Medicaid Program; Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program

SUPPLEMENTARY INFORMATION:

I. Background

A. Introduction

Under the Medicaid program, section 1902(a)(54) of the Social Security Act (the Act) provides States with the option of providing coverage of prescribed drugs as described in section 1905(a)(12) of the Act, and to date, all States have elected to do so. Section 1903(a) of the Act provides for Federal Financial Participation (FFP) in State expenditures for these covered outpatient drugs (CODs). Coverage of CODs under the option provided by section 1902(a)(54) of the Act must comply with the requirements of section 1927 of the Act. Section 1927 of the Act governs the Medicaid Drug Rebate Program (MDRP) and payment for CODs, which are defined in section 1927(k)(2) of the Act. In general, for payment to be made available for CODs under section 1903(a) of the Act, manufacturers must enter into a National Drug Rebate Agreement (NDRA) as set forth in section 1927(a) of the Act. See also section 1903(i)(10) of the Act conditioning FFP in medical assistance for drugs covered under section 1902(a)(54) on the manufacturer of the drug having an NDRA. The rebates paid by manufacturers to States help to partially offset the Federal and State costs of most outpatient prescription drugs dispensed to Medicaid beneficiaries.

The amount of the rebate is determined by a formula set forth in section 1927(c) of the Act. Generally, the formula to calculate the rebate that applies to a particular drug depends on whether the drug is classified as (1) a single source drug (S drug) or innovator multiple source drug (I drug), commonly referred to as a brand-name drug, or (2) other drugs, which include noninnovator multiple source drugs (N drug), commonly referred to as generic drugs, among others. Generally, pursuant to section 1927 of the Act, drugs classified as single source drugs or innovator multiple source drugs pay higher rebates than those that are classified as an “other drug,” such as noninnovator multiple source drugs.

Consistent with section 1927(b)(3)(A) of the Act, a manufacturer must report and certify certain drug product and drug pricing information for CODs to CMS not later than 30 days after the last day of each month and certain drug product and drug pricing information 30 days after the last day of each quarter of a rebate period. If a manufacturer fails to submit timely information, or misreports information, we may be unable to establish accurate Unit Rebate Amounts (URAs) due to the misreporting or late reporting. While we provide URAs to the States each quarter to help facilitate billing manufacturers for rebates, it is ultimately the manufacturer's responsibility to ensure accurate rebates are paid to States for their CODs.

Prior to the enactment of the Medicaid Services Investment and Accountability Act of 2019 (MSIAA) (Pub. L. 116-16; enacted April 18, 2019), section 1927(k)(7)(A)(iv) of the Act defined a single source drug as a covered outpatient drug which is produced or distributed under an original new drug application (NDA). Section 1927(k)(7)(A)(ii) of the Act similarly defined an innovator multiple source drug as a multiple source drug that was originally marketed under an original NDA. A noninnovator multiple source drug was defined at section 1927(k)(7)(A)(iii) of the Act as a multiple source drug that is not an innovator multiple source drug. MSIAA made several revisions to these definitions, including adding a provision to ratify CMS' existing policy to permit certain exceptions from the definitions if a narrow exception applies, as described in § 447.502 or any successor regulation.

This narrow exception process in § 447.502 was created in the 2016 final rule entitled “Medicaid Program; Covered Outpatient Drugs” (2016 COD final rule), under which drug manufacturers could submit a request for a narrow exception to allow individual drugs approved under an NDA to be treated as if they were approved under an abbreviated new drug application (ANDA) and classified as noninnovator multiple source drugs prospectively from the effective date of the 2016 COD final rule. Instructions to manufacturers regarding this process were included in Manufacturer Release #98, May 2, 2016. The 2016 COD final rule did not, however, excuse manufacturers from their obligation to correctly report drugs approved under an NDA, as either single source or innovator multiple source drugs prior to the effective date of the 2016 COD final rule, which was April 1, 2016. This narrow exception process was codified into statute in MSIAA when the Congress removed the word “original” from the definitions of single source drug and innovator multiple source drug, thereby confirming CMS' pre 2016 interpretation.

