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, 37286-37322 [2020-12970]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 85, Number 119 (Friday, June 19, 2020)]
[Proposed Rules]
[Pages 37286-37322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12970]



[[Page 37285]]

Vol. 85

Friday,

No. 119

June 19, 2020

Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 433, 438, 447, et al.





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; Proposed Rule

Federal Register / Vol. 85, No. 119 / Friday, June 19, 2020 / 
Proposed Rules

[[Page 37286]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 433, 438, 447 and 456

[CMS-2482-P]
RIN 0938-AT82


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

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would advance CMS' efforts to support state 
flexibility to enter into innovative value-based purchasing 
arrangements (VBPs) with manufacturers, and to provide manufacturers 
with regulatory support to enter into VBPs with payers, including 
Medicaid. To ensure that the regulatory framework is sufficient to 
support such arrangements and to promote transparency, flexibility, and 
innovation in drug pricing without undue administrative burden, we are 
proposing new regulatory policies and clarifying certain already 
established policies to assist manufacturers and states in 
participating in VBPs in a manner that is consistent with the law and 
maintains the integrity of the Medicaid Drug Rebate Program (MDRP). 
This proposed rule also proposes revisions to regulations regarding: 
Authorized generic sales when manufacturers calculate average 
manufacturer price (AMP); pharmacy benefit managers (PBM) accumulator 
programs and their impact on AMP and best price; state and manufacturer 
reporting requirements to the MDRP; new Medicaid Drug Utilization 
Review (DUR) provisions designed to reduce opioid related fraud, misuse 
and abuse; the definitions of CMS-authorized supplemental rebate 
agreement, line extension, new formulation, oral solid dosage form, 
single source drug, multiple source drug, innovator multiple source 
drug for purposes of the MDRP; payments for prescription drugs under 
the Medicaid program; and coordination of benefits (COB) and third 
party liability (TPL) rules related to the special treatment of certain 
types of care and payment in Medicaid and Children's Health Insurance 
Program (CHIP).

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on July 20, 2020.

ADDRESSES: In commenting, please refer to file code CMS-2842-P.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2482-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2482-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Ruth Blatt, (410) 786-1767, for issues related to the definition of 
line extension, new formulation, oral solid dosage form, single source 
drug, multiple source drug, and innovator multiple source drug.
    Cathy Sturgill, (410) 786-3345, for issues related to Third Party 
Liability.
    Michael Forman, (410) 786-2666 and Whitney Swears (410) 786-6543 
for issues related to Drug Utilization Review.
    Christine Hinds, (410) 786-4578, for issues related to Value-based 
Purchasing.
    Joanne Meneeley, (410) 786-1361, for issues related to State Drug 
Utilization Data (SDUD) certification.
    Christine Hinds, (410) 786-4578, for issues related to Authorized 
Generics and Inflation Rebates.
    Charlotte Amponsah (410) 786-1092, for issues related to 
Manufacturer-sponsored Patient Assistance Programs.

SUPPLEMENTARY INFORMATION:

I. Background

    Under the Medicaid program, states may provide coverage of 
prescribed drugs as an optional benefit under section 1905(a)(12) of 
the Social Security Act (the Act). Section 1903(a) of the Act provides 
for federal financial participation (FFP) in state expenditures for 
these drugs. In the case of a state that provides for medical 
assistance for covered outpatient drugs, as provided under section 
1902(a)(54) of the Act, the state 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 covered outpatient drugs 
(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. The MDRP is authorized under section 1927 of 
the Act, and is a program that includes CMS, state Medicaid agencies, 
and participating drug manufacturers that helps to partially offset the 
federal and state costs of most outpatient prescription drugs dispensed 
to Medicaid beneficiaries. The MDRP provides specific requirements for 
rebate agreements, drug pricing submission and confidentiality 
requirements, the formulas for calculating rebate payments, drug 
utilization reviews (DUR), and requirements for states for CODs.
    The Covered Outpatient Drugs final rule with comment period (COD 
final rule) was published in the February 1, 2016 Federal Register (81 
FR 5170) and became effective on April 1, 2016. The COD final rule 
implemented provisions of section 1927 of the Act that were added by 
the Patient Protection and Affordable Care Act of 2010, as amended by 
the Health Care and Education Reconciliation Act of 2010 (collectively 
referred to as the Affordable Care Act) pertaining to Medicaid 
reimbursement for CODs. It also revised other requirements related to 
CODs, including key aspects of Medicaid coverage and payment and the 
MDRP under section 1927 of the Act. The regulations implemented through 
the COD final rule, and those proposed in this notice of proposed 
rulemaking are consistent with the Secretary's authority set forth in 
section 1102 of the Act to publish regulations that are necessary to 
the efficient administration of the Medicaid program.

A. Changes to Coordination of Benefits/Third Party Liability Regulation 
Due to Bipartisan Budget Act (BBA) 2018

    Medicaid is the payer of last resort, which means that other 
available

[[Page 37287]]

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 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. Examples of 
liable third parties include: Private insurance companies through 
employment-related or privately purchased health insurance; casualty 
coverage resulting from an accidental injury; payment received directly 
from an individual who has voluntarily accepted or been assigned legal 
responsibility for the health care of one or more Medicaid recipients; 
fraternal groups, unions, or state workers' compensation commissions; 
and medical support provided by a parent under a court or 
administrative order.
    Effective February 9, 2018, section 53102(a)(1) of the Bipartisan 
Budget Act of 2018 amended section 1902(a)(25)(E) of the Act to require 
a state to use standard coordination of benefits cost avoidance when 
processing claims for prenatal services which now included labor and 
delivery and postpartum care claims. Additionally, effective October 1, 
2019, section 53102(a)(1) of the Bipartisan Budget Act of 2018 amended 
section 1902(a)(25)(E) of the Act, to require a state to make payments 
without regard to third party liability for pediatric preventive 
services unless the state has made a determination related to cost-
effectiveness and access to care that warrants cost avoidance for 90 
days.
    Section 53102(b)(2) of the Bipartisan Budget Act of 2018 delays the 
implementation date from October 1, 2017 to October 1, 2019 of the 
Bipartisan Budget Act of 2013 provision, which allowed for payment up 
to 90 days after a claim is submitted that is associated with medical 
support enforcement instead of 30 days under previous law. Medical 
support is a form of child support that is often provided through an 
absent parent's employers health insurance plan.
    Effective April 18, 2019, section 7 of the Medicaid Services 
Investment and Accountability Act of 2019 (Pub. L. 116-16) amended 
section 202(a)(2) of the Bipartisan Budget Act of 2013 to allow 100 
days instead of 90 days to pay claims related to medical support 
enforcement under section 1902(a)(25)(F)(i) of the Act.

B. Changes to the Calculation of Average Manufacturer Price (AMP) 
Regarding Authorized Generic Drugs Due to the Continuing Appropriations 
Act, 2020, and Health Extenders Act of 2019

    On September 27, 2019, the President signed into law the Continuing 
Appropriations Act, 2020, and Health Extenders Act of 2019 (Health 
Extenders Act) (Pub. L. 116-59), which made changes to sections 
1927(k)(1) and 1927(k)(11) of the Act, revising how manufacturers 
calculate the average manufacturer price (AMP) for a covered outpatient 
drug, for which the manufacturer permits an authorized generic to be 
sold and redefines the definition of wholesaler. Manufacturers that 
approve, allow, or otherwise permit any drug to be sold under the 
manufacturer's own new drug application (NDA) approved under section 
505(c) of the Federal Food, Drug, and Cosmetic Act, shall no longer 
include sales of these authorized generics in the calculation of AMP, 
regardless of the relationship between the brand name manufacturer and 
the manufacturer of the authorized generic.
    Specifically, section 1603 of the Health Extenders Act, which is 
titled ``Excluding Authorized Generic Drugs from Calculation of Average 
Manufacturer Price for Purposes of the Medicaid Drug Rebate Program; 
Excluding Manufacturers from Definition Of Wholesaler,'' amended the 
statute as follows:
     Section 1927(k)(1)(C) of the Act to replace the term 
``Inclusion'' with ``Exclusion'' in the title and further amended 
subparagraph (C) to state that, in the case of a manufacturer that 
approves, allows, or otherwise permits any drug of the manufacturer to 
be sold under the manufacturer's new drug application approved under 
section 505(c) of the Federal Food, Drug, and Cosmetic Act, such term 
shall be exclusive of the average price paid for such drug by 
wholesalers for drugs distributed to retail community pharmacies.
     The definition of wholesaler at section 1927(k)(11) of the 
Act to remove references to manufacturers from the definition of 
wholesaler.
    Typically, an authorized generic is a product that a manufacturer 
(primary manufacturer) allows another manufacturer (secondary 
manufacturer) to sell under the primary manufacturer's FDA approved NDA 
but under a different National Drug Code (NDC) number. The authorized 
generic is typically the primary manufacturer's brand product offered 
at a lower price point. Primary manufacturers may sell the authorized 
generic product to the secondary manufacturer they are allowing to sell 
an authorized generic of their brand product, and such sales are 
commonly referred to as transfer sales. Under the amendments made to 
section 1927 of the Act, a primary manufacturer that sells the 
authorized generic version of the brand drug to the secondary 
manufacturer can no longer include the price of the transfer sale of 
the authorized generic to the secondary manufacturer in its calculation 
of AMP for the brand product. The exclusion of these transfer sales 
from the primary manufacturer's brand drug AMP will likely result in 
higher AMPs for the brand drugs and a potential increase to a 
manufacturer's Medicaid drug rebates to states.
    The amendments to section 1927 authorized under section 1603 of the 
Health Extenders Act are effective October 1, 2019. Therefore, 
manufacturers must reflect the changes to the calculation of their AMPs 
for rebate periods beginning October 1, 2019 (reported to CMS no later 
than 30 days after the end of the rebate period). To assist 
manufacturers, CMS provided guidance in Manufacturer Release #111 \1\ 
and Manufacturer Release #112.\2\ Furthermore, in accordance with 42 
CFR 447.510(b), manufacturers have 12 quarters from the quarter in 
which the data were due to revise AMP, if necessary.
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    \1\ https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/mfr-releases/mfr-rel-111.pdf.
    \2\ https://www.medicaid.gov/prescription-drugs/downloads/mfr-rel-112.pdf.
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C. Changes as Result of the Bipartisan Budget Act of 2015

    Under the Medicaid program, states may provide coverage of 
prescribed drugs as an optional service under section 1905(a)(12) of 
the Act. Section 1903(a) of the Act provides for FFP in state 
expenditures for these drugs. Section 1927 of the Act governs the MDRP 
and payment for CODs, which are defined in section 1927(k)(2) of the

[[Page 37288]]

Act. In general, for payment to be made available under section 1903(a) 
of the Act for CODs, manufacturers must enter into an NDRA as set forth 
in section 1927(a) and (b) of the Act. Section 1927 of the Act provides 
specific requirements for rebate agreements, drug pricing submission 
and confidentiality requirements, the formulas for calculating rebate 
payments, and requirements for states for CODs. Section 602 of the 
Bipartisan Budget Act of 2015 (BBA 2015) (Pub. L. 114-74, enacted 
November 2, 2015) amended section 1927(c)(3) of the Act to require that 
manufacturers pay additional rebates on their non-innovator multiple 
source (N) drugs if the average manufacturer prices of an N drug 
increase at a rate that exceeds the rate of inflation. This provision 
of BBA 2015 was effective beginning with the January 1, 2017 quarter, 
or in other words, beginning with the unit rebate amounts (URAs) that 
are calculated for the January 1 2017 quarter. This additional 
inflation adjusted rebate requirement for N drugs was discussed in 
Manufacturer Release Nos. 97 (Manufacturer Release 97) and 
101(Manufacturer Release 101).

D. Current Medicaid Drug Rebate Program and Value-Based Purchasing 
Arrangements (VBP)

    In the preamble of the COD final rule, in response to a comment (81 
FR 5253), we recognized the importance of VBPs, especially when such 
arrangements benefit patients. We acknowledged that, given the 
uniqueness of each VBP arrangement, we had to consider how to provide 
more specific guidance on the matter, including how such arrangements 
affect a manufacturer's calculation of its best price and Medicaid drug 
rebate obligations. Thereafter, we released a state and manufacturer 
notice on July 14, 2016 (available at State Release 176 \3\ and 
Manufacturer Release 99 \4\) to inform states and manufacturers on how 
to seek guidance from us on their specific VBP, as well as to encourage 
states to consider entering into VBP as a means to address high cost 
drug treatments.
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    \3\ https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/state-releases/state-rel-176.pdf.
    \4\ https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/mfr-releases/mfr-rel-099.pdf.
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    Since the release, manufacturers and states have shown an increased 
interest in VBP as a possible option for better managing and predicting 
drug spending, which helps to assure that manufacturers have some 
vested interest in assuring positive patient outcomes from the use of 
their drugs. To this end, CMS has approved several state plan 
amendments submitted by states that allow states to negotiate 
supplemental rebates under CMS-authorized rebate agreements with drug 
manufacturers based on evidence or outcomes-based measures for a 
patient or beneficiary based on use of the drug. In addition, 
manufacturers have approached us with their issues and questions 
regarding the impact of various types of VBP proposals on their MDRP 
price reporting obligations (that is, AMP and best price), as well as 
the regulatory challenges they encounter when structuring and 
implementing VBP. Finally, manufacturers have noted MDRP reporting 
challenges with VBP programs, whose evidence or outcomes-based measures 
extend beyond 3 years, particularly given that manufacturers have 
limited ability to make changes to reporting metrics outside the 12-
quarter MDRP reporting period. This proposed regulation would address 
some of the manufacturer concerns with regards to these MDRP 
requirements.

E. Definition of Line Extension, New Formulation, and Oral Solid Dosage 
Form for Alternative Unit Rebate Amount

    Section 2501(d) of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148, enacted March 23, 2010), as amended by section 1206 
of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 
111-152, enacted March 30, 2010) (collectively referred to as the 
Affordable Care Act) added section 1927(c)(2)(C) of the Act effective 
for drugs paid for by a state on or after January 1, 2010. This 
provision establishes an alternative formula for calculating the URA 
for a line extension of a single source drug or innovator multiple 
source drug that is an oral solid dosage form. We refer to the URA 
calculated under the alternative formula as the ``alternative URA''. 
Additionally, the Affordable Care Act defined ``line extension'' to 
mean, with respect to a drug, a new formulation of the drug, such as an 
extended release formulation. Section 1927(c)(2)(C) of the Act was 
further amended by section 705 of the Comprehensive Addiction and 
Recovery Act of 2016 (CARA) (Pub. L. 114-198, enacted July 22, 2016) to 
exclude from that definition an abuse-deterrent formulation of the drug 
(as determined by the Secretary), regardless of whether such abuse-
deterrent formulation is an extended release formulation. The 
determination of whether a drug is excluded because it is an abuse 
deterrent formulation is explained in at Manufacturer Release 102.\5\ 
The CARA amendment applies to drugs paid for by a state in calendar 
quarters beginning on or after the July 22, 2016 date of enactment of 
CARA (that is, beginning with 4Q 2016). Finally, section 1927(c)(2)(C) 
of the Act was further amended by section 53104 of the BBA of 2018, 
which provided a technical correction such that the rebate for a line 
extension of a single source drug or an innovator multiple source drug 
that is an oral solid dosage form shall be the greater of either (1) 
the standard rebate (calculated as a base rebate amount plus an 
additional inflation-based rebate) or (2) the base rebate amount 
increased by the alternative formula described in section 
1927(c)(2)(C)(iii)(I) through (III) of the Act. We refer to the 
additional inflation-based rebate as the ``additional rebate.'' 
Additionally, as we have previously used the term ``initial brand name 
listed drug'' in the ``Medicaid Program; Covered Outpatient Drugs'' 
proposed rule published in the February 2, 2012 Federal Register (77 FR 
5318, 5323 through 5324) (hereinafter referred to as the February 2, 
2012 proposed rule), the Covered Outpatient Drugs final rule with 
comment published on February 1, 2016 (81 FR 5197), and 42 CFR 
447.509(a)(4)(iii) to refer to the initial single source drug or 
innovator multiple source drug, we continue to do so in this proposed 
rule. The BBA of 2018 amendment applies to rebate periods beginning on 
or after October 1, 2018.
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    \5\ https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/mfr-releases/mfr-rel-102.pdf.
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    We proposed a definition of ``line extension'' in the February 2, 
2012 proposed rule (77 FR 5323 through 5324) and received numerous 
comments from stakeholders. In the COD final rule, we did not finalize 
the proposed definition and requested additional comments with a 60-day 
comment period that closed on April 1, 2016. The additional comments 
received, although instructive of the public's thoughts at the time, 
were not informed by the then-current statutory framework. Therefore, 
we did not finalize a definition of ``line extension'' in the April 1, 
2019 final rule (84 FR 12132). We reiterated in the April 1, 2019 final 
rule that manufacturers are to rely on the statutory definition of 
``line extension'' at section 1927(c)(2)(C) of the Act, and where 
appropriate are permitted to use reasonable assumptions in their 
determination of whether their drug qualifies as a line extension. We 
also stated that if we later decide to develop

[[Page 37289]]

a regulatory definition of ``line extension,'' we would do so through 
our established Administrative Procedures Act (APA) compliant 
rulemaking process and issue a proposed rule. For the reasons discussed 
in section II.C. of this proposed rule, we are proposing definitions of 
``line extension'', ``new formulation'', and ``oral solid dosage 
form''.
    The line extension provision has been in effect since January 1, 
2010, and the Drug Data Reporting for Medicaid (DDR) system was 
modified in 2016 to implement the data reporting requirements for line 
extensions. However, we have found that some manufacturers are unclear 
about their line extension reporting obligations, for example, whether 
a particular drug satisfies the statutory definition of line extension 
and the identification of the initial brand name listed drug. 
Therefore, in addition to proposing definitions of ``line extension'', 
``new formulation'', and ``oral solid dosage form'', we are providing 
clarification below regarding manufacturers' reporting obligations.
    Details regarding how to calculate the additional rebate 
(calculated as a percentage of AMP) and the alternative URA can be 
found in the ``Medicaid Program; Covered Outpatient Drug; Line 
Extension Definition; and Change to the Rebate Calculation for Line 
Extension Drugs'' final rule and interim final rule with comment period 
that was published in the April 1, 2019 Federal Register (84 FR 12133) 
(hereinafter referred to as the April 1, 2019 final rule). We note that 
under Sec.  447.509(a)(4)(iii), manufacturers are required to calculate 
the alternative URA if the manufacturer of the line extension also 
manufactures the initial brand name listed drug or has a corporate 
relationship with the manufacturer of the initial brand name listed 
drug. As noted later in section II.C. of this proposed rule, although a 
drug that meets the definition of a line extension should be identified 
as such in DDR, a manufacturer is not required to calculate the 
alternative URA unless the manufacturer of the line extension also 
manufactures, or has a corporate relationship with the manufacturer of, 
the initial brand name listed drug.
    To apply the alternative formula described in section 
1927(c)(2)(C)(iii)(I) through (III) of the Act for each line extension 
and rebate period, the manufacturer must determine which NDC represents 
the initial brand name listed drug that will be used to calculate the 
alternative URA. First, the manufacturer must identify all potential 
initial brand name listed drugs by their respective NDCs by considering 
all strengths of the initial brand name listed drug in accordance with 
section 1927(c)(2)(C)(iii)(II) of the Act. Additionally, only those 
potential initial brand name listed drugs that are manufactured by the 
manufacturer of the line extension or by a manufacturer with which the 
line extension manufacturer has a corporate relationship should be 
considered. Then, the manufacturer must evaluate the additional rebate 
(calculated as a percentage of AMP) for each potential initial brand 
name listed drug. The potential initial brand name listed drug that has 
the highest additional rebate (calculated as a percentage of AMP) is 
the initial brand name listed drug that must be identified in DDR and 
used to calculate the alternative URA for the rebate period.
    Section 1927(c)(2)(C)(i) of the Act requires the manufacturer to 
calculate the alternative formula for each quarter in order to 
determine the initial drug for each quarter that has the highest 
additional rebate (calculated as a percentage of AMP). Therefore, the 
manufacturer must re-evaluate the additional rebate (calculated as a 
percentage of AMP) for each potential initial brand name listed drug 
each quarter. Because the additional rebate (calculated as a percentage 
of AMP) for any potential initial brand name listed drug may change 
from one quarter to the next, the initial brand name listed drug used 
for the alternative URA calculation may also change from one quarter to 
the next. Additionally, the NDC for the initial brand name listed drug 
must be active in MDRP for the quarter, that is, an NDC that is 
produced or distributed by a manufacturer with an active NDRA and the 
NDC does not have a termination date that occurred in a rebate period 
earlier than the rebate period for which the calculation is being 
performed. Because drugs may come on and off the market, an initial 
brand name listed drug that was used to calculate the alternative URA 
for one quarter may not be active in MDRP for the next quarter. 
However, a different initial brand name listed drug may be active in 
MDRP and available to use to calculate the alternative URA for the next 
quarter.

F. Impact of Certain Manufacturer Sponsored Patient Assistance Programs 
(``PBM Accumulator Programs'') on Best Price and Average Manufacturer 
Price (AMP)

    Manufacturer-sponsored patient assistance programs can be helpful 
to patients in obtaining necessary medications. However, pharmacy 
benefit managers (PBMs) contend that manufacturer-sponsored assistance 
programs steer consumers towards more expensive medications when there 
may be more cost saving options available to health plans. Therefore, 
as a cost saving measure, PBMs have encouraged health plans in some 
cases to not allow the manufacturer assistance provided under such 
programs to be applied towards a patient's health plan deductible for a 
brand name drug not on a plan's formulary. This proposed regulation 
would provide instruction to manufacturers on how to consider the 
implementation of such programs when determining best price and AMP for 
purposes of the MDRP.

G. State Drug Utilization Data (SDUD) Reported to Medicaid Drug Rebate 
Program

    Section 1927(b)(2)(A) of the Act requires each State agency to 
report to each manufacturer not later than 60 days after the end of 
each rebate period and in a form consistent with a standard reporting 
format established by the Secretary, information on the total number of 
units of each dosage form and strength and package size of each covered 
outpatient drug dispensed after December 31, 1990, for which payment 
was made under the plan during the period, including such information 
reported by each Medicaid managed care organization, and shall promptly 
transmit a copy of such report to the Secretary. In accordance with 
this requirement, states are required to send state drug utilization 
data (SDUD) using OMB-approved Rebate Invoice Form, the CMS-R-144 (the 
data fields and descriptions are included as Exhibit X in this proposed 
rule) to manufacturers and transmit a copy of this report to CMS.
    While many states subject their SDUD on the CMS-R-144 to edits in 
order to uncover outliers/inaccuracies in the invoices to manufacturers 
before sending copies to CMS, some states send unedited copies of the 
SDUD to CMS, resulting in discrepancies that do not conform with the 
statutory requirement at section 1927(b)(2)(A) of the Act. The statute 
requires such reporting to be in a form consistent with a standard 
reporting format established by the Secretary, and we believe that such 
a copy means that the data submitted on the invoice (CMS-R-144) to the 
manufacturer must be accurate and identical to the report (copy) states 
send to CMS. Further, we expect that when states send SDUD updates or 
changes to manufacturers, they transmit those changes to us 
concurrently in a copy to CMS. However, in some cases,

[[Page 37290]]

states fail to submit these updates causing the data to be mismatched. 
This results in states not complying with section 1927(b)(2)(A) of the 
Act and CMS not having an accurate account of rebates billed in the 
MDRP.

H. Changes Related to the Substance Use-Disorder Prevention That 
Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and 
Communities Act

    The epidemic of opioid overdose, misuse, and addiction is a 
critical public health issue that affects the lives of millions of 
Americans. Research shows the opioid overdose epidemic has a 
disproportionate impact on Medicaid beneficiaries and the consequences 
have been tragic. In 2017, 47,600 people in America died of an opioid 
overdose per the Centers for Disease Control and Prevention (CDC).\6\ 
Inappropriate opioid prescribing can result in costly medical 
complications such as abuse, misuse, overdoses, falls and fractures, 
drug to drug interactions and neonatal conditions. The use of multiple 
opioids is associated with a higher risk of mortality, with mortality 
risk increasing in direct relation to the number of opioids prescribed 
concurrently.7 8 Beneficiaries who receive multiple opioids 
may lack coordinated care and are at higher risk for opioid 
overdose.\9\ These complications are costly, preventable, and result in 
avoidable healthcare expenditures.\10\ Moreover, according to the 
National Institute on Drug Abuse (NIDA), research suggests that misuse 
of prescription pain relievers may actually open the door to heroin 
use, as four in five new heroin users started out misusing prescription 
painkillers.\11\
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    \6\ https://www.cdc.gov/drugoverdose/data/statedeaths.html.
    \7\ Ray WA, Chung CP, Murray KT, Hall K, Stein CM. Prescription 
of Long-Acting Opioids and Mortality in Patients with Chronic 
Noncancer Pain. JAMA. 2016 Jun 14; 315(22):2415-23.
    \8\ Baumblatt JA, Wiedeman C, Dunn JR, Schaffner W, et al. High-
risk use by patients prescribed opioids for pain and its role in 
overdose deaths. JAMA Intern Med. 2014 May; 174(5):796-801.
    \9\ Bonnie, Richard J., et al. Pain Management and the Opioid 
Epidemic: Balancing Societal and Individual Benefits and Risks of 
Prescription Opioid Use. The National Academies Press, 2017.
    \10\ Davis, Cory. ``Naloxone for Community Opioid Overdose 
Reversal.'' Naloxone for Community Opioid Overdose Reversal [bond] 
Public Health Law Research, Public Health Law Research (PHLR), 22 
June 2015, https://phlr.org/product/naloxone-community-opioid-overdose-reversal.
    \11\ ``Opioid Addiction 2016 Facts & Figures--ASAM Home Page.'' 
American Society of Addition Medicine, www.asam.org/docs/default-source/advocacy/opioid-addiction-disease-facts-figures.pdf.
---------------------------------------------------------------------------

    Since 1993, section 1927(g) of the Act has required each state to 
develop a DUR program targeted, in part, at reducing abuse and misuse 
of outpatient prescription drugs covered under the State's Medicaid 
Program. The DUR program operates to assure that prescriptions are 
appropriate, medically necessary, and are not likely to result in 
adverse medical events. Each state DUR program consists of prospective 
drug use review, retrospective drug use review, data assessment of drug 
use against predetermined standards, and ongoing educational outreach 
activities.
    Consistent with section 1927(g)(3)(D) of the Act, we require each 
state Medicaid Program to submit to us an annual report on the 
operation of its Medicaid DUR program with respect to the fee-for-
service (FFS) delivery system, including information on prescribing 
patterns, cost savings generated by the state's DUR program, and the 
state's DUR program's overall operations, including any new or 
innovative practices. Additionally, Sec.  438.3(s)(4) and (5) require 
state contracts with any managed care organization (MCO), prepaid 
inpatient health plan (PIHP) or prepaid ambulatory health plan (PAHP) 
that covers covered outpatient drugs to require the MCO, PIHP, or PAHP 
to operate a DUR program that complies with section 1927(g) of the Act 
and 42 CFR part 456, subpart K, and to submit detailed information 
about its DUR program activities annually. For the purposes of this 
proposed rule, managed care program (MCP) references MCOs, managed care 
entities (MCEs), PAHPs and PIHPs.
    The Substance Use-Disorder Prevention that Promotes Opioid Recovery 
and Treatment for Patients and Communities Act (Pub. L. 115-271, 
enacted October 24, 2018) (the SUPPORT for Patients and Communities 
Act) includes measures to combat the opioid crisis in part by reducing 
opioid related abuse and misuse by advancing treatment and recovery 
initiatives, improving prevention, protecting communities, and 
bolstering efforts to fight deadly illicit synthetic drugs. There are 
several Medicaid-related DUR provisions for FFS and MCP pharmacy 
programs contained within section 1004 of the SUPPORT for Patients and 
Communities Act. These provisions establish drug review and utilization 
standards in section 1902(a)(85) and (oo) of the Act to supplement 
existing requirements under section 1927(g) of the Act, in an effort to 
reduce opioid-related fraud, misuse and abuse. State implementation of 
these strategies was required by October 1, 2019, and states must 
include information about their implementation in their annual reports 
under section 1927(g)(3)(D) of the Act. In turn, the Secretary is 
required to report to Congress on the information submitted by the 
states, starting with information from states' FY 2020 reports.
    Consistent with section 1927(g) of the Act, the SUPPORT for 
Patients and Communities Act has the goal of improving the quality of 
care received by Medicaid recipients by reducing their exposure to 
hazards resulting from the inappropriate prescribing, gross overuse, or 
inappropriate or medically unnecessary care. In this context, 
strategies to assure the appropriate use of opioids are now being 
implemented in clinical settings, health care systems and public health 
agencies. Efforts to prevent harms associated with overuse and misuse 
of opioids must be integrated to ensure patients are receiving 
appropriate standards of care. We recognize efforts involving multiple 
stakeholders are needed to address the opioid crisis, to assure the 
health and well-being of Medicaid beneficiaries, and decrease any 
related health care expenditures as well as for prevention of future 
epidemics. We are committed to ensuring there are basic minimum 
standards implemented through Medicaid DUR programs nationwide to help 
ensure that prescriptions are appropriate, medically necessary and 
align with current standards of care, under our authority to implement 
section 1927(g) of the Act and section 1004 of the SUPPORT for Patients 
and Communities Act.

