[Federal Register: December 22, 2006 (Volume 71, Number 246)]
[Proposed Rules]
[Page 77173-77200]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22de06-26]
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Part IV
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 447
Medicaid Program; Prescription Drugs; Proposed Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 447
[CMS-2238-P]
RIN 0938-AO20
Medicaid Program; Prescription Drugs
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would implement the provisions of the
Deficit Reduction Act of 2005 (DRA) pertaining to prescription drugs
under the Medicaid program. The DRA requires the Secretary of Health
and Human Services to publish a final regulation no later than July 1,
2007. In addition, we would add to existing regulations certain
established Medicaid rebate policies that are currently set forth in
CMS guidance. This rule would bring together existing and new
regulatory requirements in one, cohesive subpart.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on February 20,
2007.
ADDRESSES: In commenting, please refer to file code CMS-2238-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click
on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (Attachments should be in Microsoft Word,
WordPerfect, or Excel; however, we prefer Microsoft Word.)
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-2238-P, P.O. Box 8015, Baltimore, MD 21244-8015.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-2238-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-7195 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by mailing your
comments to the addresses provided at the end of the ``Collection of
Information Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Kimberly Howell, (410) 786-6762 (for
issues related to the determination of average manufacturer price and
best price).
Yolanda Reese, (410) 786-9898 (for issues related to authorized
generics).
Madlyn Kruh, (410) 786-3239 (for issues related to nominal prices).
Marge Watchorn, (410) 786-4361 (for issues related to manufacturer
reporting requirements).
Gail Sexton, (410) 786-4583 (for issues related to Federal upper
limits).
Christina Lyon, (410) 786-3332 (for issues related to physician-
administered drugs).
Bernadette Leeds, (410) 786-9463 (for issues related to the
regulatory impact analysis).
SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-2238-P and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking.
Click on the link ``Electronic Comments on
CMS Regulations'' on that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
I. Background
[If you choose to comment on issues in this section, please include the
caption ``Background'' as the beginning of your comments.]
A. Introduction
Under the Medicaid program, States may provide coverage of
outpatient drugs as an optional service 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 order for payment to be made available under section
1903 for certain drugs, manufacturers must enter into a Medicaid drug
rebate agreement as set forth in section 1927(a) of the Act. Section
1927 of the Act provides specific requirements for rebate agreements,
drug pricing submission and confidentiality requirements, the formula
for calculating rebate payments, and requirements for States with
respect to covered outpatient drugs.
This proposed rule would implement sections 6001(a)-(d), 6002, and
6003 of the Deficit Reduction Act of 2005 (DRA), Pub. L. 109-171 (Feb.
8, 2006). It also would codify those parts of section 1927 of the Act
that pertain to requirements for drug manufacturers' calculation and
reporting of average
[[Page 77175]]
manufacturer price (AMP) and best price, and it would revise existing
regulations that set upper payment limits for certain covered
outpatient drugs. This proposed rule would also implement section
1903(i)(10) of the Act, as revised by the DRA, with regard to the
denial of FFP in expenditures for certain physician-administered drugs.
Finally, the proposed rule would address other provisions of the drug
rebate program, to the extent those provisions are affected by the DRA.
The Medicaid Drug Rebate Program was established by section 4401 of
the Omnibus Budget Reconciliation Act of 1990 (OBRA 90), Pub. L. 101-
508 (Nov. 5, 1990) and subsequently modified by the Veterans Health
Care Act of 1992 (VHCA), Pub. L. 102-585 (Nov. 4, 1992) and the Omnibus
Budget Reconciliation Act of 1993, Pub. L. 103-66 (Aug. 10, 1993).
These provisions were implemented primarily through the national drug
rebate agreement (56 FR 7049 (Feb. 21, 1991)) and other informal
program releases, which provide standards for manufacturer reporting
and rebate calculations. The statutory changes that affect the
provisions of this proposed rule are described below.
B. Changes Made by the Deficit Reduction Act of 2005
Section 6001(a) of the DRA amends section 1927(e) of the Act to
revise the formula CMS uses to set Federal upper limits (FULs) for
multiple source drugs. Effective January 1, 2007, the upper limit for
multiple source drugs shall be established at 250 percent of the
average manufacturer price (AMP) (as computed without regard to
customary prompt pay discounts extended to wholesalers) for the least
costly therapeutic equivalent.
Section 6001(b) of the DRA amends section 1927(b)(3) of the Act to
create a requirement that manufacturers report certain prices to the
Secretary monthly. It also requires the Secretary to provide AMP to
States on a monthly basis beginning July 1, 2006 and post AMP on a Web
site at least quarterly. We are aware of concerns that the AMPs
released to the States beginning July 1, 2006, will not reflect changes
to the definition of AMP made by the DRA and proposed in this rule.
While we made the AMPs available to the States beginning July 1, 2006,
States should keep these data confidential in accordance with section
1927(b)(3)(D) of the Act. Section 6001(b) of the DRA revises these
confidentiality provisions to permit States to use AMP to calculate
payment rates; however, these confidentiality amendments are not
effective until January 1, 2007. This six-month period will give the
States a chance to review the AMP data and revise their systems to
address the DRA amendments.
Section 6001(c) of the DRA modifies the definition of AMP to remove
customary prompt pay discounts extended to wholesalers from the AMP
calculation and requires manufacturers to report these customary prompt
pay discounts to the Secretary. It requires the Inspector General of
the Department of Health and Human Services (IG) to review the
requirements for, and the manner in which, AMP is determined and submit
to the Secretary and Congress any recommendations for changes no later
than June 1, 2006. Finally, it requires the Secretary to promulgate a
regulation that clarifies the requirements for, and the manner in
which, AMP is determined no later than July 1, 2007, taking into
consideration any IG recommendations.
Section 6001(d) of the DRA requires manufacturers to report
information on sales at nominal price to the Secretary for calendar
quarters beginning on or after January 1, 2007. It also specifies the
entities to which nominal price applies. It limits the merely nominal
exclusion to sales at nominal prices to the following: A covered entity
described in section 340B(a)(4) of the Public Health Service Act
(PHSA), an intermediate care facility for the mentally retarded (ICF/
MR), a State-owned or operated nursing facility, and any other facility
or entity that the Secretary determines is a safety net provider to
which sales of such drugs at a nominal price would be appropriate,
based on certain factors such as type of facility or entity, services
provided by the facility or entity, and patient population.
Section 6001(e) of the DRA amends section 1927 of the Act to
provide for a survey of retail prices and State performance rankings.
These provisions are not addressed in this proposed rule.
Section 6001(f) of the DRA makes minor amendments to section
1927(g) of the Act which are self-implementing.
Section 6001(g) of the DRA provides that the amendments in section
6001 are effective on January 1, 2007, unless otherwise noted.
Section 6002 of the DRA amends section 1903(i)(10) of the Act by
prohibiting Medicaid FFP for physician-administered drugs unless States
submit the utilization data described in section 1927(a) of the Act. It
also amends section 1927 of the Act to require the submission of
utilization data for physician-administered drugs.
Section 6003(a) of the DRA amends section 1927(b)(3)(A) of the Act
to require manufacturers to include within AMP and best price all of
its drugs that are sold under a new drug application (NDA) approved
under section 505(c) of the Federal Food, Drug, and Cosmetic Act
(FFDCA) when they report AMP and best price to the Secretary.
Section 6003(b) of the DRA amends section 1927(c)(1)(C) of the Act
to clarify that manufacturers must include the lowest price available
to any entity for a drug sold under an NDA approved under section
505(c) of the FFDCA when determining best price. Section 6003(b) also
amends section 1927(k) to require that in the case of a manufacturer
that approves, allows, or otherwise permits any of its drugs to be sold
under an NDA approved under section 505(c) of the FFDCA, the AMP shall
be calculated to include the average price paid for such drugs by
wholesalers for drugs distributed to the retail pharmacy class of
trade. Section 6003(c) of the DRA provides that the amendments made by
section 6003 are effective January 1, 2007.
The statutory provisions in the DRA that affect the Medicaid Drug
Rebate Program, as well as the regulatory provisions we are proposing
to implement the program, are discussed in greater detail in the
section entitled ``Provisions of the Proposed Regulations'' below.
C. Notice of Proposed Rulemaking Published September 19, 1995
On September 19, 1995, CMS (then the Health Care Financing
Administration) published a notice of proposed rulemaking (NPRM) in the
Federal Register (60 FR 48442 (Sept. 19, 1995)). The purpose of the
1995 NPRM was to propose regulations pertaining to the Medicaid Drug
Rebate Program and to address the national rebate agreement (56 FR 7049
(Feb. 21, 1991)). On August 29, 2003, CMS finalized two of the
provisions in the 1995 NPRM through a final rule with comment period
(68 FR 51912). These regulations require manufacturers to retain
records for data used to calculate AMP and best price for three years
from when AMP and best price are reported to CMS. We also provided that
manufacturers should report revisions to AMP and best price for a
period not to exceed twelve quarters from the quarter in which the data
are due. On November 26, 2004, we published final regulations (69 FR
68815) that require a manufacturer to retain pricing data for 10 years
from the date the manufacturer reports that data to CMS and for an
additional time frame where the manufacturer is the subject of an audit
or government investigation. Due to the time that has elapsed since
publication of the 1995 NPRM and
[[Page 77176]]
changes in the prescription drug industry, we do not plan to finalize
the other provisions of that proposed rule, and any comments on the
1995 NPRM are outside the scope of this proposed rule. This proposed
rule does not address the entire Medicaid Drug Rebate Program, but
focuses primarily on the provisions of the DRA that address the
Medicaid Drug Rebate Program.
II. Provisions of the Proposed Regulations
Basis and Purpose of Subpart I--Section 447.500
This subpart would implement specified provisions of sections 1927,
1903(i)(10), and 1902(a)(54) of the Act related to implementation of
the DRA. It would include requirements related to State plans, FFP for
drugs, and the payment for covered outpatient drugs under Medicaid. In
this rule, we also propose to move the existing Medicaid drug
provisions in the Federal regulations from subpart F to subpart I of 42
CFR part 447.
Definitions--Section 447.502
This section of the rule would include definitions of key terms
used in 42 CFR part 447, subpart I. We propose to use definitions from
several sources, including the Act, Federal regulations, program
guidance, and the national rebate agreement. We invite the public to
provide comments on the terms we have chosen to define as well as the
proposed definitions described below.
Bona fide service fee would mean a fee paid by a manufacturer to an
entity, that represents fair market value for a bona fide, itemized
service actually performed on behalf of the manufacturer that a
manufacturer would otherwise perform (or contract for) in the absence
of the service arrangement, and that is not passed in whole or in part
to a client or customer of an entity, whether or not the entity takes
title to the drug.
Brand name drug would mean a single source or innovator multiple
source drug.
Bundled sale would mean an arrangement regardless of physical
packaging under which the rebate, discount, or other price concession
is conditioned upon the purchase of the same drug or drugs of different
types (that is, at the nine-digit National Drug Code (NDC) level) or
some other performance requirement (e.g., 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. For bundled sales, the
discounts are allocated proportionately to the dollar value of the
units of each drug sold under the bundled arrangement. For bundled
sales where multiple drugs are discounted, the aggregate value of all
the discounts should be proportionately allocated across all the drugs
in the bundle.
Consumer Price Index `` Urban (CPI-U) would be defined the same as
it is in the national rebate agreement, except we would replace ``U.S.
Department of Commerce'' with ``U.S. Department of Labor'' to reflect
that the Department of Labor is now responsible for updating the CPI-U.
Therefore, the term CPI-U would mean the index of consumer prices
developed and updated by the U.S. Department of Labor. For purposes of
this subpart, it would be the CPI for all urban consumers (U.S.
average) for the month before the beginning of the calendar quarter for
which the rebate is paid.