We published the proposed rule (88 FR 34238-34296) on May 26, 2023, and provided a 60-day comment period. A total of 128 comments were received. We are now publishing the final rule. We are clarifying and emphasizing our intent that if any provision of this final rule is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further action, it shall be severable from other parts of this final rule, and from rules and regulations currently in effect, and not affect the remainder thereof or the application of the provision to other persons not similarly situated or to other, dissimilar circumstances. Through this rule, we adopt provisions that are intended to and will operate independently of each other, even if each serves the same general purpose or policy goal. Where a provision is necessarily dependent on another, the context generally makes that clear.

B. Amendments Made by the Medicaid Services Investment and Accountability Act of 2019 (MSIAA) to Section 1927 of the Act Regarding MDRP Drug Classification Enforcement and Penalties

Section 6 of MSIAA, titled “Preventing the Misclassification of Drugs Under the Medicaid Drug Rebate Program,” amended sections 1903 and 1927 of the Act to (1) specify the definitions for single source drug, innovator multiple source drug, and noninnovator multiple source drug, and (2) to provide the Secretary with additional compliance, oversight and enforcement authorities to ensure compliance with program requirements with respect to manufacturers' reporting of drug product and pricing information, which includes the appropriate classification of a drug. Drug classification refers to how a drug should be classified—as a single source drug, innovator multiple source drug, or noninnovator multiple source drug—for the purposes of determining the correct rebates that each manufacturer owes the States.

Although much of this law is self-implementing, we proposed a series of regulatory amendments at §§ 447.509 and 447.510 to implement and codify the statutory changes in regulation. We proposed that misclassification of a drug under the MDRP has occurred or is occurring when a manufacturer reports and certifies to the agency a drug category or drug product information relating to that COD that is not supported by the statutory and regulatory definitions of S, I, or N drug. We also defined a misclassification as a situation in which a manufacturer is correctly reporting its drug category or drug product information for a COD but is paying a different rebate amount to the States than is supported by the classification.

MSIAA also amended the Act to expressly require a manufacturer to report not later than 30 days after the last day of each month of a rebate period under the agreement, such drug product information as the Secretary shall require for each of the manufacturer's covered outpatient drugs. We proposed a definition of “drug product information” for the purposes of the MDRP.

Similarly, MSIAA amended the Act to specify that the reporting of false information, including information related to drug pricing, drug product information, and data related to drug pricing or drug product information, would also be subject to possible civil monetary penalties (CMPs) by the Department of Health and Human Services (HHS) Office of the Inspector General (OIG), and to provide specific new authority to the Secretary to issue CMPs related to knowing misclassifications of drug product or misreported information. These OIG authorities are not the subject of this rulemaking.

Under MSIAA, if a manufacturer fails to correct the misclassification of a drug in a timely manner after receiving notification from the agency that the drug is misclassified, in addition to the manufacturer having to pay past unpaid rebates to the States for the misclassified drug if applicable, the Secretary can take any or all of the following actions, including correcting the misclassification, suspending the misclassified drug from the MDRP, imposing CMPs, or ultimately terminating the manufacturer's participation in the MDRP.

Codifying these statutory amendments in our regulations provides an opportunity for the agency to give additional clarity to and guidance on the new legal authorities for ensuring oversight of, compliance with, and enforcement of the provisions of the MDRP, and ultimately to ensure that Federal and State programs are receiving appropriate rebates and that CMS continues to be a stringent steward of taxpayer monies.

C. MDRP Program Administration Proposed Changes

In order to increase efficiency and economy of directing overall MDRP operations, resources, and activities to better facilitate the needs of Medicaid beneficiaries, we proposed a number of new regulatory policies and clarifications of existing policies. Specifically, consistent with our statutory authorities, we proposed to define, specify, or amend the definitions for COD, internal investigation (for restatement purposes outside of a 3-year time window), manufacturer (for National Drug Rebate Agreement (NDRA) purposes), market date, noninnovator multiple source drug, drug product information, and vaccine for the purposes of the MDRP. We also proposed to specify that the rebate provisions for a drug other than a single source drug or an innovator multiple source drug apply to an array of drugs, including those that may not satisfy the definition of noninnovator multiple source drug.

