CMS Proposes to Withdraw Medicaid Rebate AMP and Federal Upper Limit Regulations

By Michelle Butler & Alan Kirschenbaum –  

It took CMS 17 years to issue a regulation implementing the Medicaid Rebate Program, and much of that regulation is turning out to be short-lived.  On Friday, September 3, CMS published a proposal to withdraw provisions of its 2007 regulation governing the determination of average manufacturer price ("AMP") and the setting of federal upper limits ("FULs") for multiple source drugs.  Both of these regulations have been superseded by the Patient Protection and Affordable Care Act ("PPACA"), which, as described in our summary of that law, made significant changes to the definition of AMP and also redefined the methodology for calculating FULs. 

As a result of the PPACA changes, CMS is proposing to withdraw 42 C.F.R. § 447.504, “Determination of AMP,” in its entirety.  In the preamble, CMS advises companies to calculate AMP based on the definitions set forth in the statute (effective October 1, 2010) rather than definitions in the withdrawn AMP regulation and other CMS guidance.  CMS states that it expects to develop regulations that will implement the changes made by PPACA relating to the determination of AMP and the setting of FULs.  However, no timeline is provided, and regulations certainly will not be forthcoming by the time the first monthly AMP report (for October) is due under the new PPACA methodology on November 30.  For that report, manufacturers will have to rely on the statutory definition, whatever subregulatory guidance CMS may issue before then, and reasonable assumptions regarding issues that are not addressed in the statute or any guidance.  CMS also proposes to withdraw in its entirety 42 C.F.R. § 447.514, “Upper limits for multiple source drugs,” which is inconsistent with the new FUL methodology set forth in PPACA. 

It is important to note that certain AMP-related provisions of the 2007 regulation would not be withdrawn under CMS’ proposal, including the requirements that AMP be reported monthly and quarterly, that 12-month averaging be used for lagged price concessions, and that bundled discounts be allocated in calculating AMP.  Also remaining intact would be provisions relating to best price, authorized generics, certification of reports, recordkeeping, restatements of AMP and best price, nominal price sales, and reporting of prompt pay discounts.

Comments may be submitted to CMS until 5 pm on October 4, 2010.