CMS Finalizes New Medicaid Rebate Agreement

In order for their outpatient drugs to be covered under Medicaid and Medicare Part B, drug manufacturers must enter into a National Drug Rebate Agreement (“Agreement”) with the Department of Health and Human Services. The Agreement requires the manufacturer to pay quarterly rebates to state Medicaid programs on units of the manufacturer’s drug that are dispensed to Medicaid beneficiaries during the quarter, and to submit monthly and quarterly reports containing certain pricing data that are used by CMS to calculate the unit rebate amount. Today, CMS issued a final revised Agreement to replace the current one, which dates back to the inception of the Medicaid Drug Rebate Program in January 1991 and has become largely outdated as a result of amendments to the Program since that time. The new revision brings the Agreement into alignment with 2010 Affordable Care Act amendments to the Medicaid rebate statute and CMS’ implementing final rule issued on February 1, 2016, and also contains additional changes incorporating CMS policies adopted over the years.

Manufacturers with existing Agreements will have until October 1, 2018 to sign the revised Agreement, otherwise their existing Agreement will be terminated.

The final NDRA contains only minor changes from a draft that CMS issued for comment on November 9, 2016, which we described in a previous post here. Among the changes from the draft are the following:

• Language has been added to the Manufacturer’s Responsibility section to make clear that required pricing data must be calculated and reported “for all covered outpatient drugs of all labeler codes of a manufacturer.” See § II(b). The preamble elaborates that manufacturers are required to report “all of their covered outpatient drugs to CMS, regardless of labeler code. Therefore, in an effort to prevent selective reporting of NDCs, manufacturers must ensure that all associated labeler codes . . . enter into a rebate agreement in order to comply with the terms of the NDRA.” (P. 43.)
• In the same section, a sentence has been added reflecting long-standing CMS policy that, although CMS ordinarily calculates the unit rebate amount (URA) based on reported pricing and communicates the URA to the states, that does not relieve the manufacturer of the responsibility for doing its own URA calculation.
• The draft version of Section II(f) addressed revisions to previously submitted prices, but only those revisions resulting in additional rebate payments. In response to comments, a sentence has been added to also address overpayment situations, providing that manufacturers should communicate with states about how to apply the credit due to the manufacturer.
• The final Agreement retains the definitions of “depot price,” “single-award contract,” and “single-award contract price,” which the draft Agreement had proposed to delete. These terms are used in statutory and regulatory provisions regarding best price, but are defined only in the MDRA.

Several of the definitions and other provisions of the Agreement refer to Form CMS‑367c, which lists the data fields contained in the monthly and quarterly electronic reports to the Medicaid Drug Rebate Program and defines each field. The current Form
CMS-367c is appended to the final Agreement.