[Federal Register Volume 75, Number 219 (Monday, November 15, 2010)]
[Rules and Regulations]
[Pages 69591-69597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28649]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 447
[CMS-2238-F2]
RIN 0938-AP67
Medicaid Program; Withdrawal of Determination of Average
Manufacturer Price, Multiple Source Drug Definition, and Upper Limits
for Multiple Source Drugs
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule withdraws two provisions from the ``Medicaid
Program; Prescription Drugs'' final rule (referred to hereafter as
``AMP final rule'') published in the July 17, 2007 Federal Register.
The provisions we are withdrawing are as follows: The determination of
average manufacturer price, and the Federal upper limits for multiple
source drugs. We are also withdrawing the definition of ``multiple
source drug'' as it was revised in the ``Medicaid Program; Multiple
Source Drug Definition'' final rule published in the October 7, 2008
Federal Register.
DATES: Effective Date: These regulations are effective on December 15,
2010.
FOR FURTHER INFORMATION CONTACT: Wendy Tuttle, (410) 786-8690.
SUPPLEMENTARY INFORMATION:
I. Background
On September 3, 2010, we published a proposed rule (75 FR 54073) in
the Federal Register to withdraw two provisions from the ``Medicaid
Program; Prescription Drugs'' final rule published in the July 17, 2007
Federal Register (72 FR 39142) (referred to hereafter as ``AMP final
rule''). The provisions we proposed to withdraw are as follows:
Section 447.504 ``Determination of AMP.''
Section 447.514 ``Upper limits for multiple source
drugs.''
We also proposed to withdraw the definition of ``multiple source drug''
as it was revised in the ``Medicaid Program; Multiple Source Drug
Definition'' final rule published in the October 7, 2008 Federal
Register (73 FR 58491).
The AMP final rule, published in the July 17, 2007 Federal Register
(72 FR 39142), implemented sections 6001(a) through (d), 6002, and 6003
of the Deficit Reduction Act of 2005 (Pub. L. 109-171, enacted on
February 8, 2006) (DRA) as well as codified parts of
[[Page 69592]]
section 1927 of the Social Security Act (the Act) that pertain to
requirements for drug manufacturers' calculation and reporting of AMP
and best price, and revised existing regulations that set FULs for
certain covered outpatient drugs. The AMP final rule also implemented
section 1903(i)(10) of the Act, as revised by the DRA with regard to
the denial of FFP in expenditures for certain physician administered
drugs. Finally, the AMP final rule addressed other provisions of the
Medicaid Drug Rebate Program.
On November 7, 2007, a complaint was filed with the United States
District Court for the District of Columbia by the National Association
of Chain Drug Stores (NACDS) and the National Community Pharmacists
Association (NCPA) (collectively, the Plaintiffs), which alleged that
the AMP final rule unlawfully changed the methodology by which
pharmacies are reimbursed for dispensing prescription drugs to Medicaid
patients. On December 19, 2007, the Court issued a preliminary
injunction which prohibits CMS from ``[u]ndertaking any and all action
to implement the AMP Rule to the extent such action affects Medicaid
reimbursement rates for retail pharmacies under the Medicaid program,''
and, subject to certain exceptions, prohibits CMS from ``[p]osting any
AMP data on a public Web site or otherwise disclosing any AMP data to
any individual or entities.'' The preliminary injunction, however, does
not enjoin implementation of the AMP final rule as it relates to the
calculation of rebates for the Medicaid rebate program, or the
disclosure of AMP data to States as necessary for the administration of
that program.
In response to this litigation, CMS published an interim final rule
with comment period on March 14, 2008, followed by a final rule on
October 7, 2008 to revise the definition of multiple source drug to
better conform to the statutory definition of ``multiple source drug''
found in section 1927(k)(7) of the Act, and to inform the public of the
procedures and practices the Agency would follow to ensure compliance
with those statutory provisions. The Plaintiffs, however, amended their
filing with the Court contending that the revised multiple source drug
definition and implementation procedures remained inconsistent with the
statute.
On July 15, 2008, the Medicare Improvements for Patients and
Providers Act of 2008 (Pub. L. 110-275) (MIPPA) was enacted. Section
203 of MIPPA prohibited HHS from imposing FULs prior to October 1, 2009
for multiple source drugs under Sec. 447.514(b) as published in the
July 17, 2007 AMP final rule. In accordance with MIPPA, CMS resumed
publishing FULs for multiple source drugs using the methodology in
Sec. 447.332 as in effect on December 31, 2006. The methodology in
Sec. 447.332 applied through September 30, 2009.
