April 1, 2016

CMS Delays Enforcement of 5i AMP Provisions

Legal Alert

Today, many new Medicaid drug price reporting regulations take effect, under the Centers for Medicare & Medicaid Services (CMS) rule, Covered Outpatient Drug Final Rule (81 Fed. Reg. 5170). Yesterday, just one day before the effective date, CMS announced that it will delay enforcement of certain provisions of the Final Rule relating to 5i drugs (inhalation, infusion, instilled, implanted, or injectable drugs) that are not generally dispensed through retail community pharmacies.
This is not an April Fool's Day prank, and we are including CMS's Release #96 (for manufacturers) and Release #174 (for states) to prove it.
CMS states that it is delaying enforcement of the provisions of the Final Rule regarding the identification of 5i drugs (42 C.F.R. § 447.507) and the calculation of average manufacturer prices (AMPs) for 5i drugs (42 C.F.R. § 447.504). Enforcement of these provisions will begin on July 1, 2016, which effectively gives manufacturers one full additional quarter to identify and implement new calculation methodologies for these drugs. In the releases, CMS recognizes that manufacturers may need additional time to implement the 5i provisions, particularly in light of CMS's change to the ratio of retail to non-retail sales (from 90/10 in the proposed rule to 70/30 in the Final Rule), and its new option permitting manufacturers to adopt a smoothing methodology.
In the interim, CMS notes that manufacturers still are required to report AMPs on a timely basis, and that manufacturers "may do so using reasonable assumptions" (which, as CMS notes in the releases, should be documented adequately). Importantly, manufacturers that avail themselves of the additional implementation time will be required to restate monthly and quarterly AMPs back to the effective date of April 1, 2016, consistent with the applicable 5i regulations. CMS states that it will be issuing FAQs and operational guidance to address questions it has received regarding the Final Rule, and encourages manufacturers to submit any additional questions to its policy email address.

Please feel free to contact any of the Arnold & Porter attorneys listed here if you have questions regarding the CMS releases and/or the Final Rule.

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