I. Single Source Drug, Multiple Source Drug, Innovator Multiple Source 
Drug

    Section 6(c) of the Medicaid Services Investment and Accountability 
Act of 2019 (Pub. L. 116-16, enacted April 18, 2019) modified the 
definitions in section 1927(k) of the Act for single source drug, 
multiple source drug, and innovator multiple source drug. In this 
proposed rule, we propose to revise the definitions of these terms at 
Sec.  447.502 to reflect these statutory changes.

II. Provisions of the Proposed Regulations

A. Third Party Liability: Payment of Claims (Sec.  433.139)

    In 1980, under the authority in section 1902(a)(25)(A) of the Act, 
we issued regulations at 42 CFR part 433, subpart D establishing 
requirements for state Medicaid agencies to support the coordination of 
benefits (COB) effort by identifying TPL. Effective February 9, 2018, 
section 53102(a)(1) of BBA 2018 amended section 1902(a)(25)(E) of the 
Act to require states to cost avoid claims

[[Page 37291]]

(for example, when the state Medicaid agency has determined there is a 
legally liable third party responsible for paying the claim, it will 
reject (``cost avoid'') the claim) for prenatal care for pregnant women 
including labor and delivery and postpartum care, and to allow the 
state Medicaid agency 90 days instead of 30 days to pay claims related 
to medical support enforcement services, as well as requiring states to 
collect information on TPL before making payments. Effective April 18, 
2019, section 7 of the Medicaid Services Investment and Accountability 
Act of 2019 amended section 1902(a)(25)(E) of the Act to allow 100 days 
instead of 90 days to pay claims related to medical support enforcement 
services, as well as requiring states to collect information on TPL 
before making payments.
    Section 433.139(b)(2), (b)(3)(i) and (b)(3)(ii)(B) detail the 
exception to standard COB cost avoidance by allowing pay and chase for 
certain types of care, as well as the timeframe allowed prior to 
Medicaid paying claims for certain types of care. Specifically, we are 
proposing to delete Sec.  433.139(b)(2). We are also proposing to 
revise Sec.  433.139(b)(3)(i) by removing ``prenatal care for pregnant 
women, or'' from pay and chase services, and Sec.  433.139(b)(3)(ii)(B) 
by removing ``30 days'' and adding ``100 days.''

B. Changes To Address Medicaid Access to Drugs Using Value-Based 
Purchasing Arrangements (VBP)

    In the preamble of the COD final rule, in response to a comment in 
the COD final rule (81 FR 5253), we recognized the importance of VBP 
especially when such arrangements benefit Medicaid patients' access to 
drug treatments. We acknowledged that given the uniqueness of each VBP 
arrangement, we had to consider how to provide more specific guidance 
on the matter, including how such arrangements affect a manufacturer's 
best price and Medicaid drug rebate obligations. Thereafter, we 
released a state and manufacturer notice on July 14, 2016 (State 
Release 176 and Manufacturer Release 99) to inform states and 
manufacturers on how to seek guidance from us on their specific VBPs, 
as well as encourage states to consider entering into VBPs as a means 
to address high cost drug treatments.
    Since those releases, manufacturers and states have shown an 
increased interest in VBP as a potential option for better managing and 
predicting drug spending, which helps to assure that manufacturers have 
some vested interest in assuring positive patient outcomes from the use 
of their drugs. However, some manufacturers hesitate to offer VBP 
arrangements to payers, including Medicaid, because of concerns that 
the existing Medicaid covered outpatient drug statute and applicable 
regulations do not specifically address, with respect to price 
reporting, the purchase or discounting of drugs based on evidence or 
outcomes-based measures. That is, CMS has not addressed the possible 
impact of offering VBP arrangements on manufacturer compliance with 
applicable MDRP price reporting obligations, including best price and 
AMP reporting.
    The Administration supports VBP because it believes it will assist 
states with providing Medicaid patients access to needed therapies 
while providing a payment arrangement that allows the state 
flexibility, including an option to only pay when a therapy actually 
works. In order for such arrangements to work for Medicaid, we need to 
consider changes to MDRP regulations to both address manufacturers' 
concerns with offering Medicaid such innovative payment arrangements, 
while ensuring the required economies, efficiencies, and quality of 
care provided under the Medicaid program. If we do not consider such 
changes, manufacturers may be unwilling to offer VBP to Medicaid, which 
in turn will mean Medicaid will not have the advantage of accessing 
these arrangements for some of the drug therapies on the market that 
could replace other more expensive Medicaid services (such as hospital 
and physician-based services). In other words, by addressing a number 
of potential regulatory hurdles in a proposed regulation, states will 
be able to provide such methods and procedures relating to the 
utilization of, and payment for care and services as may be necessary 
to safeguard against unnecessary utilization of such care and services 
and assure that consistent with section 1902(a)(30)(A) of the Act, 
Medicaid payments are consistent with efficiency, economy, and quality 
of care.
    One potential regulatory hurdle manufacturers have raised with us 
is best price reporting. Section 1927(c)(1)(C) of the Act defines best 
price in relevant part to mean with respect to a single source drug or 
innovator multiple source drug of a manufacturer the lowest price 
available from the manufacturer during the rebate period to any 
wholesaler, retailer, provider, health maintenance organization, non-
profit entity, or governmental entity within the United States, with 
certain exclusions enumerated at sections 1927(c)(1)(C)(i)(I) through 
(VI) of the Act. One of the issues manufacturers face in determining 
best price with the advent of VBP arrangements is that a manufacturer's 
best price can be reset based upon the outcome of a drug treatment for 
one patient or one unit of the drug because of the VBP. When this 
occurs, the rebate due for that single use of the drug during a quarter 
that results in a negative outcome will reset the best price to a 
significantly lower amount, sometimes zero, prompting a significantly 
higher rebate (sometimes 100 percent of the drug's AMP).
    This being the case, manufacturers have questioned how they should 
calculate best price and account for these units when an outcome of a 
VBP arrangement results in ``a lowest price available'' of zero or at a 
significant discount. Manufacturers have expressed concern to CMS that 
without further guidance from CMS in regulation regarding the 
determination of best price in this scenario, the manufacturer could be 
at risk of understating rebates and may potentially be subject to False 
Claims Act liability, a risk which further diminishes manufacturer 
interest in offering VBP payment arrangements in either the commercial 
or Medicaid market. In turn, this may hinder Medicaid access to the 
care and services provided as part of these VBP arrangements (for 
example, to gene therapies and potentially curative orphan drug 
treatments) that are available in the general population and that are 
consistent with efficiency, economy, and quality of care in accordance 
with section 1902(a)(30)(A) of the Act.
    We believe this proposed rule proposes changes to the MDRP price 
reporting (in particular best price) to address the regulatory 
challenges manufacturers encounter when structuring and implementing 
VBP, and therefore, gives manufacturers the ability to offer these 
programs to commercial payers or Medicaid without the negative impact 
on best price or the potential for MDRP regulatory compliance.
Subpart I--Payment for Drugs
1. Definitions (Sec.  447.502)
a. Value-Based Purchasing Arrangement (VBP)
    A VBP arrangement is not expressly defined or addressed in section 
1927 of the Act or the MDRP implementing regulations. In order to 
address the issues noted above, we are proposing a definition of VBP to 
apply, as appropriate, in implementation of the MDRP.
    More specifically, we are proposing to define VBP at Sec.  447.502 
to further clarify for manufacturers how discounts,

[[Page 37292]]

rebates, pricing etc. as a result of VBP arrangements should be 
accounted for in a manufacturer's determination of AMP and best price 
for an applicable covered outpatient drug.
    At this time, manufacturers are permitted to make reasonable 
assumptions in the absence of applicable statute, regulation or 
guidance regarding how to treat pricing as a result of VBP. However, 
because of the uncertainty or lack of assurances as to the propriety of 
those reasonable assurances, we understand manufacturers may be 
discouraged from offering VBP to payers including Medicaid. Therefore, 
we propose to define VBP as an arrangement or agreement intended to 
align pricing and/or payments to an observed or expected therapeutic or 
clinical value in a population (that is, outcomes relative to costs) 
and includes (but is not limited to):
     Evidence-based measures, which substantially link the cost 
of a drug product to existing evidence of effectiveness and potential 
value for specific uses of that product;
     Outcomes-based measures, which substantially link payment 
for the drug to that of the drug's actual performance in a patient or a 
population, or a reduction in other medical expenses.
    We have observed that some examples of evidence or outcomes-based 
measures used by manufacturers in their VBP proposals may be derived by 
observing and recording the absence of disease over a period of time, 
reducing a patient's medical spending, or improving a patient's 
activities of daily living thus resulting in reduced non-medical 
spending. In response to the proposed definition of VBP, we welcome 
suggestions for other measures and a rationale for the suggested 
measures that could be used to reflect value from a drug therapy and 
considered as we develop a final definition. We also welcome 
suggestions as to how to interpret ``substantially'' as used in the 
definition. That is, how much of the drug product's final cost should 
be associated with the evidence or outcomes based measure in order for 
the arrangement to be considered a VBP (for example, a drug product 
cost with less than 90 percent of the discounts/rebates tied to the 
drug's performance not be considered a VBP arrangement).
b. Bundled Sale
    As stated earlier, one of the issues manufacturers contend with in 
determining best price with the advent of VBP arrangements is that a 
manufacturer's best price can be reset based upon the outcome of a drug 
treatment for one patient or one unit of the drug because of the VBP 
arrangement. When this occurs, the rebate due for that single use of 
the drug during a quarter that results in a negative outcome will reset 
the best price to a significantly lower amount, sometimes zero, 
prompting a significantly higher rebate (sometimes 100 percent of the 
drug's AMP). We have received stakeholder comments and inquiries 
regarding how rebates or discounts as part of a VBP arrangement could 
be considered in a bundled sale when determining best price. Some 
manufacturers have made reasonable assumptions that such discounts, as 
a result of a VBP, should be considered part of a bundled sale as 
defined at Sec.  447.502.
    In the COD final rule, we defined bundled sale at Sec.  447.502 as 
any arrangement regardless of physical packaging under which the 
rebate, discount, or other price concession is conditioned upon the 
purchase of the same drug, drugs of different types (that is, at the 
nine-digit national drug code (NDC) level) or another product or some 
other performance requirement (for example, the achievement of market 
share, inclusion or tier placement on a formulary), or where the 
resulting discounts or other price concessions are greater than those 
which would have been available had the bundled drugs been purchased 
separately or outside the bundled arrangement. Specifically, the 
discounts in a bundled sale, including those discounts resulting from a 
contingent arrangement, are allocated proportionally to the total 
dollar value of the units of all drugs or products sold under the 
bundled arrangement. Also, for bundled sales where multiple drugs are 
discounted, the current definition indicates that the aggregate value 
of all the discounts in the bundled arrangement must be proportionally 
allocated across all the drugs or products in the bundle. (See Sec.  
447.502; 81 FR at 5182.) We understand that based on the bundled sale 
definition, which provides that the rebate, discount or other price 
concession is conditioned upon the purchase of the same drug, drugs of 
different types, or another product or some other performance 
requirement, some manufacturers have made reasonable assumptions to 
take into account the discounts from a VBP arrangement that has a 
performance requirement when a measure (such as a performance-based 
measure) is not met. When manufacturers recognize the VBP arrangement 
as a bundled sale, the manufacturer, for example, may assume that the 
discount that resulted from a performance requirement of a single unit 
is distributed proportionally to the total dollar value of the units of 
all the drugs sold in the bundled arrangement. This smooths out the 
discount over all the units sold under the arrangement in the rebate 
period and does not reset the manufacturer's best price based upon the 
ultimate price of one unit of a drug.
    For example, a manufacturer could structure a VBP arrangement such 
that to qualify for a patient outcome rebate, the bundled sale VBP 
arrangement requires the sale of 1,000 units of the same drug at $200 
per unit, and if one patient fails to achieve an outcomes-based 
performance measure the manufacturer agrees to a $100 price concession 
on that one unit. In this example, because all of the drugs in the 
bundle were subject to the performance requirement, the manufacturer's 
scheme qualified as a bundled sale VBP arrangement, and thus, the 
manufacturer's rebate of $100 on that one unit would be allocated 
across all units in that bundled sale as follows:

1,000 units x $200 = $200,000-$100 price concession = ($199,900/1,000 
units) = $199.90

    Best price could be set at $199.90 if that $100 rebate available in 
a qualifying bundled sale resulted in the lowest price available from 
the manufacturer, and not at $100 ($200/unit-$100).
    We agree with the applicability of the bundled sale definition in 
this context because it will permit manufacturers to have a best price 
that is not based upon the failure of one patient taking the drug. 
Therefore, in order to facilitate the appropriate application of a 
bundled sale offered in the context of a VBP arrangement to the best 
price determination, we are proposing to revise the definition of 
bundled sale at Sec.  447.502 to add paragraph (3) that states VBP 
arrangements may qualify as a bundled sale, if the arrangement contains 
a performance requirement such as an outcome(s) measurement metric. We 
expect manufacturers, consistent with the manufacturer recording 
keeping requirements at Sec.  447.510(f), to maintain documentation of 
the arrangement to support their calculation of AMP and best price.
2. Definitions--Best Price (Sec.  447.505(a)) and Reporting of Multiple 
Best Prices, Adjustments to Best Price (Sec.  447.505(d)(3))
    In the preamble to the Covered Outpatient Drug Final Regulation (81 
FR 5253), we indicated that we recognized the value of pharmaceutical 
value based purchasing arrangements in the marketplace, and that we 
were

[[Page 37293]]

considering how to give specific guidance on this matter, including how 
such arrangements affect a manufacturer's ``best price.'' In addition 
to CMS, States, manufacturers, and commercial payers all have an 
interest in making new innovative therapies available to patients, and 
we have heard that there are challenges with the current interpretation 
of statutes and regulations with respect to how ``best price'' can 
affect the availability of value based purchasing arrangements. Because 
the statute was drafted more than 30 years ago, when such arrangements 
were not prevalent in the market, it is understandable that such 
interpretations by CMS to date regarding ``best price'' have been 
limited to one ``best price'' per drug.
    The Medicaid statute defines best price in relevant part to mean, 
with respect to a single source drug or innovator multiple source drug 
of a manufacturer, the lowest price available from the manufacturer 
during the rebate period to any wholesaler, retailer, provider, health 
maintenance organization, non-profit entity, or governmental entity 
within the United States, with certain exclusions enumerated at 
sections 1927(c)(1)(C)(i)(I) through (VI) of the Act. Historically, we 
have interpreted this language to result in only one best price per 
drug. The current Medicaid ``best price'' regulation at Sec.  447.505 
generally tracks the statutory language, but reads in relevant part 
that ``best price'' means, for a single source drug or innovator 
multiple source drug, the lowest price available from the manufacturer 
during the rebate period in any pricing structure (including capitated 
payments), in the same quarter for which the AMP is computed (emphasis 
added).
    The current regulation is interpreted further in the preamble 
language to the COD final rule and MDRP releases where we have 
indicated that the lowest price available means ``actually realized'' 
by the manufacturer or the lowest price at which a manufacturer sells a 
[covered outpatient drug]--that is, one lowest price available per 
dosage form and strength of a drug. This interpretation results in 
setting a best price that is either at a greatly reduced price or 
possibly zero if a single dosage form or strength dispensed to one 
patient is subject to a full or very large rebate under a VBP 
arrangement. Thus, we need to reconcile the interpretation of the 
statute in regulation, which currently contemplates that for any 
quarter, the ``best price'' is a single price for each dosage form and 
strength of a drug that represents the actual revenue realized by the 
manufacturer for that drug--in any pricing structure offered by the 
manufacturer (such as capitated payments)--with the realities of the 
current evolving marketplace which contemplate that multiple prices 
could be made available by the manufacturer for a particular drug based 
on the drug's performance (such as the case with VBP arrangements that 
use evidence or outcomes-based measures) in a quarter.
    In that regard, because VBP and other innovative payment 
arrangements sometimes result in various price points for a dosage form 
and strength of a single drug or therapy being available in a quarter, 
we are proposing to reflect this possibility in this proposed rule. 
Specifically, we are proposing that a single drug may be available at 
multiple price points, each of which may establish a ``best price'' 
based on the relevant or applicable VBP arrangement and patient 
evidence-based or outcome-based measures.
    We believe we can do this because we previously interpreted the 
statutory definition of best price at Sec.  447.505(a) to reference the 
best price ``in any pricing structure,'' contemplating the possibility 
of various pricing structures, such as capitated payments. With the new 
VBP pricing structures that are available in the marketplace, we 
believe it is appropriate and reasonable to propose to further 
interpret what pricing structures are available, and account for the 
new VBP pricing structures, which may introduce the offering of a drug 
at multiple price points. That is, we are proposing to expand our 
interpretation of ``in any pricing structure'' and also the term 
``price available'' by proposing that the price realized in a VBP 
arrangement by the manufacturer when a measure is not met for a single 
patient would not reset the best price for the drug in the quarter. 
Rather, we propose that multiple prices could be realized by the 
manufacturer and when a price is realized as a result of a VBP pricing 
structure, multiple price points (price points as a result of a VBP and 
price points absent a VBP) may be reported for one dosage form and 
strength.
    As an example, under VBP, the manufacturer would report a single 
best price for the drug for the quarter for sales of the drug in that 
quarter. In addition, the manufacturer would also report a distinct set 
of ``best prices'' that would be available based on the range of 
evidence-based or outcomes measures for that drug that are possible 
under the VBP arrangement. As an example, the manufacturer could offer 
varying rebates based on a patient's response after the drug is 
administered. The calculated MDRP rebate due to the state using the VBP 
best price would be a function of whether or not the Medicaid rebate is 
being paid on a unit of a drug dispensed to a Medicaid patient that 
participated in a VBP, and the level of rebate associated with that 
patient's outcome. The rebate paid for that patient would only 
represent the amount of rebate due to the state from the manufacturer 
for that patient, not all patients. That is, the rebate would be 
specific to that patient's outcome, as that price is the lowest price 
available from the manufacturer based on that patient's outcomes. 
Otherwise, the best price used in the Medicaid rebate formula would 
mirror the lowest price available absent a VBP arrangement.
    Therefore, we are proposing to further interpret the regulatory 
language ``in any pricing structure'' to include VBP arrangements. 
Then, we are proposing to interpret the statutory and regulatory phrase 
``lowest price available'' as used in the definition of best price, to 
permit, in the context of a VBP arrangement, to include a set of prices 
at which a manufacturer makes a product available based on that pricing 
structure. This being the case, we are proposing that the definition of 
best price be expanded at Sec.  447.505(a) to provide that a lowest 
price available from a manufacturer may include varying best price 
points for a single dosage form and strength as a result of a VBP (as 
defined at Sec.  447.502). We understand the operational challenges 
this may bring to MDRP systems and that it will take us time to make 
such system changes. We welcome comments on this proposal, its impact 
on the MDRP, the commercial market, and its operational implications. 
Specifically, we request comments regarding the potential impact of 
these changes on supporting payment innovation and health care quality. 
We also seek comments on steps which would be needed by manufacturers 
and states to implement these Best Price changes, including how states 
would track health outcomes for Medicaid beneficiaries to align with 
the outcomes developed in a private market VBP.
    Also, to provide consistency between AMP and best price, as we did 
under the Medicaid Program; Covered Outpatient Drugs final rule with 
comment (81 FR 5170), we are proposing to revise Sec.  447.505(d)(3) to 
make it consistent with Sec.  447.504(f)(3). That is, Sec.  
447.504(f)(3) provides that the manufacturer must adjust the AMP for a 
rebate period if cumulative discounts, rebates, or other arrangements 
subsequently adjust the prices actually realized to the extent that 
such cumulative discounts, rebates, or other arrangements are not 
excluded from the

[[Page 37294]]

determination of AMP by statute or regulation. We propose to add a 
similar qualifying phrase at the end of Sec.  447.505(d)(3) to state 
that the manufacturer must adjust the best price for a rebate period if 
cumulative discounts, rebates or other arrangements subsequently adjust 
the prices available, to the extent that such cumulative discounts, 
rebates, or other arrangements are not excluded from the determination 
of best price by statute or regulation. We believe this is consistent 
with the requirement at section 1927(c)(1)(C)(ii)(I) of the Act, which 
provides that best price shall be inclusive of cash discounts, free 
goods that are contingent on any purchase requirement, volume discounts 
and rebates, and therefore, best price must account for these to the 
extent they are not excluded by statute or regulation.

C. Changes To Update Definitions To Reflect Recent Statutory Changes 
Made by Medicaid Services Investment and Accountability Act of 2019 
(Pub. L. 116-16, Enacted April 18, 2019), BBA 2018 and the Affordable 
Care Act

1. Definitions (Sec.  447.502)
a. Innovator Multiple Source Drug
    The Medicaid Services Investment and Accountability Act of 2019 
clarified the definition of innovator multiple source drug at section 
1927(k) of the Act by removing the phrase ``an original new drug 
application'' and inserting ``a new drug application,'' removing ``was 
originally marketed'' and inserting ``is marketed,'' and inserting, ``, 
unless the Secretary determines that a narrow exception applies (as 
described in Sec.  447.502 of title 42, Code of Federal Regulations (or 
any successor regulation))'' before the period. Section 
1927(k)(7)(A)(ii) of the Act now defines innovator multiple source drug 
to mean a multiple source drug that is marketed under a new drug 
application approved by the Food and Drug Administration (FDA), unless 
the Secretary determines that a narrow exception applies (as described 
in Sec.  447.502 (or any successor regulation)). To align the 
regulatory definition with the definition in the statute, as clarified 
by the Medicaid Services Investment and Accountability Act of 2019, we 
are proposing to define innovator multiple source drug in Sec.  447.502 
as a multiple source drug, including an authorized generic drug, that 
is marketed under a new drug application (NDA) approved by FDA, unless 
the Secretary determines that a narrow exception applies (as described 
in this section or any successor regulation). It also includes a drug 
product marketed by any cross-licensed producers, labelers, or 
distributors operating under the NDA and a covered outpatient drug 
approved under a biologics license application (BLA), product license 
application (PLA), establishment license application (ELA) or 
antibiotic drug application (ADA).
b. Line Extension and New Formulation
    Section 1927(c)(2)(C) of the Act defines line extension to mean, 
for a drug, a new formulation of the drug, such as an extended release 
formulation, but does not include an abuse-deterrent formulation of the 
drug (as determined by the Secretary), regardless of whether such abuse 
deterrent formulation is an extended release formulation. As discussed 
earlier in section I.E. of this proposed rule, we proposed to define 
line extension in the February 2, 2012 proposed rule, but did not 
finalize a definition in the COD final rule or the April 1, 2019 final 
rule. We reiterated in the April 1, 2019 final rule that manufacturers 
are to rely on the statutory definition of line extension at section 
1927(c)(2)(C) of the Act, and where appropriate are permitted to use 
reasonable assumptions in their determination of whether their drug 
qualifies as a line extension (81 FR 5265).
    After several years of experience with manufacturers self-reporting 
their line extensions, and numerous inquiries from manufacturers 
regarding the identification of drugs as line extensions, we have noted 
inconsistency among manufacturers in their identification of drugs as 
line extensions. In addition, we are concerned that manufacturers may 
have a financial incentive to be underinclusive in their identification 
of drugs as line extensions because a drug identified as a line 
extension may be subject to a higher rebate. We note that if 
manufacturers underreport their line extensions, rebates may be 
calculated incorrectly and underpaid.
    We believe the line extension provision was codified in statute to 
assure that manufacturers are not circumventing rebate liability by 
creating a line extension drug and avoiding inflation-based additional 
rebates. In order to ensure that section 1927(c)(2)(C) of the Act is 
fully implemented and the universe of line extensions is identified 
consistent with our understanding of Congressional intent, we are 
proposing to provide further interpretation of the statute in this 
proposed rule.
    As an initial matter, we are proposing that only the initial single 
source drug or innovator multiple source drug (the initial brand name 
listed drug) must be an oral solid dosage form. In the 2012 proposed 
rule (77 FR 5338, 5339), we proposed that both the initial brand name 
drug and the line extension drug had to be an oral solid dosage form. 
However, as noted above, we did not finalize a regulatory definition of 
line extension, and instructed manufacturers to make ``reasonable 
assumptions'' regarding whether a drug is a line extension (81 FR 
5265). The statute states that the alternative calculation must be 
performed in the case of a drug that is a line extension of a single 
source drug or an innovator multiple source drug that is an oral solid 
dosage form. Upon further evaluation of this statutory language, we 
believe that the statutory text can be reasonably construed to provide 
that only the initial single source drug or innovator multiple source 
drug must be an oral solid dosage form. We believe this interpretation 
is appropriate because the alternative construction (requiring both the 
line extension and the initial single source drug or innovator multiple 
source drug to be an oral solid dosage form) may inappropriately limit 
the universe of line extension drugs in a manner which would allow a 
manufacturer to circumvent rebate liability when creating a line 
extension and to potentially avoid inflation-based additional rebates, 
in cases where such rebates should apply. Therefore, we are proposing 
that when determining whether a drug is a line extension, only the 
initial single source drug or innovator multiple source drug must be an 
oral solid dosage form. That is, we are proposing that the line 
extension of the initial brand name listed drug does not need to be an 
oral solid dosage form. We believe this is consistent with the 
statutory language and will assist in appropriately identifying drugs 
that may be line extension drugs. Therefore, we are proposing to amend 
Sec.  447.509(a)(4)(i) and (ii) to refer to ``a drug that is a line 
extension of a single source drug or an innovator multiple source drug 
provided that the initial single source drug or innovator multiple 
source drug is an oral solid dosage form,'' and Sec. Sec.  
447.509(a)(4)(i)(A) and (a)(4)(ii)(A) to refer to ``a single source 
drug or an innovator multiple source drug'' in the regulatory text that 
describes the alternative rebate calculation.
    In response to requests to provide more specific guidance on how to 
identify a line extension drug, we are proposing to define ``line 
extension'' and ``new formulation'' at Sec.  447.502. Specifically, we 
are proposing that as provided in section 1927(c)(2)(C) of the

[[Page 37295]]