As a result of the lawsuit, and subsequent preliminary injunction,
CMS has been enjoined from implementing the AMP-based FULs that the DRA
had required. However, manufacturers were not affected by the
injunction and continue to calculate and report AMP for the purpose of
Medicaid rebates, in accordance with the determination of AMP as
specified in the AMP final rule.
Section 2503(a) of the Patient Protection and Affordable Care Act
(Affordable Care Act) (Pub. L. 111-148, enacted on March 23, 2010),
amends section 1927(e) of the Act by revising the Federal upper
reimbursement limit to be no less than 175 percent of the weighted
average (determined on the basis of utilization) of the most recently
reported monthly AMPs for pharmaceutically and therapeutically
equivalent multiple source drug products that are available for
purchase by retail community pharmacies on a nationwide basis. It also
amends section 1927(k) of the Act by revising the definitions of AMP
and multiple source drug. In addition, it adds to section 1927(k) of
the Act definitions of the terms ``retail community pharmacy'' and
``wholesaler,'' and eliminates the term ``retail pharmacy class of
trade.'' The amendments made by section 2503(a) of the Affordable Care
Act, as amended by section 1101(c) of the Health Care and Education
Reconciliation Act (Pub. L. 111-152, enacted on March 30, 2010) and
section 202 of the FAA Air Transportation Modernization and Safety
Improvement Act (Pub. L. 111-226, enacted on August 10, 2010), were
effective October 1, 2010.
II. Provisions of the Proposed Regulations
In the proposed rule published on September 3, 2010, we proposed
the following revisions to the AMP final rule published on July 17,
2007:
Section 447.504, ``Determination of AMP,'' should be
withdrawn in its entirety;
Section 447.514, ``Upper limits for multiple source
drugs,'' should be withdrawn in its entirety; and
The definition of ``multiple source drug'' in Sec.
447.502, ``Definitions'' (as it was amended by the Multiple Source Drug
rule published on October 7, 2008), should be withdrawn.
We proposed that the terms ``average manufacturer price'' and
``multiple source drug'' be defined in accordance with section 1927 of
the Act, including changes made by section 2503 of the Affordable Care
Act, as amended by the Health Care and Education Reconciliation Act,
and the FAA Air Transportation Modernization and Safety Improvement
Act. In particular, drug manufacturers would be advised to base their
AMP calculations on the definitions set forth in section 1927 of the
Act, instead of on the AMP and AMP-related definitions provided in
existing regulations and guidance.
Additionally, we proposed to revise three sections within the AMP
final rule that make reference to the sections being proposed for
withdrawal. Section 447.510 ``Requirements for manufacturers,'' makes
reference to Sec. 447.504 ``Determination of AMP,'' and Sec. 447.512
``Drugs: Aggregate upper limits for payment,'' and Sec. 447.518
``State plan requirements,'' make reference to Sec. 447.514 ``Upper
limits for multiple source drugs. We proposed conforming regulatory
amendments to those sections.
III. Analysis of and Responses to Public Comments
We received 16 comments in response to the September 3, 2010
proposed rule. We received comments from drug manufacturers, membership
organizations, law firms, pharmacy benefit managers, a consulting firm,
and a not-for-profit organization. A summary of the issues and our
responses follow:
General Comments
Comment: Many commenters expressed general support for the
provisions of the proposed rule. One commenter commended the agency's
withdrawal proposal and commitment to develop regulations that will
implement provisions of section 2503 of the Affordable Care Act.
Another commenter stated that they believe it is appropriate that CMS
withdraw these sections of the regulation as Congress recently amended
several sections of section 1927 in the Affordable Care Act. One
commenter applauded the Agency for moving forward with withdrawing the
provisions of the AMP final rule as well as the Multiple Source Drug
rule.
Response: We appreciate the comments in support of the withdrawal
of the determination of AMP and the upper limits for multiple source
drugs provisions as well as the withdrawal of the definition of
multiple source drug. CMS is committed to developing further
regulations that will provide the necessary guidance to all parties
[[Page 69593]]
impacted by the revisions made to the Medicaid Drug Rebate Program by
the Affordable Care Act.