In addition, we proposed new policies, including to add a time limitation on manufacturers' ability to initiate audits with States, to further clarify and establish the requirements for FFS pharmacy reimbursement, and to clarify the required collection of all National Drug Codes (NDCs) for single and multiple source physician-administered drugs to receive FFP and secure manufacturer rebates.

We also proposed to revise Medicaid managed care standard contract requirements to adopt a requirement for the inclusion of Bank Identification Number and Processor Control Number (BIN/PCN) numbers on Medicaid enrollee identification cards for pharmacy benefits, as well as enhance drug cost transparency by adopting specific requirements relating to the third-party administration of the pharmacy benefit. We provide additional background later in this rule.

1. Proposal To Modify the Definition of Covered Outpatient Drug

In the 2016 COD final rule (81 FR 5278), we finalized a regulatory definition of covered outpatient drug in § 447.502 that substantially mirrors the statutory definition and is consistent with section 1927(k)(3) of the Act. The definition includes a limiting definition which exempts from the COD definition, and thus from rebates, any drug, biological product, or insulin provided as part of, or as incident to and in the same setting as, (and for which payment may be made under this title as part of payment for the following and not as direct reimbursement for the drug) certain health care setting or situations described in section 1927(k)(3). However, we never clarified what the term “direct reimbursement” means for the purposes of defining those situations under which a State could bill a manufacturer for a rebate for a COD when the COD is part of an inclusive payment for the COD and related services. In regulation, we proposed to define the term direct reimbursement at § 447.502 so that States know those situations in which the limiting definition would not apply such that a State could bill for a rebate. CMS received several thoughtful comments on this issue, and based on these comments, we realized the proposed language did not adequately clarify the policy. Thus, we are further refining the definition to more clearly delineate the situations in which the limiting definition would not apply.

2. Proposed Definition of an Internal Investigation for Purposes of Pricing Metric Revisions

In accordance with section 1927(b)(3) of the Act, § 447.510 of the applicable regulations, and the terms of the NDRA, manufacturers are required to report certain pricing and drug product information to CMS on a timely basis or else they could incur penalties or other compliance and enforcement measures. In the 2016 COD final rule, we established § 447.510(b)(1), which provides that a manufacturer must report to CMS any revision to AMP, best price, customary prompt pay discounts, or nominal prices (pricing data) for a period not to exceed 12 quarters from the quarter in which the data were due unless enumerated exceptions apply. See § 447.510(b)(1)(i) through (vi).

The existing regulation at § 447.510(b)(1)(v) provides an exception to the 12-quarter price reporting rule if the change is being made to address specific rebate adjustments to States by manufacturers, as required by CMS or court order, or under an internal investigation or an OIG or Department of Justice (DOJ) investigation. However, up to this point, we have not defined the term internal investigation, which has led to different interpretations of the nature of an internal investigation. Therefore, we proposed to add a definition of internal investigation at § 447.502 and additional clarity around the 12-quarter price reporting rule at § 447.510. Based on comments we received, we are finalizing as proposed except we are adding the term “possible” to “fraud, abuse or violation of law or regulation”.

3. Proposal To Modify the Definition of Manufacturer for National Drug Rebate Agreement (NDRA) Compliance Purposes

We proposed to further refine the definition of manufacturer to clarify that a manufacturer includes all other manufacturers that are associated or affiliated with that manufacturer. This was intended to clarify that once a manufacturer has entered into a rebate agreement with CMS, all entities (with their applicable labeler codes) that are associated or affiliated with a manufacturer must have a rebate agreement in effect in order for the manufacturer to satisfy the statutory requirement that the manufacturer have a rebate agreement in effect with the Secretary.

We appreciate the thoughtful comments received on this issue, and we determined not to finalize the proposed policy at this time. We are continuing to review the input provided by commenters, which may inform future rulemaking on this topic.

