CMS releases final rule for covered outpatient drugs
In January 2016, the Centers for Medicare & Medicaid Services (CMS) released its Covered Outpatient Drugs final rule, which addresses key areas of Medicaid drug reimbursement and changes made to the Medicaid Drug Rebate Program by the Affordable Care Act.
This rule assists states and the federal government in managing drug costs; establishes the long-term framework for implementation of the Medicaid drug-rebate program; and creates a more fair reimbursement system for Medicaid programs and pharmacies.
Managing drug costs
The final rule:
• Creates a regulatory definition for Average Manufacturer Price (AMP), which is the Medicaid drug-rebate program’s key metric for determining both manufacturer rebates and pharmacy reimbursement for certain generic drugs that are subject to the Federal Upper Limit (FUL).
• Establishes a definition of AMP for inhalation, infusion, instilled, implanted, or injectable drugs, so states can collect rebates on more expensive infused and injected drugs, which are an increasing expense to the Medicaid program.
• Updates the FUL formula on payment for certain generic drugs, creating an incentive for pharmacies to use generic drugs, since pharmacy costs for these drugs will be regularly updated.
• Implements the Affordable Care Act provision that extended rebates to covered outpatient drugs provided to beneficiaries enrolled in Medicaid managed-care organizations.
• Revises the definition of “states” to include U.S. territories (Puerto Rico, Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands) in the rebate program, so that territories can also achieve savings in their drug expenditures.
Medicaid Drug Rebate Program
The final rule clarifies many of the changes made to the Medicaid Drug Rebate Program by the Affordable Care Act. Specifically, the final rule:
• Clarifies the definition of what is a manufacturer’s “best price” and aligns it, where applicable, with the definition of AMP.
• Clarifies the definitions of other key terms used in the determination of AMP, such as “retail community pharmacy” and “wholesaler,” and establishes regulatory definitions for “pediatric indication” and “clotting factor.”