Act, the term ``line extension'' means, for a drug, a new formulation 
of the drug, but does not include an abuse-deterrent formulation of the 
drug (as determined by the Secretary).
    Additionally, we are proposing to define ``new formulation'' to 
mean, for a drug, any change to the drug, provided that the new 
formulation contains at least one active ingredient in common with the 
initial brand name listed drug. New formulations, (for the purpose of 
determining if a drug is a line extension) would not include abuse 
deterrent formulations but would include, but would not be limited to: 
Extended release formulations); changes in dosage form, strength, route 
of administration, ingredients, pharmacodynamics, or pharmacokinetic 
properties; changes in indication accompanied by marketing as a 
separately identifiable drug (for example, a different NDC); and 
combination drugs, such as a drug that is a combination of two or more 
drugs or a drug that is a combination of a drug and a device. We are 
requesting comments about whether a drug approved with a new indication 
that is not separately identifiable should be considered a new 
formulation and, if so, how such a drug could be identified in DDR for 
purposes of calculating the alternative URA.
    We note that under Sec.  447.509(a)(4)(iii), manufacturers are 
required to calculate the alternative URA if the manufacturer of the 
line extension also manufactures the initial brand name listed drug or 
has a corporate relationship with the manufacturer of the initial brand 
name listed drug. Although a drug may satisfy the definition of line 
extension, and should therefore be identified in DDR as a line 
extension, a manufacturer is not required to calculate the alternative 
URA unless the manufacturer of the line extension also manufactures, or 
has a corporate relationship with the manufacturer of the initial brand 
name listed drug.
    Based on the definition of line extension that was included in the 
Affordable Care Act, we believe that the statute gives us discretion 
and authority to interpret the term ``line extension'' broadly. We are 
expressly soliciting comments on our proposed definitions of ``line 
extension'' and ``new formulation,'' specifically on whether these 
terms should be interpreted more narrowly. Moreover, if stakeholders 
believe that a narrower interpretation is appropriate, we are 
soliciting comments on how to identify those drugs that constitute a 
line extension and a new formulation to apply the alternative URA 
calculation when required by statute.
i. Combination Drugs
    The statutory definition of line extension does not expressly 
exclude combination drugs, such as a drug that is a combination of two 
or more drugs or a drug that is a combination of a drug and a device, 
and, as noted previously in this rule, our proposed definition of new 
formulation includes combination drugs provided that the new 
formulation contains at least one active ingredient in common with the 
initial brand name listed drug.
    As noted in the COD final rule (81 FR 5197, 5265 through 5267), we 
received numerous comments regarding our proposal in the February 2, 
2012 proposed rule to include combination drugs in the definition of 
line extension. In particular, commenters were concerned that our 
proposal required sharing of proprietary pricing information with 
competitors. We believe that the commenters' concerns have been 
mitigated by Sec.  447.509(a)(4)(iii), which requires the additional 
rebate to be calculated only if the manufacturer of the line extension 
also manufactures the initial brand name listed drug or has a corporate 
relationship with the manufacturer of the initial brand name listed 
drug. Therefore, we are clarifying that while our proposed definition 
of new formulation includes combination drugs, the alternative URA 
calculation is only required under Sec.  447.509(a)(4)(iii) for a 
rebate period if the manufacturer of the line extension also 
manufactures the initial brand name listed drug or has a corporate 
relationship with the manufacturer of the initial brand name listed 
drug.
    Furthermore, we note that in the event that the initial brand name 
listed drug is a combination drug, neither the statutory definition of 
line extension nor our proposed definitions of line extension or new 
formulation exclude new formulations of combination drugs. For example, 
if an initial brand name listed drug is a combination drug consisting 
of a previously approved drug plus a new molecular entity, and FDA 
subsequently approves a new drug consisting only of the new molecular 
entity, then we would consider the new drug to be a new formulation of 
the initial brand name listed drug because it would constitute a change 
to the initial brand name listed drug and contains at least one active 
ingredient in common with the initial brand name listed drug.
    As stated previously, we believe we have the discretion and 
authority to include a broad range of drugs as a line extension, 
including combination drugs. However, we are also aware that some 
combination drugs appear to be slightly different than an existing drug 
while other combination drugs are very different drugs than the initial 
brand name listed drug. For example, if a new combination drug contains 
a new molecular entity in combination with a previously approved drug, 
the resultant new combination may appear to be very different from the 
initial brand name listed drug, however, we believe that it is a new 
formulation of an initial brand name listed drug. Conversely, we 
believe that a new combination of two previously approved drugs, or a 
combination of a previously approved drug and a non-drug product (for 
example, a dietary supplement or a device), may not be a significant 
alteration even though it also is a new formulation of an initial brand 
name listed drug. Given that different stakeholders have differing 
thoughts on what constitutes a new formulation of an initial brand name 
listed drug, and CMS is attempting to provide a reasonable 
interpretation of the statute to define or describe what constitutes a 
change that should be considered a new formulation, we are soliciting 
comments that may provide a way to define and identify those 
combination drugs that should be identified as line extensions while 
excluding those combination drugs that should not be so identified.
ii. New Strengths
    In the COD final rule (81 FR 5267), we indicated that we do not 
consider new strengths of the same formulation of the initial brand 
name listed drug to be a line extension because section 1927(c)(2)(C) 
of the Act does not expressly contemplate that a new strength is a line 
extension. As noted previously in this proposed rule though, we did not 
finalize a regulatory definition of line extension, and instructed 
manufacturers to make ``reasonable assumptions'' regarding whether a 
drug is a line extension. As noted in section I.E. of this proposed 
rule, we are proposing to interpret the definition of line extension 
more broadly, which includes proposing a much broader definition of new 
formulation. The statutory definition of line extension does not 
expressly exclude a new strength of a drug, and we believe a change in 
strength is a relatively simple modification to a currently marketed 
product. Furthermore, changing the strength of an initial brand name 
listed drug allows a manufacturer to establish a new base date AMP, 
thereby avoiding inflation

[[Page 37296]]

based rebate liability, which may incentivize a manufacturer to change 
the strength of a drug that is losing its exclusivity or patent 
protection to prolong the lifecycle of the drug, preventing money 
saving generic substitution. Therefore, consistent with the intent of 
the statute, we believe that a new strength of a drug, produced or 
distributed at a later time than the initial strength(s), should be 
identified as a line extension and made subject to the line extension 
alternative URA calculation. Therefore, as noted in section I.E. of 
this proposed rule, our proposed definition of new formulation includes 
changes in strength.
iii. New Indication
    In the February 2, 2012 proposed rule, we proposed that a drug 
approved with a new indication for an already approved drug would be a 
line extension (77 FR 5323). We received several comments stating that 
the proposal was not feasible because the approval of a new indication 
for an already approved drug may not result in a different drug product 
and it would not be logical that a drug is a line extension of itself. 
Additional comments noted that it is not possible to apply the 
alternative line extension calculation to rebate invoices for an NDC 
only for those claims that were prescribed the newly approved 
indication. We agree that if following the approval of a new indication 
a manufacturer markets its drug in such a way that it is not a 
separately identifiable drug product the alternative URA calculation 
would not apply. However, if following the approval of a new indication 
the manufacturer markets the drug in such a way that it is a separately 
identifiable drug product, we are proposing that the alternative URA 
calculation would apply. Thus, as discussed previously in this proposed 
rule, our proposed definition of new formulation includes changes in 
indication accompanied by marketing as a separately identifiable drug 
(for example, a different NDC).\12\ We are requesting comments about 
whether a drug approved with a new indication that is not separately 
identifiable should be considered a new formulation and, if so, how 
such a drug could be identified in DDR for purposes of calculating the 
alternative URA.
---------------------------------------------------------------------------

    \12\ An NDC comprises three segments. The first segment is a 
labeler code, associated with the labeler, the second segment is a 
product code, which in association with a specific labeler code 
identifies the product, and the third segment is a package code, 
which, in association with the preceding segments, identifies the 
package size and type. For purposes of reporting to the MDRP, FDA's 
10-digit NDC must be converted to an 11-digit NDC. The 9-digit NDC 
cited here is a combination of the labeler code plus the product 
code. FDA requirements for an NDC are at 21 CFR 207.33.
---------------------------------------------------------------------------

    We believe that Congress included the alternative URA calculation 
for a line extension in order to address changes to a drug that allow a 
manufacturer to avoid inflation-based additional rebates by 
establishing a new market date and base date AMP for the drug. We agree 
with the comments suggesting that if there is a change to a drug but 
that drug is not separately identifiable, then it is not feasible for 
the manufacturer to identify the drug as a line extension and perform 
an alternative URA calculation.
c. Oral Solid Dosage Form
    Oral solid dosage form is defined at Sec.  447.502 to mean 
capsules, tablets, or similar drugs products intended for oral use as 
defined in accordance with FDA regulation at 21 CFR 206.3 that defines 
solid oral dosage form. As we now have more experience reviewing and 
dealing with the line extension provisions from the Affordable Care 
Act, we believe that manufacturers may not be interpreting the term 
oral solid dosage form consistently. To mitigate any potential 
confusion, we believe that manufacturers and other stakeholders would 
benefit from a more detailed definition. In this proposed rule, we are 
proposing to modify the definition of oral solid dosage form.
    In the COD final rule (81 FR 5198), CMS interpreted an oral route 
of administration as any drug that is intended to be taken by mouth. 
Because there is potential confusion about whether a dosage form must 
be swallowed, or otherwise enter the gastrointestinal tract in order to 
be considered an orally administered dosage form, we are proposing to 
interpret that an oral form of a drug is one that enters the oral 
cavity. This includes, but is not limited to, a tablet or film 
administered sublingually and a drug that is orally inhaled. We believe 
that this interpretation provides greater clarity to stakeholders 
regarding what constitutes an oral form of a drug.
    Additionally, we believe that manufacturers may not be interpreting 
the term solid dosage form consistently. To mitigate any potential 
confusion, we are proposing to interpret that a solid dosage form is a 
dosage form that is neither a gas nor a liquid.
    The FDA regulation at 21 CFR 206.3 defines the term ``solid oral 
dosage form'' for the purpose of identifying drugs for which a code 
imprint is required to permit identification of the product. The phrase 
``capsules, tablets or similar drugs products'' may not encompass the 
range of dosage forms that we believe should be considered for the 
application of the line extension provision in the Affordable Care Act. 
For example, a sublingual film is an oral solid dosage form; however, 
because of the physical attributes of the dosage form, there may not be 
a requirement to imprint an identifying code on the dosage form. 
Another example of an oral solid dosage form is a powdered drug 
administered by oral inhalation. Therefore, we are proposing to modify 
the definition of oral solid dosage form at Sec.  447.502 to read that 
it is an orally administered dosage form that is not a liquid or gas at 
the time the drug enters the oral cavity. Additionally, an oral solid 
dosage form that incorporates a medical device would not be exempt from 
this definition solely due to the addition of a device to the oral 
solid dosage form. For example, if a manufacturer adds a device to a 
tablet, the new drug would not be exempt from being a line extension 
solely due to the addition of a device to the tablet.
d. Multiple Source Drug
    The Medicaid Services Investment and Accountability Act of 2019 
clarified the definition of multiple source drug in section 1927(k) of 
the Act by removing ``(not including any drug described in paragraph 
(5))'' and inserting ``, including a drug product approved for 
marketing as a non-prescription drug that is regarded as a covered 
outpatient drug under paragraph (4),''. Section 1927(k)(7)(A)(i) of the 
Act now provides that the term multiple source drug means, with respect 
to a rebate period, a covered outpatient drug, including a drug product 
approved for marketing as a non-prescription drug that is regarded as a 
covered outpatient drug under section 1927(k)(4) of the Act for which 
there is at least 1 other drug product which: Is rated as 
therapeutically equivalent (under FDA's most recent publication of 
``Approved Drug Products with Therapeutic Equivalence Evaluations''), 
except as provided in section 1927(k)(7)(B) of the Act, is 
pharmaceutically equivalent and bioequivalent, as defined in section 
1927(k)(7)(C) of the Act and as determined by FDA, and is sold or 
marketed in the United States during the period.
    We are proposing to revise the definition of multiple source drug 
at Sec.  447.502 to align with the statutory definition. Specifically, 
we are proposing to revise the definition of multiple source drug to 
mean, for a rebate period, a covered outpatient drug, including a drug 
product approved for marketing as a non-prescription drug that is 
regarded as a covered outpatient

[[Page 37297]]

drug under section 1927(k)(4) of the Act, for which there is at least 1 
other drug product which meets all the following criteria:
     Is rated as therapeutically equivalent (under the FDA's 
most recent publication of ``Approved Drug Products with Therapeutic 
Equivalence Evaluations'' which is available at https://www.accessdata.fda.gov/scripts/cder/ob/).
     Except as provided at section 1927(k)(7)(B) of the Act, is 
pharmaceutically equivalent and bioequivalent, as defined at section 
1927(k)(7)(C) of the Act and as determined by the FDA.
     Is sold or marketed in the United States during the 
period.
e. Single Source Drug
    The Medicaid Services Investment and Accountability Act of 2019 
clarified the definition of single source drug in section 1927(k) of 
the Act by removing the phrase ``an original new drug application'' and 
inserting ``a new drug application'', inserting ``, including a drug 
product approved for marketing as a non-prescription drug that is 
regarded as a covered outpatient drug under paragraph (4),'' after 
``covered outpatient drug'', inserting ``unless the Secretary 
determines that a narrow exception applies (as described in Sec.  
447.502 of title 42, Code of Federal Regulations or any successor 
regulation))'' after ``under the new drug application'' and adding 
language to specify that such term also includes a covered outpatient 
drug that is a biological product licensed, produced, or distributed 
under a biologics license application approved by the FDA. Section 
1927(k)(7)(A)(iv) of the Act now defines a single source drug to mean a 
covered outpatient drug, including a drug product approved for 
marketing as a non-prescription drug that is regarded as a covered 
outpatient drug under section 1927(k)(4) of the Act, which is produced 
or distributed under a new drug application approved by the FDA, 
including a drug product marketed by any cross-licensed producers or 
distributors operating under the new drug application unless the 
Secretary determines that a narrow exception applies (as described in 
Sec.  447.502 or any successor regulation) and the term includes a 
covered outpatient drug that is a biological product licensed, 
produced, or distributed under a biologics license application approved 
by the FDA. To align the regulatory definition with the definition in 
the statute at section 1927(k)(7)(A)(iv) of the Act, as clarified by 
the Medicaid Services Investment and Accountability Act of 2019, we are 
proposing to revise the regulatory definition of single source drug at 
Sec.  447.502. We are proposing to define single source drug in Sec.  
447.502 to mean a covered outpatient drug, including a drug product 
approved for marketing as a non-prescription drug that is regarded as a 
covered outpatient drug under section 1927(k)(4) of the Act, which is 
produced or distributed under a new drug application approved by the 
FDA, including a drug product marketed by any cross-licensed producers 
or distributors operating under the new drug application unless the 
Secretary determines that a narrow exception applies (as described in 
Sec.  447.502 or any successor regulation) and includes a covered 
outpatient drug that is a biological product licensed, produced, or 
distributed under a biologics license application approved by the FDA.
e. CMS-Authorized Supplemental Rebate Agreements
    States may enter into separate or supplemental drug rebate 
agreements as long as such agreements achieve drug rebates equal to or 
greater than the drug rebates set forth under the national drug rebate 
agreement. See section 1927(a)(1) of the Act. CMS approval to enter 
directly into such agreements with manufacturers is required under 
section 1927(a)(1) of the Act, and thus, states are required to use the 
state plan amendments process as a means to seek CMS authorization. 
Supplemental rebates must be considered a reduction in the amount 
expended under the State plan in the quarter for medical assistance as 
provided at section 1927(b)(1)(B) of the Act. See program guidance at 
https://www.medicaid.gov/federal-policy-guidance/downloads/smd091802.pdf.
    The Affordable Care Act revised section 1927(b)(1)(A) of the Act to 
require that manufacturers provide rebates for covered outpatient drugs 
dispensed to individuals enrolled with a Medicaid MCO when the 
organization is responsible for coverage of such drugs. At that time, 
states had to re-assess whether or not to directly collect supplemental 
rebates related to covered outpatient drugs dispensed to Medicaid 
managed care enrollees if the MCO was responsible for such drug 
coverage. Some states required their MCOs to collect and share 
supplemental rebates under the CMS-authorized supplemental rebate 
agreement, while other states permitted their MCOs to negotiate their 
own rebates with manufacturers outside of the CMS-authorized 
supplemental rebate agreement, allowing the MCO to keep the savings 
generated by the supplemental rebates.
    The Affordable Care Act amendment to section 1927(b)(1)(A) of the 
Act also prompted some manufacturers to make assumptions with regard to 
AMP and best price calculations. Specifically, manufacturers made 
assumptions that all supplemental rebates paid by manufacturers for 
prescriptions dispensed to Medicaid managed care enrollees should be 
excluded from the manufacturer's determination of AMP and best price. 
That included those rebates paid directly to Medicaid MCOs, even if 
those rebates were not a result of a CMS-authorized supplemental rebate 
agreement, and therefore, not shared with the state or eventually used 
to offset state drug expenditures prior to claiming Federal financial 
participation (FFP) from the federal government. Since CMS-authorized 
supplemental rebate agreement is not defined as it is used at 
Sec. Sec.  447.504(c)(19) and (e)(9) and 447.505(c)(7), manufacturers 
assumed that any supplemental rebates paid based on dispensing to 
Medicaid managed care enrollees are always a part of a CMS-authorized 
supplemental rebate agreement with the states. However, rebates paid to 
Medicaid MCOs may be paid by manufacturers that are not part of a CMS-
authorized rebate agreement and are not shared with the state to offset 
drug expenditures prior to claiming FFP. Therefore, in order to clarify 
that such rebates paid by manufacturers are not part of a state's CMS-
authorized supplemental rebate agreement, we propose to define CMS-
authorized supplemental rebate agreement to mean an agreement that is 
approved through a state plan amendment (SPA) by CMS, which allows a 
state to enter into single and/or multi-state supplemental drug rebate 
arrangements that generate rebates that are at least as large as the 
rebates set forth in the Secretary's national rebate agreement with 
drug manufacturers.
    Furthermore, and consistent with section 1927(b)(1)(B) of the Act 
which provides that the amounts received by a State under subsection 
(a)(1) (Federal rebates) or an agreement under (a)(4) (the existing 
state rebates) in any quarter shall be considered to be a reduction in 
the amount expended under the State plan in the quarter for medical 
assistance for purposes of section 1903(a)(1) of the Act. The proposed 
definition further states that the revenue from these rebates must be 
paid directly to the state and be used by the state to offset a state's 
drug expenditures resulting in shared savings with the Federal 
government.

[[Page 37298]]

D. Exclusion of Certain Manufacturer Sponsored Patient Assistance 
Programs (``PBM Accumulator Programs'') From Determination of Best 
Price (Sec.  447.505) and Average Manufacturer Price (AMP) (Sec.  
447.504)

    Manufacturers participating in the MDRP are required to report 
certain pricing information to the Secretary, including a covered 
outpatient drug's best price and AMP. Best price is defined at section 
1927(c)(1)(C) of the Act to mean, with respect to a single source or 
innovator multiple source drug of a manufacturer (including the lowest 
price available to any entity for any such drug of a manufacturer that 
is sold under a new drug application approved under section 505(c) of 
the Federal, Food, Drug and Cosmetic Act), the lowest price available 
from the manufacturer during the rebate period to any wholesaler, 
retailer, provider, health maintenance organization, nonprofit entity, 
or government entity within the United States, subject to certain 
exclusions. Section 1927(c)(1)(C)(ii) of the Act further defines the 
term best price to be inclusive of cash discounts, free goods that are 
contingent on any purchase requirement, volume discounts, and rebates 
(other than rebates under this section). The definition of best price 
is further defined at Sec.  447.505(a) and includes the lowest price 
available from the manufacturer during the rebate period to any 
provider, which is defined to mean a hospital, HMO, MCO, or entity that 
provides coverage or services to individuals for illnesses or injuries 
or providers services or items in the provision of healthcare. 
Paragraph (b) further indicates that best price includes all prices, 
including applicable discounts, rebates, or other transactions that 
adjust prices either directly or indirectly to the best price eligible 
entities in paragraph (a).
    We have learned that some health plans (which meet the definition 
of provider when determining best price) are being instructed or 
encouraged by their pharmacy benefit managers (PBMs) to apply 
manufacturer sponsored patient assistance programs, such as patient 
copay assistance programs, to the benefit of the plan, instead of 
entirely to the patient. (Note that Medicaid patients are not eligible 
for these manufacturer patient assistance programs, but the 
administration of these programs by commercial health plans and PBMs 
can affect the rebates that the Medicaid program receives from the 
manufacturer-sponsor of these programs.)
    For example, certain PBMs have instructed health plans to not allow 
the manufacturer copay assistance to be applied towards a patient's 
plan deductible for a brand name drug not on a plan's formulary. PBMs 
contend that such programs steer consumers towards more expensive 
medications when there may be more cost saving options, such as generic 
substitution. Therefore, PBMs offer health plans that are commonly 
referred to as PBM accumulator programs and tout them as cost saving 
measures. For instance, using a copayment assistance card program as an 
example, instead of applying the manufacturer sponsored patient 
assistance program in a manner that bestows the entire benefit of the 
program to the patient or consumer, and ensures no contingency on a 
purchase requirement, as applicable, the PBM (on behalf of the plan) 
identifies when a copayment card is used by a patient and adjusts the 
beneficiary's deductible only in instances when the out-of-pocket 
contribution is made by the beneficiary. As a result, the manufacturer 
assistance does not accrue towards a patient's deductible and the 
patient sometimes does not realize this until the manufacturer 
copayment assistance runs out and the patient receives a significantly 
larger bill for the drug. This results in the health plan delaying the 
application of its plan benefit to the patient to the detriment of the 
patient or consumer, thus generating savings for the plan. We provide 
an illustration below:

Example:

Assume:
    $2500--Drug cost
    $2500--Patient Deductible
    $10,000--Copayment Assistance Program Maximum
Copay Assistance Program With No PBM Accumulator Program
    In this scenario, the manufacturer's copayment assistance accrues 
to the benefit of the patient because the patient has a high 
deductible, which is what we believe the manufacturer intended. In such 
cases, it is clear that the manufacturer's program is directly 
assisting the patient's copayment/deductible costs.

                        Table 1--Copay Assistance Program With No PBM Accumulator Program
----------------------------------------------------------------------------------------------------------------
                                   Jan             Feb            Mar          Apr          May          June
----------------------------------------------------------------------------------------------------------------
Plan Pays....................           $0  $2000...........        $2000        $2000        $2000        $2000
Patient Pays.................           25  25..............           25           25           25           25
Manufacturer Pays............         2475  475 deductible            475          475          475          475
                                             reached.
                                             Manufacturer
                                             only pays $475.
----------------------------------------------------------------------------------------------------------------

Copay Assistance Program With PBM Accumulator Program
    In the PBM accumulator scenario, the PBM does not apply the 
manufacturer's copayment assistance to the deductible of the patient 
thus delaying the patient satisfying his/her deductible, which benefits 
the health plan. The patient usually is not aware of the change until 
he/she is subject to a larger cost share of the drug when the 
manufacturer's support copay benefit maximum is reached (see May 
column). At that time, the patient receives a significantly a larger 
bill.

                         Table 2--Copay Assistance Program With PBM Accumulator Program
----------------------------------------------------------------------------------------------------------------
                                   Jan          Feb          Mar          Apr             May            June
----------------------------------------------------------------------------------------------------------------
Plan Pays....................           $0           $0           $0           $0  $0..............        $2000
Patient Pays.................           25           25           25           25  2400............          500
Manufacturer Pays............         2475         2475         2475         2475  100 manufacturer            0
                                                                                    copay benefit
                                                                                    max. reached.
----------------------------------------------------------------------------------------------------------------


[[Page 37299]]

    As demonstrated by the example above, the health plan is benefiting 
from the manufacturer sponsored copay assistance program instead of the 
patient (consumer). However, manufacturers, in these instances, claim 
they are not aware of when these practices by the health plans take 
place, and therefore, make reasonable assumptions that their discount 
programs meet the criteria at Sec.  447.505(c) that exclude such 
programs from best price.
    Specifically, manufacturers make reasonable assumptions that their 
programs meet the best price exclusions listed in Sec.  447.505(c)(8) 
through (12) which provide:
     Manufacturer-sponsored drug discount card programs, but 
only to the extent that the full value of the discount is passed on to 
the consumer and the pharmacy, agent, or other entity does not receive 
any price concession. Sec.  447.505(c)(8).
     Manufacturer coupons to a customer redeemed by a consumer, 
agent, pharmacy, or another entity acting on behalf of the 
manufacturer; but only to the extent that the full value of the coupon 
is passed on to the consumer, and the pharmacy, agent, or other entity 
does not receive any price concession. Sec.  447.505(c)(9).
     Manufacturer copayment assistance programs, to the extent 
that the program benefits are provided entirely to the patient and the 
pharmacy, agent, or other entity does not receive any price concession. 
Sec.  447.505(c)(10).
     Manufacturer-sponsored patient refund or rebate programs, 
to the extent that the manufacturer provides a full or partial refund 
or rebate to the patient for out-of-pocket costs and the pharmacy, 
agent or other entity does not receive any price concession. Sec.  
447.505(c)(11).
     Manufacturer-sponsored programs that provide free goods, 
including but not limited to vouchers and patient assistance programs, 
but only to the extent that the voucher or benefit of such program is 
not contingent on any other purchase requirement; the full value of the 
voucher or benefit of such program is passed on to the consumer; and 
the pharmacy, agent or other entity does not receive any price 
concession. Sec.  447.505(c)(12).
    However, we understand from some manufacturers that they do not 
monitor or place parameters around how the benefits of their 
manufacturer sponsored assistance programs are applied when an 
individual has health plan coverage. Therefore, we are proposing to 
revise these paragraphs to provide expressly that the exclusions 
discussed above apply only to the extent the manufacturer ensures the 
full value of the assistance or benefit is passed on to the consumer or 
patient. We believe manufacturers have the ability to establish 
coverage criteria around their manufacturer assistance programs to 
ensure the benefit goes exclusively to the consumer or patient. We note 
that nothing in this proposed change should be construed to contradict 
any OIG guidance. We welcome comments on this proposal.
    The current list of prices excluded from best price as noted above 
also apply to AMP as specified in Sec.  447.504(c) and (e). As stated 
in the COD final rule, in order to provide consistency between the AMP 
and best price sections, where applicable, and to help with 
streamlining and clarifying a manufacturer's price reporting 
responsibilities, the same methodology is applied to AMP (81 FR 5253), 
and for the same reasons already discussed above, we are making a 
corresponding proposal with respect to these exclusions in the context 
of AMP.
    Accordingly, we are proposing to revise the determination of best 
price Sec.  447.505 to add a requirement that manufacturers ensure that 
the benefits of their assistance programs as provided at Sec.  
447.505(c)(8) through (12) are provided entirely to the consumer and 
are proposing corresponding changes to the AMP regulations at Sec.  
447.504(c)(25) through (29) and (e)(13) through (17).