Definition of Bona fide Service Fees
Comment: We received several comments regarding the definition of
bona fide service fees. A few commenters indicated the need for CMS to
ensure that when it promulgates new regulations to implement the
changes made by the Affordable Care Act, it seeks stakeholder input and
provides further clarity on the treatment of bona fide service fees for
the purposes of AMP reporting. Two commenters expressed concern that in
the proposed rule, CMS did not propose to withdraw the definition of
bona fide service fee. These commenters recommended that CMS also
withdraw the definition of bona fide service fee to be consistent with
the definition of bona fide service fee enacted by the Affordable Care
Act. Other commenters recommended that despite the change the
Affordable Care Act makes to the definition of bona fide service fee,
the existing definition should remain intact and unchanged. One
commenter noted that the language in the Affordable Care Act
presupposes a background definition of bona fide service fees that
would be applied to the named fees and any others paid by a
manufacturer. Another commenter recommended that CMS provide
clarification on how manufacturers should evaluate the language in the
Affordable Care Act to be consistent with the historical definition.
Response: We appreciate the comments pertaining to bona fide
service fees. At this time, we believe it would be inappropriate to
withdraw the definition of bona fide service fee from the AMP final
rule because the definition of bona fide service fee that is in Sec.
447.502 ``Definitions'' was intended to apply to both AMP and best
price calculations. While the Determination of AMP (Sec. 447.504) is
being withdrawn, at this time, no change is being made to the
Determination of Best Price (Sec. 447.505). Therefore, we see no need
to withdraw the definition of bona fide service fees. We do note,
however, that the definition of bona fide service fee at Sec. 447.502
should not be used in the calculation of AMP. Issues related to the
Affordable Care Act's treatment of bona fide service fees will be
addressed in future rulemaking.
Definition of Multiple Source Drug
Comment: We received a few comments on the definition of ``multiple
source drug.'' One commenter indicated that an accurate definition of
``multiple source drug'' is critical to the implementation of the
provisions of the Affordable Care Act. Two commenters stated that CMS
should allow for public review and comment on a definition for what
constitutes a ``multiple source drug'' that is available for purchase
by retail community pharmacies on a nationwide basis.
Response: CMS continues to believe that the definition of
``multiple source drug'' in Sec. 447.502 should be withdrawn in light
of changes to the relevant statutory language in the Affordable Care
Act. In the absence of Federal guidance or regulation, manufacturers
should rely on section 1927(k)(7) of the Act, as amended by the
Affordable Care Act, for the definition of ``multiple source drug.''
Withdrawal of Determination of AMP (Sec. 447.504)
Comment: We received one comment indicating support for the
position that AMP continue to be calculated using the current
regulation (42 CFR 447.504(g)(1)). This commenter indicated that if CMS
were to change the definition of AMP and therefore require
manufacturers to purchase data from wholesalers in order to calculate
AMP, it would be a substantial burden and expense and could result in
less accurate data.
Response: CMS interpreted this comment to mean the commenter
disagreed with the withdrawal of Sec. 447.504 in its entirety since
the commenter specifically mentioned Sec. 447.504(g)(1) in support of
continuing to calculate AMP using the current regulation. We appreciate
this comment, but in light of the changes in relevant statutory
language, CMS continues to believe that withdrawing Sec. 447.504 in
its entirety is the appropriate action at this time.
Monthly AMP Calculations
Comment: One commenter suggested that CMS modify the quarterly AMP
calculation requirement under Sec. 447.504(i)(2) by eliminating the
requirement that manufacturers report monthly AMP for single source
drugs.
Response: In light of the changes in relevant statutory language
made by the Affordable Care Act, we continue to believe it is necessary
to withdraw all of Sec. 447.504 at this time. In addition, we are not
making further changes to the monthly AMP reporting requirements in
this final rule.
Quarterly AMP Calculations
Comment: One commenter requested that CMS confirm the methodology
for calculating quarterly AMPs stating that the proposed rule would
delete the current provision (42 CFR Sec. 447.504(i)(2)) that provides
that the ``[q]uarterly AMP is calculated as a weighted average of the
monthly AMPs in the quarter.'' This commenter requested clarification
on whether manufacturers should continue to calculate quarterly AMPs as
a function of the monthly AMPs or whether a separate calculated
quarterly AMP would be permitted or required.
