies.
We provide responses to the following comments on the exclusion of
certain manufacturer sponsored patient assistance programs (``PBM
Accumulator Programs'') from determination of best price (Sec.
447.505) and AMP (Sec. 447.504).
(1) Impact on Patients
Comment: Several commenters supported the proposals for
manufacturers to account for patient assistance in Medicaid best price
reporting when it is not passed through to the patient, and shared CMS'
concerns about the role that health carriers and PBMs play in
manipulating manufacturer-sponsored assistance programs, and wanted to
ensure financial assistance benefits flowed to the patient and not the
health plan.
Response: It is our understanding that PBM Accumulator Programs
shift costs back to the patient prematurely by not applying the full
value of the manufacturer-sponsored assistance to a patient's health
plan deductible. Upon exhaustion of the value of the manufacturer's
assistance (manufacturer sponsored drug discounts, coupons, copayment
assistance or refund/rebate programs) the beneficiary of the
manufacturer-sponsored assistance must pay the remaining amount of
their deductible for the drug before the plan's benefit begins. We
believe the final rule will encourage manufacturers to ensure the full
value of manufacturer-sponsored assistance is extended to the patient,
as described in greater detail below.
Comment: A few commenters expressed concern that CMS equates the
``full'' value and ``exclusive'' benefit of a manufacturer assistance
program with reducing the patient's deductible and maximum out-of-
pocket obligation and stated that there is no factual or statutory
basis for this proposition. A few commenters stated that regardless of
whether a patient is subject to a PBM accumulator program that
appropriates part of their assistance, the patient has received the
full benefit of manufacturer assistance as long as the manufacturer has
helped the patient meet their point-of-sale cost and that manufacturers
have
[[Page 87050]]
no control over what happens to the benefit after the point-of-sale.
One commenter stated that CMS is not entitled to make the conclusion
without any supporting evidence that manufacturers allow or acquiesce
to a diversion of the manufacturer-sponsored assistance away from the
patient to the plans when PBM accumulator adjustment programs are used.
Response: We do not agree with the commenter that, as long as the
manufacturer has helped the patient receive manufacturer assistance at
the point-of-sale, the patient has received the full benefit of
manufacturer-sponsored assistance. By not applying the manufacturer
assistance to a patient's deductible or other cost sharing obligations
to obtain the drug, the assistance becomes a price concession to the
health plan by delaying the point at which the health plan's
contribution toward the patient's cost sharing begins, or reducing the
value of the assistance to the patient, and thus should be counted in
best price and, in certain cases, the calculation of the AMP. When the
patient does not receive the full value of the manufacturer's
assistance, the end result is that:
The patient may be subject to a significant out-of-pocket
drug bill in the event the manufacturer-sponsored assistance ends in
the middle of the plan year, and the patient finds out that he or she
is still in the deductible phase of a benefit. If this happens, the
patient may need to switch to the less expensive alternative offered by
the plan or pay the full bill for the non-formulary or non-preferred
drug, neither of which are patient friendly scenarios.
The patient is unaware of the other more cost effective
drugs that his/her health plan offers on its drug formulary at the time
that the original prescription is filled. Since the patient likely
presents at the pharmacy with the manufacturer-sponsored assistance
card, the manufacturer-sponsored assistance is automatically applied by
the pharmacy (electronically) and the beneficiary is not made aware of
other less expensive drug treatments offered by the health plan. In
other words, it is not transparent to the patient at the pharmacy
(point-of-sale) which drug may be more affordable to the patient in the
long run.
Comment: Several commenters expressed concern about the impact of
the proposal on patients with rare, life-threatening illnesses or
complex chronic conditions who rely on discounts and copay assistance
to access specialty medications, and disagreed that patient assistance
steers consumers towards more expensive medications because there is
often no generic alternative or clinically appropriate substitute. Many
commenters raised concerns about the potential impact of the proposals
in this section on medication adherence, medical complications,
outcomes, and hospitalizations and requested CMS to take patient's
special needs into consideration.
Response: We do not believe that the final policies we are adopting
in this final rule will negatively impact patients with rare, life-
threatening illnesses who rely on manufacturer assistance programs.
Rather, we do believe that there is a corollary benefit to this
proposed policy, as it might lead to reforms in manufacturer assistance
programs. We understand from many manufacturers and patient groups that
PBM accumulator programs are increasing in number, and that the value
of these programs to the patient is diminishing. It is not clear how
these programs can continue to benefit patients without some
modifications and reforms.
We believe manufacturers can implement a system to ensure the full
benefit of its manufacturer-sponsored assistance passes on to the
patient. By doing so, patients will continue to have access to much
needed medication which will in turn increase positive outcomes and
also improve adherence.
We are aware of situations when a patient has been subject to
significant out-of-pocket costs because the patient has not progressed
through the deductible phase of the health plan. That is because the
value of the manufacturer-sponsored assistance was not applied to the
patient's deductible. When this happens, the patient may be forced to
stop taking the drug, switch to an alternative offered by the plan, or
pay the full bill for the non-formulary drug, none of which are
patient-friendly, especially for those patients with rare and life
threatening conditions. The policies we are adopting in this final rule
could help avoid these concerns because it will improve transparency in
drug pricing and will ensure that the full value of the manufacturers-
sponsored assistance programs is passed on to the patient. We believe
this will also help assure patient compliance and adherence with
medications.
Comment: Several commenters expressed concern that the proposed
rule would encourage expansion of PBM accumulator programs and stated
that if the federal government continues to permit PBMs to profit from
the use of PBM accumulator programs, then manufacturers will either
have to set higher prices for new drugs to offset these incremental
profits, or withdraw manufacturer-sponsored assistance altogether,
resulting in harm to patients.
Response: We understand the concerns about PBM accumulator programs
and the impact on manufacturer prices. As noted above, the current
regulations at 42 CFR 447.504 and 447.505 already require that best
price and AMP exclude manufacturer-sponsored assistance programs
(copayment, patient refund/rebate, coupons, discount card programs)
when the full value of the assistance is passed on to the consumer, and
the pharmacy, agent or other entity does not receive any price
concession.
The goal of this final policy is to not affect drug manufacturers'
prices, but to make sure that Medicaid programs receive the rebates
that they are owed from manufacturers if any value of the manufacturer
assistance is accruing to a ``best price'' eligible entity rather than
the patient. It is possible that manufacturers, knowing that any
assistance not being passed through would have to factor in their
Medicaid rebates, will improve their oversight of these manufacturer
assistance programs such that they will not have to pay higher rebates
to Medicaid. This could actually lead to lower drug prices, and
increase the amount of manufacturer assistance that will actually go to
patients. This will help reduce the potential for patient harm
resulting from a lack of compliance with medications if the patient
cannot afford them because they are not receiving the full value of
their cost sharing assistance.
Thus, we believe the proposed rule and the policies we are adopting
in this final rule will encourage manufacturers to monitor and track
their manufacturer-sponsored assistance programs to ensure the full
value of the manufacturer-sponsored assistance goes to the consumer and
not to health plans.
Comment: Several commenters noted that another justification for
prohibiting or increasing oversight of PBM Accumulator Programs is the
surprise impact of receiving a significantly larger bill for the drug
than expected due to lack of patient awareness of PBM policies that do
not count manufacturer-sponsored assistance towards patient cost-
sharing obligations.
A few commenters recommended requiring plans to give notice to a
patient of its intent to withhold third party funds, and explain in
plain language what benefits accrue to the patient, how manufacturer
assistance will be affected and applied, and account for third-party
assistance, as a potential alternative to the proposals in
[[Page 87051]]
this section. One commenter supported a policy alternative requiring
health plans and PBMs to apply price reduction instruments for out-of-
pocket expenses when calculating an insured individual's cost-sharing
requirement.
Response: We appreciate the comments regarding the identification
of certain mechanisms to increase patient awareness that the health
plan that they are enrolled in may use a PBM accumulator program. We
agree with the many comments that we received expressing concern about
the impact of these programs on patients, including the sudden impact
that such programs can have on patient out-of-pocket spending for their
drugs, and lack of patients' awareness of the existence of such
programs.
We are only able to regulate this issue within the scope of the
Medicaid drug rebate program rules. That is, under the MDRP, the
manufacturer can only exclude manufacturer assistance that is fully
passed through to a patient/consumer from the calculation of best
price, and when applicable, AMP for 5i drugs. We believe the final
policies adopted in this rule will help ensure the full benefits of the
manufacturer-sponsored assistance program are passed on to the patient,
which hopefully, will have the added benefit of reducing some of the
negative consequences that patients have faced as a result of
manufacturers not making such assurances related to PBM accumulator
programs.
Comment: Several commenters supported CMS' proposals on the basis
that they may reduce spending on prescription drugs and noted that the
use of manufacturer sponsored coupons and similar arrangements are
designed to increase drug spending, needlessly drive consumers to high
cost treatments and circumvent utilization management tools adopted by
health plans. Several commenters stated that manufacturer copay coupons
create anti-competitive effects, market disruptions, unreliable access
for patients, and undermine more affordable generic or biosimilar
drugs, and viewed CMS proposals as an effort to prevent manufacturers
from increasing drug prices without market constraints.
Response: We appreciate the comments and agree that manufacturer-
sponsored assistance may increase drug spending by circumventing health
plan utilization management tools and steering patients towards more
expensive treatments not necessarily covered by a patient's plan. We
are also concerned that patient out-of-pocket spending will increase
significantly when the manufacturer-sponsored assistance runs out, and
patients are required to pay for the drug in full much earlier than
anticipated. We believe that this rule will encourage manufacturers to
examine the structures of their manufacturer-sponsored assistance
program(s) so that patients are not surprised by high drug costs when
all or part of the cost sharing assistance is passed through to the
plan rather than the patient.
Comment: A few commenters defended the existence of PBM accumulator
programs as necessary to ensure that benefits will be administered as
they are designed, rather than artificially reducing deductibles for
patients on specific high cost drugs.
Response: We are aware that PBM accumulator programs are used by
health plans to ensure their benefits are administered as they are
designed. However, these PBM accumulator programs often do not allow
for the full benefit of the manufacturer-sponsored assistance to accrue
to the patient. This regulation requires that the manufacturer be aware
of this action taken by the PBM so that the manufacturer complies with
the regulations that set forth the determination of AMP and best price
for the purposes of the MDRP.
Comment: One commenter cited several studies, one of which showed
that for 23 branded drugs studied, coupons were associated with a 3.4
percent decrease in the rate of generic utilization and an estimated
excess spending of 1.2 percent to 4.6 percent higher total drug
spending over 5 years and requested that this be considered a well-
documented problem rather than attributing concerned statements only to
health plans and PBMs.
Response: We appreciate the information regarding the impact of
manufacturer-sponsored assistance programs have on drug benefits and
spending. However, as noted above, we believe the final policies
adopted in this rule will ensure that the full benefits of the
manufacturer-sponsored assistance program pass on to the patient, and
that the exclusions to best price and AMP are applied appropriately.
Comment: A few commenters stated that PBM accumulator programs do
not only apply to brand name drugs not on a plan's formulary, but to
all drugs.
Response: We agree that PBM accumulator programs do not apply only
to single source brand name drugs. The use of brand name drugs in the
rule was an example of a particular situation where the PBM does not
apply the benefit of the manufacturer sponsored assistance to the
patient's health plan deductible in circumstances when a health plan's
formulary covers a lower cost generic (or brand) alternative. We
believe this is one scenario, and not an exclusive example.
(2) Legal Authority
Comment: Several commenters stated that health plan enrollment in a
PBM accumulator program, or the existence of the program, has no
bearing on manufacturer exclusion of a manufacturer assistance program
from AMP and best price. Several commenters stated that requiring
manufacturers to include the value of manufacturer assistance that was
subsequently taken away from patients by plans in the calculation of
best price is contrary to the statutory definition of best price
because patient assistance is not a price, or a price concession that
is available from a manufacturer to plans. A few commenters suggested
that to be consistent with CMS' prior interpretations of the statute,
patient assistance can only be viewed as a price concession when the
manufacturer develops that program specifically for patients of a
particular payer or PBM, but absent such negotiation or coordination,
and the assistance is not ``designed to'' adjust prices to the payer or
PBM, then the assistance should be excluded from AMP and best price.
Several commenters noted that CMS lacks statutory authority for the
proposals in this section, that they are based on erroneous
interpretation of the Medicaid drug rebate statute, or that they are
based on unexplained or unsupported assumptions, and thus requested
that CMS rescind the proposals related to including patient assistance
programs in best price and AMP unless manufacturers ``ensure'' that
their assistance solely benefits patients and does not benefit third
parties. These commenters noted that CMS has not articulated an overall
context or reasoning behind their proposed change in treatment of
manufacturer sponsored patient assistance programs, specifically the
intended outcome for these changes and how this approach would achieve
those goals. One commenter stated that implementation of such a
dramatic change in the assistance available to patients across the
country should not occur without additional explanation accompanied by
concrete data and evidence to support it. A few commenters stated that
basing the proposals in this section on what one group of commenters
``contend'' constitutes an ``unsupported and conclusory statement''
that renders
[[Page 87052]]
CMS' proposals arbitrary and capricious within the meaning of the APA.
Some commenters stated that it is unfair, infeasible, and contrary
to statutory intent to hold manufacturers responsible for ensuring that
the discount goes exclusively to the consumer or patient when
manufacturers are not involved in the application of tools that change
how assistance is applied to the patient's insurance benefit, and
therefore, cannot monitor or place parameters around them. For these
reasons, several commenters stated that these proposals cannot be
operationalized if made final and that the agency's proposals are
arbitrary and capricious.
Response: We do not agree with the commenters that manufacturer-
sponsored assistance is not a price, or a price concession that is
available from the manufacturer to the plans, in situations when health
plans participate in PBM accumulator programs, and then the value of
the assistance does not accrue in full to the patient. Nor do we agree
that this proposal is arbitrary and capricious, as current regulations
already provide that manufacturers can only exclude manufacturer-
sponsored assistance if it is being passed through to the patient. See
Sec. Sec. 447.504(c) and (e) and 447.505(c).
Manufacturers are fully aware of the existence of PBM accumulator
programs, and may not have taken action to date to address the
potential that they may already be reporting in violation of the
regulations at Sec. 447.504(c) and (e) for AMP and Sec. 447.505(c)
for the calculation of best price. These sections of the regulation
have always stated that the manufacturer-sponsored assistance (coupons,
free goods, discounts, refund/rebate programs and copay assistance)
exclusions apply only if such assistance is passed on to the consumer
and the pharmacy, agent, or other AMP/best price eligible entity does
not receive any price concession. In cases where the PBM accumulator
programs do not allow any manufacturer-sponsored assistance to apply to
the beneficiary' deductible, the health plan is receiving a price
concession in the form of delaying the health plan's obligation to
provide coverage of the drug under the patient's health plan benefit.
This postponement in providing benefits to the patient, or the accrual
of the benefit to the plan in whole or part, is a price concession to
the health plan.
Since these programs are increasing in scope and number, such that
it is no longer the case that such assistance is always passed through
to the patient which is an existing requirement, we believe a change in
the regulatory text underpinning this exemption is needed. Under this
final rule, manufacturers must ensure that the full value of the
manufacturer-sponsored assistance is passed on to the consumer or
patient regardless of the specific transactions that occur between
payers, pharmacies and PBMs.
We believe that we have the statutory authority for this rule and
have explained the overall context or rationale to support our proposed
policies and now our final policies. Manufacturers participating in the
MDRP are required to report certain pricing information to the
Secretary, including a COD's best price and AMP. In the proposed rule,
we noted that some health plans (which meet the definition of provider
when determining best price) are being instructed or encouraged by
their PBMs to apply manufacturer-sponsored assistance programs, such as
patient copay assistance programs, to the benefit of the plan, instead
of entirely to the patient.
Best price is defined at section 1927(c)(1)(C) of the Act to mean,
for a single source or innovator multiple source drug of a manufacturer
(including the lowest price available to any entity for any such drug
of a manufacturer that is sold under a NDA approved under section
505(c) of the FFDCA), the lowest price available from the manufacturer
during the rebate period to any wholesaler, retailer, provider, HMO,
nonprofit entity, or government entity within the United States,
subject to certain exclusions. Section 1927(c)(1)(C)(ii) of the Act
further defines the term best price to be inclusive of cash discounts,
free goods that are contingent on any purchase requirement, volume
discounts, and rebates (other than rebates under this section). The
definition of best price is further defined at Sec. 447.505(a) and
includes the lowest price available from the manufacturer during the
rebate period to any provider, which is defined to mean a hospital,
HMO, MCO, or entity that provides coverage or services to individuals
for illnesses or injuries or providers services or items in the
provision of healthcare. Paragraph (b) further indicates that best
price includes all prices, including applicable discounts, rebates, or
other transactions that adjust prices either directly or indirectly to
the best price eligible entities in paragraph (a). We believe the
reference to ``other transactions that adjust prices either directly or
indirectly'' to the best price eligible entities in paragraph (a)
includes the transactions made by the manufacturer indirectly to health
plans via manufacturer-sponsored assistance programs should be
included.
Comment: Several commenters stated that treating patients as best-
price eligible entities exceeds the scope of CMS' statutory authority.
Several commenters stated the plain language of the statute requires
that to be considered for best price calculations as a ``price
available from the manufacturer,'' the manufacturer had to intend to
offer the price to a best-price eligible entity. However, several
commenters stated that the Congress' only intended best price-eligible
entities under the statute are purchasers, wholesalers, retailers,
providers, HMOs, non-profit entities, and governmental entities.
Several commenters further stated that manufacturer-sponsored
assistance designed solely to benefit patients and reduce their out-of-
pocket costs cannot constitute a ``price available from the
manufacturer'' because the manufacturer did not intend to offer the
price to an eligible third party such as the health plan, and therefore
should not be required to include the value of assistance in its best
price calculations when the health plan denies the manufacturer
assistance apply to patients. Other commenters stated that a
manufacturer can only have intended to make the price available to
eligible entities if the manufacturer negotiated with the PBM to offer
manufacturer assistance or designed the manufacturer assistance to
benefit the PBM, and further stated that when such coordination,
negotiation, or consideration is not present, the assistance cannot by
a price ``available from'' the manufacturer and included in best price.
One commenter stated that CMS confirmed that patients are not eligible
purchasers in the COD final rule in 2016.
Response: This regulation does not treat patients as best price
eligible entities. In accordance with current regulations at Sec.
447.505(c)(8) through (12), prices excluded from best price include
manufacturer-sponsored assistance programs, but only to the extent that
the full value of the assistance is passed on to the consumer, and the
pharmacy, agent or other entity does not receive any price concession
(see further discussion on these existing policies in preamble to COD
final rule at 81 FR 5254). As proposed and finalized in this rule,
these regulations have been revised to require that a manufacturer
ensure that the value of the manufacturer's assistance accrues to the
benefit of the patient and not the plan (a best price eligible entity)
before excluding the value of these assistance programs from the
determination of best
[[Page 87053]]
price and AMP. As stated in current regulation, the manufacturer's
assistance can be excluded from best price only if the full value of
the assistance is passed through to the patient/consumer. However, if
any of the manufacturer-sponsored assistance is diverted to the plan,
those amounts should be included when a manufacturer calculates its
best price and AMP in certain cases. This final policy requires
manufacturers to ensure the full value is passed on to the consumer,
consistent with the regulation.
Comment: A few commenters expressed concern about the impact of the
proposals in this section on the ability of manufacturers to continue
offering manufacturer assistance programs to individuals in the larger
commercial market during the COVID-19 pandemic. These commenters stated
that during the PHE and economic crisis, patients and families across
the country would experience significant harm if the proposal is
finalized and they lose access to medications.
A few commenters stated the proposals are contrary to an Executive
Order urging federal agencies to rescind, modify, waive, or provide
exemptions from regulations and other requirements that may inhibit
economic recovery, consistent with applicable law and with protection
of the public health and safety. A few commenters stated that to be
consistent with that Executive Order, CMS should reconsider and modify
its current policies for PBM accumulator programs and to withdraw the
current proposal that would impose new standards for exclusions of
manufacturer-sponsored assistance amounts to patients in connection
with Best Price and AMP determinations.
Response: Since there is concern with the impact of this policy on
manufacturer's ability to provide assistance during the COVID-19
crisis, and manufacturers are also concerned that they may not be able
to ensure their manufacturer assistance is going to the patient and not
being passed through to the health plan via an electronic means right
away, we are finalizing this rule, as proposed, but are delaying the
effective date until January 1, 2023. This will give manufacturers time
to implement a system that will ensure the full value of assistance
under their manufacturer-sponsored assistance program is passed on to
the patient, such as contracting with a third party vendor to track
their assistance when provided at the point of sale, or changing the
structure of their manufacturer-sponsored assistance programs to
require patients pay for the drug first and then have the patient
collect the rebate directly from the manufacturer (outside of the
electronic claims process). Manufacturers may also choose to revise the
manufacturer-sponsored assistance structure by requiring the patient to
submit its claim for the manufacturer-sponsored assistance outside of
the electronic claims process (this will allow a patient's cost sharing
at the point of sale to apply to the patient's deductible because the
pharmacy and PBM will be unable to identify that the patient used
manufacturer-sponsored assistance.
(3) Existence of Mechanisms To Assist Manufacturers With Compliance
Comment: Several commenters stated that manufacturers do not have
knowledge, visibility, or control over programs deployed by PBMs and
health plans regarding the pass through of patient assistance, and
suggested that CMS focus on imposing program efficiencies on plan
managers and PBMs instead. Other commenters similarly stated that
manufacturers are not party to arrangements between, nor do they
receive consideration from, health plans and PBMs that withhold
discounts from patients.
Several commenters stated that the use of PBM Accumulator Programs
is a post-transaction or downstream cost adjustment mechanism into
which manufacturers have no insight, and pointed to CMS'
acknowledgement that even patients are often not aware when they are
enrolled in such programs. Several commenters further stated that
despite good faith efforts, they do not have access to data, plan
policies, or an information exchange with enough specificity on PBM
Accumulator Programs on a per-product, per-customer, per-quarter, or
per-unit basis, and therefore, have no awareness of which patients are
subject to PBM Accumulator Programs and which ones are not. Several
commenters further stated that obtaining such data would create new
administrative burdens, citing that documents are private, proprietary,
or lengthy and complex.
One commenter challenged manufacturer arguments that there would be
too many barriers to knowing when their coupons are absorbed by PBM
Accumulator Programs and excluded from deductibles, stating that
manufacturers can contract with third parties to obtain such data.
Several commenters stated that PBM Accumulator Programs only exist to
interfere with or prevent manufacturer-sponsored assistance from being
applied to the patient's deductibles and maximum out-of-pocket costs
from the consumer, and that instead of ensuring patient accessibility,
accumulators penalize patients for using coupons to lower their costs.
Response: We understand the concerns from the commenters that
manufacturers may not currently have the ability to track their
manufacturer assistance to ensure it is provided in full to the
patient. However, we believe that the electronic prescription claims
processing infrastructure that is currently in place can serve as a
possible foundation for manufacturers to have the ability to ensure
their manufacturer-sponsored assistance is going to the patient.
Almost all prescriptions are electronically processed at the
pharmacy, and when transmitted from the pharmacy, are routed through a
switch to the corresponding PBM based on the information on the
patient's prescription card, such as BIN/PCN number. As noted,
manufacturers do currently contract with switches and brokers that are
electronically connected to this prescription claims processing
``highway'', and which apply manufacturer-sponsored assistance on the
manufacturers' behalf at the point-of-service to reduce the amount that
a patient might have to pay for a prescription.
Manufacturers also have relationships with PBMs, given that they
pay rebates and other price concessions for formulary placement on the
PBMs' formularies. Thus, the electronic and contractual infrastructure
is in place for manufacturers to better understand how the PBMs are
using the manufacturer assistance. We believe and have the expectation
that PBMs will work with manufacturers to provide this information to
the manufacturers to help them ensure that their assistance is passed
though.
Alternatively, manufacturers may consider redesigning assistance
programs to require patients pay for the drug first and then have the
patient collect the rebate directly from the manufacturer (outside of
the electronic claims process). Revising the manufacturer-sponsored
assistance structure by allowing the patient to pay first and bill the
manufacturer for the assistance after the claim has been processed will
guarantee patient's cost sharing applies to the patient's deductible
and that the payer does not receive any price concession from the
manufacturer-sponsored assistance. This manual approach also allows the
patient at the point-of-sale to consider alternatives offered by their
own health plan to the drug offered under the manufacturer-sponsored
assistance
[[Page 87054]]
program, and therefore, supports the Administration's quest for drug
pricing transparency.
Comment: Many commenters stated the proposals in this section are
unworkable for manufacturers due to the lack of transparency in PBM
accumulator programs and rather than finalizing these proposals,
requested that CMS ban the use of PBM accumulator programs entirely, or
at least prohibit their use when generic alternatives are not
available. These commenters noted that this would directly accomplish
CMS' stated goals of ensuring that the full value of assistance be
passed along to the patient.
Several commenters also requested CMS to regulate cost sharing,
transparency, standards for access to plan information, marketing, and
benefit design as a means of protecting patients from the potential
negative clinical and financial consequences of PBM accumulator
programs. A few commenters stated that PBM accumulator programs should
not be necessary since health plans have many guardrails in place to
ensure that patients are incentivized to use lower cost medications
such as prior authorization and step therapy.
Response: While we appreciate the comments, this final rule only
addresses situations when the value of manufacturer-sponsored
assistance is not passed through to the patient and how that should be
reflected by the manufacturer in the determination of best price and
calculation of AMP in certain cases. The proposed rule requires
manufacturers ensure that the full value of the manufacturer-sponsored
assistance is passed on to the consumer and that the entity, in this
case the health plan, does not receive any part of the value of the
manufacturer assistance in order for that value to be excluded from
best price and AMP. Banning PBM accumulator programs is outside the
scope of this rule.
Comment: One commenter expressed concern that the proposed changes
to the best price determination might require health plans and PBMs to
provide additional information to manufacturers beyond what they
already provide and stated that this risks giving manufacturers greater
market insight that could be leveraged to circumvent plan designs that
encourage use of cost effective drugs in new ways, thereby increasing
prices for patients and plans alike. One commenter recommended that CMS
clarify that drug manufacturers, not PBMs and health plans, are solely
responsible for correctly characterizing and accounting for amounts
attributable to their manufacturer-sponsored assistance programs for
the purposes of best price.
Response: This rule does not require PBMs and health plans disclose
or disseminate information they believe to be proprietary to
manufacturers. Manufacturers that offer assistance only need to know if
the patient is receiving the full value of the assistance for their
drug (that is, the assistance is being fully counted towards the
patient's deductible and cost sharing). The mechanism by which the
manufacturer determines whether or not the full value of its assistance
is provided to the patient will be determined by the manufacturer,
working with its brokers, the PBMs, and plans.
(4) Viability of Manufacturer Assistance Programs With This Policy
Comments: Several commenters expressed concern that the operational
challenges to manufacturers would deter them from offering a broad
range of manufacturer assistance currently exempt from best price
reporting including coupons, drug discount card programs, patient
rebate programs and copay assistance.
Several commenters challenged CMS' assertion that manufacturers can
establish ``parameters'' or ``coverage criteria'' for ensuring the full
value of assistance to patients' subject to PBM accumulators, stating
that it has no factual support. Several commenters requested further
explanation or guardrails on such parameters or coverage criteria from
CMS to ensure the provision has its intended effect while protecting
people who rely on assistance. A few commenters expressed concern that
the proposals in this section would also affect the frequency of
government price reporting if manufacturers are expected to investigate
on a plan by plan basis every suspicion that manufacturer assistance
funds were being appropriated by a health plan. One commenter stated
that even diligent checks and oversight cannot reveal every instance of
plan or PBM capture or misappropriation of patient assistance funds due
to the plan's overall lack of transparency.
Response: We do not agree that this regulation creates an
insurmountable burden for manufacturers to comply with this new
regulatory requirement. This rule does not place a federal mandate on
health plans, insurers, and pharmacies to provide specific data or
verify data to manufacturers relating to the operation of their
manufacturer-sponsored assistance programs. However, our expectation is
that manufacturers will work with their contracted patient assistance
brokers, prescription claims processing switches, health plans and
their contracted PBMs to ensure that they have the information
necessary to comply with this regulatory requirement.
The mechanism by which manufacturers will ensure that the full
value of the manufacturer-sponsored assistance will be going to the
patient will be determined by the manufacturer. However, we believe
that one of the approaches that manufacturers may be able to use to
capture information regarding how their manufacturer-sponsored
assistance is used is through an electronic feedback mechanism at the
point-of-sale, which appears to be in place at the present time. We
believe that the PBMs will have to work with the manufacturers and
their switches and brokers to assure that the manufacturers have the
information necessary to comply with this regulatory requirement.
Comment: A few commenters expressed concern that there is no way a
manufacturer can certify to the accuracy of data obtained by health
plans regarding PBM accumulator programs, subjecting manufacturers to
penalties for false reporting or non-compliance with the MDRP
requirements. One commenter stated that absent a federal mandate for
health plans, insurers, and pharmacies to provide certified reports of
the PBM accumulator transactions to manufacturers, manufacturers will
not be able to provide accurate price reports.
Response: We understand manufacturers concerns regarding
certification of the data that they are required to report to comply
with MDRP reporting requirements. Manufacturers currently certify data
that are required to be reported to us regarding the calculation of AMP
and best price. These calculations currently require that manufacturer
sponsored assistance programs be passed through to the patient in full
in order to be excluded from the calculation of best price and AMP in
certain cases. Manufacturers should only be exempting manufacturer-
sponsored assistance from their AMP and best price now if the value of
its assistance passed onto the patient in full. If manufacturers are
certifying their AMP and best price data at this time, which they are
required to do each quarter, they should be doing so only with the
knowledge that such their manufacturer-sponsored assistance is being
passed through to the patient in compliance with applicable statutes
and regulations. This final regulation
[[Page 87055]]
emphasizes the need for manufacturers to ensure this is happening. As
we have stated, it is our expectation that manufacturers will work with
the various components of the electronic prescription processing
system, such as PBMs, switches, and brokers, among others, to obtain
the information they need to accurately determine the pricing
benchmarks they need to report each quarter.
Comment: Several commenters requested that CMS not finalize its
proposals in this section unless it establishes safe harbors that
clearly identify actions that manufacturers can reasonably take to
ensure they have met CMS standards. One commenter expressed concern
that although manufacturers typically have terms and conditions
governing their patient assistance programs, neither PBMs nor plans are
a party to those terms and conditions. The commenter suggested that the
only way for manufacturers to ensure that the full value of
manufacturer copay assistance programs go exclusively to the patient is
to create terms and conditions that prohibit a patient's acceptance of
manufacturer support when a PBM accumulator program applies. The
commenter recommended that if CMS finalizes its proposal, it should
expressly state that such a prohibition would be sufficient to meet the
regulatory standard if manufacturers are held responsible for ensuring
the full benefit of patient assistance passes to the patient.
Response: We appreciate the commenter's suggestion, but do not
agree that shifting the burden to patients is necessary for a
manufacturer to be able to determine that the full value of
manufacturer assistance has been passed through to the patient.
Prohibiting patients from accepting assistance unless they know that an
accumulator program does not apply in their plan places undue burdens
on patients. We do not agree that such a regulatory standard would
satisfy the requirement that a manufacturer ensures that manufacturer
sponsored patient assistance is passed through to the patient in full
before it may be excluded from the calculation of best price or AMP in
certain cases. Satisfying this regulatory requirement is the
responsibility of the manufacturer, which is the entity that is
regulated by CMS. The patient may not understand what an accumulator
is, how it works, or whether their health plan's PBM uses an
accumulator.
As noted in prior responses, we believe that there may be multiple
ways that manufacturers will be able to meet these new regulatory
requirements to ensure that manufacturer patient assistance is passed
through fully to the patient or consumer, such as being able to
electronically capture information regarding the value of manufacturer-
sponsored assistance that is being passed through in PBM accumulator
programs through some type of feedback mechanism at the point-of-sale,
or by creating coverage criteria for the use of their patient
assistance programs.
Comment: One commenter stated that any regulatory language that
discourages the use of PBM accumulator programs would have a
significant impact on a payer's ability to appropriately manage their
prescription drug benefit and leads to increased costs when coupon and
copay card amounts must apply to their members' deductibles and out of
pocket maximums for certain drugs.
Response: The current regulation already requires that best price
and AMP exclude manufacturer-sponsored assistance programs (copayment,
patient refund/rebate, coupons, discount card programs) when the full
value of the assistance is passed on to the consumer, and the pharmacy,
agent or other entity does not receive any price concession. In the
interest of program integrity, and to assure that the states receive
the rebates that they are due, this final regulation is specifically
requiring manufacturers to ensure compliance with that requirement that
the manufacturer ensures the full value of the assistance is going to
the patient.
We understand that PBMs may be using this accumulator approach to
steer patients away from drugs for which lower-cost generics are
available, thus potentially impacting the payer's ability to manage
their prescription drug benefit if this proposed policy was adopted as
final. In that regard, however, we understand that these programs are
being used for both single source brands, as well as innovator off
patent brands for which there are multiple lower cost generics on the
market. However, there is no distinction made in the statute between
single source and innovator multiple source drugs for which
manufacturers would have to make a best price determination. That is,
if a manufacturer's price concession is being realized by a best price
eligible entity, whether it is for a single source or innovator
multiple source drug, then that price should be considered in the
determination of best price.
(5) Impact on Other Federal Programs and Policies
Comment: One commenter expressed concern that the proposals in this
section would increase the risk of manufacturers cutting off vital
patient assistance. The commenter requested that we work with the HHS'
OIG to revisit rebate pass-through policies to ensure patients benefit
directly from manufacturer discounts and rebates provided to PBMs.
Response: We appreciate the comment, but do not agree that the
final policy will have the effect of cutting off vital manufacturer
assistance because manufacturers should only be exempting manufacturer-
sponsored assistance from their AMP and best price now if the value of
its assistance passed onto the patient in full. If manufacturers are
certifying their AMP and best price data at this time, which they are
required to do each quarter, they should be doing so only with the
knowledge that such their manufacturer-sponsored assistance is being
passed through to the patient in compliance with applicable statutes
and regulations. This final regulation emphasizes the need for
manufacturers to ensure this is happening.
The request to work with HHS' OIG to revisit other policies is
outside the scope of this rule.
Comment: Several commenters suggested in response to CMS' concerns
about the impacts of the growing use of PBM accumulator programs that
CMS revert to the Notice of Benefit and Payment Parameters 2020 (NBPP
2020) proposals (85 FR 78572). Several commenters stated that CMS
initially proposed to prohibit the use of PBM accumulator programs when
the patient was prescribed a brand name medication for which a generic
alternative was not available, and made clear that cost-sharing support
for a brand drug on the formulary would always count toward the annual
limitation on cost sharing. Several commenters noted that they
preferred this earlier proposal, stating it would be simpler and more
effective for creating guardrails to ensure provisions on cost-sharing
assistance have their intended effect and to mitigate the harmful
effects of such programs on patients.
Several commenters also noted that the proposals conflict with the
recent Notice of Benefit and Payment Parameters Rule for 2021 final
rule (85 FR 29164), that permitted, but did not require, issuers to
count toward the annual limitation on cost sharing amounts paid toward
reducing out of-pocket costs using any form of direct support offered
by drug manufacturers to enrollees for specific prescription drugs.
Several commenters stated that CMS did not provide that same degree of
flexibility to plans in the proposed rule, and instead, preferred that
[[Page 87056]]
assistance programs are counted towards the patient's deductible. One
commenter stated that the differing approaches in the two regulations
create operational complications for plans participating in both the
Marketplace and Medicaid programs, as they have different requirements
under each program as it relates to the treatment of patient assistance
programs, and expressed concern this would lead to competitive
disadvantages for plans that operate in both spaces. A few commenters
stated that it is important for plans to have the flexibility to manage
pharmaceutical copay assistance programs, as such programs often
incentivize enrollees to utilize more expensive medications and stated
that the proposals in this section undermine formulary and benefit
design and results in higher health care costs.
Response: The CMS Medicaid drug rebate program requires that
manufacturers only exclude the value of manufacturer sponsored
assistance to patients from the best price when the value of the
assistance is passed through to the patient in full. This requirement
is the focus of this rulemaking. In the Notice of Benefit and Payment
Parameters Rule for 2021 final rule (hereinafter referred to as ``2021
NBPP''), we permitted, to the extent consistent with state law, but did
not require, issuers to count toward the annual limitation on cost
sharing amounts paid toward reducing out-of-pocket costs using any form
of direct support offered by drug manufacturers to enrollees for
specific prescription drugs.
The policies we are adopting in this rule require manufacturers
ensure that the full value of their assistance programs is passed on to
the consumer, and the entity, in this case the payer, does not receive
any price concession. In cases when some of the value goes to the
payer, manufacturers must include the value of the assistance in their
determination of best price and AMP.
In the 2021 NBPP, we stated that issuers and group health plans are
allowed to continue longstanding policies with regard to how direct
drug manufacturers' support accrues towards an enrollee's annual
limitation on cost sharing. When the issuer does not permit the patient
to realize the full benefit of the manufacturer's assistance,
manufacturers must not exclude such amounts from best price
calculations. We suggest ways that manufacturers can become aware of
such circumstance and thus include the assistance as a price concession
in the manufacturer's determination of best price and AMP. However, we
are not prescribing a way that this should be done. The policies we are
adopting in this final rule will require manufacturers to ensure that
the full benefit of the assistance program goes exclusively to the
patient in order for the manufacturer to exclude the manufacturer's
assistance from the calculation of best price and AMP. To allow
manufacturers to develop mechanisms to obtain the information necessary
to know whether the assistance has been in fact passed through to the
patient, we are delaying the effective date for this requirement until
January 1, 2023.
Comment: A commenter noted that there is no inherent False Claims
Act risk in price reporting by properly treating coupon amounts as
price concessions.
Response: The determination of whether a manufacturer is at risk of
violating the False Claims Act is outside of the scope of this final
rule.
Comment: A few commenters noted the proposal to include
manufacturer-sponsored assistance in reporting for AMP, unless the
manufacturer ensures the full value is passed on to the patient, would
result in lowering the AMP, which in turn would lower manufacturers'
rebate liability under the MDRP. These commenters stated that CMS'
proposal may encourage manufacturers to set higher list prices and
offer coupons, rather than simply starting with a lower list price,
while not having any greater rebate liability under the MDRP. One
commenter provided an example of a drug priced at $10,000 with the
offer of a $5,000 coupon from the manufacturer, and stated that in
order for that $5,000 to be deducted from AMP, the full value must be
passed directly to the patient under the proposal. The commenter
expressed concern that this could mean the $5,000 manufacturer copay
assistance must count toward the patient's annual deductible and/or
maximum out-of-pocket (MOOP) spending and that such a policy may
incentivize utilization of higher-priced pharmaceutical products and
increase overall health care spending. The commenter also noted that if
the discount does have to apply towards the patient's deductible or
MOOP, then the drug manufacturer would have subverted the patient's
formulary and benefit design by skewing product choice and insulating
the patient from financial liability intended to encourage responsible
health care decision-making. The commenter suggested in contrast, if
the manufacturer set the list price at $5,000, the net price would be
the same as the higher priced drug as reduced by the coupon, and the
AMP would be the same.
A few commenters expressed concern that CMS' proposal to ensure
that the full value of manufacturer-sponsored assistance is passed
through to the patient in order for it to be excluded from calculations
of best price and AMP would have negative downstream effects on ASP and
the 340B ceiling price. These commenters noted that CMS' proposals in
this section could result in the inclusion of patient assistance in ASP
leading to a reduction in ASP and payer reimbursement in this rule
acquisition costs. These commenters stated that in order for drug
reimbursement rates not to fall below their costs, manufacturers would
discontinue assistance programs and harm patients in need.
One commenter stated that the ASP statute and regulations require
that 103 percent of AMP be substituted for the ordinary Part B payment
rate (106 percent of ASP) if the ASP for a drug exceeds AMP by 5
percent or more for 2 consecutive quarters, meaning that a decline in
AMP could cause such a substitution and thus reduce the Part B drug
payment rate. The commenter stated that reducing a drug's Part B
payment rate (either through a decline in ASP or through a substitution
of 103 percent of AMP) could have detrimental effects on Medicare Part
B providers and could hinder patient access to critical drugs.
Response: We do not believe this final rule will have a significant
impact on Part B drug payments. First, under section 1927(k)(1) of the
Act, AMP is defined as the average price paid to manufacturers for a
covered outpatient drug by wholesalers for drugs distributed to retail
community pharmacies, as well as for drugs that retail pharmacies
purchase directly from manufacturers. The calculation for AMP excludes
payments to insurers as found at section 1927(k)(1)(B)(IV) of the Act,
meaning these sales (with applicable exclusions) are not reflected in
AMP.
