Medicaid Program; Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program

<RULE> DEPARTMENT OF HEALTH AND HUMAN SERVICES <SUBAGY>Centers for Medicare & Medicaid Services</SUBAGY> <CFR>42 CFR Parts 433, 438, and 447</CFR> <DEPDOC>[CMS-2434-F]</DEPDOC> <RIN>RIN 0938-AU28</RIN> <SUBJECT>Medicaid Program; Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS). <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This final rule implements policies in the Medicaid Drug Rebate Program (MDRP) related to the new legislative requirements in the Medicaid Services Investment and Accountability Act of 2019 (MSIAA), which address drug misclassification, as well as drug pricing and product data misreporting by manufacturers. Additionally, we are finalizing several other proposed program integrity and program administration provisions or modifications in this final rule, including revising and finalizing key definitions used in the MDRP. This rule also finalizes a provision not directly related to MDRP that makes revisions to the third-party liability regulation due to amendments made by the Bipartisan Budget Act (BBA) of 2018. We also are finalizing our proposal to rescind revisions made by the December 31, 2020 final rule “Medicaid Program; Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and Supporting Value-Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third Party Liability (TPL) Requirements” (“the 2020 final rule”) to the Determination of Best Price and Determination of Average Manufacturer Price (AMP) sections. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> These regulations are effective on November 19, 2024. <E T="03">Applicability Dates:</E> In the <E T="02">Supplementary Information</E> section of this final rule, we provide a table (Table 1), which lists key changes in this final rule that have an applicability date other than the effective date of this final rule. For information on viewing public comments, see the beginning of the <E T="02">SUPPLEMENTARY INFORMATION</E> section. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Omar Alemi, 720-853-2724, <E T="03">omar.alemi@cms.hhs.gov,</E> for issues related to the definition of covered outpatient drug (COD) and removal of manufacturer rebate cap. Ruth Blatt, 410-786-1767, <E T="03">ruth.blatt@cms.hhs.gov,</E> for issues related to the definitions of noninnovator multiple-source drug, market date, and COD. Ginger Boscas, 410-786-3098, <E T="03">ginger.boscas@cms.hhs.gov,</E> for issues related to third-party liability. Michael Forman, 410-786-2666, <E T="03">michael.forman@cms.hhs.gov,</E> for issues related to physician-administered drugs. Charlotte Hammond, 410-786-1092, <E T="03">charlotte.hammond@cms.hhs.gov,</E> for issues related to diagnosis on prescriptions and professional dispensing fees. Mickey Morgan, 443-745-3950, <E T="03">mickey.morgan1@cms.hhs.gov,</E> for issues related to drug cost transparency in Medicaid managed care contracts and accounting for accumulated price concessions from 'stacking' when determining best price. Lisa Shochet, 410-786-5445, <E T="03">lisa.shochet@cms.hhs.gov,</E> for issues related to Bank Identification Number and Processor Control Number (BIN/PCN). Terry Simananda, 410-786-8144, <E T="03">terry.simananda@cms.hhs.gov,</E> for issues related to internal investigation, Collection of Information, and Regulatory Impact Analysis sections. Whitney Swears, 410-786-6543, <E T="03">whitney.swears@cms.hhs.gov,</E> for issues related to time limitation on audits and the definition of manufacturer. Cathy Traugott, 720-853-2785, <E T="03">catherine.traugott@cms.hhs.gov,</E> for issues related to drug misclassifications, definition of vaccine, and a drug price verification process through data collection survey. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> <HD SOURCE="HD2">A. Introduction</HD> Under the Medicaid program, section 1902(a)(54) of the Social Security Act (the Act) provides States with the option of providing coverage of prescribed drugs as described in section 1905(a)(12) of the Act, and to date, all States have elected to do so. Section 1903(a) of the Act provides for Federal Financial Participation (FFP) in State expenditures for these covered outpatient drugs (CODs). Coverage of CODs under the option provided by section 1902(a)(54) of the Act must comply with the requirements of section 1927 of the Act. Section 1927 of the Act governs the Medicaid Drug Rebate Program (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 conditioning FFP in medical assistance for drugs covered under section 1902(a)(54) on the manufacturer