Response: CMS recognizes that with the deletion of Sec. 447.504
Determination of AMP, manufacturers will have questions regarding the
calculation of AMP, including monthly and quarterly AMP calculations.
Manufacturers should rely on the statutory language found at section
1927(k)(1) of the Act, as amended by the Affordable Care Act, and
regulations (except those regulations or portions thereof have been
withdrawn).
Customary Prompt Pay Discounts
Comment: We received a few comments regarding the definition of
``customary prompt pay discounts.'' One commenter noted that the
removal of Sec. 447.504 would remove the definition of ``customary
prompt pay discounts'' and would therefore create ambiguity as to
whether a discount is customary. The commenter suggested that the
definition of ``customary prompt pay discounts'' should remain in the
regulation. Another commenter requested that CMS confirm that when it
issues future regulations, it does not intend to change the definition
of ``customary prompt pay discounts,'' which the proposed rule would
withdraw.
Response: Given the amendments made by the Affordable Care Act, we
continue to believe that withdrawing Sec. 447.504 in its entirety is
the appropriate action at this time. We do expect to address this issue
in future rulemaking. Until such time as those rules are issued and
finalized, manufacturers should operate consistent with the Medicaid
drug rebate statute, and regulations (except those regulations or
portions thereof that have been withdrawn).
Reasonable Assumptions
Comment: We received one comment asking if the proposed regulation
was designed to change the reasonable assumption option provided to
manufacturers in the AMP final rule. The commenter went on to request
that CMS confirm that manufacturers' reasonable assumptions may include
assumptions based on the current AMP regulations to the extent that
those
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regulations do not appear inconsistent with the statutory changes.
Response: We wish to remind manufacturers that they may not rely on
regulatory provisions and language that have been withdrawn. Until a
subsequent rule is issued and finalized, manufacturers should rely on
section 1927 of the Act, as amended by the Affordable Care Act, and
regulations (except those regulations or portions thereof that have
been withdrawn).
Base Date AMP Recalculation
Comment: A few commenters noted that CMS revised the language in
the regulatory text of Sec. 447.510(c), pertaining to a manufacturer's
recalculation of the base date AMP. One commenter suggested that CMS
should take this opportunity to amend Sec. 447.510(c)(1) by removing
the notation ``[OFR: Insert publication date of the final rule]'' and
specify when these recalculations will be permitted in light of the
evolving definition of AMP. Another commenter thought that the revision
implied that manufacturers could submit revised base date AMPs on a
product-by-product basis. A third commenter suggested that
manufacturers be allowed a one-time restatement of AMP in order to have
a more accurate comparison between base AMP and the current AMP.
Response: As indicated in the proposed rule, CMS proposed
conforming regulatory amendments to Sec. Sec. 447.510, 447.512, and
447.518 as these sections made specific references to the provisions
being proposed for withdrawal. It would have been inappropriate to keep
these references to Sec. Sec. 447.504 and 447.514 since they would no
longer exist in the regulatory text. By changing the references to
section 1927 of the Act, CMS did not address whether manufacturers
could restate base date AMPs. The reference to section 1927 of the Act
merely replaces the references to the withdrawn regulatory text. As to
the comment that CMS take this opportunity to replace the notation with
the date when the recalculations would be permitted, while we
appreciate the comment, taking such action would be outside the scope
of the proposed rule.
Lagged Price Concessions
Comment: We received one comment expressing confusion over whether
the proposed rule, if finalized, would delete the regulatory language
on the AMP rolling average methodology for lagged price concessions
that currently appears as 42 CFR 447.510(d)(2). Specifically, this
commenter questioned whether the proposed rule would delete all of
current 42 CFR 447.510(d)(2) and replace it with a single sentence, or
whether it is just the first sentence being replaced and the rolling
average provision would remain intact. The commenter recommended that
CMS retain the current rolling average provision in the regulations as
this approach has worked well to date and is consistent with the
Affordable Care Act smoothing process. The commenter further stated
that during the first year under the new AMP definition, manufacturers
would like confirmation from CMS that they may choose whether to blend
pre-ACA lagged price concessions with post-ACA lagged price
concessions.
Response: We appreciate the commenter's concern about the
methodology previously described in Sec. 447.510(d)(2) regarding the
calculation of monthly AMP. We have decided to revise the first
sentence of this paragraph as stated in the proposed rule and delete
the remaining sentences. We will address this issue in future
rulemaking.