However, many Part B drugs can also be classified as ``5i'' drugs
under the MDRP, that is, instilled, infused, injected, intraocular, and
implanted drugs. The manufacturer's calculation of the AMP for 5i drugs
includes a broader set of manufacturer's transactions, including sales,
nominal price sales and associated discounts, rebates, payments or
other financial transactions to insurers. Thus, the 5i AMP for a drug,
may be impacted if the manufacturer fails to ensure that the full value
of its manufacturer-sponsored assistance accrues to the patient and the
insurer realizes a price concession. In
[[Page 87057]]
circumstances when the manufacturer does not assure that the
manufacturer assistance is passed through to the patient in full, and
thus has to be included in the calculation of 5i AMP for the drug, such
a situation could possibly reduce 5i AMP and impact Part B
reimbursement.
However, since not all sales of a manufacturer's 5i drug utilizes a
manufacturer-sponsored assistance program, we do not believe the amount
associated with the manufacturer-sponsored assistance (value of
discounts, coupons, rebates) will impact 5i AMP significantly to result
in the substitution of AMP to the detriment of Medicare Part B
providers and access to critical drugs. Thus, while it is possible that
the inclusion of manufacturer assistance in the calculation of the 5i
AMP for the drug could affect whether the Secretary makes such a
substitution for the Part B drug, we do not believe it is likely. To
the extent that manufacturer-sponsored assistance is passed fully
through to the patient, there should be no reduction in the value of
the 5i AMP. As a result, there should be no increased incidence of
substituting 103 percent of AMP for ASP under section 1847A(d) of the
Act, which creates an additional incentive for manufacturers to ensure
that their assistance is being passed through fully to the patient.
For 340B ceiling prices, such prices are calculated by subtracting
the URA (URA = AMP - best price when greater than the statutory rebate
percentage based on drug classification) for a drug from the drug's
AMP, as described in section 340B(a)(1) of the Public Health Service
Act. The URA is the Medicaid rebate amount for a quarter for a dosage
form and strength of a drug. To the extent that manufacturer-sponsored
assistance is passed through to the payer, rather than the patient, it
could be counted in best price, which could affect the calculation of
the ceiling price, as it is one component of the URA. The impact on
340B ceiling prices would depend on the inclusion of the manufacturer-
sponsored assistance in the best price, and in some cases the AMP, for
the drug for that quarter.
Comment: One commenter supported the proposals and recommended that
CMS conduct a regulatory impact analysis of the potential impacts on
manufacturer pricing behavior before finalizing its proposal to adjust
Best Price calculations to include manufacturer coupon payments to
patients in copay PBM accumulator programs due to concerns about the
unintended effect of manufacturers increasing their overall drug prices
to compensate for the additional price concessions.
Response: We do not believe this rule will have a major regulatory
impact. More discussion can be found in section IV. of this final rule,
the Regulatory Impact Analysis section.
Comment: One commenter recommended as an alternative to the
proposed changes to best price and AMP regarding manufacturer-sponsored
assistance programs that CMS require insurance companies to remove any
reference in their policies regarding cost-sharing assistance, and
stated that the health plan should not have knowledge of transactions
that are between the patient and manufacturer.
Response: This comment requests action that is outside the scope of
the rule.
Comment: One commenter requested clarification on whether the Bona
Fide Service Fee test would apply and whether CMS views the portion of
the pharmacy reimbursement that is in excess of the wholesaler
acquisition cost as a price concession to the pharmacy. The commenter
requested CMS to clarify if, for example, if it is determined that
payers typically reimburse pharmacies wholesale acquisition cost plus
12.5 percent, whether the pharmacy reimbursement for free good programs
would be excluded from AMP and best price up to that threshold.
Response: This comment is outside the scope of this rule.
After consideration of the comments received, we are finalizing the
proposed rule without modification, but delaying the effective date of
this final policy. While the effective date of this rule is March 1,
2021, this final policy will not be effective until January 1, 2023.
This will give manufacturers time to implement a system that helps them
track their programs to ensure the manufacturer assistance is being
passed through to the patient in full, and no other entity is receiving
any price concessions. To be clear, we are providing a later effective
date by which manufacturers will have to ensure that their cost sharing
assistance is being passed through to the patient in full in order to
exempt any such program assistance from the calculation of best price
and AMP.
E. Authorized Generic Drugs (Sec. Sec. 447.502, 447.504, 447.506)
The Continuing Appropriations Act of 2020, and Health Extenders Act
of 2019 (Health Extenders Act) made changes to section 1927(k) of the
Act, revising how manufacturers calculate the AMP for a COD for which
the manufacturer permits an authorized generic to be sold. That is, the
law requires that manufacturers that approve, allow, or otherwise
permit any drug to be sold under the manufacturer's own NDA approved
under section 505(c) of the FFDCA are no longer permitted to include
those sales of these drugs in the calculation of AMP.
Specifically, section 1603 of Health Extenders Act, entitled
``Excluding Authorized Generic Drugs from Calculation of Average
Manufacturer Price for Purposes of the Medicaid Drug Rebate Program;
Excluding Manufacturers from Definition of Wholesaler,'' amended:
Section 1927(k)(1)(C) of the Act to replace the term
``inclusion'' with ``exclusion'' in the title and further amended
paragraph (k)(1)(C) to state that, in the case of a manufacturer that
approves, allows, or otherwise permits any drug of the manufacturer to
be sold under the manufacturer's NDA approved under section 505(c) of
the FFDCA, such term shall be exclusive of the average price paid for
such drug by wholesalers for drugs distributed to retail community
pharmacies (emphasis added).
The definition of wholesaler at section 1927(k)(11) of the
Act to remove references to manufacturers from the definition of
wholesaler.
The amendments to section 1927 of the Act authorized under section
1603 of the Health Extenders Act are effective October 1, 2019.
Therefore, manufacturers must reflect the changes to the calculation of
their AMPs for rebate periods beginning October 1, 2019 (reported to
CMS no later than 30 days after the end of the rebate period).
Furthermore, in accordance with Sec. 447.510(b), manufacturers have 12
quarters from the quarter in which the data were due to revise AMP, if
necessary.
In accordance with the statutory amendments to section
1927(k)(1)(C) and (k)(11) of the Act described in this rule, we
proposed to revise Sec. Sec. 447.502, 447.504, and 447.506 as they
apply to AMP and authorized generic sales as follows:
We proposed to revise Sec. 447.502 to change the
definition of wholesaler to reflect the revised statutory definition of
wholesaler at section 1927(k)(11) of the Act. Specifically, we proposed
to revise the definition of wholesaler by removing any reference to
``manufacturer(s)'' consistent with the changes to the definition of
wholesaler made by section 1603(b) of the Health Extenders Act. We
proposed the term ``wholesaler'' to mean a drug wholesaler that is
engaged in wholesale distribution of prescription drugs to retail
[[Page 87058]]
community pharmacies, including but not limited to repackers,
distributors, own-label distributors, private-label distributors,
jobbers, brokers, warehouses (including distributor's warehouses, chain
drug warehouses, and wholesale drug warehouses), independent wholesale
drug traders, and retail community pharmacies that conduct wholesale
distributions.
Since the definition of wholesaler at section 1927(k)(11)
of the Act no longer includes manufacturers, we further proposed to
remove from the list of sales, nominal price sales, and associated
discounts, rebates, payments or other financial transactions included
in AMP, sales to other manufacturers who act as wholesalers for drugs
distributed to retail community pharmacies at Sec. 447.504(b)(2). The
nominal price sales, and associated discounts, rebates, payments or
other financial transactions included in AMP in accordance with Sec.
447.504(d) (AMP for 5i drugs that are not generally dispensed through
retail community pharmacies) do not change because the statute at
section 1927(k)(1)(C) of the Act only speaks to authorized generic
sales from the manufacturer to wholesalers that distribute to retail
community pharmacies.
We proposed to revise Sec. 447.506, which provides
specific requirements to manufacturers regarding the treatment of
authorized generic drug sales when determining AMP and best price. For
purposes of those calculations, the current regulation defines primary
manufacturer as the manufacturer that holds the NDA of the authorized
generic drug and the secondary manufacturer as the manufacturer that is
authorized by the primary manufacturer to sell the drug, but does not
hold the NDA.
The regulation further requires that the primary manufacturer must
include in its calculation of AMP its sales of authorized generic drugs
that have been sold or licensed to a secondary manufacturer, acting as
a wholesaler for drugs distributed to retail community pharmacies, or
when the primary manufacturer holding the NDA sells directly to a
wholesaler. The Health Extenders Act revised the definition of
wholesaler at section 1927(k)(11) of the Act by removing
``manufacturer'' and revised the determination of AMP at section
1927(k)(1)(C) of the Act by replacing the term ``inclusion'' with
``exclusion'' in the title and further amended paragraph (C) to state,
in the case of a manufacturer that approves, allows, or otherwise
permits any drug of the manufacturer to be sold under the
manufacturer's NDA approved under section 505(c) of the FFDCA, such
term shall be exclusive of the average price paid for such drug by
wholesalers for drugs distributed to retail community pharmacies.
Therefore, we proposed to revise Sec. 447.506(b) to replace the word
``Inclusion'' with ``Exclusion'' in the first sentence and replace the
second sentence in its entirety to state that the primary manufacturer
(as defined at Sec. 447.506(a)) must exclude from its calculation of
AMP any sales of authorized generic drugs to wholesalers for drugs
distributed to retail community pharmacies when reporting the AMP of
the brand name drug.
More specifically, we proposed that a separate AMP is determined
for the brand drug, which shall be exclusive of any authorized generic
sales, and a separate AMP shall be generated for the authorized
generic. As discussed in the June 2020 proposed rule, typically, an
authorized generic is a product that a manufacturer (primary
manufacturer) allows another manufacturer (secondary manufacturer) to
sell under the primary manufacturer's FDA-approved NDA but under a
different NDC number. The authorized generic is typically the primary
manufacturer's brand product offered at a lower price point. Primary
manufacturers may sell the authorized generic product to the secondary
manufacturer they are allowing to sell an authorized generic of their
brand product, and such sales are commonly referred to as transfer
sales. Primary manufacturers have included those transfer sales in the
determination of the brand product's AMP. Under the amendments made to
section 1927 of the Act, a primary manufacturer that sells the
authorized generic version of the brand drug to the secondary
manufacturer can no longer include the price of the transfer sale of
the authorized generic to the secondary manufacturer in its calculation
of AMP for the brand product. The exclusion of these transfer sales
from the primary manufacturer's brand drug AMP will likely result in
higher AMPs for the brand drugs and a potential increase to a
manufacturer's Medicaid drug rebates to states. To assist
manufacturers, we provided guidance in Manufacturer Release #111 and
Manufacture Release #112.\22\ In turn, we received inquiries as to what
is meant by ``In the case of a manufacturer that approves, allows, or
otherwise permits any drug of the manufacturer to be sold under the
manufacturer's NDA approved under section 505(c) of the FFDCA, such
term shall be exclusive of the average price paid for such drug by
wholesalers for drugs distributed to retail community pharmacies.''
Specifically, we received questions regarding when a primary
manufacturer itself, or an affiliate of the manufacturer is also
producing the authorized generic, and whether, such a case, constitutes
``a case of a manufacturer that approves, allows, or otherwise
permits'' the drug to be sold under the manufacturer's NDA, such that
the exclusion applies. And if not, whether the primary manufacturer may
include the average price paid for the authorized generic when
calculating AMP for the brand drug. We believed that irrespective of
the relationship between the manufacturer of the brand drug, and the
manufacturer of the authorized generic, if the primary manufacturer
``approves, allows, or otherwise permits'' the drug to be sold under
the primary manufacturer's NDA, then the AMP for the brand should be
calculated separately from (not include) the sales of the authorized
generic. That is, it would not matter whether the manufacturer being
approved, allowed, or otherwise permitted to sell the drug under the
primary manufacturer's NDA was the same, affiliated or non-affiliated.
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\22\ https://www.medicaid.gov/prescription-drugs/downloads/mfr-rel-112.pdf.
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Therefore, we interpret section 1927(k)(1)(C) of the Act, which
provides that in the case of a manufacturer that approves, allows, or
otherwise permits any of its drugs to be sold under the same NDA, the
AMP for that brand drug shall be exclusive of the average price paid
for such drug by wholesalers for drugs distributed to retail community
pharmacies, to mean a separate AMP should be calculated for each drug
product--that is, one AMP for the brand drug, and one AMP for the
authorized generic product, and the AMP for the brand drug should
always exclude sales of the authorized generic product, including
transfer sales of the brand name drug to the manufacturer of the
authorized generic, as the definition of wholesaler no longer includes
a manufacturer. Thus, a manufacturer's sales to manufacturers who act
as wholesalers can no longer be included in AMP. This includes a
situation when it is the same manufacturer making both the brand name
drug and authorized generic, or if the drugs are being manufactured by
different, but affiliated manufacturers or even non-affiliated
manufacturers. We proposed a policy that applies irrespective of a
specific brand manufacturer's sales arrangement.
The amendments made by section 1603 of the Health Extenders Act
were effective October 1, 2019. Therefore, manufacturers are required
to reflect the changes to the calculation of their AMPs for rebate
periods beginning October 1,
[[Page 87059]]
2019 (reported to CMS no later than 30 days after the end of the rebate
period). Furthermore, in accordance with Sec. 447.510(b),
manufacturers have 12 quarters from the quarter in which the data were
due to revise AMP, if necessary.
We received the following comments on our proposed policies
regarding authorized generic drugs (Sec. Sec. 447.502, 447.504,
447.506).
Comment: A few commenters supported the proposed regulations
regarding how manufacturers should calculate AMP for authorized generic
drugs. Several commenters supported the proposed regulations that
manufacturers must calculate separate AMPs for their brand drug and
authorized generic. One commenter noted the proposed regulation should
reduce manufacturer anti-competitive strategies and another noted the
proposal successfully addresses one of the ways that authorized
generics create marketplace distortions that hurt patients. One
commenter supported the proposed approach that this exclusion apply
irrespective of whether the authorized generic is sold by an affiliated
or unaffiliated manufacturer, or the nature of the sales arrangement.
Response: We appreciate the commenters support, and are finalizing
the proposals consistent with the changes made by the Continuing
Appropriations Act of 2020, and Health Extenders Act of 2019 (Health
Extenders Act) to section 1927(k) of the Act with one modification
relative to the regulatory definition of secondary manufacturer.
Comment: A few commenters supported the exclusion of sales, nominal
price sales, and associated discounts, rebates, payments, or other
financial transactions included in AMP from other manufacturers who act
as wholesalers for drugs distributed to retail community pharmacies.
Response: We appreciate the support for this proposal. Since the
definition of wholesaler at section 1927(k)(11) of the Act no longer
includes manufacturers, we are removing from the list of sales, nominal
price sales, and associated discounts, rebates, payments or other
financial transactions included in AMP, sales to other manufacturers
who act as wholesalers for drugs distributed to retail community
pharmacies at Sec. 447.504(b)(2). The nominal price sales, and
associated discounts, rebates, payments or other financial transactions
included in AMP in accordance with Sec. 447.504(d) (AMP for 5i drugs
that are not generally dispensed through retail community pharmacies)
do not change because the statute at section 1927(k)(1)(C) of the Act
only speaks to authorized generic sales from the manufacturer to
wholesalers that distribute to retail community pharmacies.
Comment: A few commenters did not support the proposed regulations
that would prohibit manufacturers from blending the brand name AMP and
the AMP of the authorized generic in certain situations. For example,
one commenter stated that the Health Extenders Act that created the
statutory prohibition of the blending of brand name and authorized
generic AMPs did not amend the Medicaid drug rebate statute provisions
which require the calculation of Medicaid URAs at the drug, dosage
form, and strength level. As a result, because the brand product and
authorized generic share the same drug, dosage form, and strength, the
commenter believes that the provision regarding the calculation of the
AMP at the drug, dosage form, and strength level also supports blending
of AMPs where the same manufacturer sells both. (The URA for a dosage
form and strength of drug for a quarter is calculated using the drug's
AMP as one of the inputs.)
Another commenter did not support the proposed regulations
requiring the calculation of separate AMPs in certain situations, and
stated the statutory AMP exclusion for authorized generics applies only
in cases when a manufacturer ``approves, allows, or otherwise permits
any drug of the manufacturer to be sold under the manufacturer's
[NDA]''. The commenter further indicated that as a result, the
requirement to calculate separate AMPs cannot apply where there is no
secondary manufacturer. A few commenters did not support CMS' proposal
to exclude sales of authorized generics from the AMP calculation of the
brand drug when these products are sold without the involvement of a
``secondary'' manufacturer, and stated that the text and history of the
Medicaid rebate statute support blending of the AMPs in this
circumstance.
Response: We do not agree with the commenters that the statutory
text continues to support the blending of the authorized generic sales
and brand sales when calculating AMP in certain situations. As
described above, and in Manufacturer Releases #111 and #112, section
1603 of the Health Extenders Act made changes to section 1927(k) of the
Act, revising how manufacturers calculate the AMP for a COD for which
the manufacturer approves, allows or otherwise permits the COD of the
manufacturer to be sold under the manufacturer's NDA. That is,
manufacturers that approve, allow, or otherwise permit any drug to be
sold under the manufacturer's own NDA approved under section 505(c) of
the FFDCA shall no longer include those sales in the calculation of the
brand name AMP, which includes authorized generic sales.
We have also interpreted this provision regarding the inability of
manufacturers to further blend AMPs to apply beyond authorized generic
cases to other situations in which a manufacturer approves, allows or
otherwise permits the COD to be sold under the manufacturers' NDA. For
example, with respect to a manufacturer's importation of drugs under
Section 801 of the FFDCA, we issued manufacturer release #114 guidance
on September 25, 2020, in which we interpreted that when a manufacturer
approves, allows or otherwise permits a drug imported under an NDA to
also be sold under the same NDA, then the manufacturer would not be
permitted to blend the AMPs of the drug sold in the United States, with
the drug that the manufacturer imports which is sold under the same
NDA.
With regard to comments suggesting the exclusion not being
applicable to situations where both the brand drug and authorized
generic drug are approved, allowed, or permitted to sold under the same
NDA by the ``same manufacturer'', irrespective of the relationship
between the manufacturer of the brand drug, and the entity permitted to
sell the authorized generic, if the primary manufacturer ``approves,
allows, or otherwise permits'' any drug to be sold under the primary
manufacturer's NDA, then the AMP for the brand should be calculated
separately from (exclude) the sales of the other drug or drugs that are
being sold under that NDA, in this case, an authorized generic. That
is, it would not matter whether the manufacturer or entity (that is,
the secondary manufacturer) being approved, allowed, or otherwise
permitted to sell the drug under the primary manufacturer's NDA was the
same, affiliated or non-affiliated from the primary manufacturer as
explained further below.
As discussed in the proposed rule (85 FR 37300), after we issued
Manufacturer Releases #111 and #112, we received inquiries as to what
is meant by ``In the case of a manufacturer that approves, allows, or
otherwise permits any drug of the manufacturer to be sold under the
manufacturer's NDA approved under section 505(c) of the FFDCA, such
term shall be exclusive of the average price paid for such drug by
wholesalers for
[[Page 87060]]
drugs distributed to retail community pharmacies.'' Specifically, we
received questions regarding when a primary manufacturer itself, or an
affiliate of the manufacturer is also producing the authorized generic,
and whether, such a case, constitutes ``a case of a manufacturer that
approves, allows, or otherwise permits'' the drug to be sold under the
manufacturer's NDA, such that the exclusion applies. And if not,
whether the primary manufacturer may include the average price paid for
the authorized generic when calculating AMP for the brand drug.
In Manufacturer release #112, we advised that, until we issue a
regulation in final, when a manufacturer approves, allows, or otherwise
permits any of its drugs to be sold under the same NDA, a separate AMP
should be calculated for each drug product--that is, one AMP for the
brand drug, and one AMP for the authorized generic product, and the AMP
for the brand drug should exclude sales of the authorized generic
product. We also advised that such situation includes both when a
manufacturer is the same for both the brand drug and authorized generic
version and the situation when the drugs are being manufactured by
different, but affiliated companies. For example, the manufacturer
making the authorized generic might be a subsidiary of the brand name
company, or the two might simply have a corporate or business
relationship.
To support this view, we note that the title of section 1603 of the
Health Extenders Act amending section 1927(k)(1) and (k)(11) of the Act
is ``Excluding Authorized Generic Drugs from Calculation of Average
Manufacturer Price for Purposes of the Medicaid Drug Rebate Program,''
and section 1603(a)(1) specifically amended the statutory provision at
section 1927(k)(1) by striking ``INCLUSION'' and ``inclusive'' and
inserting ``EXCLUSION'' and ``exclusive.'' The statute did not
previously, nor was it later amended to distinguish among the different
business or corporate relationships, if any, that might exist among the
manufacturer of the brand name drug and the entity that that
manufacturer approves, allows, or otherwise permits to sell such drug
under the same NDA. It simply indicates that the AMP calculation for
the brand drug shall be exclusive of (shall not include) the average
price paid (sales) of the drug the manufacturer is permitting to be
sold under its NDA.
For these reasons, we are also finalizing this rule by not
distinguishing among the business or corporate relationships between
the companies, such as whether they are subsidiaries, affiliates, or
have corporate relationships. However, based on the comments we
received, we are amending the current definition of secondary
manufacturer found at Sec. 447.506(a) to clarify this point, and are
removing the phrase at the end of the definition, ``but does not hold
the NDA.'' As noted above, the statute neither before amendment or
after distinguishes among the different business or corporate
relationships, if any, that might exist among the manufacturer of the
brand name drug and the entity that that manufacturer approves, allows,
or otherwise permits to sell such drug under the same NDA. And this is
likely because in some cases, the primary and secondary manufacturers
are one in the same; that is, one manufacturer who holds the NDA makes
and markets both the brand name drug and the authorized generic. This
regulatory modification will clarify that regardless of the
relationship that exists between the primary and secondary
manufacturer, that the sales of the authorized generic cannot be
blended with the sales of the brand name drug.
Comment: One commenter stated that the AMP for the brand product
should still include the price of the authorized generic drug as
removing the authorized generic will lead to increasing the price of
the brand name medication.
Response: We did not make any proposals related to drug launch
prices, have no control over how those are set, and remind the
commenter that there is the inflation rebate penalty in the Medicaid
drug rebate program for manufacturers that increase prices faster than
inflation (CPI-U) on their drugs. This should serve as a disincentive
to manufacturers to increase prices faster than inflation.
Moreover, we do not believe that the exclusion of the sales of the
authorized generic from the calculation of the brand AMP should
increase the price of the brand name drug, as the calculation of the
AMP by a manufacturer is done solely to report the AMP value used by
CMS to calculate the unit rebate amount for states to bill
manufacturers for rebates. While the AMP of the brand name drug will
likely increase if the manufacturer can no longer include the sales of
the authorized generic, it should not affect the sales price of the
brand name drug in the marketplace.
For these reasons, we are finalizing the policy that manufacturers
cannot blend the sales of the AMPs for the brand name drug sold under
the NDA and the sales of any other drug sold under the NDA, regardless
of the relationships between the entities selling the drugs.
After consideration of the comments received, we are finalizing our
proposals at Sec. Sec. 447.502, 447.504 and 447.506 as modified, which
includes a clarifying revision to the definition of secondary
manufacturer as noted above.
F. Medicaid Drug Rebates (MDR) (Sec. 447.509)
Manufacturers that participate in the MDRP are required to pay
rebates for CODs that are dispensed to Medicaid patients. The rebates
are calculated based on formulas described in section 1927(c) of the
Act. As described in section I. of the June 2020 proposed rule, the BBA
2015 made revisions to the statutory rebate formula for CODs other than
single source or innovator multiple source drugs. That is, section 602
of BBA 2015, amended section 1927(c)(3) of the Act to require that
manufacturers pay additional rebates on their CODs other than single
source or innovator multiple source drugs (non-innovator multiple
source (N) drugs) when the AMP of the N drug increases at a rate that
exceeds the rate of inflation. The amendments made by section 602 of
BBA 2015 were effective beginning with the January 1, 2017 quarter
(that is, first quarter of 2017). The implementation of these
amendments was discussed in Manufacturer Release 97 and Manufacturer
Release 101.
Prior to the enactment of BBA 2015, the basic quarterly URA
calculation for N drugs was equal to 13 percent of a drug's quarterly
AMP. However, section 602(a) of BBA 2015 amended section 1927(c)(3) of
the Act by adding an inflation-based additional rebate requirement to
the URA for N drugs, which is similar to the additional rebate applied
to single source (S) and innovator multiple source (I) drugs.
To calculate the additional rebate portion of the URA calculation
for N drugs, section 602(a) of BBA 2015 amended section 1927 of the Act
to establish a base AMP or base date AMP value for N drugs based, in
part, upon each N drug's market date. In general, for N drugs marketed
on or before April 1, 2013, the base date AMP is equal to the third
quarter of 2014 and the Base CPI-U is the CPI-U for September 2014. For
N drugs marketed after April 1, 2013, the base date AMP is equal to the
AMP for the fifth full calendar quarter after which the drug is
marketed as a drug other than a single source or innovator multiple
source drug and the base CPI-U is equal to the CPI-U for the last month
of the base AMP quarter.
[[Page 87061]]
We proposed to revise Sec. 447.509 to codify the rebate formulas
in regulation. Specifically, we proposed to revise paragraph (a)(6) to
distinguish the basic rebate for N drugs from this additional rebate.
In addition, we proposed to add paragraph (a)(7) to expressly include
the additional rebate calculation for N drugs. We proposed that in
addition to the basic rebate under paragraph (a)(6), for each dosage
form and strength of a N drug, the rebate amount will increase by an
amount equal to the product of the following: The total number of units
of such dosage form and strength paid for under the state plan in the
rebate period, and the amount, if any, by which the AMP for the dosage
form and strength of the drug for the period exceeds the base date AMP
for such dosage form and strength, increased by the percentage by which
the consumer price index for all urban consumers (United States city
average) for the month before the month in which the rebate period
begins exceeds such index associated with the base date AMP of the
drug. We also proposed to add paragraph (a)(8) to capture that the
total rebate amount for noninnovator multiple source drugs is equal to
the basic rebate amount plus the additional rebate amount, if any.
In addition to the proposed regulatory changes related to section
602 of BBA 2015 amendments noted in this rule, we also proposed to
amend Sec. 447.509 at:
Paragraph (a)(5) to specify that in no case will the total
rebate amount exceed 100 percent of the AMP of the single source or
innovator multiple source drug; and
By adding paragraph (a)(9) to specify that in no case will
the total rebate amount exceed 100 percent of the AMP of the
noninnovator multiple source drug.
We also added to paragraph (a)(7)(ii)(B) to state that the
base date AMP has the meaning of AMP set forth in section
1927(c)(2)(A)(ii)(II), (c)(2)(B) and (c)(3)(C) of the Act as the
regulation did not provide a specific definition of base date AMP for
calculating the additional rebate. We believe it is reasonable to
include this in regulation to provide further clarity for manufacturers
and states with regard to the calculation of the additional rebate, and
to ensure the appropriate product data and pricing information is
submitted to CMS.
We received the following comments on Medicaid drug rebates (MDR)
(Sec. 447.509).
Comment: A few commenters supported the proposed changes to the
calculation for non-innovator multiple source drugs, single source
drugs, or innovator multiple source drugs to ensure manufacturers of
authorized generic drugs do not take advantage of monopoly situations,
and increase prices beyond the rate of inflation.
Response: The proposed changes were made to conform to changes made
by section 602 of the BBA 2015 to section 1927(c)(3) of the Act which
requires that manufacturers pay additional rebates on their non-
innovator multiple source (N) drugs if the AMPs of an N drug increase
at a rate that exceeds the rate of inflation. It is not clear what the
commenter meant by the statement that these proposed changes would
ensure that manufacturers of authorized generics do not take advantage
of monopoly situations. Authorized generics are considered innovator
multiple source drugs as they are sold under a manufacturer's NDA, and
an existing inflation penalty applies to such drugs under section
1927(c)(2) of the Act.
Comment: Several commenters do not support the proposed changes to
the inflation rebate or the inclusion of an additional rebate for N
drugs. A few commenters noted the additional rebate for non-innovators
multiple source drugs (N drugs) would be a disincentive to
manufacturers from participating in Medicaid and 340B programs.
Response: While we appreciate the commenters expressing their
concerns, the proposed revisions to Sec. 447.509, conform with the
changes made by section 602 of the BBA 2015 to section 1927(c)(3) of
the Act, which require that manufacturers pay additional rebates on
their N drugs if the AMPs of an N drug increase at a rate that exceeds
the rate of inflation. This provision of BBA 2015 was effective
beginning with the January 1, 2017 quarter, or in other words,
beginning with the URAs that are calculated for the January 1, 2017
quarter. Since that date, we have not noticed a decline in
manufacturers participating in either the Medicaid program or 340B
program.
Comment: One commenter noted the proposed methodology for
calculating the basic rebate and the additional rebate could result in
a ``double discount'' in situations where products with a price
increase that is greater than inflation would also now have to pay an
inflation rebate. This commenter recommended rather than add the two
rebate components together, a manufacturer should be permitted to sum
the total net of the duplicate portion of the rebates.
Response: We believe the commenter is noting that the basic rebate
for a non-innovator multiple source drug may already reflect a higher
rebate due to price increases on that non-innovator drug resulting in a
higher AMP and therefore, the additional rebate duplicates, to some
extent, an already increased basic rebate (due to the increase in the
AMP). There is no statutory basis to allow for the type of rebate
calculation proposal that the commenter is suggesting. We note that
section 602 of the BBA of 2015 added section 1927(c)(3) of the Act,
which requires that manufacturers pay, in addition to a basic rebate,
an additional rebate for their N drugs if the AMPs of an N drug
increase at a rate that exceeds the rate of inflation. This provision
of BBA 2015 was effective beginning with the January 1, 2017 quarter,
or in other words, beginning with the URAs that are calculated for the
January 1, 2017 quarter.
After consideration of the public comments received, we are
finalizing the proposed changes (described in this section (II.F. of
this final rule)) made to Sec. 447.509 without modification.
Additionally, please refer to section II.C.2. of this final rule
for a description of other changes we are finalizing to Sec. 447.509
as they relate to drugs that are line extensions.
G. Requirements for Manufacturers (Sec. 447.510)
In accordance with section 1927(b)(3) of the Act and the terms of
the NDRA, manufacturers are required to report pricing information to
CMS on a timely basis or face a penalty. Current regulations at Sec.
447.510 implement the manufacturer price reporting requirements
including the timing of revisions to pricing data. The current
regulation at Sec. 447.510(b)(1) requires that the revision to pricing
data be made within the 12 quarters from which the data were due,
unless it meets one of the exceptions in paragraphs (b)(1)(i) through
(v).
As discussed in section II.B. of the June 2020 proposed rule, VBP
has evolved into a possible option for states and manufacturers to help
manage drug expenditures. Many VBP arrangements or pay-over-time models
may be better suited for periods longer than 12 quarters, and
manufacturers entering into such arrangements may need to adjust AMPs
and best prices beyond the 12 quarters because the evidence-based or
outcomes-based measures are being measured beyond a period of 12
quarters or a final installment payment is being made outside of the 12
quarters. With this evolution it has become apparent that certain
manufacturer reporting requirements could be viewed as an impediment to
adopting VBP arrangements. For instance, under
[[Page 87062]]
current regulations, a manufacturer would not be able to account for
any adjustments to prices that may occur outside of the 12 quarters
because of VBP arrangements (or even pay-over-time models), as
required.
The definition of AMP at section 1927(k)(1)(B)(ii) of the Act,
indicates that any other discounts, rebates, payments or other
financial transactions that are received by, paid by, or passed through
to retail community pharmacies shall be included in AMP for a COD. The
special rules in section 1927(c)(1)(C)(ii) of the Act define best price
to be inclusive of cash discounts, free goods that are contingent on
any purchase requirement, volume discounts and rebates. Since
manufacturers are required to report AMP and best price that capture
these statutory required financial transactions, including such
financial transactions (for example, rebates, incremental payments)
that are a result of VBP arrangements or pay-over-time models, and such
pricing structures may be designed to result in transactions taking
place outside of the 3-year window, we proposed to add Sec.
447.510(b)(1)(vi) to specify an additional exception to the 12-quarter
rule to account for the unique nature of VBP arrangements and pay-over-
time models. Specifically, we proposed that the manufacturer may make
changes outside of the 12-quarter rule as a result of a VBP arrangement
when the outcome must be evaluated outside of this 12-quarter period.
We received the following comments on requirements for
manufacturers (Sec. 447.510).
Comment: Many commenters supported the extension of the price
reporting period for VBP arrangements beyond the current 12-quarter
restatement window. One commenter noted this will improve the reporting
of net prices. Another commenter supported the extension because they
noted limiting an outcome measurement to less than the historical 12-
quarter maximum, regardless of the clinical data associated with a
given treatment, might jeopardize the usefulness of a VBP arrangement.
Response: We appreciate the support for the exception to the 12-
quarter restatement window and are finalizing the regulation at Sec.
447.510(b)(1)(vi) as proposed.
Comment: Several commenters provided recommendations for allowing
adjustments outside of the 12-quarter window or requested further
modifications to CMS' proposals in this section. Specifically,
commenters recommended that CMS consider a specific length of the time
for the restatement period of AMP and best price for therapies subject
to VBP arrangements, such as 5 or 10 years. In addition, commenters
requested that CMS address the impact of the amended restatement period
on the traditional AMP smoothing methodology. Finally some commenters
requested that manufacturers be able to make such restatements in the
same way that they can make restatements within the 12-quarter window,
that is, without any need for approval by CMS.
Response: This final regulation adds an exception to the 12-quarter
rule that allows a manufacturer to request revisions to price reporting
(including quarterly AMP and best price reporting) that exceed 12
quarters from which the data was due when the change is a result of a
VBP arrangement and the outcome must be evaluated outside of the 12-
quarter period. We do not agree with the suggestion that we consider
adding a specific length of time for the applicability of the exception
outside of the 12 quarters, because our intent is to provide necessary
flexibilities understanding the various VBP arrangements will be
designed with different protocols, outcomes and timeframes.
For example, there may be a 5-year lag time between the time that a
drug is first administered to a patient and the evaluation period for
that patient's VBP arrangement. After that, there may be several years
of prior period pricing adjustments based on the data that are
generated from VBP program's patient results which may affect the
pricing data being reported that had already been reported for the
initial 5-year period. Manufacturers that use a VBP-based bundled sales
approach would also be expected to revise their pricing metrics as
additional data are compiled from the VBP arrangement, and make
adjustments to AMP and BP, with the ability to make such adjustments
outside the 12-quarter reporting window.
We also note that there are currently five exceptions listed at
Sec. 447.510(b) to the 12 quarter price reporting rule, and none of
these exceptions are time limited. For example, there are currently no
time limits on manufacturer requests for changes related to the initial
submission of a product (Sec. 447.510(b)(1)(ii)) or due to a change in
drug category or market date (Sec. 447.510(b)(1)(i)). We do not see a
need, therefore, to place a time limit of manufacturer reporting
outside the 12 quarter rule regarding VBP arrangements.
We would implement this new exception to the 12-quarter rule in the
same manner that we are currently processing requests from
manufacturers for other exceptions. That is, the manufacturer would
submit its request to us to describe the change they want to make with
supporting documentation. If the change is permissible, we will notify
the manufacturer that they can make the change in the current reporting
system, and then the manufacturer would be able to certify that change.
With respect to permitting revisions to the pricing data under a
VBP arrangement, the regulations require manufacturers to request, and
for the agency to determine whether or not to ``reopen'' the MDRP for
revised pricing outside of the 12 quarters based upon the
manufacturer's request and whether it meets an exception at Sec.
447.510(b)(1)(i) through (v). The same practice will apply to this new
exception at Sec. 447.510(b)(1)(vi). We will not permit manufacturers
to restate pricing data in excess of 12 quarters in MDRP without the
manufacturer submitting its request to us.
Comment: A few commenters requested that CMS consider the
implications of changes to drug pricing information outside the 12-
quarter period on the MDRP and 340B ceiling price calculations.
Response: Price calculations for 340B drugs are made by the Health
Resources Services Administration (HRSA) and are based on the pricing
data reported to the MDRP each calendar quarter. In accordance with
section 340B(a)(1) of the Public Health Service Act, the 340B Ceiling
Price and Civil Monetary Penalty final rule defines the 340B ceiling
price as calculated as the AMP from the preceding calendar quarter for
the smallest unit of measure minus the URA and will be calculated using
six decimal places (82 FR 1210). Any retrospective changes to MDRP
pricing metrics also affect 340B ceiling prices as the inputs to the
ceiling prices would also change. Thus, any changes to MDRP pricing
metrics, whether within the 12-quarter adjustment period or outside the
12-quarter adjustment period could affect the 340B ceiling price for
the calendar quarter. We would expect manufacturers to make adjustments
to their 340B ceiling prices as they have done in the past consistent
with any changes to the MDRP pricing metrics.
Comment: A commenter noted the proposal could create a misalignment
of discounts and sales volumes in the AMP calculation due to the longer
time frame over which patient outcomes will be measured and rebates
paid. This commenter recommended CMS engage
[[Page 87063]]
commenters to discuss potential solutions to execute through future
guidance or rulemaking on a parallel time frame to the effective date
of this final rule.
Response: We thank the commenter for this important observation. It
is not clear the extent to which ``misalignments'' may occur within AMP
calculation as a result of discounts and sales volume under a VBP
approach. However, we expect that the ability of manufacturers to
request an adjustment of pricing metrics outside the 12 quarter window
for VBP-related changes will give manufacturers and payers more
flexibility in structuring VBP arrangements as they would know that
there could be a longer timeframe for evaluation. This could encourage
the use of these programs, which would help increase their use in
commercial plans, as well as their use by Medicaid.
Comment: A few commenters requested clarification on specific
operational details and implications on the VBP arrangements exception
provided in Sec. 447.510(b)(1)(vi). These commenters requested that
CMS should consider that out-year payments in VBP approaches do not
need to adjust for the time value of money and that the restatement of
Best Price should not be necessary as part of a VBP arrangement since
the Best Price would have already been reported.
A few commenters requested clarification of how the proposal would
address pay-over-time arrangements. One commenter requested
clarification on how the proposal would allow for pay-over-time
arrangements, specifically, when resetting Best Price more than three
years after administration of the drug, and what would qualify as the
product's Best Price until the benchmark is met and Best Price is
reset, especially as each installment payment may stretch across
multiple rebate reporting periods and recommended CMS allow for an
annuity payment in the case of one-time therapies/gene-therapies.
Response: We recognize that it will be a challenge for CMS to
evaluate and address the impact of every VBP arrangement on government
pricing as part of this final rule because there is no standard or
``one-size'' fits all approach to manufacturer VBP arrangements. For
example, manufacturers may pay adjustments to payers in the form of
rebates if a drug does not work as intended, choose to require payers
to pay in installments as the drug meets intended outcomes, or pay
premiums to third parties to ``warrant'' their drug products, which
would allow a manufacturer to pay the health care costs incurred by a
payer as a result of the failure of a particular therapy. All these
approaches (and more) may require different calculations to determining
best price and AMP, and reporting these figures in MDRP.
We note that some manufacturers that are using a ``pay-over-time''
model that does not involve a VBP component may contract with an
intermediary to receive full payment for the drug and thus report it in
the manufacturer's AMP when reporting their pricing metrics. That is,
the payer makes ``pay-over-time'' payments to the intermediary, and the
intermediary makes full payment to the manufacturer so the manufacturer
can report the full sale in the quarter in which the drug was
administered or dispensed so as not to affect their AMP reporting. The
``best price'' for the quarter would also be reported. However, to the
extent that future rebates or discounts adjust the AMP or ``best
price'', adjustments would have to be reported as they would under a
non pay-over-time model. Finally, because pay-over-time arrangements do
not necessarily have an outcomes component and simply allow payers to
pay for high cost drugs over a period of time, these types of pay-over-
time arrangements would not be subject to the exception at Sec.
447.510(b)(1)(vi) because there is no outcomes related to the pay-over-
time payments, and the exception applies only in cases when the VBP
arrangement involves an outcome that must be evaluated outside of the
12-quarter period.
We will need to remain flexible as additional VBP design structures
come to the market. This being the case, we will consider issuing
operational guidance to assist manufacturers in the reporting of AMP
and best price and to the extent there is no guidance specific to a
manufacturer's VBP arrangement, manufacturers may continue to make
reasonable assumptions consistent with statute and regulation regarding
the determination of best price and AMP.
Comment: Several commenters did not support the proposed rule
providing for an additional exception to the generally applicable 12-
quarter reporting rule for certain VBP arrangements. A few commenters
noted this would create additional burden on states and fiscal agents
to manually review rebates and credits. One commenter noted price
reporting requirements for performance-based contracts and annuities
with terms greater than 12 quarters are unclear and may cause
administrative burden to revise.
Response: We understand and appreciate the comment, as
retrospective changes to price reporting can create burdens to states
and manufacturers. However, we expect that prior period adjustments
resulting from rebates or discounts paid under a VBP program could be
made in the same manner as traditional prior period adjustments; that
is, through changes to the URA that are sent to states by CMS, and paid
by or paid to manufacturers.
Comment: One commenter noted the proposal created opportunity for
drug makers to game the system and recommended CMS more clearly define
requirements drug makers will need to abide by under the new VBP rules
to avoid future gaming.
