Several important updates have been issued to the Medicaid Drug Rebate and 340B Drug Pricing Programs in the month of November.

  • Medicaid Drug Rebate Program. On November 7, 2016, the Centers for Medicare and Medicaid Services (CMS) issued a proposed notice announcing changes to the Medicaid National Drug Rebate Agreement (NDRA) used by the Secretary of the Department of Health and Human Services (HHS) and pharmaceutical manufacturers under the Medicaid Drug Rebate Program (MDRP). In addition, on November 14, 2016, CMS issued an interim final rule with comment period that delays the inclusion of the U.S. territories in the definition of “States” and “United States” under the MDRP until April 1, 2020. This is an important opportunity for pharmaceutical manufacturers participating in the MDRP to comment on the proposed changes.
  • 340B Drug Pricing Program. On November 1, 2016, the Health Resources and Services Administration (HRSA) released a new addendum (Addendum) to the Pharmaceutical Pricing Agreement (PPA) used by the Secretary of HHS and pharmaceutical manufacturers under the 340B Drug Pricing Program (340B Program). This document is considered final, and manufacturers participating in the 340B Program should sign and return the Addendum by December 31, 2016.

CMS’ Proposed Notice Announcing Changes to the NDRA

CMS’ proposed changes to the NDRA represent the first time that CMS has updated the NDRA since the agency first issued the NDRA in 1991. CMS states in the notice that it is updating the NDRA to reflect the changes in the CMS Covered Outpatient Drug final rule1 issued earlier this year (Final Rule), as well as other operational and legislative changes since the NDRA was first issued.

Once finalized, the updated NDRA will need to be signed by all manufacturers currently participating in the MDRP. Although the proposed notice does not specify when manufacturers must sign and submit the finalized NDRA, CMS states that it intends to provide additional instructions and guidance on how to execute the finalized NDRA. CMS is accepting comments on the proposed notice until February 7, 2017.

CMS’ proposed updates to the NDRA include:

  • Definitions. The proposed NDRA updates the definitions in the rebate agreement to bring them in line with the statute and regulations. For example, the definition of Average Manufacturer Price (AMP) has been updated to reference Section 1927(k)(1) of the Social Security Act as implemented by 42 C.F.R. § 447.504. Further, the definition for “Medicaid Utilization Information” in the current NDRA has been removed and, in its stead, the proposed NDRA uses the definition for “State Drug Utilization Data.” A number of definitions were also removed, including “Depot Price” and “Single-Award Contract.”
  • Manufacturer’s Responsibilities. The proposed NDRA makes numerous updates to conform with the Final Rule and other guidance, including that (i) manufacturers must ensure that their National Drug Codes (NDCs) are electronically listed with the Food and Drug Administration (FDA), and (ii) manufacturers are responsible for payment within 30 days of increases to previously submitted total rebate amounts that are caused by changes in product, pricing, or related data.
  • Secretary’s Responsibilities. The proposed NDRA adds a provision that the Secretary expects State Medicaid Agencies to report any changes to prior quarterly state drug utilization data at the same time as they report the current quarterly state drug utilization data to manufacturers, i.e., within 60 days of the last day of the rebate period.
  • Nonrenewal and Termination. The proposed NDRA adds a provision that if the rebate agreement is terminated by CMS or the manufacturer, the manufacturer must address to the satisfaction of CMS any outstanding violations from any previous rebate agreement(s) before the manufacturer can enter into another rebate agreement.

A copy of the proposed notice is available here.

CMS Delays the Inclusion of Territories Under MDRP Until 2020

CMS’ interim final rule delays the inclusion of the U.S. territories (American Samoa, the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands) in the definitions of “States” and “United States” under the MDRP from April 1, 2017 to April 1, 2020. Earlier this year, CMS’ Covered Outpatient Drug Final Rule amended the regulatory definitions of “States” and “United States” under 42 C.F.R. § 447.502 to include the territories beginning April 1, 2017. However, CMS states that, based on its discussions with the territories, the territories will not be able to develop and implement the necessary system changes to participate in the MDRP by April 1, 2017. Thus, under this interim final rule, manufacturers will be required to include sales to territories in their calculation of AMP and best price and to pay rebates on their covered outpatient drugs dispensed to Medicaid patients in the territories beginning April 1, 2020.

The interim final rule is effective on November 15, 2016, and CMS is accepting comments until January 17, 2017.

A copy of the interim final rule is available here.

HRSA’s 340B Program PPA Addendum

HRSA’s PPA Addendum incorporates into the PPA two provisions mandated by Section 7102(b) of the Affordable Care Act (ACA). First, the Addendum requires pharmaceutical manufacturers participating in the 340B Program to submit to HRSA quarterly reports of the maximum price that 340B covered entities may permissibly be required to pay for the manufacturers’ covered outpatient drugs (340B ceiling price). Second, the Addendum requires pharmaceutical manufacturers to represent that the manufacturer will offer its covered outpatient drugs to 340B covered entities at or below the manufacturer’s reported 340B ceiling price. HRSA states that these provisions support HRSA’s development of the 340B ceiling price validation system — a system that verifies the accuracy of manufacturer-submitted quarterly pricing data with ceiling price data calculated by HHS — as required under Section 7102(d) of the ACA.

The Addendum must be signed by a corporate officer of the manufacturer, such as the manufacturer’s Chief Executive Officer. The Frequently Asked Questions (FAQs) section of the 340B Prime Vendor Program website includes information regarding the timing and methods of submission for the Addendum. FAQ ID 2338, available here, states that manufacturers should submit the signed Addendum to HRSA by close of business December 31, 2016. This update was subject to notice and comment as part of HRSA’s Notice on Agency Information Collection Activities, 80 Fed. Reg. 63560 (Oct. 20, 2015), available here.

A copy of the PPA Addendum is available here.