Dispensing fee would be defined similarly to how it is defined for
the Medicare Part D program in 42 CFR 423.100 in light of some of the
parallels of Part D to Medicaid. We are defining this term in order to
assist States in their evaluation of factors in establishing a
reasonable dispensing fee to pharmacy providers. We note that while we
propose to define this term, we do not intend to mandate a specific
formula or methodology which the States must use to determine the
dispensing fee. The formula is consistent with our regulation that
defines estimated acquisition costs which give States flexibility to
determine EAC. However, consistent with a recommendation made by the
Office of the Inspector General (OIG) in its report, ``Determining
Average Manufacturer Prices for Prescription Drugs under the Deficit
Reduction Act of 2005,'' (A-06-06-00063) May 2006, we encourage States
to analyze the relationship between AMP and pharmacy acquisition costs
to ensure that the Medicaid program appropriately reimburses pharmacies
for estimated acquisition costs.
Dispensing fee would be defined as the fee which--
(1) Is incurred at the point of sale and pays for costs other than
the ingredient cost of a covered outpatient drug each time a covered
outpatient drug is dispensed;
(2) Includes only pharmacy costs associated with ensuring that
possession of the appropriate covered outpatient drug is transferred to
a Medicaid beneficiary. Pharmacy costs include, but are not limited to,
any reasonable costs associated with a pharmacist's time in checking
the computer for information about an individual's coverage, performing
drug utilization review and preferred drug list review activities,
measurement or mixing of the covered outpatient drug, filling the
container, beneficiary counseling, physically providing the completed
prescription to the Medicaid beneficiary, delivery, special packaging,
and overhead associated with maintaining the facility and equipment
necessary to operate the pharmacy; and
(3) Does not include administrative costs incurred by the State in
the operation of the covered outpatient drug benefit including systems
costs for interfacing with pharmacies.
Innovator multiple source drug would be defined based on the
definition in section 1927(k)(7)(A)(ii) of the Act. We would also use
the definition from the national rebate agreement. Innovator multiple
source drug would mean a multiple source drug that was originally
marketed under an original NDA approved by the Food and Drug
Administration (FDA). It would include a drug product marketed by any
cross-licensed producers or distributors operating under the NDA and a
covered outpatient drug approved under an NDA, Product License
Approval, Establishment License Approval or Antibiotic Drug approval.
We believe this definition is consistent with our understanding of the
drug rebate statute and section 6003 of the DRA which includes within
the definition those drugs which often receive a certain amount of
patent protection and/or market exclusivity.
Manufacturer would be defined based on the definition in section
1927(k)(5) of the Act and the national rebate agreement. It would also
mirror the current definition of manufacturer used by Medicare in the
regulations regarding manufacturer's average sales price (ASP) data.
For purposes of the Medicaid program, manufacturer would be defined as
any entity that possesses legal title to the NDC for a covered drug or
biological product and--
(a) Is engaged in the production, preparation, propagation,
compounding, conversion, or processing of covered outpatient drug
products, either directly or indirectly by extraction from substances
of natural origin, or independently by means of chemical synthesis, or
by a combination of extraction and chemical synthesis; or
(b) Is engaged in the packaging, repackaging, labeling, relabeling,
or distribution of covered outpatient drug products and is not a
wholesaler of drugs or a retail pharmacy licensed under State law.
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(c) With respect to authorized generic products, the term
``manufacturer'' will also include the original holder of the NDA.
(d) With respect to drugs subject to private labeling arrangements,
the term ``manufacturer'' will also include those entities that do not
possess legal title to the NDC.
Multiple source drug is currently defined in Federal regulations at
section 42 CFR 447.301. We propose removing the definition from that
section and revising the definition to reflect the DRA amendments to
section 1927 of the Act. We would define the term multiple source drug
to mean, with respect to a rebate period, a covered outpatient drug for
which there is at least one other drug product which--
(1) Is rated as therapeutically equivalent. For the list of drug
products rated as therapeutically equivalent, see the FDA's most recent
publication of ``Approved Drug Products with Therapeutic Equivalence
Evaluations'' which is available at http://www.fda.gov/cder/orange/default.htm
or can be viewed at the FDA's Freedom of Information Public
Reading Room at 5600 Fishers Lane, rm. 12A-30, Rockville, MD 20857;
(2) Is pharmaceutically equivalent and bioequivalent, as determined
by the FDA; and
(3) Is sold or marketed in the United States during the rebate
period.
National drug code (NDC) would be defined as it is used by the FDA
and based on the definition used in the national rebate agreement. For
purposes of this subpart, it would mean the 11-digit numerical code
maintained by the FDA that indicates the labeler, product, and package
size, unless otherwise specified in the regulation as being without
respect to package size (9-digit numerical code).
National rebate agreement is described in section 1927 of the Act.
Section 1927(b) of the Act outlines the terms of the rebate agreement,
including reporting timeframes, manufacturer responsibilities,
penalties, and confidentiality of pricing data. We propose that the
national rebate agreement would continue to be defined as the rebate
agreement developed by CMS and entered into by CMS on behalf of the
Secretary or his designee and a manufacturer to implement section 1927
of the Act.
Nominal price would be defined as it is in the national rebate
agreement. We propose incorporating this definition in this rule
because it is the standard presently used in the Medicaid program and
the Medicare Part B program, and is similar to that used by the
Department of Veterans Affairs (DVA) in administering the Federal
Supply Schedule (FSS). Nominal price would mean a price that is less
than 10 percent of AMP in the same quarter for which the AMP is
computed.
Rebate period is defined in section 1927(k)(8) of the Act as a
calendar quarter or other period specified by the Secretary with
respect to the payment of rebates under the national rebate agreement.
The Medicaid Drug Rebate Program currently operates using a calendar
quarter for the rebate period. While AMPs would be reported monthly for
purposes of calculating FULs and for release to States, we can find no
evidence in the legislative history of the DRA that Congress intended
to change the definition of rebate period. Therefore, we would define
rebate period as a calendar quarter.
Single source drug is defined in section 1927(k)(7)(A)(iv) of the
Act as a covered outpatient drug which is produced or distributed under
an original NDA approved by the FDA, including a drug product marketed
by any cross-licensed producers or distributors operating under the
NDA. It is further defined in the national rebate agreement as a
covered outpatient drug approved under a Product License Approval,
Establishment License Approval, or Antibiotic Drug Approval. We propose
to define the term single source drug as it is defined in the statute
and the national rebate agreement.
Determination of Average Manufacturer Price--Section 447.504
Background
Prior to the DRA, section 1927(k)(1) of the Act specified that the
AMP with respect to a covered outpatient drug of a manufacturer for a
rebate period is the average unit price paid to the manufacturer for
the drug in the United States by wholesalers for drugs distributed to
the retail pharmacy class of trade after deducting customary prompt pay
discounts.
The national rebate agreement (56 FR 7049 (Feb. 21, 1991)) further
specifies that:
Direct sales to hospitals, health maintenance
organizations (HMOs) and wholesalers, where the drug is relabeled under
that distributor's national drug code number, and FSS prices are not
included in the calculation of AMP;
AMP includes cash discounts and all other price reductions
(other than rebates under section 1927 of the Act), which reduce the
actual price paid;
AMP is calculated as net sales divided by the number of
units sold, excluding free goods (i.e., drugs or any other items given
away, but not contingent on any purchase requirements), and
Net sales means quarterly gross sales revenue less cash
discounts allowed and all other price reductions (other than rebates
under section 1927 of the Act) which reduce the actual price paid.
Consistent with these provisions, it has been our policy that in
order to provide a reflection of market transactions, the AMP for a
quarter should be adjusted by the manufacturer if cumulative discounts
or other arrangements subsequently adjust the prices actually realized.
AMP should be adjusted for bundled sales (as defined above) by
determining the total value of all the discounts on all drugs in the
bundle and allocating those discounts proportionately to the respective
AMP calculations. The aggregate discount is allocated proportionately
to the dollar value of the units of each drug sold under the bundled
arrangement. Where discounts are offered on multiple products in a
bundle, the aggregate value of all the discounts should be
proportionately allocated across all the drugs in the bundle. The
average unit price means a manufacturer's quarterly sales included in
AMP less all required adjustments divided by the total units sold and
included in AMP by the manufacturer in a quarter.
Provisions of the DRA
Section 6001(c)(1) of the DRA amended section 1927(k)(1) of the Act
to revise the definition of AMP to exclude customary prompt pay
discounts to wholesalers, effective January 1, 2007. Section 6001(c)(3)
of the DRA requires the OIG to review the requirements for and manner
in which AMPs are determined and recommend changes to the Secretary by
June 1, 2006. Section 6001(c)(3) of the DRA requires the Secretary to
clarify the requirements for and the manner in which AMPs are
determined by promulgating a regulation no later than July 1, 2007,
taking into consideration the OIG's recommendations.
OIG Recommendations on AMP
In accordance with 6001(c)(3) of the DRA, the OIG issued its
report, ``Determining Average Manufacturer Prices for Prescription
Drugs under the Deficit Reduction Act of 2005,'' (A-06-06-00063), in
May 2006. In this report, the OIG recommended that CMS:
Clarify the requirements in regard to the definition of
retail pharmacy class of trade and treatment of pharmacy
[[Page 77178]]
benefit manager (PBM) rebates and Medicaid sales and
Consider addressing issues raised by industry groups, such
as:
[ctrcir] Administrative and service fees,
[ctrcir] Lagged price concessions and returned goods,
[ctrcir] The frequency of AMP reporting,
[ctrcir] AMP restatements, and
[ctrcir] Base date AMP.
The OIG also recommended that the Secretary direct CMS to:
Issue guidance in the near future that specifically
addresses the implementation of the AMP-related reimbursement
provisions of the DRA and
Encourage States to analyze the relationship between AMP
and pharmacy acquisition cost to ensure that the Medicaid program
appropriately reimburses pharmacies for estimated acquisition costs.
We address these recommendations as we discuss provisions of this
proposed rule in the section below.
Definition of Retail Pharmacy Class of Trade and Determination of AMP
We recognize that there have been concerns expressed regarding AMP
because of inconsistencies in the way manufacturers determine AMP,
changes in the drug marketplace, and the introduction of newer business
practices such as payment of services fees. We also realize that in
light of the DRA amendments, AMP will serve two distinct purposes: For
drug rebate liability and for payments. For the purpose of determining
drug rebate liability, drug manufacturers would generally benefit from
a broad definition of retail pharmacy class of trade which would
include entities that purchase drugs at lower prices and which would
lower rebate liability. Including these lower prices would decrease the
AMP, decreasing manufacturers' rebate liability. The retail pharmacy
industry might benefit from a narrow definition of retail pharmacy
prices that would be limited to certain higher priced sales given that,
in light of the DRA amendments, States might use AMP to calculate
pharmacy payment rates. Excluding low-priced sales would increase AMP,
increasing, in all likelihood, manufacturers' rebate payments. The
pharmacy industry believes that mail order pharmacies and nursing home
pharmacies (long-term care pharmacies) pay less for drugs than retail
pharmacies (e.g., independents and chain pharmacies), and thus the
inclusion of such prices would lower AMP below the price paid by such
retail pharmacies.
The statute mandates that, effective January 1, 2007, the Secretary
use AMP when computing FULs. For this purpose, we would exclude certain
outlier payments (see our discussion in the FULs section for a more
complete description of outlier exclusions). The statute also requires
that AMP be provided to States monthly and be posted on a public Web
site. While there is no requirement that States use AMPs to set payment
amounts, we believe the Congress intended that States have drug pricing
data based on actual prices, in contrast to previously available data
that did not necessarily reflect actual manufacturer prices of sales to
the retail pharmacy class of trade. We considered several options to
define what prices should be included in AMP. We considered including
only prices of sales to retail pharmacies that dispense drugs to the
general public (e.g., independent and chain pharmacies) in retail
pharmacy class of trade and removing prices to mail order pharmacies,
nursing home pharmacies (long-term care pharmacies), and PBMs. This
definition would address the retail pharmacy industry's contentions
that an AMP used for reimbursement to retail pharmacies should only
reflect prices of sales to those pharmacies which dispense drugs to the
general public.
