CMS Updates the Medicaid Drug Rebate Agreement For the First Time in 25 Years

As we continue our coverage of the potentially seismic changes to the Medicaid Program under a Trump Administration, we’d like to take a momentary detour into the weeds—it’s inevitable in Medicaid after all—and touch on a recent development that may be of interest to some of our readers.

On November 9, 2016, the Center for Medicare and Medicaid (CMS) published a notice announcing proposed changes to the Medicaid National Drug Rebate Agreement (NDRA), a contractual agreement entered into by the Secretary of the Department of Health and Human Services (HHS) and pharmaceutical manufacturers participating in the Medicaid Drug Rebate Program (MDRP).  This is the first time CMS has updated the NDRA since 1991.  According to CMS, the impetus for requiring changes to the NDRA are a result of changes introduced by the Covered Outpatient Drugs Final Rule, which was published on February 1, 2016.  You can read our coverage of that rule here.

Manufacturers that participate or are intending to participate in the MDRP are encouraged to submit comments.  CMS states that once finalized, the NDRA will need to be executed by all participating manufacturers (including those seeking reinstatement).  However, manufacturers with an active NDRA at the time the updated NDRA is finalized will not be subject to verification of their proposed covered outpatient drug lists; prospective manufacturers requesting a new NDRA, or reinstatement of a previously active NDRA would be subject to verification. The finalized NDRA is intended to serve as a standard agreement that will not be subject to further revisions based on negotiations with individual manufacturers.  CMS is accepting comments on the proposed changes until February 7, 2017.

We have highlighted some notable changes from the previous version of the document:

  • Definitions Section – The proposed NDRA now aligns its definitions of terms with the statute and regulatory framework they are intended to operate under. Instead of separately defining each term contained in the agreement, as did the previous version, the proposed NDRA now cross-references each definition (i.e. Average Manufacturer Price, Best Price, etc.) with the definition as established by the statute and regulations.  This is expected to ensure that terms are used consistently across the MDRP, and perhaps just as importantly, that the terms automatically keep-in-step with any changes to the underlying regulations.  Additionally, the previous version’s definitions for “Depot Price” and “Single Award Contract” have been removed, and the term “Medicaid Utilization Information” has been replaced with “State Drug Utilization Data” to reflect managed Medicaid utilization.
  • Manufacturer’s Responsibilities Section – The proposed NDRA includes the requirement, set out in other guidance, that manufacturers ensure their drugs are listed electronically with the FDA for verification of covered outpatient drug status. The proposed NDRA also keeps the allowance to manufacturers to make and maintain “reasonable assumptions” it uses in calculating AMP and best price, but it adds the requirement that these assumptions must be made available to the Secretary upon request.  Finally, there is a new requirement that manufactures must notify CMS within 7 days of filing for bankruptcy.
  • Secretary Responsibilities Section – The proposed NDRA extends audit authority to all manufacturer information reported under the Medicaid statute at 1927(b)(3)(A). The prior version only provided for auditing authority of AMP and Best Price.
  • Penalty Provisions Section – The proposed NDRA adds new subparagraph (d) which expressly indicates the government is not limited to the remedies described in the agreement.
  • General Provisions – The proposed NDRA adds that in the event of a transfer in ownership of the manufacturers, the NDRA agreement and “any outstanding rebate liability” are automatically assigned to the new owner. The previous version only assigned the NDRA agreement itself and did not mention “outstanding rebate liability.”

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