On 14 November 2016, the Centers for Medicare and Medicaid Services (CMS) released an interim final rule with comment period (IFR), effective 15 November 2016, that delays the effective date of the inclusion of the U.S. territories in the Medicaid Drug Rebate Program (MDRP) until 1 April 2020. The IFR was published in the Federal Register on 15 November 2016, and comments are due within 60 days of publication, no later than 17 January 2017.

The Covered Outpatient Drug Final Rule (Final Rule) revised the definition of "States" and "United States" to include the U.S. territories (American Samoa, the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands), effective 1 April 2017. The IFR now postpones that effective date until 1 April 2020.

When the revised definitions of "States" and "United States" become effective, the U.S. territories will be required to participate in the MDRP, unless granted a waiver, and participating manufacturers will have to include in their Average Manufacturer Price (AMP) and Best Price (BP) reporting prices paid by entities located in the U.S. territories.

CMS outlines the following reasons in the IFR for delaying the effective date of the revised definitions of "States" and "United States:"

  • The "interested U.S. territories" cannot be ready to implement the MDRP by 1 April 2017, and need more time to develop and change electronic claims processing systems to identify and report Medicaid utilization so as to be able to generate rebate invoices.
  • Requiring U.S. territories to seek a waiver from MDRP participation would impose burdens on territories, particularly on those territories that are not included in the broad waiver authority under section 1902(j) of the Social Security Act (Puerto Rico, the Virgin Islands, and Guam).
  • In comments to the Final Rule, manufacturers indicated that they would need time to implement the inclusion of the U.S. territories in the MDRP, and there is no waiver available for manufacturers from including sales to the U.S. territories in AMP and BP.
  • Stakeholders have indicated that manufacturers may be prompted to increase their drug prices to entities in the territories when those sales must be included in AMP and BP, so that territories receiving a waiver would experience an increase in Medicaid drug costs without the offsetting benefit of receiving Medicaid rebates.

CMS believes it has good cause to waive the requirement for issuing a proposed rulemaking in this instance, because there is not enough time before the effective date of 1 April 2017 included in the Final Rule to complete this process and also issue a final rule to change the effective date. In addition, CMS believes "it would be contrary to public interest to delay notifying manufacturers of the change in the timing of the territorial inclusion in light of the potential that, absent sufficient advance notice, drug manufacturers may raise prices on drugs sold in the territories and thereby increase drug costs for both Medicaid and non-Medicaid consumers in the territories."