On January 21, 2016, the Centers for Medicare and Medicaid Services (CMS) published the final rule with comment period titled “Medicaid Program; Covered Outpatient Drugs.” In the final rule, CMS implements provisions of the Affordable Care Act (ACA) pertaining to Medicaid reimbursement for covered outpatient drugs (CODs) and revises key requirements related to the Medicaid Drug Rebate (MDR) program.

States may provide Medicaid coverage of prescribed drugs as an optional service under the Social Security Act (the Act); section 1927 of the Act governs payment for CODs and the MDR Program.

In the final rule CMS revises the Medicaid coverage and payment for CODs, including the following:

  • adding a new regulatory definition for the Average Manufacturer Price (AMP), which clarifies what constitutes a manufacturer’s “best price.” AMP is a key metric of the MDR program both for the determination of manufacturer rebates as well as pharmacy reimbursement for certain generic drugs that are subject to the Federal Upper Limit (FUL);
  • adding a new definition of AMP for inhalation, infusion, instilled, implanted, or injective drugs so that states can collect rebates on the injection and infusion drugs that account for growing Medicaid expenses;
  • updating the FUL formula for certain generic drugs as indicated under the ACA;
  • including an exception to the FUL calculation that allows for use of a higher multiplier than 175 percent to calculate the FUL based on acquisition costs for certain multiple source drugs;
  • aligning pharmacy reimbursement with the acquisition cost of drugs and the requirement that states pay a professional dispensing fee;
  • including regulatory guidance for drug manufacturers to properly calculate and report drug product and pricing information;
  • adding a requirement that states specify in the Medicaid state plan that the reimbursement methodology for pharmacies that purchase drugs through the Federal Supply Schedule and the 340B Drug Pricing Program is consistent with overall actual acquisition cost requirements;
  • revising the definition of “states” to include territories; and
  • extending rebates to CODs furnished to beneficiaries enrolled in Medicaid managed care organizations as provided in the ACA.

On January 22nd, CMS announced that it plans to publish the draft ACA FULs calculated in accordance with the Medicaid Covered Outpatient Drug final rule for two months beginning in January 2016. The final ACA FULs will be published in late March 2016 and will be effective on April 1, 2016 to coincide with the effective date of the final rule.

In the final rule, CMS requests comments on the definition and identification of line extension drugs, which are due no later than 5 p.m. on April 1, 2016 (60 days after the final rule is published in the Federal Register, which is expected on February 1, 2016).