CMS Medicaid Drug Rebate Program


On Sep. 20, CMS issued final rule on Medicaid drug rebate program.


  • CMS issued fact sheet on final rule to update Medicaid drug rebate program (MDRP).
  • Final rule implements policies in MDRP related to new legislative requirements in the Medicaid Services Investment and Accountability Act 2019 (MSIAA), Pub. Law 116-16.
  • Re drug misclassification and drug pricing/product data misreporting by manufacturers
  • Misclassified Drug Information
  • Manufacturers that participate in MDRP must report certain drug-related product and pricing information upon participation in the MDRP on monthly and quarterly basis.
  • Final rule enhances MDRP integrity and strengthens policies that will ensure greater consistency and accuracy of drug information reporting, timely data collection.
  • Newly granted statutory authorities to address issues re incorrect reporting by drug manufacturers of drug product information in the Medicaid drug program (MDP).
  • Defines situations in which CMS would consider a drug misclassified for MDRP.
  • Also other situations in which manufacturer is paying rebates to States different from the rebates that are supported by the drug data being reported to the MDRP.
  • Describes process and timeline that CMS will use to notify the manufacturer that the agency has determined misclassification of covered outpatient drug (COD) occurred.
  • Allows CMS to suspend National drug rebate agreement of manufacturer for 30 days.
  • This for late reporting of drug product and pricing information required under statute.
  • Final rule implements CMS’ options under MSIAA for enforcing program requirements when manufacturer does not correct misclassification after being notified.
  • CMS can correct misclassification, suspending drug or terminating manufacturer from MDRP, excluding the misclassified drug from Medicaid payment, imposing civil penalty.
  • Program Enhancements
  • Final rule defines market date of drug for purposes of establishing base date average manufacturer price quarter, used to calculate inflation rebates that manufacturers owe.
  • Limits period for manufacturers to initiate disputes re State-invoiced utilization data during period under 12 quarters from last day of quarter from invoice postmark date.
  • Ingredient cost reimbursement, professional dispensing fee reimbursement must be based on pharmacy-established cost data, market-based research does not qualify.
  • Requires States to collect national drug code information on all physician-administered drugs; States should be invoicing for rebates for all physician-administered drugs.
  • Specify conditions that constitute internal investigation of pricing data to allow the manufacturer to make changes to already reported pricing data outside 12-quarters.
  • Pharmacy Benefit Operations
  • Requires that States instruct Medicaid managed care plans to assign and exclusively use Medicaid-specific bank identification number, processor control number (BIN/PCN).
  • Also, group number on Medicaid managed care beneficiaries’ cards, to help ensure the scope of benefits delivered, avoid duplicates under 340B Drug discount program.
  • State managed care contracts that include pharmacy benefit managers (PBMs) to be transparent about spread pricing, which occurs when the PBM retains the difference.
  • Between what is paid by managed care plan, what PBM pays a provider for drug cost.
  • Effectiveness
  • Regulations are effective on Nov. 19, 2024.
  • Sep. 26, 2024 Fed Reg Final Rule
  • On Sep. 26, 2024, CMS published final rule in the federal register, effective Nov. 19.
  • Except for 2 provisions in the Medicaid managed care contract requirements section.
  • 42 CFR 438.3(s)(7) and 42 CFR 438.3(s)(8) first rating period for contracts with MCOs, PIHPs, and PAHPs applicability date beginning on/after 1 year following Nov. 19, 2024.

Regulators CMS
Entity Types Corp; Ins
Reference 89 FR 79020, 9/26/2024; PR, RF RIN 0938-AU28, Doc. 2024-21254, 9/20/2024; MSIAA; Citation: Pub. Law 116-16; 42 CFR 438.3;
Functions Actuarial and Valuation; Compliance; Legal; Privacy; Product Administration; Reporting
Countries United States of America
Category
State
Products Corporate; Insurance; Insurance-Health; PBM
Regions Am
Rule Type Final
Rule Date 9/20/2024
Effective Date 11/19/2024
Rule Id 227127
Linked to N/A
Reg. Last Update 9/26/2024
Report Section US Insurance

Last substantive update on 10/01/2024