The exclusion of prices to mail order pharmacies, nursing home
facilities (long-term care facilities), and PBMs would substantially
reduce the number of transactions included in AMP. Removal of these
prices would simplify AMP calculations for manufacturers because it is
our understanding that certain data (e.g., PBM pricing data) are
difficult for manufacturers to capture. In addition, removal of these
prices would address differing interpretations of CMS policy identified
by the OIG and the Government Accountability Office (GAO) due to the
lack of a clear definition of AMP or specific guidance regarding which
retail prices should be included in AMP. However, such a removal would
not be consistent with past policy, as specified in manufacturer
Releases 28 and 29 (http://www.cms.hhs.gov/MedicaidDrugRebateProgram/03_DrugMfrReleases.asp#TopOfPage
), would likely result in a higher
AMP, and would result in an increase in drug manufacturers' rebate
liabilities.
We also considered not revising the entities included in the retail
pharmacy class of trade. However, this would not address the issues
identified by the OIG in its report, ``Medicaid Drug Rebates: The
Health Care Financing Administration Needs to Provide Additional
Guidance to Drug Manufacturers to Better Implement the Program,'' (A-
06-91-00092), November 1992 and GAO in its report ``Medicaid Drug
Rebate Program--Inadequate Oversight Raises Concerns about Rebates Paid
to States,'' (GAO-05-102), February 2005.
We believe, based in part on the OIG and GAO reports, that retail
pharmacy class of trade means that sector of the drug marketplace,
similar to the marketplace for other goods and services, which
dispenses drugs to the general public and which includes all price
concessions related to such goods and services. As such, we would
exclude from AMP the prices of sales to nursing home pharmacies (long-
term care pharmacies) because nursing home pharmacies do not dispense
to the general public. We would include in AMP the prices of sales and
discounts to mail order pharmacies. We considered limiting mail order
pharmacy prices to only those prices that are offered to all pharmacies
under similar terms and conditions. However, given our belief that such
prices are simply another form of how drugs enter into the retail
pharmacy class of trade, we have decided to maintain these prices in
the definition. We note that even were we to incorporate this change,
retail pharmacies may not be able to meet the terms and conditions
placed on mail order pharmacies to be eligible for some manufacturer
price concessions. CMS seeks public comment on the inclusion of all
mail order pharmacy prices in our definition of retail pharmacy class
of trade for purposes of inclusion in the determination of AMP.
We recognize that a major factor contributing to the determination
of AMP is the treatment of PBMs. These entities have assumed a
significant role in drug distribution since the enactment of the
Medicaid Drug Rebate Program in 1990. We are considering how PBM
rebates, discounts, or other price concessions should be recognized for
purposes of AMP calculations.
A GAO report ``Medicaid Drug Rebate Program--Inadequate Oversight
Raises Concerns about Rebates Paid to States,'' (GAO-05-102), in
February 2005, indicated that the Medicaid Drug Rebate Program does not
clearly address certain financial concessions negotiated by PBMs. The
GAO recommended that we issue clear guidance on manufacturer price
determination methods and the definitions of AMP and best price, and
update such guidance as additional issues arise.
The issue regarding PBMs was also addressed in the recently issued
OIG report, ``Determining Average
[[Page 77179]]
Manufacturer Prices for Prescription Drugs under the Deficit Reduction
Act of 2005,'' (A-06-06-00063), in May 2006. In this report, the OIG
recommended that we clarify the treatment of PBM rebates. This report
says that manufacturers treat rebates and fees paid to PBMs in the
calculation of AMP in three different ways. Specifically they found
that manufacturers (1) did not subtract rebates or fees paid to PBMs
from the AMP calculation; (2) subtracted the rebates or fees paid to
PBMs; or (3) subtracted a portion of the PBMs rebates or fees from the
AMP calculation.
In developing this proposed rule, we considered including all
rebates, discounts and other price concessions from PBMs in the
determination of AMP. We also considered excluding rebates, discounts
and other price concessions from PBMs in the determination of AMP.
One of the most difficult issues with PBM discounts, rebates, or
other price concessions is that manufacturers contend that they do not
know what part of these discounts, rebates, or other price concessions
is kept by the PBM for the cost of its activities and profit, what part
is passed on to the health insurer or other insurer or other entity
with which the PBM contracts, and what part, if any, that entity passes
on to pharmacies. Despite the difficulties of including certain PBM
rebates, discounts or other price concessions in AMP, excluding all of
these price concessions could result in an artificial inflation of AMP.
For this reason, we propose to include PBM rebates, discounts, or other
price concessions for drugs provided to the retail pharmacy class of
trade for the purpose of determining AMP; however, we invite comments
on whether this proposal is operationally feasible.
As discussed more fully below, we have proposed that PBM rebates
and price concessions that adjust the amount received by the
manufacturer for drugs distributed to the retail pharmacy class of
trade should be included in the calculation of AMP. We acknowledge that
manufacturers have a variety of arrangements with PBMs and thus invite
comments on all aspects of our proposal as explained below.
The rebate agreement defines AMP to include cash discounts and all
other price reductions (other than rebates under section 1927 of the
Act), which reduce the actual price paid to the manufacturer for drugs
distributed to the retail pharmacy class of trade. As noted in Release
28 and reiterated in Release 29, manufacturers have developed a myriad
of arrangements whereby specific discounts, chargebacks, or rebates are
provided to PBMs which, in turn, are passed on to the purchaser. Those
releases recognize that certain prices provided by manufacturers to
PBMs should be included within AMP calculations. In accordance with
those releases, our position has been that PBMs have no effect on the
AMP calculations unless the PBM is acting as a wholesaler as defined in
the rebate agreement. We are concerned, however, that this position may
unduly exclude from AMP certain PBM prices and discounts which have an
impact on prices paid to the manufacturer.
We believe that AMP should be calculated to reflect the net drug
price recognized by the manufacturer, inclusive of any price
adjustments or discounts provided directly or indirectly by the
manufacturer. We are interested in comments on this proposal, including
the comments on the operational difficulties of including such PBM
arrangements within AMP calculations.
We recognize that the statute defines AMP as the average price paid
to the manufacturer by wholesalers for drugs distributed to the retail
pharmacy class of trade; however, in light of our understanding of
congressional intent, we believe that the definition is meant to
capture discounts and other price adjustments, regardless of whether
such discounts or adjustments are provided directly or indirectly by
the manufacturer. We invite comments on this definition and whether AMP
should be calculated to include all adjustments that affect net drug
prices.
We acknowledge that there are many PBM/manufacturer arrangements.
To the extent manufacturers are offering rebates, discounts, or other
price concessions to the PBM that are not bona fide service fees, we
propose that these lower prices should be included in the AMP
calculations. We request comments on the operational difficulties of
tracking these rebates, discounts, or chargebacks provided to a PBM for
purposes of calculating AMP and on the inclusion of all such price
concessions in AMP. Specifically, we solicit comments on the extent to
which CMS should or should not define in regulation which rebates,
discounts, or price concessions provided to PBMs should be included in
AMP and how best to measure these. Also, we solicit public comment on
how these PBM price concessions should be reported to CMS to assure
that appropriate price adjustments are captured and included in the
determination of AMP.
Finally, we request comments on any other issues that we should
take into account in making our final decisions. These include, but may
not be limited to, possible Federal and State budgetary impacts (our
savings estimates assumed no budgetary impacts as generic drugs are
rarely, if ever, subject to PBM price adjustments in this context);
possible future evolution in industry pricing and management practices
(e.g., growth of ``preferred'' generic drugs); and possible impacts on
reimbursement for brand name drugs under Medicaid. We are generally
interested in comments on how and to what extent PBMs act as
``wholesalers.'' We propose to incorporate the explicitly listed
exclusions in section 1927 of the Act, and in the national rebate
agreement, which are direct sales to hospitals, HMOs/managed care
organizations (MCOs), wholesalers where the drug is relabeled under
that distributor's NDC and FSS prices.
The specific terms we propose to clarify and the proposed
clarifications follow.
Retail Pharmacy Class of Trade: We propose to include in the
definition of retail pharmacy class of trade any entity that purchases
prescription drugs from a manufacturer or wholesaler for dispensing to
the general public (e.g., retail, independent, chain and mail order
pharmacies), except as otherwise specified by the statute or regulation
(such as, HMOs, hospitals).
PBM Price Concessions: We proposed to include any rebates,
discounts or other price adjustments provided by the manufacturer to
the PBM that affect the net price recognized by the manufacturer for
drugs provided to entities in the retail pharmacy class of trade.
Customary Prompt Pay Discounts: Prior to the DRA, neither the
statute nor the national rebate agreement defined customary prompt pay
discounts. The DRA revises the definition of AMP to exclude customary
prompt pay discounts extended to wholesalers; however, it does not
revise or define customary prompt pay discounts. We propose to define
customary prompt pay discounts as any discount off the purchase price
of a drug routinely offered by the manufacturer to a wholesaler for
prompt payment of purchased drugs within a specified time of the
payment due date.
Treatment of Medicaid Sales: The OIG recommended that we should
address whether AMP should include Medicaid prices of sales; i.e.,
prices of sales where the end payer for the drug is the Medicaid
program. In its May 2006 report, the OIG noted confusion on this
[[Page 77180]]
issue and recommended that we clarify that these prices of sales are to
be included in AMP. It is our position that these sales are included in
AMP because they are not expressly excluded in the statute. In this
proposed rule, we would also clarify that prices to State Children's
Health Insurance Program Title XIX (SCHIP) through an expanded Medicaid
program are covered under the provisions of section 1927 of the Act and
generally subsumed in Medicaid sales. As a general matter, Medicaid
does not directly purchase drugs from manufacturers or wholesalers but
instead reimburses pharmacies for these drugs. Therefore, Medicaid
sales are determined by the entities that are actually in the sales
chain and because Medicaid reimburses pharmacies for drugs for Medicaid
beneficiaries, integrated into the chain of sales otherwise included in
AMP.
In this proposed rule, we would clarify that the units associated
with Medicaid sales should be included as part of the total units in
the AMP calculation. We have proposed that AMP be calculated to include
all sales and associated discounts and other price concessions provided
by the manufacturer for drugs distributed to the retail pharmacy class
of trade unless the sale, discount, or other price concession is
specifically excluded by the statute or regulation or is provided to an
entity excluded by statute or regulation. Therefore, we would clarify
that rebates paid to States under the Medicaid Drug Rebate Program
should be excluded from AMP calculations but that price concessions
associated with the sales of drugs in the retail pharmacy class of
trade which are provided to Medicaid patients should be included.
In this proposed rule, we also propose to clarify how the prices of
sales to State Children's Health Insurance Program Title XXI (SCHIP)
non-Medicaid expansion programs should be treated. Like the Medicaid
program, SCHIP non-Medicaid expansion programs do not directly purchase
drugs. Because such programs are not part of the Medicaid program, they
are not covered under the provisions of section 1927 of the Act. As
with Medicaid sales, these sales are included in AMP to the extent they
concern sales at the retail pharmacy class of trade. Therefore, these
sales should not be backed out of the AMP calculation to the extent
that such sales are included within sales provided to the retail
pharmacy class of trade. Rebates and units associated with those sales
should also be included in the calculation of AMP.
Treatment of Medicare Part D sales: We would clarify that the
treatment of prices of sales through a Medicare Part D prescription
drug plan (PDP), a Medicare Advantage prescription drug plan (MA-PD),
or a qualified retiree prescription drug plan for covered Part D drugs
provided on behalf of Part D eligible individuals should be included in
the AMP calculation. Like the Medicaid program, PDPs and MA-PDs do not
directly purchase drugs, but are usually third party payers. As with
Medicaid sales, these sales are included in AMP to the extent they are
sales to the retail pharmacy class of trade. Therefore, we believe
these prices of sales should not be backed out of the AMP. Rebates paid
by the manufacturer to the PDP or MA-PD should be included in the
calculation of AMP.