Response: We appreciate the commenter's concerns. Manufacturers can
offer VBP programs to payers under various approaches, such as a
``bundled sales'' approach or a multiple best price approach. These
programs must comply with the VBP arrangement definition that we are
finalizing in this final regulation in order for a manufacturer to
avail itself of the regulatory flexibilities we are finalizing in this
regulation.
As has been the case with the MDRP program since its inception,
manufacturers are responsible for following all applicable laws, and
regulations, including entering into and having in effect a national
drug rebate agreement which memorializes these requirements. Such
responsibilities will include complying with these new regulations
relating to VBP approaches, as applicable. Manufacturers continue to be
permitted to make reasonable assumptions where necessary, and remain
responsible for documenting and retaining those assumptions as provided
at Sec. 447.510(f). Manufacturers will remain subject to enforcement
actions, such as CMPs, for false reporting of product and pricing
information. In addition, we are delaying the effective date of the
multiple best price VBP approach to January 1, 2022. We will provide
additional guidance should it be necessary to both protect the
integrity of the MDRP, as well as help assure a smooth implementation
of the VBP arrangement regulatory flexibilities that will be available
under this final regulation.
After consideration of the comments received, we are finalizing the
proposed rule without modification.
H. Requirements for States (Sec. 447.511)
Section 1927(b)(2)(A) of the Act requires that states be held
responsible to report to each manufacturer not later than 60 days after
the end of each rebate period and in a form consistent with a
[[Page 87064]]
standard reporting format established by the Secretary, information on
the total number of units of each dosage form and strength and package
size of each COD dispensed after December 31, 1990, for which payment
was made under the plan during the period, including such information
reported by each Medicaid MCO, and shall promptly transmit a copy of
such report to the Secretary. The accuracy and timeliness of this SDUD
report is important for the MDRP, other programs, and legislative
efforts including, but not limited to:
Actuarial and cost impact projections of legislative or
regulatory changes to the MDRP;
The calculation of Medicaid's portion of the branded
prescription drug fee specified at section 9008 of the Affordable Care
Act); and
Ongoing audits that demonstrate that some states still
fail to bill rebates for physician-administered drugs (PADs), although
it has been 13 years since the requirement began.
States are required to send invoices (CMS-R-144 Medicaid Drug
Rebate Invoice) to each manufacturer in the MDRP for which payment was
made on behalf of the state and federal government for the
manufacturers' drugs, or in the case of MCOs (including PHIPs and
PHAPs), drugs dispensed to a beneficiary in a rebate period. States are
required to send a copy of their SDUD (a summary report of their
invoice utilization data) to CMS each quarter. If a state makes an
adjustment to a rebate invoice, the state is required to send an
updated SDUD to us in the same reporting period in which the
manufacturer received the adjustment.
We have found that some states do not have sufficient edits in
place to detect, reject and investigate SDUD outliers, which may
distort the rebate amounts due by manufacturers. This results in states
overbilling manufacturers and generating disputes on rebate invoices;
imposing resource burdens on manufacturers, states, CMS, and other MDRP
partners, as well as interrupting the payment of rebates to states and
CMS. Many states seemingly fail to implement needed system edits to
identify such disputes prior to billing manufacturers. Although both
overbilling and underbilling must be disputed, manufacturers often
neglect to dispute instances of rebate underbilling.
We have also found that many states do not send the same SDUD to
CMS as they transmit to manufacturers. In fact, some states send us
``pre-edited'' SDUD, while the manufacturer's rebate invoice contains
edited data. These practices do not comply with section 1927(b)(2)(A)
of the Act and Sec. 447.511(b), which require that states submit the
same SDUD to us on a quarterly basis that they transmit to the
manufacturers. As we move to implement new systems, we expect to put in
place data error screening to better reject or alert identified
potential inaccuracies to SDUD. States should also be improving current
systems and planning updates to future systems to better identify and
correct inaccurate SDUD before reporting to manufacturers and CMS.
Accurate reporting of SDUD to CMS is important for a number of
reasons that extend beyond the MDR program. We remind states and
manufacturers that the state submission of utilization data to us for
purposes of the MDR program is also available on our public website
(https://www.medicaid.gov/medicaid/prescription-drugs/state-drug-utilization-data/index.html), and is reviewed and utilized by various
entities (that is, IRS, OIG). State Release 177 (July 21, 2016)
(https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/state-releases/state-rel-177.pdf) addresses ``Non-Compliant State Drug Utilization Data
Reporting to CMS.''
We are now providing additional information to assist states in
more accurately reporting SDUD to us. SDUD should only contain
utilization data on NDCs that are eligible for both FFP and for rebates
under the CMS rebate program. Therefore, SDUD reporting should not
include an NDC that is not a COD and not eligible for rebates, even
though it may be covered by a state as a prescribed drug and eligible
for FFP.
States should identify and exclude utilization of those drugs whose
NDCs are:
Paid for with only state funds;
Not representative of CODs (for example, eligible for FFP
as a prescribed drug but not eligible for rebates);
Prohibited from receiving FFP (for example, COD status 05
and 06, drugs for erectile dysfunction or sexual dysfunction for which
there is no other FDA-approved indication); and
For units utilized for 340B claims prior to submitting
their utilization data to CMS.
After an SDUD file is successfully processed by CMS, the system
generates a Utilization Discrepancy Report (UDR) that lists edits and
alerts that were triggered when the SDUD file was processed. The UDR is
routed back to the state via the EFT process and should be received
within 2 days of submitting the SDUD file to CMS. While states should
review each UDR in its entirety for data issues, certain data edits
should be scrutinized more closely as they may affect state rebate
billing. These error and alert messages include:
NDC's COD Status indicates a less-than-effective drug;
NDC has been terminated for more than 4 quarters;
Labeler code is terminated for the submitted quarter/year
combination;
Labeler code does not participate in the MDR program;
As states evaluate whether submitted SDUD should be revised, they
should also evaluate whether their CMS-64-R reports require revision
because they included costs for drugs that do not qualify for FFP.
States may find additional helpful information in the Medicaid Drug
Rebate Data Guide for States that is located in the ``Documents''
section of DDR.
To better hold states accountable for their data integrity and to
mitigate the effects of inaccurate and untimely SDUD, we proposed to
revise Sec. 447.511. Specifically, we proposed to revise paragraph (a)
to specify that any subsequent updates or changes in the data on the
CMS-R-144 must be included in the state's utilization data submitted to
CMS. We also proposed to revise paragraph (b) to state that, on a
quarterly basis, the state must submit drug utilization data to CMS,
which will be the same information as submitted to the manufacturers on
the CMS-R-144, as specified in Sec. 447.511(a). In addition, to
conform to the statutory requirement at section 1927(b)(2)(A) of the
Act, we proposed to add in regulatory text that the state data
submission will be due no later than 60 days after the end of each
rebate period. In the event that a due date falls on a weekend or
federal holiday, the submission will be due on the first business day
following that weekend or federal holiday. We also proposed that any
adjustments to submitted data would be transmitted to the manufacturer
and CMS in the same reporting period.
We also proposed to add Sec. 447.511(d) to specify that the state
data must be certified by the state Medicaid director (SMD), the deputy
state Medicaid director (DSMD), or an individual other than the SMD or
DSMD, who has authority equivalent to an SMD or DSMD or an individual
with the directly delegated authority to perform the certification on
behalf of the individuals noted in this rule.
We also proposed to add Sec. 447.511(e) to specify the state data
certification language that must be included in the submission. That
is, each data submission by a state must include the following
certification language:
[[Page 87065]]
I hereby certify, to the best of my knowledge, that the state's
data submission is complete and accurate at the time of this
submission, and was prepared in accordance with the state's good faith,
reasonable efforts based on existing guidance from CMS, section 1927 of
the Act and applicable federal regulations. I further certify that the
state has transmitted data to CMS, including any adjustments to
previous rebate periods, in the same reporting period as provided to
the manufacturer. Further, the state certifies that it has applied any
necessary edits to the data for both CMS and the manufacturer to avoid
inaccuracies at both the NDC/line item and file/aggregate level. Such
edits are to be applied in the same manner and in the same reporting
period to both CMS and the manufacturer.
We received the following comments on our proposed changes to the
requirements for states (Sec. 447.511).
Comment: One commenter requested clarification as to whether a
fiscal agent Rebate Analyst (that is, a contractor) can be delegated
the authority from the SMD or DSMD to certify the quarterly file
transfer.
Response: The proposed rule specified that the authority to certify
may also be delegated to an individual who is authorized to perform the
certification on behalf of the SMD or DSMD, and does not limit or
restrict a state's ability to delegate the certification function to a
fiscal intermediary or contractor. Ultimately, it is the state's
responsibility to ensure that the data submitted to CMS complies with
the applicable statutory and regulatory requirements and is certified
as required.
After consideration of the comments, we are finalizing the proposed
rule without modification. However, since CMS will need to develop a
collection instrument to address these requirements, we are delaying
the effective date of this provision until January 1, 2022.
I. State Plan Requirements, Findings and Assurances (Sec. 447.518)
Traditionally, states have utilized the SRA pathway to secure
additional rebates over and above the federal rebate required of
manufacturers participating in the MDRP. To do so, the Secretary must
authorize a state to enter directly into these agreements with a
manufacturer in accordance with section 1927(a)(1) of the Act. In
accordance with section 1927(a)(1) of the Act, we require states to
submit a SPA for a SRA which includes a template of the SRA providing
the framework for the agreement the state has with the manufacturer. A
CMS-authorized SRA provides the parameters the state and manufacturer
agree upon regarding the supplemental rebates, including that such
rebates are at least as large as the rebates required by the federal
government.
To make new and innovative drugs more available to Medicaid
patients, states are permitted to use a SRA pathway to negotiate VBP
agreements with manufacturers that are intended to be financially
beneficial for Medicaid. As with a traditional SRAs, these VBP SRAs
must be financially advantageous for states, but may also include an
evidence or outcomes-based measure linked to the rebate. As with any
other SRA, states are required to seek a SPA approval for a VBP SRA in
accordance with section 1927(a)(1) of the Act. Through the SRA SPA
process, a state, when approved by CMS, can enter into VBP SRAs
directly with manufacturer(s) for both FFS and MCO (including PHIPs and
PHAPs) COD claims. Under the SRA VBP arrangement, the state may need to
set up processes to report the results of the evidence or outcomes-
based measures of the patient back to the manufacturer. This could
require the state to take on additional responsibilities and expense to
eventually collect a rebate, such as tracking the patient, collecting
data on the patient (such as the results of evidence or outcomes-based
measures) or providing services to the patient.
We understand that more states want to develop their own VBP
arrangements, but states want to better understand the challenges,
resources and costs to structure these programs and make them
successful. In addition, given that we have a significant interest in
the success of these innovative VBP programs, as well as the nature of
the drugs that are subject to these agreements, we have an interest in
helping evaluate these programs' effectiveness. To accomplish this, we
want to create a mechanism to exchange information about state VBP
programs. This approach is consistent with section 1902(a)(30)(A) of
the Act which requires that methods and procedures be established
relating to the utilization of, and the payment for, care and services
available under the plan (including but not limited to utilization
review plans) as may be necessary to safeguard against unnecessary
utilization of such care and services and to assure that payments are
consistent with efficiency, economy, and quality of care.
Therefore, in accordance with section 1902(a) of the Act, we
proposed that states provide to us specific data elements associated
with these CMS-authorized VBP SRAs to ensure that payments associated
with Medicaid patients receiving a drug under a VBP structure are
consistent with efficiency, economy, and quality of care. To that end,
we proposed adding Sec. 447.518(d)(1) and (2) to specify that a state
participating in a CMS-authorized supplemental rebate VBP arrangement
report data as specified on a yearly basis, and within 60 days of the
end of each year, including the following data elements:
State.
National Drug Code(s) (for the drugs covered under the VBP
arrangement).
Product's FDA list name
Number of prescriptions.
Cost to the state to administer VBP arrangement (for
example, systems changes, tracking outcomes, etc.).
Total savings generated by the supplemental rebates due to
VBP arrangement.
We invited comments on this approach and were particularly
interested in understanding from the states those issues regarding the
burden that such a proposal might create, and from all commenters on
whether the data elements being collected are appropriate and useful to
meet the goals of the proposal that we have described in this rule.
We received the following comments on state plan requirements,
findings and assurances (Sec. 447.518).
Comment: A few commenters did not support the proposed changes to
the state plan requirements section regarding VBP data requirements and
recommended CMS clarify that states do not need to seek approval via a
SPA to enter into VBP arrangements, whether based upon manufacturer
arrangements with commercial payers or on their own. However, one
commenter agreed that states should not be able to implement such
substantial shifts (for example VBP arrangements) in their operations
without federal approval.
Response: We understand that there may have been confusion over the
breadth of our proposal. This new state reporting requirement will
apply only to the information and data generated under the CMS-
authorized VBP SRAs that states enter into with manufacturers under CMS
approved templates. Therefore, we are revising the proposed changes to
Sec. 447.518(d)(1) and (2) (in this final rule at Sec. 447.518(d)(2)
and (3)) to make it clear that the data be specific only to CMS-
authorized supplemental rebate agreements. As noted above, several
state Medicaid programs already have CMS-authorized supplemental rebate
agreements that provide a template for them to enter into VBP
[[Page 87066]]
agreements with manufacturers. These specific agreements allow the
rebates that are negotiated with the manufacturers to be exempt from
best price as found under our regulations at Sec. 447.505(c)(7). We
will continue to require that states seek approval of these types of
SRAs through the SPA process.
States will not need to seek CMS approval for entering into a VBP
agreement with a manufacturer under the new multiple best price
approach. Nor will states have to report to CMS any information or data
generated under these arrangements. We would expect that states and
manufacturers would have to enter into a separate agreement under a
multiple best price arrangement to indicate their intent to meet the
manufacturer's requirements (for example, patient testing, patient
tracking). Should the manufacturer and state negotiate additional
rebates over and above those that are offered under theVBP arrangement
reported to CMS, then the state would have to do that under a CMS
authorized VBP SRA to exempt those prices from ``best price.''
We refer readers to the description of current policy related to
state utilization of SRAs as a pathway to securing additional rebates
over and above the federal rebate required of manufacturers
participating in the MDRP in the proposed rule (85 FR 37302 and 37303),
and past guidance regarding SRAs and SPA requirements, which is
available at https://www.medicaid.gov/federal-policy-guidance/downloads/smd091802.pdf and https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/mfr-releases/mfr-rel-099.pdf.
Comment: Several commenters supported the proposed changes for
states to seek a SPA prior to implementing changes to SRAs. One
commenter noted the SPA requirements improve the MDRP and allow those
states that have an interest to adopt the same types of agreements that
manufacturers have entered into with commercial payers.
Response: We are not revising the state plan requirements related
to the SPA process for submission of SRAs. However, we are adding a new
requirement relating to the conditions for the approval of such CMS
authorized VBP SRAs such that states provide us with certain
information relative to the operation and results of the VBP program so
that we may evaluate the effectiveness of the programs and share the
information with other states. We proposed that states provide to us
specific data elements associated with VBP SRAs to ensure that payments
associated with Medicaid patients receiving a drug under a VBP
structure are consistent with efficiency, economy, and quality of care.
Comment: One commenter noted these requirements improve
transparency relevant to the effectiveness of VBP arrangements as part
of a state's SRA, but expressed concern that this approach could affect
Medicaid MCOs from negotiating between states and pharmaceutical
manufacturers.
Response: We agree that the proposed requirements to collect data
regarding a state's VBP SRA arrangement may impact Medicaid MCO
negotiations with states and manufacturers to the extent the state and
the Medicaid MCO have agreed to include Medicaid managed care enrollees
in the state's VBP SRA arrangements. If the Medicaid managed care
enrollees are part of the state's VBP SRA arrangement, the state and
Medicaid MCO will likely need to establish responsibilities regarding
the collection and reporting of data so that states meet the data
collection requirements set forth in this final rule.
Comment: A few commenters provided additional recommendations to
the proposed changes to Sec. 447.518(d) for CMS' consideration. One
commenter recommended that CMS develop a federal framework for state
Medicaid agencies to design and implement a VBP arrangement, including
expanding the existing SRA requirements to better enable state VBP
arrangements. Another commenter recommended CMS require VBP
arrangements to include minimum and maximum and expected rebates, such
as a high cost drug threshold to avoid impact to Preferred Drug List
classes and SRAs.
Response: We have an interest in helping states ensure they
understand and evaluate these programs' effectiveness. To accomplish
this, we proposed the collection of specific data elements to exchange
information about state VBP programs, and in the event this information
reveals federal involvement is needed we may address it in the future.
We believe our proposal is consistent with section 1902(a)(30)(A) of
the Act which provides that a state plan must provide, in part, such
methods and procedures relating to the utilization of, and the payment
for, care and services available under the plan (including but not
limited to utilization review plans) as may be necessary to safeguard
against unnecessary utilization of such care and services and to assure
that payments are consistent with efficiency, economy, and quality of
care.
Comment: A few commenters agreed with the proposed state reporting
requirements and offered additional recommendations to CMS. One
commenter recommended additional reporting elements, including
identifying the drugs under the VBP arrangement, the number of
prescriptions, and the costs and savings attributed to the arrangement,
and the number of beneficiaries covered under a VBP arrangement. One
commenter recommended states report to CMS the average net price paid
per unit and per prescription of each drug in a state's VBP
arrangement.
Response: We appreciate the support for the proposed data elements
and appreciate the suggestions for additional reporting elements. We
are finalizing the regulation as proposed, which includes a requirement
for the state to identify the specific drug by NDC, the product FDA
list name, and the number of prescriptions, and cost and savings
attributed to the VBP arrangement. Further instructions regarding the
instrument for collection of these data elements will be provided in
guidance. We are not finalizing a requirement for the state to report
the number of beneficiaries covered under a particular VBP arrangement,
as reporting of a low number of participants may lead to privacy
concerns. As for the recommendation to require the reporting of the net
price paid per unit and per prescription of each drug, we are not
accepting this recommendation as this data element relates to a
manufacturer's proprietary drug pricing information.
Comment: A few commenters had concerns about consistency of state
reporting and requested further guidance or modifications to the
proposed data. Specifically, a commenter recommended CMS provide
guidance to states to ensure the accuracy and consistency of state
calculations of the required elements. Another commenter recommended
CMS mandate that states provide claims-level data as a means of
ensuring the accuracy of their calculations and reporting.
Response: We intend to prepare a collection instrument which will
allow states to report consistent data. If necessary, we will provide
additional guidance as states submit reporting obligations. We will not
require state collection and reporting of claims-level data at the
federal level. However, a state may review its own claims-level data
related to the VBP arrangement to further analyze Medicaid beneficiary
impact and overall Medicaid program impact at the state level.
[[Page 87067]]
Comment: One commenter noted VBP arrangements may involve measuring
outcomes over months or years so reporting that would take place
annually may fail to provide an accurate measure of the total savings.
Response: We agree that measuring outcomes may take place over a
period longer than a year and annual reporting may not result in a full
picture of what savings can be generated by a VBP arrangement.
Therefore, we are requesting that the data collected and reported in
the annual report be cumulative so that the annual report provides the
data elements that are requested, and that the final report on the VBP
program is generated within 60 days after the final year of the VBP
time period. Therefore, we are revising the regulation at Sec.
447.518(d)(2) and (3) to provide that a state participating in a VBP
arrangement approved under a CMS authorized SRA report the required
data (including cumulative data to date) found at paragraphs (d)(3)(i)
through (vi) within 60 days of the end of each year also include
cumulative data.
Comment: One commenter did not support the proposed state VBP
reporting requirements and recommended CMS implement reporting
requirements at a later date.
Response: These reporting requirements will be effective January 1,
2022. This will give states time to prepare to submit this information
to us.
Comment: Several commenters disagreed with the proposed state
reporting requirements citing their belief that they will disclose
proprietary information between the manufacturer, PBM, and state. These
commenters recommended CMS clarify that the actual terms and conditions
of the contracts would not be subject to full disclosure.
Response: We do not believe the data elements that will be
collected in accordance with this final rule will disclose proprietary
information. The reporting requirements do not include a state's
reporting of actual terms and conditions of the contracts between the
state, manufacturer(s), and PBMs.
Comment: A few commenters recommended CMS establish clear guidance
regarding how states should calculate savings in a VBP SRA arrangement
and how states should calculate the administrative expenses of entering
into a VBP SRA arrangement. Another commenter noted the data element
requiring states to report the total savings generated by the
supplemental rebate due to the VBP may underestimate savings due to
failure to account for rebates that have yet to be paid. One commenter
requested clarification on how CMS intends to utilize these annual
state reports to evaluate VBP SRA arrangements.
Response: We are finalizing the proposal to require the data
elements specified in the proposed rule and will provide further
instructions regarding the collection of these data elements in
guidance. Given the fact that each VBP arrangement has distinct
measures and cost strategies, a one size fits all approach to
calculating savings will be a challenge to state Medicaid programs. As
stated in the preamble to the proposed rule, these annual reports from
states will give CMS and states a better understanding of the
challenges, resources and costs to structure these programs and make
them successful. To accomplish this, we believe this collection will
assist states in evaluating information about savings generated by
state supplemental rebates received under VBP arrangements.
Comment: One commenter supported the proposed data elements
required to be reported by states to CMS, although noted that many VBP
arrangements may show little-to-no economic value in the beginning
especially during a multi-year arrangement.
Response: We appreciate the support for the collection of the data
elements. The reporting of these data elements will hopefully guide us
and the states that choose to participate in VBP arrangements as to
whether participating in such arrangements bring economic value to
Medicaid.
For the reasons stated above, we are finalizing the policy that
states that enter into VBP agreements with manufacturers under a CMS-
authorized supplemental rebate agreement template must report to us
within 60 days of the end of each calendar year, on the data described
in the regulation, including cumulative data to date, regarding the
operation and parameters of their VBP arrangements. Thus, for the
reasons discussed in the proposed rule (82 FR 37302 and 37303) and
after consideration of the comments received we are finalizing the
regulations as proposed with modification to 447.518(d) by making it
clear that only VBP arrangements approved under a CMS-authorized SRA
must submit the data described and ``including cumulative data to
date'' in the regulatory text. Furthermore, while we proposed to revise
Sec. 447.518(d)(1) and (2), we are redesignating these sections as
Sec. 447.518(d)(2) and (3) in this final rule. This section will not
be effective until January 1, 2022 to allow time for CMS to generate a
collection instrument to collect the state's information.
J. Drug Utilization Review (DUR) Program and Electronic Claims
Management System for Outpatient Drug Claims (Sec. Sec. 456.700
Through 456.725), Managed Care Standard Contract Requirements and
Requirements for MCOs, PIHPs, or PAHPs That Provide CODs (Sec.
438.3(s))
Section 1004 of the SUPPORT Act requires states to implement
certain opioid-specific DUR standards within their FFS and managed care
programs. These requirements supplement preexisting DUR standards under
section 1927(g) of Act. In Medicaid, DUR involves the structured,
ongoing review of healthcare provider prescribing, pharmacist
dispensing, and patient use of medication. DUR involves a comprehensive
review of patients' prescription and medication data and dispensing to
help ensure appropriate medication decision-making and positive patient
outcomes. Potentially inappropriate prescriptions, unexpected and
potentially troublesome patterns, data outliers, and other issues can
be identified when reviewing prescriptions through prospective DUR or
retrospective DUR activities. In Prospective DUR, the screening of
prescription drug claims occurs to identify problems such as
therapeutic duplication, drug-disease contraindications, incorrect
dosage or duration of treatment, drug allergy and clinical misuse or
abuse prior to dispensing of the prescription to the patient.
Retrospective DUR involves ongoing and periodic examination and reviews
of claims data to identify patterns of inappropriate use, fraud, abuse,
or medically unnecessary care, and facilitates corrective action when
needed. Often times, these activities are synergistic; information
gleaned through retrospective DUR claim reviews can be used to shape
effective safety edits that can be implemented through prospective DUR,
better enabling prescribers and dispensers to investigate prescription
concerns prior to dispensing the medication to the patient. From
prospective alerts (which can incorporate information from the
beneficiary's claims data), potential issues can be identified to help
promote the appropriate prescription and dispensing of outpatient drugs
to beneficiaries. DUR programs play a key role in helping health care
systems understand, interpret, and improve the prescribing,
administration, and use of medications.
Section 1902 of the Act, as amended by section 1004 of the SUPPORT
Act,
[[Page 87068]]
requires states to implement safety edits and claims review automated
processes for opioids as DUR requirements. We interpret ``safety
edits'' to refer to the prospective DUR review specified in section
1927(g)(2)(A) of the Act. These prospective safety edits provide for
identifying potential problems at point of sale (POS) to engage both
patients and prescribers about identifying and mitigating possible
opioid misuse, abuse, and overdose risk at the time of dispensing. The
POS safety edits provide real-time information to the pharmacist prior
to the prescription being dispensed to a patient, but do not
necessarily prevent the prescription from being dispensed. When a
safety edit is prompted, the pharmacist receives an alert and may be
required as dictated by good clinical practice and predetermined
standards determined by the state, to take further action to resolve
the issue flagged by the alert before the prescription can be
dispensed.\23\ A claims review automated process, which we interpret to
refer to as a retrospective DUR review as defined in section
1927(g)(2)(B) of the Act, provides for additional examination of claims
data to identify patterns of fraud, abuse, gross overuse, or
inappropriate or medically unnecessary care. Retrospective reviews
often involve reviews of patient drug and disease history generated
from claims data after prescriptions have been dispensed to the
beneficiary. For many retrospective reviews, in an effort to promote
appropriate prescribing and utilization of medications, claims data is
evaluated against state determined criteria on a regular basis to
identify recipients with drug therapy issues, enabling appropriate
action to be taken based on any issues identified. After these reviews,
prescribers often have the opportunity to review prescriptions and
diagnosis history and make changes to therapies based on the
retrospective review intervention. Retrospective claims reviews provide
access to more comprehensive information relevant to the prescriptions
and services that are being furnished to beneficiaries and better
enable and encourage prescribers and dispensers to minimize opioid risk
in their patients, and assure appropriate pain care.
---------------------------------------------------------------------------
\23\ Prada, Sergio. (2019). Comparing the Medicaid Prospective
Drug Utilization Review Program Cost-Savings Methods Used by State
Agencies in 2015 and 2016. American Health and Drug Benefits. 12-7-
12.
---------------------------------------------------------------------------
Many of the proposed safety edits and reviews described in the June
2020 proposed rule were designed to implement requirements outlined in
the SUPPORT Act. The purpose of these safety edits and claims reviews
is to prompt prescribers and pharmacists to conduct additional safety
reviews to determine if the patient's opioid use is appropriate and
medically necessary. Provisions to address antipsychotic utilization in
children and fraud and abuse requirements were also included in the
SUPPORT Act and are measures designed to enhance appropriate
utilization of medication. In the proposed rule, we recognized that the
SUPPORT Act provides considerable flexibility for states to specify
particular parameters of the safety edits, claims review automated
processes, program for monitoring use of antipsychotic medications in
children, and process for identifying fraud and abuse. Additionally, we
acknowledged that many states already have effective DUR processes and
other controls in place, and that section 1902(oo)(1)(E) of the Act (as
added by section 1004 of the SUPPORT Act) clarified that states may
meet new opioid-related requirements with such safety edits, claims
review automated processes, programs, or processes as were in place
before October 1, 2019. However, to ensure a consistent baseline of
minimum national standards for these DUR activities, while preserving
appropriate flexibility for the states to determine their particular
parameters and implementation, we explained our belief that it is
necessary under our authority to implement section 1927(g) of the Act,
to ensure that prescriptions are appropriate, medically necessary, and
not likely to result in adverse medical results, to codify in
regulation the proposed safety edits, claims review automated
processes, program for monitoring antipsychotic medications in
children, and fraud and abuse process requirements as described in the
June 2020 proposed rule. Accordingly, we proposed provisions to
implement opioid-related requirements established in the SUPPORT Act
and further implement requirements under section 1927(g) of the Act, in
an effort to reduce prescription-related fraud, misuse and abuse.
In addition to codifying the SUPPORT Act requirements, we proposed
additional minimum DUR standards in the June 2020 proposed rule that
states would be required to implement as part of their DUR programs.
Specifically, section 1927 of the Act provides for drug use review
programs for CODs to ensure that prescriptions (1) are appropriate, (2)
are medically necessary, and (3) are not likely to result in adverse
medical results. Accordingly, under our authority to implement section
1927(g) of the Act and consistent with the goals of the SUPPORT Act to
ensure the appropriate use of prescription opioids, we proposed minimum
standards for DUR reviews related to medication assisted treatment
(MAT) and identification of beneficiaries who could be at high risk of
opioid overdose for consideration of co-prescription or co-dispensing
of naloxone.
We also sought comments on potential additional standards that we
might implement through future rulemaking, to ensure minimally adequate
DUR programs that help ensure prescribed drugs are appropriate,
medically necessary, and not likely to result in adverse medical
results. We interpreted adverse medical results to include medication
errors or medical adverse events, reactions and side effects. We noted
our anticipation that any such additional standards would be clinically
based and scientifically valid and developed with state collaboration,
standards development organizations, and entities that support Medicaid
DUR programs, and would help ensure all states have established a
reasonable and appropriate DUR program. Such proposed standards would
align with current clinical guidelines and could address the following:
Maintaining policies and systems to assist in preventing over-
utilization and under-utilization of prescribed medications,
establishing quality assurance measures and systems to reduce
medication errors and adverse drug interactions, and improving
medication compliance and overall well-being of beneficiaries. We also
noted that we would consider other mechanisms to encourage states to
adopt additional DUR standards in a timely manner to respond to new and
emerging issues in drug use, as the rulemaking process can be a lengthy
process. For example, we are considering issuing possible future
suggested ``best practices'' or guidance for states in advance of and
in anticipation of rulemaking. We sought comments on the best processes
for collaboratively developing future minimum DUR standards and sought
comments from states and other commenters on potential approaches.
The early signs of the opioid crisis emerged years ago, with
groundwork for the crisis being laid in the late 1990s, when providers
began to prescribe opioid analgesics at greater rates, which led to
widespread misuse and abuse of both prescription and illegal opioids.
After what the CDC characterizes as a ``first wave'' of opioid deaths,
a second wave followed in 2010, involving heroin, with a third wave
beginning in
[[Page 87069]]
2013 involving overdoses from synthetic opioids.\24\ CDC data indicate
that from 1999 through 2017, almost 400,000 people died in the United
States from an overdose involving any opioid, including prescription
and illicit opioids.\25\ In 2018, there were an additional 67,367 drug
overdose deaths in the United States. The age-adjusted rate of overdose
deaths decreased by 4.6 percent from 2017 (21.7 per 100,000) to 2018
(20.7 per 100,000). Opioids--mainly synthetic opioids (other than
methadone)--are currently the main driver of drug overdose deaths.
Opioids were involved in 46,802 overdose deaths in 2018 (69.5 percent
of all drug overdose deaths) \26\ and two out of three (67.0 percent)
opioid-involved overdose deaths involved synthetic opioids.\27\
---------------------------------------------------------------------------
\24\ ``Understanding the Epidemic.'' Centers for Disease Control
and Prevention, Centers for Disease Control and Prevention, 19 Dec.
2018, https://www.cdc.gov/drugoverdose/epidemic/index.html.
\25\ ``Understanding the Epidemic.'' Centers for Disease Control
and Prevention, Centers for Disease Control and Prevention, 19 Dec.
2018, www.cdc.gov/drugoverdose/epidemic/index.html.
\26\ Hedegaard H, Mini[ntilde]o AM, Warner M. Drug Overdose
Deaths in the United States, 1999-2018.pdf icon NCHS Data Brief, no.
356. Hyattsville, MD: National Center for Health Statistics. 2020.
\27\ Wilson N, Kariisa M, Seth P, et al. Drug and Opioid-
Involved Overdose Deaths--United States, 2017-2018. MMWR Morb Mortal
Wkly Rep 2020; 69:290-297.
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In a 2016 informational bulletin titled, ``Best Practices for
Addressing Prescription Opioid Overdoses, Misuse and Addiction,'' \28\
CMS issued guidance to states to outline how to help curb the opioid
crisis, and in 2019, guidance was issued on how states can use
statutory authority to expand the treatment of pain through
complementary and integrative approaches.\29\ Section 6032 of the
SUPPORT Act has directed HHS to collaborate with the Pain Management
Best Practices Inter-Agency Task Force (PMTF) to develop an action plan
on payment and coverage in Medicare and Medicaid for acute and chronic
pain, and substance use disorders (SUDs), informed by a RFI and a
public meeting held at CMS in September, 2019.\30\ The action plan is
related to CMS's Fighting the Opioid Crisis Roadmap, which describes
our three-pronged approach to managing pain using a safe and effective
range of treatment options that rely less on prescription opioids,
expanding treatment for opioid use disorder (OUD), and using data to
target prevention efforts and identify fraud and abuse.\31\
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\28\ ``Best Practices for Addressing Prescription Opioid
Overdoses, Misuse and Addiction.'' CMCS Informational Bulletin
available at www.medicaid.gov/federal-policy-guidance/downloads/CIB-02-02-16.pdf.
\29\ ``Medicaid Strategies for Non-Opioid Pharmacologic and Non-
Pharmacologic Chronic Pain Management.'' CMCS Informational Bulletin
at https://www.medicaid.gov/sites/default/files/federal-policy-guidance/downloads/cib022219.pdf.
\30\ ``Request for Information for the Development of a CMS
Action Plan to Prevent Opioid Addiction and Enhance Access to
Medication-Assisted Treatment.'' CMCS request for information
available at https://www.cms.gov/About-CMS/Story-Page/Opioid-SUPPORT-Act-RFI.pdf.
\31\ ``CMS Roadmap: Fighting the Opiod Crisis.'' Available at
http://wwww.cms.gov/About-CMS/Agency-Information/Emergency/Downloads/Opioid-epidemic-roadmap.pdf.
---------------------------------------------------------------------------
In 2018, the SUPPORT Act was passed as part of a bipartisan effort
to address the opioid crisis, as well as the treatment of pain. The
practice of chronic pain management and the opioid crisis have
influenced one another as each has evolved in response to different
influences and pressures. At the same time CMS seeks to implement these
requirements, we want to ensure Medicaid beneficiaries with chronic
pain can work with their health care providers to optimize function,
quality of life, and productivity while minimizing risks for opioid
misuse and harm such as addiction and overdose.\32\ Therefore, we
discussed in the June 2020 proposed rule that we considered appropriate
approaches through which we could collaboratively develop future
minimum DUR standards with involvement from states and other
commenters, taking into account the need for administrative flexibility
and adequate time for operational implementation, which could be
implemented more quickly to respond to public health crises that may
arise in the future on a more rapid timeframe. We also considered
posting DUR recommendations on our website or through guidance to
states to allow quick dissemination of the information.
---------------------------------------------------------------------------
\32\ Pain Management Best Practices Inter-Agency Task Force.
``Pain Management Best Practices.'' Available at https://www.hhs.gov/sites/default/files/pmtf-final-report-2019-05-23.pdf.
---------------------------------------------------------------------------
1. Minimum Standards for DUR Programs Under the SUPPORT Act and Section
1927 of the Act
In Sec. 456.703, we proposed to redesignate paragraph (h) as
paragraph (i) and to add a new paragraph (h), specifying minimum
standards for DUR programs. The proposed minimum standards in Sec.
456.703(h)(1), discussed in greater detail in this rule, would
implement the amendments made by section 1004 of the SUPPORT Act and
section 1927(g) of the Act and are intended to help ensure DUR programs
continue to adapt and improve the quality of pharmaceutical care
provided to beneficiaries in the face of evolving healthcare guidelines
and technology practices.
We proposed the provisions in this rule for implementation of
requirements in the SUPPORT Act \33\ consistent with section 1927(g) of
the Act. The proposed safety edits and claim reviews were intended to
help protect beneficiaries from serious potential consequences of
overutilization, including misuse, abuse, overdose, and increased side
effects. In addition to the risk of overutilization and diversion, we
noted that opioids can have side effects including respiratory
depression, confusion, tolerance, and physical dependence.\34\
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\33\ https://www.congress.gov/115/bills/hr6/BILLS-115hr6enr.pdf.
\34\ ``CDC Guideline for Prescribing Opioids for Chronic Pain--
United States, 2016.'' Centers for Disease Control and Prevention,
Centers for Disease Control and Prevention, 29 Aug. 2017, https://www.cdc.gov/mmwr/volumes/65/rr/pdfs/rr6501e1er.pdf.
---------------------------------------------------------------------------
The CDC has recommended, in 2016 guidance,\35\ that primary care
providers prescribing to adults in outpatient settings consider non-
pharmacologic therapy and non-opioid pharmacologic therapy as the
first-line treatment for chronic pain.\36\ The CDC guideline defines
chronic pain as ``pain continuing or expected to continue for greater
than 3 months or past the time of normal tissue healing.'' Regarding
chronic pain, CDC states clinicians should use caution when initiating
prescribing opioids at any dosage, and should carefully reassess
evidence of individual benefits and risks when considering increasing
dosage to >=50 morphine milligram equivalents (MME)/day, and should
avoid increasing dosage to >=90 MME/day or carefully justify a decision
to titrate dosage to >=90 MME/day.\37\ Caution is also recommended in
prescribing opioids for acute pain, noting that long-term opioid use
often begins with treatment of acute pain; when opioids are prescribed
for non-traumatic, non-surgical acute pain, primary care clinicians
should prescribe the lowest effective dose for the shortest duration
possible- usually 3 days or less is sufficient and more than 7 days
will
[[Page 87070]]
rarely be needed.\38\ Non-pharmacologic therapies pose minimal risks,
and many of these treatments, when available and accessible--such as
exercise therapy, physical therapy, and cognitive behavioral therapy
(CBT)--have been shown to effectively treat chronic pain associated
with some conditions.\39\ For example, exercise therapy can be
effective in treating moderate pain associated with lower back pain,
osteoarthritis, and fibromyalgia in some patients.\40\
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\35\ ``CDC Guideline for Prescribing Opioids for Chronic Pain--
United States, 2016.'' Centers for Disease Control and Prevention,
Centers for Disease Control and Prevention, 18 Mar. 2016, https://www.cdc.gov/mmwr/volumes/65/rr/rr6501e1.htm?CDC_AA_refVal=https://
www.cdc.gov/mmwr/volumes/65/rr/rr6501e1er.html.
\36\ Dowell, D., Haegerich, T.M., Chou, R. CDC Guideline for
Prescribing Opioids for Chronic Pain-United States 2016, Morbidity
and Mortality Weekly Report March 18, 2016: 65)1 [Accessed February
11, 2019 at https://www.cdc.gov/mmwr/volumes/65/rr/rr6501e1.htm.
\37\ ``CDC Guidelines for Prescribing Opioids for Chronic
pain.'' Available at https://www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
\38\ Dowell, D., Haegerich, T.M., Chou, R. CDC Guideline for
Prescribing Opioids for Chronic Pain-United States 2016, Morbidity
and Mortality Weekly Report March 18, 2016: 65)1 [Accessed February
11, 2019 at https://www.cdc.gov/mmwr/volumes/65/rr/rr6501e1.htm].
\39\ For a review of the evidence base for CBT, see Ehde D.M.,
Dillworth, T.M. and Turner, J.A. 2014. Cognitive-Behavioral Therapy
for Individuals with Chronic Pain: Efficacy, Innovations, and
Directions for Research. American Psychologist, 69(2); 153-166.
\40\ Additional information on non-opioid treatments for chronic
pain are available at https://www.cdc.gov/drugoverdose/pdf/nonopioid_treatments-a.pdf.
---------------------------------------------------------------------------
In 2019, HHS' PMTF issued its report to HHS and Congress, the Pain
Management Best Practices Inter-Agency Task Force Report, on best
practices for the treatment of acute and chronic pain. The CDC has
identified 50 million adults in the United States with chronic daily
pain,\41\ and the National Institutes of Health (NIH) states that
chronic daily pain cost the nation between $560 billion and $635
billion annually.\42\ \43\ The PMTF final report emphasizes a person-
centered approach to pain care that includes the use of individualized,
multimodal treatment based on an effective pain treatment plan, and the
PMTF identified and described five broad treatment categories:
Medications; restorative therapies; interventional approaches;
behavioral approaches; and complementary and integrative health that
can be used through multidisciplinary care. In its report, the PMTF
recognized that there have been ``unintended consequences that have
resulted following the release of the CDC guideline in 2016, which are
due in part to misapplication or misinterpretation of the guideline,
including forced tapers and patient abandonment'' \44\ and noted the
``CDC has also published a pivotal article in the New England Journal
of Medicine on April 24, 2019, specifically reiterating that the CDC
guideline has been, in some instances, misinterpreted or misapplied.''
\45\ HHS recently issued the Guide for Clinicians on the Appropriate
Dosage Reduction or Discontinuation of Long-Term Opioid Analgesics, to
assure proper tapering and discontinuation of long-term opioids, in
part to avoid harms and encourage person-centered care that is tailored
to the specific needs and unique circumstances of each pain
patient,\46\ in addition to the CMS-issued guidance to states in 2016
and 2019 to both outline how to help curb the opioid crisis and provide
guidance to states that want to expand care for the treatment of
pain.\47\ \48\
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\41\ ``Managing Chronic Pain.'' Centers for Disease Control and
Prevention, Centers for Disease Control and Prevention, 18 Dec.