Regulatory Impact Statement
Comment: We received one comment regarding CMS' determination that
this is not an economically significant rule. The commenter expressed
concern that CMS indicated that the proposed rule will not have a
significant impact on a substantial number of small entities. The
commenter went on to share their view that withdrawing parts of the
existing regulation will undoubtedly help maintain the economic
viability of some community retail pharmacies, but remained concerned
regarding CMS' implementation of the Affordable Care Act.
Response: This final rule withdraws regulatory provisions that have
been superseded by the Affordable Care Act. In light of the new
provisions established by the Affordable Care Act, we do not expect
that this final rule will have any significant economic effects on
small business entities. Therefore, CMS continues to believe this is
not an economically significant rule.
Issues Not Addressed in the Proposed Rule
We received several comments on issues that were not addressed in
the proposed rule. Many of the comments were in regards to the
implementation of the Affordable Care Act. A summary of these comments
is provided below. However, CMS does wish to clarify that while we
appreciate the comments provided and recognize that the changes made by
the Affordable Care Act are far reaching, the comments that follow are
outside the scope of this proposed rule. CMS plans on issuing a
proposed regulation addressing the Affordable Care Act provisions.
Effective Date of Affordable Care Act Changes to AMP and FULs
Comment: One commenter indicated that manufacturers will have to
implement changes to AMP calculations beginning in October 2011 rather
than October 2010.
Response: We wish to remind all interested parties, as noted in the
``Background'' section of this final rule, that the new statutory
definition of AMP went into effect as of October 1, 2010. Manufacturers
should rely on the statute, as revised by the Affordable Care Act, in
calculating AMP.
Implementation of New AMP Definition
Comment: We received a number of comments regarding the changes the
Affordable Care Act makes to the definition and determination of AMP.
Several commenters expressed concern about the implementation of the
new Affordable Care Act definition when CMS has yet to complete the
rulemaking process. These commenters requested that CMS delay the
implementation of the new requirements until such time as further
guidance is provided. One commenter encouraged CMS to provide sub-
regulatory guidance prior to the issuance of regulations, while another
commenter indicated that CMS should not issue sub-regulatory guidance
as it could result in ongoing revisions to AMP calculations. This
commenter stated that manufacturers should be provided the ability to
make the necessary reasonable assumptions for AMP calculations until
official regulations are published. Some commenters provided specific
recommendations as to how CMS should define AMP, while other commenters
encouraged CMS to seek stakeholder input as to how to interpret the
statute regarding which entities are to be included and excluded from
the calculation of AMP, as well as the planned implementation schedule.
One commenter specifically requested that CMS ensure that PBM rebates
be excluded from AMP. Another commenter requested that a smoothing
process be implemented for discounts to minimize the potential
fluctuations in AMP from month to month. One commenter stated that AMP
calculations should be consistent with both Average Sales Price (ASP)
and Non-Federal Average Manufacturer Price (Non-FAMP) for the VA.
Response: While we appreciate these comments and suggestions, they
raise
[[Page 69595]]
issues that we believe are outside the scope of the proposed rule and
will not be addressed in this final rule. CMS does expect to issue
proposed regulations addressing the Affordable Care Act provisions.
Federal Upper Limit (FULs)
Comment: We received comments regarding the implementation of the
Federal Upper Limit (FUL) requirements. Several commenters encouraged
CMS to delay the implementation of the new FULs requirement for
multiple source drugs until a more precise definition of AMP is
available. One commenter specifically recommended at least a 60-day
transition between the issuance of a final regulation to implement the
Affordable Care Act and the effective date of such regulation. A few
commenters wanted to ensure that CMS would provide clear guidance that
a FUL will be calculated when three or more therapeutically and
pharmaceutically equivalent multiple source drug products are available
for purchase by retail community pharmacies on a nationwide basis.
Several commenters recommended that CMS develop a methodology to
determine when it would be appropriate to exceed 175 percent of AMP
when calculating a FUL. One commenter suggested that CMS develop a
formal mechanism to appeal FULs in certain cases. A few commenters
suggested that CMS establish a process to permit more frequent changes
in a FUL or the suspension of a FUL, if it were warranted.
Response: This proposed rule does not address the implementation of
the Affordable Care Act; and while we appreciate these comments, they
raise issues that are outside the scope of the proposed rule and will
not be addressed in this final rule. CMS does intend to issue a
proposed regulation addressing the Affordable Care Act provisions.
