Health Reform WK-EDGE Covered outpatient drug rule raises questions, CMS answers
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Wednesday, July 20, 2016

Covered outpatient drug rule raises questions, CMS answers

By Wolters Kluwer Editorial Staff

CMS provided some answers to frequently asked questions (FAQs) regarding the Covered Outpatient Drug Final Rule with Comment (Final rule) (81 FR 5170) as well as in the State Medicaid Director Letter (#16-001) issued in February 2016 (see CMS paves the way for bigger, better Medicaid drug rebates, February 1, 2016; Implementation of ACA pricing requirements for outpatient drugs, February 12, 2016). These answers are intended to provide guidance regarding the Social Security Act and other federal regulations. CMS has indicated that it may issue additional FAQs in the future (CMS FAQCMS-2345-FCJuly 6, 2016).

Pharmacy Reimbursement. CMS clarified that if a state is already making payment for prescription drugs under its state plan based on actual acquisition cost (AAC), it may continue to use that methodology. However, the state must submit a new state plan amendments (SPA) through the formal SPA process for review, if it changes its AAC model of reimbursement. Additionally, the state should review its currently approved professional dispensing fee (PDF) to determine if the PDF needs to be revised and an SPA needs to be submitted. The state does not have to submit a new SPA to provide assurance that its dispensing fee is reasonable. While CMS will not perform an annual review of PDF, it will review through the SPA process each state’s AAC reimbursement methodology and proposed professional dispensing fee to ensure they conform to the requirements of the Final rule.

In addition, AAC reimbursement requirements for covered outpatient drugs extend to retail community pharmacy providers where drugs are covered by Medicaid under states’ covered outpatient drug pharmacy benefit and are not reimbursed as part of a service. Physician-administered drugs are not required to meet AAC reimbursement requirements.

Federal Upper Limit (FUL). The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) FULs represent an aggregate upper limit, which gives states the flexibility to determine payment rates for individual drugs in accordance with the approved state plan. For drugs that have an FUL calculated, a state can use the calculated FUL price for reimbursement, or it can use another metric, such as an AAC, as long as that metric will allow the state to remain within the FUL aggregate. States were required to implement the limits set by the FULs in their reimbursement methodologies by April 1, 2016.

340B Drug pricing. The provisions of the Final rule related to pharmacy payments do not apply to Managed Care Organization (MCO) payment or reimbursement methodologies, including MCO providers participating in the 340B Drug Pricing Program. CMS clarified that 340B drug ceiling prices can be calculated by states based on the average manufacturer price (AMP) minus the unit rebate amount. Reimbursement to IHS and Tribal providers through the encounter rate is an option available to all states as a means to satisfying the requirement to reimburse such providers in accordance with the requirements at 42 CFR 447.518(a)(2), which specify that the state’s payment must be in accordance with the definition of AAC.

Reporting AMP. CMS recommends that manufacturers report the most recent prior month’s positive AMP. However, the actual calculated monthly AMP should be used to calculate the quarterly AMP. If the quarterly AMP is zero or negative, CMS recommends that manufacturers report the most recent positive AMP value.

Retail versus mail order. Although CMS declined in the Final rule to set a threshold for determining a mail order pharmacy, in order to accommodate changes in the pharmaceutical marketplace manufacturers may make reasonable assumptions that a pharmacy is a retail community pharmacy when the majority of the drugs are not dispensed through the mail. CMS believes the number of prescriptions dispensed would be a reasonable basis to determine whether the pharmacy dispenses "primarily through the mail."

Additional price clarifications. The FAQ included a number of other clarifications based on the Final rule. CMS specified that the lowest price available means it is the lowest price available to the best price eligible entity. The best price must include applicable discounts, rebates, or other transactions that adjust prices either directly or indirectly to the best price eligible entities.

The price of a drug would be blended for AMP when a manufacturer sells both an authorized generic (AG) and brand name drug under the same new drug application, even if the manufacturer makes a distinction between the two drugs through the National Drug Code directory.

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