2019, www.cdc.gov/learnmorefeelbetter/programs/chronic-pain.htm.
\42\ Gaskin, Darrell J. ``The Economic Costs of Pain in the
United States.'' Relieving Pain in America: A Blueprint for
Transforming Prevention, Care, Education, and Research., U.S.
National Library of Medicine, 1 Jan. 1970, www.ncbi.nlm.nih.gov/books/NBK92521/.
\43\ ``Prevalence of Chronic Pain and High-Impact Chronic Pain
among Adults--United States, 2016.'' Centers for Disease Control and
Prevention, Centers for Disease Control and Prevention, 16 Sept.
2019, www.cdc.gov/mmwr/volumes/67/wr/mm6736a2.htm.
\44\ Additional information on non-opioid treatments for chronic
pain are available at https://www.cdc.gov/drugoverdose/pdf/nonopioid_treatments-a.pdf.
\45\ Dowell D, Haegerich TM, Chou R. No shortcuts to safer
opioid prescribing. N Engl J Med 2019; 380: 2285-2287.
\46\ HHS Guide for Clinicians on the Appropriate Dosage
Reduction or Discontinuation of Long-Term Opioid Analgesics. Oct.
2019, www.hhs.gov/opioids/sites/default/files/2019-10/Dosage_Reduction_Discontinuation.pdf.
\47\ ``Best Practices for Addressing Prescription Opioid
Overdoses, Misuse and Addiction.'' CMCS Informational Bulletin
available at www.medicaid.gov/federal-policy-guidance/downloads/CIB-02-02-16.pdf.
\48\ ``Medicaid Strategies for Non-Opioid Pharmacologic and Non-
Pharmacologic Chronic Pain Management.'' CMCS Informational Bulletin
at https://www.medicaid.gov/federal-policy-guidance/downloads/cib022219.pdf.
---------------------------------------------------------------------------
Accordingly, we proposed to add Sec. 456.703(h)(1)(i) to include
minimum standard requirements as described in the June 2020 proposed
rule, with the detailed design and implementation specifications left
to the state's discretion to meet state-specific needs. We noted that
the purpose of these proposed safety edits (specifically, safety edits
to implement state-defined limits on initial prescription fill days'
supply for patients not currently receiving opioid therapy, quantity,
duplicate fills, and early refills) and reviews is to further implement
section 1927(g) of the Act to prevent and reduce the inappropriate use
of opioids and potentially associated adverse medical events to
sufficiently address the nation's opioid overdose epidemic, consistent
with the provisions under section 1004 of the SUPPORT Act.
When implementing the SUPPORT Act, we proposed the following safety
edits in Sec. 456.703(h)(1)(i) in addition to a comprehensive opioid
claims review automated retrospective review process where trends
witnessed in safety edits can be reviewed and investigated. We noted
that these reviews would allow subsequent appropriate actions to be
taken as designed by the states.
a. Opioid Safety Edits Including Initial Fill Days' Supply for Opioid-
Na[iuml]ve Beneficiaries, Quantity, Therapeutically Duplicative Fills,
and Early Refill Limits
The SUPPORT Act requires states to have in place prospective safety
edits (as specified by the state) for subsequent fills for opioids and
a claims review automated process (as designed and implemented by the
state) that indicates when an individual enrolled under the state plan
(or under a waiver of the state plan) is prescribed a subsequent fill
of opioids in excess of any limitation that may be identified by the
state.\49\ As discussed in detail in this rule, consistent with the
SUPPORT Act and DUR requirements under section 1927(g)(2)(A) of the
Act, we proposed that state-identified limitations must include state-
specified restrictions on initial prescription fill days' supply for
patients not currently receiving opioid therapy; quantity limits for
initial and subsequent fills, therapeutically duplicative fills, and
early fills on opioids prescriptions; and a claims review automated
process that indicates prescription fills of opioids in excess of these
limitations to provide for the ongoing periodic reviews of opioids
claim data and other records to identify patterns of fraud, abuse,
excessive utilization, or inappropriate or medically unnecessary care,
or prescribing or billing practices that indicate abuse or excessive
utilization among physicians, pharmacists and individuals receiving
Medicaid benefits. To further implement section 1927(g)(1) of the Act,
and consistent with section 1004 of the SUPPORT Act, we proposed to
require these safety edits to reinforce efforts to combat the nation's
opioid crisis and ensure DUR opioid reviews are consistent with current
clinical practice. We noted that these proposed safety edits were
intended to protect Medicaid patients from serious consequences of
overutilization, including overdose, dangerous interactions, increased
side effects and additive toxicity (additive side effects). In
addition, we noted that overutilization of opioids may serve as an
indication of uncontrolled disease
[[Page 87071]]
and the need of increased monitoring and coordination of care.
---------------------------------------------------------------------------
\49\ Section 1902(oo)(1)(A)(i)(I) of the Act, as added by
section 1004 of the SUPPORT Act.
---------------------------------------------------------------------------
i. Limit on Days' Supply for Opioid Na[iuml]ve Beneficiaries
To further implement section 1927(g)(1) of the Act, and consistent
with section 1004 of the SUPPORT Act, we proposed to require states to
establish safety edit limitations on the days' supply for an initial
prescription opioid fill for beneficiaries who have not filled an
opioid prescription within a defined time period to be specified by the
state. In most cases, ``Days Supply'' is calculated by dividing the
dispensed quantity of medication by the amount of the medication taken
by the patient in one day per the prescriber's instructions. ``Days'
Supply'' means how many days the supply of dispensed medication will
last. This limit would not apply to patients currently receiving
opioids and is meant for beneficiaries who have not received opioids
within this specified time period (as defined and implemented by the
state). The patients who have not received opioids within a specified
timeframe are referred to as opioid na[iuml]ve and would be subjected
to the days' supply limit on the opioid prescription. While the SUPPORT
Act mentions limits on subsequent fills of opioids, consistent with
section 1927(g) of the Act, we proposed this edit on initial fills of
opioids to help avoid excessive utilization by opioid na[iuml]ve
beneficiaries, with its attendant risk of adverse effects.
The CDC guideline recommends that opioids prescribed for acute pain
in outpatient primary care settings to adults generally should be
limited to 3 days or fewer, and more than a 7 days' supply is rarely
necessary.\50\ Nonpharmacologic therapy and nonopioid pharmacologic
therapy are preferred and should be considered by practitioners and
patients prior to treatment with opioids.\51\ Clinical evidence cited
by the CDC review found that opioid use for acute pain is associated
with long-term opioid use, and that a greater amount of early opioid
exposure is associated with greater risk for long-term use. An expected
physiologic response in patients exposed to opioids for more than a few
days is physical dependence and the chances of long-term opioid use
begin to increase after just 3 days of use and rise rapidly
thereafter.\52\ The CDC guideline mentions that more than a few days of
exposure to opioids significantly increases hazards, that each day of
unnecessary opioid use increases likelihood of physical dependence
without adding benefit, and that prescriptions with fewer days' supply
would minimize the number of pills available for unintentional or
intentional diversion.\53\
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\50\ ``CDC Guideline for Prescribing Opioids for Chronic Pain--
United States, 2016.'' Centers for Disease Control and Prevention,
Centers for Disease Control and Prevention, 29 Aug. 2017, https://www.cdc.gov/mmwr/volumes/65/rr/pdfs/rr6501e1er.pdf.
\51\ Ibid.
\52\ Shah A., Hayes C.J., Martin B.C. Characteristics of Initial
Prescription Episodes and Likelihood of Long-Term Opioid Use--United
States, 2006-2015. Morbidity and Mortality Weekly Report 2017;
66:265-269 [Accessed February 11, 2019 at http://dx.doi.org/10.15585/mmwr.mm6610a1].
\53\ Ibid.
---------------------------------------------------------------------------
As discussed in the June 2020 proposed rule, long-term opioid use
often begins with treatment of acute pain. When opioids are used for
acute pain, clinicians should prescribe the lowest effective dose of
immediate-release opioids and should prescribe no greater quantity than
needed for the expected duration of pain severe enough to require
opioids.\54\ Limiting days for which opioids are prescribed for opioid
na[iuml]ve patients could minimize the need to taper opioids to prevent
distressing or unpleasant withdrawal symptoms and help prevent opioid
dependence, the risk of which is associated with the amount of opioid
initially prescribed.\55\
---------------------------------------------------------------------------
\54\ ``CDC Guideline for Prescribing Opioids for Chronic Pain.''
Centers for Disease Control and Prevention, Centers for Disease
Control and Prevention, https://www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
\55\ Shah A, Hayes CJ, Martin BC. Characteristics of initial
prescription episodes and likelihood of long-term opioid use--United
States, 2006-2015. MMWR Morb Mortal Wkly Rep. 2017; 66(10):265-269.
doi: 10.15585/mmwr.mm6610a1.
---------------------------------------------------------------------------
On state DUR surveys, many states indicated they already have
initial fill limitations in place describing the limitations of 100
dosage units or a 34-day supply. Initial opioid analgesic prescriptions
of less than or equal to 7 days' duration appear sufficient for many
pain patients seen in primary care settings.\56\ We noted that, in its
2019 clarification of the guideline, the CDC noted that it was
``intended for primary care clinicians treating chronic pain for
patients 18 and older, and examples of misapplication include applying
the guideline to patients in active cancer treatment, patients
experiencing acute sickle cell crises, or patients experiencing post-
surgical pain.'' States can consider the current CDC guideline and
other clinical guidelines when implementing initial fill limitations,
being mindful of the context in which such guidelines are written (for
example, acute pain, chronic pain, treatment setting, population,
etc.).
---------------------------------------------------------------------------
\56\ ``Days' Supply of Initial Opioid Analgesic Prescriptions
and Additional Fills for Acute Pain Conditions Treated in the
Primary Care Setting--United States, 2014 [verbar] MMWR.'' Centers
for Disease Control and Prevention, Centers for Disease Control and
Prevention, https://www.cdc.gov/mmwr/volumes/68/wr/mm6806a3.htm.
---------------------------------------------------------------------------
The CDC guideline states primary care clinicians should assess
benefits and harms of opioids with patients early on when starting
opioid therapy for chronic pain and regularly when escalating doses and
continue to evaluate therapy with patients on an ongoing basis. If
benefits do not outweigh harms of continued opioid therapy, clinicians
should optimize other therapies and work with patients to taper opioids
to lower dosages or to taper and discontinue opioid therapy. Consistent
with the foregoing clinical recommendations, we proposed to require
states to implement safety edits aligned with clinical guidelines
alerting the dispenser at the POS when an opioid prescription is
dispensed to an opioid na[iuml]ve patient that exceeds a state-
specified days' supply limitation. In consideration of clinical
recommendations to limit opioid use to the shortest possible duration
and to assess the clinical benefits and harms of opioid treatment on an
ongoing basis, we believe this safety edit is necessary to assure that
opioid prescriptions are appropriate, medically necessary, and not
likely to result in adverse events, and to accomplish other purposes of
the DUR program under section 1927(g) of the Act and of the SUPPORT
Act. Accordingly, we proposed in Sec. 456.703(h)(1)(i)(A) to require
states to implement a days' supply limit when an initial opioid
prescription is dispensed to a patient not currently receiving ongoing
therapy with opioids.
ii. Opioid Quantity Limits
To further implement section 1927(g)(1) of the Act and section 1004
of the SUPPORT Act, we proposed to require states establish safety
edits to implement quantity limits on the number of opioid units to be
used per day, as identified by the state. We proposed that states take
clinical indications and dosing schedules into account when
establishing quantity limits to restrict the quantity of opioids per
day to ensure dose optimization and to minimize potential for waste and
diversion. While the SUPPORT Act mentions quantity limits on subsequent
fills of opioids, under section 1927(g) of the Act, we proposed this
edit to apply for initial and subsequent fills of opioids to avoid
excessive utilization, with its attendant risk of adverse effects.
We proposed that the quantity limits would be required to take into
account both dosage and frequency, to allow for
[[Page 87072]]
dose optimization of pills, capsules, tablets, etc. (``pills'') and
limit the supply of opioids being dispensed. Dose optimization is a
method to consolidate the quantity of medication dispensed to the
smallest amount required to achieve the desired daily dose and regimen.
Dosage optimization seeks to prospectively identify patients who have
been prescribed multiple pills per day of a lower strength medication
meant to be taken together to achieve higher dose, when a higher
strength of medication already is available, and provides clinicians a
tool to switch these patients to a regimen that is an equivalent daily
dose given as a single pill (or a smaller quantity of pills).
Performing this intervention with medications that are available in
multiple strengths, with comparable pricing among these strengths, can
yield significant drug cost savings. In addition, dose-optimization
simplifies dosing schedules, decreases pill burdens, improves treatment
compliance and limits the number of excess units available for
diversion.\57\ We noted that the proposed safety edit would allow most
patients to achieve pain relief while minimizing patient pill burdens
and unnecessary unused opioids.\58\ When implementing this edit, we
noted that we would expect states to also consider current opioid
guidelines, clinical indications, and dosing schedules of opioids to
ensure prescriptions are appropriate, medically necessary, and not
likely to result in adverse events.
---------------------------------------------------------------------------
\57\ Calabrese D. Baldinger S., Dose Optimization Intervention
Yields Significant Drug Cost Savings. https://www.jmcp.org/doi/pdf/10.18553/jmcp.2002.8.2.146.
\58\ Daoust R. Limiting Opioid Prescribing. JAMA. 2019;
322(2):170-171. doi:10.1001/jama.2019.5844.
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Decreasing the initial amount prescribed will lower the risk that
patients develop an addiction to these drugs and transition to chronic
use or misuse.\59\ A survey of adults in Utah estimated that in the
previous 12 months, 1 in 5 state residents were prescribed an opioid
medication and 72 percent had leftover pills and nearly three-quarters
of those with leftover pills kept them.\60\ Leftover medications are an
important source of opioids that are misused or diverted.\61\ We
believe that decreasing the initial amount prescribed will lower the
risk that patients develop OUD.\62\
---------------------------------------------------------------------------
\59\http://www.cdc.gov/drugoverdose/pdf/hhs_prescription_drug-abuse_report_09.2013.pdf.
\60\ Ibid.
\61\ ``FDA Patient Education Campaign Targets Opioid Diversion,
Disposal.'' Available at https://patientengagementhit.com/news/fda-patient-education-campaign-targets-opioid-diversion-disposal.
\62\ Opioid Use during the Six Months After an Emergency
Department Visit for Acute Pain: A Prospective Cohort Study.
Friedman, Benjamin W. et al. Annals of Emergency Medicine, Volume 0,
Issue 0.
---------------------------------------------------------------------------
Prescribing opioids using lowest dosage at fewest possible units
dispensed based on product labeling, and matching duration to scheduled
reassessment, helps reduce the quantity of unused, leftover opioid
pills. Additionally, clinicians should continue to evaluate benefits
and harms of continued ongoing therapy with opioid patients every 3
months or more frequently.\63\ As discussed in the June 2020 proposed
rule, if benefits do not outweigh harms of continued opioid therapy,
clinicians should optimize other therapies and work with patients to
taper opioids to lower dosages or to taper and discontinue opioids.\64\
In circumstances when beneficiaries are already opioid dependent,
providers should consider initiating a treatment program, such as
medication-assisted treatment (MAT) and/or behavioral counseling. State
Medicaid programs already cover MAT, and as of October 2020, states are
required cover MAT drugs and services as a mandatory benefit. We
encourage states to consider the situation of opioid-dependent
beneficiaries in designing and implementing quantity limits in their
comprehensive DUR programs, to minimize any possibility of harm.
---------------------------------------------------------------------------
\63\ Dowell, Deborah, et al. ``CDC Guideline for Prescribing
Opioids for Chronic Pain--United States, 2016.'' JAMA, U.S. National
Library of Medicine, 19 Apr. 2016, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6390846/.
\64\ Frieden TR, Houry D. Reducing the Risks of Relief--The CDC
Opioid-Prescribing Guideline. N Engl J Med. 2016; 374(16):1501-1504.
doi: 10.1056/NEJMp1515917.
---------------------------------------------------------------------------
In consideration of clinical recommendations to limit opioid units
to the fewest number possible and to assess the clinical benefits and
harms of opioid treatment on an ongoing basis, we believe this safety
edit is necessary to assure that opioid prescriptions are appropriate,
medically necessary, and not likely to result in adverse events, and to
accomplish other purposes of the DUR program under section 1927(g) of
the Act and of the SUPPORT Act. Accordingly, we proposed at Sec.
456.703(h)(1)(i)(B) that states be required to implement quantity
limits on opioids prescriptions (both initial and subsequent fills) to
help identify abuse, misuse, excessive utilization, or inappropriate or
medically unnecessary care.
iii. Therapeutic Duplication Limitations
To further implement section 1927(g)(1) of the Act and section 1004
of the SUPPORT Act, we proposed to require states to establish safety
edits to alert the dispenser to potential therapeutic duplication
before a prescription is filled for an opioid product that is in the
same therapeutic class as an opioid product currently being prescribed
for the beneficiary. Prescriptions for multiple opioids and multiple
strengths of opioids increase the supply of opioids available for
diversion and abuse, as well as the opportunity for self-medication and
dose escalation.\65\ Some patients, especially those living with
multiple chronic conditions, may consult multiple physicians, which can
put them at risk of receiving multiple medications in the same
therapeutic class for the same diagnosis.\66\ In some instances, the
side-effects produced by overmedication, due to the duplication of
prescriptions within the same therapeutic class, are more serious than
the original condition.\67\ We proposed to require this opioid safety
edit to help avoid inappropriate or unnecessary therapeutic duplication
when simultaneous use of multiple opioids is detected.
---------------------------------------------------------------------------
\65\ Manchikanti, Laxmaiah, et al. ``Opioid Epidemic in the
United States.'' Pain Physician, U.S. National Library of Medicine,
July 2012, www.ncbi.nlm.nih.gov/pubmed/22786464.
\66\ Ibid.
\67\ ``Therapeutic Duplication.'' Journal of the American
Medical Association, vol. 160, no. 9, 1956, p. 780., doi:10.1001/
jama.1956.02960440052016.
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In consideration of clinical recommendations to use caution in
combining opioids and to limit opioid use to only when necessary while
assessing clinical benefits and harms of opioid treatment on an ongoing
basis, we believe this safety edit is necessary to assure that opioid
prescriptions are appropriate, medically necessary, and not likely to
result in adverse medical results, and to accomplish other purposes of
the DUR program under section 1927(g) of the Act and of the SUPPORT
Act. Accordingly, we proposed at Sec. 456.703(h)(1)(i)(C) that states
must implement safety edits for therapeutically duplicative fills for
initial and subsequent prescription fills on opioid prescriptions and
identify suspected abuse, misuse, excessive utilization, or
inappropriate or medically unnecessary care.
iv. Early Fill Limitations
To further implement section 1927(g)(1) of the Act and section 1004
of the SUPPORT Act, we proposed to
[[Page 87073]]
require that states establish safety edits to alert the dispenser
before a prescription is filled early for an opioid product, based on
the days' supply provided at the most recent fill or as specified by
the state. As discussed in the June 2020 proposed rule, these early
fill edits on opioids are intended to protect beneficiaries from
adverse events associated with using an opioid medication beyond the
prescribed dose schedule and to help minimize the opioid supply
available for diversion.
In consideration of clinical recommendations to limit opioid use to
only when necessary and as prescribed, we believe this safety edit is
necessary to assure that opioid prescriptions are appropriate,
medically necessary, and not likely to result in adverse medical
results, and to accomplish other purposes of the DUR program under
section 1927(g) of the Act and of the SUPPORT Act. Accordingly, we
proposed at Sec. 456.703(h)(1)(i)(D) that states must implement early
fill safety alerts on opioid prescriptions to identify abuse, misuse,
excessive utilization, or inappropriate or medically unnecessary care.
b. Maximum Daily Morphine Milligram Equivalent (MME) Limits
Section 1004 of the SUPPORT Act requires state DUR programs to
include safety edit limits (as specified by the state) on the maximum
daily morphine equivalent that can be prescribed to an individual
enrolled under the state plan (or under a waiver of the state plan) for
treatment of chronic pain (as designed and implemented by the state)
that indicates when an individual enrolled under the plan (or waiver)
is prescribed the morphine equivalent for such treatment in excess of
any threshold identified by the state.\68\ Accordingly, to further
implement section 1927(g)(1) of the Act and section 1004 of the SUPPORT
Act, we proposed that states must include in their DUR programs safety
edit limitations identified by the state on the maximum daily MME for
treatment of chronic pain and a claims review automated process,
discussed in this rule in connection with paragraph (h)(1)(iii), that
indicates when an individual is prescribed an MME in excess of these
limitations.
---------------------------------------------------------------------------
\68\ Section 1902(oo)(1)(A)(i)(II) of the Act, as added by
section 1004 of the SUPPORT Act.
---------------------------------------------------------------------------
Section 1004 of the SUPPORT Act specifically addresses MME
limitations in the context of chronic pain. According to the CDC, acute
pain (as distinct from chronic pain) usually occurs suddenly and
usually has a known cause, like an injury, surgery, or infection. For
example, acute pain can be caused from a wisdom tooth extraction, a
surgery, or a broken bone after an automobile accident. Acute pain
normally resolves as your body heals. Chronic pain, on the other hand,
can last weeks, months or years--past the normal time of healing.\69\
Regarding chronic pain, CDC states clinicians should use caution when
prescribing opioids at any dosage, and should carefully reassess
evidence of individual benefits and risks when considering increasing
dosage to >=50 morphine milligram equivalents (MME)/day, and should
avoid increasing dosage to >=90 MME/day or carefully justify a decision
to titrate dosage to >=90 MME/day.\70\ With the proposal to require
maximum daily MME limits, we did not mean to suggest rapid
discontinuation of opioids already prescribed at higher dosages.
---------------------------------------------------------------------------
\69\ ``Opioids for Acute Pain.'' Centers for Disease Control and
Prevention, available at https://www.cdc.gov/drugoverdose/pdf/patients/Opioids-for-Acute-Pain-a.pdf.
\70\ ``CDC Guidelines for Prescribing Opioids for Chronic pain.
'' Available at https://www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
---------------------------------------------------------------------------
The MME/day metric is often used as a gauge of the overdose
potential of the amount of opioid that is being given at a particular
time.\71\ Calculating the total daily dosage of opioids helps identify
patients who may benefit from closer monitoring, reduction or tapering
of opioids, prescribing of naloxone, or other measures to reduce risk
of overdose. The opioid MME levels discussed in the June 2020 proposed
rule typically would not be clinically appropriate for acute, short
term pain; moreover, if the prescription were for acute pain, given the
risks associated with high acute doses (in particular, respiratory
risks), we believe that this limitation also would be appropriate to
ensure appropriateness, medical necessity, and avoidance of adverse
events. Accordingly, we proposed to require states to establish MME
threshold amounts for implementation regardless of whether the
prescription is for treatment of chronic or acute pain. We explained
this proposal in preamble to the proposed rule (85 FR 37309) but made a
technical error in the proposed regulation text, which was erroneously
limited to prescriptions ``for treatment of chronic pain.''
---------------------------------------------------------------------------
\71\ Ibid.
---------------------------------------------------------------------------
We also noted that the proposed prospective safety edit must
include a MME threshold amount to meet statutory requirements, to
assist in identifying patients at potentially high clinical risk who
may benefit from closer monitoring and care coordination. Calculation
of MMEs is used to assess the total daily dose of opioids, taking into
account the comparative potency of different opioids and frequency of
use. The calculation to determine MMEs includes drug strength,
quantity, days' supply and a defined conversion factor unique to each
drug.\72\ Patients prescribed higher opioid dosages are at higher risk
of overdose death.\73\ Calculating the total MME daily dose of opioids
can help identify patients who may benefit from closer monitoring,
reduction or tapering of opioids, prescribing of naloxone, or other
measures to reduce risk of overdose.\74\ HHS's Guide for Clinicians on
the Appropriate Dosage Reduction or Discontinuation of Long-Term Opioid
Analgesics \75\ is also a valuable resource for considering how best to
taper and/or discontinue usage in a thoughtful manner, consistent with
best clinical practices. We noted that HHS does not recommend opioids
be tapered rapidly or discontinued suddenly due to the significant
risks of opioid withdrawal, unless there is a life-threatening issue
confronting the individual patient. FDA issued a safety announcement on
tapering in April 2019 noting concerns about safely decreasing or
discontinuing doses of opioids in patients who are physically dependent
after hearing reports about serious harm.\76\
---------------------------------------------------------------------------
\72\ Calculating Total Daily Dose of Opioids For Safer Dosage.
Centers for Disease Control and Prevention, available at https://www.cdc.gov/drugoverdose/pdf/calculating_total_daily_dose-a.pdf.
\73\ Guideline for Prescribing Opioids for Chronic Pain.
www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
\74\ Ibid.
\75\ https://www.hhs.gov/opioids/sites/default/files/2019-10/Dosage_Reduction_Discontinuation.pdf.
\76\ ``FDA identifies harm reported from sudden discontinuation
of opioid pain medicines and requires label changes to guide
prescribers on gradual, individualized tapering.'' Food and Drug
Administration. Available at https://www.fda.gov/drugs/drug-safety-and-availability/fda-identifies-harm-reported-sudden-discontinuation-opioid-pain-medicines-and-requires-label-changes.
---------------------------------------------------------------------------
When determining MME threshold amounts, states are reminded that
clinical resources, including, for example, the CDC guideline,\77\
recommend caution when prescribing opioids for chronic pain in certain
circumstances, and recommend that primary care practitioners reassess
evidence of individual benefits and risks when increasing doses and
[[Page 87074]]
subsequently, justifying decisions by thoroughly documenting the
clinical basis for prescribing in the patient's medical record.\78\ As
noted, it is important to be cognizant that the CDC guideline states
the dosage thresholds referenced therein pertain solely to opioids used
to treat chronic pain in primary care settings and that these
thresholds, as recommended by the CDC, do not represent hard limits for
opioid prescriptions.\79\
---------------------------------------------------------------------------
\77\ Dowell D, Haegerich TM, Chou R. CDC Guideline for
Prescribing Opioids for Chronic Pain--United States, 2016. MMWR
Recomm Rep 2016; 65(No. RR-1):1-49. DOI: http://dx.doi.org/10.15585/mmwr.rr6501el. https://www.cdc.gov/mmwr/volumes/65/rr/rr6501e1.htm?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.gov%2Fmmwr%2Fvolumes
%2F65%2Frr%2Frr6501e1er.htm.
\78\ Dowell, Deborah, et al. ``CDC Guideline for Prescribing
Opioids for Chronic Pain--United States, 2016.'' JAMA, U.S. National
Library of Medicine, 19 Apr. 2016, https://www.ncbi.nlm.nih.gov/pubmed/26977696.
\79\ Staff, News. ``CDC Clarifies Opioid Guideline Dosage
Thresholds.'' AAFP Home, 12 Jan. 2018, www.aafp.org/news/health-of-the-public/20180112cdcopioidclarify.html.
---------------------------------------------------------------------------
In consideration of clinical recommendations and to assess the
clinical benefits and harms of opioid treatment on an ongoing basis, we
believe the proposed safety edit is necessary to assure at risk
individuals are receiving appropriate treatment that is not likely to
result in adverse medical results, and to accomplish other purposes of
the DUR program under section 1927(g) of the Act and of the SUPPORT
Act. Accordingly, we proposed at Sec. 456.703(h)(1)(ii) that states be
required to implement safety edits that indicate when an individual
enrolled under the plan (or waiver) is prescribed the morphine
equivalent for such treatment in excess of the MME dose limitation
identified by the state.
c. Automated Claims Reviews for Opioids
To further implement section 1927(g) of the Act and section 1004 of
the SUPPORT Act, we proposed that states must have in place a claims
automated review process (as designed and implemented by the state)
that indicates when an individual enrolled under the state plan (or
under a waiver of the state plan) is prescribed opioids in excess of
proposed limitations identified by the state. In these ongoing,
comprehensive reviews of opioid claim data, states should continuously
monitor opioid prescriptions, including overrides of safety edits by
the prescriber or dispenser on initial fill days' supply for opioid
na[iuml]ve patients, quantity limits, therapeutically duplicative
fills, early refills and maximum daily MME limitations on opioids
prescriptions.
These opioid claim reviews are necessary to allow states to
continually monitor opioid prescriptions beneficiaries are receiving
and determine and refine future potential prospective DUR safety edits,
based on the findings of the claims reviews. Information obtained
through retrospective DUR claim reviews can be used to shape effective
safety edits that can be implemented through prospective DUR, better
enabling prescribers and dispensers to investigate prescription
concerns prior to dispensing the medication to the patient. Through
ongoing monitoring and observation of trends over time, these reviews
will allow for regular updates to safety edits in an evolving pain
treatment landscape.
Accordingly, we proposed at Sec. 456.703(h)(1)(iii) that states
must conduct retrospective claims review automated processes that
indicate prescription fills in excess of the prospective safety edit
limitations specified by the state under paragraph (h)(1)(i) or (ii) to
provide for the ongoing review of opioid claims data to identify
patterns of fraud, misuse, abuse, excessive utilization, inappropriate
or medically unnecessary care, or prescribing or billing practices that
indicate abuse or provision of inappropriate or medically unnecessary
care among prescribers, pharmacists and individuals receiving Medicaid
benefits. We explained that, in addition to opioid claims data, we also
intended for states to consider incorporating other available records
to provide for the ongoing periodic reviews of opioids claim data and
other records (including but not limited to prescription histories,
diagnoses, medical records, and prescription drug monitoring program
(PDMP) files, when available), in their retrospective claims review
automated processes order to identify patterns of fraud, misuse, abuse,
excessive utilization, or inappropriate or medically unnecessary care,
or prescribing or billing practices that indicate abuse or excessive
utilization among physicians, pharmacists and individuals receiving
Medicaid benefits.
d. Concurrent Utilization Reviews
Section 1902 of the Act, as amended by the SUPPORT Act, requires
states to have an automated process for claims review (as designed and
implemented by the state) that monitors when an individual enrolled
under the state plan (or under a waiver of the state plan) is
concurrently prescribed opioids and benzodiazepines or opioids and
antipsychotics.\80\ This requirement is consistent with the requirement
in section 1927(g)(1)(A) of the Act that state DUR programs must assure
that prescriptions are appropriate, medically necessary, and not likely
to result in adverse medical results.
---------------------------------------------------------------------------
\80\ Section 1902(oo)(1)(A)(i)(III) of the Act, as added by
section 1004 of the SUPPORT Act.
---------------------------------------------------------------------------
Clinically, through the use of retrospective automated claim
reviews, concurrent use of opioids and benzodiazepines and opioids and
antipsychotics, as well as potential complications resulting from other
medications concurrently being prescribed with opioids, can be reduced.
In the proposed rule, we reminded states that the requirement for a
retrospective automated claims review added by section 1004 of the
SUPPORT Act does not preclude the state from also establishing a
prospective safety edit system to provide additional information to
patients and providers at the POS about concurrent utilization
alerts.\81\ In addition, the state could use the authorities under
section 1927 of the Act to subject these patients to appropriate
utilization management techniques. We reminded states that section
1927(g)(1) of the Act also currently supports including other
potentially harmful opioid interactions as additional prospective or
retrospective reviews in state DUR programs, such as opioids and
central nervous system (CNS) depressants, including alcohol or
sedatives. We noted that we fully support states including such
additional opioid interactions or contraindications in prospective or
retrospective reviews as part of a comprehensive DUR program.
---------------------------------------------------------------------------
\81\ See section 1902(oo)(1)(A)(iii) of the Act, as added by
section 1004 of the SUPPORT Act.
---------------------------------------------------------------------------
In consideration of clinical recommendations to limit opioids
interactions with certain other drugs, including benzodiazepines and
antipsychotics, and to assess the clinical benefits and harms of opioid
treatment on an ongoing basis, we believe the retrospective reviews we
proposed to require are necessary to help ensure at-risk individuals
are receiving appropriate treatment that is not likely to result in
adverse medical results, and otherwise to accomplish purposes of the
DUR program under section 1927(g) of the Act and of the SUPPORT Act.
Accordingly, we proposed at Sec. 456.703(h)(1)(iv)(A) and (B) that
states be required to implement a claims review automated process that
monitors when an individual is concurrently prescribed opioids and
benzodiazepines; or opioids and antipsychotics.
i. Opioid and Benzodiazepines Concurrent Fill Reviews
In 2016, FDA added a boxed warning to prescription opioid
analgesics, opioid-containing cough products, and
[[Page 87075]]
benzodiazepines with information about the serious risks associated
with using these medications concurrently.\82\ The CDC guideline
recommends that clinicians avoid prescribing benzodiazepines
concurrently with opioids whenever possible. Benzodiazepines may be
abused for recreational purposes by some individuals, with some opioid
overdoses also involving opioids and benzodiazepines or other
substances, such as alcohol.\83\
---------------------------------------------------------------------------
\82\ Office of the Commissioner. ``Drug Safety Communications--
FDA warns about serious risks and death when combining opioid pain
or cough medicines with benzodiazepines; requires its strongest
warning.'' U.S. Food and Drug Administration Home Page, Office of
the Commissioner, https://www.fda.gov/media/99761/download.
\83\ Jones, Jermaine D, et al. ``Polydrug Abuse: a Review of
Opioid and Benzodiazepine Combination Use.'' Drug and Alcohol
Dependence, U.S. National Library of Medicine, 1 Sept. 2012,
www.ncbi.nlm.nih.gov/pmc/articles/PMC3454351/.
---------------------------------------------------------------------------
Studies show that people concurrently using both drugs are at
higher risk of visiting the emergency department or being admitted to a
hospital for a drug-related emergency.\84\ Due to the heightened risk
of adverse events associated with the concurrent use of opioids and
benzodiazepines, physicians should avoid the initial combination of
opioids and benzodiazepines by offering alternative approaches.\85\
This review would alert providers when these drugs have been prescribed
concurrently to assist in avoiding and mitigating associated risks.
---------------------------------------------------------------------------
\84\ Forum, Addiction Policy. ``Sedative Use Disorder.''
Addiction Policy Forum, https://www.addictionpolicy.org/sedative-use-disorder.
\85\ ``Reduce Risk of Opioid Overdose Deaths by Avoiding and
Reducing Co-Prescribing Benzodiazepines.'' MLN Matters Number:
SE19011. Available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE19011.pdf.
---------------------------------------------------------------------------
ii. Opioid and Antipsychotic Concurrent Fill Reviews
This alert is supported by FDA's boxed warning of increased risk of
respiratory and CNS depression with concurrent use of opioid and CNS
depressants such as antipsychotics or sedatives, including extreme
sleepiness, slowed or difficult breathing, unresponsiveness or the
possibility that death can occur.\86\ Patients concurrently prescribed
opioid and antipsychotic drugs can benefit from increased coordination
of care. Additionally, improving treatment of comorbid mental disorders
is an important consideration when trying to reduce the overall
negative impacts of pain. As the PMTF report noted, ``the occurrence of
pain and behavioral health comorbidities, including depression, post-
traumatic stress disorder, and SUDs, is well documented, and it is
established that psychosocial distress can contribute to pain
intensity, pain-related disability, and poor response to chronic pain
treatment.'' \87\ Evidence indicates that optimizing mental health and
pain treatment can improve outcomes in both areas for patients seen in
primary and specialty care settings. Untreated psychiatric conditions
may increase the risk of both unintentional and intentional medication
mismanagement, OUD, and overdose.\88\ Given the intersection between
psychiatric/psychological symptoms and chronic pain, it is important
that the behavioral health needs of patients with pain are
appropriately and carefully evaluated and treated with the concurrent
physical pain problem.\89\ As such, beneficiaries who are concurrently
prescribed both opioids and antipsychotics should be considered from a
health system or policy perspective when addressing their
treatment.\90\ A patient's unique presentation and circumstances should
be considered when prescribing opioids and antipsychotics. This review
would encourage coordination of care for patients taking antipsychotic
and opioid medications concurrently.
---------------------------------------------------------------------------
\86\ Office of the Commissioner. ``Drug Safety Communications--
FDA warns about serious risks and death when combining opioid pain
or cough medicines with benzodiazepines; requires its strongest
warning.'' U.S. Food and Drug Administration Home Page, Office of
the Commissioner, https://www.fda.gov/media/99761/download.
\87\ Pain Management Best Practices Inter-Agency Task Force.
``Pain Management Best Practices.'' Available at https://www.hhs.gov/sites/default/files/pmtf-final-report-2019-05-23.pdf.
\88\ Ibid.
\89\ Ibid.
\90\ Davis, Matthew A., et al. ``Prescription Opioid Use among
Adults with Mental Health Disorders in the United States.'' The
Journal of the American Board of Family Medicine, vol. 30, no. 4,
2017, pp. 407-417., doi:10.3122/jabfm.2017.04.170112.
---------------------------------------------------------------------------
e. Other Considerations
Consistent with section 1902(oo)(1)(A)(iii) of the Act, as added by
section 1004 of the SUPPORT Act, the provisions proposed to be
implemented in Sec. 456.703(h)(1) would not prohibit states from
designing and implementing an automated claims review process that
provides for other processes for the prospective or retrospective
review of claims. Furthermore, none of these proposed provisions would
prohibit the exercise of clinical judgment by a provider regarding the
best or most appropriate care and treatment for any patient.
We encouraged states to develop prospective and retrospective drug
reviews that are consistent with medical practice patterns in the state
to help meet the health care needs of the Medicaid patient population.
In doing so, we encouraged states to utilize, for example, the 2016 CDC
guideline \91\ for primary care practitioners on prescribing opioids in
outpatient settings for chronic pain.
---------------------------------------------------------------------------
\91\ ``CDC Guideline for Prescribing Opioids for Chronic Pain--
United States, 2016.'' Centers for Disease Control and Prevention,
Centers for Disease Control and Prevention, 29 Aug. 2017, https://www.cdc.gov/mmwr/volumes/65/rr/pdfs/rr6501e1er.pdf.
---------------------------------------------------------------------------
To avoid abrupt opioid withdrawal, we noted that prior
authorization may be necessary for patients who will need clinical
intervention to taper off high doses of opioids to minimize potential
symptoms of withdrawal and manage their treatment regimen, while
encouraging pain treatment using non-pharmacologic therapies and non-
opioid medications, where available and appropriate.
When implementing these requirements, we encouraged states to offer
education and training and to provide consistent messaging across all
healthcare providers. We noted that education and training of all
providers on new opioid-related provisions and on the treatment of
acute and chronic pain and behavioral health issues related to pain,
would help minimize workflow disruption and ensure beneficiaries have
access to their medications in a timely manner.
The following is a summary of the comments we received on these
proposed minimum standards for DUR programs and under the SUPPORT Act
and section 1927 of the Act, and our responses.
Comment: Some commenters expressed support for the availability of
the CDC guideline for Prescribing Opioids for Chronic Pain, and
approved of our references to the guideline as being a possible
resource for states to use in developing their state DUR programs.
Other commenters stated a belief that the guideline has been misapplied
and is inherently flawed and may result in unintended consequences.
Response: The CDC guideline is intended to help providers determine
when and how to prescribe opioids for chronic pain, and also when and
how to use nonopioid and nonpharmacologic options that can be effective
with less risk. The guideline was developed to help ensure that primary
care clinicians work with their patients to consider all safe and
effective treatment options for chronic pain management. Some providers
have misinterpreted the application of this document, and CDC
[[Page 87076]]
released a clarification in April 2019 in response.\92\ As discussed in
the proposed rule and this final rule, the CDC Guideline for
Prescribing Opioids for Chronic Pain is one of many clinical guidelines
states can consult when implementing DUR safety edits and automated
claims review. Section 1004 of the SUPPORT Act amends section 1902 of
the Act to include a new paragraph (a)(85), requiring the state plan to
provide that the state is in compliance with the new DUR requirements.
This statutory provision, as well as the provisions of this final rule,
give authority to the states to develop, specify and implement
important parameters for these edits and reviews, as determined by the
state. In our experience from reviewing the annual FFS and MCO DUR
reports, available on www.Medicaid.gov, states typically consult
multiple authoritative clinical resources and guidelines when designing
and implementing their DUR programs.
---------------------------------------------------------------------------
\92\ https://www.cdc.gov/media/releases/2019/s0424-advises-misapplication-guideline-prescribing-opioids.html.
---------------------------------------------------------------------------
Comment: Several commenters suggested that CMS establish uniform
opioid-related limits or reporting requirements across Medicare Part D
and all Medicaid programs instead of allowing Medicaid programs to
create unique policies for the relevant state, and require state
Medicaid safety edits to be no more restrictive than those implemented
in Medicare.
Response: We appreciate the comments in reference to establishing
consistency in DUR activities between Medicaid and Medicare; however,
requirements for DUR in Medicare are not within the scope of this
rulemaking. Additionally, it is important to remember that while
Medicare is a federally-operated program, Medicaid is primarily a
state-run program. The amendments made by section 1004 of the SUPPORT
Act make clear that Congress intended for states to have considerable
discretion in determining how to implement opioid-related DUR measures
in their state Medicaid programs.
