CMS Proposes Delays to Major Regulations Affecting Medicaid Rebates

On May 28, 2021, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule to delay the effective dates of two amendments to the Medicaid Drug Rebate Program (MDRP) related to manufacturer reporting of multiple best prices for drugs when offered as part of a value-based purchasing (VBP) arrangement and inclusion of U.S. territories in the MDRP. CMS is requesting public comment on the proposed effective date delays by June 28, 2021.  

Delay of Effective Date for Reporting Multiple Best Prices for VBP Arrangements

CMS proposes to delay for six months the January 1, 2022 effective date for the provisions addressing manufacturer reporting of multiple best prices connected to a VBP arrangement. CMS’ primary stated reason for the proposed delay is to provide more time for CMS, states, and manufacturers to make the complex system changes necessary to implement the new best price and VBP program and assure patient access and quality of care, given the current need to devote resources to the public health emergency (PHE) relating to COVID-19 and the significant expansion of Medicaid under the American Rescue Plan Act of 2021 (ARP). 

In proposing this delay, CMS acknowledges that it needs more time to ensure that its own technology infrastructure will be ready to receive multiple best prices related to VBP arrangements. CMS is developing a new Medicaid Drug Program (MDP) system to replace its current system but does not believe it will be ready by January 1, 2022 to operationalize the VBP program.  

In addition, CMS stated that State Medicaid agencies need more time to develop capabilities and build an infrastructure that will be able to implement VBP arrangements. Specifically, State Medicaid agencies must develop and implement systems and methods to track beneficiaries and their outcomes, retrieve and evaluate the patient-specific outcomes data, and secure the cooperation of providers and beneficiaries to enter into some of the more complex outcome-based arrangements offered by pharmaceutical manufacturers. CMS stated, without citing evidence, that a reason for the delay was that manufacturer resources were likely diverted away from the implementation of VBP arrangements due to researching, producing, and distributing COVID-19 drugs and vaccines. Some stakeholders were puzzled by this explanation, however, as VBP arrangements continue to be actively pursued, and no manufacturer has publicly called for a delay in implementation of this provision.   

Accordingly, CMS believes that July 1, 2022 is a more realistic target date for implementation of the VBP multiple best price program. CMS also stated that it expects to issue additional guidance before July 1, 2022 on operational and policy aspects of the new VBP program, including specifications relating to beneficiary protections.

Delay of Inclusion Date for U.S. Territories in the MDRP 

CMS also proposes to delay the April 1, 2022 effective date of inclusion for U.S. territories (American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands) in the definitions of “States” and “United States” for purposes of the MDRP to April 1, 2024. However, if public comments indicate readiness to include territories in the MDRP, CMS proposes to finalize an inclusion date that may be earlier than April 1, 2024, but not before January 1, 2023. 

The MDRP regulatory definitions of “States” and “United States” were originally amended to include the U.S. territories by the Covered Outpatient Drug Final Rule (February 1, 2016), with a delayed inclusion date of April 1, 2017. Subsequently, CMS issued two interim final rules to further delay the inclusion date for the U.S. territories in the regulatory definitions of ‘‘States’’ and ‘‘United States’’ to April 1, 2022 based on discussions with the territories on preparedness to join the MDRP and concerns related to manufacturers potentially increasing drug prices to avoid setting new Medicaid best prices.

CMS is again proposing to delay the inclusion date of U.S. territories in the MDRP for substantially the same reasons, namely that territory resources should prioritize demands arising from the PHE and expansion of Medicaid under ARP to address beneficiary needs during COVID-19.

*         *         *

Pharmaceutical manufacturers and other MDRP program stakeholders should consider commenting on the proposed delays. In particular, while the delay of the VBP regulation is currently six months, it may be important for stakeholders to indicate their readiness for the new system changes to discourage CMS from further delays in the future.