SPAP price concessions: In this proposed rule, we also propose to
clarify how the prices to State pharmaceutical assistance programs
(SPAPs) should be treated. Like the Medicaid program, PDPs, and MA-PDs,
SPAPs do not directly purchase drugs, but are generally third-party
payers. As with Medicaid sales, these sales are included in AMP to the
extent the sales are to an entity included in the retail pharmacy class
of trade. Therefore, we propose that SPAP sales should not be backed
out of the AMP calculation. Rebates paid by the manufacturer to the
SPAP should be included in the calculation of AMP.
Prices to other Federal Programs: We propose that any prices on or
after October 1, 1992, to the IHS, the DVA, a State home receiving
funds under section 1741 of title 38, United States Code, the
Department of Defense (DoD), the Public Health Service (PHS), or a
covered entity described in subsection 1927(a)(5)(B) of the Act
(including inpatient prices charged to hospitals described in section
340B(a)(4)(L) of the PHSA); any prices charged under the FSS of the
GSA; and any depot prices (including Tricare) and single award contract
prices, as defined by the Secretary, of any agency of the Federal
government are excluded from the calculation of AMP. We propose that
the prices to these entities should be excluded from AMP because the
prices to these entities are not available to the retail pharmacy class
of trade.
Administrative and Service Fees: Current Medicaid drug rebate
policy is that administrative fees which include service fees and
distribution fees, incentives, promotional fees, chargebacks and all
discounts or rebates, other than rebates under the Medicaid drug
program, should be included in the calculation of AMP, if those sales
are to an entity included in the calculation of AMP. The OIG has noted
in its report, ``Determining Average Manufacturer Prices for
Prescription Drugs under the Deficit Reduction Act of 2005,'' (A-06-06-
00063), May 2006, that confusion exists about the treatment of fees,
such as service fees negotiated between a manufacturer and
pharmaceutical distributor. Some believe that these fees should not be
included in AMP because the manufacturer does not know if the fees act
to reduce the price paid by the end purchasers. Others believe such
fees should be included in the calculation, which would reduce AMP
because they serve as a price concession. For the same reason as for
sales to PBMs, we propose that all fees except fees paid for bona fide
services should be included in AMP. We propose that bona fide service
fees means fees paid by a manufacturer to an entity, which represent
fair market value for a bona fide, itemized service actually performed
on behalf of the manufacturer that the manufacturer would otherwise
perform (or contract for) in the absence of the service arrangement,
and which are not passed in whole or in part to a client or customer of
an entity, whether or not the entity takes title to the drug. Medicare
Part B also adopted this definition in its final rule with comment
period that was published on December 1, 2006 (71 FR 69623-70251) that
implemented the ASP provisions enacted in the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (MMA). We are not
proposing to define fair market value. However, CMS invites comments
from the public regarding an appropriate definition for fair market
value.
Direct Patient Sales: In response to manufacturers' questions, CMS
has stated previously that covered outpatient drugs sold to patients
through direct programs should be included in the calculation of AMP.
These sales are usually for specialty drugs through a direct
distribution arrangement, where the manufacturer retains ownership of
the drug and pays either an administrative or service fee to a third
party for functions such as the storage, delivery and billing of the
drug. Some manufacturers have contended that direct patient sales for
covered outpatient drugs sold by a manufacturer through a direct
distribution channel should not qualify for inclusion in the
calculation of AMP because the Medicaid rebate statute and the national
rebate agreement do not address covered outpatient drugs that are not
sold to wholesalers and/or not distributed in the retail pharmacy class
of trade. We believe that the distributor is acting as
[[Page 77181]]
a wholesaler and these sales are to the retail pharmacy class of trade.
In light of this, we propose in this regulation that these sales and
the rebates associated with these sales to patients through direct
programs would be included in AMP. CMS invites comments from the public
on this proposed policy.
Returned Goods: Current Medicaid Drug Rebate Program policy is that
returned goods are credited back to the manufacturer in either the
quarter of sale or quarter of receipt. This has caused difficulty for
some manufacturers when these returns have substantially reduced AMP in
a quarter or resulted in a negative AMP. In light of these concerns, we
propose to exclude returned goods from the calculation of AMP when
returned in good faith. CMS considers that goods are being returned in
good faith when they are being returned pursuant to manufacturer
policies which are not designed to manipulate or artificially inflate
or deflate AMP. The Medicare Part B program excludes returned goods
from the calculation of ASP. The exclusion of returned goods will allow
the manufacturer to calculate and report an AMP that is more reflective
of its true pricing policies to the retail pharmacy class of trade in
the reporting period. It lessens the administrative burden and problems
associated with allocating the returned goods back to the reporting
period in which they were sold, as well as eliminating artificially
low, zero or negative AMPs that may result from these adjustments.
Manufacturer Coupons: In this proposed rule, we propose to clarify
how manufacturer coupons should be treated. The treatment of
manufacturer coupons has been problematic for CMS as well as some
manufacturers. In this rule, we propose to include coupons redeemed by
any entity other than the consumer in the calculation of AMP. We
believe that the redemption of coupons by the consumer directly to the
manufacturer is not included in the retail pharmacy class of trade. In
this proposed rule, we propose to exclude coupons redeemed by the
consumer directly to the manufacturer from the calculation of AMP. CMS
invites comments from the public on this proposed policy.
Future Clarifications of AMP: Based on past comments from the GAO
and the OIG and recommendations of the OIG in its May 2006 report on
AMP, we believe that we need to have the ability to clarify the
definition of AMP in an expedited manner in order to address the
evolving marketplace for the sale of drugs. We plan to address future
clarifications of AMP through the issuance of program releases and by
posting the clarifications on the CMS Web site as needed.
Requirements for Average Manufacturer Price
To implement the provisions set forth in sections 6001 and 6003 of
the DRA related to AMP, we propose a new Sec. 447.504. In Sec.
447.504(a), we propose a revised definition of AMP and clarify that AMP
is determined without regard to customary prompt pay discounts extended
to wholesalers. In Sec. 447.504(b), we propose to define average unit
price. In Sec. 447.504(c), we propose to define customary prompt pay
discount. In Sec. 447.504(d), we propose to define net sales. In Sec.
447.504(e), we propose to define retail pharmacy class of trade. In
Sec. 447.504(f), we propose to define wholesaler. In Sec. 447.504(g),
we would describe in detail the sales, rebates, discounts, or other
price concessions that must be included in AMP. In Sec. 447.504(h), we
would describe the sales, rebates, discounts, or other price
concessions that must be excluded from AMP. In Sec. 447.504(i), we
would provide further clarification about how manufacturers should
account for price reductions and other pricing arrangements which
should be included in the calculation of AMP.
Determination of Best Price--Section 447.505
Prior to the DRA, section 1927(c)(1)(C) of the Act provided that
manufacturers must include in their best price calculation, for a
single source or innovator multiple source drug, the lowest price
available from the manufacturers during the rebate period to any
wholesaler, retailer, provider, HMO, non-profit entity, or governmental
entity within the United States except for those entities specifically
excluded by statute. Excluded from best price are prices charged on or
after October 1, 1992, to the IHS, the DVA, a State home receiving
funds under section 1741 of title 38, United States Code, the DoD, the
PHS, or a covered entity described in section 1927(a)(5)(B) of the Act
(including inpatient prices charged to hospitals described in section
340B(a)(4)(L) of the PHSA); any prices charged under the FSS of the
GSA; any prices used under an SPAP; any depot prices (including
Tricare) and single award contract prices, as defined by the Secretary,
of any agency of the Federal Government; and prices to a Medicare Part
D PDP, an MA-PD, or a qualified retiree prescription drug plan for
covered Part D drugs provided on behalf of Part D eligible individuals.
The statute further specifies that:
Best price includes cash discounts, free goods that are
contingent on any purchase requirement, volume discounts and rebates
(other than rebates under section 1927 of the Act), which reduce the
price paid;
Best price must be determined on a unit basis without
regard to special packaging, labeling or identifiers on the dosage form
or product or package;
Best price must not take into account prices that are
merely nominal in amount.
Consistent with these provisions and the national rebate agreement,
it has been our policy that in order to reflect market transactions,
the best price for a rebate period should be adjusted by the
manufacturer if cumulative discounts or other arrangements subsequently
adjust the prices actually realized.
Best price should be adjusted for any bundled sale. The drugs in a
``bundle'' do not have to be physically packaged together to constitute
a ``bundle,'' just part of the same bundled transaction.
Section 1927(c)(1)(C)(ii)(I) of the Act specifies that best price
must include free goods that are contingent on any purchase
requirement. Thus, only those free goods that are not contingent on any
purchase requirements may be excluded from best price.
Section 103(e) of the MMA modified the definition of best price by
excluding prices which are negotiated by a PDP under part D of title
XVIII of the Act, by any MA-PD plan under part C of such title with
respect to covered part D drugs, or by a qualified retiree prescription
drug plan (as defined in section 1860D-22(a)(2) of the Act) with
respect to such drugs on behalf of individuals entitled to benefits
under part A or enrolled under part B of such title. Section 1002(a) of
the MMA modified section 1927(c)(1)(C)(i)(I) of the Act by clarifying
that inpatient prices charged to hospitals described in section
340B(a)(4)(L) of the PHSA are exempt from best price.
Section 6003 of the DRA amended section 1927(c)(1)(C) of the Act by
revising the definition of best price to clarify that the best price
includes the lowest price available to any entity for any such drug of
a manufacturer that is sold under an NDA approved under section 505(c)
of the FFDCA.
In accordance with our understanding of congressional intent, in
this proposed rule we propose to define best price with respect to a
single source drug or innovator multiple source drug of a manufacturer,
including any drug sold under an NDA approved under section
[[Page 77182]]
505(c) of the FFDCA, as the lowest price available from the
manufacturer during the rebate period to any entity in the United
States in any pricing structure (including capitated payments) in the
same quarter for which the AMP is computed. It continues to be our
policy that best price reflects the lowest price at which the
manufacturer sells a covered outpatient drug to any purchaser, except
those prices specifically exempted by law. We propose to define
provider as a hospital; HMO, including an MCO or PBM; or other entity
that treats individuals for illnesses or injuries or provides services
or items in the provisions of health care.
As with the determination of AMP, the DRA does not establish a
mechanism to clarify how best price is to be determined should new
entities be formed after this regulation takes effect. We believe that
we need to have the ability to clarify best price in an expedited
manner in order to address the evolving marketplace for the sale of
drugs. We plan to address future clarifications to best price through
the issuance of program releases and by posting the clarifications on
the CMS Web site as needed. Even though the DRA did not require CMS to
clarify the requirements for best price, we determined that it is
reasonable to propose these provisions in this proposed rule,
consistent with long-standing Medicaid Drug Rebate Program policy, the
MMA, and our understanding of congressional intent with respect to best
price as revised by the DRA.
We propose to incorporate the explicitly listed exclusions in
section 1927 of the Act, which are prices charged on or after October
1, 1992, to the IHS, the DVA, a State home receiving funds under
section 1741 of title 38, United States Code, the DoD, the PHS, or a
covered entity described in section 1927(a)(5)(B) of the Act (including
inpatient prices charged to hospitals described in section
340B(a)(4)(L) of the PHSA); any prices charged under the FSS of the
GSA; any prices paid under an SPAP; any depot prices (including
Tricare) and single award contract prices, as defined by the Secretary,
of any agency of the Federal Government; and payments made by a
Medicare Part D PDP, an MA-PD, or a qualified retiree prescription drug
plan for covered Part D drugs provided on behalf of Part D eligible
individuals. We propose to codify this policy and require that
manufacturers exclude the prices to these entities from best price.
Because best price represents the lowest price available from the
manufacturer to any entity with respect to a single source drug or
innovator multiple source drug of a manufacturer, including an
authorized generic, any price concession associated with that sale
should be netted out of the price received by the manufacturer in
calculating best price and best price should be adjusted by the
manufacturer if other arrangements subsequently adjust the prices
actually realized. We propose to consider any price adjustment which
ultimately affects those prices which are actually realized by the
manufacturer as ``other arrangements'' and that such adjustment should
be included in the calculation of best price, except to the extent that
such adjustments qualify as bona fide service fees.
