On November 7, 2016, the Centers for Medicare and Medicaid Services (CMS) released a revisedMedicaid Drug Rebate Agreement in the form of a proposed notice with comment period. The notice will be published in the Federal Register on November 9, 2016, and comments are due no later than February 7, 2017.

CMS has not substantively revised the agreement since it was initially published in 1991 at the inception of the program. See 59 Fed. Reg. 7049 (Feb. 1, 1991), and the "sample" copy posted on the CMS site. The agreement was administratively updated in 2001 solely to reflect the name change of the Health Care Financing Administration to "CMS." We have prepared a blackline, showing the proposed agreement marked against the 1991 (2001) agreement, to assist in your review.

CMS explains that it proposes to revise the agreement to reflect intervening legislative and regulatory changes (specifically referring to the Covered Outpatient Drug Final Rule, which became effective April 1, 2016), as well as "editorial and structural revisions," such as referring to OMB-approved data collection forms and electronic data reporting. CMS indicates that once issued in final form, manufacturers participating in the program and those newly joining or seeking reinstatement would have to execute the revised agreement. Only manufacturers newly joining the program or seeking reinstatement would be subject to verification of their proposed covered outpatient drug list. CMS also states that once issued in final form, the agreement will not be subject to revisions based on negotiations with individual manufacturers.

Proposed revisions to the agreement include the following:

  • Definitions - The outdated definitions from the 1991 agreement are replaced with references to the Medicaid statute and the Final Rule. Other changes include:
    • The definitions of "Depot Price" and "Single Award Contract" have been deleted, although these terms are used but not defined in the Final Rule.
    • The term "State Drug Utilization Data" replaces the former term "Medicaid Utilization Information" and has been revised to, among other things, address managed Medicaid utilization, and to carve out "units dispensed to Medicaid beneficiaries that were purchased by covered entities through the" 340B Drug Pricing Program.
  • Manufacturer's Responsibilities
    • Updating the list of drugs: CMS includes in the proposed agreement its existing guidance that manufacturers should ensure their drugs are listed electronically with the FDA, so that CMS can use that information to verify covered outpatient drug status.
    • Subsequent URA changes: A new sentence addresses URA increases resulting from "changes in product, pricing, or related data," but does not make reference to decreased URA amounts. A statement under the "Dispute Resolution" section from the 1991 agreement that addresses rebate payment increases as well as reductions has been deleted.
    • CMS Guidance: The 1991 agreement requires manufacturers to comply with implementing regulations after "actual notice to the manufacturer." The proposed agreement requires compliance with "agency guidance" as well and eliminates the reference to prior notice.
    • Reasonable assumptions: The proposed agreement adds the requirement to make the reasonable assumption available upon request and modifies the reasonable assumption description (as shown in the blackline).
    • Notice of bankruptcy: Manufacturers are required under the proposed agreement to notify CMS within 7 days of any filing of bankruptcy.
  • Secretary's Responsibilities - The 1991 agreement refers to audits of AMP and BP, but the proposed agreement permits audits of all "manufacturer information" reported under the Medicaid statute, which may include AMP units, ASP, WAC, and sales at nominal price.
  • Penalty Provisions - An added provision indicates that the government's remedies under the agreement are not exclusive.
  • Dispute Resolution - The 1991 agreement includes a discussion of CMS compliance actions against states that fail to comply with the coverage requirement for drugs or where manufacturers can show a pattern of inaccurate utilization reporting. That section is entirely deleted in the proposed agreement.
  • Nonrenewal and Termination - A new provision indicates that manufacturers on the OIG exclusion list are subject to immediate termination from the program.
  • General Provisions
    • Statutory or regulatory changes incorporated by reference: The proposed agreement incorporates "changes in the Medicaid statute or regulations" automatically.
    • Assignment of liability after ownership transfer: The 1991 agreement provides that a transfer in ownership of the manufacturer results in the automatic assignment of the agreement to the new owner. The proposed agreement adds that "any outstanding rebate liability" is automatically assigned to the new owner as well.