340B Implications of the “AMP / COD” Final Rule
On February 1, 2016, CMS published a long awaited Final Rule (Average Manufacturer Price/Covered Outpatient Drugs Final Rule) that will impact how state Medicaid agencies address 340B issues, even though the regulation was primarily designed to implement amendments to the Medicaid Drug Rebate Program. The Final Rule will take effect on April 1, 2016, but the public also has until April 1, 2016 to submit any additional comments regarding the Final Rule.
The Final Rule will affect the 340B Program in the following ways:
- AMP Definition: The Final Rule creates a regulatory definition for AMP, a key component in the calculation of 340B ceiling prices. CMS has revised previous standards to ensure that an AMP, and therefore a 340B ceiling price, can be calculated for most, if not all, covered outpatient drugs. This includes 5i drugs (inhalation, infused, instilled, implanted and injectable drugs) not generally dispensed through retail community pharmacies.
- CODs: CMS more clearly defined CODs by clarifying that CODs include prescription prenatal vitamins, fluoride preparations, and approved radiopharmaceuticals. CMS also agreed that manufacturers may submit a request to CMS for reconsideration of a drug’s status.
- Exclusions from Best Price: The manufacturer’s Best Price is the lowest price available from a manufacturer to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity in the U.S. Best Price is used to determine the amount of rebates manufacturers will owe to state Medicaid agencies. Therefore, manufacturers may be reluctant to offer discounts to 340B covered entities if there is a chance this discount will affect their Best Price in the market. The Final Rule clarifies that any price charged to a 340B covered entity will be excluded from a manufacturer’s Best Price, which should encourage manufacturers to provide voluntary discounts to all types of 340B covered entities, including rural, cancer, and children’s hospitals.
- State Medicaid Plans: The Final Rule requires state Medicaid agencies to develop specific payment methodologies for 340B covered entities and contract pharmacies. States will also be required to use the actual acquisition cost (AAC) of both 340B and non-340B drugs to determine their reimbursement rates. CMS has taken the position that the AAC will more accurately reflect purchase prices in the market compared to the current estimated acquisition cost standard. However, CMS has not outlined a specific calculation for AAC. As such, states still have flexibility in how they determine their reimbursement rates. State policies must be effective by April 1, 2017. These requirements do not apply to Medicaid MCOs, which may still determine their own reimbursement methodologies.
- Manufacturer Rebates: Manufacturers are not required to pay rebates on CODs dispensed to Medicaid MCO enrollees if the MCO was responsible for coverage and the drug was both purchased under the 340B drug discount program and dispensed by an HMO/MCO. State plans must include procedures to exclude 340B drugs from manufacturer rebates to MCOs in these circumstances. This is in an effort to avoid duplicate discounts that would result from paying Medicaid rebates on drugs being sold at a 340B price.
Please let us know if you have any questions regarding the final “AMP/COD” rule. Murer is available to discuss it in more detail or provide educational materials explaining the Final Rule’s different components. Murer would also be happy to assist any providers that would like to submit public comments. We will continue to monitor the implementation and effects of the 2016 “AMP/COD” Final Rule and the latest updates will be found at www.murer.com.