Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.
April 5 — The CMS has delayed the effective date for part of a final rule that changes how the government pays for outpatient prescription drugs in the Medicaid program.
The delay affects certain drugs, such as those that are injected or inhaled, and responds to a request from drug industry groups for more time.
On Jan. 21, the Centers for Medicare & Medicaid Services released the final rule on outpatient drugs (CMS-2345-FC; RIN 0938-AQ41) . The final rule implements provisions in the Affordable Care Act, which revised the formula for reimbursing pharmacies for generic and multiple-source drugs in Medicaid by using the average manufacturer price (AMP) to set the federal upper limit or FUL. FUL, a type of cost-containment strategy, is the maximum Medicaid reimbursement rate for multiple-source drugs.
The final rule establishes a definition of AMP for so-called 5i drugs: inhalation, infusion, instilled, implanted or injectable drugs. This part of the final rule was set to take effect on April 1, but the CMS said in a March 31 announcement that it has delayed the effective date until July 1.
The CMS said in its March 31 statement that “it is our understanding that the greatest challenges for manufacturers” related to determining the AMP for 5i drugs “that are not generally dispensed through retail community pharmacies.”
The Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO) requested the extension of the effective date in a Feb. 26 letter to the CMS, saying the extension was needed to “give manufacturers enough time to take the steps necessary to calculate Medicaid rebates according to the final rule's requirements.”
Stephanie Trunk, of Arent Fox LLP in Washington, told Bloomberg BNA in an April 5 e-mail that the CMS “is delaying the effective date for a very limited portion of the final AMP rule related to the implementation of changes to the AMP calculation for 5i drugs that are not generally dispensed at retail.”
Trunk said that until July, manufacturers can use “existing approaches as documented in their reasonable assumptions to determine whether a 5i drug is generally dispensed by retail community pharmacies, which dictates whether a 5i AMP methodology or retail community pharmacy focused AMP methodology should be” used.
The PhRMA and BIO letter noted that under the CMS's final rule, a 5i drug will be considered “not generally dispensed through a retail community pharmacy” if 70 percent or more of its sales are to entities that aren't retail community pharmacies, in what's known as the 70/30 test. The industry groups' letter detailed the lengths that companies would have to go through to make a monthly 70/30 determination.
Donna Lee Yesner, of Morgan Lewis & Bockius LLP in Washington, told Bloomberg BNA in an April 5 e-mail that most of the requirements in the final rule “necessitating significant system changes involve 5i AMP, particularly how to apply the 70/30 ratio for determining on a monthly basis whether a drug is not generally sold to retail community pharmacies and a smoothing mechanism to reduce the likelihood of switching back and forth from retail to non-retail.”
“The calculation of 5i AMP is also unique so manufacturers need to set up a third calculation which incorporates the statute and final rule and certain assumptions where the final rule is unclear,” Yesner said. “For these reasons, CMS is rightly deferring enforcement of the 5i AMP portion of the rule.”
To contact the reporter on this story: Bronwyn Mixter in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Janey Cohen at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)