E. Authorized Generic Drugs (Sec. Sec.  447.502, 447.504, 447.506)

    The Continuing Appropriations Act of 2020, and Health Extenders Act 
of 2019 (Health Extenders Act) made changes to section 1927(k) of the 
Act, revising how manufacturers calculate the AMP for a covered 
outpatient drug for which the manufacturer permits an authorized 
generic to be sold. Manufacturers that approve, allow, or otherwise 
permit any drug to be sold under the manufacturer's own new drug 
application approved under section 505(c) of the Federal Food, Drug, 
and Cosmetic Act shall no longer include those sales of these 
authorized generics in the calculation of AMP.
    Specifically, section 1603 of Health Extenders Act, which is 
titled--Excluding Authorized Generic Drugs from Calculation of Average 
Manufacturer Price for Purposes of the Medicaid Drug Rebate Program; 
Excluding Manufacturers from Definition of Wholesaler, amended:
     Section 1927(k)(1)(C) of the Act to replace the term 
``inclusion'' with ``exclusion'' in the title and further amended 
subparagraph (C) to read (emphasis added)--In the case of a 
manufacturer that approves, allows, or otherwise permits any drug of 
the manufacturer to be sold under the manufacturer's new drug 
application approved under section 505(c) of the Federal Food, Drug, 
and Cosmetic Act, such term shall be exclusive of the average price 
paid for such drug by wholesalers for drugs distributed to retail 
community pharmacies.
     The definition of wholesaler at section 1927(k)(11) of the 
Act to remove references to manufacturers from the definition of 
wholesaler.
    The amendments to section 1927 of the Act authorized under section 
1603 of the Health Extenders Act are effective October 1, 2019. 
Therefore, manufacturers must reflect the changes to the calculation of 
their AMPs for rebate periods beginning October 1, 2019 (reported to 
CMS no later than 30 days after the end of the rebate period). 
Furthermore, in accordance with 42 CFR 447.510(b), manufacturers have 
12 quarters from the quarter in which the data were due to revise AMP, 
if necessary.
    Therefore, in accordance with the statutory amendments to section 
1927(k)(1)(C) and (k)(11) of the Act described above, we are proposing 
to revise Sec. Sec.  447.502, 447.504, and 447.506 as they apply to AMP 
and authorized generic sales as follows:
     We are proposing to revise Sec.  447.502 to change the 
definition of wholesaler to reflect the revised statutory definition of 
wholesaler at section 1927(k)(11) of the Act. Wholesaler has been 
revised to remove any reference to ``manufacturer(s)'' consistent with 
the changes to the definition of wholesaler made by section 1603(b) of 
the Health Extenders Act. We are proposing the term ``Wholesaler'' to 
mean a drug wholesaler that is engaged in wholesale distribution of 
prescription drugs to retail community pharmacies, including but not 
limited to repackers, distributors, own-label distributors, private-
label distributors, jobbers, brokers, warehouses (including 
distributor's warehouses, chain drug warehouses, and wholesale drug 
warehouses), independent wholesale drug traders, and retail community 
pharmacies that conduct wholesale distributions.
     Since the definition of wholesaler at section 1927(k)(11) 
of the Act no longer includes manufacturers, we further propose to 
remove from the list of sales, nominal price sales, and associated 
discounts, rebates, payments or other financial transactions included 
in AMP, sales to other manufacturers who act as wholesalers for drugs 
distributed to

[[Page 37300]]

retail community pharmacies at Sec.  447.504(b)(2). The nominal price 
sales, and associated discounts, rebates, payments or other financial 
transactions included in AMP in accordance with Sec.  447.504(d) (AMP 
for 5i drugs that are not generally dispensed through retail community 
pharmacies) do not change because the statute at 1927(k)(1)(C) only 
speaks to authorized generic sales from the manufacturer to wholesalers 
that distribute to retail community pharmacies.
     We propose to revise Sec.  447.506, which provides 
specific requirements to manufacturers regarding the treatment of 
authorized generic drug sales when determining AMP and best price. For 
purposes of those calculations, the current regulation defines primary 
manufacturer as the manufacturer that holds the NDA of the authorized 
generic drug and the secondary manufacturer as the manufacturer that is 
authorized by the primary manufacturer to sell the drug, but does not 
hold the NDA. The regulation further requires that the primary 
manufacturer must include in its calculation of AMP its sales of 
authorized generic drugs that have been sold or licensed to a secondary 
manufacturer, acting as a wholesaler for drugs distributed to retail 
community pharmacies, or when the primary manufacturer holding the NDA 
sells directly to a wholesaler. The Health Extenders Act revised the 
definition of wholesaler at 1927(k)(11) of the Act by removing 
``manufacturer'' and revised the determination of AMP at section 
1927(k)(1)(C) of the Act by replacing the term ``inclusion'' with 
``exclusion'' in the title and further amended paragraph (C) to state, 
in the case of a manufacturer that approves, allows, or otherwise 
permits any drug of the manufacturer to be sold under the 
manufacturer's new drug application approved under section 505(c) of 
the Federal Food, Drug, and Cosmetic Act, such term shall be exclusive 
of the average price paid for such drug by wholesalers for drugs 
distributed to retail community pharmacies. Therefore, we are proposing 
to revise Sec.  447.506(b) to replace the word ``Inclusion'' with 
``Exclusion'' in the first sentence and replace the second sentence in 
its entirety to state that the primary manufacturer (as defined at 
Sec.  447.506(a)) must exclude from its calculation of AMP any sales of 
authorized generic drugs to wholesalers for drugs distributed to retail 
community pharmacies when reporting the AMP of the brand name drug.
    More specifically, we are proposing that a separate AMP is 
determined for the brand drug, which shall be exclusive of any 
authorized generic sale, and a separate AMP shall be generated for the 
authorized generic. As discussed previously in this proposed rule, 
typically, an authorized generic is a product that a manufacturer 
(primary manufacturer) allows another manufacturer (secondary 
manufacturer) to sell under the primary manufacturer's FDA approved New 
Drug Application (NDA) but under a different National Drug Code (NDC) 
number. The authorized generic is typically the primary manufacturer's 
brand product offered at a lower price point. Primary manufacturers may 
sell the authorized generic product to the secondary manufacturer they 
are allowing to sell an authorized generic of their brand product, and 
such sales are commonly referred to as transfer sales. Primary 
manufacturers have included those transfer sales in the determination 
of the brand product's AMP. Under the amendments made to section 1927 
of the Act, a primary manufacturer that sells the authorized generic 
version of the brand drug to the secondary manufacturer can no longer 
include the price of the transfer sale of the authorized generic to the 
secondary manufacturer in its calculation of AMP for the brand product. 
The exclusion of these transfer sales from the primary manufacturer's 
brand drug AMP will likely result in higher AMPs for the brand drugs 
and a potential increase to a manufacturer's Medicaid drug rebates to 
states. To assist manufacturers, we provided guidance in Manufacturer 
Release #111 and Manufacturer Release #112. In turn, we received 
inquiries as to what is meant by ``In the case of a manufacturer that 
approves, allows, or otherwise permits any drug of the manufacturer to 
be sold under the manufacturer's new drug application approved under 
section 505(c) of the Federal Food, Drug, and Cosmetic Act, such term 
shall be exclusive of the average price paid for such drug by 
wholesalers for drugs distributed to retail community pharmacies.'' 
Specifically, we received questions regarding when a primary 
manufacturer itself, or an affiliate of the manufacturer is also 
producing the authorized generic, and whether, such a case, constitutes 
``a case of a manufacturer that approves, allows, or otherwise 
permits'' the drug to be sold under the manufacturer's NDA, such that 
the exclusion applies. And if not, whether the primary manufacturer may 
include the average price paid for the authorized generic when 
calculating AMP for the brand drug. We believe that irrespective of the 
relationship between the manufacturer of the brand drug, and the 
manufacturer of the authorized generic, if the primary manufacturer 
``approves, allows, or otherwise permits'' is the drug to be sold under 
the primary manufacturer's NDA, then the AMP for the brand should be 
calculated separately from (not include) the sales of the authorized 
generic. That is, it would not matter whether the manufacturer being 
approved, allowed, or otherwise permitted to sell the drug under the 
primary manufacturer's NDA was the same, affiliated or non-affiliated.
    Therefore, we are interpreting section 1927(k)(1)(C) of the Act, 
which provides that in the case of a manufacturer approves, allows, or 
otherwise permits any of its drugs to be sold under the same NDA, the 
AMP for that brand drug shall be exclusive of the average price paid 
for such drug by wholesalers for drugs distributed to retail community 
pharmacies, to mean a separate AMP should be calculated for each drug 
product--that is, one AMP for the brand drug, and one AMP for the 
authorized generic product, and the AMP for the brand drug should 
always exclude sales of the authorized generic product. This includes a 
situation when it is the same manufacturer making both the brand name 
drug and authorized generic, or if the drugs are being manufactured by 
different, but affiliated manufacturers or even non-affiliated 
manufacturers. We are proposing a policy that applies irrespsective of 
a specific brand manufacturer's sales arrangement.
    The amendments made by section 1603 of the Health Extenders Act are 
effective October 1, 2019. Therefore, manufacturers are required to 
reflect the changes to the calculation of their AMPs for rebate periods 
beginning October 1, 2019 (reported to CMS no later than 30 days after 
the end of the rebate period). Furthermore, in accordance with Sec.  
447.510(b), manufacturers have 12 quarters from the quarter in which 
the data were due to revise AMP, if necessary.

F. Medicaid Drug Rebates (MDR) (Sec.  447.509)

    Manufacturers that participate in the MDRP are required to pay 
rebates for covered outpatient drugs that are dispensed to Medicaid 
patients. The rebates are calculated based on formulas described in 
section 1927(c) of the Act. As described in section I. of this proposed 
rule, the BBA 2015 made revisions to the statutory rebate formula for 
covered outpatient drugs other than single source or innovator multiple 
source drugs. That is, section 602 of BBA 2015, amended section 
1927(c)(3)

[[Page 37301]]

of the Act to require that manufacturers pay additional rebates on 
their covered outpatient drugs other than single source or innovator 
multiple source drugs (non-innovator multiple source (N) drugs) when 
the AMP of the N drug increases at a rate that exceeds the rate of 
inflation. The amendments made by section 602 of BBA 2015, were 
effective beginning with the January 1, 2017 quarter (that is, first 
quarter of 2017). The implementation of these amendments was discussed 
in Manufacturer Release 97 and Manufacturer Release 101.
    Prior to the enactment of BBA 2015, the basic quarterly URA 
calculation for N drugs was equal to 13 percent of a drug's quarterly 
AMP. However, section 602(a) of BBA 2015 amended section 1927(c)(3) of 
the Act by adding an inflation-based additional rebate requirement to 
the URA for N drugs, which is similar to the additional rebate applied 
to single source (S) and innovator multiple source (I) drugs.
    To calculate the additional rebate portion of the URA calculation 
for N drugs, section 602(a) of BBA 2015 amended section 1927 of the Act 
to establish a base AMP or base date AMP value for N drugs based, in 
part, upon each N drug's market date. In general, for N drugs marketed 
on or before April 1, 2013, the base date AMP is equal to the third 
quarter of 2014 and the Base CPI-U is the CPI-U for September 2014. For 
N drugs marketed after April 1, 2013, the base date AMP is equal to the 
AMP for the fifth full calendar quarter after which the drug is 
marketed as a drug other than a single source or innovator multiple 
source drug and the base CPI-U is equal to the CPI-U for the last month 
of the base AMP quarter.
    We are proposing to revise Sec.  447.509 to codify the rebate 
formulas in regulation. Specifically, we are proposing to revise 
paragraph (a)(6) to distinguish the basic rebate for N drugs from this 
additional rebate. In addition, we are proposing to add paragraph 
(a)(7) to expressly include the additional rebate calculation for N 
drugs. We are proposing that in addition to the basic rebate under 
paragraph (a)(6), for each dosage form and strength of a N drug, the 
rebate amount will increase by an amount equal to the product of the 
following: The total number of units of such dosage form and strength 
paid for under the State plan in the rebate period, and the amount, if 
any, by which the AMP for the dosage form and strength of the drug for 
the period exceeds the base date AMP for such dosage form and strength, 
increased by the percentage by which the consumer price index for all 
urban consumers (United States city average) for the month before the 
month in which the rebate period begins exceeds such index associated 
with the base date AMP of the drug. We also are proposing to add 
paragraph (a)(8) to capture the that the total rebate amount for 
noninnovator multiple source drugs is equal to the basic rebate amount 
plus the additional rebate amount, if any.
    In addition to the proposed regulatory changes related to section 
602 of BBA 2015 amendments noted above, we also propose to amend Sec.  
447.509 at:
     Paragraph (a)(5) to specify that in no case will the total 
rebate amount exceed 100 percent of the AMP of the single source or 
innovator multiple source drug; and
     By adding paragraph (a)(9) to specify that in no case will 
the total rebate amount exceed 100 percent of the AMP of the 
noninnovator multiple source drug.
     We also added to paragraph (a)(7)(B) to state that the 
base date AMP has the meaning of AMP set forth in sections 
1927(c)(2)(A)(ii)(II), 1927(c)(2)(B) and 1927(c)(3)(C) of the Act as 
the regulation did not provide a specific definition of base date AMP 
for calculating the additional rebate. We believe it is reasonable to 
include this in regulation in order to provide further clarity for 
manufacturers and states with regard to the calculation of the 
additional rebate, and to ensure the appropriate product data and 
pricing information is submitted to CMS.

G. Requirements for Manufacturers (Sec.  447.510)

    In accordance with section 1927(b)(3) of the Act and the terms of 
the NDRA, manufacturers are required to report pricing information to 
CMS on a timely basis or face a penalty. Current regulations at Sec.  
447.510 implement the manufacturer price reporting requirements 
including the timing of revisions to pricing data. The current 
regulation at 42 CFR 447.510(b)(1) requires that the revision to 
pricing data be made within the 12 quarters from which the data were 
due, unless it meets one of the exceptions in paragraphs (i) through 
(v).
    As previously discussed in section II.B. of this proposed rule, VBP 
has evolved into a possible option for states and manufacturers to help 
manage drug expenditures. Many VBP arrangements or pay-over-time models 
may be better suited for periods longer than 12 quarters, and 
manufacturers entering into such arrangements may need to adjust AMPs 
and best prices beyond the 12 quarters because the evidence-based or 
outcomes-based measures are being measured beyond a period of 12 
quarters or a final installment payment is being made outside of the 12 
quarters. With this evolution it has become apparent that certain 
manufacturer reporting requirements could be viewed as an impediment to 
adopting VBP arrangements. For instance, under current regulations, a 
manufacturer would not be able to account for any adjustments to prices 
that may occur outside of the 12 quarters because of VBP arrangements 
(or even pay-over-time models), as required.
    The definition of AMP at section 1927(k)(1)(B)(ii) of the Act, 
indicates that any other discounts, rebates, payments or other 
financial transactions that are received by, paid by, or passed through 
to retail community pharmacies shall be included in AMP for a covered 
outpatient drug. The special rules in section 1927(c)(1)(C)(ii) of the 
Act define best price to be inclusive of cash discounts, free goods 
that are contingent on any purchase requirement, volume discounts and 
rebates. Since manufacturers are required to report AMP and best price 
that capture these statutory required financial transactions, including 
such financial transactions (for example, rebates, incremental 
payments) that are a result of VBP arrangements or pay-over-time 
models, and such pricing structures may be designed to result in 
transactions taking place outside of the 3-year window, we are 
proposing to add Sec.  447.510(b)(1)(vi) to specify an additional 
exception to the 12-quarter rule to account for the unique nature of 
VBP arrangements and pay-over-time models. Specifically, we are 
proposing that the manufacturer may make changes outside of the 12-
quarter rule as a result of a VBP arrangement when the outcome must be 
evaluated outside of this 12-quarter period.

G. Requirements for States (Sec.  447.511)

    Section 1927(b)(2)(A) of the Act requires that states be held 
responsible to report to each manufacturer not later than 60 days after 
the end of each rebate period and in a form consistent with a standard 
reporting format established by the Secretary, information on the total 
number of units of each dosage form and strength and package size of 
each covered outpatient drug dispensed after December 31, 1990, for 
which payment was made under the plan during the period, including such 
information reported by each Medicaid managed care organization, and 
shall promptly transmit a copy of such report to the Secretary. The 
accuracy and timeliness of this SDUD report is important for the MDRP, 
other programs, and legislative efforts including, but not limited to:

[[Page 37302]]

     Actuarial and cost impact projections of legislative or 
regulatory changes to the MDRP;
     The calculation of Medicaid's portion of the branded 
prescription drug fee specified at section 9008 of the ACA); and
     Ongoing audits that demonstrate that some states still 
fail to bill rebates for physician-administered drugs (PADs), although 
it has been 13 years since the requirement began.
    States are required to send invoices (CMS-R-144 Medicaid Drug 
Rebate Invoice) to each manufacturer in the MDRP for which payment was 
made on behalf of the state and federal government for the 
manufacturers' drugs, or in the case of MCOs, drugs dispensed to a 
beneficiary in a rebate period. States are required to send a copy of 
their SDUD (a summary report of their invoice utilization data) to CMS 
each quarter. If a state makes an adjustment to a rebate invoice, the 
state is required to send an updated SDUD to us in the same reporting 
period in which the manufacturer received the adjustment.
    We have found that some states do not have sufficient edits in 
place to detect, reject and investigate SDUD outliers, which may 
distort the rebate amounts due by manufacturers. This results in states 
overbilling manufacturers and generating disputes on rebate invoices; 
imposing resource burdens on manufacturers, states, CMS, and other MDRP 
partners, as well as interrupting the payment of rebates to states and 
CMS. Many states seemingly fail to implement needed system edits to 
identify such disputes prior to billing manufacturers. Although both 
overbilling and underbilling must be disputed, manufacturers often 
neglect to dispute instances of rebate underbilling.
    We have also found that many states do not send the same SDUD to 
CMS as they transmit to manufacturers. In fact, some states send us 
``pre-edited'' SDUD, while the manufacturer's rebate invoice contains 
edited data. These practices do not comply with Sec.  447.511(b), which 
requires that states submit the same SDUD to us on a quarterly basis 
that they transmit to the manufacturers. As we move to implement new 
systems, we expect to put in place data error screening to better 
reject or alert identified potential inaccuracies to SDUD. States 
should also be improving current systems and planning updates to future 
systems to better identify and correct inaccurate SDUD before reporting 
to manufacturers and CMS.
    To better hold states accountable for their data integrity and to 
mitigate the effects of inaccurate and untimely SDUD, we are proposing 
to revise Sec.  447.511. Specifically, we are proposing to revise 
paragraph (a) to specify that any subsequent updates or changes in the 
data on the CMS-R-144 must be included in the state's utilization data 
submitted to CMS. We are also proposing to revise paragraph (b) to 
state that, on a quarterly basis, the state must submit drug 
utilization data to CMS, which will be the same information as 
submitted to the manufacturers on the CMS-R-144, as specified in Sec.  
447.511(a). In addition, to conform to the statutory requirement at 
section 1927(b)(2)(A) of the Act, we are proposing to add in regulatory 
text that the state data submission will be due no later than 60 days 
after the end of each rebate period. In the event that a due date falls 
on a weekend or federal holiday, the submission will be due on the 
first business day following that weekend or federal holiday. We also 
propose that any adjustments to previously submitted data would be 
transmitted to the manufacturer and CMS in the same reporting period.
    We are also proposing to add Sec.  447.511(d) to specify that the 
state data must be certified by the state Medicaid director (SMD), the 
deputy state Medicaid director (DSMD), or an individual other than the 
SMD or DSMD, who has authority equivalent to an SMD or DSMD or an 
individual with the directly delegated authority to perform the 
certification on behalf of the individuals noted above.
    We are also proposing to add Sec.  447.511(e) to specify the state 
data certification language that must be included in the submission. 
That is, each data submission by a state must include the following 
certification language: I hereby certify, to the best of my knowledge, 
that the state's data submission is complete and accurate at the time 
of this submission, and was prepared in accordance with the state's 
good faith, reasonable efforts based on existing guidance from CMS, 
section 1927 of the Act and applicable federal regulations. I further 
certify that the state has transmitted data to CMS, including any 
adjustments to previous rebate periods, in the same reporting period as 
provided to the manufacturer. Further, the state certifies that it has 
applied any necessary edits to the data for both CMS and the labeler to 
avoid inaccuracies at both the NDC/line item and file/aggregate level. 
Such edits are to be applied in the same manner and in the same 
reporting period to both CMS and the manufacturer.

H. State Plan Requirements, Findings and Assurances (Sec.  447.518)

    Traditionally, states have utilized the supplemental rebate 
agreement (SRA) pathway to secure additional rebates over and above the 
federal rebate required of manufacturers participating in the MDRP. In 
order to do so, the Secretary must authorize a state to enter directly 
into these agreements with a manufacturer in accordance with section 
1927(a)(1) of the Act. In accordance with section 1927(a)(1) of the 
Act, we require states to submit a state plan amendment for a SRA which 
includes a template of the SRA providing the framework for the 
agreement the state has with the manufacturer. A CMS-authorized SRA 
provides the parameters the state and manufacturer agree upon regarding 
the supplemental rebates, most importantly, that such rebates are at 
least as large as the rebates required by the federal government in 
accordance with 1927(a)(4) of the Act.
    To make new and expensive innovative drugs more available to 
Medicaid patients, states are permitted to use a SRA pathway to 
negotiate VBP agreements with manufacturers that are intended to be 
financially beneficial for Medicaid. As with a traditional SRAs, these 
VBP SRAs must be financially advantageous for states, but must also 
include an evidence or outcomes-based measure. As with any other SRA, 
states are required to seek a SPA approval for a VBP SRA in accordance 
with section 1927(a)(1) of the Act. Through the SRA SPA process, a 
state, when approved by CMS, can enter into VBP SRAs directly with 
manufacturer(s) for both FFS and MCO covered outpatient drug claims. 
Under the SRA VBP arrangement, the state may need set up processes to 
report the results of the evidence or outcomes-based measures of the 
patient back to the manufacturer. This could require the state to take 
on additional responsibilities and expense in order to eventually 
collect a rebate, such as tracking the patient, collecting data on the 
patient (such as the results of evidence or outcomes-based measures) or 
providing services to the patient.
    We understand that more states want to develop their own VBP 
arrangements, but states want to better understand the challenges, 
resources and costs to structure these programs and make them 
successful. In addition, given that we have a significant interest in 
the success of these innovative VBP programs, as well as the nature of 
the drugs that are subject to these agreements, we have an interest in 
helping evaluate these programs' effectiveness. To accomplish

[[Page 37303]]

this, we want to create a mechanism to exchange information about state 
VBP programs. This approach is consistent with section 1902(a)(30)(A) 
of the Act which requires that methods and procedures be established 
relating to the utilization of, and the payment for, care and services 
available under the plan (including but not limited to utilization 
review plans) as may be necessary to safeguard against unnecessary 
utilization of such care and services and to assure that payments are 
consistent with efficiency, economy, and quality of care.
    Therefore, in accordance with section 1902(a) of the Act, we 
propose that states provide to us specific data elements associated 
with these VBP SRAs to ensure that payments associated with Medicaid 
patients receiving a drug under a VBP structure are consistent with 
efficiency, economy, and quality of care. To that end, we propose 
adding Sec.  447.511(d)(1) and (2) to specify that a state 
participating in a VBP arrangement report data as specified on a yearly 
basis, and within 60 days of the end of each year, including the 
following data elements:
     State.
     National Drug Code(s) (for the drugs covered under the 
VBP).
     Product FDA list name.
     Number of prescriptions.
     Cost to the state to administer VBP (for example, systems 
changes, tracking outcomes, etc.).
     Total savings generated by the supplemental rebate due to 
VBP.
    We invite comments on this approach and are particularly interested 
in understanding from states the burden with such a proposal and from 
all commenters whether the data elements are appropriate and useful 
with the goals of the proposal that we have laid out above.

I. Drug Utilization Review (DUR) Program and Electronic Claims 
Management System for Outpatient Drug Claims (Sec. Sec.  456.700 
Through 456.725), Managed Care Standard Contract Requirements and 
Requirements for MCOs, PIHPs, or PAHPs That Provide Covered Outpatient 
Drugs (Sec.  438.3(s))

    Section 1004 of the SUPPORT for Patients and Communities Act 
requires states to implement certain opioid-specific drug use review 
(DUR) standards within their fee-for-service (FFS) and managed care 
programs. These requirements supplement prior DUR standards under 
section 1927(g) of the Act. In Medicaid, DUR involves the structured, 
ongoing review of healthcare provider prescribing, pharmacist 
dispensing, and patient use of medication. DUR involves a comprehensive 
review of patients' prescription and medication data and dispensing to 
help ensure appropriate medication decision making and positive patient 
outcomes. Potentially inappropriate prescriptions, unexpected and 
potentially troublesome patterns, data outliers, and other issues can 
be identified when reviewing prescriptions through prospective DUR or 
retrospective DUR activities. In Prospective DUR, the screening of 
prescription drug claims occurs to identify problems such as 
therapeutic duplication, drug-disease contraindications, incorrect 
dosage or duration of treatment, drug allergy and clinical misuse or 
abuse prior to dispensing of the prescription to the patient. 
Retrospective DUR involves ongoing and periodic examination and reviews 
of claims data to identify patterns of inappropriate use, fraud, abuse, 
or medically unnecessary care and facilitates corrective action when 
needed. Often times, these activities are synergistic; information 
gleaned through retrospective DUR claim reviews can be used to shape 
effective safety edits that can be implemented through prospective DUR, 
better enabling prescribers and dispensers to investigate prescription 
concerns prior to dispensing the medication to the patient. From 
prospective alerts (which can incorporate information from the 
beneficiary's claims data), potential issues can be identified to help 
promote the appropriate prescription and dispensing of outpatient drugs 
to beneficiaries. DUR programs play a key role in helping health care 
systems understand, interpret, and improve the prescribing, 
administration, and use of medications.
    Section 1902 of the Act, as amended by section 1004 of the SUPPORT 
for Patients and Communities Act, requires states to implement safety 
edits and claims review automated processes for opioids as DUR 
requirements. We interpret ``safety edits'' to refer to the prospective 
DUR review specified in section 1927(g)(2)(A) of the Act. These 
prospective safety edits provide for identifying potential problems at 
point of sale (POS) to engage both patients and prescribers about 
identifying and mitigating possible opioid misuse, abuse, and overdose 
risk at the time of dispensing. The POS safety edits provide real-time 
information to the pharmacist prior to the prescription being dispensed 
to a patient, but do not necessarily prevent the prescription from 
being dispensed. When a safety edit is prompted, the pharmacist 
receives an alert and may be required, as dictated by good clinical 
practice and predetermined standards determined by the state, to take 
further action to resolve the alert before the prescription can be 
dispensed.\13\ A claims review automated process, which we interpret to 
refer to as a retrospective DUR review) as defined in section 
1927(g)(2)(B) of the Act, provides for additional examination of claims 
data to identify patterns of fraud, abuse, gross overuse, or 
inappropriate or medically unnecessary care. Retrospective reviews 
often involve reviews of patient drug and disease history generated 
from claims data after prescriptions have been dispensed to the 
beneficiary. For many retrospective reviews, in an effort to promote 
appropriate prescribing and utilization of medications, claims data is 
evaluated against state determined criteria on a regular basis to 
identify recipients with drug therapy issues, enabling appropriate 
action to be taken based on any issues identified. After these reviews, 
prescribers often have the opportunity to review prescriptions and 
diagnosis history and make changes to therapies based on the 
retrospective review intervention. Retrospective claims reviews provide 
access to more comprehensive information relevant to the prescriptions 
and services that are being furnished to beneficiaries and better 
enable and encourage prescribers and dispensers to minimize opioid risk 
in their patients, and assure appropriate pain care.
---------------------------------------------------------------------------

    \13\ Prada, Sergio. (2019). Comparing the Medicaid Prospective 
Drug Utilization Review Program Cost-Savings Methods Used by State 
Agencies in 2015 and 2016. American Health and Drug Benefits. 12. 7-
12.
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    Many of the proposed safety edits and reviews described in this 
proposed rule are designed to implement requirements outlined in the 
SUPPORT for Patients and Communities Act. The purpose of these safety 
edits and claims reviews is to prompt prescribers and pharmacists to 
conduct additional safety reviews to determine if the patient's opioid 
use is appropriate and medically necessary. Provisions to address 
antipsychotic utilization in children and fraud and abuse requirements 
are also included in the SUPPORT for Patient and Communities Act and 
are measures designed to enhance appropriate utilization of medication. 
We recognize that the SUPPORT for Patients and Communities Act provides 
considerable flexibility for states to specify particular parameters of 
the safety edits, claims review automated processes, program for 
monitoring use of antipsychotic