4. Proposal To Establish a Definition of Market Date for a COD for the Purposes of Determining a Base Date AMP for a COD

The rebates due by manufacturers are calculated based on statutory formulas described in section 1927(c) of the Act and consist of a basic rebate and, in some cases, an additional rebate that is applicable when an increase in the AMP, with respect to each dosage, form, and strength of a drug, exceeds the rate of inflation. A key factor in the calculation of the additional rebate is the base date AMP of the drug, a value that is determined based on the market date of the drug. Manufacturers are required to report the market date of each dosage form and strength of a COD for all of their CODs. The term market date has not been previously defined in regulation for purposes of the MDRP, and CMS has received numerous questions regarding the determination of market date. Accordingly, we proposed to define the term market date at § 447.502 for the purpose of the MDRP and are finalizing as proposed.

5. Proposal To Modify the Definition of Noninnovator Multiple Source Drug

As discussed previously in the proposed rule, section 6(c) of MSIAA included a number of amendments to statutory definitions in section 1927 of the Act. One of the amendments to the statutory definitions was to remove the phrase “was originally marketed” from the definition of an I drug and replace it with “is marketed.” We also made conforming changes to the regulatory definition of an I drug in the 2020 final rule.

These amendments should have prompted a corresponding change to the regulatory definition of noninnovator multiple source (N) drug in the 2020 final rule to align with the statutory and regulatory change to the definition of an I drug, however we neglected to include the change. Therefore, we proposed to amend the definition of an N drug at § 447.502 to maintain the clear distinction between an I drug and an N drug and are finalizing as proposed.

6. Proposal To Define Vaccine for the Purposes of the MDRP Only

Section 1927(k)(2)(B) of the Act specifically excludes vaccines from the definition of COD for purposes of the MDRP. This exclusion is codified in paragraph (1)(iv) of the regulatory definition of COD at § 447.502. Section 1927 of the Act does not define vaccine.

We proposed a definition of vaccine at § 447.502 for the purpose of identifying products that do not satisfy the definition of COD and are therefore not subject to possible required coverage under the prescribed drugs benefit consistent with section 1927 of the Act and applicable rebate liability under the MDRP. We noted that the regulatory definition of vaccine is intended to be established solely for the purposes of the MDRP and is intended to be applicable only to that program and Medicaid expansion CHIP programs (that is, CHIP programs operating pursuant to 42 CFR 457.70(a)(2) and (c)). It is not intended to apply under any title XIX statutory provisions other than section 1927(k)(2), or to separate CHIPs operating pursuant to 42 CFR 457.70(a)(1) and (d), or for purposes of the Vaccines for Children (VFC) Program. Nor is it intended to apply to any other programs within CMS or any other agencies within HHS (for example, the Food and Drug Administration (FDA), Centers for Disease Control and Prevention (CDC), or Health Resources and Services Administration (HRSA)). Rather, we stated that the proposed changes would only specify which products are vaccines and are therefore excluded from the definition of a COD under the MDRP and thus are not subject to section 1927, including to MDRP rebate liability; the proposed changes would not apply to any applicable Federal or State requirements to cover vaccines for Medicaid beneficiaries, as applicable. We appreciate the thoughtful comments we received on this issue. At this time, we are not finalizing the proposed regulatory definition. We are continuing to review the input provided by commenters, which may inform future rulemaking on this topic.

7. Proposal To Account for Stacking When Determining Best Price

We proposed to revise § 447.505(d)(3) to add language to make clearer that the manufacturer must adjust the best price for a drug for a rebate period if cumulative discounts, rebates, or other arrangements to best price eligible entities subsequently adjust the prices available from the manufacturer, and that those discounts, rebates, or other arrangements must be “stacked” for a single transaction to determine a final price realized by the manufacturer for a drug. CMS received a number of thoughtful comments on this issue, and we have determined not to finalize the proposed regulation changes at this time. We are continuing to review the input provided by commenters. We intend to collect information through a separate Paperwork Reduction Act (PRA) request to collect additional information related to manufacturers' stacking methodologies, which may inform future rulemaking on this topic.