Comment: Several commenters recommended the promotion of non-
pharmacological pain management strategies for OUD and suggested CMS
promote integrated care models to include counseling, behavioral
therapies and physical rehabilitation. Other commenters suggested
additional non-pharmacological pain management strategies to include
osteopathic principles, including physical therapy, acupuncture,
chiropractic care, over-the-counter medications and occupational
therapy to improve self-management of pain conditions with the goal of
reducing pain, improving function, increasing self-efficacy, and
improving quality of life.
Response: We appreciate the suggestions regarding alternative non-
pharmacologic therapy and agree that there can be an appropriate
clinical role for therapies such as those suggested by the commenters.
Several related CMS resources include, but are not limited to, the CMS
Roadmap Strategy To Fight The Opioid Crisis, June 2020; \93\ the CMS
Opioid Misuse Strategy, January 2017; \94\ the Medicaid Strategies for
Non-Opioid Pharmacologic and Non-Pharmacologic Chronic Pain Management,
February 2019; \95\ and Best Practices for Addressing Prescription
Opioid Overdoses, Misuse and Addiction, January 2016.\96\ These
resources provide additional information on Medicaid authorities that
states may use for coverage of non-opioid pharmacologic and non-
pharmacologic pain management therapies, highlight some preliminary
strategies used by several states, and include other useful resources
to help states.
---------------------------------------------------------------------------
\93\ https://www.cms.gov/About-CMS/Agency-Information/Emergency/Downloads/Opioid-epidemic-roadmap.pdf.
\94\ https://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/Downloads/CMS-Opioid-Misuse-Strategy-2016.pdf.
\95\ https://www.medicaid.gov/sites/default/files/federal-policy-guidance/downloads/cib022219.pdf.
\96\ https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/cib-02-02-16.pdf.
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Comment: Several commenters expressed concern that the proposed
rule would give too much autonomy to the states for determining days'
supply for opioid na[iuml]ve beneficiaries, and quantity, therapeutic
duplication and early refill limits. Several commenters also opined
that leaving the determination of quantity limits up to the states'
discretion will evolve into a highly heterogeneous set of state
requirements. Other commenters encouraged alignment and consistency in
state DUR programs nationwide, and suggested that CMS should direct
state Medicaid agencies to consult existing resources to come into
compliance with the proposed requirements, if finalized.
Response: We disagree with the commenters that the proposed
policies give too much discretion to the states. In accordance with and
the amendments made by section 1004 of the SUPPORT Act, states are
required to implement safety edits (as specified by the state) for
subsequent fills for opioids and a claims review automated process (as
designed and implemented by the state) that indicates when an
individual enrolled under the state plan (or under a waiver of the
state plan) is prescribed a subsequent fill of opioids in excess of any
limitation that may be identified by the state. We are finalizing our
proposal to implement these provisions, and to further implement
section 1927(g) of the Act, by requiring states to specify quantity,
days' supply, therapeutic duplication, and early fill safety alerts on
opioids prescriptions, the specific parameters of which will be left to
the states' discretion to establish minimum standards. We believe these
state-established parameters will be effective in helping identify
abuse, misuse, excessive utilization, or inappropriate or medically
unnecessary care. We encourage states to consult existing resources on
safe and appropriate opioid prescribing. We recognize there are many
national guidelines and resources available to the states. These
include, but are not limited to, guidance issued by associations such
as the Pharmacy Quality Alliance (PQA), National Committee for Quality
Assurance (NCQA), National Quality Forum (NQF); and federal agencies
including, but limited to, the Agency for Healthcare Research and
Quality (AHRQ), the Substance Abuse and Mental Health Services
Administration, and the CDC. In our experience from reviewing the
annual FFS and MCO DUR reports, available on www.Medicaid.gov, states
typically consult multiple authoritative clinical resources and
guidelines when designing and implementing their DUR programs. We agree
with commenters who suggested that the proposed policies would result
in varying implementations across state DUR programs. However, we
believe this variation was specifically contemplated by Congress in
enacting the relevant provisions of the SUPPORT Act, and is fully
consistent with the overall structure of the Medicaid program, which
gives states flexibility to design and administer their programs.
Additionally, the flexibility afforded to states will help enable them
to ensure the establishment of minimum standards relevant to their
state circumstances and beneficiary populations.
Comment: One commenter suggested adopting the models found in the
Virginia Medicaid Addiction and Recovery Treatment Services program and
the Vermont Blueprint for Health when implementing opioid safety edits.
Response: States can evaluate these and other models when designing
and
[[Page 87077]]
implementing their DUR programs. States have the flexibility to employ
techniques and standards from existing state models, or develop their
own, in compliance with the requirements of this final rule.
Comment: One commenter stated that CMS is applying a ``one-size-
fits-all algorithm and policies that do not take individual patient's
[sic] needs into account'' when suggesting opioid safety edits.
Response: We disagree with the commenter. Consistent with the
SUPPORT Act and section 1927(g) of the Act, under the policies in this
final rule, states have autonomy to implement safety edits as
determined by the state, in consideration of state-specific
circumstances and the needs of the state's Medicaid population. For
example, we are not prescribing a national limit on the quantity of
opioids that may be prescribed or dispensed to a beneficiary, only that
each state must determine a limit and implement a safety edit that, if
exceeded, would trigger an alert and opportunity for appropriate
clinical intervention prior to dispensing. Similarly, we are not
establishing a specific national MME limit, but consistent with the
statutory requirement added by the SUPPORT Act, we are requiring states
to determine an MME limit and implement a safety edit to trigger an
alert if it is exceeded. Safety edits provide an opportunity for
identifying potential problems at the pharmacy POS before the
prescription is dispensed to the individual, which creates an
opportunity for engagement between pharmacists, prescribers and
patients to identify and mitigate possible opioid misuse, abuse, and
overdose risk. POS safety edits provide real-time information to the
pharmacist prior to the prescription being dispensed to a patient;
however, they do not necessarily prevent the prescription from being
dispensed. When a safety edit is prompted, the pharmacist receives an
alert and may be required, as dictated by predetermined standards
established by the state, to take further action to resolve the issue
prior to the prescription being dispensed.
Comment: One commenter requested that CMS require states, when
implementing these opioid safety edit requirements, to offer education
and training and to provide consistent messaging across all healthcare
providers, and noted that coordination between all stakeholders is key
to successful policy and DUR program implementation for opioid safety
edits.
Response: Based on CMS' Annual DUR Survey, it is apparent that
states have implemented a majority of these proposed safety edits
already. We agree with the commenter's suggestion that states provide
education and training on their DUR programs generally and regarding
opioid utilization review initiatives specifically to providers in the
state. Currently, states are required to carry out an educational
program with respect to their DUR programs, as specified in section
1927(g)(2)(D) of the Act. We believe states generally are providing
consistent messaging to their providers through educational mechanisms
that include, but are not limited to, state website postings, bulletins
and newsletters, educational seminars, and toolkits, as needed and
appropriate to promote effective provider education and training.
Comment: A few commenters urged consideration of flexible policies
to accommodate the needs of provider groups, such as emergency
physicians, and special patient populations, such as cancer survivors
and patients with sickle cell disease, through the use of evidence-
based, nationally-recognized, and population specific prescribing
guidelines. These commenters suggested CMS direct state Medicaid
agencies to consult existing resources on safe and appropriate opioid
prescribing.
Response: We appreciate the commenters concerns, and believe that
the structure of the final regulation will continue to give states
flexibility in designing their DUR programs to meet the needs of
certain providers, such as emergency physicians and oncologists, and
certain special populations, such as cancer and sickle cell patients
and those in chronic pain. Consistent with the requirements of section
1004 of the SUPPORT Act, the states will determine and implement
specifications for their DUR programs. As discussed below in this final
rule, states have the option to exclude certain populations from these
opioid-related DUR requirements. Nationally-recognized guidelines and
resources are also available to the states and providers. Organizations
that have developed relevant materials include, but are not limited to,
the PQA, NCQA, NQF, and federal agencies including, but not limited to
AHRQ, SAMHSA, and the CDC. We encourage states to consult existing
resources on safe and appropriate opioid prescribing. In our experience
from reviewing the annual FFS and MCO DUR reports, available on
www.Medicaid.gov, states typically consult multiple authoritative
clinical resources and guidelines when designing and implementing their
DUR programs. Therefore, we are finalizing our proposal to allow
flexibility in designing implementing the opioid-related DUR parameters
under Sec. 456.703(h).
Comment: A few commenters encouraged CMS to gather data on the
impact of the proposed opioid safety edits across race and ethnicity as
studies have found that although the rate of drug-related deaths is
highest among non-Hispanic whites, patients who are African American
and Hispanic are less likely to receive any pain medication and more
likely to receive lower doses of pain medication, despite higher pain
scores.
Response: In implementing statutory requirements added by the
SUPPORT Act and in section 1927(g) of the Act, this final rule is
intended to improve the clinical use of opioids in all beneficiaries,
regardless of race or ethnicity, to promote improved quality of life.
As we have noted, the states operate their DUR programs under federal
guidelines and are responsible for using their DUR data to improve the
use of medications in the Medicaid population. We believe that the use
of these new opioid-related safety edits will help identify for states
and health care professionals both those patients who might be taking
too many opioids, or taking opioids in circumstances where their use
could be medically inappropriate or likely to result in adverse medical
events. States also retain flexibility to implement opioid and non-
opioid related safety edits and claims reviews that are designed to
help ensure that patients suffering from pain are receiving adequate
treatment. As described in the proposed rule and elsewhere in this
final rule, the states through their DUR programs are required to
retrospectively review claims and provide feedback to prescribers
through the required program of educational interventions, see Sec.
456.711. The retrospective review process helps to identify patterns in
prescribing and dispensing which can then be used by states in
designing interventions to help improve the overall use of these
medications.
In addition, to support these state level activities, CMS collects
information through collaboration with various CMS components and
Department partners to develop and implement initiatives to improve
data collection, analysis and reporting by race, ethnicity, primary
language, disability, and gender, as well as other characteristics that
have been associated with health disparities. We have formulated
objectives to disseminate information, identify vulnerabilities and
collaborate with states and external organizations on health
disparities, to include data collection and strategies for
[[Page 87078]]
achieving health equity. Resources, including federal and state
initiatives, can be accessed on Medicaid.gov.\97\ Through collaboration
with other CMS, Departmental, and external entities, we hope to
determine and correlate claims data to assess impact of the newly
required safety edits in the future.
---------------------------------------------------------------------------
\97\ https://www.medicaid.gov/medicaid/quality-of-care/quality-improvement-initiatives/quality-of-care-health-disparities/index.html.
---------------------------------------------------------------------------
Comment: One commenter expressed concern that utilization
management in certain patient populations risks discriminating on the
basis of disability, depending on what ``utilization management
techniques'' the state may adopt in its implementation of the proposed
requirements for opioid-related safety edits and automated claims
reviews.
Response: Nothing in the proposed rule or this final rule is
intended to interfere with the providers' clinical decision-making or
with the provider-patient relationship. The final rule continues to
allow providers to make clinical decisions based on each patient's
specific situation and relevant clinical principles. Section 1557 of
the Affordable Care Act \98\ provides that an individual shall not, on
the grounds prohibited under Title VI of the Civil Rights Act of 1964
(Title VI), 42 U.S.C. 2000d et seq. (race, color, national origin),
Title IX of the Education Amendments of 1972 (Title IX), 20 U.S.C. 1681
et seq. (sex), the Age Discrimination Act of 1975 (Age Act), 42 U.S.C.
6101 et seq. (age), or Section 504 of the Rehabilitation Act of 1973
(Section 504), 29 U.S.C. 794 (disability), be excluded from
participation in, be denied the benefits of, or be subjected to
discrimination under, any health program or activity, any part of which
is receiving federal financial assistance, or under any program or
activity that is administered by an Executive Agency or any entity
established under Title I of the Act or its amendments. States have
many years of experience applying utilization management techniques in
the context of their Medicaid DUR programs, with the enactment of the
DUR provisions of the Omnibus Budget Reconciliation Act (OBRA) of 1990.
The safety edits are intended to help protect Medicaid patients from
serious consequences of overutilization, including overdose, dangerous
interactions, increased side effects and additive toxicity. Safety
edits provide for identifying potential problems at pharmacy POS to
engage both patient and provider in identifying and mitigating possible
opioid misuse, abuse, and overdose risk at the time of dispensing which
ultimately assists the provider in making appropriate clinical
decisions. States will continue to have flexibility in design,
development and implementation of safety edits and respective claims
review as specified in section 1004 of the SUPPORT Act.
---------------------------------------------------------------------------
\98\ https://www.hhs.gov/sites/default/files/ppacacon.pdf.
---------------------------------------------------------------------------
Comment: One commenter suggested that the proposed rule could
create disparities in care between individuals who are and who are not
Medicaid beneficiaries, if similar safety edits and claims reviews,
specifically including early refill limits, are not established for
non-Medicaid beneficiaries. Additionally, one commenter suggested
states could build in appropriate flexibilities and exceptions to allow
for extenuating circumstances.
Response: Implementing safety edits and claims reviews, including
for early refill limits, is beyond the scope of this rulemaking with
respect to individuals who are not Medicaid beneficiaries. The non-
Medicaid population is not addressed by the relevant provisions of the
SUPPORT Act and section 1927 of the Act that we are implementing
through this rulemaking. We proposed and are finalizing early fill
limitations at Sec. 456.703(h)(1)(i)(D) to apply with respect to
Medicaid beneficiaries. However, we agree that there is no reason that
the standards of care or protocols for the dispensing of prescription
opioids should vary between individuals solely on the basis of the
individual's status as a Medicaid beneficiary (or not). Nothing in the
SUPPORT Act or section 1927(g) of the Act prohibits states from
considering and implementing more broadly applicable requirements for
opioid-related safety edits.
Consistent with the provisions in section 1004 of the SUPPORT Act
allowing states considerable discretion in their design and
implementation of opioid-related safety edits, and with similar
flexibility available for states in operating their DUR programs under
section 1927(g) of the Act, this final rule affords states flexibility
in designing and implementing required safety edits in the manner the
state determines would be best adapted to the circumstances in the
state, including the particular needs of the state's Medicaid
beneficiaries. This flexibility extends to the manner in which the
state's design and implementation account for potential extenuating
circumstances, including emergency situations and the situations of
beneficiaries being treated for particular conditions such as acute or
chronic pain. We agree that safety edits should be implemented in a way
that is sufficiently flexible to ensure that medically appropriate care
is not withheld from beneficiaries in such circumstances, and agree
that safety edits generally should be designed to avoid harm. States
are encouraged to apply national guidelines and best practices to
inform their design and implementation of the required safety edits
before implementing any safety edit to ensure coordinated and
undisruptive patient care.
Comment: One commenter suggested that states that have existing
initial prescription fill limits should be encouraged to align with
CMS's initial fill limits.
Response: We do not specify a prescription fill limit for opioid
drugs or other Medicaid reimbursed drugs; however, consistent with the
SUPPORT Act and DUR requirements under section 1927(g) of the Act, we
proposed and are finalizing at Sec. 456.703(h)(1)(i) that states must
establish state-identified prospective safety edits that must include
limitations on initial prescription fill days' supply for patients not
currently receiving opioid therapy; quantity limits for initial and
subsequent fills, therapeutically duplicative fill limits, and early
fill limits on opioids prescriptions. To further implement section
1927(g)(1) of the Act, and consistent with section 1004 of the SUPPORT
Act, we proposed and are finalizing this rule to require states to
establish safety edit limitations on the days' supply for an initial
prescription opioid fill for beneficiaries who have not filled an
opioid prescription within a defined time period to be specified by the
state. This limit would not apply to patients currently receiving
opioids and is meant for beneficiaries who have not received opioids
within this specified time period (as defined and implemented by the
state). The patients who have not received opioids within this state-
specified timeframe are referred to as opioid na[iuml]ve and would be
subjected to the days' supply limit on the opioid prescription initial
fill, as defined and implemented by the state. While the SUPPORT Act
requires state-specified limits on subsequent fills of opioids,
pursuant to section 1927(g) of the Act, we proposed and are finalizing
this rule with edits on initial fills of opioids to help avoid
excessive utilization by opioid na[iuml]ve beneficiaries, with its
attendant risk of adverse effects.
Comment: Some commenters requested that CMS modify parts of the
proposed opioid safety edits regarding the limit on days' supply for
opioid naive beneficiaries, specifically that CMS remove language
relating to initial
[[Page 87079]]
prescribing as they claim it goes beyond the statute and could be
harmful to certain patient groups. Other commenters stated that
evidence for strict duration limits is insufficient to support state
laws currently in place and that limitations may harm patients with
chronic illnesses and injuries. These commenters expressed their belief
that states should not implement a days' supply limit that is less than
7 days, and in exceptional circumstances, should allow for a longer
supply. A few commenters requested that states build in exceptions for
emergencies and extreme situations that could make it possible for
patients to receive a needed refill.
Response: We disagree that the proposed requirement that states
establish opioid initial fill days' supply limits, which we are
finalizing in Sec. 456.703(h)(1)(i)(A), exceeds our statutory
authority. As we discussed in the proposed rule, although the
amendments made by section 1004 of the SUPPORT Act only require states
to establish safety edits (and a claims review automated process) to
identify subsequent fills of opioids in excess of any limitation that
may be identified by the state, pursuant to our authority under section
1927(g) of the Act, we proposed and are finalizing a requirement to
apply limitations to initial fills, as well. In consideration of
clinical recommendations to limit opioid use to the shortest possible
duration and to assess the clinical benefits and harms of opioid
treatment on an ongoing basis, this safety edit is necessary to help
ensure that opioid prescriptions are appropriate, medically necessary,
and not likely to result in adverse events, and to accomplish other
purposes of the DUR program under section 1927(g) of the Act and
section 1004 of the SUPPORT Act. Accordingly, we proposed and are
finalizing this rule at Sec. 456.703(h)(1)(i)(A) to require states to
implement a days' supply limit when an initial opioid prescription is
dispensed to a patient not currently receiving ongoing therapy with
opioids. The safety edit requirements under this final rule authorize
states to not only design and implement the specific parameters of the
safety edits based on existing state-specific criteria, but also allow
states to consider all relevant factors in designing and implementing
their state-specific limitations, such as the particular needs and
circumstances of patients with chronic illnesses or injuries. States
are encouraged to consult national guidelines when determining,
specifying and implementing any safety edit (to include initial days
supply) to ensure appropriate, coordinated patient care and minimize
any unnecessary disruption to such care. States are also encouraged to
evaluate specific needs that may arise in particular care settings in
the state, such as in emergency departments and other acute treatment
facilities; in vulnerable populations, such as chronically ill or
disabled patients; and in other relevant state programs and
initiatives, such as those for managing patients receiving medication-
assisted treatment, when considering whether exceptional circumstances
could mean that a particular implementation of a days' supply limit may
adversely affect patient care.
We note that, under section 1927(d)(5) of the Act, states are
required to provide for the dispensing of at least a 72-hour supply of
a covered outpatient drug (COD), within 24 hours, in an emergency
situation. This statutory requirement helps ensure timely access to
needed medications, including when a beneficiary may require an opioid
prescription in an emergency situation. Section 1927(d)(5)(B) of the
Act ensures that a beneficiary can obtain an emergency supply until the
prescriber or pharmacist is able to obtain prior authorization approval
for the drug, if such approval is required.
Comment: Some commenters did not support CMS' proposal to require
safety edits on initial prescription fill days' supply for patients not
currently receiving opioid therapy, quantity, duplicate fills, and
early refills to prevent and reduce the inappropriate use of opioids
and potentially associated adverse medical events. One commenter noted
that ``strict limits on opioid prescription may be counterproductive by
increasing opioid dependence and failing to effectively address the
need for SUD and OUD treatment.'' The commenter explained that while
quantity and other limits on prescriptions for opioids may lead to a
decrease in the supply of opioids, there is no guarantee that it will
result in a reduction of opioid-related harm.
Response: Based on the requirements added by section 1004 of the
SUPPORT Act and our existing authority under section 1927(g) of the
Act, we proposed and are finalizing a requirement that state-identified
safety edits must include state-specified limitations on initial
prescription fill days' supply for patients not currently receiving
opioid therapy, quantity limits, therapeutically duplicative fill
limits, and early refill limits. These opioid-related safety edits are
intended to protect Medicaid enrollees, to include people with
disabilities who live with chronic pain, from serious consequences of
overutilization, including overdose, dangerous interactions, increased
side effects and additive toxicity. In addition, overutilization of
opioids may serve as an indication of uncontrolled disease and the need
of increased monitoring and coordination of care. We believe these
safety edits are not counterproductive, in fact these safety edits, as
designed and implemented by the state, are necessary to assure that
opioid prescriptions are appropriate, medically necessary, and not
likely to result in adverse events. Safety edits provide for
identifying potential problems at the pharmacy POS to engage both
patient and provider in identifying and mitigating possible opioid
misuse, abuse, and overdose risk at the time of dispensing, which
ultimately assists the provider in making appropriate clinical
decisions. Accordingly, we proposed and are finalizing at Sec.
456.703(h)(1)(i)(A) through (D) minimum standards for required safety
edits, with the detailed design and implementation specifications left
to the state's discretion to meet state-specific needs, to further
implement section 1927(g) of the Act and section 1004 of the SUPPORT
Act.
Comment: Several commenters recommended that CMS standardize the
look-back period for evaluating beneficiaries' opioid medication use in
implementing the proposed safety edits and claims reviews, such as
considering whether the patient had used opioids within the previous 90
days, as a uniform standard for identifying acute and chronic opioid
utilization. Several commenters recommended that we develop guidance on
prior authorization standards to avoid abrupt opioid withdrawal.
Response: We did not propose, and are not finalizing, any specific
look-back period of time that states must use in their implementation
of the required opioid-related safety edits and claims reviews, nor are
we developing guidance on prior authorization standards to avoid abrupt
opioid withdrawal. However, states may reference guidelines such as the
CDC Guideline for Prescribing Opioids for Chronic Pain \99\ and/or the
HHS Guide for Clinicians on the Appropriate Dosage Reduction or
Discontinuation of
[[Page 87080]]
Long-Term Opioid Analgesics \100\ when designing or implementing these
standards to avoid abrupt opioid withdrawal.
---------------------------------------------------------------------------
\99\ https://www.cdc.gov/mmwr/volumes/65/rr/rr6501e1.htm?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.gov%2Fmmwr%2Fvolumes
%2F65%2Frr%2Frr6501e1er.htm.
\100\ https://www.hhs.gov/opioids/sites/default/files/2019-10/Dosage_Reduction_Discontinuation.pdf.
---------------------------------------------------------------------------
Details such as these are left to the states to determine, in
consideration of the particular circumstances and needs of
beneficiaries in the state. Moreover, we are not aware of authoritative
clinical or health policy guidance that suggests a particular length of
time for a look-back period for opioid prescription monitoring in
patients receiving opioid medications. This time period should be
established by the state though consultation with experts, such as
their DUR Board.
However, to provide an example of how one state uses a look back
period to help avoid possible abuse of short term opioids, Kansas
Medicaid requires prior authorization for a patient to obtain another
opioid prescription if that patient had already obtained a short term
supply of opioids (defined as a quantity of opioids to treat a patient
for fewer than 90 days) within the last 4 months.\101\ The prior
authorization allows for the determination of whether the additional
course of treatment is medically necessary, given that the patient
recently had another course of treatment with opioids during the
designated look back period. The Washington State Hospital Association,
which has partnered with the Washington State Medical Association, is
another resource to consult when developing and implementing state-
specific look-back periods in a comprehensive DUR program.\102\
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\101\ https://www.kmap-state-ks.us/Documents/Content/Bulletins/18101%20-%20General%20-%20Opioid_2.1.pdf.
\102\ https://www.wsha.org/quality-safety/projects/opioid-pain-management/opioid-prescribing-reports/.
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Comment: One commenter noted that a patient may be taking more than
one opioid-based medication for long-term opioid therapy for chronic
pain (that is, duplicate therapy), and as result, a significant number
of safety edit alerts to the pharmacist may result.
Response: The proposed safety edit we are finalizing in this rule
for therapeutically duplicative fills is intended to identify and alert
to the prescribing and dispensing of the same drug or two or more drugs
from the same therapeutic class where periods of drug administration
overlap. We acknowledge that there may be patients who are taking
multiple opioids to help manage pain, and these situations may result
in safety alerts, depending on the state's implementation of the
requirements being finalized in this rule. The alerts are not intended
to necessarily limit or deny patients access to a prescribed opioid
drug; rather, they are meant to flag for the pharmacist that the
beneficiary is taking multiple opioids and that the opportunity should
be used to assess the patient's need for the prescribed drugs or
possible changes in therapy, including through discussion with the
beneficiary and/or the prescriber. Potential effects from taking
therapeutically duplicative opioids may include excessive drowsiness,
confusion and respiratory distress. Respiratory distress in turn may
cause a condition known as hypoxia. Hypoxia can have short- and long-
term psychological and neurological effects, including coma, permanent
brain damage, or death.\103\ Therefore, we proposed and are finalizing
at Sec. 456.703(h)(1)(i)(C) that states must implement safety edits
for therapeutically duplicative fills for initial and subsequent
prescription fills on opioids prescriptions, to help identify potential
abuse, misuse, excessive utilization, or inappropriate or medically
unnecessary care.
---------------------------------------------------------------------------
\103\ https://www.drugabuse.gov/publications/drugfacts/prescription-opioids.
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Comment: One commenter noted that the use of an MME to limit opioid
use does not correspond to current CDC guidelines. The commenter
further requested CMS postpone finalizing any new MME requirements
around the treatment of chronic pain until the new CDC Opioid Workgroup
has a chance to convene, consider current evidence and best practices,
and issue recommendations.
Response: Section 1004 of the SUPPORT Act requires state DUR
programs to include safety edit limits (as specified by the state) on
the maximum daily MME that can be prescribed to an individual enrolled
under the state plan (or under a waiver of the state plan) for
treatment of chronic pain (as designed and implemented by the state)
that indicates when an individual enrolled under the plan (or waiver)
is prescribed the morphine equivalent for such treatment in excess of
any threshold identified by the state. Based on the FFY 2018 Annual DUR
Survey, most states were already compliant with having established an
MME threshold, and those not having this safety edit in place were
aware of the requirement added by section 1004 of the SUPPORT Act,
effective October 1, 2019. To note, the newly appointed CDC Opioids
Workgroup is actively working to update the CDC guideline; however, its
release is not expected until late 2021, and is hoped to include new
recommendations not only for chronic pain management, but for the
treatment of acute, short-term pain. To implement the statutory
requirement, we proposed and are finalizing at Sec. 456.703(h)(1)(ii)
that states must include in their DUR programs safety edit limitations
identified by the state on maximum daily MME for treatment of chronic
pain and, under Sec. 456.703(h)(1)(iii), a claims review automated
process that indicates when an individual is prescribed a MME in excess
of these limitations. The application of this required safety edit does
not necessarily prevent the prescription from being dispensed, rather,
it provides the opportunity to assure clinical appropriateness of
therapy.
Comment: One commenter requested CMS emphasize that Morphine
Milligram Equivalent (MME) safety edits are not strict limits, and that
individual provider decision-making based on the patient's condition
will supersede safety edits. Another commenter recommended that CMS
policies should allow physicians to make clinical decisions based on
each patient's specific circumstances, and not interfere in the
provider-patient relationship.
Response: The safety edits required under this final rule are
intended to protect Medicaid patients from serious consequences of
overutilization, including overdose, dangerous interactions, increased
side effects and additive toxicity. These safety edits provide for
identifying potential problems at the pharmacy POS to engage both
patient and provider in identifying and mitigating possible opioid
misuse, abuse, and overdose risk at the time of dispensing, which
ultimately assists the prescriber in making appropriate clinical
decisions; however, the required safety edits do not necessarily
prevent the prescription from being dispensed. When a safety edit is
prompted, the pharmacist receives an alert and may be required, as
dictated by predetermined standards established by the state, to take
further action to resolve the issue prior to the prescription being
dispensed. This rule is not intended to interfere with provider-patient
relationship or the provider's exercise of clinical judgment. We are
finalizing at Sec. 456.703(h)(1)(ii), to require state DUR programs to
include prospective safety edit limitations for opioid prescriptions,
as specified by the state, on the maximum daily MME for treatment of
pain, for initial and subsequent prescription fills.
[[Page 87081]]
Comment: A few commenters expressed concern that due to variance in
tolerance among patients receiving long-term opioid treatment and the
risks of opioid tapering, it may not be conceptually possible for
states to select an MME limit that uniformly achieves the goal of
patient safety or that does not create new risks.
Response: Section 1004 of the SUPPORT Act requires state DUR
programs to include safety edit limits (as specified by the state) on
the maximum daily MME that can be prescribed to an individual enrolled
under the state plan (or under a waiver of the state plan) for
treatment of chronic pain (as designed and implemented by the state)
that indicates when an individual enrolled under the plan (or waiver)
is prescribed the morphine equivalent for such treatment in excess of
any threshold identified by the state. We would expect that states
typically would not establish MME limits that cannot be overridden, but
instead would implement them as a safety edit that, when triggered by a
prescription for a beneficiary, would prompt the dispensing pharmacist
to review the patient's prescribed therapy. We expect that state
implementations of maximum MME limits would include a function for
exceptions based on specific patient factors affecting treatment
protocol, including opioid dose tapering, as applicable. For example,
the safety edit might prompt the pharmacist to more closely review all
relevant clinical information about the prescription, counsel the
beneficiary about the prescription and solicit from him or her
additional information about why the drug has been prescribed, and
consult directly with the prescriber to confirm the medical
appropriateness of the prescription. If activities such as these result
in a determination that the prescription is clinically sound and can be
dispensed without modification, then we envision that the pharmacist
typically would be able to override the safety edit after appropriately
documenting that decision (consistent with any applicable documentation
requirements, such as those that may be established by the state or a
professional licensure or other governance entity). In this regard, we
encourage states to consult existing resources on safe and appropriate
opioid prescribing. We recognize there are many national guidelines and
resources available to the states. Associations including, but not
limited to, the PQA, NCQA, NQF, and federal agencies including AHRQ,
SAMHSA, and the CDC can be utilized as existing resources. Therefore,
we are finalizing as proposed this implementing regulation at Sec.
456.703(h)(1)(ii).
Comment: Some commenters suggested removing the word ``rapid'' from
the statement in the CMS proposed rule ``we do not mean to suggest
rapid discontinuation of opioids already prescribed at higher
dosages,'' as the commenter stated that even slow tapers have resulted
in serious harm, which has not been adequately studied. Additionally,
commenters noted that withdrawal is one of many risks associated with
opioid tapering.
Response: We use the word ``rapid'' as a commonly referenced term
to differentiate tapering regimens and agree withdrawal symptoms may be
a risk of opioid tapering, which could potentially occur with slow
tapering regimens, also. We do not suggest rapid discontinuation of
opioids already prescribed at higher dosages. The maximum daily MME
metric is often used as a gauge of the overdose potential of the amount
of opioid that is being given at a particular time. Please refer to the
HHS Guide for Clinicians on the Appropriate Dosage Reduction or
Discontinuation of Long-Term Opioid Analgesics \104\ for more
information.
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\104\ https://www.cms.gov/About-CMS/Story-Page/CDCs-Tapering-Guidance.pdf.
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Comment: Some commenters noted that CMS could develop clearer
guidance to ensure that safety edits and automated retrospective claims
reviews achieve their intended goals without harming certain patient
groups, emphasizing flexibility when applying safety edit thresholds,
as well as addressing potential burden placed on physicians whose
prescriptions might frequently be flagged due to the nature of their
specialty, for example, such as cancer pain specialists, orthopedists
or dental providers.
Response: We expect that states will continue to allow prescribers
to make the best clinical decisions for patients regarding prescription
medications needed to treat the patient's medical condition. The safety
edits and automated retrospective claims reviews, as determined and
implemented by state, that we are requiring under this final rule, are
intended to assist providers in making clinical decisions to augment,
not jeopardize patient care and clinical decision-making. We expect
that many of the safety edit parameters will be reviewed by the state's
DUR Board--which must include physicians and pharmacists, see Sec.
456.716(b)--prior to implementation by the state. We also know that
often times, prescribers may not be aware that patients are taking
concomitant drugs that include the same type of active ingredients,
such as opioids, and these situations are sometimes only detected at
the time that the prescription is filled through a prospective review
process, or after the prescription is filled, through a retrospective
review process. We view the DUR program as providing an important,
positive feedback loop to prescribers and dispensers to assure patient
safety and improve therapeutic outcomes.
States will continue to have flexibility in design, development and
implementation of safety edits and automated retrospective claims
review as specified in section 1004 of the SUPPORT Act and in the
provisions of this final rule. We envision that states will consult
national guidelines and resources available to develop state policy to
provide appropriate flexibility for their providers to ensure
prospective safety edits and automated claims reviews will not
adversely affect coordinated patient care, but augment clinical
decision-making. We recognize there are many national guidelines and
resources available to the states. Associations including, but not
limited to, the PQA, NCQA, NQF, and federal agencies including AHRQ,
SAMHSA, and the CDC can be utilized as existing resources.
Comment: One commenter recommended requiring an additional
prospective safety edit to monitor when an individual is concurrently
prescribed opioids and either benzodiazepines or antipsychotics.
Response: Under section 1004 of the SUPPORT Act, states are
required, as determined and implemented by the state, to establish a
retrospective claims review automated process to monitor when an
individual is concurrently prescribed opioids, and benzodiazepines or
antipsychotics. At the option of the state, the state may also
establish prospective safety edits as part of a comprehensive DUR
program to monitor for the same. The benefit of prospective safety
edits for concurrently-prescribed medications would allow for real-time
clinical assessment at the point of dispensing of the prescribed drugs.
Additionally, such prospective safety edits could help in the detection
of fraud and abuse. State Medicaid DUR programs promote patient safety
through state-administered utilization management (UM) tools and
systems that interface with the state's claims processing systems. The
concurrent prescription monitoring requirement added by section 1004 of
the SUPPORT Act is consistent with the requirement in
[[Page 87082]]
section 1927(g)(1)(A) of the Act that state DUR programs must assure
that prescriptions are appropriate, medically necessary, and not likely
to result in adverse medical results. Therefore, we proposed and are
finalizing this rule at Sec. 456.703(h)(1)(iv)(A) and (B) to require
states to establish a retrospective claims review automated process
and, at the option of the state, prospective safety edits for
concurrently prescribed opioids and benzodiazepines or antipsychotics,
as determined and implemented by the state.
Comment: One commenter recommended adding nonbenzodiazepine
sedative hypnotics to CMS' proposed minimum DUR requirements for
monitoring concurrent prescribing with opioids.
Response: We encourage states to determine whether to adopt safety
edits for the prescribing of nonbenzodiazepine sedative hypnotics
concurrently with opioids as part of their DUR programs. There are many
existing resources available to the states, including but not limited
to the PQA, NCQA, NQF, and federal agencies including AHRQ, SAMHSA, and
the CDC, that have developed clinical guidance that may be relevant to
establishing such safety edits and claims reviews. Neither the SUPPORT
Act nor this final rule prohibits states from designing and
implementing a prospective safety edit and/or retrospective automated
claims review process to monitor for concurrent prescribing of opioids
and another drug class, which additional monitoring could support
enhanced care and treatment for Medicaid beneficiaries.
Comment: A few commenters encouraged CMS to work with various
commenters, including NIH and the NIDA, to develop objective measures
of pain and to perform ongoing assessment of the DUR activities to
ensure that legitimate patient access to appropriate pain treatment is
not negatively impacted.
Response: These activities described by the commenters are not
within the scope of this rulemaking; however, we acknowledge the
commenters' concern regarding the need for beneficiaries to have access
to appropriate pain treatment, and the need to assess whether the pain
treatment regimen prescribed is working to alleviate the patient's
pain. Currently, we publish states' annual responses to the FFS and MCO
DUR surveys on Medicaid.gov, including national summary comparison
reports collated by CMS. These reports help us conduct state oversight
and enable states to review other states' reports and compare their own
DUR program activity to that of other states. In doing so, CMS and
states gain visibility into the effectiveness of various DUR efforts
and are better able to ensure that legitimate patient access to
appropriate pain treatment is not negatively impacted. Additionally,
beginning with state-submitted DUR reporting regarding the state'
compliance with requirements of this final rule for FFY 2020, as
required under amendments made by section 1004 of the SUPPORT Act, we
will submit an annual report to Congress (RTC) that includes this
state-submitted information to facilitate improved congressional
oversight of the implementation of opioid-related DUR requirements.
Finally, regarding the comments on developing objective measures of
pain, we note that currently available national pain assessment
resources include the CMS Clinical Quality Measures (CQMS) Pain
Assessment and Follow-Up criteria \105\ and the Joint Commission's Pain
Assessment and Management Standards.\106\
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\105\ https://qpp.cms.gov/docs/QPP_quality_measure_specifications/CQM-Measures/2019_Measure_131_MIPSCQM.pdf.
\106\ https://www.jointcommission.org/resources/patient-safety-topics/pain-management-standards-for-accredited-organizations/#a98ee961a3184ec899b62579053a24a7.
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Comment: One commenter noted that the proposed DUR standards should
specifically require providers to consider benefits of opioid
medication along with risks, and to include patients' goals and
priorities in any decisions regarding dosage reduction.
Response: Decisions weighing the benefits and risks of opioid
prescription treatment are the purview of the prescriber and the
patient. We agree that, generally in medical decision-making, the
health care provider and the patient should thoroughly consider the
benefits and risks of available treatment options together before
arriving at a decision about the patient's care. However, the DUR
program can provide systematic feedback to prescribers about their
opioid prescribing patterns, as compared to other prescribers, which
information can help inform their thinking about their clinical
treatment practices.
Comment: One commenter stated that flexibility at all levels of DUR
program development and implementation is key to ensuring that patient
needs are met.
Response: While states will need to comply with the requirements of
the SUPPORT Act and the requirements of this final rule, we agree with
the commenter that affording states the flexibility to develop and
implement prospective safety edits and automated claims review
processes in this final rule will allow states to ensure patient and
provider needs are addressed in an effective DUR program. The
flexibilities afforded to the states in this final rule will allow
states to establish state-specific DUR standards to suit their
circumstances and beneficiary populations. States also have the
flexibility to use standards from existing state DUR models, or develop
their own, in complying with the requirements of this final rule. We
envision states will consult national guidelines and resources issued
by public associations such as the PQA, NCQA, NQF; and federal agencies
including, but not limited to, the AHRQ, SAMHSA, and the CDC, to
develop, implement and potentially enhance their safety edits and
claims reviews for an effective and efficient DUR program.
In consideration of the comments received, with a limited
exception, we are finalizing as proposed Sec. 456.703(h)(1)(i) through
(iv), to require that the state's DUR program must include certain
minimum standards for DUR Programs under the SUPPORT Act and section
1927 of the Act. The limited modification to the proposed regulation
text concerns the safety edit for MME in Sec. 456.703(h)(1)(ii), which
we explained in preamble to the proposed rule that we intended to apply
with respect to opioids prescribed for pain, not limited to chronic
pain. 85 FR 37309. We made a technical error in the proposed regulation
text that limited the applicability of the MME safety edit to opioids
prescribed for chronic pain, which we are correcting in this final rule
by removing the errant word ``chronic'' from the regulation text so
that the requirement will clearly apply for opioid prescriptions ``for
treatment of pain,'' whether chronic or acute.
f. Program To Monitor Antipsychotic Medications in Children
Under section 1004 of the SUPPORT Act, states must have a program
(as designed and implemented by the state) to monitor and manage the
appropriate use of antipsychotic medications by children enrolled under
the state plan (or under a waiver of the state plan), including any
Medicaid expansion group for the Children's Health Insurance Program
(CHIP).\107\ Additionally, states must annually submit information on
activities carried out under this program for individuals not more than
the age of 18 years old generally, and children in foster care
[[Page 87083]]
specifically, as part of the annual report submitted to the Secretary
under section 1927(g)(3)(D) of the Act, as provided in section
1902(oo)(1)(D) of the Act.
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\107\ Section 1902(oo)(1)(B) of the Act, as added by section
1004 of the SUPPORT Act.
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Antipsychotic medications are increasingly used for a wide range of
clinical indications in diverse populations, including privately and
publicly insured youth.\108\ Antipsychotics' adverse metabolic effects
have heightened concern over growth in prescribing to youth, including
off-label prescribing and polytherapy of multiple antipsychotics.\109\
Studies have raised concerns regarding the long term safety and
effectiveness of antipsychotics in this broadened population. Studies
in adults have found that antipsychotics can cause serious side effects
and long-term safety and efficacy for off-label utilization is a
particular concern in children.\110\
---------------------------------------------------------------------------
\108\ Crystal, Stephen et al. ``Broadened use of atypical
antipsychotics: safety, effectiveness, and policy challenges.''
Health affairs (Project Hope) vol. 28, 5 (2009): w770-81.
doi:10.1377/hlthaff.28.5.w770.
\109\ Ibid.
\110\ Ibid.