[[Page 37304]]

medications in children, and process for identifying fraud and abuse. 
Additionally, we acknowledge that many states already have effective 
DUR processes and other controls in place, and that section 
1902(oo)(1)(E) of the Act (as added by section 1004 of the SUPPORT for 
Patients and Communities Act) clarifies that states may meet new 
opioid-related requirements with such safety edits, claims review 
automated processes, programs, or processes as were in place before 
October 1, 2019. However, to ensure a consistent baseline of minimum 
national standards for these DUR activities, while preserving 
appropriate flexibility for the states to determine their particular 
parameters and implementation, we believe it is necessary under our 
authority to implement section 1927(g) of the Act, to assure that 
prescriptions are appropriate, medically necessary, and not likely to 
result in adverse medical results, to codify in regulation the proposed 
safety edits, claims review automated processes, program for monitoring 
antipsychotic medications in children, and fraud and abuse process 
requirements as described in this proposed rule. Accordingly, the 
provisions of this proposed rule would implement opioid-related 
requirements established in the SUPPORT for Patients and Communities 
Act and further implement requirements under section 1927(g) of the 
Act, in an effort to reduce prescription-related fraud, misuse and 
abuse.
    In addition to codifying the SUPPORT for Patients and Communities 
Act requirements, we are proposing additional minimum DUR standards in 
this proposed rule that states would be required to implement as part 
of their DUR programs. Specifically, section 1927 of the Act provides 
for drug use review programs for covered outpatient drugs to assure 
that prescriptions (1) are appropriate, (2) are medically necessary, 
and (3) are not likely to result in adverse medical results. 
Accordingly, under our authority to implement section 1927(g) of the 
Act and consistent with the goals of the SUPPORT for Patients and 
Communities Act to assure the appropriate use of prescription opioids, 
we are proposing minimum standards for DUR reviews related to 
medication assisted treatment (MAT) and identification of beneficiaries 
who could be at high risk of opioid overdose for consideration of 
naloxone prescribing or dispensing.
    We also are seeking comments on potential additional standards that 
we might implement through future rulemaking, to ensure minimally 
adequate DUR programs that help ensure prescribed drugs are: 
Appropriate, medically necessary, and not likely to result in adverse 
medical results. We are interpreting adverse medical results to include 
medication errors or medical adverse events, reactions and side 
effects. We anticipate that any such additional standards would be 
clinically based and scientifically valid and developed with state 
collaboration, standards development organizations, and entities that 
support Medicaid DUR programs, and would help ensure all states have 
established a reasonable and appropriate DUR program. Such proposed 
standards would align with current clinical guidelines and could 
address the following: Maintaining policies and systems to assist in 
preventing over-utilization and under-utilization of prescribed 
medications, establishing quality assurance measures and systems to 
reduce medication errors and adverse drug interactions, and improving 
medication compliance and overall well-being of beneficiaries. We are 
considering other mechanisms to encourage states to adopt additional 
DUR standards in a timely manner to respond to new and emerging issues 
in drug use, as the rulemaking process can be a lengthy process. For 
example, we are considering issuing possible future suggested ``best 
practices'' or guidance for states in advance of and in anticipation of 
rulemaking. We are seeking comments on the best processes for 
collaboratively developing future minimum DUR standards and are seeking 
comments from states and other stakeholders on potential approaches.
    The early signs of the opioid crisis emerged years ago, with 
groundwork for the crisis being laid in the late 1990s, when providers 
began to prescribe opioid analgesics at greater rates, which led to 
widespread misuse and abuse of both prescription and illegal opioids. 
After what the CDC characterizes as a ``first wave'' of opioid deaths, 
a second wave followed in 2010, involving heroin, with a third wave 
beginning in 2013 involving overdoses from synthetic opioids.\14\ CDC 
data indicate that from 1999 through 2017, almost 400,000 people died 
from an overdose involving any opioid, including prescription and 
illicit opioids.\15\ In 2018, there was an additional 67,367 drug 
overdose deaths occurred in the United States. The age-adjusted rate of 
overdose deaths decreased by 4.6 percent from 2017 (21.7 per 100,000) 
to 2018 (20.7 per 100,000). Opioids--mainly synthetic opioids (other 
than methadone)--are currently the main driver of drug overdose deaths. 
Opioids were involved in 46,802 overdose deaths in 2018 (69.5 percent 
of all drug overdose deaths) \16\ and two out of three (67.0 percent) 
opioid-involved overdose deaths involved synthetic opioids.\17\
---------------------------------------------------------------------------

    \14\ ``Understanding the Epidemic.'' Centers for Disease Control 
and Prevention, Centers for Disease Control and Prevention, 19 Dec. 
2018, https://www.cdc.gov/drugoverdose/epidemic/.
    \15\ ``Understanding the Epidemic.'' Centers for Disease Control 
and Prevention, Centers for Disease Control and Prevention, 19 Dec. 
2018, www.cdc.gov/drugoverdose/epidemic/.
    \16\ Hedegaard H, Mini[ntilde]o AM, Warner M. Drug Overdose 
Deaths in the United States, 1999-2018.pdf icon NCHS Data Brief, No 
356. Hyattsville, MD: National Center for Health Statistics. 2020.
    \17\ Wilson N, Kariisa M, Seth P, et al. Drug and Opioid-
Involved Overdose Deaths--United States, 2017-2018. MMWR Morb Mortal 
Wkly Rep 2020;69:290-297.
---------------------------------------------------------------------------

    In a 2016 informational bulletin titled, ``Best Practices for 
Addressing Prescription Opioid Overdoses, Misuse and Addiction'' CMS 
issued guidance to states to outline both how to help curb the opioid 
crisis,\18\ and in 2019 guidance was issued on how states can use 
statutory authority to expand the treatment of pain through 
complementary and integrative approaches.\19\ Another section of the 
SUPPORT for Patients and Communities Act, section 6032, has directed 
HHS to collaborate with the Pain Management Best Practices Inter-Agency 
Task Force (PMTF), to develop an Action Plan on payment and coverage in 
Medicare and Medicaid for acute and chronic pain, and substance use 
disorders, informed by a Request for Information and a public meeting 
held at CMS in September, 2019.\20\ The Action Plan is related to CMS's 
Fighting the Opioid Crisis Roadmap, which describes our three-pronged 
approach to managing pain using a safe and effective range of treatment 
options that rely less on prescription opioids, expanding treatment for 
OUD, and using data to target prevention efforts and identify fraud and 
abuse.\21\
---------------------------------------------------------------------------

    \18\ ``Best Practices for Addressing Prescription Opioid 
Overdoses, Misuse and Addiction.'' CMCS Informational Bulletin 
available at www.medicaid.gov/federal-policy-guidance/downloads/CIB-02-02-16.pdf.
    \19\ ``Medicaid Strategies for Non-Opioid Pharmacologic and Non-
Pharmacologic Chronic Pain Management.'' CMCS Informational Bulletin 
at https://www.medicaid.gov/sites/default/files/federal-policy-guidance/downloads/cib022219.pdf.
    \20\ ``Request for Information for the Development of a CMS 
Action Plan to Prevent Opioid Addiction and Enhance Access to 
Medication-Assisted Treatment.'' CMCS request for information 
available at https://www.cms.gov/About-CMS/Story-Page/Opioid-SUPPORT-Act-RFI.pdf.
    \21\ ``CMS Roadmap: Fighting the Opioid Crisis.'' Available at 
https://www.cms.gov/About-CMS/Agency-Information/Emergency/Downloads/Opioid-epidemic-roadmap.pdf.
---------------------------------------------------------------------------

    In 2018, the SUPPORT for Patients and Communities Act was passed as

[[Page 37305]]

part of a bipartisan effort to address the opioid crisis, as well as 
the treatment of pain. The practice of chronic pain management and the 
opioid crisis have influenced one another as each has evolved in 
response to different influences and pressures. At the same time CMS 
seeks to implement these requirements, we want to ensure Medicaid 
beneficiaries with chronic pain can work with their health care 
providers to optimize function, quality of life, and productivity while 
minimizing risks for opioid misuse and harm such as addiction and 
overdose.\22\ Therefore, we are considering appropriate approaches 
through which we could collaboratively develop future minimum DUR 
standards with involvement from states and other stakeholders, taking 
into account the need for administrative flexibility and adequate time 
for operational implementation, which could be implemented more quickly 
to respond to public health crises that may arise in the future on a 
more rapid timeframe. We are also considering posting DUR 
recommendations on our website or through guidance to States to allow 
quick dissemination of the information.
---------------------------------------------------------------------------

    \22\ Pain Management Best Practices Inter-Agency Task Force. 
``Pain Management Best Practices.'' Available at https://www.hhs.gov/sites/default/files/pmtf-final-report-2019-05-23.pdf.
---------------------------------------------------------------------------

1. Minimum Standards for DUR Programs Under the SUPPORT for Patients 
and Communities Act and Section 1927 of the Act
    In Sec.  456.703, we are proposing to redesignate paragraph (h) as 
paragraph (i) and to add a new paragraph (h), specifying minimum 
standards for DUR programs. The proposed minimum standards in Sec.  
456.703(h)(1), discussed in greater detail below, would implement the 
amendments made by section 1004 of the SUPPORT for Patients and 
Communities Act and section 1927(g) of the Act and are intended to help 
ensure DUR programs continue to adapt and improve the quality of 
pharmaceutical care provided to beneficiaries in the face of evolving 
healthcare guidelines and technology practices.
    We are proposing the provisions below for implementation of 
requirements in the SUPPORT for Patients and Communities Act \23\ 
consistent with section 1927(g) of the Act. The proposed safety edits 
and claim reviews are intended to help protect beneficiaries from 
serious potential consequences of overutilization, including misuse, 
abuse, overdose, and increased side effects. In addition to the risk of 
abuse, misuse, and diversion, opioids can have side effects including 
respiratory depression, confusion, tolerance, and physical 
dependence.\24\
---------------------------------------------------------------------------

    \23\ https://www.congress.gov/115/bills/hr6/BILLS-115hr6enr.pdf.
    \24\ ``CDC Guideline for Prescribing Opioids for Chronic Pain--
United States, 2016.'' Centers for Disease Control and Prevention, 
Centers for Disease Control and Prevention, 29 Aug. 2017, https://www.cdc.gov/mmwr/volumes/65/rr/pdfs/rr6501e1er.pdf.
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    The Centers for Disease Control and Prevention has recommended, in 
2016 guidance,\25\ that primary care providers prescribing to adults in 
outpatient settings consider non-pharmacologic therapy and non-opioid 
pharmacologic therapy as the first-line treatment for chronic pain.\26\ 
The CDC guideline defines chronic pain as ``pain continuing or expected 
to continue for greater than 3 months or past the time of normal tissue 
healing.'' Regarding chronic pain, CDC states clinicians should use 
caution when initiating prescribing opioids at any dosage, and should 
carefully reassess evidence of individual benefits and risks when 
considering increasing dosage to >=50 morphine milligram equivalents 
(MME)/day, and should avoid increasing dosage to >=90 MME/day or 
carefully justify a decision to titrate dosage to >=90 MME/day.\27\ 
Caution is also recommended in prescribing opioids for acute pain, 
noting that long-term opioid use often begins with treatment of acute 
pain; when opioids are prescribed for non-traumatic, non-surgical acute 
pain, primary care clinicians should prescribe the lowest effective 
dose for the shortest duration possible--usually 3 days or less is 
sufficient and more than 7 days will rarely be needed.\28\ Non-
pharmacologic therapies pose minimal risks, and many of these 
treatments, when available and accessible--such as exercise therapy, 
physical therapy, and cognitive behavioral therapy (CBT) have been 
shown to effectively treat chronic pain associated with some 
conditions.\29\ For example, exercise therapy can be effective in 
treating moderate pain associated with lower back pain, osteoarthritis, 
and fibromyalgia in some patients.\30\
---------------------------------------------------------------------------

    \25\ ``CDC Guideline for Prescribing Opioids for Chronic Pain--
United States, 2016.'' Centers for Disease Control and Prevention, 
Centers for Disease Control and Prevention, 18 Mar. 2016, https://www.cdc.gov/mmwr/volumes/65/rr/rr6501e1.htm?CDC_AA_refVal=https://
www.cdc.gov/mmwr/volumes/65/rr/rr6501e1er.html.
    \26\ Dowell, D., Haegerich, T.M., Chou, R. CDC Guideline for 
Prescribing Opioids for Chronic Pain--United States 2016, Morbidity 
and Mortality Weekly Report March 18, 2016: 65)1 [Accessed February 
11, 2019 at https://www.cdc.gov/mmwr/volumes/65/rr/rr6501e1.htm.
    \27\ ``CDC Guidelines for Prescribing Opioids for Chronic pain. 
'' Available at https://www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
    \28\ Dowell, D., Haegerich, T.M., Chou, R. CDC Guideline for 
Prescribing Opioids for Chronic Pain--United States 2016, Morbidity 
and Mortality Weekly Report March 18, 2016: 65)1 [Accessed February 
11, 2019 at https://www.cdc.gov/mmwr/volumes/65/rr/rr6501e1.htm].
    \29\ For a review of the evidence base for CBT, see Ehde D.M., 
Dillworth, T.M. and Turner, J.A. Cognitive-Behavioral Therapy for 
Individuals with Chronic Pain: Efficacy, Innovations, and Directions 
for Research. American Psychologist, 69(2); 153-166.
    \30\ Additional information on non-opioid treatments for chronic 
pain are available at https://www.cdc.gov/drugoverdose/pdf/nonopioid_treatments-a.pdf.
---------------------------------------------------------------------------

    In 2019 the Department of Health and Human Services' PMTF issued 
its report to HHS and Congress, the Pain Management Best Practices 
Inter-Agency Task Force Report, on best practices for the treatment of 
acute and chronic pain. The CDC has identified 50 million adults in the 
United States with chronic daily pain,\31\ and the NIH states that 
chronic daily pain cost the nation between $560 billion and $635 
billion annually.32 33 The PMTF final report emphasizes a 
person-centered approach to pain care that includes the use of 
individualized, multimodal treatment based on an effective pain 
treatment plan, and the PMTF identified and described five broad 
treatment categories: Medications, restorative therapies, 
interventional approaches, behavioral approaches, and complementary and 
integrative health that can be used through multidisciplinary care. In 
its report, the PMTF recognized that there have been ``unintended 
consequences that have resulted following the release of the CDC 
Guideline in 2016, which are due in part to misapplication or 
misinterpretation of the Guideline, including forced tapers and patient 
abandonment'' \34\ and noted the ``CDC has also published a pivotal 
article in the New England Journal of Medicine on April 24, 2019, 
specifically reiterating that the CDC Guideline has

[[Page 37306]]

been, in some instances, misinterpreted or misapplied.'' \35\ HHS 
recently issued the Guide for Clinicians on the Appropriate Dosage 
Reduction or Discontinuation of Long-Term Opioid Analgesics, to assure 
proper tapering and discontinuation of long-term opioids, in part to 
avoid harms and encourage person-centered care that is tailored to the 
specific needs and unique circumstances of each pain patient,\36\ in 
addition to the CMS-issued guidance to states in 2016 and 2019 to both 
outline how to help curb the opioid crisis and provide guidance to 
states that want to expand care for the treatment of 
pain.37 38
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    \31\ ``Managing Chronic Pain.'' Centers for Disease Control and 
Prevention, Centers for Disease Control and Prevention, 18 Dec. 
2019, www.cdc.gov/learnmorefeelbetter/programs/chronic-pain.htm.
    \32\ Gaskin, Darrell J. ``The Economic Costs of Pain in the 
United States.'' Relieving Pain in America: A Blueprint for 
Transforming Prevention, Care, Education, and Research., U.S. 
National Library of Medicine, 1 Jan. 1970, www.ncbi.nlm.nih.gov/books/NBK92521/.
    \33\ ``Prevalence of Chronic Pain and High-Impact Chronic Pain 
Among Adults--United States, 2016.'' Centers for Disease Control and 
Prevention, Centers for Disease Control and Prevention, 16 Sept. 
2019, www.cdc.gov/mmwr/volumes/67/wr/mm6736a2.htm.
    \34\ Additional information on non-opioid treatments for chronic 
pain are available at https://www.cdc.gov/drugoverdose/pdf/nonopioid_treatments-a.pdf.
    \35\ Dowell D., Haegerich T.M., Chou R. No shortcuts to safer 
opioid prescribing. N Engl J Med 2019; 380: 2285-2287.
    \36\ HHS Guide for Clinicians on the Appropriate Dosage 
Reduction or Discontinuation of Long-Term Opioid Analgesics. Oct. 
2019, www.hhs.gov/opioids/sites/default/files/2019-10/Dosage_Reduction_Discontinuation.pdf.
    \37\ ``Best Practices for Addressing Prescription Opioid 
Overdoses, Misuse and Addiction.'' CMCS Informational Bulletin 
available at www.medicaid.gov/federal-policy-guidance/downloads/CIB-02-02-16.pdf.
    \38\ ``Medicaid Strategies for Non-Opioid Pharmacologic and Non-
Pharmacologic Chronic Pain Management.'' CMCS Informational Bulletin 
at https://www.medicaid.gov/federal-policy-guidance/downloads/cib022219.pdf).
---------------------------------------------------------------------------

    Accordingly, we are proposing to add Sec.  456.703(h)(1)(i) to 
include minimum standard requirements as described in this proposed 
rule, with the detailed design and implementation specifications left 
to the state's discretion to meet state-specific needs. The purpose of 
these proposed safety edits (specifically, safety edits to implement 
state-defined limits on initial prescription fill days' supply for 
patients not currently receiving opioid therapy, quantity, duplicate 
fills, and early refills) and reviews is to further implement section 
1927(g) of the Act to prevent and reduce the inappropriate use of 
opioids and potentially associated adverse medical events to 
sufficiently address the nation's opioid overdose epidemic, consistent 
with the provisions under section 1004 of the SUPPORT for Patients and 
Communities Act.
    When implementing the SUPPORT for Patients and Communities Act, we 
propose the following safety edits in Sec.  456.703(h)(1)(i) in 
addition to a comprehensive opioid claims review automated 
retrospective review process where trends witnessed in safety edits can 
be reviewed and investigated. These reviews will allow subsequent 
appropriate actions to be taken as designed by the states.
a. Opioid Safety Edits Including Initial Fill Days' Supply for Opioid-
Na[iuml]ve Beneficiaries, Quantity, Therapeutically Duplicative Fills, 
and Early Refill Limits
    The SUPPORT for Patients and Communities Act requires states to 
have in place prospective safety edits (as specified by the state) for 
subsequent fills for opioids and a claims review automated process (as 
designed and implemented by the state) that indicates when an 
individual enrolled under the state plan (or under a waiver of the 
state plan) is prescribed a subsequent fill of opioids in excess of any 
limitation that may be identified by the state.\39\ As discussed in 
detail below, consistent with the SUPPORT for Patients and Communities 
Act and DUR requirements under section 1927(g)(2)(A) of the Act, we are 
proposing that state-identified limitations must include state-
specified restrictions on initial prescription fill days' supply for 
patients not currently receiving opioid therapy; quantity limits for 
initial and subsequent fills, therapeutically duplicative fills, and 
early fills on opioids prescriptions; and a claims review automated 
process that indicates prescription fills of opioids in excess of these 
limitations to provide for the ongoing periodic reviews of opioids 
claim data and other records in order to identify patterns of fraud, 
abuse, excessive utilization, or inappropriate or medically unnecessary 
care, or prescribing or billing practices that indicate abuse or 
excessive utilization among physicians, pharmacists and individuals 
receiving Medicaid benefits. To further implement section 1927(g)(1) of 
the Act, and consistent with section 1004 of the SUPPORT for Patients 
and Communities Act, we are proposing to require these safety edits to 
reinforce efforts to combat the nation's opioid crisis and ensure DUR 
opioid reviews are consistent with current clinical practice. These 
proposed safety edits are intended to protect Medicaid patients from 
serious consequences of overutilization, including overdose, dangerous 
interactions, increased side effects and additive toxicity (additive 
side effects). In addition, overutilization of opioids may serve as an 
indication of uncontrolled disease and the need of increased monitoring 
and coordination of care.
---------------------------------------------------------------------------

    \39\ Section 1902(oo)(1)(A)(i)(I) of the Act, as added by 
section 1004 of the SUPPORT for Patients and Communities Act.
---------------------------------------------------------------------------

(i) Limit on Days' Supply for Opioid Na[iuml]ve Beneficiaries
    To further implement section 1927(g)(1) of the Act, and consistent 
with section 1004 of the SUPPORT for Patients and Communities Act, we 
are proposing to require states to establish safety edit limitations on 
the days' supply for an initial prescription opioid fill for 
beneficiaries who have not filled an opioid prescription within a 
defined time period to be specified by the state. In most cases, ``Days 
Supply'' is calculated by dividing the dispensed quantity of medication 
by the amount of the medication taken by the patient in one day per the 
prescriber's instructions. ``Days' Supply'' means how many days the 
supply of dispensed medication will last. This limit would not apply to 
patients currently receiving opioids and is meant for beneficiaries who 
have not received opioids within this specified time period (as defined 
and implemented by the state). The patients who have not received 
opioids within a specified timeframe are referred to as opioid 
na[iuml]ve and would be subjected to the days' supply limit on the 
opioid prescription. While the SUPPORT for Patients and Communities Act 
mentions limits on subsequent fills of opioids, consistent with section 
1927(g) of the Act, we are proposing this edit on initial fills of 
opioids to help avoid excessive utilization by opioid na[iuml]ve 
beneficiaries, with its attendant risk of adverse effects.
    The CDC Guideline recommends that opioids prescribed for acute pain 
in outpatient primary care settings to adults generally should be 
limited to 3 days or fewer, and more than a 7 days' supply is rarely 
necessary.\40\ Nonpharmacologic therapy and nonopioid pharmacologic 
therapy are preferred [for chronic pain] and should be considered by 
practitioners and patients prior to treatment with opioids.\41\ 
Clinical evidence cited by the CDC review found that opioid use for 
acute pain is associated with long-term opioid use, and that a greater 
amount of early opioid exposure is associated with greater risk for 
long-term use. An expected physiologic response in patients exposed to 
opioids for more than a few days is physical dependence and the chances 
of long-term opioid use begin to increase after just 3 days of use and 
rise rapidly thereafter.\42\ The CDC

[[Page 37307]]

Guideline mentions that more than a few days of exposure to opioids 
significantly increases hazards, that each day of unnecessary opioid 
use increases likelihood of physical dependence without adding benefit, 
and that prescriptions with fewer days' supply would minimize the 
number of pills available for unintentional or intentional 
diversion.\43\
---------------------------------------------------------------------------

    \40\ ``CDC Guideline for Prescribing Opioids for Chronic Pain--
United States, 2016.'' Centers for Disease Control and Prevention, 
Centers for Disease Control and Prevention, 29 Aug. 2017, https://www.cdc.gov/mmwr/volumes/65/rr/pdfs/rr6501e1er.pdf.
    \41\ Ibid.
    \42\ Shah A., Hayes C.J., Martin B.C. Characteristics of Initial 
Prescription Episodes and Likelihood of Long-Term Opioid Use--United 
States, 2006-2015. Morbidity and Mortality Weekly Report 2017; 
66:265-269 [Accessed February 11, 2019 at https://dx.doi.org/10.15585/mmwr.mm6610a1].
    \43\ Ibid.
---------------------------------------------------------------------------

    Long-term opioid use often begins with treatment of acute pain. 
When opioids are used for acute pain, clinicians should prescribe the 
lowest effective dose of immediate-release opioids and should prescribe 
no greater quantity than needed for the expected duration of pain 
severe enough to require opioids.\44\ Limiting days for which opioids 
are prescribed for opioid na[iuml]ve patients could minimize the need 
to taper opioids to prevent distressing or unpleasant withdrawal 
symptoms and help prevent opioid dependence, the risk of which is 
associated with the amount of opioid initially prescribed.\45\
---------------------------------------------------------------------------

    \44\ ``CDC Guideline for Prescribing Opioids for Chronic Pain.'' 
Centers for Disease Control and Prevention, Centers for Disease 
Control and Prevention, https://www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
    \45\ Shah A, Hayes CJ, Martin BC. Characteristics of initial 
prescription episodes and likelihood of long-term opioid use--United 
States, 2006-2015. MMWR Morb Mortal Wkly Rep. 2017;66(10):265-269. 
doi:10.15585/mmwr.mm6610a1.
---------------------------------------------------------------------------

    On state DUR surveys many states indicated they already have 
initial fill limitations in place describing the limitations of 100 
dosage units or a 34 days supply. Initial opioid analgesic 
prescriptions of less than or equal to 7 days' duration appear 
sufficient for many pain patients seen in primary care settings.\46\ We 
note that in its 2019 clarification of the Guideline, the CDC noted 
that it was ``intended for primary care clinicians treating chronic 
pain for patients 18 and older, and examples of misapplication include 
applying the Guideline to patients in active cancer treatment, patients 
experiencing acute sickle cell crises, or patients experiencing post-
surgical pain.'' States can consider the current CDC Guideline and 
other clinical guidelines when implementing initial fill limitations, 
being mindful of the context in which such guidelines are written (for 
example, acute pain, chronic pain, treatment setting, population, 
etc.).
---------------------------------------------------------------------------

    \46\ ``Days' Supply of Initial Opioid Analgesic Prescriptions 
and Additional Fills for Acute Pain Conditions Treated in the 
Primary Care Setting--United States, 2014 [bond] MMWR.'' Centers for 
Disease Control and Prevention, Centers for Disease Control and 
Prevention, https://www.cdc.gov/mmwr/volumes/68/wr/mm6806a3.htm.
---------------------------------------------------------------------------

    The CDC Guideline states primary care clinicians should assess 
benefits and harms of opioids with patients early on when starting 
opioid therapy for chronic pain and regularly when escalating doses and 
continue to evaluate therapy with patients on an ongoing basis. If 
benefits do not outweigh harms of continued opioid therapy, clinicians 
should optimize other therapies and work with patients to taper opioids 
to lower dosages or to taper and discontinue opioid therapy. Consistent 
with the foregoing clinical recommendations, we are proposing to 
require states to implement safety edits aligned with clinical 
guidelines alerting the dispenser at the POS when an opioid 
prescription is dispensed to an opioid na[iuml]ve patient that exceeds 
a state-specified days' supply limitation. In consideration of clinical 
recommendations to limit opioid use to the shortest possible duration 
and to assess the clinical benefits and harms of opioid treatment on an 
ongoing basis, we believe this safety edit is necessary to assure that 
opioid prescriptions are appropriate, medically necessary, and not 
likely to result in adverse events, and to accomplish other purposes of 
the DUR program under section 1927(g) of the Act and of the SUPPORT for 
Patients and Communities Act. Accordingly, we are proposing in Sec.  
456.703(h)(1)(i)(A) to require states to implement a days' supply limit 
when an initial opioid prescription is dispensed to a patient not 
currently receiving ongoing therapy with opioids.
(ii) Opioid Quantity Limits
    To further implement section 1927(g)(1) of the Act and section 1004 
of the SUPPORT for Patients and Communities Act, we are proposing to 
require states establish safety edits to implement quantity limits on 
the number of opioid units to be used per day, as identified by the 
state. We propose that states take clinical indications and dosing 
schedules into account when establishing quantity limits to restrict 
the quantity of opioids per day to ensure dose optimization and to 
minimize potential for waste and diversion. While the SUPPORT for 
Patients and Communities Act mentions quantity limits on subsequent 
fills of opioids, consistent with section 1927(g) of the Act, we are 
proposing this edit to apply with respect to initial and subsequent 
fills of opioids to avoid excessive utilization, with its attendant 
risk of adverse effects.
    We propose that the quantity limits would be required to take into 
account both dosage and frequency, to allow for dose optimization of 
pills, capsules, tablets, etc. (pills) and limit the supply of opioids 
being dispensed. Dose optimization is a method to consolidate the 
quantity of medication dispensed to the smallest amount required to 
achieve the desired daily dose and/regimen. Dosage optimization seeks 
to prospectively identify patients who have been prescribed multiple 
pills, capsules and/or tablets (``pills'') per day of a lower strength 
medication meant to be taken together to achieve higher dose, when a 
higher strength of medication already is available, and provides 
clinicians a tool to switch these patients to a regimen that is an 
equivalent daily dose given as a single pill (or a smaller quantity of 
pills). Performing this intervention with medications that are 
available in multiple strengths, with comparable pricing among these 
strengths, can yield significant drug cost savings. In addition, dose-
optimization yields simplifies dosing schedules, decreases pill 
burdens, improves treatment compliance and limits the number of excess 
units available for diversion.\47\ This proposed safety edit would 
allow most patients to achieve pain relief while minimizing patient 
pill burdens and unnecessary unused opioids.\48\ When implementing this 
edit we expect states to also consider current opioid guidelines, 
clinical indications, and dosing schedules of opioids to ensure 
prescriptions are appropriate, medically necessary, and not likely to 
result in adverse events.
---------------------------------------------------------------------------

    \47\ Calabrese D., Baldinger S., Dose Optimization Intervention 
Yields Significant Drug Cost Savings. https://www.jmcp.org/doi/pdf/10.18553/jmcp.2002.8.2.146.
    \48\ Daoust R. Limiting Opioid Prescribing. JAMA. 2019; 
322(2):170-171. doi:10.1001/jama.2019.5844.
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    Decreasing the initial amount prescribed will lower the risk that 
patients develop an addiction to these drugs and transition to chronic 
use or misuse.\49\ A survey of adults in Utah estimated that in the 
previous 12 months, 1 in 5 state residents were prescribed an opioid 
medication and 72 percent had leftover pills and nearly three-quarters 
of those with leftover pills kept them.\50\ Leftover medications are an 
important source of opioids that are misused or diverted.\51\ We 
believe that decreasing the initial amount prescribed will lower the 
risk that patients develop opioid use disorder.\52\
---------------------------------------------------------------------------

    \49\ Ibid.
    \50\ Ibid.
    \51\ ``FDA Patient Education Campaign Targets Opioid Diversion, 
Disposal.'' Available at https://patientengagementhit.com/news/fda-patient-education-campaign-targets-opioid-diversion-disposal.
    \52\ Opioid Use During the Six Months After an Emergency 
Department Visit for Acute Pain: A Prospective Cohort Study. 
Friedman, Benjamin W. et al. Annals of Emergency Medicine, Volume 0, 
Issue 0.