8. Proposal To Establish a Time Limitation for Audits Over Utilization Data With States: 12-Quarter Rebate Dispute Time Limitation

Currently, there is no time limit for a manufacturer to initiate an audit or resolve previously disputed State utilization data with respect to rebates owed, and section 1927 of the Act does not impose a specific timeframe on a manufacturer's audit authority. We proposed to limit the time period during which manufacturers may initiate disputes, hearing requests, and audits of State-invoiced utilization units to 12 quarters from the last day of the quarter from the date of State invoice to the manufacturer. Upon reviewing comments, we believe referencing the invoice postmark date instead of the date of the State invoice offers the same clarity for both States and Manufacturers on the timeline initiation and would align with previous DP policy. Therefore, we are finalizing as proposed, with the exception of referencing “postmark date” instead of “the date of the State invoice”.

9. Proposal Regarding Drug Price Verification Through Data Collection

Section 1927(b)(3)(B) of the Act authorizes the Secretary to “survey wholesalers and manufacturers that directly distribute their [CODs], when necessary, to verify manufacturer prices” reported under section 1927(b)(3)(A) of the Act. Under this authority, we proposed rules to describe those situations when it would be considered “necessary” for such surveys to be sent to manufacturers and wholesalers, and the information that would be requested to use in order to verify the reported prices at issue.

We appreciate the thoughtful comments we received on this issue, and we determined not to finalize the proposed policy at this time. We are continuing to review the input provided by commenters, which may inform future rulemaking on this topic.

10. Proposal To Clarify and Establish Requirements for FFS Pharmacy Reimbursement

In the 2016 COD final rule, we finalized at § 447.518 moving FFS pharmacy reimbursement to an actual acquisition cost-based reimbursement, under which pharmacists would be paid for the ingredient costs of the drug that was dispensed, and a professional dispensing fee (PDF) that reflected their costs of dispensing. We proposed to revise § 447.518, “State plan requirements, findings, and assurances,” in paragraph (d)(1) to clarify State requirements regarding pharmacy ingredient costs and professional dispensing fees to be consistent with the applicable statutory and regulatory requirements, specifying in particular that any dispensing fee surveys must be based on actual pharmacy dispensing costs data and not market research data. We are finalizing as proposed.

11. Proposals Relating to Section 1927(a)(7) of the Act and Federal Financial Participation (FFP): Conditions Relating to Physician-Administered Drugs (PADs)

In accordance with section 1927(a)(7) of the Act, for payment to be available under section 1903 of the Act, and for States to secure applicable Medicaid rebates, States are to provide for the collection and submission of utilization data and coding (such as J-codes and NDC numbers) for a COD that is a physician-administered single source drug as determined by the Secretary, or that is a multiple source drug that is determined by the Secretary to be a top 20 high dollar volume PAD dispensed under Medicaid (as identified on a published list). Regulations at § 447.520 were established to implement these statutory provisions in the final rule entitled “Medicaid Program; Prescription Drugs” (72 FR 39142, 39162) (hereinafter referred to as the 2007 final rule), specifying the conditions for FFP for PADs.

We proposed to amend § 447.520 to require States to collect NDC information on all covered outpatient single and multiple source PADs and to specify that States must invoice for rebates for all covered outpatient PADs to receive FFP and secure manufacturer rebates. We are finalizing as proposed but have added a discussion of our statutory authority for extending this requirement by regulation beyond the top 20 multiple source drugs already required by statute.

12. Proposal Related to Suspension of a Manufacturer's Drug Rebate Agreement

We proposed regulatory changes to further implement section 1927(b)(3)(C)(i) of the Act, which provides authority to suspend a rebate agreement for a manufacturer's failure to timely report drug pricing or drug product information to the agency, when there is a continued failure to report after a 90-calendar day deadline is imposed by the agency. Specifically, we proposed in § 447.510(i) that a manufacturer must report information required under § 447.510(a) and (d), and the failure to report such information to the agency after the end of an imposed 90-calendar day period would result in suspension of the manufacturer's rebate agreement, and that such agreement would not be reinstated until such information was reported in full and certified, but not for a period of suspension of less than 30 calendar days. We are finalizing as proposed.