of the drug having an NDRA. The rebates paid by manufacturers to States help to partially offset the Federal and State costs of most outpatient prescription drugs dispensed to Medicaid beneficiaries. The amount of the rebate is determined by a formula set forth in section 1927(c) of the Act. Generally, the formula to calculate the rebate that applies to a particular drug depends on whether the drug is classified as (1) a single source drug (S drug) or innovator multiple source drug (I drug), commonly referred to as a brand-name drug, or (2) other drugs, which include noninnovator multiple source drugs (N drug), commonly referred to as generic drugs, among others. Generally, pursuant to section 1927 of the Act, drugs classified as single source drugs or innovator multiple source drugs pay higher rebates than those that are classified as an “other drug,” such as noninnovator multiple source drugs. Consistent with section 1927(b)(3)(A) of the Act, a manufacturer must report and certify certain drug product and drug pricing information for CODs to CMS not later than 30 days after the last day of each month and certain drug product and drug pricing information 30 days after the last day of each quarter of a rebate period. If a manufacturer fails to submit timely information, or misreports information, we may be unable to establish accurate Unit Rebate Amounts (URAs) due to the misreporting or late reporting. While we provide URAs to the States each quarter to help facilitate billing manufacturers for rebates, it is ultimately the manufacturer's responsibility to ensure accurate rebates are paid to States for their CODs. Prior to the enactment of the Medicaid Services Investment and Accountability Act of 2019 (MSIAA) (Pub. L. 116-16; enacted April 18, 2019), section 1927(k)(7)(A)(iv) of the Act defined a single source drug as a covered outpatient drug which is produced or distributed under an original new drug application (NDA). Section 1927(k)(7)(A)(ii) of the Act similarly defined an innovator multiple source drug as a multiple source drug that was originally marketed under an original NDA. A noninnovator multiple source drug was defined at section 1927(k)(7)(A)(iii) of the Act as a multiple source drug that is not an innovator multiple source drug. MSIAA made several revisions to these definitions, including adding a provision to ratify CMS' existing policy to permit certain exceptions from the definitions if a narrow exception applies, as described in § 447.502 or any successor regulation. This narrow exception process in § 447.502 was created in the 2016 final rule entitled “Medicaid Program; Covered Outpatient Drugs”  <SU>1</SU> <FTREF/> (2016 COD final rule), under which drug manufacturers could submit a request for a narrow exception to allow individual drugs approved under an NDA to be treated as if they were approved under an abbreviated new drug application (ANDA) and classified as noninnovator multiple source drugs prospectively from the effective date of the 2016 COD final rule. Instructions to manufacturers regarding this process were included in Manufacturer Release #98, May 2, 2016. <SU>2</SU> <FTREF/> The 2016 COD final rule did not, however, excuse manufacturers from their obligation to correctly report drugs approved under an NDA, as either single source or innovator multiple source drugs prior to the effective date of the 2016 COD final rule, which was April 1, 2016. This narrow exception process was codified into statute in MSIAA when the Congress removed the word “original” from the definitions of single source drug and innovator multiple source drug, thereby confirming CMS' pre 2016 interpretation. <FTNT> <SU>1</SU>   <E T="03">https://www.govinfo.gov/content/pkg/FR-2016-02-01/pdf/2016-01274.pdf.</E> </FTNT> <FTNT> <SU>2</SU>   <E T="03">https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/mfr-releases/mfr-rel-098.pdf.</E> </FTNT> We published the proposed rule (88 FR 34238-34296) on May 26, 2023, and provided a 60-day comment period. A total of 128 comments were received. We are now publishing the final rule. We are clarifying and emphasizing our intent that if any provision of this final rule is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further action, it shall be severable from other parts of this final rule, and from rules and regulations currently in effect, and not affect the remainder thereof or the application of the provision to other persons not similarly situated or to other, dissimilar circumst ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 484k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━