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[[Page 37308]]

    Prescribing opioids using lowest dosage at fewest possible units 
dispensed based on product labeling, and matching duration to scheduled 
reassessment, helps reduce the quantity of unused, leftover opioid 
pills. Additionally, clinicians should continue to evaluate benefits 
and harms of continued ongoing therapy with opioid patients every 3 
months or more frequently.\53\ If benefits do not outweigh harms of 
continued opioid therapy, clinicians should optimize other therapies 
and work with patients to taper opioids to lower dosages or to taper 
and discontinue opioids.\54\ In consideration of clinical 
recommendations to limit opioid units to the fewest number possible and 
to assess the clinical benefits and harms of opioid treatment on an 
ongoing basis, we believe this safety edit is necessary to assure that 
opioid prescriptions are appropriate, medically necessary, and not 
likely to result in adverse events, and to accomplish other purposes of 
the DUR program under section 1927(g) of the Act and of the SUPPORT for 
Patients and Communities Act. Accordingly, we are proposing at Sec.  
456.703(h)(1)(i)(B) that states be required to implement quantity 
limits on opioids prescriptions (both initial and subsequent fills) to 
help identify abuse, misuse, excessive utilization, or inappropriate or 
medically unnecessary care.
---------------------------------------------------------------------------

    \53\ Dowell, Deborah, et al. ``CDC Guideline for Prescribing 
Opioids for Chronic Pain--United States, 2016.'' JAMA, U.S. National 
Library of Medicine, 19 Apr. 2016, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6390846/.
    \54\ Frieden TR, Houry D. Reducing the Risks of Relief--The CDC 
Opioid-Prescribing Guideline. N Engl J Med. 2016; 374(16):1501-1504. 
doi:10.1056/NEJMp1515917.
---------------------------------------------------------------------------

iii. Therapeutic Duplication Limitations
    To further implement section 1927(g)(1) of the Act and section 1004 
of the SUPPORT for Patients and Communities Act, we are proposing to 
require states to establish safety edits to alert the dispenser to 
potential therapeutic duplication before a prescription is filled for 
an opioid product that is in the same therapeutic class as an opioid 
product currently being prescribed for the beneficiary. Prescriptions 
for multiple opioids and multiple strengths of opioids increase the 
supply of opioids available for diversion and abuse, as well as the 
opportunity for self-medication and dose escalation.\55\ Some patients, 
especially those living with multiple chronic conditions, may consult 
multiple physicians, which can put them at risk of receiving multiple 
medications in the same therapeutic class for the same diagnosis.\56\ 
In some instances, the side-effects produced by overmedication, due to 
the duplication of prescriptions within the same therapeutic class, are 
more serious than the original condition.\57\ We propose to require 
this opioid safety edit to help avoid inappropriate or unnecessary 
therapeutic duplication when simultaneous use of multiple opioids is 
detected.
---------------------------------------------------------------------------

    \55\ Manchikanti, Laxmaiah, et al. ``Opioid Epidemic in the 
United States.'' Pain Physician, U.S. National Library of Medicine, 
July 2012, www.ncbi.nlm.nih.gov/pubmed/22786464.
    \56\ Ibid.
    \57\ ``Therapeutic Duplication.'' Journal of the American 
Medical Association, vol. 160, no. 9, 1956, p. 780, doi:10.1001/
jama.1956.02960440052016.
---------------------------------------------------------------------------

    In consideration of clinical recommendations to use caution in 
combining opioids and to limit opioid use to only when necessary while 
assessing clinical benefits and harms of opioid treatment on an ongoing 
basis, we believe this safety edit is necessary to assure that opioid 
prescriptions are appropriate, medically necessary, and not likely to 
result in adverse medical results, and to accomplish other purposes of 
the DUR program under section 1927(g) of the Act and of the SUPPORT for 
Patients and Communities Act. Accordingly, we are proposing at Sec.  
456.703(h)(1)(i)(C) that states must implement safety edits for 
therapeutically duplicative fills for initial and subsequent 
prescription fills on opioids prescriptions and identify suspected 
abuse, misuse, excessive utilization, or inappropriate, or medically 
unnecessary care.
iv. Early Fill Limitations
    To further implement section 1927(g)(1) of the Act and section 1004 
of the SUPPORT for Patients and Communities Act, we are proposing to 
require that states establish safety edits to alert the dispenser 
before a prescription is filled early for an opioid product, based on 
the days' supply provided at the most recent fill or as specified by 
the state. These early fill edits on opioids are intended to protect 
beneficiaries from adverse events associated with using an opioid 
medication beyond the prescribed dose schedule and to help minimize the 
opioid supply available for diversion.
    In consideration of clinical recommendations to limit opioid use to 
only when necessary and as prescribed, we believe this safety edit is 
necessary to assure that opioid prescriptions are appropriate, 
medically necessary, and not likely to result in adverse medical 
results, and to accomplish other purposes of the DUR program under 
section 1927(g) of the Act and of the SUPPORT for Patients and 
Communities Act. Accordingly, we are proposing at Sec.  
456.703(h)(1)(i)(D) that states must implement early fill safety alerts 
on opioids prescriptions to identify abuse, misuse, excessive 
utilization, or inappropriate, or medically unnecessary care.
b. Maximum Daily Morphine Milligram Equivalent (MME) Limits
    Section 1004 of the SUPPORT for Patients and Communities Act 
requires state DUR programs to include safety edit limits (as specified 
by the state) on the maximum daily morphine equivalent that can be 
prescribed to an individual enrolled under the state plan (or under a 
waiver of the state plan) for treatment of chronic pain (as designed 
and implemented by the state) that indicates when an individual 
enrolled under the plan (or waiver) is prescribed the morphine 
equivalent for such treatment in excess of any threshold identified by 
the state.\58\ Accordingly, to further implement section 1927(g)(1) of 
the Act and section 1004 of the SUPPORT for Patients and Communities 
Act, we are proposing that states must include in their DUR programs 
safety edit limitations identified by the State on the maximum daily 
morphine milligram equivalent (MME) for treatment of pain and a claims 
review automated process, discussed below in connection with paragraph 
(h)(1)(iii), that indicates when an individual is prescribed a morphine 
milligram equivalent in excess of these limitations.
---------------------------------------------------------------------------

    \58\ Section 1902(oo)(1)(A)(i)(II) of the Act, as added by 
section 1004 of the SUPPORT for Patients and Communities Act.
---------------------------------------------------------------------------

    Section 1004 of the SUPPORT for Patients and Communities Act 
specifically addresses MME limitations in the context of chronic pain. 
According to the CDC, acute pain (as distinct from chronic pain) 
usually occurs suddenly and usually has a known cause, like an injury, 
surgery, or infection. For example, acute pain can be caused from a 
wisdom tooth extraction, a surgery, or a broken bone after an 
automobile accident. Acute pain normally resolves as your body heals. 
Chronic pain, on the other hand, can last weeks, months or years--past 
the normal time of healing.\59\ Regarding chronic pain, CDC states 
clinicians should use caution when prescribing opioids at any dosage, 
and should carefully reassess evidence of individual

[[Page 37309]]

benefits and risks when considering increasing dosage to >=50 morphine 
milligram equivalents (MME)/day, and should avoid increasing dosage to 
>=90 MME/day or carefully justify a decision to titrate dosage to >=90 
MME/day.\60\ With this proposal to require maximum daily MME limits, we 
do not mean to suggest rapid discontinuation of opioids already 
prescribed at higher dosages. The MME/day metric is often used as a 
gauge of the overdose potential of the amount of opioid that is being 
given at a particular time.\61\
---------------------------------------------------------------------------

    \59\ ``Opioids for Acute Pain.'' Centers for Disease Control and 
Prevention, available at https://www.cdc.gov/drugoverdose/pdf/patients/Opioids-for-Acute-Pain-a.pdf.
    \60\ ``CDC Guidelines for Prescribing Opioids for Chronic 
pain.'' Available at https://www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
    \61\ Ibid.
---------------------------------------------------------------------------

    Calculating the total daily dosage of opioids helps identify 
patients who may benefit from closer monitoring, reduction or tapering 
of opioids, prescribing of naloxone, or other measures to reduce risk 
of overdose. The opioid MME levels mentioned previously in this 
proposed rule typically would not be clinically appropriate for acute, 
short term pain; moreover, if the prescription were for acute pain, 
given the risks associated with high acute doses (in particular, 
respiratory risks), we believe that this limitation also would be 
appropriate to ensure appropriateness, medical necessity, and avoidance 
of adverse events. Accordingly, we are proposing to require states to 
establish MME threshold amounts for implementation regardless of 
whether the prescription is for treatment of chronic or acute pain.
    The proposed prospective safety edit must include a MME threshold 
amount to meet statutory requirements, to assist in identifying 
patients at potentially high clinical risk who may benefit from closer 
monitoring and care coordination. Calculation of MMEs is used to assess 
the total daily dose of opioids, taking into account the comparative 
potency of different opioids and frequency of use. The calculation to 
determine MMEs includes drug strength, quantity, days' supply and a 
defined conversion factor unique to each drug.\62\ Patients prescribed 
higher opioid dosages are at higher risk of overdose death.\63\ 
Calculating the total MME daily dose of opioids can help identify 
patients who may benefit from closer monitoring, reduction or tapering 
of opioids, prescribing of naloxone, or other measures to reduce risk 
of overdose.\64\ HHS's Guide for Clinicians on the Appropriate Dosage 
Reduction or Discontinuation of Long-Term Opioid Analgesics,\65\ is 
also a valuable resource for considering how best to taper and/or 
discontinue usage in a thoughtful manner consistent with best clinical 
practices. We note that HHS does not recommend opioids be tapered 
rapidly or discontinued suddenly due to the significant risks of opioid 
withdrawal, unless there is a life-threatening issue confronting the 
individual patient. The FDA issued a safety announcement on tapering in 
April 2019 noting concerns about safely decreasing or discontinuing 
doses of opioids in patients who are physically dependent after hearing 
reports about serious harm.\66\
---------------------------------------------------------------------------

    \62\ Calculating Total Daily Dose of Opioids For Safer Dosage. 
Centers for Disease Control and Prevention, available at https://www.cdc.gov/drugoverdose/pdf/calculating_total_daily_dose-a.pdf.
    \63\ Guideline for Prescribing Opioids for Chronic Pain. 
www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
    \64\ Ibid.
    \65\ https://www.hhs.gov/opioids/sites/default/files/2019-10/Dosage_Reduction_Discontinuation.pdf).
    \66\ ``FDA identifies harm reported from sudden discontinuation 
of opioid pain medicines and requires label changes to guide 
prescribers on gradual, individualized tapering.'' Food and Drug 
Administration. Available at https://www.fda.gov/drugs/drug-safety-and-availability/fda-identifies-harm-reported-sudden-discontinuation-opioid-pain-medicines-and-requires-label-changes.
---------------------------------------------------------------------------

    When determining MME threshold amounts, states are reminded that 
clinical resources, including, for example, the CDC Guideline,\67\ 
recommend caution when prescribing opioids for chronic pain in certain 
circumstances, and recommend that primary care practitioners reassess 
evidence of individual benefits and risks when increasing doses and 
subsequently, justifying decisions by thoroughly documenting the 
clinical basis for prescribing in the patient's medical record.\68\ It 
is important to be cognizant that the CDC Guideline states the dosage 
thresholds referenced therein pertain solely to opioids used to treat 
chronic pain in primary care settings and that these thresholds, as 
recommended by the CDC, do not represent hard limits for opioid 
prescriptions.\69\
---------------------------------------------------------------------------

    \67\ Dowell D, Haegerich TM, Chou R. CDC Guideline for 
Prescribing Opioids for Chronic Pain--United States, 2016. MMWR 
Recomm Rep 2016;65(No. RR-1):1-49. DOI: https://dx.doi.org/10.15585/mmwr.rr6501el. https://www.cdc.gov/mmwr/volumes/65/rr/rr6501e1.htm?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.gov%2Fmmwr%2Fvolumes
%2F65%2Frr%2Frr6501e1er.htm.
    \68\ Dowell, Deborah, et al. ``CDC Guideline for Prescribing 
Opioids for Chronic Pain--United States, 2016.'' JAMA, U.S. National 
Library of Medicine, 19 Apr. 2016, https://www.ncbi.nlm.nih.gov/pubmed/26977696.
    \69\ Staff, News. ``CDC Clarifies Opioid Guideline Dosage 
Thresholds.'' AAFP Home, 12 Jan. 2018, www.aafp.org/news/health-of-the-public/20180112cdcopioidclarify.html.
---------------------------------------------------------------------------

    In consideration of clinical recommendations and to assess the 
clinical benefits and harms of opioid treatment on an ongoing basis, we 
believe this proposed safety edit is necessary to assure at risk 
individuals are receiving appropriate treatment that is not likely to 
result in adverse medical results, and to accomplish other purposes of 
the DUR program under section 1927(g) of the Act and of the SUPPORT for 
Patients and Communities Act. Accordingly, we are proposing at Sec.  
456.703(h)(1)(ii) that states be required to implement safety edits 
that indicates when an individual enrolled under the plan (or waiver) 
is prescribed the morphine equivalent for such treatment in excess of 
the MME dose limitation identified by the state.
c. Automated Claims Reviews for Opioids
    To further implement section 1927(g) of the Act and section 1004 of 
the SUPPORT for Patients and Communities Act, we propose that states 
must have in place a claims automated review process (as designed and 
implemented by the state) that indicates when an individual enrolled 
under the state plan (or under a waiver of the state plan) is 
prescribed opioids in excess of above-proposed limitations identified 
by the state. In these ongoing, comprehensive reviews of opioid claim 
data, states should continuously monitor opioid prescriptions, 
including overrides of safety edits by the prescriber or dispenser on 
initial fill days' supply for opioid na[iuml]ve patients, quantity 
limits, therapeutically duplicative fills, early refills and maximum 
daily MME limitations on opioids prescriptions.
    These opioid claim reviews are necessary to allow states to 
continually monitor opioid prescriptions beneficiaries are receiving 
and determine and refine future potential prospective DUR safety edits, 
based on the findings of the claims reviews. Information obtained 
through retrospective DUR claim reviews can be used to shape effective 
safety edits that can be implemented through prospective DUR, better 
enabling prescribers and dispensers to investigate prescription 
concerns prior to dispensing the medication to the patient. Through 
ongoing monitoring and observation of trends over time, these reviews 
will allow for regular updates to safety edits in an evolving pain 
treatment landscape.
    Accordingly, we are proposing at Sec.  456.703(h)(1)(iii) that 
states must conduct retrospective claims review automated processes 
that indicate prescription fills in excess of the

[[Page 37310]]

prospective safety edit limitations specified by the state under 
paragraphs Sec.  456.703(h)(1)(i) or (h)(1)(ii) to provide for the 
ongoing review of opioid claims data to identify patterns of fraud, 
misuse, abuse, excessive utilization, inappropriate or medically 
unnecessary care, or prescribing or billing practices that indicate 
abuse or provision of inappropriate or medically unnecessary care among 
prescribers, pharmacists and individuals receiving Medicaid benefits 
above-proposed limitations. In addition to opioid claims data, we also 
intend for states to consider incorporating other available records to 
provide for the ongoing periodic reviews of opioids claim data and 
other records (including but not limited to prescription histories, 
diagnoses, medical records, and prescription drug monitoring program 
(PDMP) files, when available), in their retrospective claims review 
automated processes order to identify patterns of fraud, misuse, abuse, 
excessive utilization, or inappropriate or medically unnecessary care, 
or prescribing or billing practices that indicate abuse or excessive 
utilization among physicians, pharmacists and individuals receiving 
Medicaid benefits.
d. Concurrent Utilization Reviews
    Section 1902 of the Act, as amended by the SUPPORT for Patients and 
Communities Act, requires states to have an automated process for 
claims review (as designed and implemented by the state) that monitors 
when an individual enrolled under the state plan (or under a waiver of 
the state plan) is concurrently prescribed opioids and benzodiazepines 
or opioids and antipsychotics.\70\ This requirement is consistent with 
the requirement in section 1927(g)(1)(A) of the Act that state DUR 
programs must assure that prescriptions are appropriate, medically 
necessary, and not likely to result in adverse medical results.
---------------------------------------------------------------------------

    \70\ Section 1902(oo)(1)(A)(i)(III) of the Act, as added by 
section 1004 of the SUPPORT for Patients and Communities Act.
---------------------------------------------------------------------------

    Clinically, through the use of retrospective automated claim 
reviews, concurrent use of opioids and benzodiazepines and opioids and 
antipsychotics, as well as potential complications resulting from other 
medications concurrently being prescribed with opioids, can be reduced. 
States are reminded that the requirement for a retrospective automated 
claims review added by section 1004 of the SUPPORT for Patients and 
Communities Act does not preclude the state from also establishing a 
prospective safety edit system to provide additional information to 
patients and providers at the POS about concurrent utilization 
alerts.\71\ In addition, the state could use the authorities under 
section 1927 to subject these patients to appropriate utilization 
management techniques. We also would like to remind states that section 
1927(g)(1) of the Act also currently supports including other 
potentially harmful opioid interactions as additional prospective or 
retrospective reviews in state DUR programs, such as opioids and 
central nervous system (CNS) depressants, including alcohol or 
sedatives. We fully support states including such additional opioid 
interactions or contraindications in prospective or retrospective 
reviews as part of a comprehensive DUR program.
---------------------------------------------------------------------------

    \71\ See section 1902(oo)(1)(A)(iii) of the Act, as added by 
section 1004 of the SUPPORT for Patients and Communities Act.
---------------------------------------------------------------------------

    In consideration of clinical recommendations to limit opioids 
interactions with certain other drugs, including benzodiazepines and 
antipsychotics, and to assess the clinical benefits and harms of opioid 
treatment on an ongoing basis, we believe the retrospective reviews we 
are proposing to require are necessary to assure at-risk individuals 
are receiving appropriate treatment that is not likely to result in 
adverse medical results, and to accomplish purposes of the DUR program 
under section 1927(g) of the Act and of the SUPPORT for Patients and 
Communities Act. Accordingly, we are proposing in Sec.  
456.703(h)(1)(iv)(A) and (B) that states be required to implement a 
claims review automated process that monitors when an individual is 
concurrently prescribed opioids and benzodiazepines; or opioids and 
antipsychotics.
i. Opioid and Benzodiazepines Concurrent Fill Reviews
    In 2016, FDA added a boxed warning to prescription opioid 
analgesics, opioid-containing cough products, and benzodiazepines with 
information about the serious risks associated with using these 
medications concurrently.\72\ The CDC Guideline recommends that 
clinicians avoid prescribing benzodiazepines concurrently with opioids 
whenever possible. Benzodiazepines may be abused for recreational 
purposes by some individuals, with some opioid overdoses also involving 
opioids and benzodiazepines or other substances, such as alcohol.\73\
---------------------------------------------------------------------------

    \72\ Office of the Commissioner. ``Drug Safety Communications--
FDA warns about serious risks and death when combining opioid pain 
or cough medicines with benzodiazepines; requires its strongest 
warning.'' U.S. Food and Drug Administration Home Page, Office of 
the Commissioner, https://www.fda.gov/media/99761/download.
    \73\ Jones, Jermaine D, et al. ``Polydrug Abuse: a Review of 
Opioid and Benzodiazepine Combination Use.'' Drug and Alcohol 
Dependence, U.S. National Library of Medicine, 1 Sept. 2012, 
www.ncbi.nlm.nih.gov/pmc/articles/PMC3454351/.
---------------------------------------------------------------------------

    Studies show that people concurrently using both drugs are at 
higher risk of visiting the emergency department or being admitted to a 
hospital for a drug-related emergency.\74\ Due to the heightened risk 
of adverse events associated with the concurrent use of opioids and 
benzodiazepines, physicians should avoid the initial combination of 
opioids and benzodiazepines by offering alternative approaches.\75\ 
This review would alert providers when these drugs have been prescribed 
concurrently to assist in avoiding and mitigating associated risks.
---------------------------------------------------------------------------

    \74\ Forum, Addiction Policy. ``Sedative Use Disorder.'' 
Addiction Policy Forum, https://www.addictionpolicy.org/sedative-use-disorder.
    \75\ ``Reduce Risk of Opioid Overdose Deaths by Avoiding and 
Reducing Co-Prescribing Benzodiazepines.'' MLN Matters Number: 
SE19011. Available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE19011.pdf.
---------------------------------------------------------------------------

ii. Opioid and Antipsychotic Concurrent Fill Reviews
    This alert is supported by FDA's boxed warning of increased risk of 
respiratory and central nervous system (CNS) depression with concurrent 
use of opioid and CNS depressants such as antipsychotics or sedatives, 
including extreme sleepiness, slowed or difficult breathing, 
unresponsiveness or the possibility that death can occur.\76\ Patients 
concurrently prescribed opioid and antipsychotic drugs can benefit from 
increased coordination of care. Additionally, improving treatment of 
comorbid mental disorders is an important consideration when trying to 
reduce the overall negative impacts of pain. As the PMTF report noted, 
``the occurrence of pain and behavioral health comorbidities, including 
depression, post-traumatic stress disorder, and substance use 
disorders, is well documented, and it is established that psychosocial 
distress can contribute to pain intensity, pain-related disability, and 
poor response to chronic pain treatment.'' \77\ Evidence indicates that

[[Page 37311]]

optimizing mental health and pain treatment can improve outcomes in 
both areas for patients seen in primary and specialty care settings. 
Untreated psychiatric conditions may increase the risk of both 
unintentional and intentional medication mismanagement, OUD, and 
overdose.\78\ Given the intersection between psychiatric/psychological 
symptoms and chronic pain, it is important that the behavioral health 
needs of patients with pain are appropriately and carefully evaluated 
and treated with the concurrent physical pain problem.\79\ As such, 
beneficiaries who are concurrently prescribed both opioids and 
antipsychotics should be considered from a health system or policy 
perspective when addressing their treatment.\80\ A patient's unique 
presentation and circumstances should be considered when prescribing 
opioids and antipsychotics. This review would encourage coordination of 
care for patients taking antipsychotic and opioid medications 
concurrently.
---------------------------------------------------------------------------

    \76\ Office of the Commissioner. ``Drug Safety Communications--
FDA warns about serious risks and death when combining opioid pain 
or cough medicines with benzodiazepines; requires its strongest 
warning.'' U.S. Food and Drug Administration Home Page, Office of 
the Commissioner, https://www.fda.gov/media/99761/download.
    \77\ Pain Management Best Practices Inter-Agency Task Force. 
``Pain Management Best Practices.'' Available at https://www.hhs.gov/sites/default/files/pmtf-final-report-2019-05-23.pdf.
    \78\ Ibid.
    \79\ Ibid.
    \80\ Davis, Matthew A., et al. ``Prescription Opioid Use among 
Adults with Mental Health Disorders in the United States.'' The 
Journal of the American Board of Family Medicine, vol. 30, no. 4, 
2017, pp. 407-417, doi:10.3122/jabfm.2017.04.170112.
---------------------------------------------------------------------------

e. Other Considerations
    Consistent with section 1902(oo)(1)(A)(iii) of the Act, as added by 
section 1004 of the SUPPORT for Patients and Communities Act, the 
provisions proposed to be implemented in Sec.  456.703(h)(1) would not 
prohibit states from designing and implementing an automated claims 
review process that provides for other processes for the prospective or 
retrospective review of claims. Furthermore, none of these proposed 
provisions would prohibit the exercise of clinical judgment by a 
provider regarding the best or most appropriate care and treatment for 
any patient.
    We encourage states to develop prospective and retrospective drug 
reviews that are consistent with medical practice patterns in the state 
to help meet the health care needs of the Medicaid patient population. 
In doing so, we encourage states to utilize, for example, the 2016 CDC 
Guideline \81\ for primary care practitioners on prescribing opioids in 
outpatient settings for chronic pain.
---------------------------------------------------------------------------

    \81\ ``CDC Guideline for Prescribing Opioids for Chronic Pain--
United States, 2016.'' Centers for Disease Control and Prevention, 
Centers for Disease Control and Prevention, 29 Aug. 2017, https://www.cdc.gov/mmwr/volumes/65/rr/pdfs/rr6501e1er.pdf.
---------------------------------------------------------------------------

    In order to avoid abrupt opioid withdrawal, prior authorization may 
be necessary for patients who will need clinical intervention to taper 
off high doses of opioids to minimize potential symptoms of withdrawal 
and manage their treatment regimen, while encouraging pain treatment 
using non-pharmacologic therapies and non-opioid medications, where 
available, and appropriate.
    When implementing these requirements, we encourage states to offer 
education and training and to provide consistent messaging across all 
healthcare providers. Education and training of all providers on new 
opioid-related provisions and on the treatment of acute and chronic 
pain, and on behavioral health issues related to pain, would help 
minimize workflow disruption and ensure beneficiaries have access to 
their medications in a timely manner.
f. Program To Monitor Antipsychotic Medications in Children
    Under section 1004 of the SUPPORT for Patients and Communities Act, 
states must have a program (as designed and implemented by the state) 
to monitor and manage the appropriate use of antipsychotic medications 
by children enrolled under the state plan (or under a waiver of the 
state plan), including any Medicaid expansion group for Children's 
Health Insurance Program (CHIP).\82\ Additionally, states must annually 
submit information on activities carried out under this program for 
individuals not more than the age of 18 years old generally, and 
children in foster care specifically, as part of the annual report 
submitted to the Secretary under section 1927(g)(3)(D) of the Act, as 
provided in section 1902(oo)(1)(D) of the Act.
---------------------------------------------------------------------------

    \82\ Section 1902(oo)(1)(B) of the Act, as added by section 1004 
of the SUPPORT for Patients and Communities Act.
---------------------------------------------------------------------------

    Antipsychotic medications are increasingly used for a wide range of 
clinical indications in diverse populations, including privately and 
publicly insured youth.\83\ Antipsychotics' adverse metabolic effects 
have heightened concern over growth in prescribing to youth, including 
off-label prescribing and polytherapy of multiple antipsychotics.\84\ 
Studies have raised concerns regarding the long-term safety and 
effectiveness of antipsychotics in this broadened population. Studies 
in adults have found that antipsychotics can cause serious side effects 
and long-term safety and efficacy for off-label utilization is a 
particular concern in children.\85\ Some of the most concerning effects 
include uncontrollable movements and tremors, an increased risk of 
diabetes, substantial weight gain, elevated cholesterol, triglycerides 
and prolactin, changes in sexual function, and abnormal lactation.\86\ 
Children appear to be at higher risk than adults for a number of 
adverse effects, such as extrapyramidal symptoms and metabolic and 
endocrine abnormalities. Some studies suggests that antipsychotic 
treatment may be associated with increased mortality among children and 
youths and the distal benefit/risk ratio for long-term off-label 
treatment remains to be determined.87 88
---------------------------------------------------------------------------

    \83\ Crystal, Stephen et al. ``Broadened use of atypical 
antipsychotics: safety, effectiveness, and policy challenges.'' 
Health affairs (Project Hope) vol. 28,5 (2009): w770-81. 
doi:10.1377/hlthaff.28.5.w770.
    \84\ Ibid.
    \85\ Ibid.
    \86\ Marder SR, et al. Physical health monitoring of patients 
with schizophrenia. Am J Psychiatry. 2004;161(8):1334.
    \87\ https://jamanetwork.com/journals/jamapsychiatry/article-abstract/2717966.
    \88\ https://www.healthline.com/health/consumer-reports-antipsychotics-children#1.
---------------------------------------------------------------------------

    In consideration of clinical recommendations to monitor and manage 
the appropriate use of antipsychotic medications by children and to 
assess the clinical benefits and harms of treatment on an ongoing 
basis, we believe this program is necessary to assure children are 
receiving appropriate treatment that is not likely to result in adverse 
medical results, and to accomplish other purposes of the DUR program 
under section 1927(g) of the Act and of the SUPPORT for Patients and 
Communities Act. Accordingly, we are proposing at Sec.  
456.703(h)(1)(v) that states be required to implement programs to 
monitor and manage the appropriate use of antipsychotic medications by 
children enrolled under the State plan, including any Medicaid 
expansion groups for the Children's Health Insurance Program (CHIP). We 
understand states need considerable flexibility when implementing this 
program. These proposed provisions are not meant to prohibit the 
exercise of clinical judgment by a provider regarding the best or most 
appropriate care and treatment for any patient. States are expected to 
consult national guidelines and are encouraged to work with their 
pharmacy and therapeutics (P&T) and DUR committees to identify 
clinically appropriate safety edits and reviews. We recommend states 
consider expanding DUR programs to include reviews on children for 
polytherapy (therapy that

