Overview

The Centers for Medicare & Medicaid Services (CMS) released the Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and Supporting Value- Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third Party Liability (TPL) Requirements (CMS 2482-P).

This notice of proposed rulemaking (NPRM) advances CMS’ efforts to support state flexibility to enter innovative value-based purchasing arrangements (VBPs) with drug manufacturers for new expensive therapies, and to provide manufacturers with regulatory flexibility to enter into VBPs with commercial payers, which will benefit Medicaid programs. It also creates minimum standards in state Medicaid Drug Utilization Review (DUR) programs designed to reduce opioid-related fraud, misuse and abuse

This proposed rule also proposes revisions to regulations regarding: how manufacturers should calculate the average manufacturer price (AMP) of the brand name drug when there is also a sale of an authorized generic; how manufacturers should include the value of their patient assistance programs in the calculation of “best price”, including when they are impacted by pharmacy benefit managers (PBM) accumulator programs; state and manufacturer reporting requirements to the Medicaid Drug Rebate Program (MDRP); the definitions of CMS-authorized supplemental rebate agreement in relation to Medicaid Managed Care Organizations (MCOs) and when those sales are exempt from AMP and “best price”; the definition of line extension, new formulation, oral solid dosage form, single source drug, multiple source drug, and innovator multiple source drug for purposes of the MDRP; payments for prescription drugs under the Medicaid program; and coordination of benefits (COB) and third party liability (TPL) rules related to the special treatment of certain types of care and payment in Medicaid and Children’s Health Insurance Program (CHIP).

Increases beneficiary access to medications by promoting value-based purchasing (VBP)

In this notice of proposed rulemaking (NPRM), we are proposing policies and revisions to the MDRP which will modify and relax some of the manufacturer reporting obligations around AMP and best price in order to encourage manufacturers and states to enter into VBP arrangements. Consistent with current statute and regulation, this will help modernize the law which was enacted 30 years ago, and will help implement the President’s drug pricing initiatives.

CMS believes state VBP arrangements with drug manufacturers is an important strategy to manage drug costs and promote beneficiary access to needed medications. By addressing the regulatory hurdles in a proposed regulation, CMS will encourage states to enter into VBP arrangements for drug therapies, especially in cases when the therapy will safeguard against unnecessary utilization of other more expensive medical services.

To accomplish this, the NPRM will for the first time allow manufacturers to report multiple “best prices” for a therapy under the MDRP if the prices are tied to a VBP arrangement. It will also clarify that VBP arrangements can be defined as “performance requirements” under the definition of “bundled sale” which will also facilitate VBP arrangements, especially for small population drugs; and, it will permit revisions to AMP and BP reporting beyond the current thirty-six month time limit to allow for revisions to pricing metrics as a result of VBP arrangements.

Encourages the appropriate use of opioids and reduces prescription-related fraud, abuse and misuse

CMS regulations at 42 CFR 456.703(d) require that the state assess drug use information against predetermined standards developed directly by the state or obtained from another source as provided under 42 CFR 456.703(e). In administering their DUR programs, states have flexibility to develop or select standards that may best fit their programs and patient populations. This proposed rule amends this section of the regulation to implement new opioid-related DUR standards that are required of states under section 1004 of the SUPPORT for Patients and Communities Act, as well as additional opioid-related DUR standards that CMS would propose under the authority of section 1927 of the Act. These changes reflect CMS’ continued efforts to reduce prescription-related fraud, abuse and misuse and assure that opioid prescriptions are appropriate, medically necessary, and not likely to result in adverse medical results. Additionally, we are soliciting comments on other opioid-related DUR standards that CMS could propose to adopt through rulemaking in the future.

Clarifies the application of the new authorized generic law to the calculation of a manufacturer’s brand name AMP

The Continuing Appropriations Act, 2020 and Health Extenders Act of 2019 made changes to the calculation of AMP for brand drugs to exclude the sales of authorized generic drugs when brand manufacturers have approved, allowed, or otherwise permitted an authorized generic to be sold under the brand name drug’s new drug application (NDA). Prior to this statutory change, manufacturers included the sales of the authorized generic in the AMP of the brand name drug which resulted in lowered AMPs and reduced rebates paid for the brand name drug. While the statute is self-implementing, this regulation provides additional clarity to these statutory changes so that manufacturers will understand that they can no longer include the sales of the authorized generic in the calculation of the brand name AMP regardless of the type of relationship between the brand name manufacturer and the authorized generic manufacturer.

Aligns regulation with statute and changes in marketplace which enhance manufacturer and state understanding of the Medicaid Drug Rebate Program

As the pharmaceutical marketplace evolves and new laws are passed, CMS is issuing this proposed rule to define and clarify regulations that will assist manufacturers and states in ensuring compliance with the Medicaid drug rebate statute. We are providing clarity around how manufacturers calculate their AMP and best price when considering the value of patient assistance programs, especially when a health plan uses a PBM accumulator program. The proposed regulation also clarifies that rebates paid on Medicaid managed care claims are only excluded under a CMS authorized supplemental rebate agreement. The NPRM proposes a definition of line extension and oral solid dosage form, which would be used by the manufacturer as part of their determination of whether they should calculate an alternative inflation penalty on their oral brand name drugs. The NPRM creates new requirements around state reporting and certification of state drug utilization data, which are used by CMS and others for multiple program integrity purposes. Finally, the regulation codifies the inflation penalty for non-innovator multiple source drugs (generics), as well as modifications to the definitions of single source drug and innovator multiple source drug.

Third party liability (TPL)

States are currently collecting information on liable third parties for all Medicaid beneficiaries and this rule proposes to change the regulation to instruct states when to cost avoid claims and when to pay and chase claims. In instances when cost avoiding a claim might create an access to care issue for a beneficiary, a state is permitted to pay the claim first and then collect the applicable portion of the payment from the liable third party.

