CMS Finalizes Updates to the Medicaid Drug Rebate Agreement

On March 23, CMS finalized updates to the Medicaid National Drug Rebate Agreement (NDRA) for the first time in 27 years to incorporate legislative and regulatory changes that have occurred since the Agreement was first published.  As my colleague previously wrote, CMS proposed changes to the NDRA in November 2016—most, though not all, of the proposed changes were finalized.

On March 26, CMS issued guidance, available here, to manufacturers on completing, signing, and submitting the updated NDRA to CMS.  All drug manufacturers (currently there are more than 650) participating in the Medicaid Drug Rebate Program (MDRP) will need to sign and submit new NDRAs for each of their labeler codes by September 30, 2018 to remain in the MDRP.  Existing NDRAs will be terminated October 1, 2018.

Below are several highlights:

  • Manufacturer’s Responsibilities – Manufacturers must ensure that the NDRA is signed for all their covered outpatient drugs of all labeler codes of a manufacturer. CMS makes clear that all associated companies of the manufacturer that have covered outpatient drugs must enter into an NDRA with the Secretary.
    • New language in the NDRA, reaffirming existing policy, states that although CMS may calculate the unit rebate amount (URA) based on manufacturer reported pricing and communicates the URA to states, manufacturers are still responsible for doing their own URA calculation.
    • The NDRA maintains reference to a manufacturer’s ability to make “reasonable assumptions” in calculating AMP and Best Price, and also notes that an explanation of the assumptions must be made available to the Secretary upon request.
  • Secretary Responsibilities – The updated NDRA explicitly extends audit authority to all manufacturer information reported under the Medicaid statute at 1927(b)(3)(A) of the Act. The prior Agreement only referenced auditing authority of AMP and Best Price.
  • Updated definitions – The updated NDRA in large part replaces its definitions of terms (e.g. Average Manufacturer Price, Best Price, etc.) with references to statutory and regulatory definitions. CMS added back in several definitions for terms not defined except in the NDRA.  CMS replaced the term “Medicaid Utilization Information” with a new term “State Drug Utilization Data” that reflects Medicaid managed care utilization.
  • Reference to “Prescription Drugs Access and State Systems Issues”– CMS removed the reference to drug access requirements in § 1927 of the Act but noted the requirements continue to be binding on states, regardless of whether they are referenced in the NDRA.

CMS pointed out that when drug access issues arise, CMS will release guidance reminding states of drug access requirements.  In the past, CMS has issued State Releases, e.g., State Release #172 (HCV), State Release #38 (coverage of new multiple sclerosis drug), and State Release #51 (in response to proposed state legislation that would limit drug coverage for states seeking to leverage discounts from manufacturers).

  • CMS-367 – The updated NDRA includes CMS-367 which includes detailed information, for example, on electronic reports, data fields, and forms for supplemental data.

As noted above, all drug manufacturers participating in the MDRP will have to sign and submit an updated rebate agreement to the Secretary by September 30, 2018.  To review the NDRA and additional information, see here.

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