CMS Publishes Final Part D Coverage Gap Discount Agreements With Admonition to Act Quickly

By Michelle L. Butler & Alan M. Kirschenbaum –

On August 3, CMS issued final versions of three agreements to implement the Medicare Coverage Gap Discount Program.  We previously described the guidance CMS developed with regard to this program as well as the draft agreements CMS published for comment.  CMS has now issued final versions of the Model Manufacturer Agreement and the Model Third Party Administrator ("TPA") Agreement.  In a cover memorandum, CMS describes the revisions it made to the agreements in response to industry comments.  and describes the signing process and deadlines.  In order to participate in the Coverage Gap Discount Program in 2011, a manufacturer must complete and return to CMS the signed agreements, as well as a labeler code worksheet, by 11:59 pm Eastern Time on September 1, 2010.

CMS made the following notable revisions to the Model Manufacturer Agreement:

• Payment deadline:  CMS revised the payment timeframe in section II(b) so that Manufacturers are now required to pay each Part D sponsor within 38 calendar days after receipt from the TPA of the electronic invoice and supporting data.  Manufacturers had vigorously objected to the 14-day deadline proposed in the draft agreement.  In addition, the deadline for manufacturers to electronically notify the TPA that it has paid Part D plans has been extended from one to five business days.

• Level of detail of data provided to manufacturers:  In response to manufacturer comments, CMS has increased the level of information that will be provided to manufacturers from summary-level information to claims-level information, including, among other things, date of dispensing, prescription number, and pharmacy identifier.  Exhibit A to the Agreement provides list of data elements that will be provided to manufacturers.

• Audits:  The final agreement expands considerably on the audit rights of both manufacturers and the TPA.  Audits may not be conducted more frequently than annually.  The party requesting the audit is required to give the other party 60 days notice of the reasonable basis for the audit and a description of the audit.  Manufacturers are limited to auditing specified data for a statistically significant sample of Prescription Drug Events ("PDEs") to determine the applicable discounts.  Exhibit B to the Agreement identifies the PDE data elements available for audit.  The manufacturer is limited to auditing the data and information made available by the TPA and is not permitted to audit CMS records or the records of Part D sponsors.

• Payment of disputed amounts:  Rejecting manufacturer requests that they be permitted to withhold disputed amounts, at least where there are egregious errors, CMS decided not to revise the requirement in the Agreement that Manufacturers must pay invoices in full pending dispute resolution.  However, CMS did provide a narrow exception where an invoice contains NDCs that are not subject to the Agreement.

• Limitations period for claimed discounts:  CMS added a limitation that manufacturers may not be invoiced for drugs dispensed over three years before the date of invoice.

• Monitoring for errors:  Provisions have been added for CMS or the TPA to reconcile discrepancies with discounts reported by Part D sponsors prior to invoicing manufacturers, and to notify manufacturers of any errors discovered after the invoicing.

• Data use provisions:  The data use provisions, which were contained in a separate draft agreement, have now been incorporated into the main Agreement as Exhibit C.  In response to manufacturer objections, the final data use provisions no longer require manufacturers to provide data security of a level and scope required of federal government agencies under OMB and NIST standards.    Instead, manufacturers will be held to a less exacting standard of establishing “appropriate administrative, technical, and physical safeguards . . . .”  In addition, a provision has been added that permits manufacturers to grant access to data to contracted third parties for the purpose of assisting the manufacturer in evaluating the accuracy of claimed discounts, resolving disputes, and otherwise exercising its rights and responsibilities under the Agreement.

Manufacturers who do not sign an agreement by September 1 will not have any of their drugs covered by Part D in 2011.  CMS advises that no extensions will be granted, and encourages companies who are uncertain whether they have covered Part D drugs to sign an agreement, since no discount will be due if the company’s drugs turn out not to be covered.  Similarly, CMS invites companies who are not yet marketing any products to sign an Agreement, which can be updated if products later become available.