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WASHINGTON — The Centers for Medicare & Medicaid Services (CMS) has issued the Covered Outpatient Drugs final rule with comment, which the National Association of Chain Drug Stores said includes “significant changes” to Medicaid pharmacy reimbursement for generic drugs based on the average manufacturer price (AMP) model.
Released on Thursday and due to be published in the Federal Register on Feb. 1, the final rule (CMS-2345-FC) addresses key areas of Medicaid drug reimbursement and changes made to the Medicaid Drug Rebate Program by the Affordable Care Act (ACA). CMS said the rule assists states and the federal government in managing drug costs, sets the long-term framework for the Medicaid drug rebate program and establishes a “more fair” reimbursement system for Medicaid programs and pharmacies.
“This is the latest chapter in a decade-long saga that has required NACDS and our allies to defend pharmacy patient care against the potentially devastating cuts of the Deficit Reduction Act of 2005, which was enacted in 2006, and the regulations that were proposed to implement it in 2007,” NACDS president and CEO Steve Anderson said late Thursday. (See NACDS timeline on the history of AMP-based pharmacy reimbursement under Medicaid.)
According to CMS, the ACA’s changes to rebate percentages have increased Medicaid rebates paid to the federal and state governments by manufacturers of covered outpatient drugs, including higher-cost branded drugs. The agency noted that the final rule takes steps to ensure that governments will save money in managing Medicaid drug costs.
Steve Anderson, NACDS president and CEO
Among core elements of the 658-page final rule is a regulatory definition for AMP, which CMS said is the Medicaid drug rebate program’s key metric both for determining manufacturer rebates and pharmacy reimbursement for certain generics subject to the Federal Upper Limit (FUL). The FUL formula has been updated for the payment of certain generic drugs, which according to CMS incents pharmacies to use generics because their costs for these medications will be regularly updated. The final regulation, too, implements the ACA provision that extended rebates to covered outpatient drugs for beneficiaries in Medicaid managed care organizations.
Also, the final rule clarifies the definition of a manufacturer’s “best price” and aligns it to the definition of AMP, where applicable, CMS said. Also clarified are definitions of “retail community pharmacy” and “wholesaler,” which the agency noted are key terms used in determining AMP.
In what has been a point of contention for retail pharmacies, CMS said the final rule aims to better align pharmacy reimbursement with drugs’ acquisition costs and ensure that the states pay an “appropriate” professional dispensing fee.
Key items in the final rule for creating a fairer pharmacy reimbursement system, CMS reported, include the following:
• An exception to the FUL calculation that allows for the use of a higher multiplier than 175% to calculate the FUL based on acquisition costs for certain multiple source drugs.
• Actual acquisition cost (AAC) being made the basis for states to use in determining ingredient cost reimbursement so payments are based on a more accurate estimate of the prices available in the marketplace, “while still ensuring sufficient beneficiary access.”
• Use of the term “professional dispensing fee” to make sure the dispensing fee paid to pharmacies reflects the costs of the pharmacist’s professional services and the dispensing of the drug product to a Medicaid beneficiary.
• The requirement that states assess the sufficiency of both the ingredient cost reimbursement and the professional dispensing fee reimbursement when proposing changes to either of those components.
NACDS said its members are now evaluating the final rule. “We are at this point today because NACDS and our allies have waged a pro-patient and pro-pharmacy effort at the federal and state levels, and in the legislative, executive and judicial branches of government. We have advocated for policies that are appropriate from the perspectives of good government and of high quality, accessible patient care,” Anderson said.
“As a result, this decade-long story includes — among other developments — the initially enacted provisions of the Deficit Reduction Act; the development of regulations to enact that law; a federal court’s decision to strike down the initial rule as a result of a lawsuit brought by NACDS and the National Community Pharmacists Association; the U.S. Congress’ action to revisit and improve the legislative language, including related provisions in the Affordable Care Act; and now the Centers for Medicare & Medicaid Services’ efforts to develop a new rule in response to those Affordable Care Act legislative provisions,” he explained.
With the release of the final rule, CMS also is calling for further comment on the definition of line-extension drugs. The 60-day public comment period runs until April 1.
“The next step is to evaluate completely this final rule and to hold it to the same standards that have motivated us consistently throughout the past near-decade: appropriate government policymaking and accessible patient care,” Anderson commented. “As a member-driven trade association, NACDS will work with member companies to review the rule and to determine exactly where we stand.”
In a blog post on Friday, the National Community Pharmacists Association noted that CMS plans to publish draft FULs based on the final rule for two months starting in January. The final FULs are slated to be published in late March 2016 and go into effect on April 1. The association said states will have up to 30 days to implement the FULs, and thereafter the FULs will be updated monthly on the Medicaid.gov website become effective on the first day of the month after the update is published.
NCPA reported that it aims to file comment on the final rule within the 60-day deadline.
“We are still early in our assessment of this lengthy policy that was just released. However, in our very early read, there are several provisions that appear that CMS listened to the evidence NCPA and others have presented to them and is treating community pharmacies fairly so they can continue to provide patient access to their services,” NCPA CEO B. Douglas Hoey said in the posting. “Over the next few days, we will complete our analysis and verify if this initial promising impression holds.”
*Editor’s Note: Links to more information on Covered Outpatient Drugs policy can be found here on the CMS website.