13. Proposals Related to Managed Care Plan Standard Contract Requirements

a. Requirement of BIN/PCN Inclusion on Medicaid Managed Care Pharmacy Identification Cards

Patients enrolled in health care plans, including in Medicaid managed care plans such as Medicaid managed care organizations (MCOs), prepaid inpatient health plans (PIHPs), or prepaid ambulatory health plans (PAHPs), generally use enrollee identification cards at the pharmacy so they can obtain prescription drug benefits, as well as allow pharmacies to process and bill claims in real-time. Health plans use two codes on the card to identify a patient's prescription health insurance and benefits—the National Council for Prescription Drug Programs (NCPDP) Processing Bank Identification Number (BIN) and Processor Control Number (PCN). This information, along with a group number identifier, can specify that a patient is covered by a specific insurance group, such as being a Medicaid managed care enrollee.

Without the BIN, PCN, and group number identifiers, it is often difficult to determine from a Medicaid managed care enrollee's identification card if he or she is covered under a Medicaid managed care plan or under non-Medicaid coverage, such as an employer-sponsored group health plan or individual market insurance, offered by the same organization or entity that offers the Medicaid managed care plan.

While the use of Medicaid-specific BIN, PCN, and group number identifiers does not assist in identifying claims for drugs purchased under the 340B Drug Pricing Program (340B Program), it may help States and their managed care plans avoid invoicing for rebates on 340B drugs by identifying which plans are covered under Medicaid. Section 340B(a)(5)(A) of the Public Health Service Act (the PHS Act) prohibits duplicate discounts for drugs purchased under the MDRP. Identifying claims where the dispensed drug has been discounted under the 340B Program is necessary to avoid duplicating that discount in the MDRP.

Therefore, under the authority of section 1902(a)(4) of the Act, to ensure effective implementation of and compliance with sections 1927(a)(5)(C) and 1927(j)(1) of the Act, we proposed to amend § 438.3(s) to require States to require (via standard contract requirements) MCOs, PIHPs, and PAHPs that provide coverage of CODs to assign and exclusively use unique Medicaid BIN, PCN, and group number identifiers for all Medicaid managed care enrollee identification cards for pharmacy benefits. Based on comments received, we are changing the requirement to be a unique BIN/PCN combination with a group number identifier, as well as the effective date.

b. Drug Cost Transparency in Medicaid Managed Care Contracts

Medicaid managed care plans often contract with a subcontractor Pharmacy Benefit Manager (PBM) to operate the pharmacy benefit provided to Medicaid beneficiaries. For a Medicaid managed care plan to appropriately calculate and report its Medical Loss Ratio (MLR) under § 438.8, the plan must know from the subcontractor certain information relating to how much of the payments made to the Medicaid managed care plan by the State were used to pay for health care services and other specific categories outlined in § 438.8. To correctly report the MLR, a Medicaid managed care plan must distinguish between expenses that are for covered benefits (such as incurred claims for health care services and drug costs) and administrative expenses, such as fees paid to its PBM for PBM services (for example, claims adjudication and processing prior authorization requests).

Therefore, we proposed that MCOs, PIHPs, and PAHPs that provide coverage of CODs require any subcontractor to report the amounts related to the incurred claims described in § 438.8(e)(2) separately from any administrative costs, fees, and expenses of the subcontractor. Based on comments received, we are finalizing as proposed, with a few clarifying changes. We are adding “MCO, PIHP or PAHP” in a few places to be consistent with other paragraphs in 42 CFR 438.3(s) and are adding a subsection to include an effective date, which will be the first rating period for contracts beginning on or after 1 year following the effective date of the rule.

14. Proposal To Rescind Revisions Made by the December 31, 2020 Final Rule To Determination of Best Price (§ 447.505) and Determination of Average Manufacturer Price (AMP) (§ 447.504) Consistent With Court Order

On May 17, 2022, the United States District Court for the District of Columbia vacated and set aside the “accumulator adjustment rule of 2020” in response to a complaint filed against the Secretary regarding the accumulator provisions within the 2020 final rule “Medicaid Program; Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and Supporting Value-Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third Party Liability (TPL) Requirements.” This final rule had revised the conditions for excluding patient assistance from AMP at § 447.504(c)(25) through (29) and (e)(13) through (17), and best price at § 447.505(c)(8) through (12), to add language (effective January 1, 2023) that would require manufacturers to “ensure” the full value of the assistance provided by patient assistance programs is passed on to the consumer and that the pharmacy, agent, or other AMP or best price eligible entity does not receive any price concession. While the district court's order focused on the changes to the patient assistance program exclusions from best price determinations, for consistency, we proposed to withdraw the changes related to patient assistance to both the AMP and best price sections made by the 2020 final rule so that the regulations would revert back to the language that has been in place since 2016. We are finalizing this provision as proposed.