[[Page 37312]]

uses more than one medication), inappropriate utilization or off label 
utilization.
g. Fraud and Abuse Identification
    Section 1902(oo)(1)(C) of the Act, as added by section 1004 of the 
SUPPORT for Patients and Communities Act, provides that States must 
have a process (as designed and implemented by the state) that 
identifies potential fraud or abuse of controlled substances by 
individuals enrolled under the state plan (or under a waiver of the 
state plan), health care providers prescribing drugs to individuals so 
enrolled, and pharmacies dispensing drugs to individuals so enrolled. 
We propose to implement this requirement at Sec.  456.703(h)(1)(vi); 
specifically, we propose that the state's DUR program must include a 
process to identify potential fraud or abuse of controlled substances 
by individuals enrolled under the State plan, health care providers 
prescribing drugs to individuals so enrolled, and pharmacies dispensing 
drugs to individuals so enrolled.
    We intend that this proposed process would operate in a coordinated 
fashion with other state program integrity efforts. States would have 
flexibility to define specific parameters for reviews for fraud and 
abuse, as well as protocols for recommendation, referral, or escalation 
of reviews to the relevant Program Integrity/Surveillance Utilization 
Review (SURS) unit, law enforcement, or state professional board, based 
on patterns discovered through the proposed DUR process. Additionally, 
state policy should specify the documentation required when suspected 
fraud and/or abuse results in a recommendation, referral, or escalation 
for further review, including the findings of any subsequent 
investigation into the potential deviation from the standard of care. 
States would be expected to ensure that DUR reviews conducted pursuant 
to this proposed requirement are aligned with all applicable federal 
requirements, including those specified in 42 CFR 455.12, 455.13 
through 455.21 and 455.23 and section 1902(a)(64) of the Act.
    We acknowledge that other initiatives, which many states are 
already undertaking, could work synergistically with the proposed 
requirement to help reduce fraud, misuse, and abuse related to opioids. 
For example, patient review and restriction programs (lock-in programs) 
\89\ and prescription drug monitoring programs \90\ also play an 
important role in detecting and preventing opioid-related fraud, misuse 
and abuse. Lock-in programs, also called patient review and restriction 
or drug management programs, are meant to cut down on ``doctor 
shopping''--the practice of going to several doctors or pharmacies to 
fill multiple prescriptions for opioids or other controlled substances 
for illicit sale or misuse or to support an addiction. Such programs 
are used primarily to restrict overutilization of medications. 
Additionally, programs may require beneficiaries to receive all 
prescriptions through one pharmacy, have all prescriptions written by 
one prescriber, receive health care services from one clinical 
professional, or all three depending on how the program is 
designed.\91\
---------------------------------------------------------------------------

    \89\ ``Pharmacy Lock-In Programs Slated For Expanded Use.'' OPEN 
MINDS, www.openminds.com/market-intelligence/executive-briefings/pharmacy-lock-programs-slated-expanded-use/.
    \90\ Office of National Drug Control Policy. Prescription Drug 
Monitoring Program. Prescription Drug Monitoring Program, April 
2011. https://www.ncjrs.gov/pdffiles1/ondcp/pdmp.pdf.
    \91\ ``Pharmacy Lock-In Programs Slated For Expanded Use.'' OPEN 
MINDS, www.openminds.com/market-intelligence/executive-briefings/pharmacy-lock-programs-slated-expanded-use/.
---------------------------------------------------------------------------

    Section 5042 of the SUPPORT for Patients and Communities Act 
requires covered providers who are permitted to prescribe controlled 
substances and who participate in Medicaid to query qualified 
Prescription Drug Monitoring Programs (PDMPs) before prescribing 
controlled substances to most Medicaid beneficiaries, beginning October 
1, 2021. PDMPs are database tools sometimes utilized by government 
officials and law enforcement for reducing prescription drug fraud, 
abuse and diversion, but which more frequently can be used to monitor 
controlled substance use by healthcare providers including prescribers 
and pharmacists. PDMPs collect electronically transmitted prescribing 
and some dispensing data submitted by pharmacies and dispensing 
practitioners. The data are monitored and analyzed to support states' 
efforts in education, research, enforcement and abuse prevention.\92\ 
Data analytics can help to determine the extent to which beneficiaries 
are prescribed high amounts of opioids, identify beneficiaries who may 
be at serious risk of opioid misuse or overdose, and identify 
prescribers with questionable opioid prescribing patterns for these 
beneficiaries.93 94 The process required under the SUPPORT 
for Patients and Communities Act and this proposed rule to identify 
potential fraud or abuse, can help ensure that state officials and 
staff implementing the state's program integrity, PDMP, and DUR 
functions work collaboratively to identify opportunities for DUR 
activities to assist in the identification of potential fraud and 
abuse.
---------------------------------------------------------------------------

    \92\ ``Prescription Drug Monitoring Frequently Asked Questions 
(FAQ)[bond] The PDMP Training and Technical Assistance Center.'' 
Prescription Drug Monitoring Frequently Asked Questions (FAQ) [bond] 
The PDMP Training and Technical Assistance Center, 
www.pdmpassist.org/content/prescription-drug-monitoring-frequently-asked-questions-faq.
    \93\ Beaton, Thomas. ``Preventing Provider Fraud through Health 
IT, Data Analytics.'' HealthPayerIntelligence, 5 Oct. 2018, https://healthpayerintelligence.com/news/preventing-provider-fraud-through-health-it-data-analytics.
    \94\ OIG, Opioids in Medicare Part D: Concerns about Extreme Use 
and Questionable Prescribing, OEI-02-17-00250, July 2017. https://oig.hhs.gov/oei/reports/oei-02-17-00250.pdf.
---------------------------------------------------------------------------

2. Other CMS Proposed Standards
    In addition to codifying the SUPPORT for Patients and Communities 
Act requirements, we are proposing additional minimum DUR standards in 
this proposed rule that states would be required to implement as part 
of their DUR programs at Sec.  456.703(h)(1)(vii). Specifically, under 
our authority to implement section 1927(g) of the Act and consistent 
with the goals of the SUPPORT for Patients and Communities Act to help 
combat the nation's opioid overdose epidemic, we are proposing minimum 
standards related to MAT and identification of beneficiaries who could 
be at high risk of opioid overdose and should be considered for co-
prescription or co-dispensing of naloxone. These additional standards 
are being included to ensure prescribed drugs are: (1) Appropriate; (2) 
medically necessary; and (3) not likely to result in adverse medical 
results.
    State DUR programs would be required to include prospective safety 
edit alerts, automatic retrospective claims review, or a combination of 
these approaches as determined by the state, to identify cases where a 
beneficiary is prescribed an opioid after the beneficiary has been 
prescribed one or more drugs used for MAT, and prospective safety edit 
alerts, automatic retrospective claims review, or a combination of 
these approaches as determined by the state to expand appropriate 
utilization of naloxone for dispensing to individuals at risk of 
overdose. As further discussed below, we are proposing these minimum 
requirements to further implement section 1927(g) of the Act to prevent 
and reduce the inappropriate use of opioids and potentially associated 
adverse medical results, consistent with the

[[Page 37313]]

provisions under section 1004 of the SUPPORT for Patients and 
Communities Act.
a. Medication Assisted Treatment (MAT)
    To further implement section 1927(g)(1) of the Act and consistent 
with section 1004 of the SUPPORT for Patients and Communities Act, we 
are proposing to require states to establish prospective safety edit 
alerts, automatic retrospective claims review, or a combination of 
these approaches as determined by the state, to identify cases where a 
beneficiary is prescribed an opioid after the beneficiary has been 
prescribed one or more drugs used for MAT or had an OUD diagnosis 
within a specified number of days (as determined by the state), without 
having a new indication to support utilization of opioids (such as a 
new cancer diagnosis, new palliative care treatment or entry into 
hospice).
    MAT is treatment for opioid use disorder (OUD) that includes 
addiction treatment and services plus a medication approved by FDA for 
opioid addiction, detoxification, or maintenance treatment or relapse 
prevention for opioid use disorder.\95\ The SUPPORT for Patient and 
Communities Act defines MAT to include all FDA approved drugs and 
licensed biological products to treat opioid disorders, as well as 
counseling services and behavioral therapies with respect to the 
provision of such drugs and biological products.\96\ MAT has proven to 
be clinically effective in treating opioid use disorder and 
significantly reduces the need for inpatient detoxification 
services.\97\ Medications such as buprenorphine and methadone, in 
combination with counseling and behavioral therapies, provide a whole-
patient approach to the treatment of opioid use disorders.
---------------------------------------------------------------------------

    \95\ There are four drugs or drug combinations currently used in 
MAT: Buprenorphine; naltrexone; buprenorphine in combination with 
naloxone; and methadone.
    \96\ Support for Patients and Communities Act, Section 1006(b). 
Requirement For State Medicaid Plans To Provide Coverage For 
Medication-Assisted Treatment.
    \97\ ``Medication and Counseling Treatment''. September 28, 
2015. Available at https://www.samhsa.gov/medication-assisted-treatment/treatment.
---------------------------------------------------------------------------

    Using opioid medications during the course of MAT is dangerous from 
a clinical perspective. A safety edit designed to notify healthcare 
providers about the co-administration of MAT drugs and opioids would be 
useful to alert the providers regarding a possible need for increased 
coordination of care. We believe states could take effective action to 
help prevent adverse medical results, possible OUD relapse, and 
increase coordination of care in patients with a history of OUD. We 
understand states need considerable flexibility when implementing these 
reviews to address complicated patient populations. The proposed 
prospective safety edits, automatic retrospective claims reviews, or a 
combination of these approaches, would help identify cases where a 
beneficiary is prescribed an opioid after the beneficiary has been 
prescribed one or more drugs used for MAT or has received an OUD 
diagnosis. Accordingly, we are proposing that states would have 
flexibility to determine which of these DUR approaches the state would 
implement, including the flexibility to incorporate both into an 
effective DUR program. State flexibility also would extend to 
specifying the time period between the prior episode of MAT or OUD 
diagnosis (or most recent prior episode of MAT or OUD diagnosis) and 
the subject opioid prescription that, if not met, would trigger the 
alert (for example, an opioid prescription within 24 months of the end 
of the most recent episode of MAT would trigger a prospective safety 
edit). Flexibility could also extend to diagnoses where opioid use 
after MAT is appropriate without compromising OUD treatment (for 
example in end of life care or in cancer patients with severe pain 
resulting from their disease or that does not respond to alternative 
pain management options).
    In consideration of clinical recommendations to ensure appropriate 
MAT treatment, and to prevent opioid related abuse and misuse, we 
believe the proposed prospective safety edits and/or retrospective 
claim reviews are necessary to assure that prescriptions are 
appropriate, medically necessary, and not likely to result in adverse 
medical results, and to accomplish other purposes of the DUR program 
under section 1927(g) of the Act and of the SUPPORT for Patients and 
Communities Act. This proposed requirement is authorized by and 
expected to advance the purposes of section 1927(g) of the Act and is 
consistent with the purposes of section 1004 of the SUPPORT for 
Patients and Communities Act. Accordingly, we are proposing at Sec.  
456.703(h)(1)(vii)(A) that states be required to implement reviews to 
alert when the beneficiary is prescribed an opioid after the 
beneficiary has been prescribed one or more drugs used for Medication 
Assisted Treatment (MAT) for an opioid use disorder or has been 
diagnosed with an opioid use disorder, within a timeframe specified by 
the state, in the absence of a new indication to support utilization of 
opioids (such as new cancer related pain diagnosis or entry into 
hospice care). In addition to helping ensure appropriate utilization of 
medications, these edits would assist in coordination of care, and 
potentially in improved treatment of pain.
b. Naloxone
    To further implement section 1927(g)(1) of the Act, and consistent 
with section 1004 of the SUPPORT for Patients and Communities Act, we 
are proposing and seeking comment on requiring states to establish 
prospective safety edit alerts, automatic retrospective claims review, 
or a combination of these approaches as determined by the state, to 
identify beneficiaries who could be at high risk of opioid overdose and 
should be considered for co-prescription or co-dispensing of naloxone 
with the goal of expanding appropriate utilization of naloxone to 
individuals at risk of opioid overdose. Naloxone is a medication 
designed to rapidly reverse opioid overdose by binding to opioid 
receptors and reversing the effects of opioids. Naloxone works quickly 
to restore normal respiration to a person whose breathing has slowed or 
stopped as a result of an opioid overdose, including both illicit and 
prescription opioids. However, naloxone only works if a person has 
opioids in their system; the medication has no effect if opioids are 
absent.\98\
---------------------------------------------------------------------------

    \98\ ``Understanding Naloxone.'' Harm Reduction Coalition. 
Available at https://harmreduction.org/issues/overdose-prevention/overview/overdose-basics/understanding-naloxone/.
---------------------------------------------------------------------------

    The prescribing or coprescribing of naloxone in patients at 
elevated risk for opioid overdose or for those who have overdosed on 
opioids can save lives.\99\ We recommend states consider ways for 
expanded use, distribution and access to naloxone when clinically 
appropriate.
---------------------------------------------------------------------------

    \99\ NEJM Journal Watch: Summaries of and Commentary on Original 
Medical and Scientific Articles from Key Medical Journals, HHS-
recommends-coprescribing-naloxone-with-opioids-high. https://www.jwatch.org/fw114907/2018/12/20/hhs-recommends-coprescribing-naloxone-with-opioids-high.
---------------------------------------------------------------------------

    When implementing this review, states should determine standards 
for identifying individuals at high risk for opioid overdose, such as 
individuals who have been discharged from emergency medical care 
following opioid overdose, individuals who use heroin or misuse 
prescription pain relievers as well as those who use high dose opioids 
for long-term management of chronic pain.\100\ Before starting and

[[Page 37314]]

periodically during continuation of opioid therapy, clinicians should 
evaluate risk factors for opioid-related harms. When prescribing 
opioids, the CDC Guideline recommends clinicians should incorporate 
strategies to mitigate opioid risks, including considering offering 
naloxone when factors that increase risk for opioid overdose, such as 
history of overdose, history of substance use disorder, higher opioid 
dosages (>=50 MME/day), or concurrent benzodiazepine use, are 
present.\101\ We understand states need considerable flexibility when 
implementing this review to address a complex problem and are proposing 
that states would have flexibility to determine which DUR approach the 
state would implement into an effective DUR program: Either or both of 
prospective safety edits and/or retrospective claims reviews. Further, 
we propose that states would have flexibility to determine the 
particular criteria they would use to identify which beneficiaries may 
be at high risk of opioid overdose such that they should be considered 
for co-prescription or co-dispensing of naloxone.
---------------------------------------------------------------------------

    \100\ Ibid.
    \101\ ``CDC Guidelines for Prescribing Opioids for Chronic 
pain.'' Available at https://www.cdc.gov/drugoverdose/pdf/guidelines_at-a-glance-a.pdf.
---------------------------------------------------------------------------

    In consideration of clinical recommendations to expand naloxone use 
to prevent adverse medical events among those who are prescribed 
opioids or those who may be at high risk of opioid overdose or have 
previously overdosed, we believe this review is necessary to assure at 
risk individuals are receiving appropriate treatment that is not likely 
to result in adverse medical results, and to accomplish other purposes 
of the DUR program under section 1927(g) of the Act and of the SUPPORT 
for Patients and Communities Act. Accordingly, we are proposing at 
Sec.  456.703(h)(1)(vii)(B) that states be required to implement 
prospective safety edit alerts, automatic retrospective claims review, 
or a combination of these approaches as determined by the state to 
identify when a beneficiary could be at high risk of opioid overdose 
and should be considered for co-prescription or co-dispensing of 
naloxone. We anticipate that this proposal may help expand appropriate 
utilization of naloxone, including by facilitating dispensing to 
individuals at risk of overdose.
3. Exclusions
    The above described DUR requirements added to section 1902(oo) of 
the Act by section 1004 of the SUPPORT for Patients and Communities 
Act, which we propose to implement along with additional related 
proposals under section 1927(g) of the Act at Sec.  456.703(h)(1)(i) 
through (vii)(B), do not and would not apply for individuals who are 
receiving hospice or palliative care or those in treatment for cancer; 
residents of a long-term care facility, a facility described in section 
1905(d) of the Act (that is, an intermediate care facility for the 
intellectually disabled), or of another facility for which frequently 
abused drugs are dispensed for residents through a contact with a 
single pharmacy; or other individuals the state elects to treat as 
exempted from such requirements.
    States are expected to consult national guidelines and are 
encouraged to work with their pharmacy and therapeutics (P&T) and DUR 
committees to identify other clinically appropriate patient populations 
for possible exclusion from the safety reviews specified in Sec.  
456.703(h)(1)(i) through (vii) to avoid impeding critical access to 
needed medication when managing specific complex disease states.
    We understand states need considerable flexibility when 
implementing these reviews to address complicated patient populations. 
We propose to implement this statutory exclusion at Sec.  
456.703(h)(2), such that states would not be required to implement the 
specified DUR requirements with respect to these populations. However, 
while states are not required to comply with these requirements with 
respect to these individuals, we clarify, and propose to codify in the 
regulation, that states voluntarily may apply to them the prospective 
safety edits and claims review automated processes otherwise required 
under the SUPPORT for Patients and Communities Act and this proposed 
rule.\102\ We also recognize that it is important for patients who are 
taking opioid-based MAT drugs to continue their therapy without 
disruption. In this regard, states may at their discretion include 
these drugs in their DUR reviews under section 1927(g) of the Act.
---------------------------------------------------------------------------

    \102\ Section 1902(oo)(3) of the Act, as added by section 1004 
of the SUPPORT for Patients and Communities Act.
---------------------------------------------------------------------------

4. Managed Care Requirements
    Consistent with section 1902(oo)(1)(A)(ii) of the Act, as added by 
the SUPPORT for Patients and Communities Act, states also must ensure 
that their contracts with MCOs under section 1903(m) of the Act and 
managed care entities (MCEs) under section 1905(t)(3) of the Act 
require that the MCOs or MCEs have safety edits, an automated review 
processes, a program to monitor antipsychotic medications in children, 
and fraud and abuse identification requirements as described in this 
proposed rule for individuals eligible for medical assistance under the 
state plan (or waiver of the state plan) who are enrolled with the 
entity, subject to the exclusions of individuals as proposed in section 
1902(oo)(1)(C) of the Act.\103\ States must include these DUR 
provisions in managed care contracts by October 1, 2019. Although the 
foregoing provisions added by the SUPPORT for Patients and Communities 
Act address only MCOs and MCEs in the managed care context, we propose 
also to extend these requirements to contracts with prepaid ambulatory 
health plans (PAHPs) and prepaid inpatient health plans (PIHPs) under 
our authority in section 1902(a)(4) under which existing PIHP and PAHP 
requirements are based. Thus, under this proposed rule, states would be 
required to include prepaid ambulatory health plans (PAHPs) and prepaid 
inpatient health plans (PIHPs) when uniformly implementing the updates 
and requirements specified in the SUPPORT for Patients and Communities 
Act for all Medicaid managed care plans. Furthermore, as required by 
section 1004 of the SUPPORT for Patients and Communities Act, each 
Medicaid MCO and MCE within a state must also operate a DUR program 
that complies with the above specified requirements. We are proposing 
to define MCEs in Sec.  438.2 to have the meaning given to the term 
under section 1932(a)(1)(B) of the Act, which defines the term to mean 
a Medicaid managed care organization, as defined in section 
1903(m)(1)(A), that provides or arranges for services for enrollees 
under a contract pursuant to section 1903(m) of the Act, or a primary 
care case manager, as defined in section 1905(t)(2) of the Act. Managed 
care regulations at Sec.  438.3(s)(4) require Medicaid managed care DUR 
programs in which an MCO, PIHP, or PAHP contracts to provide coverage 
for covered outpatient drugs to operate consistently with section 
1927(g) of the Act and part 456, subpart K, and that state contracts 
must be updated to include these requirements. We are proposing to 
amend the regulation at Sec.  438.3(s) and (s)(4) and (5) to require 
that MCEs comply with the requirements in section 1902(oo)(1)(A) of the 
Act as implemented in these proposed regulations, similar to MCOs, 
PIHPs, and PAHPs.
---------------------------------------------------------------------------

    \103\ H.R. 6. 24 Oct. 2018, www.congress.gov/115/bills/hr6/BILLS-115hr6enr.pdf. Page 17.

---------------------------------------------------------------------------

[[Page 37315]]

5. Reporting Requirements
    Consistent with section 1927(g)(3)(D) of the Act, we require each 
State Medicaid agency to submit to us an annual report on the operation 
of its Medicaid DUR program. Under Sec.  456.712(a), the state must 
require the DUR Board to prepare and submit, on an annual basis, a 
report to the State Medicaid agency. Under Sec.  456.712(b), each State 
Medicaid agency must in turn submit this report to us, as well as 
specified additional information, including but not limited to 
descriptions of the nature and scope of the state's prospective and 
retrospective DUR programs, detailed information on the specific DUR 
criteria and standards in use, a description of the actions taken to 
ensure compliance with predetermined standards requirements in Sec.  
465.703, a summary of the educational interventions used and an 
assessment of their effect on quality of care, and an estimate of the 
cost savings generated as a result of the DUR program. We have compiled 
state FFS Medicaid DUR annual reports since 1995 and has published them 
on Medicaid.gov since 2010. Since 2016, Sec.  438.3(s)(4) requires any 
MCO, PIHP or PAHP that covers covered outpatient drugs to operate a DUR 
program that complies with section 1927(g) of the Act and 42 CFR part 
456, subpart K, as though these requirements applied to the MCO, PIHP, 
or PAHP instead of the state, including requirements related to annual 
DUR reporting. Given the commercial nature of many managed care 
entities, incorporation of information posted to Medicaid.gov provides 
new considerations with regards to public disclosure of information 
received by CMS.
    In an effort to share and encourage innovative and collaborative 
practices, we also are proposing to publish all information received in 
annual DUR reports from managed care programs and FFS programs on a CMS 
website. Accordingly, we are proposing to add new paragraph (c) to 
Sec.  456.712 to provide that all FFS and managed care DUR reports 
received by CMS under Sec.  456.712(b) and, as applicable, pursuant to 
Sec.  438.3(s), will be publicly posted on a website maintained by CMS 
for the sharing of reports and other information concerning Medicaid 
DUR programs.
6. State Plan Amendment (SPA) Requirements
    The SUPPORT for Patients and Communities Act amended the state plan 
requirements in section 1902(a) of the Act to include a new paragraph 
(85), which requires the state plan to provide that the state is in 
compliance with the new drug review and utilization requirements set 
forth in section 1902(oo) of the Act, as also added by the SUPPORT for 
Patients and Communities Act. The SUPPORT for Patients and Communities 
Act also requires all states to implement these requirements by October 
1, 2019, and to submit an amendment to their state plan no later than 
December 31, 2019, consistent with the state plan amendment 
requirements in 42 CFR part 430, subpart B, to describe how the state 
addresses these provisions in the state plan. States are also expected 
to give appropriate tribal notification, as required, if applicable. 
Guidance regarding requirements was issued to states in a CMS 
informational bulletin https://www.medicaid.gov/federal-policy-guidance/downloads/cib080519-1004.pdf. If provisions in this proposed 
rule that would implement the amendments made by section 1004 of the 
SUPPORT for Patients and Communities Act are finalized, an additional 
state plan amendment potentially could be needed to ensure that state 
plans are in compliance with applicable final regulations. We would 
expect to provide related guidance in connection with any final rule.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), we are required to provide 60-day notice in the Federal Register 
and solicit public comment before a ``collection of information'' 
requirement is submitted to the Office of Management and Budget (OMB) 
for review and approval. For the purposes of the PRA and this section 
of the preamble, collection of information is defined under 5 CFR 
1320.3(c) of the PRA's implementing regulations.
    To fairly evaluate whether an information collection must be 
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this proposed rule that contain information 
collection requirements.

A. Wage Estimates

    To derive average costs, we used data from the U.S. Bureau of Labor 
Statistics' May 2018 National Occupational Employment and Wage 
Estimates (https://www.bls.gov/oes/current/oes_nat.htm). Table 3 
presents the mean hourly wage, the cost of fringe benefits and overhead 
(calculated at 100 percent of salary), and the adjusted hourly wage.

                          Table 3--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                      Fringe
                                                    Occupation      Mean hourly    benefits and      Adjusted
                Occupation title                       code         wage ($/hr)    overhead ($/   hourly wage ($/
                                                                                        hr)             hr)
----------------------------------------------------------------------------------------------------------------
Chief Executives................................         11-1011           96.22           96.22          192.44
Data Entry and Information Processing Workers...         43-9020           17.05           17.05           34.10
General Operations Mgr..........................         11-1021           59.56           59.56          119.12
----------------------------------------------------------------------------------------------------------------


[[Page 37316]]

    As indicated, we are adjusting our employee hourly wage estimates 
by a factor of 100 percent. This is necessarily a rough adjustment, 
both because fringe benefits and overhead costs vary significantly from 
employer to employer, and because methods of estimating these costs 
vary widely from study to study. Nonetheless, we believe that doubling 
the hourly wage to estimate total cost is a reasonably accurate 
estimation method.

