CMS Finalizes Withdrawal of AMP Regulations; Leaves Many Questions Unanswered

By Alan M. Kirschenbaum –

The Centers for Medicare & Medicaid Services (“CMS”) has finalized the withdrawal of its regulations on the calculation of Average Manufacturer Price (“AMP”) and the determination of federal upper limits.  As we previously reported, CMS is withdrawing these regulations because they have been superseded by statutory amendments as part of the Patient Protection and Affordable Care Act (“PPACA”).  The final rule will be published in the Federal Register on November 15.  Don’t look for any helpful guidance in this final rule or its preamble.  If anything, the final rule makes a number of AMP issues more murky than they were before.

The preamble does contain some clarifications regarding the effect of the withdrawal of the AMP regulations, but these clarifications leave underlying questions unanswered.  For example:

• The definition of "bona fide service fee" at 42 C.F.R. § 447.502 is not being withdrawn and should continue to be used for purposes of best price, but should not be used in the calculation of AMP.  The treatment of bona fide service fees in AMP will be addressed in a future rulemaking.
• The provision providing that the quarterly AMP is calculated as a weighted average of the monthly AMPs in the quarter is being withdrawn.  Responding to a question whether quarterly AMP should continue to be calculated in this manner, CMS responded that manufacturers should rely on the statutory definition of AMP.  (This is a puzzling answer, because the definition does not address this issue.)  Apparently, this question will also be answered in the future rulemaking.
• CMS has not yet determined whether to permit manufacturers to restate base date AMPs.
• The proposed rule was unclear whether the provision requiring lagged price concessions to be smoothed was being deleted.  CMS confirms that it is being deleted, but declines to advise whether smoothing may nevertheless be used.

The preamble contains a long list of additional questions that CMS declined to answer, including:

• Should manufacturers continue to include wholesaler sales unless they have adequate documentation that the drugs are subsequently sold to an excluded entity?
• How should manufacturers determine whether an injectable, infusible, inhaled, instilled, or implanted drug is "not generally dispensed" in retail community pharmacies?
• Should sales of an authorized generic to a secondary manufacturer who sells to retail community pharmacies be included in AMP?
• How should rebates for line extensions be calculated?

CMS’s response to these questions is that it intends to issue a proposed regulation addressing changes made by PPACA.