On May 21 CMS issued a revised version of its program instructions for the Medicare Coverage Gap Discount Program, which was established by the Patient Protection and Affordable Care Act (PPACA) as amended by the Health Care and Education Reconciliation Act of 2010, including CMS's responses to public comments received on its April 30 draft document. By way of background, effective January 1, 2011, the Discount Program generally will make available to Medicare beneficiaries in the Part D coverage gap (sometimes called the "donut hole") manufacturer discounts equal to 50% of the negotiated price of the drug, except with respect to generic drugs. Among many other things, in the updated guidance, CMS: states that it expects all manufacturers of applicable drugs will sign discount agreements and that it does not intend to apply its "extenuating circumstances" authority for 2011 to allow Part D coverage for manufacturers which do not do so; indicates that it expects manufacturers will continue to negotiate with Part D sponsors and other entities to provide rebates on Part D drugs purchased throughout the Part D benefit, and specifically during the coverage gap; reminds Part D sponsors that they will have the opportunity to make formulary changes during the August update window if necessary to address contracting changes; requires retroactive adjustments to applicable discounts when necessary to reflect the retroactive changes to the claim or beneficiary eligibility; states that the invoices to be sent to manufacturers will include "certain claim-level detail"; and indicates that employer group waiver plan will be subject to the program if their benefit designs include a coverage gap, but that they would not receive prospective payments for the program.

Also on May 21, 2010, CMS released a draft model agreement to be used by the HHS Secretary and manufacturers under the Medicare Coverage Gap Discount Program. The draft model agreement released by CMS on May 21 lists 13 specific responsibilities for Part D drug manufacturers. In addition to agreeing to provide the 50% discount for covered Part D drugs, the manufacturer is expected to, among other things: pay each Part D sponsor via electronic funds transfer within 14 days of being invoiced by the CMS contractor for the total quarterly applicable discounts; collect and make available relevant data, including utilization and pricing information; and submit to periodic audits of this data; agree to comply with all requirements imposed by the Secretary for purposes of administering the program; comply with all applicable confidentiality requirements of HIPAA; and provides a dispute resolution mechanism for invoiced amounts disputed by manufacturers, with ultimate appeal to the CMS Administrator, whose decision is final and binding. Contrary to the statement in the revised program instructions, the draft agreement does not provide for any claims-level information to be provided to manufacturers, instead defining the information to be provided as only "summary-level." CMS will not revise the standard agreement based on negotiations with individual manufacturers. Comments on the draft model agreement, w hich will be published in the Federal Regiser May 26. will be accepted until June 21, 2010.

The CMS notice also announces a public meeting on June 1, 2010 in Baltimore, Maryland to discuss the draft agreement. At the meeting, CMS will review the Discount Program and draft model agreement, and the agency intends to hear panels of various stakeholders and allow time for questions and answers.

Separately, on May 21, CMS posted a document entitled “Delayed, Incorrect, and Non-Reporting of Monthly & Quarterly AMP." The document responds to instances in which drug manufacturers submit information to CMS on why they cannot submit Medicaid average manufacturer price (AMP) data by the required deadline, or why reported AMPs were not calculated according to CMS guidance. CMS is "notifying manufacturers that submitting documentation to CMS explaining the reasons for delayed, incorrect, or non-reporting of AMP data for any reporting period does not discharge the manufacturer from its reporting requirements under Section 1927 of the Act, nor does it shield the manufacturer from possible penalties authorized by section 1927(b)(3)." CMS points out, however, that, there are regulatory provisions addressing situations in which a manufacturer becomes aware that its pricing data may be incomplete or its assumptions may have been incorrect and the manufacturer will not be able to correct or update its pricing in time for monthly or quarterly data submission deadlines. In such cases, the manufacturer may make certain reasonable assumptions and calculate monthly AMPs based on the best data available at the time of submission and then update the pricing data as soon as possible, according to the terms of the statute and rebate agreement.