15. Proposals Related to Amendments Made by the American Rescue Plan Act of 2021—Removal of the Manufacturer Rebate Cap (100 Percent AMP)

Section 9816 of the American Rescue Plan Act of 2021 (Pub. L. 117-2, enacted March 11, 2021) sunsets the limit on maximum rebate amounts for single source and innovator multiple source drugs by amending section 1927(c)(2)(D) of the Act to add “and before January 1, 2024,” after “December 31, 2009.” In accordance with section 1927(c)(3)(C)(i) of the Act and the special rules for application of the provision in section 1927(c)(3)(C)(ii)(IV) and (V) of the Act, this sunset provision also applies to the limit on maximum rebate amounts for CODs other than single source or innovator multiple source drugs. Therefore, to conform § 447.509 with section 1927(c)(2)(D) of the Act, as amended by the American Rescue Plan Act of 2021, and sections 1927(c)(3)(C)(i), (ii)(IV), and (ii)(V) of the Act, we proposed to make conforming changes to § 447.509 to reflect the removal of the limit on maximum rebate amounts for rebate periods beginning on or after January 1, 2024. We are finalizing this provision as proposed.

16. Request for Information—Comments on Issues Relating To Requiring a Diagnosis on Medicaid Prescriptions as a Condition for Claims Payment

We solicited comments on the patient care, clinical, and operational impact of requiring that a patient's diagnosis be included on a prescription as a condition of a State receiving FFP for that prescription. We were particularly interested in understanding any operational implications, privacy related concerns, associated burden, and approaches to negate any foreseeable impact on beneficiaries and providers, including what steps would be needed by States to successfully implement a Medicaid requirement for diagnosis on prescriptions.

We appreciate the thoughtful comments we received on this issue, and we determined we are not moving forward with any proposed regulations regarding this topic at this time.

17. Background on Coordination of Benefits/Third Party Liability Regulation Due to Bipartisan Budget Act of 2018 (BBA 2018)

Medicaid is generally the payer of last resort, which means that certain other available resources—known as third party liability, or TPL—must be used before Medicaid pays for services received by a Medicaid-eligible individual. Title XIX of the Act requires State Medicaid programs to identify and seek payment from liable third parties, before billing Medicaid. Section 53102 of the Bipartisan Budget Act of 2018 (BBA 2018) (Pub. L. 115-123, enacted February 9, 2018) amended the TPL provision at section 1902(a)(25) of the Act.

Specifically, section 1902(a)(25)(A) of the Act requires that States take all reasonable measures to ascertain the legal liability of third parties to pay for care and services available under the plan. That provision further specifies that a third party is any individual, entity, or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a State plan. Section 1902(a)(25)(A)(i) of the Act specifies that the State plan must provide for the collection of sufficient information to enable the State to pursue claims against third parties.

To update the regulation for the recent statutory changes, a final rule was published on December 31, 2020, which went into effect on March 1, 2021, to include changes as authorized under the BBA 2018. We submitted a correction due to an omission in the regulation text to require a State to make payments without regard to TPL for pediatric preventive services unless the State has made a determination related to cost-effectiveness and access to care that warrants cost avoidance for up to 90 days.

D. Applicability and Compliance Timeframes

Generally, we are finalizing that this rule, including the proposals being finalized herein, will be effective 60 days after publication of this final rule, with the exception of two provisions in the Standard Medicaid Managed Care Contract Requirements section. We are including Table 1 with these provisions and relevant timing information and dates. We encourage all interested parties to confirm the applicability dates indicated in this final rule for any changes from the proposed.