---------------------------------------------------------------------------
Some of the most concerning effects include uncontrollable
movements and tremors; an increased risk of diabetes; substantial
weight gain; elevated cholesterol, triglycerides and prolactin; changes
in sexual function; and abnormal lactation.\111\ Children appear to be
at higher risk than adults for a number of adverse effects, such as
extrapyramidal symptoms and metabolic and endocrine abnormalities. Some
studies suggests that antipsychotic treatment may be associated with
increased mortality among children and youths and the distal benefit/
risk ratio for long-term off-label treatment remains to be
determined.112 113
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\111\ Marder SR, et al. Physical health monitoring of patients
with schizophrenia. Am J Psychiatry. 2004; 161(8):1334.
\112\ https://jamanetwork.com/journals/jamapsychiatry/article-abstract/2717966.
\113\ https://www.healthline.com/health/consumer-reports-antipsychotics-children#1.
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In consideration of clinical recommendations to monitor and manage
the appropriate use of antipsychotic medications by children and to
assess the clinical benefits and harms of treatment on an ongoing
basis, we believe this program is necessary to help ensure children are
receiving appropriate treatment that is not likely to result in adverse
medical results, and to accomplish other purposes of the DUR program
under section 1927(g) of the Act and of the SUPPORT Act. Accordingly,
we proposed at Sec. 456.703(h)(1)(v) that states be required to
implement programs to monitor and manage the appropriate use of
antipsychotic medications by children enrolled under the state plan,
including any Medicaid expansion groups for CHIP. We noted that we
understand states need considerable flexibility when implementing this
program. The proposed provisions were not meant to prohibit the
exercise of clinical judgment by a provider regarding the best or most
appropriate care and treatment for any patient. We noted that states
are expected to work with their pharmacy and therapeutics (P&T) and DUR
committees to identify clinically appropriate safety edits and reviews.
We recommended states consider expanding DUR programs to include
reviews on children for polytherapy (therapy that uses more than one
medication), inappropriate utilization or off label utilization.
The following is a summary of the comments we received on the
proposed minimum standards for DUR programs for monitoring of
antipsychotic medications in children, and our responses.
Comment: Some commenters recommended that CMS further define or
identify guidelines for appropriate use of antipsychotics in children
and encourage states to align their DUR programs on this particular DUR
edit with national clinical practice guidelines.
Response: As outlined in the proposed rule, states are expected to
consult with their Medicaid P&T and DUR committees, as well as state
mental health and behavioral health professionals, to identify
clinically appropriate parameters for the safety edits and reviews
required under this final rule. We recommend that states, when
developing parameters and criteria to implement appropriate prospective
and retrospective DUR oversight for children, also consider
specifically the applicability of such criteria for children in
potentially vulnerable groups, such as children in foster care and
those with disabilities. Some states have developed fact sheets to help
communicate recommended strategies for prescribing psychotropic
medication to children, including those in foster care and those living
with disabilities.\114\
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\114\ https://children.wi.gov/Documents/Psychotropic%20Medication%20Prescribing%20for%20Children%20on%20Medicaid.pdf.
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Resources to consider using include, but are not limited to, the
AHRQ-CMS Pediatric Quality Measures Program (PQMP) fact sheet \115\ and
the SAMHSA guidance on Strategies to Promote Best Practice in
Antipsychotic Prescribing for Children and Adolescents.\116\
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\115\ https://www.ahrq.gov/sites/default/files/wysiwyg/policymakers/chipra/factsheets/chipra_1415-p011-1-ef_0.pdf.
\116\ https://store.samhsa.gov/sites/default/files/d7/priv/pep19-antipsychotic-bp_508.pdf.
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After considering the comments received, we are finalizing, as
proposed, Sec. 456.703(h)(i)(v), to require states to establish a
program to monitor and manage the use of antipsychotic medications by
children enrolled under the state plan, including any expansion group
for the Children's Health Insurance Program (CHIP). States must
annually submit information on activities carried out under this
program for beneficiaries not more than the age of 18 years old
generally, and children in foster care specifically, as part of the
annual report submitted to the Secretary under section 1927(g)(3)(D) of
the Act, as provided in section 1902(oo)(1)(D) of the Act.
g. Fraud and Abuse Identification
Section 1902(oo)(1)(C) of the Act, as added by section 1004 of the
SUPPORT Act, provides that states must have a process (as designed and
implemented by the state) that identifies potential fraud or abuse of
controlled substances by individuals enrolled under the state plan (or
under a waiver of the state plan), health care providers prescribing
drugs to individuals so enrolled, and pharmacies dispensing drugs to
individuals so enrolled. We proposed to implement this requirement at
Sec. 456.703(h)(1)(vi); specifically, we proposed that the state's DUR
program must include a process to identify potential fraud or abuse of
controlled substances by individuals enrolled under the state plan,
health care providers prescribing drugs to individuals so enrolled, and
pharmacies dispensing drugs to individuals so enrolled.
We intended that the proposed process would operate in a
coordinated fashion with other state program integrity efforts. States
would have flexibility to define specific parameters for reviews for
fraud and abuse, as well as protocols for recommendation, referral, or
escalation of reviews to the relevant Program Integrity/Surveillance
Utilization Review (SURS) unit, law enforcement, or state professional
board, based on patterns discovered through the proposed DUR process.
Additionally, we noted that state policy should specify the
documentation required when suspected fraud and/or abuse results in a
recommendation,
[[Page 87084]]
referral, or escalation for further review, including the findings of
any subsequent investigation into the potential deviation from the
standard of care. States would be expected to ensure that DUR reviews
conducted under the proposed requirement are aligned with all
applicable federal requirements, including those specified in in
Sec. Sec. 455.12, 455.13 through 455.21, and 455.23 and section
1902(a)(64) of the Act.
We acknowledged that other initiatives, which many states are
already undertaking, could work synergistically with the proposed
requirement to help reduce fraud, misuse, and abuse related to opioids.
For example, patient review and restriction programs (lock-in programs)
\117\ and PDMPs \118\ also play an important role in detecting and
preventing opioid-related fraud, misuse and abuse. Lock-in programs,
also called patient review and restriction or drug management programs,
are meant to cut down on ``doctor shopping''--the practice of going to
several doctors or pharmacies to obtain or fill multiple prescriptions
for opioids or other controlled substances for illicit sale or misuse
or to support an addiction. Such programs are used primarily to
restrict overutilization of medications. Additionally, we noted that
programs may require beneficiaries to receive all prescriptions through
one pharmacy, have all prescriptions written by one prescriber, receive
health care services from one clinical professional, or all three,
depending on how the program is designed.\119\
---------------------------------------------------------------------------
\117\ ``Pharmacy Lock-In Programs Slated For Expanded Use.''
OPEN MINDS, www.openminds.com/market-intelligence/executive-briefings/pharmacy-lock-programs-slated-expanded-use/.
\118\ Office of National Drug Control Policy. Prescription Drug
Monitoring Program. Prescription Drug Monitoring Program, April
2011. https://www.ncjrs.gov/pdffiles1/ondcp/pdmp.pdf.
\119\ ``Pharmacy Lock-In Programs Slated For Expanded Use.''
OPEN MINDS, www.openminds.com/market-intelligence/executive-briefings/pharmacy-lock-programs-slated-expanded-use/.
---------------------------------------------------------------------------
Section 5042 of the SUPPORT Act requires covered providers who are
permitted to prescribe controlled substances and who participate in
Medicaid to query qualified PDMPs before prescribing controlled
substances to most Medicaid beneficiaries, beginning October 1, 2021.
PDMPs are database tools sometimes utilized by government officials and
law enforcement for reducing prescription drug fraud, abuse and
diversion, but which more frequently can be used to monitor controlled
substance use by healthcare providers including prescribers and
pharmacists. PDMPs collect electronically transmitted prescribing and
some dispensing data submitted by pharmacies and dispensing
practitioners. The data are monitored and analyzed to support states'
efforts in education, research, enforcement and abuse prevention.\120\
Data analytics can help to determine the extent to which beneficiaries
are prescribed high amounts of opioids, identify beneficiaries who may
be at serious risk of opioid misuse or overdose, and identify
prescribers with questionable opioid prescribing patterns for these
beneficiaries.121 122 The process required under the SUPPORT
Act and the proposed rule would identify potential fraud or abuse, and
can help ensure that state officials and staff implementing the state's
program integrity, PDMP, and DUR functions work collaboratively to
identify opportunities for DUR activities to assist in the
identification of potential fraud and abuse.
---------------------------------------------------------------------------
\120\ ``Prescription Drug Monitoring Frequently Asked Questions
(FAQ): The PDMP Training and Technical Assistance Center.''
Prescription Drug Monitoring Frequently Asked Questions (FAQ) [bond]
The PDMP Training and Technical Assistance Center,
www.pdmpassist.org/content/prescription-drug-monitoring-frequently-asked-questions-faq.
\121\ Beaton, Thomas. ``Preventing Provider Fraud through Health
IT, Data Analytics.'' HealthPayerIntelligence, 5 Oct. 2018, https://healthpayerintelligence.com/news/preventing-provider-fraud-through-health-it-data-analytics.
\122\ OIG, Opioids in Medicare Part D: Concerns about Extreme
Use and Questionable Prescribing, OEI-02-17-00250, July 2017.
https://oig.hhs.gov/oei/reports/oei-02-17-00250.pdf.
---------------------------------------------------------------------------
The following is a summary of the comments we received on the
proposed minimum standards for DUR programs for fraud and abuse
identification processes, and our responses.
Comment: Some commenters urged CMS to work with states to ensure
that mechanisms to decrease provider administrative burden are
implemented, relative to checking PDMPs, such as allowing PDMP queries
and patient history checks to be performed by designated provider staff
before patient visits, and the ability for designated provider staff to
integrate results into existing electronic health record systems. This
would reduce the burden on prescribers to check the PDMP at the time
the prescription is written, and reduce patient waiting time.
Additionally, some commenters suggested that PDMP interoperability
between states would enable more coordinated patient care and better
guard against fraud and abuse.
Response: Section 5042 of the SUPPORT Act requires covered
providers who are permitted to prescribe controlled substances and who
participate in Medicaid to query qualified PDMPs before prescribing
controlled substances to most Medicaid beneficiaries, beginning October
1, 2021. We agree this has the potential to increase administrative
burden on the prescriber, and that such increased burden could be
minimized if designated provider staff are authorized to check patient
history prior to patient visits and if PDMP information is integrated
into existing electronic health record systems used by prescribers. We
encourage states to educate providers on any best practices identified
by the state regarding allocation of staff resources for accessing PDMP
information and integrating it into clinical care processes.
Furthermore, we agree that direct integration of PDMP information into
electronic health record systems has the potential to increase the
usefulness of PDMPs and promote improved clinical outcomes while
minimizing burdens on clinical staff. The process required under
section 5042 of the SUPPORT Act and the fraud and abuse identification
process required under this final rule will help identify potential
fraud or abuse, and help ensure that state officials and staff
implementing the state's program integrity, PDMP, and DUR functions
work collaboratively to identify opportunities for DUR activities to
assist in the identification of potential fraud and abuse.
Additionally, national initiatives to promote interoperability of PDMPs
is being assessed by the Office of National Drug Control Policy (ONDCP)
and the CDC.
Comment: Some commenters noted it may be difficult to fully
understand a patient's entire opioid history and use if the patient
crosses state lines to receive care, since PDMPs currently are
separate, state-specific and non-integrated databases. In many cases,
this results in information from one state's PDMP not being easily
accessible to or interoperable with PDMPs in other states.
Response: We acknowledge the commenter's concern; however, the
accessibility and interoperability of PDMPs is not within the scope of
this rulemaking. We note that section 1944(a)(1) of the Act, as added
by section 5042 of the SUPPORT Act, requires state Medicaid programs,
beginning in October 2021, to require covered providers to check a
qualified PDMP for a covered individual's prescription drug history
before prescribing a controlled substance. Additionally, the amendments
made by section 5042 of the SUPPORT Act incentivize states to enter
into
[[Page 87085]]
agreements with contiguous states to enable covered providers also to
check the PDMPs of such contiguous states by providing 100 percent
federal matching funds during fiscal years 2019 and 2020 for design,
development, and implementation activities for establishing and
connecting qualifying PDMPs.
Comment: Some commenters recommended that dosage alone not be used
as an indicator of questionable prescribing when there is no other
evidence of fraud or abuse, and that CMS should adopt fraud detection
measures that do not compromise individualized care.
Response: We agree that using the dosage of drug being prescribed
as a sole indicator for fraud and abuse would not be appropriate, and
we encourage states to utilize their flexibility to define the specific
parameters to be implemented for the detection of fraud and abuse. We
intend that this process should operate in a coordinated manner with
other state program integrity efforts. States have flexibility to
define specific parameters for review for fraud and abuse and to
determine how best to ensure these parameters will not compromise or
unduly interfere with patient care. Resources states may consult in
determining parameters can be found in established national guidelines
such as those issued by the PQA, NCQA, NQF, and federal agencies
including AHRQ, SAMHSA, and the CDC.
Comment: One commenter expressed concern with CMS' suggestions that
states may implement programs such as provider ``lock-in programs'' or
programs that require beneficiaries to receive all prescriptions
through one pharmacy, have all prescriptions written by one prescriber,
or receive health care services from one clinical professional, to
enhance existing fraud and abuse policies. The commenter noted that
such programs may have unintended negative consequences for patients
from a continuity of care perspective if patients are required to
change their providers or discontinue using certain providers for
services that such providers have appropriately provided to them in the
past.
Response: We intend that the process for developing and/or
enhancing existing fraud and abuse programs should proceed in a
coordinated fashion with other state program integrity efforts. Under
this final rule, states have flexibility to define specific parameters
for reviews for fraud and abuse, as well as protocols for
recommendation, referral, or escalation of reviews to the relevant SURS
unit, law enforcement, or state professional board, based on patterns
discovered through the state's DUR program. State flexibility in
developing and/or enhancing fraud and abuse programs will enable states
to mitigate potential negative effects on prescribers' ability to
provide coordinated patient care. State parameters should include
processes to ensure continuity of care is not adversely affected when
developing and implementing new or enhanced fraud and abuse programs.
National guidelines such as those issued by the PQA, NCQA, NQF, and
federal agencies including AHRQ, SAMHSA, and the CDC can help identify
best practices for states to consider in implementing these programs.
In consideration of the comments received, we are finalizing Sec.
456.703(h)(1)(vi) as proposed, to require that the state's DUR program
must include a process to identify potential fraud or abuse of
controlled substances by individuals enrolled under the state plan,
health care providers prescribing drugs to individuals so enrolled, and
pharmacies dispensing drugs to individuals so enrolled.
2. Other CMS Proposed Standards
In addition to regulations implementing requirements added by
section 1004 of the SUPPORT Act, we proposed additional minimum DUR
standards in the June 2020 proposed rule that states would be required
to implement as part of their DUR programs at Sec. 456.703(h)(1)(vii).
Specifically, under our authority to implement section 1927(g) of the
Act and consistent with the goals of the SUPPORT Act to help combat the
nation's opioid overdose epidemic, we proposed additional minimum
standards related to MAT and identification of beneficiaries who could
be at high risk of opioid overdose and should be considered for co-
prescription or co-dispensing of naloxone. These additional standards
were included to ensure prescribed drugs are: (1) Appropriate; (2)
medically necessary; and (3) not likely to result in adverse medical
results.
Under the proposed policies, state DUR programs would be required
to include prospective safety edit alerts, automatic retrospective
claims review, or a combination of these approaches as determined by
the state, to identify cases where a beneficiary is prescribed an
opioid after the beneficiary has been prescribed one or more drugs used
for MAT, and prospective safety edit alerts, automatic retrospective
claims review, or a combination of these approaches as determined by
the state to expand appropriate utilization of naloxone. As discussed
in the June 2020 proposed rule, we proposed these minimum requirements
to further implement section 1927(g) of the Act to prevent and reduce
the inappropriate use of opioids and potentially associated adverse
medical results, consistent with the provisions under section 1004 of
the SUPPORT Act.
a. Medication Assisted Treatment (MAT)
To further implement section 1927(g)(1) of the Act and consistent
with section 1004 of the SUPPORT Act, we proposed to require states to
establish prospective safety edit alerts, automatic retrospective
claims review, or a combination of these approaches as determined by
the state, to identify cases where a beneficiary is prescribed an
opioid after the beneficiary has been prescribed one or more drugs used
for MAT or had an OUD diagnosis within a specified number of days (as
determined by the state), without having a new indication to support
utilization of opioids (such as a new cancer diagnosis, new palliative
care treatment or entry into hospice).
MAT is treatment for SUD that includes addiction treatment and
services plus a medication approved by FDA for opioid addiction,
detoxification, or maintenance treatment or relapse prevention. Section
1006(b) of the SUPPORT Act defines MAT to include all FDA approved
drugs and licensed biological products to treat opioid disorders, as
well as counseling services and behavioral therapies for the provision
of such drugs and biological products.\123\ MAT has proven to be
clinically effective in treating OUD and significantly reduces the need
for inpatient detoxification services.\124\ Medications such as
buprenorphine and methadone, in combination with counseling and
behavioral therapies, provide a whole-patient approach to the treatment
of OUDs.
---------------------------------------------------------------------------
\123\ Support for Patients and Communities Act, Section 1006(b).
Requirement For State Medicaid Plans To Provide Coverage For
Medication-Assisted Treatment.
\124\ ``Medication and Counseling Treatment''. September 28,
2015. Available at https://www.samhsa.gov/medication-assisted-treatment/treatment.
---------------------------------------------------------------------------
Using opioid medications during the course of MAT is dangerous from
a clinical perspective. Prospective drug safety edits are also designed
to identify other prescription and non-prescription medications that
are not indicated for use by patients being treated with opioid
therapy. For example, an
[[Page 87086]]
effective prospective DUR program can alert the pharmacist before
dispensing that the patient is taking other medications, such as blood
pressure or cough and cold medications that might have an additive
sedating effect when taken with opioids. These prospective edits are
effective only to the extent that the other potential interacting
medications are in the patient's prescription record, and not if the
patient has obtained them from a non-pharmacy source. That is, the
system can only send the alerts to the pharmacist if it includes all
the prescription and non-prescription medications being taken by the
patient.
We believe states could take effective action to help prevent
adverse medical results and possible OUD relapse, and increase
coordination of care in patients with a history of OUD. We noted that
we understand states need considerable flexibility when implementing
these reviews to address complicated patient populations. The proposed
prospective safety edits, automatic retrospective claims reviews, or a
combination of these approaches, would help identify cases where a
beneficiary is prescribed an opioid after the beneficiary has been
prescribed one or more drugs used for MAT or has received an OUD
diagnosis. Accordingly, we proposed that states would have flexibility
to determine which of these DUR approaches the state would implement,
including the flexibility to incorporate both into an effective DUR
program. State flexibility also would extend to specifying the time
period between the prior episode of MAT or OUD diagnosis (or most
recent prior episode of MAT or OUD diagnosis) and the subject opioid
prescription that, if not met, would trigger the alert (for example, an
opioid prescription within 24 months of the end of the most recent
episode of MAT would trigger a prospective safety edit). Flexibility
could also extend to diagnoses where opioid use after MAT is
appropriate without compromising OUD treatment (for example, in end of
life care or in cancer patients with severe pain resulting from their
disease or that does not respond to alternative pain management
options).
In consideration of clinical recommendations to ensure appropriate
MAT treatment, and to prevent opioid related abuse and misuse, we
believe the proposed prospective safety edits and/or retrospective
claim reviews are necessary to assure that prescriptions are
appropriate, medically necessary, and not likely to result in adverse
medical results, and to accomplish other purposes of the DUR program
under section 1927(g) of the Act and of the SUPPORT Act. This proposed
requirement is authorized by and expected to advance the purposes of
section 1927(g) of the Act and is consistent with the purposes of
section 1004 of the SUPPORT Act. Accordingly, we proposed at Sec.
456.703(h)(1)(vii)(A) that states be required to implement reviews to
alert when the beneficiary is prescribed an opioid after the
beneficiary has been prescribed one or more drugs used for MAT for an
OUD or has been diagnosed with an OUD, within a timeframe specified by
the state, in the absence of a new indication to support utilization of
opioids (such as new cancer related pain diagnosis or entry into
hospice care). In addition to helping ensure appropriate utilization of
medications, we noted that these edits would assist in coordination of
care, and potentially in improved treatment of pain.
The following is a summary of the comments we received on these
additional minimum standards for DUR programs related to MAT, and our
responses.
Comment: One commenter requested clarification as to whether DUR
activities are applicable to beneficiaries who receive implantable or
injectable formulations of medications for opioid use disorder (MOUD).
Additionally, other commenters expressed concern that MOUD dispensed in
an Outpatient Treatment Programs (OTPs) or MOUD administered in
settings where regulations pertaining to CODs do not apply are
vulnerable to adverse reactions that result from concurrent
prescribing, particularly for beneficiaries receiving methadone. With
respect to OTPs, this concern arises because methadone is generally
paid for as part of a single bundled service when used in an OTP, and
thus would not be a covered outpatient drug as a result of the limiting
definition found at section 1927(k)(3) of the Act; therefore, methadone
use may not be detected by DUR systems designed to examine use of
covered outpatient drugs.
Response: We interpret the comment regarding MOUD as referring to
medications used to treat opioid use disorders, more commonly referred
to as medication-assisted treatment (MAT). Medications used in MAT--
including methadone, naltrexone, and buprenorphine--are used to treat
individuals who have opioid use disorders, such as opioid dependency.
Section 1006(b) of the SUPPORT Act amended section 1902(a)(10)(A) of
the Act to require state Medicaid plans to include coverage of MAT for
OUD for categorically needy populations, added this new required
benefit to the definition of medical assistance at section 1905(a)(29)
of the Act, and added a definition of the coverage required under the
new benefit at section 1905(ee)(1) of the Act. Section 1905(a)(29)
specifies that the new mandatory MAT benefit will be in effect for the
period beginning October 1, 2020, and ending September 30, 2025.
CMS interprets section 1905(a)(29) and 1905(ee) of the Act to
require that states include as part of this new mandatory benefit all
forms of drugs and biologicals that FDA has approved or licensed for
MAT to treat OUD. At this time, this includes the drugs methadone,
buprenorphine, and naltrexone, as there are no biologicals currently
licensed by FDA to treat OUD. Before the new mandatory MAT benefit took
effect on October 1, 2020, states covered many of these MAT drugs (for
all FDA approved and medically-accepted indications) under the optional
benefit for prescribed drugs described at section 1905(a)(12) of the
Act.
A statutory change was made to sections 1905(a)(29) and 1905(ee) of
the Act by section 2601 of the Continuing Appropriations Act of 2021,
and other Extensions Act (Pub. L. 116-159), to specify that the
Medicaid drug rebate program (MDRP) requirements in section 1927 of the
Act shall apply to any MAT drugs or biologicals used to treat OUD
described under the definition of the mandatory benefit at section
1905(ee)(1)(A) of the Act, that are furnished as medical assistance
under sections 1905(a)(29) and section 1902(a)(10)(A) of the Act, and
are covered outpatient drugs, as that term is defined at section
1927(k)(7) of the Act.
In determining whether such a MAT drug or biological satisfies the
definition of a covered outpatient drug, such MAT drugs or biologicals
are deemed prescribed drugs for such purposes. More specifically, these
amendments ensure that MAT drugs and biologicals covered under the new
mandatory benefit are included in the MDRP, make it possible for states
to seek section 1927 rebates and apply drug utilization management
mechanisms (such as preferred drug lists and prior approval) with
respect to these drugs and biologicals, and establish a manufacturer's
obligation to pay appropriate rebates and comply with all applicable
drug product and drug pricing reporting and payment of rebates with
respect to these drugs and biologicals. The change in law is effective
as if included in the enactment of the SUPPORT Act, which was October
24, 2018.
To the extent the injectable and implantable drugs used for MOUD
[[Page 87087]]
satisfy the definition of a covered outpatient drug, such drugs would
be subject to the same DUR edits and activities as other drugs that
meet the definition of a covered outpatient drug. That is, states would
be expected to include such drugs in the prospective claims edits and
retrospective claims analysis that would be applicable to other covered
outpatient drugs, and apply any of the opioid safety edits and other
required DUR activities to the extent that these MAT drugs were also
opioids.
Comment: One commenter encouraged CMS to consider how the proposed
DUR approaches complement or otherwise interact with other utilization
management strategies, to ensure that states are not unduly restricting
access to MOUD.
Response: As noted above, MAT drugs, or medications for opioid use
disorders, are covered under a new mandatory MAT benefit, but can also
be covered outpatient drugs. MAT drugs that are also covered outpatient
drugs can thus be subject to the same utilization management
approaches, such as prior authorization, and DUR program safety edits
and claims reviews, as can other covered outpatient drugs under section
1927 of the Act. Before the new mandatory MAT benefit took effect on
October 1, 2020, MAT drugs were available to patients through the
optional prescription drug benefit under section 1905(a)(12) of the Act
as covered outpatient drugs, and evidence from state DUR program
surveys indicate that these medications were made available by states
to Medicaid beneficiaries under the optional benefit. We expect that
access to these medications will increase given that they are now
covered under the new MAT mandatory benefit.
Comment: A few commenters urged CMS to clearly articulate the
requirements for a MAT DUR program.
Response: We are not requiring states to implement a DUR program
specific to MAT medications. We proposed to require states to implement
prospective safety edits, automatic retrospective claims reviews, or a
combination of these approaches, as determined by the state, to
identify when a beneficiary is prescribed an opioid after the
beneficiary has been prescribed one or more drugs used for MAT for an
OUD or has been diagnosed with an OUD, within a timeframe specified by
the state, in the absence of a new indication to support utilization of
opioids (such as new cancer related pain diagnosis or entry into
hospice care). Accordingly, we proposed that states would have
flexibility to determine which of these DUR approaches--prospective,
retrospective, or both--the state would implement as part of an
effective DUR program to identify these patients. State flexibility
also would extend to specifying the time period between the prior
episode of MAT or OUD diagnosis (or most recent prior episode of MAT or
OUD diagnosis), as well as the identification of specific indications
that could support a new opioid prescription (such as new cancer
related pain diagnosis or entry into hospice care) and therefore not
trigger a safety edit alert and/or retrospective review under the
state's implementation. We are finalizing this provision as proposed in
Sec. 456.703(h)(1)(vii)(A).
Comment: One commenter supported the proposed minimum standards for
MAT but noted that the proposals for prospective safety edit alerts and
retrospective claims review may impact 42 CFR part 2 confidentiality
protection of those patients with Substance Use Disorder (SUD) patient
records. Another commenter suggested that CMS and SAMHSA provide
guidance on how the proposed opioid-related DUR requirements should be
implemented in a manner that protects beneficiary information
consistent with the requirements in part 2; this commenter was
specifically concerned that claims data about services beneficiaries
receive from part 2 providers might be disclosed to non-part 2
providers without patient consent.
Response: We believe that it is essential for all states to comply
with 42 CFR part 2 regulations in order to uphold the confidentiality
of patient medication information held by part 2 providers. We further
note the potential applicability of state privacy regulations and
Health Information Portability and Accountability Act as referenced in
the National Association of State Mental Health Program Directors
Technical Assistance Coalition's Compilation of State Behavioral Health
Patient Treatment Privacy and Disclosure Laws and Regulations.\125\ The
42 CFR part 2 regulations serve to protect substance use disorder
patient records that are maintained in connection with the performance
of part 2 programs (as defined in 42 CFR 2.11). The 42 CFR part 2
regulations have been revised, most recently in 2020, to facilitate
better coordination of care activities with providers that are not
participating in a part 2 program (considered non-part 2 providers) in
response to the opioid epidemic while maintaining patient
confidentiality protections against unauthorized record use and
disclosure pursuant to 42 CFR part 2. Section 3221 of the Coronavirus
Aid, Relief, and Economic Security Act (CARES Act) will require further
revisions to part 2. CMS notes that part 2 records may be disclosed
under certain conditions with patient consent and under various
exceptions to patient consent requirements (for example, 42 CFR 2.53).
Because the application of part 2 regulations to specific disclosures
may be complex, state programs should consult legal counsel about DUR
programs, applicable privacy laws and regulations and disclosure of
patient identifying information. A SAMHSA Part 2 Revised Rule Fact
Sheet is available for more information.\126\
---------------------------------------------------------------------------
\125\ https://www.nasmhpd.org/content/tac-assessment-working-paper-2016-compilation-state-behavioral-health-patient-treatment.
\126\ https://www.hhs.gov/about/news/2020/07/13/fact-sheet-samhsa-42-cfr-part-2-revised-rule.html.
---------------------------------------------------------------------------
Comment: One commenter encouraged CMS to provide more examples of
when it may be appropriate to prescribe additional opioid medications
to patients receiving MAT.
Response: We included examples in the proposed rule focusing on end
of life care or for cancer patients with severe pain resulting from
their disease or that does not respond to alternative pain management
options. We recommend exploring currently approved and accepted
clinical practice guidelines to better understand these and other
instances when it may be appropriate to prescribe additional opioid
medications to patients receiving MAT, such as SAMHSA's publication,
Medication-Assisted Treatment For Opioid Addiction in Opioid Treatment
Programs.\127\
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\127\ https://store.samhsa.gov/product/TIP-63-Medications-for-Opioid-Use-Disorder-Full-Document/PEP20-02-01-006.
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Comment: One commenter suggested that certified registered nurse
anesthetists' (CRNAs') approach to pain management may reduce the
reliance on opioids as primary pain management as CRNAs manage chronic
pain in a compassionate, patient-centered, holistic manner, using a
variety of therapeutic, physiological, pharmacological, and
interventional modalities. Additionally, this commenter stated that
moving from a unimodal approach of using opioid drugs to manage chronic
and acute pain to a more patient-centered, multidisciplinary,
multimodal opioid-sparing treatment approach optimizes patient
engagement in their own pain care which would reduce the risk of
patients developing SUDs.
Response: We agree that all of a patient's treating providers
working in
[[Page 87088]]
coordination have a role to play in reducing the reliance on opioids as
a primary pain management modality. Section 1006(b) of the SUPPORT Act
amended the Social Security Act to include a new MAT Medicaid benefit,
and defined that benefit to not only include FDA approved drugs and
licensed biological products to treat OUD, but also counseling services
and behavioral therapies related to the provision of the drugs and
biological products, and thus recognizes that providing these therapies
could help to optimize treatment.
Comment: One commenter noted that for chronic pain management,
particularly if opioids are prescribed in the treatment, the clinician
should discuss the risk of dependence and OUD, as well as enter into a
pain management treatment agreement with the patient.
Response: Generally, to the greatest extent possible, clinical
decision-making should be undertaken in the context of the relationship
between the provider and the patient and should consider nationally
recognized clinical best practices relevant to the patient's specific
treatment needs. The provider should educate the patient on any
prescribed treatment, to include both benefits and potential risks.
Resources and guidance issued by public associations such as the PQA,
NCQA, NQF; and federal agencies including, but limited to, the AHRQ,
SAMHSA, and the CDC are available to support clinical best practices.
Additionally, the safety edits required under this final rule can
create an opportunity for additional review and patient consultation
that could potentially result in a more clinically appropriate approach
to treatment to forge a stronger provider/patient relationship. Another
tool available to help foster a better a provider/patient relationship
could be to employ the use of a pain management agreement (PMA) which
allows for the documentation of understanding between a provider and
patient. PMAs, when used, provide a means of facilitating care and
improving communication between providers and their patients. It is
important to note that the PMA is not designed as a contract, but
rather a tool that sets forth important information about potential
risks, benefits, safeguards, expectations, and patient and provider
responsibilities. In the event the patient gets off-course with his or
her treatment, the PMA provides a foundation for discussion as to the
potential consequences and solutions.\128\
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\128\ https://health.ri.gov/publications/guidelines/provider/PatientViolatesPainAgreement.pdf.
---------------------------------------------------------------------------
Comment: One commenter opined that CMS should encourage state
Medicaid programs to remove coverage and formulary limits, prior
authorization requirements, step therapy requirements, and other
administrative burdens or barriers that may inappropriately delay or
deny MAT, with respect to all medications approved by FDA for OUD.
Response: MAT is an effective, comprehensive, and evidence-based
treatment that is integral to addressing the nation's opioid crisis.
Section 1006(b) of the SUPPORT Act amended the Social Security Act to
require state Medicaid plans to cover MAT for OUD for the categorically
needy populations. Evidence demonstrates that treatment for substance
use disorders--including inpatient, residential, and outpatient
treatment--is cost-effective compared with no treatment.\129\ Existing
Medicaid authorities, as well as new opportunities afforded by the
SUPPORT Act, are available to help states expand their SUD service
continuum, which can include MAT. Additionally, to increase access to
MAT for OUD, section 1006(b) of the SUPPORT Act requires states to
provide Medicaid coverage of certain drugs and biological products, and
related counseling services and behavioral therapy.\130\ Additionally,
states may use utilization management controls to promote the efficient
delivery of care and to control costs.
---------------------------------------------------------------------------
\129\ Office of the Surgeon General, Facing Addiction in
America: The Surgeon General's Report on Alcohol, Drugs, and Health.
Washington, DC: HHS, November 2016. Chapter 4, Early Intervention,
Treatment, and Management of Substance Use Disorders. https://addiction.surgeongeneral.gov/sites/default/files/surgeon-generals-report.pdf.
\130\ SUPPORT for Patients and Communities Act section 1006(b),
Public Law 115-271 (2018), https://www.congress.gov/115/plaws/publ271/PLAW-115publ271.pdf.
---------------------------------------------------------------------------
In consideration of comments received, we are finalizing Sec.
456.703(h)(1)(vii)(A) as proposed, to require states to establish
approaches to identify cases where a beneficiary is prescribed an
opioid after the beneficiary has been prescribed one or more drugs used
for MAT or had an OUD diagnosis within a specified number of days,
without having a new indication to support utilization of opioids.
b. Coprescribing or Codispensing of Naloxone When a Patient Is at High
Risk for Opioid Overdoses
To further implement section 1927(g)(1) of the Act, and consistent
with section 1004 of the SUPPORT Act, we proposed and sought comment on
requiring states to establish prospective safety edit alerts, automatic
retrospective claims review, or a combination of these approaches as
determined by the state, to identify beneficiaries who could be at high
risk of opioid overdose and should be considered for co-prescription or
co-dispensing of naloxone with the goal of expanding appropriate
utilization to individuals at risk of opioid overdose. As discussed
below, based on comments received, we are modifying the proposal in
this final rule by replacing the reference to naloxone with a reference
to all FDA-approved opioid antagonist/reversal agents so that the final
regulation is broad enough to encompass additional such drugs, should
FDA approve any others in the future. An opioid antagonist/reversal
agent is a medication designed to rapidly reverse opioid overdose by
binding to opioid receptors and reversing the effects of opioids.
Opioid antagonist/reversal agents work quickly to restore normal
respiration to a person whose breathing has slowed or stopped as a
result of an opioid overdose, including both illicit and prescription
opioids. However, opioid antagonist/reversal agents only work if a
person has opioids in their system; the medication has no effect if
opioids are absent.\131\ Currently, naloxone is the only FDA-approved
opioid antagonist/reversal agent, but it is possible that FDA could
approve others in the future.
---------------------------------------------------------------------------
\131\ ``Understanding Naloxone.'' Harm Reduction Coalition.
Available at https://harmreduction.org/issues/overdose-prevention/overview/overdose-basics/understanding-naloxone/.
---------------------------------------------------------------------------
The prescribing or co-prescribing of an opioid antagonist/reversal
agent to patients at elevated risk for opioid overdose or for those who
have overdosed on opioids can save lives.\132\ We recommended states
consider ways to expand access to, and distribution and use of
naloxone, or another opioid antagonist/reversal agent that may be
approved in the future, when clinically appropriate.
---------------------------------------------------------------------------
\132\ NEJM Journal Watch: Summaries of and Commentary on
Original Medical and Scientific Articles from Key Medical Journals,
HHS-recommends-coprescribing-naloxone-with-opioids-high. https://www.jwatch.org/fw114907/2018/12/20/hhs-recommends-coprescribing-naloxone-with-opioids-high.
---------------------------------------------------------------------------
When implementing this safety edit or review, we noted that states
should
[[Page 87089]]
determine standards for identifying individuals at high risk for opioid
overdose, such as individuals who have been discharged from emergency
medical care following opioid overdose, individuals who use heroin or
misuse prescription pain relievers, as well as those who use high-dose
opioids for long-term management of chronic pain.\133\ Before starting
and periodically during continuation of opioid therapy, we stated that
clinicians should evaluate risk factors for opioid-related harms. When
prescribing opioids, the CDC guideline recommends clinicians should
incorporate strategies to mitigate opioid risks, including considering
offering an opioid antagonist/reversal agent when factors that increase
risk for opioid overdose are present, such as history of overdose,
history of SUD, higher opioid dosages (>=50 MME/day), or concurrent
benzodiazepine use.\134\ We noted that we understand states need
considerable flexibility when implementing this requirement to address
a complex problem and proposed that states would have flexibility to
determine which DUR approach the state would implement in an effective
DUR program: either or both of prospective safety edits and/or
retrospective claims reviews. Further, we proposed that states would
have flexibility to determine the particular criteria they would use to
identify which beneficiaries may be at high risk of opioid overdose
such that they should be considered for co-prescription or co-
dispensing of an opioid antagonist/reversal agent.
---------------------------------------------------------------------------
\133\ Ibid.
\134\ ``CDC Guidelines for Prescribing Opioids for Chronic pain.
'' Available at https://www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
---------------------------------------------------------------------------
In consideration of clinical recommendations to expand opioid
antagonist/reversal agent use to prevent adverse medical events among
those who are prescribed opioids or those who may be at high risk of
opioid overdose or who have previously overdosed, we believe this
requirement is necessary to ensure that at-risk individuals are
receiving appropriate treatment that is not likely to result in adverse
medical results, and to accomplish other purposes of the DUR program
under section 1927(g) of the Act and of the SUPPORT Act. Accordingly,
we proposed at Sec. 456.703(h)(1)(vii)(B) that states be required to
implement prospective safety edit alerts, automatic retrospective
claims reviews, or a combination of these approaches, as determined by
the state, to identify when a beneficiary could be at high risk of
opioid overdose and should be considered for co-prescription or co-
dispensing of naloxone. As discussed below, we are modifying this
requirement in this final rule to extend to any FDA-approved opioid
antagonist/reversal agent. As noted in the proposed rule, we anticipate
that this requirement may help expand appropriate utilization of an
opioid antagonist/reversal agent, including the facilitation of
dispensing to individuals at risk of overdose.
The following is a summary of the comments we received on
additional minimum standards for DUR programs with respect to co-
prescribing or co-dispensing of naloxone and our responses.
Comment: One commenter suggested expanding the language in the
proposed rule to include therapies that are not naloxone-based,
suggesting ``any FDA-approved opioid antagonist/reversal agent'' in the
place of naloxone.
Response: We agree with the commenter. The language in our proposed
rule referred to naloxone because this is the only FDA approved
antagonist/reversal agent at this time. We do understand that other
agents may be developed and receive FDA approval within this
therapeutic class. We do not want to limit the new safety edit to
simply one drug, should another opioid antagonist/reversal agent gain
FDA approval in the future; such a limitation would be less effective
in accomplishing our goal of promoting the appropriate co-prescribing
and co-dispensing of such agents to help mitigate the effects of opioid
overdose. To reflect the proactive intent of this rulemaking, we are
implementing the commenter's suggestion to revise the regulation text
to refer to ``any FDA-approved opioid antagonist/reversal agent.''
Comment: A few commenters encouraged CMS to work with state
Medicaid agencies and other commenters to develop recommended best
practices for prescribers and pharmacists for communicating with
patients about an opioid antagonist/reversal agent. Some commenters
recommended that CMS consider approaches to expand education on
administering opioid antagonist/reversal agents and in recognizing the
signs and symptoms of an overdose.
Response: We agree with the commenters that best practices should
be established for providers to educate beneficiaries and their
families about opioid antagonist/reversal agents. Currently available
relevant materials include the SAMHSA Opioid Overdose Prevention
Toolkit.\135\ This toolkit provides advice for prescribers and
beneficiaries and their families. Additionally, the toolkit encourages
providers and others to learn about preventing and managing opioid
overdose, promoting access to treatment for individuals who have a SUD,
expanding access to naloxone, and it encourages prescribers to use
PDMPs. This resource could be helpful to providers, including
prescribers and pharmacists, in discussing opioid overdose risk and
prevention with patients and their families and caregivers.
---------------------------------------------------------------------------
\135\ https://store.samhsa.gov/sites/default/files/d7/priv/sma18-4742.pdf.
---------------------------------------------------------------------------
Comment: Some commenters expressed the belief that pharmacists
should be allowed to dispense any FDA-approved opioid antagonist/
reversal agent over the counter (OTC) without a prescription and
appropriate related indemnification should be extended to pharmacists.
One commenter suggested CMS address prescription status, as well as the
cost of opioid antagonist/reversal agents as barriers to utilization.
Commenters also opined that Good Samaritan laws should be implemented
in every state to shield health care personnel and lay persons from
liability when administering an opioid antagonist/reversal agent to
individuals suspected of opioid overdose.