Consistent with our understanding of congressional intent, we
propose that best price be calculated to include all sales, discounts,
and other price concessions provided by the manufacturer for covered
outpatient drugs to any entity unless the manufacturer can demonstrate
that the sale, discount, or other price concession is specifically
excluded by statute or is provided to an entity not included in the
rebate calculation. To the extent that an entity is not included in the
best price calculation, both sales and associated discounts or other
price concessions provided to such an entity should be excluded from
the calculation. The specific terms we propose to clarify and the
proposed clarification follow.
The Medicaid drug rebate agreement defines best price, in part, as
the lowest price at which the manufacturer sells the covered outpatient
drug to any purchaser in the United States. We propose to codify this
policy in this proposed rule.
Customary Prompt Pay Discounts: The DRA revises the definition of
AMP to exclude customary prompt pay discounts to wholesalers; however,
we can find no evidence in the legislative history of the DRA that
Congress intended to change the definition of best price to exclude
customary prompt pay discounts. Therefore, we propose in this
regulation to include customary prompt pay discounts in best price.
PBM Price Concessions: We recognize that a major factor
contributing to the determination of best price includes the treatment
of PBMs. These entities have assumed a significant role in drug
distribution since the enactment of the Medicaid Drug Rebate Program in
1990.
As noted in Release 28 and reiterated in Release 29, manufacturers
have developed a myriad of arrangements whereby specific discounts,
chargebacks, or rebates are provided to PBMs which, in turn, are passed
on to the purchaser. In such situations where discounts, chargebacks,
or rebates are used to adjust drug prices at the wholesaler or retail
level, such adjustments are included in the best price calculation.
A GAO report, ``Medicaid Drug Rebate Program--Inadequate Oversight
Raises Concerns about Rebates Paid to States,'' (GAO-05-102), in
February 2005, indicated that the Medicaid Drug Rebate Program does not
clearly address certain financial concessions negotiated by PBMs. The
GAO recommended that we issue clear guidance on manufacturer price
determination methods and the definitions of AMP and best price, and
update such guidance as additional issues arise.
The issue regarding PBMs was also addressed in the recently issued
OIG report, ``Determining Average Manufacturer Prices for Prescription
Drugs under the Deficit Reduction Act of 2005,'' (A-06-06-00063), in
May 2006. In this report, the OIG recommended that we clarify the
treatment of PBM rebates.
One of the most difficult issues with PBM discounts, price
concessions, or rebates is that manufacturers contend that they do not
know what part of these discounts, price concessions, or rebates are
kept by the PBM for the cost of their activities and profit, what part
is passed on to the health insurer or other insurer or other entity
with which the PBM contracts, and what part that entity passes on to
pharmacies.
Despite the difficulties of including certain PBM rebates,
discounts or other price concessions in best price, excluding these
price concessions could result in an artificial inflation of best
price. We propose to include PBM rebates, discounts, or other price
concessions for the purpose of determining best price.
To the extent manufacturers are offering PBMs rebates, discounts,
or other price concessions, these lower prices should be included in
the best price calculations. Therefore, where the use of the PBM by
manufacturers affects the price available from the manufacturer, these
lower prices should be reflected in best price calculations. We
acknowledge that there are many PBM/manufacturer arrangements.
We believe that PBMs often obtain rebates, discounts, or other
price concessions which adjust prices, either directly or indirectly.
Unless the fees/discounts qualify as bona fide service fees (which are
excluded), the PBM rebates, discounts, or chargebacks should be
included in best price. We propose to consider these rebates,
[[Page 77183]]
discounts, or chargebacks in best price calculations. CMS invites
public comment on the inclusion of certain PBM price concessions in the
determination of best price. Also, we solicit public comment on how
these PBM price concessions should be reported to CMS to assure that
appropriate price concessions are captured and included in the
determination of best price.
We propose to incorporate the explicitly listed exclusions in
section 1927 of the Act and in the national rebate agreement. Because
best price represents the prices available from the manufacturer for
prescription drugs, best price should be adjusted by the manufacturer
if other arrangements subsequently adjust the prices actually realized.
We propose to consider that any price adjustment which ultimately
affects those prices which are actually realized by the manufacturer as
``other arrangements'' and that such an adjustment should be included
in the calculation of best price. The specific terms we propose to
clarify and the proposed clarifications follow.
Administrative and Service Fees: We propose that administrative
fees which include service fees and distribution fees, incentives,
promotional fees, chargebacks and all discounts or rebates, other than
rebates under the Medicaid Drug Rebate Program, should be included in
the calculation of best price, if those sales are to an entity included
in the calculation of best price. As previously discussed, the OIG has
noted in its report, ``Determining Average Manufacturer Prices for
Prescription Drugs under the Deficit Reduction Act of 2005,'' (A-06-06-
00063), May 2006 that confusion exists about the treatment of fees,
such as service fees negotiated between a manufacturer and
pharmaceutical distributor for AMP and best price. We believe that
price adjustments which ultimately affect those prices which are
actually available from the manufacturer should be included in best
price. We propose that manufacturers should include all such fees
except bona fide service fees provided at fair market value in the best
price calculation.
Treatment of Medicare Part D Prices: In this proposed rule, we
propose to clarify the treatment of prices which are negotiated by a
Medicare Part D PDP, an MA-PD, or a qualified retiree prescription drug
plan for covered Part D drugs provided on behalf of Part D eligible
individuals. We propose that these prices are exempt from the best
price. Section 1860D-2(d)(1)(C) of the Act specifically states that
``prices negotiated by a prescription drug plan, by an MA-PD plan with
respect to covered part D drugs, or by a qualified retiree prescription
drug plan (as defined in section 1860D-22(a)(2)) with respect to such
drugs on behalf of Part D eligible individuals, shall (notwithstanding
any other provision of law) not be taken into account for the purposes
of establishing the best price under section 1927(c)(1)(C).''
Therefore, while we propose that the prices listed above be included
for the purpose of calculating AMP, we propose that prices negotiated
by a PDP, an MA-PD, or a qualified retiree prescription drug plan for
covered Part D drugs provided on behalf of Part D eligible individuals
not be taken into account for the purpose of establishing best price.
Manufacturer Coupons: In this proposed rule, we propose to clarify
how manufacturer coupons should be treated for the purpose of
establishing best price. We believe that the redemption of coupons by
any entity other than the consumer to the manufacturer ultimately
affects the price paid by the entity (e.g., retail pharmacy). In this
rule, we propose to include coupons redeemed by any entity other than
the consumer in the calculation of best price. We believe that the
redemption of coupons by the consumer directly to the manufacturer does
not affect the price paid by any entity whose sales are included in
best price. In this proposed rule, we propose to exclude coupons
redeemed by the consumer directly to the manufacturer from the
calculation of best price. CMS invites comments from the public on this
proposed policy.
Medicaid Rebates and Supplemental Rebates: Section
1927(c)(1)(C)(ii)(I) of the Act and the national rebate agreement
provide that any rebates paid by manufacturers under section 1927 of
the Act are to be excluded from the calculation of best price.
Therefore, we propose to exclude Medicaid rebates from best price.
Likewise, we consider rebates paid under CMS-authorized separate
(supplemental) Medicaid drug rebate agreements with States to meet this
requirement and propose that these rebates be excluded from best price.
In accordance with section 1927 of the Act pertaining to the
determination of best price and our understanding of congressional
intent, we propose a new Sec. 447.505. In Sec. 447.505(a), we would
provide a general definition of the term best price. In Sec.
447.505(b), we propose to define provider. In Sec. 447.505(c), we
would specify the sales and prices which must be included in best
price. In Sec. 447.505(d), we would specify which sales and prices
must be excluded from best price. In Sec. 447.505(e), we would further
clarify the price reductions and other pricing arrangements included in
the calculation of best price.
Authorized Generic Drugs--Section 447.506
Under current law, drug manufacturers participating in the Medicaid
Drug Rebate Program are required to report the AMP for each covered
outpatient drug offered under the Medicaid program and the best price
for each single source or innovator multiple source drug available to
any wholesaler, retailer, provider, HMO, non-profit entity, or
governmental entity with certain exceptions.
For purposes of the Medicaid Drug Rebate Program, an authorized
generic is any drug product marketed under the innovator or brand
manufacturer's original NDA, but labeled with a different NDC than the
innovator or brand product. According to our reading of the statute,
authorized generics are single source or innovator multiple source
drugs for the purpose of computing the drug rebate and are classified
based on whether the drug is being sold or marketed pursuant to an NDA.
Responsibility for the rebate rests with the manufacturer selling or
marketing the drug to the retail pharmacy class of trade.
This rule would implement section 6003 of the DRA. We propose to
adopt the term ``authorized generic'' and define this term with respect
to the Medicaid Drug Rebate Program, as any drug sold, licensed or
marketed under a new drug application approved by the FDA under section
505(c) of the FFDCA that is marketed, sold or distributed directly or
indirectly under a different product code, labeler code, trade name,
trademark, or packaging (other than repackaging the listed drug for use
in institutions) than the listed drug.
Section 6003 of the DRA amended section 1927(b)(3)(A) of the Act to
include drugs approved under section 505(c) of the FFDCA in the
reporting requirements for the primary manufacturer (NDA holder) for
AMP and best price. We propose to interpret the language of section
6003 of the DRA to include in the best price and AMP calculations of
the branded drugs, the authorized generic drugs that have been marketed
by another manufacturer or subsidiary of the brand manufacturer (or NDA
holder). We believe that to limit the applicability of this regulation
to the sellers of authorized generic drugs would allow manufacturers to
circumvent the intent of the provision by licensing rather than selling
the rights to such drugs. This is why we propose a broad definition of
authorized
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generic drugs rather than a more narrow definition of such drugs. We
propose to require the NDA holder to include sales of the authorized
generic product marketed by the secondary manufacturer or the brand
manufacturer's subsidiary in its calculation of AMP and best price. We
welcome comments on this issue.
The secondary manufacturer or subsidiary of the brand manufacturer
would continue to pay the single source or innovator multiple source
rebate for the authorized generic drug products based on utilization
under its own NDC number, as required under current law. We welcome
comments on these issues.
In Sec. 447.506(a), we would define the term authorized generic
drug for the purposes of the Medicaid Drug Rebate Program.
In Sec. 447.506(b), we would require the sales of authorized
generic drugs that have been sold or licensed to another manufacturer
to be included by the primary manufacturer as part of its calculation
of AMP for the single source or innovator multiple source drug
(including all such drugs that are sold under an NDA approved under
section 505(c) of the FFDCA).
In Sec. 447.506(c), we would require that sales of authorized
generic drugs by the secondary manufacturer that buys or licenses the
right to sell the drugs be included by the primary manufacturer in
sales used to determine the best price for the single source or
innovator multiple source drug approved under section 505(c) of the
FFDCA during the rebate period to any manufacturer, wholesaler,
retailer, provider, HMO, non-profit entity, or governmental entity
within the United States. The primary manufacturer must include in its
calculation of best price all sales of the authorized generic drug
which have been sold or marketed by a secondary manufacturer or by a
subsidiary of the brand manufacturer.
Exclusion From Best Price of Certain Sales at a Nominal Price--Section
447.508
Pursuant to the terms of the national rebate agreement,
manufacturers excluded from their best price calculations outpatient
drug prices below 10 percent of the AMP. The rebate agreement did not
specify whether this nominal price exception applied to all purchasers
or to a subset of purchasers. Medicaid has used this definition since
the start of the Medicaid Drug Rebate Program and Medicare Part B also
adopted it in its April 6, 2004 interim final rule with comment period
(69 FR 17935) that implemented the ASP provisions enacted in the MMA.
It is also similar to the definition of nominal price in the VHCA. We
propose to continue to define nominal prices as prices at less than 10
percent of the AMP in that same quarter; however, in accordance with
the DRA, we further propose to specify that the nominal price exception
applies only when certain entities are the purchasers.