Inhalation, Infusion, Instilled, Implanted and Injectable Drugs
Comment: CMS received a number of comments regarding the statutory
amendment passed by Congress in August 2010 as part of Public Law 111-
226 that addressed inhalation, infusion, instilled, implanted and
injectable drugs that are not generally dispensed through retail
community pharmacies. A few commenters stated that the Congressional
intent of this amendment was to provide CMS with the authority to
continue collecting rebates for these drugs that are not generally
dispensed through a retail community pharmacy and was not intended to
impact reimbursement to retail community pharmacies. Several commenters
provided CMS with suggestions on how to define the phrase ``not
generally dispensed.'' Others commented that manufacturers need
interpretive guidance in determining which of these drugs are not
generally dispensed by a retail community pharmacy. One commenter
suggested that CMS publish a list of drugs that meet the statutory
definition of inhalation, infusion, instilled, implanted and injectable
drugs. A few commenters indicated that CMS should exercise its
discretionary authority to increase the FUL of these drugs, while
others commented that a FUL should not be calculated for these drugs
under any circumstances.
Response: While CMS appreciates these comments, the topic of
inhalation, infusion, instilled, implanted and injectable drugs is
beyond the scope of the proposed rule and will not be addressed in this
final rule. CMS plans to issue a proposed regulation addressing these
provisions of the Affordable Care Act.
340B Drug Prices
Comment: CMS received several comments regarding the impact of the
AMP calculation on the discounted drug prices that 340B covered
entities receive. One commenter urged that CMS coordinate with the
Health Resources and Services Administration (HRSA) with respect to the
application of the new AMP definition to 340B price calculations and to
ensure that the new definition of AMP is used to calculate 340B ceiling
prices as HRSA uses AMP data to calculate the 340B drug prices. CMS
received a few comments in regard to the relationship between 340B drug
prices and the amendment to the statute regarding inhalation, infusion,
instilled, implanted and injectable drugs. One commenter stated that
calculating AMP for these types of drugs based solely on retail
community pharmacies' prices would have had a devastating impact on
340B discount prices of Factor Replacement Product (FRP) because only
about 1 percent to 2 percent of FRP is distributed through retail
community pharmacies. Another commenter stated that calculating AMP by
taking into account discounts and rebates provided to non-retail
pharmacies is important for 340B entities because the use of retail
pricing alone would distort 340B price calculations.
Response: While we appreciate these comments, the topic of 340B
drug pricing is outside the scope of the proposed rule and therefore
will not be addressed in this final rule.
Adequate Documentation
Comment: CMS received several comments regarding the use of the
phrase ``adequate documentation'' in Sec. 447.504(g)(1), which states
that sales to wholesalers are to be included in the calculation of AMP
unless the manufacturer has adequate documentation showing the drugs
are subsequently resold to an excluded entity as specified in paragraph
(h). A few commenters recommended that CMS reverse this provision and
instead provide guidance to manufacturers that sales and discounts
should be excluded from AMP calculations unless the manufacturers have
adequate documentation to show that the sales and discounts fit the
statute's definition of AMP. Other commenters expressed support for
retaining the current language. One commenter claimed that this
language has worked well to date in promoting stability of AMP
calculations and is not inconsistent with new statutory provisions.
This commenter further stated that this language poses no risk of
creating adverse consequences for pharmacies that serve Medicaid
beneficiaries and would be unlikely to decrease FULs inappropriately.
Another commenter stated that the Affordable Care Act seems to remain
silent on this issue and recommends that the current language remain in
effect in future regulations. One commenter supports the current
language as a better approach than requiring manufacturers to generate
or purchase data necessary to calculate an AMP that includes wholesaler
sales, only if resale to a retail community pharmacy is documented.
Response: While we appreciate these comments, they are outside the
scope of the proposed rule and therefore will not be addressed in this
final rule, except to emphasize that Sec. 447.504, including paragraph
(g)(1), is being withdrawn by this final rule.
Authorized Generics
Comment: We received a few comments requesting CMS provide
clarification regarding manufacturers with authorized generics. Two
commenters requested that CMS confirm that transactions related to the
transfer of authorized generics to secondary manufacturers that resell
to community pharmacies are to be treated as wholesalers and therefore
should be included in AMP. Another commenter stated that with the
broader definition of wholesaler it is unclear whether authorized
generics manufacturers would be considered in AMP.