Response: Although this is not in scope of this rule, most states
do allow pharmacists to dispense FDA-approved opioid antagonist/
reversal agents. Forty-seven states (94 percent) allow pharmacists to
dispense these agents independently or through collaborative practice
agreements, standing orders, or other predetermined protocols developed
by entities including State Boards of Professional Regulations, Boards
of Pharmacy, and/or Boards of Medicine, as applicable.\136\ This allows
greater access and less barriers to obtain these agents by patients
and/or their family members and caregivers. Additionally, FDA-approved
opioid antagonists/reversal agents are available without prior
authorization in all states.\137\
---------------------------------------------------------------------------
\136\ https://www.medicaid.gov/medicaid/prescription-drugs/drug-utilization-review/drug-utilization-review-annual-report/index.html.
\137\ Ibid.
---------------------------------------------------------------------------
Comment: Some commenters suggested standards for healthcare
providers who administer naloxone or any FDA-approved opioid
antagonist/reversal agent such as educational programs designed to
inform providers on proper administration and patient communication.
[[Page 87090]]
Response: We agree that clinical standards for healthcare providers
who administer any FDA-approved opioid antagonist/reversal could be
useful and that providers should be properly educated on the correct
use of drugs in this class, of which naloxone currently is the only
one. The SAMHSA Opioid Overdose Prevention Toolkit is a resource
available to states, providers, and beneficiaries; it contains helpful
information regarding the proper use of naloxone.\138\
---------------------------------------------------------------------------
\138\ https://store.samhsa.gov/sites/default/files/d7/priv/sma18-4742.pdf.
---------------------------------------------------------------------------
In consideration of comments received, with a limited exception, to
further implement section 1927(g)(1) of the Act, and consistent with
section 1004 of the SUPPORT Act, we are finalizing, as proposed, Sec.
456.703(h)(1)(vii)(B) to require states to establish approaches to
identify beneficiaries who could be at high risk of opioid overdose and
should be considered for co-prescription or co-dispensing of naloxone.
Based on comments received, we are revising the final regulation text
in Sec. 456.703(h)(1)(vii)(B) to replace the proposed reference to
naloxone with a reference to all FDA-approved opioid antagonist/
reversal agents, so that the final regulation is broad enough to
encompass additional such drugs, should FDA approve any others in the
future.
3. Exclusions
The foregoing DUR requirements added to section 1902(oo) of the Act
by section 1004 of the SUPPORT Act, which we proposed to implement
along with additional related proposals under section 1927(g) of the
Act at Sec. 456.703(h)(1)(i) through (h)(1)(vii)(B), do not apply for
individuals who are receiving hospice or palliative care or those in
treatment for cancer; residents of a long-term care (LTC) facility, a
facility described in section 1905(d) of the Act (that is, an
intermediate care facility for the intellectually disabled), or of
another facility for which frequently abused drugs are dispensed for
residents through a contact with a single pharmacy; or other
individuals the state elects to treat as exempted from such
requirements.
We understand states need considerable flexibility when
implementing these safety edits and claims reviews to address
complicated patient populations. We noted our expectation that states
would consult national guidelines and work with their P&T and DUR
committees to identify other clinically appropriate patient populations
for possible exclusion from the safety edits and claims reviews
specified in Sec. 456.703(h)(1)(i) through (vii), to avoid impeding
critical access to needed medication when managing specific complex
disease states.
We proposed to implement this statutory exclusion at Sec.
456.703(h)(2), such that states would not be required to implement the
specified DUR requirements for these populations. However, while states
are not required to comply with these requirements for these
individuals, we clarified, and proposed to codify in the regulation,
that states voluntarily may apply the prospective safety edits and
claims review automated processes otherwise required under the SUPPORT
Act to exempt populations.\139\
---------------------------------------------------------------------------
\139\ Section 1902(oo)(3) of the Act, as added by section 1004
of the SUPPORT Act.
---------------------------------------------------------------------------
The following is a summary of the comments we received on the
proposed exclusion standards for DUR programs, and our responses.
Comment: One commenter expressed concern that more information
would be needed from the states for the pharmacist and other providers
to properly identify beneficiaries who are receiving hospice or
palliative care, or who are residents in certain LTC facilities, to
ensure exemptions from opioid safety edits and automated claims reviews
are correctly applied.
Response: We understand states have multiple patient information
systems and data sources available to help identify beneficiaries that
are exempt from opioid-related safety edits and/or claims reviews,
including their claims systems, PDMPs, and information from the
databases of pharmacy benefit managers with which the state (or the
state's managed care plans) has contracted to administer COD benefits
for beneficiaries. As drug utilization review is performed through
claims processing systems, linking to other sources to identify these
populations should help states implement their safety edits and claims
reviews. Ideally, a comprehensive DUR program that optimizes such
system linkages would present safety edit information at the point of
care, including to the provider (such as through an EHR system) before
the prescription is written and to the pharmacist before it is
dispensed. This way, clinical issues can be resolved proactively and
the beneficiary will be able to receive his or her clinically-indicated
opioid therapy without undue disruption.
We remind states that they should not impose a greater burden on
medication access for individuals with disabilities residing in
community-based settings than that applied to similar individuals
residing in institutional settings, consistent with the Americans with
Disabilities Act (ADA) and the Supreme Court's decision in Olmstead v.
L.C., 527 U.S. 581 (1999).
CMS will consider adding additional questions to the annual state
and MCO DUR surveys that may help provide additional information on
policies relating to patient populations that the state exempts from
the opioid-specific DUR requirements, and how states implement such
policies.
Comment: One commenter suggested that CMS identify beneficiaries
residing in assisted living facilities (ALFs) as a population that
would be excluded from these opioid safety edits. Additionally, some
commenters recommended that patients with sickle cell disease and
cancer survivors should be considered as potential excluded
populations. Other commenters requested that we delete from the
regulatory exemption text proposed at Sec. 456.703(h)(2) the following
sentence: ``While States are not required to apply these requirements
for these individuals, States may elect to do so,'' due to the
commenters' belief that the statement is inconsistent with the clear
expression of the Congress that the specified groups should be exempt
from the DUR requirements.
Response: Under this final rule, states have flexibility to
determine additional populations to exclude from the application of the
required opioid-related safety edits and claims reviews. This includes
the flexibility to exclude, for example, patients with sickle cell
disease or cancer survivors. Additionally, we proposed to codify in the
regulation, that states voluntarily may apply prospective safety edits
and claims review automated processes, as well as the program for
monitoring antipsychotic use in children and the process for
identifying potential fraud or abuse of controlled substances that are
otherwise required under the SUPPORT Act to otherwise exempt
populations. As stated, this is not a requirement; however, we believe
beneficiaries in the excluded populations would benefit from the safety
edits and claims reviews and other measures otherwise required under
this final rule, to help ensure their opioid-related treatment is
clinically appropriate and their risk of opioid-related harm is
minimized. For example, beneficiaries in the excluded populations would
also benefit from safety edits and reviews being finalized in this rule
to help avert unintended therapeutic duplication and drug interactions,
which would be more
[[Page 87091]]
likely to be missed if the beneficiaries were not subject to opioid-
related safety edits and claims reviews. States would benefit from
subjecting as broad a population as possible to opioid-related safety
edits and claims reviews, too, as comprehensive data collection better
ensures all populations are accounted for when further developing the
DUR program and making other policy decisions. States that opt not to
exclude otherwise excluded beneficiaries from the activities required
under Sec. 456.703(h)(1)(i) through (vii) would do so under the
authority of section 1927(g) of the Act, not the amendments made by the
SUPPORT Act. Furthermore, as discussed above, the safety edits and
claims reviews required under this final rule are not intended to
prevent any beneficiary from receiving clinically appropriate
prescribed treatment, but rather, to help ensure their prescribed
treatment is appropriate and medically necessary.
Comment: One commenter requested clearer guidance to ensure that
safety edits and retrospective claims reviews, if voluntarily
implemented by the state for otherwise exempt populations, achieve
their intended goal without harming these excluded patients.
Response: This final rule is intended to ensure that certain
patient and clinical information is provided to prescribers and
pharmacists to help ensure that beneficiaries who take opioids are
taking them correctly and are not unnecessarily subjected to increased
potential for clinical harm. State flexibility to voluntarily implement
safety edits and claims reviews on otherwise excluded patient
populations should help ensure coordinated patient care and avoid harm
that could be associated with excessive or otherwise inappropriate use
of opioids. We encourage states to consult nationally-recognized
guidelines when implementing these safety edits, including but not
limited to those issued by PQA, NCQA, NQF, and federal agencies such as
AHRQ, SAMHSA, and the CDC.
In consideration of the comments received, we are finalizing Sec.
456.703(h)(2) as proposed, specifying that the requirements in Sec.
456.703(h)(1)(i) through (vii) do not apply with respect to individuals
receiving hospice or palliative care or treatment for cancer;
individuals who are residents of long-term care facilities,
intermediate care facilities for the intellectually disabled, or
facilities that dispense frequently abused drugs through a contract
with a single pharmacy; or other individuals the state elects to
exempt. While states are not required to apply these requirements with
respect to these individuals, states may elect to do so, pursuant to
section 1927(g) of the Act.
4. Managed Care Requirements
Pursuant to section 1902(oo)(1)(A)(ii) of the Act, as added by
section 1004 of the SUPPORT Act, states also must ensure that their
contracts with MCOs under section 1903(m) of the Act and MCEs under
section 1905(t)(3) of the Act require that the MCOs or MCEs have safety
edits, an automated review processes, a program to monitor
antipsychotic medications in children, and fraud and abuse
identification requirements as described in the June 2020 proposed rule
for individuals eligible for medical assistance under the state plan
(or waiver of the state plan) who are enrolled with the entity, subject
to the exclusions of individuals specified in section 1902(oo)(1)(C) of
the Act. We noted that states must include these DUR provisions in
managed care contracts by October 1, 2019. Although the foregoing
provisions added by the SUPPORT Act address only MCOs and MCEs in the
managed care context, we proposed also to extend these requirements to
contracts with PAHPs and PIHPs under our authority in section
1902(a)(4) of the Act, under which existing PIHP and PAHP requirements
are authorized. Thus, as proposed, states would be required to include
PAHPs and PIHPs when uniformly implementing the updates and
requirements specified in amendments made by section 1004 of the
SUPPORT Act for all Medicaid managed care programs, regardless of
whether the services are covered through a contract with an MCO, MCE,
PIHP, or PAHP.
As required by section 1004 of the SUPPORT Act, each Medicaid MCO
and MCE within a state must also operate a DUR program that complies
with specified requirements. We proposed to define MCEs in Sec. 438.2
to have the meaning given to the term under section 1932(a)(1)(B) of
the Act, which defines the term to mean a Medicaid MCO, as defined in
section 1903(m)(1)(A), that provides or arranges for services for
enrollees under a contract pursuant to section 1903(m) of the Act, or a
primary care case manager, as defined in section 1905(t)(2) of the Act.
Managed care regulations at Sec. 438.3(s)(4) require Medicaid managed
care DUR programs in which an MCO, PIHP, or PAHP contracts to provide
coverage for CODs to operate consistently with section 1927(g) of the
Act and part 456, subpart K, and that state contracts must be updated
to include these requirements. We proposed to amend the regulation at
Sec. 438.3(s) introductory text and (s)(4) and (5) to require that
MCEs comply with the requirements in section 1902(oo)(1)(A) of the Act
as implemented in these proposed regulations, similar to MCOs, PIHPs,
and PAHPs.
Although no comments were received, we are not finalizing our
proposed definition of managed care entities and MCE in Sec. 438.2 and
we are finalizing amendments to Sec. 438.3(s) introductory text and
(s)(4) and (s)(5) replacing all proposed references to MCE to ``PCCM''
in the final version of Sec. 438.2(s) to implement our proposal that
PCCMs be added to the list of managed care plans that must comply with
Sec. 438.3(s)(4) and (5). Because MCO and PCCM are already defined
terms, we believe it would be simpler and less potentially confusing to
add a reference to PCCM in each of the amended provisions, rather than
define MCE as a new term that would only group two already-defined
entity types. No substantive change in meaning from the proposal is
intended by this change in the final rule.
5. State Plan Amendment (SPA) Requirements
Section 1004 of the SUPPORT Act amended the state plan requirements
in section 1902 of the Act to include a new paragraph (a)(85), which
requires the state plan to provide that the state is in compliance with
the new drug review and utilization requirements set forth in section
1902(oo) of the Act, as also added by the SUPPORT Act. The SUPPORT Act
also requires all states to implement these requirements by October 1,
2019, and to submit an amendment to their state plan no later than
December 31, 2019, consistent with the SPA requirements in 42 CFR part
430, subpart B, to describe how the state addresses these provisions in
the state plan. States are also expected to give appropriate tribal
notification, as required, if applicable. Guidance regarding state plan
amendment requirements was issued to states in a CMS informational
bulletin in August 2019.\140\ In the proposed rule, we noted that, if
the proposed provisions implementing section 1004 of the SUPPORT Act
and section 1927(g) of the Act were finalized, then an additional SPA
potentially could be needed to ensure that state plans are in
compliance with the applicable final regulations. We stated that we
would
[[Page 87092]]
expect to provide related guidance in connection with any final rule.
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\140\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib080519-1004.pdf.
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The following is a summary of the comments we received on SPA
requirements, and our responses.
Comment: One commenter noted that CMS is proposing a number of
minimum DUR standards that restate the requirements of the SUPPORT Act,
with which states have already submitted state plan amendments to
comply. This commenter noted that states should be required to follow
their approved state plans, which the state can seek to further amend
based on best practices in medicine. This commenter also opined that
CMS is overstepping its authority to regulate by proposing to prescribe
other DUR practices in regulation beyond those that are included in the
SUPPORT Act.
Response: We agree with the commenter that all states have
submitted state plan amendments to comply with the amendments made by
section 1004 of the SUPPORT Act, and all have been approved.
Additionally, the state plan must be amended as necessary so that it
accurately and comprehensively describes how the state complies with
the requirements added to section 1902 of the Act by section 1004 of
the SUPPORT Act, as well as the requirement in section 1902(a)(54) of
the Act that a state plan that includes coverage of CODs must comply
with the applicable requirements of section 1927 of the Act.
We do not believe that we have exceeded our statutory authority
with respect to the proposed requirements, which we are finalizing as
discussed elsewhere in this final rule, for safety edits and claims
reviews beyond those that are expressly required pursuant to amendments
made by the SUPPORT Act. To further implement section 1927(g)(1) of the
Act, which requires that a state DUR program assures that covered
outpatient drugs are appropriate, medically necessary, and not likely
to result in adverse events, and consistent with section 1004 of the
SUPPORT Act, we proposed to require states to establish several new
safety edits and/or claims reviews. Specifically, these requirements
are: To develop prospective safety edit alerts, automatic retrospective
claims review, or a combination of these approaches as determined by
the state to identify cases where a beneficiary is prescribed an opioid
after the beneficiary has been prescribed one or more drugs used for
MAT or had an OUD diagnosis; and where beneficiaries who could be at
high risk of opioid overdose should be considered for co-prescription
or co-dispensing of any FDA-approved opioid antagonist/reversal agent.
This final rule affords states flexibility in designing and
implementing required safety edits and claims reviews in the manner the
state determines would be best adapted to the circumstances in the
state, including the particular needs of the state's Medicaid
beneficiaries. These requirements implement section 1927 of the Act,
and while consistent with them, do not directly implement amendments
made by section 1004 of the SUPPORT Act.
6. Reporting Requirements
Consistent with section 1927(g)(3)(D) of the Act, we require each
state Medicaid agency to submit to us an annual report on the operation
of its Medicaid DUR program. Under Sec. 456.712(a), the state must
require the DUR Board to prepare and submit, on an annual basis, a
report to the state Medicaid agency. Under Sec. 456.712(b), each state
Medicaid agency must in turn submit this report to us, as well as
specified additional information, including but not limited to
descriptions of the nature and scope of the state's prospective and
retrospective DUR programs, detailed information on the specific DUR
criteria and standards in use, a description of the actions taken to
ensure compliance with predetermined standards requirements in Sec.
456.703, a summary of the educational interventions used and an
assessment of their effect on quality of care, and an estimate of the
cost savings generated as a result of the DUR program. We have compiled
state FFS Medicaid DUR annual reports since 1995 and have published
them on Medicaid.gov since 2012. Since 2016, Sec. 438.3(s)(4) requires
any MCO, PIHP or PAHP that covers CODs to operate a DUR program that
complies with section 1927(g) of the Act and 42 CFR part 456, subpart
K, as though these requirements applied to the MCO, PIHP, or PAHP
instead of the state, including requirements related to annual DUR
reporting. Given the commercial nature of many MCEs, incorporation of
information posted to Medicaid.gov provides new considerations with
regard to public disclosure of information received by CMS.
In an effort to share and encourage innovative and collaborative
practices, we also proposed to publish all information received in
annual DUR reports from FFS and managed care programs on a CMS website.
We proposed to add new paragraph (c) to Sec. 456.712 to provide that
all FFS and managed care DUR reports received by CMS under Sec.
456.712(b) and, as applicable, under Sec. 438.3(s), will be publicly
posted on a website maintained by CMS for the sharing of reports and
other information concerning Medicaid DUR programs.
The following is a summary of the comments we received on the
proposed minimum standards for DUR program reporting requirements, and
our responses.
Comment: One commenter recommended CMS provide a standardized
template for Medicaid MCOs reporting DUR program information, to help
ease administrative burdens.
Response: CMS does currently provide a standardized template for
Medicaid MCOs to complete. In response to section 1004 of the SUPPORT
Act, revised and additional survey questions have been incorporated to
the annual MCO survey to address recently enacted provisions. Reports
can be accessed on www.Medicaid.gov.\141\
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\141\ https://www.medicaid.gov/medicaid/prescription-drugs/drug-utilization-review/drug-utilization-review-annual-report/index.html.
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In consideration of comments received, CMS is finalizing Sec.
456.712(c) as proposed, to provide that all FFS and managed care DUR
reports received by CMS under Sec. 456.712(b) and, as applicable,
pursuant to Sec. 438.3(s), will be publicly posted on a website
maintained by CMS for the sharing of these reports and other
information concerning Medicaid DUR programs.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. With
respect to the PRA and this section of the preamble, collection of
information is defined under 5 CFR 1320.3(c) of the PRA's implementing
regulations.
To fairly evaluate whether a collection of information should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the collection of information and its
usefulness in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the
[[Page 87093]]
affected public, including automated collection techniques.
Our June 2020, proposed rule (85 FR 37286) solicited public comment
on each of these issues for our proposed information collection
requirements, burden estimates, and assumptions. PRA-related comments
were received for ICR #1 Regarding State Plan Requirements, Findings,
and Assurances and ICR #3 Regarding the Payment of Claims 18. Summaries
of the public comments and our response can be found below under the
respective ICR. We did not receive any PRA-related comments for ICR #2
Regarding Requirements for States.
A. Wage Estimates
To derive average costs, we used data from the U.S. Bureau of Labor
Statistics' May 2018 National Occupational Employment and Wage
Estimates (http://www.bls.gov/oes/current/oes_nat.htm). Table 3
presents the mean hourly wage, the cost of fringe benefits and overhead
(calculated at 100 percent of salary), and the adjusted hourly wage.
Table 3--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
Fringe
Occupation Mean hourly benefits and Adjusted
Occupation title code wage ($/hr) overhead ($/ hourly wage ($/
hr) hr)
----------------------------------------------------------------------------------------------------------------
Chief Executives................................ 11-1011 93.20 93.20 186.40
Data Entry and Information Processing Workers... 43-9020 17.52 17.52 35.04
General Operations Manager...................... 11-1021 59.15 59.15 118.30
----------------------------------------------------------------------------------------------------------------
We are adjusting our employee hourly wage estimates by a factor of
100 percent since fringe benefits and overhead costs vary significantly
from employer to employer, and because methods of estimating these
costs vary widely from study to study. Nonetheless, we believed that
doubling the hourly wage to estimate total cost is a reasonably
accurate estimation method.
Revised Wage and Cost Estimates: While our proposed rule's costs
were based on BLS's May 2018 wages, this final rule's cost estimates
are based on BLS's more recent May 2019 wages. Changes to BLS' mean
hourly wage figures are presented in the Table 4.
Table 4--Comparison of Proposed and Final Rule Mean Wage Data
----------------------------------------------------------------------------------------------------------------
CMS-2482-P: CMS-2482-F:
Occupation title Occupation May 2018 ($/ May 2019 ($/ Difference ($/
code hr) hr) hr)
----------------------------------------------------------------------------------------------------------------
Chief Executives................................ 11-1011 96.22 93.20 -3.02
Data Entry and Information Processing Workers... 43-9020 17.05 17.52 +0.47
General Operations Manager...................... 11-1021 59.56 59.15 -0.41
----------------------------------------------------------------------------------------------------------------
B. Information Collection Requirements (ICRs)
1. ICRs Regarding State Plan Requirements, Findings, and Assurances
(Sec. 447.518(d)(2) and (3))
The following changes will be submitted to OMB for approval under
control number 0938-1385(CMS-10722).
Under section 1902(a)(30)(A) the Act, we are granted the authority
to require that methods and procedures be established by states
relating to the utilization of, and the payment for, care and services
available under the state plan process (including but not limited to
utilization review plans) as may be necessary to safeguard against
unnecessary utilization of such care and services and to assure that
state payments to providers of Medicaid services are consistent with
efficiency, economy, and quality of care.
To that end, as part of the state plan approval process relative to
the CMS authorized VBP SRA, we are finalizing new reporting
requirements that would affect the 51 state Medicaid programs (the 50
states and the District of Columbia). Specifically, a state
participating in CMS authorized supplemental rebate VBP arrangements
will be required to report data described in Sec. 447.518(d)(2) and
(3) on an annual basis within 60 days of the end of each year, as well
as cumulative data if a CMS authorized SRA VBP program ended in that
year. The reported data must include: The state name; NDC(s) (for drugs
covered under the CMS authorized SRA VBP); product FDA list name;
number of prescriptions; cost to the State to administer the CMS
authorized SRA VBP (for example: Systems changes, tracking evidence or
outcomes-based measures, etc.); and the total savings generated by the
supplemental rebate due to the CMS-authorized SRA VBP. The reporting
requirements will be applicable to both FFS and MCO COD claims.
We estimate it would take an additional 6 hours at $118.30/hr for a
general operations manager to collect the SRA VBP drug utilization
information when due annually (we will choose the quarter in which the
annual data will be due), and submit the report to CMS. In aggregate we
estimate an ongoing annual burden of 306 hours (6 hr/report x 1/year x
51 respondents) at a cost of $36,200.60 (306 hr x $118.30/hr).
Other than our adjusted costs as discussed above under Wage
Estimates, our proposed requirements and burden estimates are being
finalized in this rule without change.
Comment: Several commenters raised concerns about the proposed data
reporting requirements for states participating in CMS-authorized SRA
VBP arrangements and the burden it may place on state Medicaid
agencies, such as additional administrative expenses. A few commenters
noted that if more CMS-authorized SRA VBP contracts are signed between
manufacturers and state Medicaid agencies, the administrative burden
may become too great for current state Medicaid staff and require
additional resources, such as additional staff,
[[Page 87094]]
system changes, and physical office space. Another commenter suggested
that CMS delay finalizing the proposal for states to provide CMS
specific data elements associated with CMS-authorized VBP SRAs to
ensure that the data elements can be easily collected and would not
unintentionally create additional administrative burden to state
Medicaid agencies in collecting and reporting the data elements.
Response: This final regulation does not require that states
participate in CMS authorized VBP SRAs with manufacturers, or any other
VBP arrangement. Rather, this regulation addresses the challenges faced
by manufacturers and states regarding the impact of the VBP
arrangements on MDRP price reporting obligations and the regulatory
challenges that may impede manufacturers and payer progress in
structuring and implementing VBP arrangements. However, we recognize
that states may encounter administrative burden associated with CMS-
authorized SRA VBP arrangements. This is one of the reasons that we
have requested that states provide specific data elements associated
with participating in VBP arrangements via CMS-authorized SRAs, so that
we can determine how we can help states reduce these burdens, which may
facilitate their contracting with manufacturers.
2. ICRs Regarding Requirements for States (Sec. 447.511(b), (d) and
(e))
The following changes will be submitted to OMB for approval under
control number 0938-0582 (CMS-R-144). Subject to renewal, the control
number is currently set to expire on June 30, 2023.
Under Sec. 447.511(b) states, territories, and the District of
Columbia will be required to ensure by certification that the quarterly
rebate invoices sent to manufacturers that participate in the MDRP no
later than 60 days after the end of each rebate period via CMS-R-144
(Quarterly Medicaid Drug Rebate Invoice), mirrors the data sent to us.
This rule does not impose any changes to the CMS-R-144 form.
Under Sec. 447.511(d) states will be required to certify that
their SDUD meets the requirements specified under Sec. 447.511(e) via
a certification statement. We believe the certification will not impose
a significant burden as we will provide systems access to state
certifiers to log in once per quarter to certify their SDUD report.
Certifiers would have to apply for a CMS user ID and password, and keep
current with required annual computer-based training, as current state
staff with access to our systems must do. To comply with the
certification requirements, states must already have system edits in
place to find and correct SDUD outliers prior to reporting to
manufacturers and CMS.
We estimate it would take 5 hours at $186.40/hr for the State
Medicaid Director, Deputy State Medicaid Director, another individual
with equivalent authority, or an individual with directly delegated
authority from one of the above to obtain current CMS systems access.
In aggregate we estimate a one-time system ID/password access burden of
280 hours (5 hr x 56 respondents) at a cost of $52,192 (280 hr x
$186.40/hr).
We also estimate an additional annual burden of 2 hours (or 30
minutes/quarter) at $186.40/hr for a chief executive to certify such
data and to add the state data certification language in their
submission. In aggregate we estimate an annual burden of 112 hours (2
hr x 56 respondents) at a cost of $20,877 (112 hr x $192.44/hr).
Other than our adjusted costs as discussed above under Wage
Estimates, our proposed requirements and burden estimates are being
finalized in this rule without change.
3. ICRs Regarding the Payment of Claims (Sec. 433.139(b)(2),
(b)(3)(i), and (b)(3)(ii)(B))
The following changes will be submitted to OMB for approval under
control number 0938-1265 (CMS-10529). Subject to renewal, the control
number is currently set to expire on April 30, 2021. It was last
approved on June 10, 2019, and remains active.
This final rule would implement provisions of BBA 2018 which
includes several provisions that modify COB and TPL in both statute and
regulation related to special treatment of certain types of care and
payment in Medicaid and Children's Health Insurance Program
Reauthorization Act of 2009 (CHIPRA) (Pub. L. 111-3, enacted February
4, 2009). Section 53102 of BBA 2018 amended the TPL provision at
section 1902(a)(25) of the Act. Effective February 9, 2018, section
53102(a)(1) of the BBA 2018 amended section 1902(a)(25)(E) of the Act
to require states to cost avoid claims for prenatal care for pregnant
women including labor and delivery and postpartum care, and to allow
the state Medicaid agency 90 days instead of 30 days to pay claims
related to medical support enforcement services, as well as requiring
states to collect information on TPL before making payments. Effective
April 18, 2019, section 7 of the MSIAA amended section 1902(a)(25)(E)
of the Act to allow 100 days instead of 90 days to pay claims related
to medical support enforcement services, as well as requiring all
states, the District of Columbia, and the territories (56 respondents)
to collect information on TPL before making payments.
Additionally, effective October 1, 2019, section 53102(a)(1) of the
Bipartisan Budget Act of 2018 amended section 1902(a)(25)(E) of the
Act, to require a state to make payments without regard to third party
liability for pediatric preventive services unless the state has made a
determination related to cost-effectiveness and access to care that
warrants cost avoidance for 90 days.
Under the authority in section 1902(a)(25)(A) of the Act, our
regulations at part 433, subpart D, establishes requirements for state
Medicaid agencies to support the COBs effort by identifying TPL.
Section 433.139(b)(2), (b)(3)(i), and (b)(3)(ii)(B) detail the
exception to standard COB cost avoidance by allowing pay and chase for
certain types of care, as well as the timeframe allowed prior to
Medicaid paying claims for certain types of care. Title XIX of the Act
requires state Medicaid programs to identify and seek payment from
liable third parties, before billing Medicaid.
We estimate it would take 1 hour at $35.040/hr for a data entry/
information processing worker to collect information on TPL and report
that information to CMS on CMS-64 (approved by OMB under the
aforementioned OMB control number and CMS ID number) on a quarterly
basis. In aggregate we estimate an annual burden of 224 hours (1 hr/
response x 4 responses/year x 56 respondents) at a cost of $8,550 (224
hr x $35.04/hr).
Other than our adjusted costs as discussed above under Wage
Estimates, our proposed requirements and burden estimates are being
finalized in this rule without change.
C. Summary of Finalized Requirements and Annual Burden Estimates
Table 5 sets out our annual burden estimates.
[[Page 87095]]
Table 5--Summary of Annual Requirement and Burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total
Section under title 42 of the CFR Number of responses (per Time per response Total time Labor rate ($/hr) Total cost ($) OMB control number (CMS ID No.)
respondents year) (hours) (hours)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 447.518(d)(1) and (2)...... 51 51 6....................... 306 118.30................. 36,200 0938-1385 (CMS-10722)
Sec. 447.511.................... 56 56 5....................... 280 186.40................. 52,192 0938-0582 (CMS-R-144)
Sec. 447.518(d) (1) and (2)..... 51 51 6....................... 306 18.3................... 36,200 0938-1385 (CMS-10722)
0......................
Sec. 447.511.................... 56 224 0.5..................... 112 186.40................. 20,877 0938-0582 (CMS-R-144)
Sec. 433.139(b)(2), (b)(3)(i), 56 224 1....................... 224 35.04.................. 7,849 0938-1265 (CMS-10529)
and (b)(3)(ii)(B).
-------------------------------------------------------------------------------------------------------------------------------------------------------------
Total......................... 56 555 Varies.................. 922 Varies................. 117,118 n/a
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
IV. Regulatory Impact Statement
A. Statement of Need
This final rule will implement:
Changes to section 1927 of the Act;
Statutory changes from the Medicaid Services Investment
and Accountability Act of 2019 (Pub. L. 116-16, enacted April 18,
2019), BBA 2018 and the Affordable Care Act;
Section 602 of BBA 2015, which amended section 1927(c)(3)
of the Act;
Section 2501(d) of the Affordable Care Act, which added
section 1927(c)(2)(C) of the Act;
Section 1927(b)(2)(A) of the Act requiring states to
report to each manufacturer not later than 60 days after the end of
each rebate period;
Changes and additions to sections 1902 and 1927(g)(1) of
the Act as set forth by section 1004 of the SUPPORT Act;
Title XIX of the Act and section 7 of the Medicaid
Services Investment and Accountability Act of 2019 amending section
1902(a)(25)(E) of the Act ((Sec. 433.139(b)(2), (b)(3)(i), and
(b)(3)(ii)(B)); and
Changes made by section 1603 of Public Law 116-59, the
Continuing Appropriations Act, 2020, and Health Extenders Act of 2019
(Health Extenders Act), which amended sections 1927(k)(1) and
1927(k)(11) of the Act.
B. Overall Impact
We have examined the impact of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4),
Executive Order 13132 on Federalism (August 4, 1999) and Executive
Order 13771 on Reducing Regulation and Controlling Regulatory Costs
(January 30, 2017).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
A regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million or more in any 1
year). We believe that this rule does reach the economic threshold and
thus is considered a major rule.
We received the following comments regarding the impact of this
rule:
Comment: A few commenters disagreed with CMS' conclusion that the
proposed rule did not reach the necessary threshold for economically
significant effects (of $100 million or more in any 1 year), and
therefore, did not require a regulatory impact analysis. The commenters
noted that the proposed changes to best price, line extension, drug
rebate payments, drug pricing reporting requirements, and DUR would
greatly impact state Medicaid agencies and manufacturers and would meet
the financial threshold for a regulatory impact analysis. A few
commenters suggested that CMS conduct a regulatory impact analysis
prior to publication of a final rule or withdraw the proposed rule in
order to conduct a regulatory impact analysis.
Several commenters expressed concern that the proposed rule does
not include an impact analysis of the proposed changes on state
Medicaid programs or Medicaid program spending specific to the proposed
changes or potential decreases to the Medicaid manufacturer rebate
amounts and increase to Medicaid drug costs. The commenters requested
CMS analyze the proposed changes to best price reporting and how it may
impact state Medicaid programs. One commenter also requested that CMS
provide financial impact estimates on states' rebates due to their
belief that this will ensure transparency and provide states adequate
time to address budget shortfalls created from the proposed rule. A few
commenters expressed concern that CMS did not conduct an impact
analysis of the proposed VBP-related regulations on the U.S. healthcare
system.
Response: For the following reasons, we agree with the commenters
that a regulatory impact analysis is necessary. The projections below
are based on the assumptions and projections for Medicaid expenditures
in the President's FY 2021 Budget. As with any projections of health
care spending and changes to health care regulations, these projections
are uncertain and impacts could be higher or lower than projected here.
In addition, these projections do not account for any impacts related
to COVID-19, which has had a major impact on health care spending and
coverage in 2020.
Implementation of Minimum DUR Standards: The requirement
under section 1927 of the Act to provide for DUR (prospective and
retrospective) for CODs to assure that prescriptions (1) are
appropriate, (2) are medically necessary, and (3) are not likely to
result in adverse medical results, is longstanding. Under our authority
to implement section 1927(g) of the Act and the SUPPORT Act, to ensure
the appropriate use of prescription opioids, the minimum standards for
DUR in this final regulation, including standards related to MAT and
co-prescribing or co-dispensing of any FDA-approved opioid antagonist/
reversal agent, have already been adopted by state Medicaid programs as
reflected in our most recent
[[Page 87096]]
DUR survey.\142\ Therefore, such DUR standards and the addition of
minimum standards as set forth under this rule will not have a
substantial impact on state Medicaid programs. Furthermore, these
standards establish a baseline for minimally adequate DUR programs that
help ensure prescribed drugs are appropriate, medically necessary, and
not likely to result in adverse medical results, which ultimately may
result in savings to the states and Federal government.
---------------------------------------------------------------------------
\142\ https://www.medicaid.gov/medicaid/prescription-drugs/downloads/2019-dur-ffs-summary-report.pdf.
---------------------------------------------------------------------------
Line Extension and New Formulation: Since the
line extension provision came into effect on January 1, 2010,
manufacturers have been making reasonable assumptions as to the meaning
of line extension at section 1927(c)(2)(C) of the Act, and where
appropriate, have been permitted to use such reasonable assumptions in
their determination of whether their drug qualifies as a line
extension. Thus, manufacturers have been applying the alternative
rebate calculation approach for ten years to determine their rebate
obligations for drugs that are line extensions. The economic impact of
the new policies for line extensions would be dependent on the change
in the number of drugs that are reported to us as line extensions, the
differences between the standard rebate amount and the alternative
rebate amount that is calculated for that line extension drug, and that
the impact of the new policies on the incentives to bring new
formulations of existing drugs to market that represented true
advancements in treatment of particular conditions.
Notably, only 1.5 percent of all drugs that are reported to the
Medicaid Drug Rebate Program (MDRP), or 408 drugs, are currently
classified by their manufacturer as a line extension. This reporting is
based on the manufacturer making its own reasonable assumptions that
the new formulation of their drug is a line extension.
With respect to innovation, we also note that since we added a
specific indicator in the Drug Data Reporting (DDR) system in 2016 for
manufacturers to self-identify drugs that are line extensions, the rate
at which the number of line extension drugs reported has been
relatively stable, but increasing, thereby providing evidence that the
line extension policies in existence have not resulted in a sharp
change in the number of line extensions brought to market by
manufacturers. For example, in 2016, 320 line extensions were reported
to us, 360 in 2017, 373 in 2018, 389 in 2019, and 397 in 2020.
We have reviewed the impacts of the final regulatory definition of
line extension on Medicaid drug rebates. The final rule clarifies the
definition of ``line extension'' drugs. Drugs classified as line
extensions are subject to an alternative rebate. The additional rebate
amounts under the alternative rebate are collected entirely by the
federal government. To calculate this impact, we determined which drugs
were likely to be classified as line extensions under the definition in
this final rule. We reviewed the top 100 drugs by total spending (from
data in the second quarter of 2020 in the MDR), and then identified
which of those drugs would be defined as line extension drugs under the
definition in the final rule. There were 17 drugs identified of the top
100 that would likely be classified as line extensions, which would not
now be currently classified as line extensions under the statutory
definition of line extension.
We then calculated the alternative rebate per unit for these drugs
(defined as the inflationary or additional rebate divided by the AMP
for the original drug, multiplied by the AMP of the line extension
drug). Note that only 6 of the 17 drugs had alternative rebates that
were higher than the standard rebate. For these 6 drugs, the rebates
would increase by 6.5 percent and reduce spending net of rebates by
19.3 percent. We estimate that this would represent an increase of
about 1.1 percent on rebates for the top 100 drugs, while decreasing
net drug spending by 3.3 percent. We extrapolated the estimates on
these drugs to the impact on all Medicaid drug spending. This assumes
that the number of drugs classified as line extensions under the new
regulatory definition of line extension, and the relative impacts on
those drugs for the rest of the brand-name drug market is comparable to
the top 100 drugs; it is possible that the impact on the rest of the
drug market could be greater than or less than we have estimated here.
----------------------------------------------------------------------------------------------------------------
Change in
rebates due Percentage Percentage
Total Total Net to line change in change in
spending rebates spending extension rebates net
definition spending
----------------------------------------------------------------------------------------------------------------
Top 100 drugs..................... $25,265 $18,894 $6,371 $209 1.1 -3.3
Top 100 drugs identified as line 4,295 3,212 1,083 209 6.5 -19.3
extensions.......................
All drug spending................. 86,017 39,802 46,215 381 1.0 -0.8
----------------------------------------------------------------------------------------------------------------
The table below shows the projected impacts by fiscal year in
millions of dollars.
----------------------------------------------------------------------------------------------------------------
Lower bound 2021 2022 2023 2024 2025 2021-2025
----------------------------------------------------------------------------------------------------------------
Federal government................ -$400 -$430 -$460 -$490 -$520 -$2,300
State government.................. 0 0 0 0 0 0
-----------------------------------------------------------------------------
Total............................. -400 -430 -460 -490 -520 -2,300
----------------------------------------------------------------------------------------------------------------
There are several caveats to the estimates. First, the estimates do
not assume any impact on future drug pricing or new line extension
introduction changes. It is possible manufacturers might reconsider
future
[[Page 87097]]
drug launch strategies (including pricing and formulations) in light of
this change. Second, we have not considered if there might be impacts
on state supplemental rebate agreements that states negotiate directly
with manufacturers. It is possible that there are some drugs for which
states have some supplemental rebates that could be affected by the
line extension rebates. Finally, the estimates rely on an analysis of a
limited number of drugs; however, these drugs do represent a
substantial share of Medicaid prescription drug spending (about 29
percent of prescription drug spending, and about 37 percent of brand-
name prescription drug spending). The impact on the drugs affected
could be significant, but given the small number of drugs affected, the
overall impact may be smaller as a percentage of total spending.
Depending on the final number of drugs determined to be line extensions
and the relative increase in the rebates for those drugs, the actual
impact could be greater than or less than estimated here.
We also note with respect to comments on the proposed definition of
line extension and new formulation that there would be a negative
impact on manufacturers' incentive to continue to innovate, that we
refined the final definitions to limit the scope of drugs that are new
formulations, and thereby subject to the alternative rebate calculation
relative to our proposed definitions.
As previously stated, the proposed definitions included combination
drugs and drugs approved with a new indication; however, we are not
finalizing those changes. We believe that the exclusion of combination
drugs and drugs that obtain new indications from the final definition
of line extension will help ensure that we have maintained incentives
for manufacturers to bring such advances to the market, such as new HIV
drugs, or new uses for drugs that could be used to treat COVID-19.
Finally, the amount of additional rebate amounts that may be due
from manufacturers as a result of the new regulatory definition of line
extension are a function of the net change in the number of drugs that
may be considered a line extension, as well as the difference between
the standard rebate calculated on the line extension drug and the
alternative rebate calculation, as noted above. The existence of a line
extension drug does not categorically result in a higher URA for a line
extension of a drug, as there are many factors that enter into the URA
calculation. As previously noted, one of the most important factors in
the calculation is the inflation-based rebate that is applied to the
initial brand name listed drug for the rebate quarter being calculated.
Regardless of the price of the line extension drug, if the initial
brand name listed drug did not increase in price in excess of the rate
of inflation, then the alternative rebate calculation for the line
extension should not result in a higher URA than the standard
calculation for the drug that is a line extension. That is, if a
manufacturer's price increases over the years have been within the CPI-
U, then there is reduced chance that they will be subject at all to the
alternative rebate calculation.