Section 6001(d)(2) of the DRA modified section 1927(c)(1) of the
Act to limit the nominal price exclusion from best price to exclude
only sales to certain entities and safety net providers. Specifically,
it excluded from best price those nominal price sales to 340B covered
entities as described in section 340B(a)(4) of the PHSA, ICFs/MR, and
State-owned or operated nursing facilities. In addition, the Secretary
has authority to identify as safety net providers other facilities or
entities to which sales at a nominal price will be excluded from best
price if he deems them eligible safety net providers based on four
factors: the type of facility or entity, the services provided by the
facility or entity, the patient population served by the facility or
entity and the number of other facilities or entities eligible to
purchase at nominal prices in the same service area.
Section 340B(a)(4) of the PHSA defines entities covered under that
provision. Covered entities include: A federally qualified health
center as defined in section 1905(l)(2)(B) of the Act; an entity
receiving a grant under section 340A of the PHSA; a family planning
project receiving a grant or contract under Section 1001 of the PHSA
(42 U.S.C. Sec. 300); an entity receiving a grant under subpart II of
part C of title XXVI of the PHSA (relating to categorical grants for
outpatient early intervention services for HIV disease); a State-
operated AIDS drug purchasing assistance program receiving financial
assistance under title XXVI of the PHSA; a black lung clinic receiving
funds under section 427(a) of the Black Lung Benefits Act; a
comprehensive hemophilia diagnostic treatment center receiving a grant
under section 501(a)(2) of the Act; a Native Hawaiian Health Center
receiving funds under the Native Hawaiian Health Care Act of 1988; an
urban Indian organization receiving funds under the title V of the
Indian Health Care Improvement Act, any entity receiving assistance
under title XXVI of the PHSA (other than a State or unit of local
government or an entity receiving a grant under subpart II of part C of
title XXVI of the PHSA), but only if the entity is certified by the
Secretary pursuant to section 340B(a)(7) of the PHSA; an entity
receiving funds under section 318 of the PHSA (relating to treatment of
sexually transmitted diseases) or section 317(j)(2) of the PHSA
(relating to treatment of tuberculosis) through a State or unit of
local government, but only if the entity is certified by the Secretary
pursuant to section 340B(a)(7) of the PHSA; a subsection (d) hospital
(as defined in section 1886(d)(1)(B) of the Act that (i) is owned or
operated by a unit of State or local government, is a public or private
non-profit corporation which is formally granted governmental powers by
a unit of State or local government, or is a private non-profit
hospital which has a contract with a State or local government to
provide health care services to low income individuals who are not
entitled to benefits under title XVIII of the Act or eligible for
assistance under the State plan under this title, (ii) for the most
recent cost reporting period that ended before the calendar quarter
involved, had a disproportionate share adjustment percentage (as
determined under section 1886(d)(5)(F) of the Act) greater than 11.75
percent or was described in section 1886(d)(5)(F)(i)(II) of the Act,
and (iii) does not obtain covered outpatient drugs through a group
purchasing organization or other group purchasing arrangement. We do
not believe it necessary to elaborate further on these entities. We
propose to define ICF/MR, for purposes of the nominal price exclusion
from best price, to mean an institution for the mentally retarded or
persons with related conditions that provides services as set forth in
42 CFR 440.150. Additionally, we propose to define nursing facility as
a facility that provides those services set forth in 42 CFR 440.155.
The statute allows the Secretary to determine other facilities or
entities to be safety net providers to whom sales of drugs at a nominal
price would be excluded from best price. The Secretary's determination
would be based on the four factors noted above established by the DRA.
We considered using this authority to expand this exclusion to other
safety-net providers. We considered proposing that we use the broader
definition of safety net provider used by the Institute of Medicine
(IOM). In its report, ``America's Health Care Safety Net, Intact but
Endangered,'' the IOM defines safety-net providers as ``providers that
by mandate or mission organize and deliver a significant level of
healthcare and other health-related services to the uninsured, Medicaid
and other vulnerable patients.'' We also considered proposing how the
Secretary might use the four factors to allow the
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nominal price exclusion to best price to apply to other safety net
providers. However, we believe that the entities specified in the
statute are sufficiently inclusive and capture the appropriate safety
net providers. Therefore, we have chosen not to propose to expand the
entities subject to this provision at this time. Additionally, we
believe that adding other entities or facilities would have an
undesirable effect on the best price by expanding the entities for
which manufacturers can receive the best price exclusion beyond those
specifically mandated by the DRA and lowering manufacturer rebates to
the Medicaid Program. Because the statute gives the Secretary
discretion not to expand the list of entities, we do not propose to do
so at this time in this rule.
CMS has concerns that despite the fact that the DRA limits the
nominal price exclusion to specific entities, the nominal price
exclusion will continue to be used as a marketing tool. Historically,
patients frequently remain on the same drug regimen following discharge
from a hospital. Physicians may be hesitant to switch a patient to a
different brand and risk destabilizing the patient once discharged from
the hospital. We believe that using nominal price for marketing is not
within the spirit and letter of the law. We are considering crafting
further guidance to address this issue. CMS invites comments from the
public to assist us in ensuring that all aspects of this issue are
fully considered.
In accordance with the provisions of the DRA, the restriction on
nominal price sales shall not apply to sales by a manufacturer of
covered outpatient drugs that are sold under a DVA master agreement
under section 8126 of title 38, United States Code.
We propose a new Sec. 447.508 in which we would specify those
entities to which a manufacturer of covered outpatient drugs may sell
at nominal price and provide for the exclusion of such sales from best
price.
Requirements for Manufacturers--Section 447.510
On August 29, 2003, CMS finalized two of the provisions in the 1995
NPRM through a final rule with comment period (68 FR 51912). We
required manufacturers to retain records for data used to calculate AMP
and best price for three years from when AMP and best price are
reported to CMS. We also required manufacturers to report revisions to
AMP and best price for a period not to exceed twelve quarters from the
quarter in which the data are due. On January 6, 2004, we published an
interim final rule with comment period replacing the three-year
recordkeeping requirement with a ten-year requirement on a temporary
basis (69 FR 508 (Jan. 6, 2004)). We also required that manufacturers
retain records beyond the ten-year period if the records were subject
to certain audits or government investigations. On November 26, 2004,
we published final regulations (69 FR 68815) that require that a
manufacturer retain pricing data for ten years from the date the
manufacturer reports that period's data to CMS. We propose to move the
recordkeeping requirements at Sec. 447.534(h) to Sec. 447.510(f) and
revise them by adding the requirement that manufacturers must also
retain records used in calculating the customary prompt pay discounts
and nominal prices reported to CMS.
Existing regulations at Sec. 447.534(i) require manufacturers to
report revisions to AMP and best price for a period not to exceed
twelve quarters from the quarter in which the data were due. We propose
to move this provision to Sec. 447.510(b) and revise it to require
manufacturers to also report revisions to customary prompt pay
discounts and nominal prices for the same period.
In order to reflect the changes to AMP as set forth in the DRA, we
propose allowing manufacturers to recalculate base date AMP in
accordance with the definition of AMP in Sec. 447.504(e) of this
subpart. Base date AMP is used in the calculation of the additional
rebate described in section 1927(c)(2) of the Act. This additional
rebate is defined as the difference between the quarterly AMP reported
to CMS and the base date AMP trended forward using the CPI--U. We
propose this amendment so that the additional rebate would not increase
due to changes in the definition of AMP. We propose giving
manufacturers an opportunity to submit a revised base date AMP with
their data submission for the first full calendar quarter following the
publication of the final rule. We propose to allow manufacturers the
option to decide whether they will recalculate and submit to CMS a base
date AMP based on the new definition of AMP or submit their existing
base date AMP. We are giving manufacturers this option because we are
aware that some manufacturers may not have the data needed to
recalculate base date AMP or may find the administrative burden to be
more costly than the savings gained.
Under section 1927(b)(3)(A) of the Act and the terms of the
national rebate agreement, manufacturers that sign the national rebate
agreement must supply CMS with a list of all product data (e.g., date
entered market, drug category of single source, innovator multiple
source, or noninnovator multiple source) and pricing information for
their covered outpatient drugs. In accordance with the statute, the
rule would require manufacturers to report AMP and best price to CMS
not later than thirty days after the end of the rebate period.
Section 6001(b)(1) of the DRA amended section 1927(b)(3)(A)(i) of
the Act by adding ``month of a'' before ``rebate period.'' Section
6003(a) of the DRA restructured section 1927(b)(3)(A)(i) of the Act.
The statute, as amended by these provisions, can be read in different
ways. One interpretation is that the revisions made by section 6003(a)
of the DRA supersede the revisions made by section 6001(b)(1) of the
DRA, effectively eliminating the requirement that manufacturers report
data to CMS on a monthly basis. However, we do not believe that this
reading is the better reading of the statute or consistent with
congressional intent. It is unreasonable to presume that Congress would
simultaneously establish and render meaningless a new provision of law
and we do not propose to adopt this interpretation. Another
interpretation is that the revisions made by section 6001(b)(1) of the
DRA, when read with the amendments made by section 6003 of the DRA,
create a new requirement that AMP, best price, and customary prompt pay
discounts be reported on a monthly basis. However, there is no
compelling evidence in the legislative history which indicates that
Congress intended to change the rebate period from quarterly to
monthly. Best price is reported to CMS quarterly for purposes of our
calculation of the unit rebate amount for single source and innovator
multiple source drugs. While Congress clearly intended that AMPs be
reported and disclosed to States on a monthly basis, it did not
establish any similar monthly use for best price or customary prompt
pay discounts. For these reasons, we propose to interpret section
6001(b) of the DRA to require that manufacturers report only AMP to CMS
on a monthly basis beginning January 1, 2007. To implement this
provision, we would require in Sec. 447.510(d) that manufacturers must
submit monthly AMP to CMS not later than 30 days after each month. We
would also require manufacturers to report quarterly AMP, best price,
and customary prompt pay discounts on a quarterly basis.
We propose that the monthly AMP will be calculated the same as the
quarterly AMP, with the following exceptions. The time frame
represented by the monthly AMP would be one calendar month instead of a
calendar
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quarter and once reported, would not be subject to revision later than
30 days after each month. Because we recognize that industry pricing
practices sometimes result in rebates or other price concessions being
given by manufacturers to purchasers at the end of a calendar quarter,
if the monthly AMP were calculated simply using sales in that month,
these pricing practices might result in fluctuations between the AMP
for the first two months and the AMP for the third month in a calendar
quarter. In order to maximize the usefulness of the monthly AMP and
minimize volatility in the prices, we propose allowing manufacturers to
rely on estimates regarding the impact of their end-of-quarter rebates
or other price concessions and allocate these rebates or other price
concessions in the monthly AMPs reported to CMS throughout the quarter.
We considered applying this same methodology to other cumulative
rebates or other price concessions over longer periods of time, but are
not certain that such rebates or other prices concessions could be
allocated with respect to monthly AMP calculations. We invite comments
on allowing the use of 12-month rolling average estimates of all lagged
discounts for both the monthly and quarterly AMP. We also considered
allowing manufacturers to calculate the monthly AMP based on updates of
the most recent three-month period (i.e., a rolling three-month AMP).
While this methodology may minimize volatility in the data, we believe
it would be fairly complex for manufacturers to operationalize. We
encourage comments on the appropriate methodology for calculating
monthly AMP.
Section 6001(b)(2)(C) of the DRA amended the confidentiality
requirements at section 1927(b)(3)(D) of the Act by adding an exception
for AMP disclosure through a Web site accessible to the public. The
statute does not specify that this exception only applies to monthly
AMP; therefore, we also propose to make the quarterly AMP publicly
available. We note that the quarterly AMP would not necessarily be
identical to the monthly AMP due to the potential differences in AMP
from one timeframe to the next.
Section 6001(d)(1) of the DRA modified section 1927(b)(3)(A)(iii)
of the Act by adding a requirement that manufacturers report nominal
prices for calendar quarters beginning on or after January 1, 2007 to
the Secretary. To implement this provision, we propose to require that
manufacturers report nominal price exception data to CMS on a quarterly
basis. We further propose that nominal price exception data shall be
reported as an aggregate dollar amount which includes all nominal price
sales to the entities listed in Sec. 447.508(a) of this subpart for
the rebate period.