Response: These comments are outside the scope of the proposed rule
[[Page 69596]]
and will not be addressed in this final rule. However, CMS does wish to
clarify that while the definition of ``wholesaler'' as defined in Sec.
447.504 of the AMP final rule will no longer exist, the Affordable Care
Act does provide a new definition of wholesaler. Therefore, in the
absence of regulatory guidance, manufacturers should refer to the
statute, as revised by the Affordable Care Act. CMS does intend to
issue a proposed regulation addressing the changes made by the
Affordable Care Act.
Definitions of Retail Community Pharmacy and Wholesaler
Comment: We received comments regarding definitions that were
revised or introduced in the Affordable Care Act. One commenter noted
that an accurate definition of ``retail community pharmacy'' is
critical to the implementation of the provisions within the Affordable
Care Act. Another commenter recommended that CMS provide a table
providing a specific breakdown of what is considered to be a retail
community pharmacy. A few commenters indicated that CMS should revise
the definition of ``wholesaler'' to be consistent with the new
statutory definition of wholesaler. One commenter stated that an
accurate definition of ``wholesaler'' is critical to the implementation
of these new provisions.
Response: We appreciate these comments; however, they are outside
the scope of the proposed rule and will not be addressed in this final
rule. In the absence of regulatory guidance, interested parties should
rely on the statute, as revised by the Affordable Care Act. CMS intends
to issue a proposed regulation addressing the changes made by the
Affordable Care Act.
Other Comments
Comment: We received comments requesting guidance on Line Extension
Drugs, Medicaid Managed Care Organizations (MCOs), and State invoices
to manufacturers. One commenter requested guidance on the
implementation of the new requirements for calculating rebates for line
extension drugs. This commenter noted that Release 81 provided guidance
on how to perform the calculation and price comparison but it did not
provide a useful interpretation of the term. Another commenter
requested guidance regarding the implementation of the new statutory
requirement, which requires that rebates to be collected on
prescriptions paid by Medicaid MCOs. The commenter stated that
companies will need data from CMS on the number of Medicaid
beneficiaries enrolled in MCOs with pharmacy benefits to be able to
verify prescription data. Additionally, this commenter had concerns
regarding MCOs and 340B drugs and stated that the new statutory
requirements for rebates on prescriptions paid by Medicaid MCOs creates
the likelihood that double discounts could be imposed on manufacturers
unless CMS makes it clear that such utilization may not be reported to
Medicaid. One commenter raised concerns with a manufacturer's
obligation to pay rebates on claims that are paid primarily by a non-
Medicaid payor, where Medicaid is a secondary payor. This commenter was
particularly interested in having CMS clarify that States may not
invoice a manufacturer for more than 100 percent of the amount paid by
the State associated with a drug claim.
Response: While we appreciate the comments, they are outside the
scope of the proposed rule and will not be addressed in this final
rule. However, CMS does wish to remind all interested parties that in
the absence of regulatory guidance, they should refer to the statute as
amended by the Affordable Care Act.
Retail Price Survey and Publication of AMP Data
Comment: We received one comment regarding the retail price survey
which indicated that it would be important for CMS to only publish
weighted average Retail Price Survey (RPS) data for multiple source
drugs subject to the FUL and only include reimbursement paid to
community retail pharmacies. Another commenter recommended that CMS
review several months of the weighted AMP data before making it public.
Response: The issues raised in these comments are outside the scope
of the proposed rule and will not be addressed in this final rule.
IV. Provisions of the Final Regulations
This final rule incorporates the provisions of the September 3,
2010 proposed rule.
V. Collection of Information Requirements
This document does not impose any new reporting, recordkeeping, or
disclosure requirements. The burden associated with the existing
reporting requirements contained in Sec. 447.510(a) is currently
approved under OCN: 0938-0578.
VI. Regulatory Impact Statement
We have examined the impact of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive
Order 13132 on Federalism (August 4, 1999) and the Congressional Review
Act (5 U.S.C. 804(2)).
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This
regulatory action withdraws those regulatory provisions that have been
superseded by the Affordable Care Act. In light of the new provisions
established by the Affordable Care Act, we do not expect that this
final rule will have any significant economic effects. Therefore, this
final rule is not considered an economically significant rule.
