Navigating Change: A Deep Dive into the Pending CMS Rule (CMS-2434) for Pharma Manufacturers

The CMS Final Rule currently pending holds significant implications for pharmaceutical manufacturers. Within the Office of Information and Regulatory Affairs (OIRA), there are rules pending review for extended periods, with 25 rules for the Department of Health and Human Services awaiting resolution. In this update, we’ll focus on the pending CMS Rule: CMS-2434, “Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program.” This rule has the potential to reshape aspects of drug pricing and reporting, with far-reaching effects on the industry.

As of 5/15/24, most aspects of the proposed CMS final rule are under review, potentially concluding with a final rule in the near future. Manufacturers must stay informed and prepared for these changes as they navigate the evolving regulatory landscape.

Below is a summary of key proposed changes that may impact drug manufacturers:

• Best Price Modifications (Update): Best Price modifications would require reporting of any “stacking” of all rebates, discounts, and price concessions when determining best price. For example, if rebates are offered to a retail pharmacy as well as a health plan, a specific drug sold could receive rebates from both, thereby “stacking” the discounts. This means both discounts would potentially factor into the best price calculation. For instance, if the pharmacy receives a 10% discount and the health plan receives a 30% discount, manufacturers may have to report a 40% discounted price as their Best Price. Currently, manufacturers would just be required to report the Best Price to a single customer (meaning the health plan with a 30% rebate in this example).

On May 15, 2024, CMS announced that they will not be finalizing their proposal regarding Best Price stacking at this time. Instead, they plan to gather more information to better understand the issue and guide future rulemaking.

• Implementation of Government Pricing Surveys: CMS has proposed implementing pricing surveys, a process allowed through the MDRP statute but historically not conducted. This proposal includes a methodology to identify high-cost drugs and conduct surveys to gather information on utilization, pricing, distribution, research, and marketing. CMS also proposes publishing non-public information obtained in these surveys, with the MDRP statute currently permitting these surveys when necessary to verify manufacturer prices and average manufacturer prices.
  
• CMS revises Multiple Definitions Including:
  • Market Date: CMS is suggesting a new definition of “market date” regarding AMP calculations, specifying it as “the date on which the COD was first sold by any manufacturer.” Previous guidelines referred to the market date as the time when the drug was initially “available for sale.” Should this proposal be adopted, it could potentially impact baseline information that manufacturers report.
  • Drug Product Information: Previously undefined in regulations, CMS proposes to include various details such as NDC, drug name, units per package size, drug category, unit type, drug product type, base date AMP, therapeutic equivalent code, line extension indicator, 5i indicator, route of administration, FDA approval date, FDA application number, market date, COD status, and any other information deemed necessary for accurate URA calculations.
  • Vaccine: Historically, no rebates have been owed on vaccines as they’ve been excluded from the definition of a covered outpatient drug. CMS seeks to clarify this with a formal definition, “to mean a product that is administered prophylactically to induce active, antigen-specific immunity for the prevention of one or more specific infectious diseases and is included in a current or previous FDA published list of vaccines licensed for use in the United States.”
• Required Agreements for Manufacturer & Related Entities: CMS has previously issued guidance for manufacturers that if a manufacturer of covered outpatient drugs participates in the MDRP program, any associated companies must enter into a National Drug Rebate Agreement. CMS looks to clarify and establish formal regulations addressing this concept which would state that “all associated entities of the manufacturer that sell prescription drugs, including, but not limited to, owned, acquired, affiliates, brother or sister corporations operating subsidiaries, franchises, business segments, part of holding companies, divisions, or entities under common corporate ownership or control, must each maintain an effectuated rebate agreement.”
• CMS Defines “Internal Investigation” Required for Restatement Approval: Manufacturers have 36 months (12 quarters) to restate AMP or Best Price. Any restatements older than this must receive CMS approval. CMS will only approve restatements beyond three years for specific circumstances, including when calculations are under an “internal investigation.” In this rule, CMS defines “internal investigation” as a manufacturer’s investigation of its AMP, best price, customary prompt pay discounts, or nominal prices previously certified in the MDRP. This investigation must result in a finding of fraud, abuse, or violation of law or regulation. Manufacturers will then be required to provide data to CMS to support their findings.
• Medicaid History Audit Limitation: Manufacturers are allowed to dispute Medicaid claims submitted
  by states for rebates. There is currently no set limit for manufacturers to audit state rebate claims across their entire history , however, CMS is proposing to limit the timeframe to 12 quarters.
• Suspension of National Drug Rebate Agreement: In the proposed rule, CMS is establishing a procedure for suspending a manufacturer’s drug rebate agreement if they report late to CMS. If manufacturers fail to report within 30 days of the deadline, CMS will contact the manufacturer to provide a new deadline, not exceeding 90 days after. If manufacturers do not comply within that timeframe, CMS proposes suspending the agreement. However, CMS also states that “while suspended for purposes of the MDRP, the Medicaid Drug Rebate Agreement with the manufacturer would remain in effect for purposes of Medicare Part B reimbursement and the 304B Drug Pricing Program.”

In summary, the pending CMS Rule (CMS-2434) has significant implications for pharmaceutical manufacturers. This includes changes to best price calculations and the implementation of pricing surveys for high-cost drugs. The rule also revises definitions for market date, drug product information, and vaccines, and requires all associated entities to maintain a National Drug Rebate Agreement. Manufacturers must be aware of criteria for restating AMP or Best Price beyond three years, proposed limitations on auditing state rebate claims, and procedures for suspending drug rebate agreements if reporting deadlines are missed. Your success and compliance are our top priorities, and we are committed to keeping you informed and prepared for changes ahead. These changes emphasize the need for compliance and strategic planning to address potential impacts on pricing and agreements. As the regulatory landscape evolves, trust in Prescription Analytics to guide you through these changes with expert guidance and support. Contact us today for valuable insights and assistance.

Sources:

https://www.federalregister.gov/documents/2023/05/26/2023-10934/medicaid-program-misclassification-of-drugs-program-administration-and-program-integrity-updates

https://www.sidley.com/en/insights/newsupdates/2023/5/us-cms-seeks-to-reverse-prior-stacking-guidance-and-proposes-novel-transparency-requirements#:~:text=CMS%20proposes%20to%20define%20%E2%80%9Cmarket,baseline%20information%20reported%20by%20manufacturers.

https://www.cms.gov/newsroom/press-releases/cms-statement-misclassification-drugs-program-administration-and-program-integrity-updates-under “CMS Statement on Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program (MDRP) Proposed Rule (CMS-2434-P)”