Proposed rule updates provisions to promote value-based payment for prescription drugs

As part of President Trump’s longstanding commitment to lowering drug prices, today the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would start to remove barriers to the development of payment models based on value for innovative new therapies.  Therapies are coming to market today that fight disease in an entirely new way, including at the genetic level.  While the impact of these therapies can be transformative, their costs are unprecedented.  New approaches to payment are needed to allow the market room to adapt to these types of curative treatments while ensuring that public programs like Medicaid remain sustainable.  Several proposals will also enhance CMS’s efforts to combat the opioid epidemic and make sure that opioid outpatient drug coverage is appropriate, medically necessary, and avoids adverse medical events.

“CMS’s rules for ensuring that Medicaid receives the lowest price available for prescription drugs have not been updated in thirty years and are blocking the opportunity for markets to create innovative payment models,” said CMS Administrator Seema Verma.  “By modernizing our rules, we are creating opportunities for drug manufacturers to have skin in the game through payment arrangement that challenge them to put their money where their mouth is.”

Under current regulations, prescription drug manufacturers face challenges reporting payments under value-based arrangements to CMS.  Current regulations hinder payers and manufacturers from designing new payment arrangements based on the value provided to a patient, which leads to price negotiations based on quantity of drugs sold instead of the quality of a drug product, as well as efforts by payers to limit access to emerging treatments through utilization management practices like prior authorization and step therapy.  Today’s proposals seek to modernize these regulations, encouraging innovation and empowering states, private payers, and manufacturers to pay for prescription drugs based on clinical outcomes.  Basing payment on the effectiveness of a given therapy can foster innovation in the treatments that are most impactful to patients, while reducing overall healthcare spending and hospital visits.

These proposals would support the healthcare system’s move to paying on the basis of value instead of volume and increasing accountability for outcomes, as insurers would be able to better negotiate discounts based on a drug’s effectiveness.  In addition, more widespread adoption of payment arrangements based on value could lead to the collection of more evidence on clinical outcomes for a given therapy.  This type of real-world, real-time evidence could help providers use new medications and treatments in a more targeted fashion.  Increasing the link between reimbursement and drug effectiveness will also encourage payers to facilitate patients’ access to new therapies by easing more traditional utilization management practices.

By offering more flexibility for payers and manufacturers to enter into value-based agreements while still ensuring that Medicaid always gets the best deal, CMS is continuing our efforts to foster innovation, increase access to the latest technologies, and ensure that the Medicaid program is sustainable and can continue to serve our most vulnerable populations.

These proposals build on the steps that the Trump Administration has already taken to lower drug prices including the following actions:

• In Medicare Part D, which covers prescription drugs that beneficiaries pick up at the pharmacy, the average basic premium for Medicare Part D prescription drug plans was projected to decline 13.5 percent since 2017 to the lowest level in seven years, saving beneficiaries about $1.9 billion in premium costs over that time.
• Announced the Senior Savings Model where, starting in 2021, participating enhanced Part D prescription drug plans across the country will provide Medicare beneficiaries access to a broad set of insulins at a maximum $35 copay for a month’s supply, saving beneficiaries on average $446 for their insulins.
• Allowing Part D plans to substitute certain generic drugs to onto plan formularies more quickly during the year, so beneficiaries immediately have lower cost sharing for these drugs.
• Increasing competition among plans by removing the requirement that certain Part D plans have to “meaningfully differ” from each other, making more plan options available for beneficiaries.
• Providing more information on out-of-pocket costs for prescription drugs to beneficiaries by requiring Part D plans to adopt tools that provide clinicians with information that they can discuss with patients on out-of-pocket drug costs at the time a prescription is written.
• Implementing Part D legislation signed by President Trump to prohibit “gag clauses,” which keep pharmacists from telling patients about lower-cost ways to obtain prescription drugs.
• Approved state plan amendments from eight states to negotiate supplemental rebate agreements involving innovative value-based payment arrangements with drug manufacturers, so states can demand results from manufacturers in exchange for payment.
• Issued guidance intended to help states monitor and audit Medicaid and CHIP managed care plans to identify spread pricing when calculating their medical loss ratio (MLR).

The changes CMS is proposing also furthers the Trump Administration’s efforts to combat the opioid crisis.  The proposed rule would implement provisions under the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act to promote safe prescribing of opioids and other medications, which is essential to prevent and reduce opioid misuse and abuse.  These proposals include standards that would enhance a states’ ability to identify or limit inappropriate prescribing of opioids if a beneficiary is already receiving medication assisted treatment for substance use disorder (SUD).

CMS is also seeking input on proposals for future rulemaking that would require additional review of opioid prescribing, medication assisted treatment, and naloxone prescribing.  CMS is requesting comments on potential new standards that would enhance states’ ability to identify or limit inappropriate prescribing of opioids if a beneficiary is already receiving medications that can be unsafe when taken with opioids.  These proposals are key to addressing the misuse and overuse of opioids in order to help reduce hospitalizations, emergency department visits, and family crises associated with the epidemic.

A Fact Sheet on the Proposed Rule can be viewed at: https://www.cms.gov/newsroom/fact-sheets/establishing-minimum-standards-medicaid-state-drug-utilization-review-dur-and-supporting-value-based

The Proposed Rule can be viewed at: https://www.federalregister.gov/documents/2020/06/19/2020-12970/medicare-program-establishing-minimum-standards-in-medicaid-state-drug-utilization-review-and

By Craig Settles

To use broadband for the long-needed healthcare overhaul in rural America communities will have to develop strategies to decrease the “healthcare gap.” Read more here.