Editor’s Note: This month, we offer updates on two significant topics. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.

Table of Contents:

1. Important Updates in MDRP NOTICE Release No. 117
2. Inflation Reduction Act: CMS Guidance & the Medicare Inflation Rebates

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Important Updates on MDRP NOTICE Release No. 117

CMS manufacturer release number 117 (January 23, 2023) contains guidance on several important areas affecting pharmaceutical manufacturers participating in the Medicaid Drug Rebate Program (MDRP), Medicare Part B, and Medicare Part D. Highlights of this guidance are described below. 

Impact of Medicare Discarded Drug Refunds on Average Manufacturer Price (AMP) and Best Price

The Infrastructure, Investment, and Jobs Act (Section 90004) requires single-dose vial manufacturers to pay the Centers for Medicare & Medicaid Services (CMS) a refund based on the volume of discarded drugs reimbursed by Medicare Part B where the discarded amount exceeds 10% of the drug volume in the vial. The rebate program went into effect on January 1, 2023. Read our July update for more details on how the Medicare discarded drug rebate legislation is set to go into effect in 2023.

Release number 117 clarifies that CMS considers the refunds to be treated similarly to unsalable returned goods and thereby excludes the refunds from AMP (RCP and 5i AMP) and Best Price.

Inclusion of Territories’ Sales in Average Manufacturer Price and Best Price

Release number 117 reminds manufacturers that they must now include AMP and BP-eligible US territory sales (American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands) in their AMP and Best Price calculations. This regulation, which was initially addressed in the 2016 AMP Final Rule, went into effect beginning January 2023. Manufacturers’ AMP and BP calculation state filters must be revised to now include the US territory codes.  

Impact of the Inflation Reduction Act of 2022 on Average Manufacturer Price and Best Price

Medicare Part B Inflation Rebate

Section 11101 of the Inflation Reduction Act of 2022 (IRA)  provides for “inflation rebates” to be paid to CMS for Medicare Part B utilization on certain single-source drugs and biologicals where prices have increased faster than inflation. This provision of the IRA was effective as of January 1, 2023. Each quarter, CMS will report to each manufacturer the total number of units dispensed under Part B times the inflationary rebate amount based on any increase in ASP greater than the rate of inflation (CPI-u).

Release number 117 clarifies that the Medicare Part B inflation rebates will not be included in the Best Price determination nor the AMP calculation. 

Medicare Part D Inflation Rebate

Effective October 1, 2022, like the Medicare Part B inflation rebates described above, Section 11102 of the IRA requires manufacturers to pay inflation rebates for sales to Medicare beneficiaries under Part D where the prices (based on increases of AMP) increase at a rate greater than inflation (CPI-u). 

Release number 117 clarifies that, as with Part B above, Medicare Part D inflation rebates will not be included in the Best Price determination nor the AMP calculation.

Fair Market Price (MFP)

Beginning in 2026, CMS will select 10 Part D drugs to negotiate MFP with the respective drug manufacturers. The list of drugs selected for negotiation will be added to each year. In 2028, CMS will also begin negotiations for Fair Market Price for Part B drugs as well. These products will be selected from the 50 drugs with the highest Part D and Part B spending. The upper limits of the Fair Market Price will be determined by a combination of comparisons with ASP (for Part B drugs) and Non-Federal Manufacturer Price (NFAMP) for Part D drugs.

According to Release number 117, beginning January 1, 2026, the MFP for a selected drug will be utilized for the Best Price determination but not utilized for the final AMP determination. Thus, select manufacturers might start to see higher Medicaid rebate liabilities for those drugs on the negotiation list.

References

• Part B
• Part D
• MFP

Inflation Reduction Act: CMS Guidance & the Medicare Inflation Rebates

The Inflation Reduction Act has aimed to make major implementations to government programs, which will not only involve more leg work from manufacturers but also from CMS. With every new act, the concept – such as an “inflation rebate” – might be simple. If you exceed the specified CPI-U, you’ll pay the government more in rebates. Yes, simple in theory; however, healthcare regulations are anything but simple, especially when it comes to operationalization. To help understand how to operationalize the current statute, CMS continues to release updated Inflation Reduction Act guidance on the Part B and Part D Medicare inflationary rebates.

CMS provided initial IRA guidance including restatements of the original legislation, without soliciting comments, on the following Part B topics.

• Determination of Part B rebatable drugs, including price thresholds and certain exclusions
• The computation of beneficiary coinsurance
• The calculation of the inflation rebate amount, including specified amounts and relevant benchmarks
• Civil monetary penalties and enforcement
• Formulas for the calculation of excluded drugs, benchmarks, rebate amounts, multiple manufacturers for a single source drug, and billing unit identification 

For Part D: 

• The calculations and formulas for the Medicare inflation rebate amount, including drug approval timing, AMP, benchmarks, line extensions, and unit determination 

CMS will digest comments and considerations submitted by manufacturers on the following topics. 

For both CMS and manufacturers determination of consistent and reliable access to eligible Part B and Part D units is still under consideration. In some cases, this is a data responsibility for CMS alone, and they are looking for ideas from manufacturers; whereas others may involve additional administrative responsibilities and GP cal calculation inclusion/exclusion considerations for manufacturers. 

For both programs, comment solicitation centered around 340B units, while Part B also considers dual enrollees and Medicare Advantage programs. In addition, Part D focused on how and/or if to utilize PDE data to determine eligible units and as an AMP unit crosswalk, and in the absence of an MDRP agreement, whether manufacturers should adopt additional unit reporting requirements for CMS to calculate the eligible units for the inflationary rebates.

CMS is also soliciting comments regarding the rebate treatment considerations for supply chain disruptions and FDA-listed drug shortages. Inflationary rebates are eligible to be reduced or waived given a disruption or shortage, but for how long, how much, how to treat products that qualify for both considerations and how can these reductions/waivers facilitate appropriate supply generation – without facilitating unjust enrichment – are all major outstanding CMS processes. 

New reforms and regulations pose complications for all sectors of healthcare. Staying up-to-date on the most recent information is important for manufacturers to be prepared to handle the dynamic landscape. However, taking advantage of the open comment periods by CMS is essential to help ensure these new programs have the appropriate visibility on all of the potential considerations manufacturers are now required to digest and respond to. As much as this guidance might provide clarity in some areas, CMS actively encourages manufacturers to provide feedback and comments, especially where related to process implementation uncertainties – such as appropriate data sources, calculation methodologies, eligibility determination, and rebate inclusion/exclusion rules.  By providing the necessary feedback to CMS, manufacturers are thinking through how to strike a balance between a clear shift towards greater federal cost control and the necessity to facilitate the high demand that society and patients place on the pharmaceutical industry for continued development of health innovation and treatments [at reduced costs]. 

The open comment period is closed for the February 9 releases, but CMS recently published additional guidance on the MFP on March 15. A focus of GP experts at IntegriChain is examining how the coverage gap redesign will impact upcoming Part D bids and who will be responsible for picking up the bill when a manufacturer is “phase-in” eligible.

IntegriChain is actively engaging with the industry to unpack and ensure the appropriate application of the IRA for manufacturers, so please do not hesitate to reach out if you have any questions regarding CMS’ manufacturer releases or any other sub-regulatory guidance provided. 

References

• Part B
• Part D
• MFP

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Tags: Inflation Reduction, Medicare Inflationary Rebates