Centers for Medicare & Medicaid Services Issues “Most Favored Nation” Interim Final Rule for Select Medicare Part B Drugs

Select Drugs. CMS has selected 50 Part B separately payable drugs and biologicals for inclusion in year 1 of the MFN Model. CMS states that additional drugs may be added in subsequent years. According to CMS, the 50 drugs selected for year 1 are those that, subject to certain exclusions, had the highest annual Medicare Part B spending in 2019. CMS states that for future years, the initial 50 drugs generally will remain, but additional drugs may be added if they enter the “top 50” in subsequent years.

• Drugs Not Included in the MFN Model. Under the IFC, CMS excludes from the MFN Model Part B drugs and biologicals that are furnished in the inpatient setting, administered through covered durable medical equipment, orally administered, or paid under the End-Stage Renal Disease prospective payment system. In addition, CMS excludes from the MFN Model certain vaccines (including any future vaccine for COVID-19), radiopharmaceuticals, compounded drugs, drugs authorized or approved by the Food and Drug Administration (FDA) to treat COVID-19, intravenous immune globulin products, drugs without specific Healthcare Common Procedure Coding System (HCPCS) codes, and drugs that share a HCPCS code with a generic product. The IFC also includes a “quarterly payment exception for MFN drugs that are in short supply (based on inclusion on the FDA drug shortages list).” CMS requests comment on other possible exclusions that could be implemented for future years, such as exclusions for blood-related, plasma-derived, and human tissue products; for gene and cell therapies; for drugs indicated to treat rare diseases; or for drugs where a different manufacturer distributes the product outside the United States.
• Drugs Included for Year 1. Table 2 of the IFC lists the 50 drugs by HCPCS code that CMS selected for the first year of the MFN Model. CMS states that the agency will publish the MFN Model Drug HCPCS Codes List quarterly on the MFN Model website.

MFN Price and Add-On Payment. Under the IFC, the MFN Price for drugs for a quarter will reflect the lowest per capita Gross Domestic Product-adjusted (GDP-adjusted) price in any Organisation for Economic Co-operation and Development (OECD) country with a GDP per capita at least 60 percent of the U.S. figure.

• For the first quarter of year 1, CMS states that 22 countries will be used to calculate the MFN Price.
• To identify the international prices, CMS will rely on existing data sources. CMS sets forth a “hierarchy of data sources” in the IFC that the agency will use. CMS notes that the agency will use data on a two-quarter-lagged basis, as it does with Average Sales Price (ASP), and that the agency may use different sources for different drugs over different quarters.
• CMS will phase in the use of the MFN Price by blending it with ASP for the first three years of the MFN Model. In year 1, the payment rate will be based on 25 percent of the MFN Price and 75 percent of ASP. MFN Price weight increases by 25 percent in year 2 and year 3 until the payment rate for MFN Model drugs is fully based on the MFN Price in year 4. This phase-in timeline will apply to all drugs in the MFN Model, regardless of when a drug may be added to the model. CMS also states that the agency may accelerate the transition to the MFN Price if the ASP for an MFN Model drug increases faster than the rate of inflation or the MFN Price.
• In addition to the MFN Price, providers will receive a fixed add-on payment “per dose,” which will relate to the number of HCPCS billing units reported on the claims form. For year 1, the add-on payment will be 6.1224 percent of 2019 ASPs for MFN Model drugs, plus inflation, which equals $148.73. CMS will update this add-on payment based on inflation each quarter.
• CMS states that MFN Prices for the first quarter of the MFN Model will be posted online prior to January 1, 2021.

Scope. CMS states that the MFN Model will apply in all U.S. states and territories. All providers and suppliers that participate in the Medicare program and submit a separately payable claim for an MFN Model drug will be required to participate, with limited exceptions, such as providers and suppliers that are paid for separately payable Part B drugs based on reasonable costs.

Manufacturer Price Reporting. Under the IFC, manufacturers must exclude from their calculation of ASP all units of MFN Model drugs that are furnished to MFN beneficiaries and for which payment is allowed under the MFN Model regulation. CMS states that “[m]anufacturers will need to determine the number of units to exclude and may adjust purchasing arrangements with MFN participants in order to obtain information about such units.” According to CMS, the agency “anticipate[s] that manufacturers may establish mechanisms to obtain such information.”

340B Program Drugs. In the IFC, CMS references its calendar year 2021 Medicare Hospital Outpatient Prospective Payment System (OPPS) Proposed Rule, in which CMS has proposed to pay for drugs acquired by 340B-participating hospitals under the 340B program at ASP minus 34.7 percent, plus an add-on of 6 percent of the product’s ASP, for a net payment rate of ASP minus 28.7 percent. CMS states that if the agency finalizes this proposed OPPS payment policy for drugs acquired under the 340B program, the MFN Drug Payment Amount for such drug will be capped at ASP minus 34.7 percent. CMS adds that in such cases, the MFN participant also will receive the per-dose add-on payment. 

Quality Measures and Protections for Providers and Patients. The IFC includes certain monitoring and evaluation activities for the MFN Model, which, according to CMS, are intended to assess the MFN Model’s effect on beneficiaries’ access to drugs and quality of care. These activities include, for example, analyzing claims data, using data from a patient survey beginning in year 1 and site visits “to identify any unintended consequences.”

Provider Financial Hardship Exemption. The IFC includes a “financial hardship exemption” in the form of a potential reconciliation amount for providers that “furnish substantial amounts of MFN Model drugs” and that submit a complete and timely request to CMS that meets certain criteria. 

The IFC states that in one estimate from the CMS Office of the Actuary, “the MFN Model will result in savings of $85.5 billion.” CMS adds, however, “that there is much uncertainty around the assumptions” for its cost-saving estimates.

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Given the short period for implementation, significant attention to the IFC and its terms is an immediate priority for affected stakeholders.