Section 1927(b)(3)(C) of the Act describes penalties for
manufacturers that provide false information or fail to provide timely
information to CMS. In light of these requirements, we propose to
require that manufacturers certify the pricing reports they submit to
CMS in accordance with Sec. 447.510. We propose to adopt the
certification requirements established by the Medicare Part B Program
for ASP in the interim final rule with comment period published on
April 6, 2004. Each manufacturer's pricing reports would be certified
by the manufacturer's Chief Executive Officer (CEO), Chief Financial
Officer (CFO), or an individual who has delegated authority to sign
for, and who reports directly to, the manufacturer's CEO or CFO.
We propose that all product and pricing data, whether submitted on
a quarterly or monthly basis, be submitted to CMS in an electronic
format. When the Medicaid Drug Rebate Program was first implemented in
1991, electronic data transfer was one of three data submission options
as the use of such electronic media was not yet as commonplace as it is
today. Due to the new monthly data reporting requirements and
additional quarterly data reporting requirements, we propose to require
manufacturers to use one uniform data transmission format to transmit
and collect these data. CMS will issue operational instructions to
provide additional guidance regarding the new electronic data
submission requirements.
Aggregate Upper Limits of Payment--Section 447.512
We propose that the existing Sec. 447.331 be revised and
redesignated as a new Sec. 447.512. We propose to revise subsection
(a) to clarify that the upper limit for multiple source drugs applies
in the aggregate. We also propose to update several cross-references to
provisions in subpart I.
Upper Limits for Multiple Source Drugs--Section 447.514
We propose that the existing Sec. 447.332 be revised in a new
Sec. 447.514.
A. Upper Limits for Multiple Source Drugs
Existing regulations at 42 CFR 447.331, 447.332 and 447.334 address
upper limits for payment of drugs covered under the Medicaid program.
We propose to redesignate existing regulations at Sec. Sec. 447.331,
447.332, and 447.334 as new regulations at Sec. Sec. 447.512, 447.514,
and 447.516, respectively.
Existing regulations at Sec. 447.332(a)(1)(i) state that an upper
limit for a multiple source drug may be established if all of the
formulations of the drug approved by the FDA have been evaluated as
therapeutically equivalent in the current edition of the FDA's
publication, ``Approved Drug Products with Therapeutic Equivalence
Evaluations.''
Section 1927(e)(4) of the Act, as amended by OBRA 90, expanded the
criteria for multiple source drugs subject to FUL reimbursement.
Specifically, the statute required CMS to establish an upper payment
limit for each multiple source drug when there are at least three
therapeutically and pharmaceutically equivalent multiple source drugs,
regardless of whether all additional formulations are rated as such.
Effective January 1, 2007, the DRA changed the requirement such that a
FUL must be established for each multiple source drug for which the FDA
has rated two or more products as therapeutically equivalent.
Currently, if all formulations of a multiple source drug are
identified as A-rated in the FDA's publication, ``Approved Drug
Products with Therapeutic Equivalence Evaluations,'' at least two
formulations must be listed in that publication for CMS to establish a
FUL for that drug. If all formulations of a multiple source drug are
not A-rated, there must be at least three A-rated versions of the drug
listed in ``Approved Drug Products with Therapeutic Equivalence
Evaluations'' for CMS to establish a FUL for the drug. If a product
meets the FDA criteria described above, we confirm that at least three
suppliers (i.e., manufacturers, wholesalers, re-packagers, re-labelers
or any other entity from which a drug can be purchased) list the drug
in published compendia of cost information for drugs available for sale
nationally (e.g., Red Book, First DataBank, or Medi-Span). Then, using
these pricing compendia, we select the lowest price (e.g., the average
wholesale price, wholesale acquisition cost, or direct price) from
among the A-rated formulations of a particular drug and apply the
formula described in existing Sec. 447.332 to determine the FUL for
that drug. FUL lists and changes to those lists based on the
methodology set forth in the statute and regulations are issued
periodically through Medicaid program issuances and are posted on the
CMS Web site.
[[Page 77187]]
By the term, ``therapeutically equivalent,'' we mean drugs that are
identified as A-rated in the current edition of the FDA's publication,
``Approved Drug Products with Therapeutic Equivalence Evaluations''
(including supplements or successor publications). We propose that the
FUL will be established, as per section 1927(e)(4) of the Act, only
using an ``A'' rated drug. However, we propose to continue our current
practice of applying the FUL to all drug formulations, including those
drug versions not proven to be therapeutically equivalent, (e.g., B-
rated drugs). We believe it is appropriate to apply the FUL to B-rated
drugs in order not to encourage pharmacies to substitute B-rated drugs
to avoid the FUL in the case where B-rated drugs would be excluded from
the FUL. Current regulation does not prohibit or exclude B-rated drugs
from the FUL reimbursement.
We propose revising the methodology we use to establish FULs for
multiple source drugs based on the modifications made by the DRA.
Specifically, sections 6001(a)(3) and (4) of the DRA changed the
definition of multiple source drug established in section
1927(k)(7)(A)(i) of the Act to mean, with respect to a rebate period, a
covered outpatient drug for which there is at least one other drug
product which is rated as therapeutically equivalent (under the FDA's
most recent publication of ``Approved Drug Products with Therapeutic
Equivalence Evaluations''). Also, section 6001(a)(1) of the DRA changed
the requirement for a FUL to be established for each multiple source
drug for which the FDA has rated three or more products therapeutically
and pharmaceutically equivalent to a requirement for a FUL when the FDA
has established such a rating for two or more products. Therefore, we
propose in Sec. 447.514(a)(1)(ii) that a FUL will be set when at least
two suppliers (e.g., manufacturers, wholesalers, re-packagers, or re-
labelers) list the drug in a nationally available pricing compendia
(e.g., Red Book, First DataBank, or Medi-Span).
Existing regulations at Sec. 447.332(b) specify that the agency's
payments for multiple source drugs identified and listed must not
exceed, in the aggregate, payment levels determined by applying, for
each drug entity, a reasonable dispensing fee established by the
agency, plus an amount that is equal to 150 percent of the published
price for the least costly therapeutic equivalent (using all available
national pricing compendia) that can be purchased by pharmacies in
quantities of 100 tablets or capsules (or, if the drug is not commonly
available in quantities of 100, the package size commonly listed) or,
in the case of liquids, the commonly listed size.
Section 6001(a)(2) of the DRA added section 1927(e)(5) to the Act
that changed the formula used to establish the FUL for multiple source
drugs. Effective January 1, 2007, the upper limit for multiple source
drugs shall be established at 250 percent of the AMP (as computed
without regard to customary prompt pay discounts extended to
wholesalers) for the least costly therapeutic equivalent. The currently
reported AMP is based on the nine-digit NDC and is specific only to the
product code, combining all package sizes of the drug into the same
computation of AMP. We propose to continue to use the AMP calculated at
the nine-digit NDC for the FUL calculation. In accordance with the DRA
amendments, we will no longer take the individual 11-digit NDC, and
thereby the most commonly used package size into consideration when
computing the FUL because the currently reported AMP does not
differentiate among package sizes.
We considered using the 11-digit NDC to calculate the AMP, which
would require manufacturers to report the AMP at the 11-digit NDC for
each package size and that doing so would offer other advantages to the
program for FULs and other purposes. An AMP at the 11-digit NDC would
allow us to compute a FUL based on the most common package size as
specified in current regulations. We do not believe computing an AMP at
the 11-digit NDC would be significantly more difficult than computing
the AMP at the nine-digit NDC as the data from each of the 11-digit
NDCs is combined into the current AMP. The AMP at the 11-digit NDC
would also align with State Medicaid drug payments that are based on
the package size. It would also allow us to more closely examine
manufacturer price calculations and allow the States and the public to
know the AMP for the drug for each package size. It would also allow
340B covered entities, which are entitled to buy drugs at a discount
that is in part based on calculations related to AMP, to know what the
pricing is for each package size, as 340B ceiling prices are
established per package size. Calculating the AMP at the 11-digit NDC
level permits greater transparency, and may increase accuracy and
reduce errors for the 340B covered entities where prices are
established for a package-size product rather than a per unit cost
using the product's weighted average AMP.
However, the legislation did not change the level at which
manufacturers are to report AMP, and we find no evidence in the
legislative history that the Congress intended that AMP should be
restructured to collect it by 11-digit NDCs. We are proposing to use
the currently reported 9-digit AMP for calculating the FUL. Changing
the current method of calculating the AMP would require manufacturers
to make significant changes to their reporting systems and have an
unknown effect on the calculation of rebates in the existing Medicaid
Drug Rebate Program. In State Medicaid payment systems that consider a
number of different factors in deriving payment rates, we also believe
it would offer minimal advantages. Furthermore, we expect that because
the AMP is marked up 250 percent, the resultant reimbursement should be
sufficient to reimburse the pharmacy for the drug regardless of the
package size the pharmacy purchased and that to the extent it does have
an impact, it would encourage pharmacies to buy the most economical
package size.
We specifically ask for comments on the alternative approach of
using the 11-digit NDC to calculate the AMP. We will consider comments
on the merits of using both approaches in calculating the AMP for the
FUL.
In computing the FUL, we propose that the monthly AMP submitted by
the manufacturer will be used. Using the monthly AMP will provide for
the timeliest pricing data and allow revisions to the FUL list on a
monthly basis. It will also permit us to update the FULs on a timely
basis in accordance with the provisions of section 1927(f)(1)(B) of the
Act, wherein the Secretary, after receiving notification that a
therapeutically equivalent drug product is generally available, shall
determine within 7 days if that drug product should have a FUL.
Section 6001(c)(1) of the DRA redefines AMP to exclude customary
prompt pay discounts extended to wholesalers. Due to this change in the
computation, and the requirement that monthly AMP first be reported as
of January 1, 2007, we propose that a FUL update of drugs, using the
new methodology first be published when the revised AMPs are available
and processed.
We propose to adopt additional criteria to ensure that the FUL will
be set at an adequate price to ensure that a drug is available for sale
nationally as presently provided in our regulations. When establishing
a FUL, we propose to disregard the AMP of an NDC which has been
terminated. The AMP of a terminated NDC will not be used to set
[[Page 77188]]
the FUL beginning with the first day of the month after the actual
termination date reported by the manufacturer. This refinement may not
capture all outlier AMPs that would offset the availability of drugs at
the FUL price. It is possible that a product that is not discontinued
may be available on a limited basis at a very low price. As a further
safeguard to ensure that a drug is nationally available at the FUL
price and that a very low AMP is not used by us to set a FUL that is
lower than the AMP for other therapeutically and pharmaceutically
equivalent multiple source drugs, we propose to set the FUL based on
the lowest AMP that is not less than 30 percent of the next highest AMP
for that drug. That is to say, that the AMP of the lowest priced
therapeutically equivalent drug will be used to establish the FUL,
except in cases where this AMP is more than 70 percent below the second
lowest AMP. In those cases, the second lowest AMP will be used in the
FUL calculation. We propose to use this percentage calculation as a
benchmark to prevent an outlier price from determining the FUL, but
invite comments as to whether this percentage is an appropriate measure
to use. We did consider other options, such as 60 percent below the
next highest AMP so that at least drugs of two different manufacturers
would be in the FULs group, but we were concerned that this percentage
was insufficient to encourage competition where the cost of a
particular drug was dropping rapidly. We also considered a test of a
drug priced 90 percent below the next lowest priced drug, in line with
how we look on nominal prices, as an indicator that the manufacturer
was offering this drug on a not-for-profit basis. However, we note that
nominal price relates to best price for some sales and it is unlikely a
manufacturer would sell all of its drugs at this price. We welcome
suggestions about other means to address outliers and whether outliers
should be addressed at all.
We are proposing an exception to the 30 percent carve-out policy
when the FUL group only includes the innovator single source drug and
the first new generic in the market, including an authorized generic.
