CMS Weighs in on FDA Importation Rule

 On September 24, 2020 the U.S. Food and Drug Administration took two major steps to implement its Safe Importation Action Plan, including publishing a new Final Rule allowing the importation of certain prescription drugs from Canada, and a Final Guidance describing procedures to allow manufacturers to obtain National Drug Codes (NDC) for FDA-approved drugs originally intended to be marketed in a foreign country ( referred to as “multi-market approved products” or “MMA products”). Given that the rule has some immediate implications for both states and manufacturers that participate in the Medicaid program, on September 25th the Centers for Medicare & Medicaid Services (CMS) released two program notices intended to advise interested stakeholders on the price reporting implications of the final rule and final guidance, respectively. Because the two new importation pathways are distinct in terms of FDA approval status of an eligible prescription drug (with the final rule on importation from Canada applying to eligible prescription drugs which “meet the conditions” of an FDA-approved NDA or ANDA, but do not actually receive one, and the re-importation guidance apply to MMA products which have actually received an approved NDA), treatment for purposes of Medicaid is separate and distinct under these two new programs.

Impact of “Importation of Prescription Drugs” Final Rule (Section 804 of the FFDCA) on MDRP

  •  In general, the Medicaid Drug Rebate Program (MDRP) program only applies to “covered outpatient drugs,” a term defined in section 1927 of the Social Security Act to mean, in part, “a drug which may be dispensed only upon prescription … and which is approved for safety and effectiveness as a prescription drug under section 505 or 507 of the Federal Food, Drug, and Cosmetic Act, or which is approved under section 505(j) of such Act.“
  • In CMS’ guidance on the Final Rule, CMS takes the position that drugs imported under the new FDCA section 805 authority will not meet the definition of “covered outpatient drugs” and therefore be ineligible for Federal rebates and exempt from “best price” and AMP reporting.
  • In particular, CMS notes in the guidance that because section 1927 defines a “covered outpatient drug”, in part, as a drug approved under Section 505 of the FFDCA, and because drugs imported under the final rule are defined to only “meet the conditions” of an NDA or ANDA but not actually receive approved under Section 505, imported drugs will not be treated as “covered outpatient drugs” for purposes of the MDRP.
  • Note: The guidance does state that “such drugs may [still] be eligible for Medicaid federal financial participation (FFP) as prescribed drugs.” To qualify for FFP, states will need to ensure their approved state plan permits coverage  of prescribed drugs that are not “covered outpatient drugs”, or else apply for a State Plan Amendment to make this clarification.

Impact of “FDA Guidance on Importation of Certain Drugs under Section 801(d)(1)(B) of the FFDCA) on MDRP

  •  Unlike the Canadian importation program which to eligible prescription drugs as simply meeting the conditions of an FDA-approved NDA or ACDA, the final FDA guidance refers to MMA products as “an FDA-approved prescription drug or FDA-licensed biological product, or a combination product approved in a new drug application (NDA) or biologics license application (BLA). Because MMA products will be approved under section 505 of the FFDCA, such product will meet he definition of a “covered outpatient drug” for purpose of the MDRP. As a result, all applicable requirements under section 1927 of the Social Security Act will apply, including that a manufacture have entered into a rebate agreement and participate in quarterly price reporting, as a condition of coverage. All such reporting for MMA products will be under the MMA’s NDC.
  • For purposes of AMP and “best price” calculations, CMS generally views the MMA product as akin to an “authorized generic” of the non-MMA product. For AMP reporting this means that the manufacturer of an MMA product will be required to calculate separate AMPs for the MMA and non-MMA products. For purposes of the MDRP, the manufacturer will be responsible for reporting a separate AMP for the MMA product based only on sales of the product in the U.S. (from retail community pharmacies and wholesalers, as otherwise required under the MDRP).
  • The impact on “best price” will similarly mimic what occurs with “authorized generics.” CMS expects that the manufacturer’s determination of best price will be reflective of the lowest price available to any entity for such drug sold under the non-MMA products NDA or for the NDA of the MMA product for sales in the United States.


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