The RFA requires agencies to analyze options for regulatory relief
of small businesses, if a rule has a significant impact on a
substantial number of small entities. For purposes of the RFA, small
entities include small businesses, nonprofit organizations, and small
governmental jurisdictions. Most hospitals and most other providers and
suppliers are small entities, either by nonprofit status or by having
revenues of $7.0 million to $34.5 million in any 1 year. Individuals
and States are not included in the definition of a small entity. We are
not preparing an analysis for the RFA because the Secretary has
determined that this final rule will not have a significant economic
impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area for Medicare payment regulations and has fewer than
100 beds. We are not preparing an analysis for section 1102(b) of the
Act because the Secretary has determined that this final rule will not
have a significant impact on the
[[Page 69597]]
operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2010, that
threshold is approximately $135 million. This rule will not have
consequential effect on State, local, or tribal governments or on the
private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. Since this regulation does not impose any costs on State
or local governments, the requirements of Executive Order 13132 are not
applicable.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 447
Accounting, Administrative practice and procedure, Drugs, Grant
programs--health, Health facilities, Health professions, Medicaid,
Reporting and recordkeeping requirements, Rural areas.
0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 447--PAYMENT FOR SERVICES
0
1. The authority citation for part 447 continues to read as follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
Subpart I--Payment for Drugs
0
2. Section 447.502 is amended by removing the definition of ``multiple
source drug.''
Sec. 447.504 [Removed and reserved]
0
3. Section 447.504 is removed and reserved.
0
4. Section 447.510 is amended by--
0
A. Republishing paragraph (a) introductory text.
0
B. Revising paragraphs (a)(1), (c)(2)(i), and (d)(2).
The revisions read as follows:
Sec. 447.510 Requirements for manufacturers.
(a) Quarterly reports. A manufacturer must report product and
pricing information for covered outpatient drugs to CMS not later than
30 days after the end of the rebate period. The quarterly pricing
report must include:
(1) AMP, calculated in accordance with section 1927(k)(1) of the
Social Security Act.
* * * * *
(c) * * *
(2) * * *
(i) A manufacturer's recalculation of the base date AMP must only
reflect the revisions to AMP as provided for in section 1927(k)(1) of
the Social Security Act.
* * * * *
(d) * * *
(2) Calculation of monthly AMP. Monthly AMP should be calculated
based on section 1927(k)(1) of the Social Security Act, except the
period covered should be based on monthly, as opposed to quarterly AMP
sales.
* * * * *
0
5. Section 447.512 is amended by--
0
A. Removing and reserving paragraph (a).
0
B. Revising the introductory text of paragraph (b).
0
C. Revising paragraph (c).
The revisions read as follows:
Sec. 447.512 Drugs: Aggregate upper limits of payment.
(a) [Reserved]
(b) Other drugs. The agency payments for brand name drugs certified
in accordance with paragraph (c) of this section and drugs other than
multiple source drugs for which a specific limit has been established
must not exceed, in the aggregate, payments levels that the agency has
determined by applying the lower of the--.
* * * * *
(c) Certification of brand name drugs.
(1) The upper limit for payment for multiple source drugs for which
a specific limit has been established does not apply if a physician
certifies in his or her own handwriting (or by an electronic
alternative means approved by the Secretary) that a specific brand is
medically necessary for a particular recipient.
(2) The agency must decide what certification form and procedure
are used.
(3) A check-off box on a form is not acceptable but a notation like
``brand necessary'' is allowable.
(4) The agency may allow providers to keep the certification forms
if the forms will be available for inspection by the agency or HHS.
Sec. 447.514 [Removed and reserved]
0
6. Section 447.514 is removed and reserved.
0
7. Section 447.518 is amended by revising paragraphs (b)(1)(i) and
(b)(2) to read as follows:
Sec. 447.518 State plan requirements, findings and assurances.
* * * * *
(b) * * *
(1) * * *
(i) In the aggregate, its Medicaid expenditures for multiple source
drugs are in accordance with the established upper limits.
* * * * *
(2) Assurances. The agency must make assurances satisfactory to CMS
that the requirements set forth in Sec. 447.512 of this subpart
concerning upper limits and in paragraph (b)(1) of this section
concerning agency findings are met.
* * * * *
Authority: (Catalog of Federal Domestic Assistance Program No.
93.778, Medical Assistance Program).
Dated: October 20, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Approved: November 3, 2010.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-28649 Filed 11-9-10; 4:15 pm]
BILLING CODE 4120-01-P