In this event, we would not apply the 30-percent rule as we believe the
DRA intends that a FUL be set when new generic drugs become generally
available so as to encourage greater utilization of a generic drug when
the price is set less than its brand name counterpart.
We invite comments from the public on all issues set forth in this
subpart. We invite suggestions on how best to accomplish the goal of
ensuring that the use of AMP in calculating the FUL will ensure that a
drug is available nationally at the FUL price. Please submit data
supporting your proposal when available.
Upper Limits for Drugs Furnished as Part of Services--Section 447.516
We propose that the existing Sec. 447.334 be redesignated as a new
Sec. 447.516.
State Plan Requirements, Findings and Assurances--Section 447.518
We propose that the existing Sec. 447.333 be redesignated as a new
Sec. 447.518.
FFP: Conditions Relating to Physician-Administered Drugs--Section
447.520
Prior to the DRA, many States did not collect rebates on physician-
administered drugs when they were not identified by NDC number because
the NDC number is necessary for States to bill manufacturers for
rebates. In its report, ``Medicaid Rebates for Physician Administered
Drugs'' (April 2004, OEI-03-02-00660), the OIG reported that, by 2003,
24 States either required providers to bill using NDC numbers or
identified NDC numbers using a Healthcare Common Procedure Coding
System (HCPCS)-to-NDC crosswalk for physician-administered drugs in
order to collect rebates. Four of the 24 States were able to collect
rebates for all physician-administered drugs, both single source and
multiple source drugs (one State only collected these rebates from
targeted providers). Section 6002 of the DRA added sections 1927(a)(7)
and 1903(i)(10)(C) to the Act to require that States collect rebates on
certain physician-administered drugs in order for FFP to be available
for these drugs.
Section 1927(a)(7)(A) of the Act requires that, effective January
1, 2006, in order for FFP to be available, States must require the
submission of utilization data for single source physician-administered
drugs using HCPCS codes or NDC numbers. (HCPCS codes are numeric and
alpha-numeric codes assigned by CMS to every medical or surgical
supply, service, orthotic, prosthetic and generic or brand name drug
for the purpose of reporting healthcare transactions for claims
billing. Physician-administered drugs are assigned alpha-numeric HCPCS
codes, and are commonly referred to as J-codes. However, physician-
administered drugs are also coded using other letters of the alphabet.
For this reason, we will refer to the coding system, HCPCS, as opposed
to one set of alpha-numeric codes in our discussion of section 6002
requirements.) If States collect HCPCS codes for single source drugs,
they can crosswalk these codes to NDC numbers because most HCPCS codes
for single source drugs include only one NDC in order to collect
rebates.
Section 1927(a)(7)(C) of the Act requires that, beginning January
1, 2007, States must provide for the submission of claims data with
respect to physician-administered drugs (both single source and
multiple source drugs) using NDC numbers, unless the Secretary
specifies that an alternative coding system can be used. The Secretary
does not plan to specify an alternative coding system because we
believe that NDC numbers are well established in the medical community
and provide States the most useful information to collect rebates.
Section 1927(a)(7)(B) of the Act requires the Secretary, by January
1, 2007, to publish a list of the 20 multiple source physician-
administered drugs with the highest dollar volume dispensed under the
Medicaid program. We propose that the list will be developed by the
Secretary using data from the Medicaid Statistical Information System
and published on the CMS Web site.
Section 1927(a)(7)(B)(ii) of the Act (when read with other DRA
amendments) requires that, effective January 1, 2008, in order for FFP
to be available, States must provide for the submission of claims for
physician-administered multiple source drugs using NDC numbers for
those drugs with the highest dollar volume listed by the Secretary.
We propose, for the purpose of this section, that the term
``physician-administered drugs'' be defined as covered outpatient drugs
under section 1927(k)(2) of the Act (many are also covered by Medicare
Part B) that are typically furnished incident to a physician's service.
These drugs are usually injectable or intravenous drugs administered by
a medical professional in a physician's office or other outpatient
clinical setting. Examples include injectables: Lupron acetate for
depot suspension (primarily used to treat prostate cancer), epoetin
alpha (injectable drug primarily used to treat cancer), anti-emetic
drugs (injectable drug primarily used to treat nausea resulting from
chemotherapy), intravenous drugs primarily used to treat cancer
(paclitaxel and docetaxel), infliximab primarily used to treat
rheumatoid arthritis, and rituximab primarily used to treat non-
Hodgkin's lymphoma. We believe that some oral self-administered drugs
(administered in an outpatient clinical setting), such as oral anti-
cancer drugs, oral anti-emetic
[[Page 77189]]
drugs should also be included in the designation of physician-
administered drugs consistent with Part B policy and sections
1861(s)(2)(Q) and (T) of the Act.
Section 1927(a)(7)(D) of the Act allows the Secretary to grant
States extensions if they need additional time to implement or modify
reporting systems to comply with this section. We are not proposing any
criteria for reviewing these extension requests as we expect that most,
if not all States will be able to meet the statutory deadlines for
collection of NDC numbers on claims. Most States are already collecting
rebates for single source drugs that are provided in a physician's
office. For multiple source drugs, the States have nearly two years
following enactment of the DRA before FFP would be denied for the 20
multiple source drugs specified by the Secretary as having the highest
dollar volume.
We expect that States will require physicians to submit all claims
using NDC numbers, as using multiple billing systems would be
burdensome for physicians and States. This will also advantage States
because rebates will be collectible on all physician-administered
drugs.
For States not currently billing manufacturers for rebates on
single source drugs, we believe that the Medicare Part B crosswalk may
be helpful to crosswalk HCPCS codes to NDC numbers. This crosswalk may
be found on the CMS Web site at http://new.cms.hhs.gov/McrPartBDrugAvgSalesPrice/02_aspfiles.asp
.
To implement the provisions set forth in section 6002, we propose a
new Sec. 447.520. In Sec. 447.520(a), we would require States to
require that claims for physician-administered drugs be submitted using
codes that identify the drugs sufficiently to bill a manufacturer for
rebates in order for the State to receive FFP. In Sec. 447.520(b), we
would require States to require providers to submit claims using NDC
numbers. In Sec. 447.520(c), we would allow States that require
additional time to comply with the requirements of this section to
apply to the Secretary for an extension.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), we are required to
provide 60-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. In
order to fairly evaluate whether an information collection should be
approved by the OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comment on the following issues:
The need for the information collection 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 affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements:
Requirements for Manufacturers (Sec. 447.510)
Proposed Sec. 447.510 states that a manufacturer must report,
electronically, product and pricing information to CMS not later than
30 days after the end of the rebate period. In addition, customary
prompt pay discounts and nominal prices must be reported quarterly.
Detailed information pertaining to the manufacturer's reporting
requirements is located under Sec. Sec. 447.510(a), (b), (c), (d), and
(e).
The burden associated with these new requirements is the time and
effort it would take for a drug manufacturer to gather product and
pricing information and submit it to CMS in an electronic format. We
estimate that these requirements would affect the approximately 550
drug manufacturers that currently participate in the Medicaid Drug
Rebate Program. Our current reporting and recordkeeping hour burden for
each manufacturer in the Medicaid Drug Rebate Program is 71 hours per
quarter or 284 hours annually. We believe the new reporting
requirements will require less than half of this time. Specifically, we
believe it would take each manufacturer 31 hours per quarter or 124
hours annually to report additional new information to CMS. The total
estimated burden on all drug manufacturers associated with the new
requirements under Sec. 447.510 is 68,200 annual hours.
Section 447.510(f) requires a manufacturer to retain records for
ten years from the date the manufacturer reports data to CMS for that
rebate period. The ten-year time frame applies to a manufacturer's
quarterly and monthly submissions of pricing data, as well as any
revised quarterly pricing data subsequently submitted to CMS. As stated
under Sec. 447.510(f)(2), there are certain instances when records
must be maintained beyond the ten-year period.
While this requirement is subject to the PRA, the retention of
quarterly data it is not a new requirement. While this requirement will
now also apply to monthly AMP data, we believe a similar set of data is
now retained to support the quarterly retention requirement. Therefore,
we believe this regulation imposes no additional burden on the drug
manufacturer.
FFP: Conditions Relating to Physician-Administered Drugs. (Sec.
447.520)
Section 447.520 requires providers, effective January 1, 2007, to
submit claims to the State for physician-administered single source
drugs and the 20 multiple source drugs identified by the Secretary
using NDC numbers.
Assuming all States impose this requirement, the burden associated
with this requirement is the time and effort it would take for a
physician's office, hospital outpatient department or other entity
(e.g., non profit facilities) to include the NDC on claims submitted to
the State. We estimate this requirement would affect an excess of
20,000 physicians, hospitals with outpatient departments and other
entities that would submit approximately 3,910,000 claims annually. We
believe this would take approximately 15 seconds per claim. We
estimated the cost based on the average annual wage and benefits paid
for office and administrative support services in 2006 of $21.14 per
hour (http://www.bls.gov/news.release/pdf/ecec.pdf). The per claim cost
would be under 9 cents.
Section 447.520(c) allows States requiring additional time to
comply with the requirements of this section to apply for an extension.
The burden associated with this requirement is the time and effort it
would take for each State to apply for a one-time extension. We
estimate that it would take five hours for each State to apply for the
extension; however, we believe that no State will apply. Therefore, we
believe this requirement to be exempt as specified at 5 CFR
1320.3(c)(4).
We have submitted a copy of this proposed rule to the OMB for its
review of the information collection requirements described above.
These requirements are not effective until they have been approved by
the OMB.
If you comment on these information collection and recordkeeping
requirements, please mail copies directly to the following: Centers for
Medicare & Medicaid Services, Office of Strategic Operations and
Regulatory Affairs, Division of Regulations Development, Attn: Melissa
Musotto, [CMS-2238-P], Room C4-26-05, 7500 Security Boulevard,
Baltimore, MD
[[Page 77190]]
21244-1850; and Office of Information and Regulatory Affairs, Office of
Management and Budget, Room 10235, New Executive Office Building,
Washington, DC 20503, Attn: Katherine Astrich, CMS Desk Officer, CMS-
2238-P, katherine_astrich@omb.eop.gov. Fax (202) 395-6974.
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the ``DATES'' February 20, 2007, and,
when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
V. Regulatory Impact Analysis
[If you choose to comment on issues in this section, please include
the caption ``Impact Analysis'' at the beginning of your comments].
A. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Act, the Unfunded Mandates Reform Act of 1995
(Pub. L. 104-4), Executive Order 13132, and the Congressional Review
Act (CRA, 5 U.S.C. 804(2)).
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) directs 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). We believe this rule will have an economically significant
effect. We believe the rule would save $8.4 billion over the next five
years ($4.93 billion Federal savings and $3.52 billion State savings as
shown in the table below). This figure represents a 5.6 percent
reduction in total Medicaid drug expenditures in Federal fiscal years
2007-2011. We consider this proposed rule to be a major rule for
purposes of the CRA.
State and Federal Savings Over 5 Years
[In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2007-11
DRA section and provision FFY Federal State 2007 2008 2009 2010 2011 Total
savings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Section 6001--Federal Upper Payment Limits and Federal............................... $465 $750 $1,075 $1,155 $1,250 $4,695
Other Provisions.
State................................. 330 535 765 825 890 3,345
-----------------------------------------------------------------
Total................................ 795 1,285 1,840 1,980 2,140 8,040
=================================================================
Section 6002--Rebates on Physician- Federal............................... 18 19 20 22 24 103
Administered Drugs.
State................................. 13 14 15 16 18 76
-----------------------------------------------------------------
Total................................ 31 33 35 38 42 179
=================================================================
Section 6003--Authorized Generics in Rebate Federal............................... 10 25 28 32 36 131
Best Price.
State................................. 7 19 21 24 27 98
-----------------------------------------------------------------
Total................................ 17 44 49 56 63 229
=================================================================
Total Savings for FFY..................... Federal............................... 493 794 1,123 1209 1310 4,929
State................................. 350 568 801 865 935 3,519
----------------------------------------------------