VBP Arrangements and Changes to Best Price and
Manufacturer Reporting requirements: As stated previously, this final
regulation makes revisions to the determination of best price and AMP
and manufacturer reporting requirements to address the regulatory
challenges that manufacturers, states and private payers encounter when
considering the development and implementation of VBP arrangements. The
changes made by this regulation ensure that the regulatory framework is
sufficient to support such arrangements and to promote transparency,
flexibility, and innovation in drug pricing without undue
administrative burden on states and manufacturers. They also clarify
certain already-established policies to assist manufacturers and states
in participating in VBP arrangements in a manner that is consistent
with the law and maintains the integrity of the MDRP.
The change being finalized in this rule, which provides for the
reporting of multiple best prices pursuant to a VBP arrangement (which
meets the definition of VBP arrangement, also being finalized in this
rule), is the most significant from a policy perspective, and could
result in an increased use of VBP among commercial payers, and thus
Medicaid programs. The estimated impacts of these VBP arrangements
under the final rule are significantly uncertain. Primarily, this is
due to lack of experience with such arrangements and the fact that the
impacts will be highly dependent on the interest of states and
manufacturers to enter into such arrangements.
As of 2020, there are only 9 such state arrangements of which we
are aware, and we do not have data or estimates on the impact of these
arrangements. Moreover, the impact will depend on 3 factors: (1) How
many states would take up such arrangements; (2) how many drugs and
which drugs would be covered under these arrangements; and (3) the
nature of these arrangements (for example, what will be the terms for
payment and coverage of drugs under these arrangements). These are all
unknowable at this time.
In an attempt to estimate the possible impacts of such
arrangements, we have estimated a range of impacts. At the upper bound
of impacts on the federal government and the states, we estimate the
impact would be 0. In these circumstances, it could be a combination of
(1) no states or manufacturers enter into these VBP arrangements and
(2) while states and manufacturers enter into VBP arrangements, these
do not reduce net prescription drug spending.
At the lower bound (on impacts on the federal government and the
states), we have estimated that there could be some savings. We made
the following assumptions: (1) Half of states would enter into VBP
arrangements; (2) states would enter into arrangements with 50 percent
of the top 100 drugs as measured by price per unit; and (3) these
arrangements would reduce net spending on these drugs by 50 percent.
Based on data from the Medicaid Drug Rebate (MDR) database from
2020, we estimate that these drugs account for about $1.1 billion in
spending and about $320 million in net drug spending (net of rebates)
in 2020. Using the assumptions described above, this would reduce net
drug spending by $40 million in 2020 ($24 million federal share, $16
million state share). This would represent about a 7,000 percent
increase in the number of such arrangements, and it assumes a
significant reduction in spending on the drugs under these
arrangements. Therefore, we believe it is more likely the actual impact
would be smaller than the lower bound of the estimates (that is, it
would generate fewer savings for the federal government and the
states).
The tables below shows the projected impacts by fiscal year in
millions of dollars at the lower bound and upper bound.
----------------------------------------------------------------------------------------------------------------
Lower bound 2021 2022 2023 2024 2025 2021-2025
----------------------------------------------------------------------------------------------------------------
Federal government................ -$25 -$26 -$27 -$29 -$30 -$137
[[Page 87098]]
State government.................. -17 -17 -18 -19 -20 -91
-----------------------------------------------------------------------------
Total............................. -42 -43 -45 -48 -50 -228
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Upper bound 2021 2022 2023 2024 2025 2021-2025
----------------------------------------------------------------------------------------------------------------
Federal government................ $0 $0 $0 $0 $0 $0
State government.................. 0 0 0 0 0 0
-----------------------------------------------------------------------------
Total............................. 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------
We note that the policy finalized in this rule permitting
manufacturers to report multiple best price points pursuant to a VBP
arrangement, still requires a manufacturer to report a non-VBP best
price. Thus, a key consideration for states would be determining
whether the expected savings achieved by participation in the VBP
arrangement (in excess of the non-VBP rebate rebate that they would
receive) would outweigh any additional administrative costs that might
occur as a result of participating in the VBP arrangement itself, for
example, costs associated with tracking patients' outcomes. Thus,
states that decide not to participate in multiple best price VBP
arrangements will continue to receive a Medicaid drug rebate that is
based upon a non-VBP best price as reported by the manufacturer.
Encouraging the use of VBP arrangements by permitting manufacturers
to report multiple best price points also alleviates burdens on states
to submit a SPA to enter into their own CMS-authorized SRAs in order to
participate in VBP arrangements with manufacturers. That is because
this approach allows states to take advantage of the approaches made
available to commercial payers. Thus, the administrative burden of
participating in VBP arrangements through the submission of a CMS-
authorized SRA is no longer required unless a state wants to negotiate
its own VBP arrangements with manufacturers. However, there will be
costs to states and manufacturers of tracking patients, and engaging
with health care professionals to track and evaluate outcomes of these
VBP arrangements.
With respect to the additional administrative costs to states of
participating in a VBP arrangement resulting in the reporting of
multiple best price points, we will use existing operational mechanisms
to make states aware of such manufacturer VBP arrangements that have
been reported to us. We will provide additional unit rebate amounts
that states can earn under these programs through quarterly file
transfers that we currently provide each quarter, which will happen
through the Medicaid Drug Rebate (MDR) system that will become fully
functional in July, 2021.
Finally, it is possible that the increased use of VBP arrangements
as a result of the new flexibilities provided in this regulation will
encourage manufacturers to increase launch prices of new therapies to
payers in an attempt to compensate for the additional rebates that they
may have to give these payers under a VBP arrangement. This regulation
does not control the launch prices of new drugs, and such is beyond the
scope of this rulemaking, or our ability to assess economic impact.
However, we expect that commercial payers will negotiate rebates
and price concessions under VBP arrangements with manufacturers for
high cost therapies, and that states will consider whether to take
advantage of such arrangements if offered to the states by the
manufacturers based on those prices. Notably, the ability of
manufacturers to set high launch prices for new expensive gene and
cells therapies are facilitated by the fact that these therapies are
usually used to treat a small number of patients and often do not have
therapeutic competitors. This lack of competition limits the ability of
payers in the marketplace to manage the prices of drugs without
therapeutic competitors.
We would expect that commercial payers would, as they do now for
drugs that are not provided for under a VBP arrangement, negotiate as
aggressively as they could, and Medicaid programs would be able to take
advantage of such negotiations. States that thought they could obtain
better price concessions from a manufacturer under a VBP arrangement
could do so by themselves by using a CMS-authorized SRA.
Assuring Pass Through of Manufacturer Patient Assistance:
We heard from patient groups expressing concerns that, while the value
of manufacturer cost sharing assistance programs is rapidly eroding due
to PBM accumulator programs, and that patients were paying more out of
pocket for their drugs, the implementation of the pass through
assurance policy in the proposed rule would lead manufacturers to
reduce or eliminate these programs. Commenters contended that our
proposal could result in great economic harm to patients who would have
to spend more for the drugs, or go without if they are unable to afford
them. We offer the following impact analysis of the finalized policy we
are adopting in this regulation.
First, we view the required ``pass through'' of manufacturer's cost
sharing assistance to patients as a condition of exclusion from AMP and
best price as a program integrity issue relating to the MDRP.
Manufacturers have a legal obligation to certify each quarter that
their AMPs and best prices are calculated accurately based on the
inclusions and exclusions permitted based on law and regulation. This
is not new policy, but long-standing policy. Moreover, rebates to
states should reflect the discounts that manufacturers provide to best
price eligible entities, whether they are provided directly or
indirectly.
While we do not require manufacturers to provide us with
documentation regarding their AMP or best price calculations, they
should maintain records regarding such calculations, including any
reasonable assumptions that they use in making such calculations.
Should they be audited by OIG or DOJ, manufacturers would likely have
to provide such documentation, including any documentation regarding
their treatment of patient assistance programs in the calculation of
their AMP and best price. Under this final policy, we will not be
requiring manufacturers to provide us with any additional documentation
regarding the assurance that the patient assistance is passed through,
but they should maintain such documentation in their records. However,
we understand that there may be additional costs to manufacturers of
modifying their patient assistance programs if necessary, working with
their business partners,
[[Page 87099]]
and keeping records of such pass through assurance, to ensure
compliance with the regulations.
Second, we also understand through discussions with manufacturers,
patient groups, and from information included in publicly-available
reports, studies, and documents, that PBM accumulator programs are
growing in number and quickly eroding the value of the manufacturer
assistance programs for patients. As a result, there is significant
tension between manufacturers and payers regarding copay assistance,
with patients caught in the middle.
According to a February 2019 survey of 43 payer/health plan
decision makers (representing over 80 million lives), nearly 60 percent
of respondents are targeting limiting manufacturer commercial copay
assistance, up from 40 percent in 2018. That same report found that the
drug categories targeted for limiting copay assistance by payers
include rheumatoid arthritis drugs, high cholesterol drugs, and
hepatitis drugs, with the HIV drug category and orphan drug category on
the horizon.\143\
---------------------------------------------------------------------------
\143\ Rolling Back the Tide: Deploying a Consultative Approach
to Tackle the Growing Expansion of Copay Accumulators, Xcenda,
February 2019.
---------------------------------------------------------------------------
Another study noted that as of early 2018, approximately 60 percent
of covered commercial lives were under payers that had already
implemented a copay accumulator program, whereas an additional
approximately 30 percent of covered commercial lives were encompassed
by plans projected to implement such a program in 2019 and beyond.\144\
This study also noted that manufacturers are concerned about these
accumulator programs because of the lack of transparency regarding how
the associated cost sharing is being used in practice, and
manufacturers' inability to determine the impact on their public
financial statements. As a result, many are considering changing the
design of their programs to prepaid debit cards and/or rebate refunds
provided directly to patients. Thus, manufacturers already appear to be
considering changes to these programs for various reasons.
---------------------------------------------------------------------------
\144\ Pharmacy Times, Co-pay Accumulator Programs: Behind the
Controversy, Lee Feigert Pharm.D, July 22, 2019.
---------------------------------------------------------------------------
Additionally, another recent survey of large employers found that
30 percent implemented a copay accumulator program for 2019, and 21
percent were considering implementing them in 2020 or 2021.\145\ Yet,
another recent employer survey found that 54 percent of respondents did
not credit third party copay assistance programs toward patient
deductibles.\146\ Thus, based on these studies, it seems clear that as
the value of these patient assistance programs to patients continues to
erode, and the economic benefits to health plans increase, given that
the health plans' spending on drugs for a patient decreases.
---------------------------------------------------------------------------
\145\ Large Employers 2018 Health Plan Design Survey, Washington
DC, National Business Group on Health, 2018.
\146\ Trends in Specialty Drug Benefits. Plano, TX: Pharmacy
Benefits Management Institute, 2018.
---------------------------------------------------------------------------
CMS has had long standing policy under Sec. 447.505(b) that best
price includes all prices, including applicable discounts, rebates, or
other transactions that adjust prices either directly or indirectly to
the best price eligible entity. Therefore, states and the Federal
government may be eligible for additional rebates which they are now
not earning if the value of these patient assistance programs is
accruing to the health plans, which are best price eligible entities,
and the plan's best price is the one that has to be reported to us by
the manufacturer for that drug for the quarter because it is the lowest
price available.
Accordingly, the provisions in the final regulation are a
clarification to the existing exclusions to best price and AMP by
stating that manufacturers must ensure their manufacturer assistance
programs pass on the full value of discounts to the consumer and that
the pharmacy, agent, or other entity (in this case, the commercial
insurer) does not receive any price concession. Since this is a
clarification to an existing requirement, we believe manufacturers will
take the steps necessary (if they have not already done so) to ensure
the exclusion of their manufacturer assistance programs will apply
appropriately to their calculations and determinations of AMP and best
price.
We also believe that there are potential future economic and health
care consequences to patients that will result if these copay
accumulator programs are not reformed and restructured. That is because
the benefit of the manufacturer cost sharing assistance is increasingly
not accruing to the patient, potentially impeding their ability to
obtain their medications. As a result, a patient's out-of-pocket costs
for medications in a health plan with accumulators can be thousands of
dollars, due largely to plans with coinsurance and deductibles.\147\
This factor could have an impact on patients' accessibility to
medications, medication adherence, and thus long term health.
---------------------------------------------------------------------------
\147\ CMS Maximizers are Displacing Accumulators--But CMS
Ignores how Payers Leverage Patient Support, Drug Channels, May 19,
2020.
---------------------------------------------------------------------------
For example, a recent study found that following implementation of
a copay accumulator program, in which patients with autoimmune disease
had to pay a higher percentage of drug costs, a significant share of
these patients either reduced or discontinued the use of autoimmune
specialty drugs.\148\ Thus, the PBM accumulator program, which can
increase patient out of pocket costs for drugs, could potentially lead
to higher overall health care spending in private plans, as well as
eventually in Medicare and Medicaid. Recognizing this potential
increase in spending, several states have also taken action to ban
these accumulator programs in certain health care plans.\149\
---------------------------------------------------------------------------
\148\ Impact of Copay Accumulator Adjustment Programs on
Specialty Drug Adherence, American Journal of Managed Care, Vol 25
No 7, July 2019.
\149\ See 148.
---------------------------------------------------------------------------
Finally, we understand that some manufacturers may eliminate,
reduce, or restructure their programs as a result of this policy, which
could result in increased medication costs to some patients. However,
patient assistance programs serve as important marketing tools for
manufacturers to start a patient on a therapy, and to promote and
maintain adherence once patients are taking their medications. We are
hopeful that manufacturers will not eliminate these programs under this
policy, but will work with their current partners to reform or
restructure the programs as has been stated in public documents, or
find another mechanism to provide the assistance. We believe that any
changes manufacturers may make to their assistance programs may be in
response to multiple factors, such as corporate integrity issues,
including shareholder concerns about how this cost sharing is being
used; continued patient demand for this assistance given the increasing
costs of new drugs; and the need to respond to competition from other
manufacturers.
As we noted above in our responses to comments regarding this
issue, we believe that the current prescription claims processing
system--which consists of switches, manufacturer cost sharing
assistance brokers, PBMs, and pharmacies, among others--can be used to
help assure manufacturer compliance with the requirement that patient
cost sharing assistance is being passed through to the patient. There
are also other entities in the marketplace that manufacturers already
work with to ensure compliance with Federal laws and regulations such
as third party vendors and switches. These companies can help
manufacturers comply with various Federal laws regulations relating
[[Page 87100]]
to patient copay assistance programs by reducing possible government
sanctions, and improve compliance efforts in a real time manner.
Given the existence of the electronic infrastructure in place that
manufacturers are already using with these partners in applying and
tracking patient assistance; the competitive nature of manufacturers
with respect to marketing their drugs to patients, and wanting them to
continue to take them; and the 2-year time frame before the effective
date of this policy, we believe that manufacturers will both retain
their cost sharing assistance programs, as well as continue to be able
to meet their legal obligations under section 1927 of the Act to ensure
that manufacturer patient assistance accrues to the patient.
However, we recognize that there may be impact to patients as a
result of some period of time when manufacturers may modify or
restructure their patient assistance programs such they are able to
track the pass through of patient assistance and fulfill their legal
obligations under section 1927 of the Act.
Comment: A few commenters noted that CMS did not analyze the impact
of the proposed changes in the rule on Medicare prices and the 340B
drug discount program. One commenter suggested that failure to consider
these potential impacts could potentially make the proposed rule
``susceptible to claims that the rules were arbitrary and capricious
for failing to consider an important aspect of the problem.''
Response: This rule makes no changes to either the pricing program
under 340B of the PHSA or Medicare Part B payment policies.
Furthermore, we do not believe we have failed to consider the impacts
on these programs because we believe the changes made by this final
rule will not have a significant impact on best price, AMP or Medicaid
drug rebates that would impact either Medicare Part B payment
allowances or 340B pricing. That is, because manufacturers will
continue to be required to report a non-VBP best price when reporting
multiple best prices generated from a VBP arrangement, and that non-VBP
best price will be used to calculate the 340B ceiling price.
The bundled sale approach's impact on best price will be minimal
since it is permitting the manufacturer to allocate the discounts or
price concessions as a result of a VBP arrangement across a bundled
sale, thus spreading out the discounts over multiple units in the
bundled sale. This approach to a bundled sale is already being adopted
by manufacturers using reasonable assumptions, and we do not expect
that codifying this practice in regulatory text will significantly
reduce the best price to the point it increases the Medicaid drug
rebate which may impact 340B pricing.
The RFA requires agencies to analyze options for regulatory relief
of small entities. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, small pharmaceutical
manufacturers participating in the MDRP, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
less than $8.0 million to $41.5 million in any 1 year. Individuals and
states are not included in the definition of a small entity. We are not
preparing an analysis for the RFA because we have determined, and the
Secretary certifies, that this final rule will not have a significant
economic impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare an
RIA if a rule may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must conform
to the provisions of section 604 of the RFA. For purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a Metropolitan Statistical Area for Medicare
payment regulations and has fewer than 100 beds. We are not preparing
an analysis for section 1102(b) of the Act because we have determined,
and the Secretary certifies, that this final rule with comment period
will not have a significant impact on the operations of a substantial
number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2020, that
threshold is approximately $156 million. This rule will have no
consequential effect on state, local, or tribal governments or on the
private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a proposed rule (and subsequent final
rule) that imposes substantial direct compliance costs on state and
local governments, preempts state law, or otherwise has federalism
implications. Since this regulation does not impose any substantial
direct compliance costs on state or local governments, preempt state
law, or otherwise have federalism implications, the requirements of
Executive Order 13132 are not applicable.
Executive Order 13771 (January 30, 2017) requires that the costs
associated with significant new regulations ``to the extent permitted
by law, be offset by the elimination of existing costs associated with
at least two prior regulations.''
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects
42 CFR Part 433
Administrative practice and procedure, Child support, Claims, Grant
programs-health, Medicaid, Reporting and recordkeeping requirements.
42 CFR Part 438
Grant programs-health, Medicaid, Reporting and Recordkeeping
requirements.
42 CFR Part 447
Accounting, Administrative practice and procedure, Drugs, Grant
programs-health, Health facilities, Health professions, Medicaid,
Reporting and recordkeeping requirements, Rural areas.
42 CFR Part 456
Administrative practice and procedure, Drugs, Grant programs-
health, Health facilities, Medicaid, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 433--STATE FISCAL ADMINISTRATION
0
1. The authority citation for part 433 is revised to read as follows:
Authority: 42 U.S.C. 1302.
0
2. Section 433.139 is amended by-
0
a. Removing and reserving paragraph (b)(2); and
0
b. Revising paragraphs (b)(3)(i) and (b)(3)(ii)(B).
The revisions read as follows:
Sec. 433.139 Payment of claims.
* * * * *
(b) * * *
(3) * * *
(i) The claim is for preventive pediatric services, including early
and periodic screening, diagnosis and treatment services provided for
under part 441, subpart B, of this chapter, that are covered under the
State plan; or
[[Page 87101]]
(ii) * * *
(B) For child support enforcement services beginning February 9,
2018, the provider certifies that before billing Medicaid, if the
provider has billed a third party, the provider has waited 100 days
from the date of the service and has not received payment from the
third party.
* * * * *
PART 438--MANAGED CARE
0
3. The authority citation for part 438 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
4. Section 438.3 is amended by revising paragraphs (s) introductory
text and (s)(4) and (5) to read as follows:
Sec. 438.3 Standard contract requirements.
* * * * *
(s) Requirements for MCOs, PCCMs, PIHPs, or PAHPs that provide
covered outpatient drugs. Contracts that obligate MCOs, PCCMs, PIHPs,
or PAHPs to provide coverage of covered outpatient drugs must include
the following requirements:
* * * * *
(4) The MCO, PCCM, PIHP, or PAHP must operate a drug utilization
review program that complies with the requirements described in section
1927(g) of the Act and part 456, subpart K, of this chapter, as if such
requirement applied to the MCO, PCCM, PIHP, or PAHP instead of the
State.
(5) The MCO, PCCM, PIHP, or PAHP must provide a detailed
description of its drug utilization review program activities to the
State on an annual basis.
* * * * *
PART 447--PAYMENTS FOR SERVICES
0
5. The authority citation for part 447 continues to read as follows:
Authority: 42 U.S.C. 1302 and 1396r-8.
0
6. Section 447.502 is amended--
0
a. In the definition of ``Bundled sale'' by adding paragraph (3);
0
b. By adding the definition of ``CMS-authorized supplemental rebate
agreement'' in alphabetical order;
0
c. By revising the definitions of ``Innovator multiple source drug'',
``Multiple source drug'', and ``Single source drug'';
0
d. By adding the definitions of ``Value-based purchasing (VBP)
arrangement'' in alphabetical order; and
0
e. By revising the definition of ``Wholesaler''.
The additions and revisions read as follows:
Sec. 447.502 Definitions.
* * * * *
Bundled sale * * *
(3) Value-based purchasing (VBP) arrangements may qualify as a
bundled sale.
* * * * *
CMS-authorized supplemental rebate agreement means an agreement
that is approved through a state plan amendment (SPA) by CMS, which
allows a state to enter into single and/or multi-state supplemental
drug rebate arrangements that generate rebates that are at least as
large as the rebates set forth in the Secretary's national rebate
agreement with drug manufacturers. Revenue from these rebates must be
paid directly to the state and be used by the state to offset a state's
drug expenditures resulting in shared savings with the Federal
Government.
* * * * *
Innovator multiple source drug means a multiple source drug,
including an authorized generic drug, that is marketed under a new drug
application (NDA) approved by FDA, unless the Secretary determines that
a narrow exception applies (as described in this section). It also
includes a drug product marketed by any cross-licensed producers,
labelers, or distributors operating under the NDA and a covered
outpatient drug approved under a biologics license application (BLA),
product license application (PLA), establishment license application
(ELA) or antibiotic drug application (ADA).
* * * * *
Multiple source drug means, for a rebate period, a covered
outpatient drug, including a drug product approved for marketing as a
non-prescription drug that is regarded as a covered outpatient drug
under section 1927(k)(4) of the Act, for which there is at least 1
other drug product which meets all of the following criteria:
(1) Is rated as therapeutically equivalent (under the FDA's most
recent publication of ``Approved Drug Products with Therapeutic
Equivalence Evaluations'' which is available at http://www.accessdata.fda.gov/scripts/cder/ob/).
(2) Except as provided at section 1927(k)(7)(B) of the Act, is
pharmaceutically equivalent and bioequivalent, as defined at section
1927(k)(7)(C) of the Act and as determined by FDA.
(3) Is sold or marketed in the United States during the period.
* * * * *
Single source drug means a covered outpatient drug, including a
drug product approved for marketing as a non-prescription drug that is
regarded as a covered outpatient drug under section 1927(k)(4) of the
Act, which is produced or distributed under a new drug application
approved by the FDA, including a drug product marketed by any cross-
licensed producers or distributors operating under the new drug
application unless the Secretary determines that a narrow exception
applies (as described in this section), and includes a covered
outpatient drug that is a biological product licensed, produced, or
distributed under a biologics license application approved by the FDA.
* * * * *
Value-based purchasing (VBP) arrangement means an arrangement or
agreement intended to align pricing and/or payments to an observed or
expected therapeutic or clinical value in a select population and
includes, but is not limited to:
(1) Evidence-based measures, which substantially link the cost of a
covered outpatient drug to existing evidence of effectiveness and
potential value for specific uses of that product; and/or
(2) Outcomes-based measures, which substantially link payment for
the covered outpatient drug to that of the drug's actual performance in
patient or a population, or a reduction in other medical expenses.
Wholesaler means a drug wholesaler that is engaged in wholesale
distribution of prescription drugs to retail community pharmacies,
including but not limited to repackers, distributors, own-label
distributors, private-label distributors, jobbers, brokers, warehouses
(including distributor's warehouses, chain drug warehouses, and
wholesale drug warehouses), independent wholesale drug traders, and
retail community pharmacies that conduct wholesale distributions.
0
7. Section 447.502 is further amended, effective January 1, 2022, by--
0
a. Adding the definitions of ``Line extension'' and ``New formulation''
in alphabetical order; and
0
b. Revising the definition of ``Oral solid dosage form''.
The additions and revision read as follows:
Sec. 447.502 Definitions.
* * * * *
Line extension means, for a drug, a new formulation of the drug,
but does not include an abuse-deterrent formulation of the drug (as
determined by the Secretary).
* * * * *
New formulation means, for a drug, a change to the drug, including,
but not
[[Page 87102]]
limited to: an extended release formulation or other change in release
mechanism, a change in dosage form, strength, route of administration,
or ingredients.
* * * * *
Oral solid dosage form means, an orally administered dosage form
that is not a liquid or gas at the time the drug enters the oral
cavity.
* * * * *
Sec. 447.504 [Amended]
0
8. Section 447.504 is amended by removing paragraph (b)(2) and
redesignating paragraph (b)(3) as paragraph (b)(2).
0
9. Section 447.504 is further amended, effective January 1, 2023, by
revising paragraphs (c)(25) through (29) and paragraphs (e)(13) through
(17) to read as follows:
Sec. 447.504 Determination of average manufacturer price.
* * * * *
(c) * * *
(25) Manufacturer coupons to a consumer redeemed by the
manufacturer, agent, pharmacy or another entity acting on behalf of the
manufacturer, but only to the extent that the manufacturer ensures the
full value of the coupon is passed on to the consumer and the pharmacy,
agent, or other AMP-eligible entity does not receive any price
concession.
(26) Manufacturer-sponsored programs that provide free goods,
including but not limited to vouchers and patient assistance programs,
but only to the extent that the manufacturer ensures: the voucher or
benefit of such a program is not contingent on any other purchase
requirement; the full value of the voucher or benefit of such a program
is passed on to the consumer; and the pharmacy, agent, or other AMP-
eligible entity does not receive any price concession.
(27) Manufacturer-sponsored drug discount card programs, but only
to the extent that the manufacturer ensures the full value of the
discount is passed on to the consumer and the pharmacy, agent, or the
other AMP-eligible entity does not receive any price concession.
(28) Manufacturer-sponsored patient refund/rebate programs, to the
extent that the manufacturer ensures that the manufacturer provides a
full or partial refund or rebate to the patient for out-of-pocket costs
and the pharmacy, agent, or other AMP-eligible entity does not receive
any price concession.
(29) Manufacturer copayment assistance programs, to the extent that
the manufacturer ensures the program benefits are provided entirely to
the patient and the pharmacy, agent, or other AMP-eligible entity does
not receive any price concession
* * * * *
(e) * * *
(13) Manufacturer coupons to a consumer redeemed by the
manufacturer, agent, pharmacy or another entity acting on behalf of the
manufacturer, but only to the extent that the manufacturer ensures the
full value of the coupon is passed on to the consumer and the pharmacy,
agent, or other AMP-eligible entity does not receive any price
concession
(14) Manufacturer-sponsored programs that provide free goods,
including, but not limited to vouchers and patient assistance programs,
but only to the extent that the manufacturer ensures: the voucher or
benefit of such a program is not contingent on any other purchase
requirement; the full value of the voucher or benefit of such a program
is passed on to the consumer; and the pharmacy, agent, or other AMP-
eligible entity does not receive any price concession.
(15) Manufacturer-sponsored drug discount card programs, but only
to the extent that the manufacturer ensures the full value of the
discount is passed on to the consumer and the pharmacy, agent, or the
other AMP-eligible entity does not receive any price concession.
(16) Manufacturer-sponsored patient refund/rebate programs, to the
extent that the manufacturer ensures the manufacturer provided a full
or partial refund or rebate to the patient for out-of-pocket costs and
the pharmacy agent, or other AMP-eligible entity does not receive any
price concession.
(17) Manufacturer copayment assistance programs, to the extent that
the manufacturer ensures the program benefits are provided entirely to
the patient and the pharmacy agent, or other AMP-eligible entity does
not receive any price concession
* * * * *
0
10. Section 447.505 is amended--
0
a. Effective January 1, 2022, in paragraph (a), by revising the
definition of ``Best price'';
0
b. Effective March 1, 2021, by revising paragraph (d)(3).
The revisions read as follows:
Sec. 447.505 Determination of best price.
(a) * * *
Best price means, for a single source drug or innovator multiple
source drug of a manufacturer (including the lowest price available to
any entity for an authorized generic drug), the lowest price available
from the manufacturer during the rebate period to any wholesaler,
retailer, provider, health maintenance organization, nonprofit entity,
or governmental entity in the United States in any pricing structure
(including capitated payments) in the same quarter for which the AMP is
computed. If a manufacturer offers a value-based purchasing arrangement
(as defined at Sec. 447.502) to all states, the lowest price available
from a manufacturer may include varying best price points for a single
dosage form and strength as a result of that value based purchasing
arrangement.
* * * * *
(d) * * *
(3) The manufacturer must adjust the best price for a rebate period
if cumulative discounts, rebates, or other arrangements subsequently
adjust the prices available, to the extent that such cumulative
discounts, rebates, or other arrangements are not excluded from the
determination of best price by statute or regulation.
0
11. Section 447.505 is amended, effective January 1, 2023, by revising
paragraphs (c)(8) through (12) to read as follows:
Sec. 447.505 Determination of best price.
* * * * *
(c) * * *
(8) Manufacturer-sponsored drug discount card programs, but only to
the extent the manufacturer ensures that the full value of the discount
is passed on to the consumer and the pharmacy, agent, or other entity
does not receive any price concession.
(9) Manufacturer coupons to a consumer redeemed by a consumer,
agent, pharmacy, or another entity acting on behalf of the
manufacturer; but only to the extent the manufacturer ensures that the
full value of the coupon is passed on to the consumer, and the
pharmacy, agent, or other entity does not receive any price concession.
(10) Manufacturer copayment assistance programs, to the extent that
the manufacturer ensures the program benefits are provided entirely to
the patient and the pharmacy, agent, or other entity does not receive
any price concession.
(11) Manufacturer-sponsored patient refund or rebate programs, to
the extent that the manufacturer ensures the manufacturer provides a
full or partial refund or rebate to the patient for out-of-pocket costs
and the pharmacy, agent, or other entity does not receive any price
concession.
(12) Manufacturer-sponsored programs that provide free goods,
including but not limited to vouchers
[[Page 87103]]
and patient assistance programs, but only to the extent that the
manufacturer ensures the voucher or benefit of such a program is not
contingent on any other purchase requirement; the full value of the
voucher or benefit of such a program is passed on to the consumer; and
the pharmacy, agent, or other entity does not receive any price
concession.
* * * * *
0
12. Section 447.506 is amended--
0
a. In paragraph (a) by revising the definition of ``Secondary
manufacturer of an authorized generic drug''; and
0
b. By revising paragraph (b).
The revisions read as follows:
Sec. 447.506 Authorized generic drugs.
(a) * * *
Secondary manufacturer of an authorized generic drug means a
manufacturer that is authorized by the primary manufacturer to sell the
drug.
(b) Exclusion of authorized generic drugs from AMP by a primary
manufacturer. The primary manufacturer must exclude from its
calculation of AMP any sales of authorized generic drugs to wholesalers
for drugs distributed to retail community pharmacies when reporting the
AMP of the brand name drug of that authorized generic drug.
* * * * *
0
13. Section 447.509 is amended--
0
a. Revising paragraph (a)(5);
0
b. In paragraph (a)(6) introductory text, by removing word ``rebate''
and adding in its place the phrase ``basic rebate''; and
0
c. By adding paragraphs (a)(7), (8), and (9).
The revision and additions read as follows:
Sec. 447.509 Medicaid drug rebates (MDR).
(a) * * *
(5) Limit on rebate. In no case will the total rebate amount exceed
100 percent of the AMP of the single source or multiple source
innovator drug.
* * * * *
(7) Additional rebate for noninnovator multiple source drugs. In
addition to the basic rebate described in paragraph (a)(6) of this
section, for each dosage form and strength of a noninnovator multiple
source drug, the rebate amount will be increased by an amount equal to
the product of the following:
(i) The total number of units of such dosage form and strength paid
for under the State plan in the rebate period.
(ii) The amount, if any, by which:
(A) The AMP for the dosage form and strength of the drug for the
period exceeds the base date AMP for such dosage form and strength,
increased by the percentage by which the consumer price index for all
urban consumers (United States city average) for the month before the
month in which the rebate period begins exceeds such index associated
with the base date AMP of the drug.
(B) The base date AMP has the meaning of AMP set forth in sections
1927(c)(2)(A)(ii)(II), 1927(c)(2)(B) and 1927(c)(3)(C) of the Act.
(8) Total rebate. The total rebate amount for noninnovator multiple
source drugs is equal to the basic rebate amount plus the additional
rebate amount, if any.
(9) Limit on rebate. In no case will the total rebate amount exceed
100 percent of the AMP for the noninnovator multiple source drug.
* * * * *
0
14. Section 447.509 is further amended, effective January 1, 2022, by--
0
a. By revising paragraphs (a)(4)(ii) introductory text;
0
b. By redesignating paragraph (a)(4)(iii) as paragraph (a)(4)(iv); and
0
c. Adding a new paragraph (a)(4)(iii).
The revision and addition read as follows:
Sec. 447.509 Medicaid drug rebates (MDR).
(a) * * *
(4) * * *
(ii) In the case of a drug that is a line extension of a single
source drug or an innovator multiple source drug that is an oral solid
dosage form, the rebate obligation for the rebate periods beginning on
October 1, 2018 through December 31, 2021 is the amount computed under
paragraphs (a)(1) through (3) of this section for such new drug or, if
greater, the amount computed under paragraph (a)(1) of this section
plus the product of all of the following:
* * * * *
(iii) In the case of a drug that is a line extension of a single
source drug or an innovator multiple source drug, provided that the
initial single source drug or innovator multiple source drug is an oral
solid dosage form, the rebate obligation for the rebate periods
beginning on and after January 1, 2022 is the amount computed under
paragraphs (a)(1) through (3) of this section for such new drug or, if
greater, the amount computed under paragraph (a)(1) of this section
plus the product of all of the following:
(A) The AMP of the line extension of a single source drug or an
innovator multiple source drug.
(B) The highest additional rebate (calculated as a percentage of
AMP) under this section for any strength of the original single source
drug or innovator multiple source drug.
(C) The total number of units of each dosage form and strength of
the line extension product paid for under the State plan in the rebate
period (as reported by the State).
* * * * *
0
15. Section 447.510 is amended by adding paragraph (b)(1)(vi) to read
as follows:
Sec. 447.510 Requirement for manufacturers.
* * * * *
(b) * * *
(1) * * *
(vi) The change is a result of a VBP arrangement, as defined in
Sec. 447.502, requiring the manufacturer to make changes outside of
the 12-quarter rule in this paragraph (b), when the outcome must be
evaluated outside of the 12-quarter period.
* * * * *
0
16. Section 447.511 is amended, effective January 1, 2022--
0
a. In paragraph (a) introductory text, by removing the phrase
``following data:'' and adding in its place the phrase ``following data
and any subsequent changes to the data fields on the CMS-R-144 Medicaid
Drug Rebate Invoice form:'';
0
b. By revising paragraph (b); and
0
c. By adding paragraphs (d) and (e).
The revision and additions read as follows:
Sec. 447.511 Requirements for States.
* * * * *
(b) Data submitted to CMS. On a quarterly basis, the State must
submit drug utilization data to CMS, which will be the same information
as submitted to the manufacturers on the CMS-R-144, as specified in
paragraph (a) of this section. The state data submission will be due no
later than 60 days after the end of each rebate period. In the event
that a due date falls on a weekend or Federal holiday, the submission
will be due on the first business day following that weekend or Federal
holiday. Any adjustments to previously submitted data will be
transmitted to the manufacturer and CMS in the same reporting period.
* * * * *
(d) State data certification. Each data submission in this section
must be certified by one of the following:
(1) The State Medicaid Director (SMD);
(2) The Deputy State Medicaid Director (DSMD);
(3) An individual other than the SMD or DSMD, who has authority
equivalent to an SMD or DSMD; or
[[Page 87104]]
(4) An individual with the directly delegated authority to perform
the certification on behalf of an individual described in paragraphs
(d)(1) through (3) of this section.
(e) State data certification language. Each data submission by a
state must include the following certification language: ``I hereby
certify, to the best of my knowledge, that the state's data submission
is complete and accurate at the time of this submission, and was
prepared in accordance with the state's good faith, reasonable efforts
based on existing guidance from CMS, section 1927 of the Act and
applicable Federal regulations. I further certify that the state has
transmitted data to CMS, including any adjustments to previous rebate
periods, in the same reporting period as provided to the manufacturer.
Further, the state certifies that it has applied any necessary edits to
the data for both CMS and the manufacturer to avoid inaccuracies at
both the NDC/line item and file/aggregate level. Such edits are to be
applied in the same manner and in the same reporting period to both CMS
and the manufacturer.''
0
17. Section 447.518 is amended, effective January 1, 2022, by--
0
a. Redesignating the text of paragraph (d) as paragraph (d)(1); and
0
b. Adding paragraphs (d)(2) and (3).
The additions read as follows:
Sec. 447.518 State plan requirements, findings, and assurances.
* * * * *
(d) * * *
(2) A State participating in VBP arrangements approved under a CMS-
authorized supplemental rebate agreement (SRA) must report data
described in paragraph (d)(3) of this section on an annual basis.
(3) Within 60 days of the end of each year, the State must submit
all of the following data, including cumulative data to date:
(i) State.
(ii) National drug code(s) (for drugs covered under the CMS-
authorized VBP SRA).
(iii) Product's FDA list name.
(iv) Number of prescriptions.
(v) Cost to the State to administer the CMS-authorized VBP SRA (for
example, systems changes, tracking outcomes, etc.).
(vi) Total savings generated by the supplemental rebate due to the
CMS-authorized VBP SRA.
PART 456--UTILIZATION CONTROL
0
18. The authority citation for part 456 is revised to read as follows:
Authority: 42 U.S.C. 1302.
0
19. Section 456.703 is amended by--
0
a. Redesignating paragraph (h) as paragraph (i); and
0
b. Adding a new paragraph (h).
The addition reads as follows:
Sec. 456.703 Drug use review programs.
* * * * *
(h) Minimum standards for DUR programs--(1) Minimum standards. In
operating their DUR programs, States must include the following minimum
standards:
(i) Prospective safety edit limitations for opioid prescriptions,
as specified by the State, on:
(A) Days' supply for patients not currently receiving opioid
therapy for initial prescription fills;
(B) Quantity of prescription dispensed for initial and subsequent
prescription fills;
(C) Therapeutically-duplicative initial and subsequent opioid
prescription fills; and
(D) Early refills, for subsequent prescription fills.
(ii) Prospective safety edit limitations for opioid prescriptions,
as specified by the State, on the maximum daily morphine milligram
equivalent for treatment of pain, for initial and subsequent
prescription fills.
(iii) A retrospective claims review automated process that
indicates prescription fills of opioids in excess of the prospective
safety edit limitations specified by the state under paragraph
(h)(1)(i) or (ii) of this section to provide for the ongoing review of
opioid claims data to identify patterns of fraud, abuse, excessive
utilization, inappropriate or medically unnecessary care, or
prescribing or billing practices that indicate abuse or provision of
inappropriate or medically unnecessary care among prescribers,
pharmacists and individuals receiving Medicaid benefits.
(iv) A retrospective claims review automated process and, at the
option of the State, prospective safety edits that monitor when an
individual is concurrently prescribed opioids and:
(A) Benzodiazepines; or
(B) Antipsychotics.
(v) A program to monitor and manage the appropriate use of
antipsychotic medications by children enrolled under the State plan,
including any Medicaid expansion groups for the Children's Health
Insurance Program (CHIP).
(vi) A process to identify potential fraud or abuse of controlled
substances by individuals enrolled under the State plan, health care
providers prescribing drugs to individuals so enrolled, and pharmacies
dispensing drugs to individuals so enrolled.
(vii) Prospective safety edits, retrospective claims review
automated processes, or a combination of these approaches as determined
by the State, to identify when:
(A) A beneficiary is prescribed an opioid after the beneficiary has
been prescribed one or more drugs used for Medication Assisted
Treatment (MAT) of an opioid use disorder or has been diagnosed with an
opioid use disorder, within a timeframe specified by the State, in the
absence of a new indication to support utilization of opioids (such as
new cancer diagnosis or entry into hospice care); and
(B) A beneficiary could be at high risk of opioid overdose and
should be considered for co-prescription or co-dispensing of any FDA-
approved opioid antagonist/reversal agent.
(2) Exclusion. The requirements in paragraphs (h)(1)(i) through
(vii) of this section do not apply with respect to individuals
receiving hospice or palliative care or treatment for cancer;
individuals who are residents of long-term care facilities,
intermediate care facilities for the intellectually disabled, or
facilities that dispense frequently abused drugs through a contract
with a single pharmacy; or other individuals the State elects to
exempt. While States are not required to apply the requirements in
paragraphs (h)(1)(i) through (vii) with respect to these individuals,
States may elect to do so.
* * * * *
0
20. Section 456.712 is amended by adding paragraph (c) to read as
follows:
Sec. 456.712 Annual report.
* * * * *
(c) Public availability. All fee-for-service (FFS) and managed care
DUR reports received by CMS under paragraph (b) of this section and, as
applicable, pursuant to Sec. 438.3(s) of this chapter, will be
publicly posted on a website maintained by CMS for the sharing of
reports and other information concerning Medicaid DUR programs.
Dated: November 30, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: December 11, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-28567 Filed 12-22-20; 4:15 pm]
BILLING CODE 4120-01-P
