CMS Publishes Proposed Rewrite of Medicaid Drug Rebate Program Regulation; HP&M Issues Summary

By Alan M. Kirschenbaum & Michelle L. Butler - 

A long anticipated proposed revision to CMS regulations governing the Medicaid Drug Rebate Program ("MDRP") appeared in the Federal Register on Thursday, February 2, 2012.  As expected, the proposal implements amendments to the MDRP that were enacted in the Patient Protection and Affordable Care Act ("ACA") (see our previous post here).  However, the regulation would also make a number of important changes to the MDRP and Medicaid drug payment that were not mandated by the ACA.  Among other notable provisions, the proposed regulation would:

• Require states to convert to an actual acquisition cost basis for Medicaid prescription drug payment 
• Expand the MDRP to the U.S. territories
• Apply a statutory alternative rebate for line extensions of oral solid dosage form innovator drugs, not only to new formulations, but new indications, combination products, and products marketed by companies independent of the company marketing the original drug
• Limit wholesaler sales included in AMP to those that can be documented as being subsequently sold to retail community pharmacies
• Require manufacturers of unapproved drugs to submit to CMS evidence that the product meets the definition of a covered outpatient drug
• Provide for penalties of $10,000 per day per drug for tardy AMP reports

Hyman, Phelps & McNamara, P.C. has prepared a memorandum summarizing the most important provisions of the proposed regulation.  The memorandum is available here.