B. Proposed Information Collection Requirements (ICRs)

1. ICRs Regarding State Plan Requirements, Findings, and Assurances 
(Sec.  447.518(d)(1) and (2))
    The following proposed changes will be submitted to OMB for 
approval under control number 0938-TBD (CMS-10722). The control number 
is currently to be determined (TBD) but will be issued by OMB upon 
their clearance of this proposed rule's information collection request 
(a.k.a., ``PRA package''). The subsequent final rule will set out the 
assigned control number.
    Under section 1902(a)(30)(A) the Act, we are granted the authority 
to require that methods and procedures be established by states 
relating to the utilization of, and the payment for, care and services 
available under the state plan process (including but not limited to 
utilization review plans) as may be necessary to safeguard against 
unnecessary utilization of such care and services and to assure that 
state payments to providers of Medicaid services are consistent with 
efficiency, economy, and quality of care.
    To that end, as part of the state plan approval process relative to 
the VBP program, this rule proposes new reporting requirements that 
would affect the 51 state Medicaid programs (the 50 states and the 
District of Columbia). Specifically, a State participating in value-
based purchasing arrangements must report data described in Sec.  
447.518(d)(1) and (2) on an annual basis and no later than 60 days 
after the end of each year. The reported data would include: The State 
name, National drug code(s) (for drugs covered under the VBP), product 
FDA list name, number of prescriptions, cost to the State to administer 
VBP (for example: Systems changes, tracking evidence or outcomes-based 
measures, etc.), and the total savings generated by the supplemental 
rebate due to the VBP. The reporting requirements would be applicable 
to both FFS and MCO COD claims. Following our evaluation of the 
response to this proposed rule, we may decide to issue a form to help 
ensure that the proper information is reported at the proper address.
    We estimate it would take an additional 4 hours at $119.12/hr for a 
general operations manager to collect the supplemental rebate agreement 
VBP drug utilization information, add this data to the state's 
quarterly report when due annually (we will choose the quarter in which 
the annual data will be due), and submit the report to CMS. In 
aggregate we estimate an ongoing annual burden of 306 hours (6 hr/
report x 1/year x 51 respondents) at a cost of $36,444.60 (816 hr x 
$119.12/hr).
2. ICRs Regarding Requirements for States (Sec.  447.511(b), (d) and 
(e))
    The following proposed changes will be submitted to OMB for 
approval under control number 0938-0582 (CMS-R-144). Subject to 
renewal, the control number is currently set to expire on July 31, 
2020. It was last approved on March 14, 2019, and remains active.
    Under proposed Sec.  447.511(b) states, territories, and the 
District of Columbia would be required to ensure by certification that 
the quarterly rebate invoices sent to manufacturers that participate in 
the MDRP no later than 60 days after the end of each rebate period via 
CMS-R-144 (Quarterly Medicaid Drug Rebate Invoice), mirrors the data 
sent to us. This rule would not impose any changes to the CMS-R-144 
form.
    Under proposed Sec.  447.511(d) states would now be required to 
certify that their SDUD meets the requirements specified under proposed 
Sec.  447.511(e) via a certification statement. We believe the 
certification would not impose a significant burden as we will provide 
systems access to state certifiers to log in once per quarter to 
certify their SDUD report. Certifiers would have to apply for a CMS 
user ID and password, and keep current with required annual computer-
based training, as current state staff with access to our systems must 
do. To comply with the proposed certification requirements, States must 
already have system edits in place to find and correct SDUD outliers 
prior to reporting to manufacturers and CMS.
    We estimate it would take 5 hours at $192.44/hr for the State 
Medicaid Director, Deputy State Medicaid Director, another individual 
with equivalent authority, or an individual with directly delegated 
authority from one of the above to obtain current CMS systems access. 
In aggregate we estimate a one-time system ID/password access burden of 
280 hours (5 hr x 56 respondents) at a cost of $53,883 (280 hr x 
$192.44/hr).
    We also estimate an additional annual burden of 2 hours (or 30 
minutes/quarter) at $192.44/hr for a chief executive to certify such 
data and to add the state data certification language in their 
submission. In aggregate we estimate a burden of 112 hours (2 hr x 56 
respondents) at a cost of $21,553 (112 hr x $192.44/hr).
3. ICRs Regarding the Payment of Claims 18 (Sec.  433.139(b)(2), 
(b)(3)(i) and (b)(3)(ii)(B))
    The following proposed changes will be submitted to OMB for 
approval under control number 0938-1265 (CMS-10529). Subject to 
renewal, the control number is currently set to expire on April 30, 
2021. It was last approved on June 10, 2019, and remains active.
    This proposed rule would implement provisions of Bipartisan Budget 
Act of 2018 (BBA 2018) (Pub. L. 115-123, enacted February 9, 2018), 
which includes several provisions that modify COB and TPL in both 
statute and regulation related to special treatment of certain types of 
care and payment in Medicaid and Children's Health Insurance Program 
Reauthorization Act of 2009 (CHIPRA) (Pub. L. 111-3, enacted February 
4, 2009). Section 53102 of BBA 2018 amended the TPL provision at 
section 1902(a)(25) of the Act. Effective February 9, 2018, section 
53102(a)(1) of the BBA 2018 amended section 1902(a)(25)(E) of the Act 
to require states to cost avoid claims for prenatal care for pregnant 
women including labor and delivery and postpartum care, and to allow 
the state Medicaid agency 90 days instead of 30 days to pay claims 
related to medical support enforcement services, as well as requiring 
states to collect information on TPL before making payments. Effective 
April 18, 2019, section 7 of the Medicaid Services Investment and 
Accountability Act of 2019 (the MSIAA) amended section 1902(a)(25)(E) 
of the Act to allow 100 days instead of 90 days to pay claims related 
to medical support enforcement services, as well as requiring states to 
collect information on TPL before making payments.
    On April 18, 2019, section 7 of the MSIAA amended section 
1902(a)(25)(E) of the Act to allow 100 days instead of 90 days to pay 
claims related to medical support enforcement and preventive pediatric 
services, as well as requiring all states, the District of Columbia, 
and the territories (56 respondents) to collect information on third 
party TPL before making payments (Sec.  433.139(b)(2), (b)(3)(i) and 
(b)(3)(ii)(B)). Under the authority in section 1902(a)(25)(A) of the 
Act, our regulations at 42 CFR part 433, subpart D establishes

[[Page 37317]]

requirements for state Medicaid agencies to support the coordination of 
benefits (COB) effort by identifying TPL. Sections 433.139(b)(2), 
(b)(3)(i) and (b)(3)(ii)(B) detail the exception to standard COB cost 
avoidance by allowing pay and chase for certain types of care, as well 
as the timeframe allowed prior to Medicaid paying claims for certain 
types of care. Title XIX of the Act requires state Medicaid programs to 
identify and seek payment from liable third parties, before billing 
Medicaid.
    We estimate it would take 1 hour at $34.10/hr for a data entry/
information processing worker to collect information on TPL and report 
that information to CMS on CMS-64 (approved by OMB under the 
aforementioned OMB control number and CMS ID number) on a quarterly 
basis. In aggregate we estimate an annual burden of 224 hours (1 hr/
response x 4 responses/year x 56 respondents) at a cost of $7,638 (224 
hr x $34.10/hr).

C. Summary of Proposed Requirements and Annual Burden Estimates

    Table 4 sets out our proposed annual burden estimates.

                                                                        Table 4--Summary of Annual Requirement and Burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Time per
       Section under Title 42 of the CFR           Number of    Responses (per     response       Total time    Labor rate ($/  Total cost ($)            OMB Control No. (CMS ID No.)
                                                  respondents        year)          (hours)         (hours)           hr)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   447.511................................              56               1               5             280          192.44          53,883  0938-0582 (CMS-R-144).
Sec.   447.511................................              56               4             0.5             112          192.44          21,553  0938-0582 (CMS-R-144).
Sec.   447.518(d)(1) and (2)..................              51               1               6             306          119.12          36,440  0938-TBD (CMS-10722).
Sec.   433.139(b)(2), (b)(3)(i) and                         56               4               1             224           34.10           7,638  0938-1265 (CMS-10529).
 (b)(3)(ii)(B).
                                               -------------------------------------------------------------------------------------------------------------------------------------------------
    Total.....................................              56              13          Varies           1,432          Varies         180,276  n/a.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

D. Submission of PRA-Related Comments

    We have submitted a copy of this proposed rule to OMB for its 
review of the rule's information collection requirements. The 
requirements are not effective until they have been approved by OMB and 
a final rule is issued.
    To obtain copies of the supporting statement and any related forms 
for the proposed collections discussed above, please visit the CMS 
website at www.cms.hhs.gov/Paperwork ReductionActof1995, or call the 
Reports Clearance Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements. If you wish to comment, please submit your comments 
electronically as specified in the DATES and ADDRESSES Section of this 
proposed rule and identify the rule (CMS-2482-P) the ICR's CFR 
citation, and OMB control number.

V. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

VI. Regulatory Impact Statement

A. Statement of Need

    This proposed rule would implement changes to:
     Section 1927 of the Act
     Statutory changes from the Medicaid Services Investment 
and Accountability Act of 2019 (Pub. L. 116-16, enacted April 18, 
2019), BBA 2018 and the Affordable Care Act;
     Section 602 of BBA 2015, which amended section 1927(c)(3) 
of the Act;
     Section 2501(d) of the Affordable Care Act, which added 
section 1927(c)(2)(C) of the Act;
     Section 1927(b)(2)(A) of the Act requiring states to 
report to each manufacturer not later than 60 days after the end of 
each rebate period;
     Changes and additions to section 1927(g)(1) of the Act as 
set forth by section 1004 of the SUPPORT for Patients and Communities 
Act; and
     Title XIX of the Act and section 7 of the Medicaid 
Services Investment and Accountability Act of 2019 amending section 
1902(a)(25)(E) of the Act ((Sec.  433.139(b)(2), (b)(3)(i) and 
(b)(3)(ii)(B)).
     Changes made by Public Law 116-59, the Continuing 
Appropriations Act, 2020, and Health Extenders Act of 2019 (Health 
Extenders Act), which made changes to section 1927(k)(1) and 
1927(k)(11) of the Act.

B. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the 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 Executive 
Order 13771 on Reducing Regulation and Controlling Regulatory Costs 
(January 30, 2017).
    Executive Orders 12866 and 13563 direct 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 rule does not reach the economic threshold and thus is not 
considered a major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, small pharmaceutical 
manufacturers participating in the Medicaid Drug Rebate Program, and 
small governmental jurisdictions. Most hospitals and most other 
providers and suppliers are small entities, either by nonprofit status 
or by having revenues of less than $8.0 million to $41.5 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 we 
have determined, and the Secretary certifies, that this proposed rule 
would 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 an 
RIA 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 603

[[Page 37318]]

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 we have determined, and the Secretary 
certifies, that this proposed rule with comment period would not have a 
significant impact on the 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 2020, that 
threshold is approximately $156 million. This rule would have no 
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 issues a proposed rule (and subsequent final 
rule) that imposes substantial direct compliance costs on state and 
local governments, preempts state law, or otherwise has federalism 
implications. Since this regulation does not impose any substantial 
direct compliance costs on state or local governments, preempt state 
law, or otherwise have federalism implications, the requirements of 
Executive Order 13132 are not applicable.
    Executive Order 13771 (January 30, 2017) requires that the costs 
associated with significant new regulations ``to the extent permitted 
by law, be offset by the elimination of existing costs associated with 
at least two prior regulations.'' This proposed rule is not subject to 
the requirements of E.O. 13771 because it is expected to result in no 
more than de minimis costs.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 433

    Administrative practice and procedure, Child support, Claims, Grant 
programs-health, Medicaid, Reporting and recordkeeping requirements.

42 CFR Part 438

    Grant programs-health, Medicaid, Reporting and Recordkeeping 
requirements.

42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs-health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.

42 CFR Part 456

    Administrative practice and procedure, Drugs, Grant programs-
health, Health facilities, Medicaid, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:

PART 433--STATE FISCAL ADMINISTRATION

0
1. The authority citation for part 433 is revised to read as follows:

    Authority:  42 U.S.C. 1302.

0
2. Section 433.139 is amended by--
0
a. Removing and reserving paragraph (b)(2); and
0
b. Revising paragraphs (b)(3)(i) and (b)(3)(ii)(B).
    The revisions read as follows:


Sec.  433.139  Payment of claims.

* * * * *
    (b) * * *
    (2) [Reserved]
    (3) * * *
    (i) The claim is for preventive pediatric services, including early 
and periodic screening, diagnosis and treatment services provided for 
under part 441, subpart B of this chapter, that are covered under the 
State plan; or
    (ii) * * *
    (B) For child support enforcement services beginning February 9, 
2018, the provider certifies that before billing Medicaid, if the 
provider has billed a third party, the provider has waited 100 days 
from the date of the service and has not received payment from the 
third party.
* * * * *

PART 438--MANAGED CARE

0
3. The authority citation for part 438 continues to read as follows:

    Authority:  42 U.S.C. 1302.

0
4. Section 438.2 is amended by adding the definition of ``Managed care 
entities (MCEs) in alphabetical order to read as follows:


Sec.  438.2   Definitions.

* * * * *
    Managed care entity (MCE) means a Medicaid managed care 
organization, as defined in section 1903(m)(1)(A) of the Act, that 
provides or arranges for services for enrollees under a contract 
pursuant to section 1903(m) of the Act or a primary care case manager, 
as defined in section 1905(t)(2) of the Act.
* * * * *
0
5. Section 438.3 is amended by revising paragraphs (s) introductory 
text, (s)(4) and (5) to read as follows:


Sec.  438.3   Standard contract requirements.

* * * * *
    (s) Requirements for MCOs, MCEs, PIHPs, or PAHPs that provide 
covered outpatient drugs. Contracts that obligate MCOs, MCEs, PIHPs or 
PAHPs to provide coverage of covered outpatient drugs must include the 
following requirements:
* * * * *
    (4) The MCO, MCE, PIHP or PAHP must operate a drug utilization 
review program that complies with the requirements described in section 
1927(g) of the Act and part 456, subpart K of this chapter, as if such 
requirement applied to the MCO, MCE, PIHP, or PAHP instead of the 
State.
    (5) The MCO, MCE, PIHP or PAHP must provide a detailed description 
of its drug utilization review program activities to the State on an 
annual basis.
* * * * *

PART 447--PAYMENTS FOR SERVICES

0
6. The authority citation for part 447 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1396r-8.

0
7. Section 447.502 is amended--
0
a. In the definition of ``Bundled sale'' by adding paragraph (3);
0
b. By adding the definition of ``CMS-authorized supplemental rebate 
agreement'' in alphabetical order;
0
c. By revising the definition of ``Innovator multiple source drug'';
0
d. By adding the definition of ``Line extension'' in alphabetical 
order;
0
e. By revising the definition of ``Multiple source drug'';
0
f. By adding the definition of ``New formulation'' in alphabetical 
order;
0
g. By revising the definitions of ``Oral solid dosage form'' and 
``Single source drug'';
0
h. By adding the definitions of ``Value-based purchasing (VBP) 
arrangement'' in alphabetical order; and
0
i. By revising the definition of ``Wholesaler''.
    The additions and revisions read as follows:


Sec.  447.502  Definitions.

* * * * *

[[Page 37319]]

    Bundled sale * * *
    (3) Value-based purchasing (VBP) arrangements may qualify as a 
bundled sale, if the arrangement contains a performance requirement 
such as an outcome(s) measurement metric.
* * * * *
    CMS-authorized supplemental rebate agreement means an agreement 
that is approved through a state plan amendment (SPA) by CMS, which 
allows a state to enter into single and/or multi-state supplemental 
drug rebate arrangements that generate rebates that are at least as 
large as the rebates set forth in the Secretary's national rebate 
agreement with drug manufacturers. Revenue from these rebates must be 
paid directly to the state and be used by the state to offset a state's 
drug expenditures resulting in shared savings with the Federal 
government.
* * * * *
    Innovator multiple source drug means a multiple source drug, 
including an authorized generic drug, that is marketed under a new drug 
application (NDA) approved by FDA, unless the Secretary determines that 
a narrow exception applies (as described in this section or any 
successor regulation). It also includes a drug product marketed by any 
cross-licensed producers, labelers, or distributors operating under the 
NDA and a covered outpatient drug approved under a biologics license 
application (BLA), product license application (PLA), establishment 
license application (ELA) or antibiotic drug application (ADA).
* * * * *
    Line extension means, for a drug, a new formulation of the drug, 
but does not include an abuse-deterrent formulation of the drug (as 
determined by the Secretary).
* * * * *
    Multiple source drug means, for a rebate period, a covered 
outpatient drug, including a drug product approved for marketing as a 
non-prescription drug that is regarded as a covered outpatient drug 
under section 1927(k)(4) of the Act, for which there is at least 1 
other drug product which meets all of the following criteria:
    (1) Is rated as therapeutically equivalent (under the FDA's most 
recent publication of ``Approved Drug Products with Therapeutic 
Equivalence Evaluations'' which is available at https://www.accessdata.fda.gov/scripts/cder/ob/).
    (2) Except as provided at section 1927(k)(7)(B) of the Act, is 
pharmaceutically equivalent and bioequivalent, as defined at section 
1927(k)(7)(C) of the Act and as determined by FDA.
    (3) Is sold or marketed in the United States during the period.
* * * * *
    New formulation means, for a drug, any change to the drug, provided 
that the new formulation contains at least one active ingredient in 
common with the initial brand name listed drug. New formulations 
include, but are not limited to: Extended release formulations; changes 
in dosage form, strength, route of administration, ingredients, 
pharmacodynamics, or pharmacokinetic properties; changes in indication 
accompanied by marketing as a separately identifiable drug (for 
example, a different NDC); and combination drugs, such as a drug that 
is a combination of two or more drugs or a drug that is a combination 
of a drug and a device.
* * * * *
    Oral solid dosage form means an orally administered dosage form 
that is not a liquid or gas at the time the drug enters the oral 
cavity.
* * * * *
    Single source drug means a covered outpatient drug, including a 
drug product approved for marketing as a non-prescription drug that is 
regarded as a covered outpatient drug under section 1927(k)(4) of the 
Act, which is produced or distributed under a new drug application 
approved by the FDA, including a drug product marketed by any cross-
licensed producers or distributors operating under the new drug 
application unless the Secretary determines that a narrow exception 
applies (as described in this section or any successor regulation), and 
includes a covered outpatient drug that is a biological product 
licensed, produced, or distributed under a biologics license 
application approved by the FDA.
* * * * *
    Value-based purchasing (VBP) arrangement means an arrangement or 
agreement intended to align pricing and/or payments to an observed or 
expected therapeutic or clinical value in a population (that is, 
outcomes relative to costs) and includes, but is not limited to:
    (1) Evidence-based measures, which substantially link the cost of a 
drug to existing evidence of effectiveness and potential value for 
specific uses of that product.
    (2) Outcomes-based measures, which substantially link payment for 
the drug to that of the drug's actual performance in patient or a 
population, or a reduction in other medical expenses.
    Wholesaler means a drug wholesaler that is engaged in wholesale 
distribution of prescription drugs to retail community pharmacies, 
including but not limited to repackers, distributors, own-label 
distributors, private-label distributors, jobbers, brokers, warehouses 
(including distributor's warehouses, chain drug warehouses, and 
wholesale drug warehouses), independent wholesale drug traders, and 
retail community pharmacies that conduct wholesale distributions.
0
8. Section 447.504 is amended by--
0
a. Removing paragraph (b)(2);
0
b. Redesignating paragraph (b)(3) as paragraph (b)(2);
0
c. Revising paragraphs (c)(25) through (29); and
0
d. Revising paragraphs (e)(13) through (17).
    The revisions read as follows:


Sec.  447.504  Determination of average manufacturer price.

* * * * *
    (c) * * *
    (25) Manufacturer coupons to a consumer redeemed by the 
manufacturer, agent, pharmacy or another entity acting on behalf of the 
manufacturer, but only to the extent that the manufacturer ensures the 
full value of the coupon is passed on to the consumer and the pharmacy, 
agent, or other AMP-eligible entity does not receive any price 
concession.
    (26) Manufacturer-sponsored programs that provide free goods, 
including but not limited to vouchers and patient assistance programs, 
but only to the extent that the manufacturer ensures: The voucher or 
benefit of such a program is not contingent on any other purchase 
requirement; The full value of the voucher or benefit of such a program 
is passed on to the consumer; and the pharmacy, agent, or other AMP-
eligible entity does not receive any price concession.
    (27) Manufacturer-sponsored drug discount card programs, but only 
to the extent that the manufacturer ensures the full value of the 
discount is passed on to the consumer and the pharmacy, agent, or the 
other AMP eligible entity does not receive any price concession.
    (28) Manufacturer-sponsored patient refund/rebate programs, to the 
extent that the manufacturer ensures that the manufacturer provides a 
full or partial refund or rebate to the patient for out-of-pocket costs 
and the pharmacy, agent, or other AMP eligible entity does not receive 
any price concession.
    (29) Manufacturer copayment assistance programs, to the extent that 
the manufacturer ensures the program benefits are provided entirely to 
the

[[Page 37320]]

patient and the pharmacy, agent, or other AMP eligible entity does not 
receive any price concession
* * * * *
    (e) * * *
    (13) Manufacturer coupons to a consumer redeemed by the 
manufacturer, agent, pharmacy or another entity acting on behalf of the 
manufacturer, but only to the extent that the manufacturer ensures the 
full value of the coupon is passed on to the consumer and the pharmacy, 
agent, or other AMP-eligible entity does not receive any price 
concession.
    (14) Manufacturer-sponsored programs that provide free goods, 
including, but not limited to vouchers and patient assistance programs, 
but only to the extent that the manufacturer ensures: The voucher or 
benefit of such a program is not contingent on any other purchase 
requirement; The full value of the voucher or benefit of such a program 
is passed on to the consumer; and the pharmacy, agent, or other AMP 
eligible entity does not receive any price concession.
    (15) Manufacturer-sponsored drug discount card programs, but only 
to the extent that the manufacturer ensures the full value of the 
discount is passed on to the consumer and the pharmacy, agent, or the 
other AMP-eligible entity does not receive any price concession.
    (16) Manufacturer-sponsored patient refund/rebate programs, to the 
extent that the manufacturer ensures the manufacturer provided a full 
or partial refund or rebate to the patient for out-of-pocket costs and 
the pharmacy agent, or other AMP eligible entity does not receive any 
price concession.
    (17) Manufacturer copayment assistance programs, to the extent that 
the manufacturer ensures the program benefits are provided entirely to 
the patient and the pharmacy agent, or other AMP eligible entity does 
not receive any price concession
* * * * *
0
9. Section 447.505 is amended--
0
a. In paragraph (a), by revising the definition of ``Best price'';
0
b. In paragraphs (c)(8) and (9), by removing the phrase ``extent that'' 
and adding in its place the phrase ``extent the manufacturer ensures 
that'';
0
c. In paragraphs (c)(10), (11) and (12), by removing the phrase ``that 
the'' and adding in its place the phrase ``that the manufacturer 
ensures the''; and
0
d. By revising paragraphs (d)(3).
    The revisions reads as follows:


Sec.  447.505  Determination of best price.

    (a) * * *
    Best price means, for a single source drug or innovator multiple 
source drug of a manufacturer (including the lowest price available to 
any entity for an authorized generic drug), the lowest price available 
from the manufacturer during the rebate period to any wholesaler, 
retailer, provider, health maintenance organization, nonprofit entity, 
or governmental entity in the United States in any pricing structure 
(including capitated payments) in the same quarter for which the AMP is 
computed. The lowest price available from a manufacturer may include 
varying best price points for a single dosage form and strength as a 
result of a value based purchasing arrangement (as defined at Sec.  
447.502).
* * * * *
    (d) * * *
    (3) The manufacturer must adjust the best price for a rebate period 
if cumulative discounts, rebates, or other arrangements subsequently 
adjust the prices available, to the extent that such cumulative 
discounts, rebates or other arrangements are not excluded from the 
determination of best price by statute or regulation.
0
10. Section 447.506 is amended by revising paragraph (b) to read as 
follows:


Sec.  447.506  Authorized generic drugs.

* * * * *
    (b) Exclusion of authorized generic drugs from AMP by a primary 
manufacturer. The primary manufacturer must exclude from its 
calculation of AMP any sales of authorized generic drugs to wholesalers 
for drugs distributed to retail community pharmacies when reporting the 
AMP of the brand name drug of that authorized generic drug.
* * * * *
0
11. Section 447.509 is amended--
0
a. By revising paragraphs (a)(4)(i) introductory text, (a)(4)(i)(A), 
(a)(4)(ii) introductory text, (a)(4)(ii)(A), and (a)(5);
0
b. In paragraph (a)(6) introductory text, by removing word ``rebate'' 
and adding in its place the phrase ``basic rebate''; and
0
c. By adding paragraphs (a)(7), (8) and (9).
    The revisions and additions read as follows:


Sec.  447.509  Medicaid drug rebates (MDR).

    (a) * * *
    (4) * * *
    (i) In the case of a drug that is a line extension of a single 
source drug or an innovator multiple source drug, provided that the 
initial single source drug or innovator multiple source drug is an oral 
solid dosage form, the rebate obligation for the rebate periods 
beginning January 1, 2010 through September 30, 2018 is the amount 
computed under paragraphs (a)(1) through (3) of this section for such 
new drug or, if greater, the product of all of the following:
    (A) The AMP of the line extension of a single source drug or an 
innovator multiple source drug.
* * * * *
    (ii) In the case of a drug that is a line extension of a single 
source drug or an innovator multiple source drug, provided that the 
initial single source drug or innovator multiple source drug is an oral 
solid dosage form, the rebate obligation for the rebate periods 
beginning on or after October 1, 2018 is the amount computed under 
paragraphs (a)(1) through (3) of this section for such new drug or, if 
greater, the amount computed under paragraph (a)(1) of this section 
plus the product of all of the following:
    (A) The AMP of the line extension of a single source drug or an 
innovator multiple source drug.
* * * * *
    (5) Limit on rebate. In no case will the total rebate amount exceed 
100 percent of the AMP of the single source or multiple source 
innovator drug.
* * * * *
    (7) Additional rebate for noninnovator multiple source drugs. In 
addition to the basic rebate described in paragraph (a)(6) of this 
section, for each dosage form and strength of a noninnovator multiple 
source drug, the rebate amount will be increased by an amount equal to 
the product of the following:
    (i) The total number of units of such dosage form and strength paid 
for under the State plan in the rebate period.
    (ii) The amount, if any, by which:
    (A) The AMP for the dosage form and strength of the drug for the 
period exceeds: (B) The base date AMP for such dosage form and 
strength, increased by the percentage by which the consumer price index 
for all urban consumers (United States city average) for the month 
before the month in which the rebate period begins exceeds such index 
associated with the base date AMP of the drug. The base date AMP has 
the meaning of AMP set forth in sections 1927(c)(2)(A)(ii)(II), 
1927(c)(2)(B) and 1927(c)(3)(C) of the Act.
    (8) Total rebate. The total rebate amount for noninnovator multiple 
source drugs is equal to the basic rebate amount plus the additional 
rebate amount, if any.
    (9) Limit on rebate. In no case will the total rebate amount exceed 
100 percent of the AMP for the noninnovator multiple source drug.
* * * * *

[[Page 37321]]

0
12. Section 447.510 is amended by adding paragraph (b)(1)(vi) to read 
as follows:


Sec.  447.510  Requirement for manufacturers.

* * * * *
    (b) * * *
    (1) * * *
    (vi) The change is a result of a VBP arrangement, as defined in 
Sec.  447.502, requiring the manufacturer to make changes outside of 
the 12-quarter rule, when the outcome must be evaluated outside of the 
12-quarter period.
* * * * *
0
13. Section 447.511 is amended--
0
a. In paragraph (a) introductory text, by removing the phrase 
``following data:'' and adding in its place the phrase ``following data 
and any subsequent changes to the data fields on the CMS-R-144 Medicaid 
Drug Rebate Invoice form:'';
0
b. By revising paragraph (b); and
0
c. By adding paragraphs (d) and (e).
    The revision and additions read as follows:


Sec.  447.511  Requirements for States.

* * * * *
    (b) Data submitted to CMS. On a quarterly basis, the State must 
submit drug utilization data to CMS, which will be the same information 
as submitted to the manufacturers on the CMS-R-144, as specified in 
paragraph (a) of this section. The state data submission will be due no 
later than 60 days after the end of each rebate period. In the event 
that a due date falls on a weekend or Federal holiday, the submission 
will be due on the first business day following that weekend or Federal 
holiday. Any adjustments to previously submitted data will be 
transmitted to the manufacturer and CMS in the same reporting period.
* * * * *
    (d) State data certification. Each data submission in this section 
must be certified by one of the following:
    (1) The State Medicaid Director (SMD);
    (2) The Deputy State Medicaid Director (DSMD);
    (3) An individual other than the SMD or DSMD, who has authority 
equivalent to an SMD or DSMD; or
    (4) An individual with the directly delegated authority to perform 
the certification on behalf of an individual described in paragraphs 
(d)(1) through (3) of this section.
    (e) State data certification language. Each data submission by a 
state must include the following certification language: ``I hereby 
certify, to the best of my knowledge, that the state's data submission 
is complete and accurate at the time of this submission, and was 
prepared in accordance with the state's good faith, reasonable efforts 
based on existing guidance from CMS, section 1927 of the Act and 
applicable federal regulations. I further certify that the state has 
transmitted data to CMS, including any adjustments to previous rebate 
periods, in the same reporting period as provided to the manufacturer. 
Further, the state certifies that it has applied any necessary edits to 
the data for both CMS and the labeler to avoid inaccuracies at both the 
NDC/line item and file/aggregate level. Such edits are to be applied in 
the same manner and in the same reporting period to both CMS and the 
manufacturer.''
0
14. Section 447.518 is amended by adding paragraphs (d)(1) and (2) to 
read as follows:


Sec.  447.518  State plan requirements, findings, and assurances.

* * * * *
    (d) * * *
    (1) A State participating in value-based purchasing arrangements 
must report data described in paragraph (d)(2) of this section on an 
annual basis.
    (2) Within 60 days of the end of each year, the State must submit 
all of the following data:
    (i) State.
    (ii) National drug code(s) (for drugs covered under the VBP).
    (iii) Product FDA list name.
    (iv) Number of prescriptions.
    (v) Cost to the State to administer VBP (for example, systems 
changes, tracking outcomes, etc.).
    (vi) Total savings generated by the supplemental rebate due to VBP.

PART 456--UTILIZATION CONTROL

0
15. The authority citation for part 456 is revised to read as follows:

    Authority: 42 U.S.C. 1302.

0
16. Section 456.703 is amended by--
0
a. Redesignating paragraph (h) as (i); and
0
b. Adding a new paragraph (h).
    The addition reads as follows:


Sec.  456.703  Drug use review programs.

* * * * *
    (h) Minimum standards for DUR programs. (1) Minimum standards. In 
operating their DUR programs, states must include the following minimum 
standards:
    (i) Prospective safety edit limitations for opioid prescriptions, 
as specified by the State, on:
    (A) Days' supply for patients not currently receiving opioid 
therapy for initial prescription fills;
    (B) Quantity of prescription dispensed for initial and subsequent 
prescription fills;
    (C) Therapeutically-duplicative initial and subsequent opioid 
prescription fills; and
    (D) Early refills, for subsequent prescription fills.
    (ii) Prospective safety edit limitations for opioid prescriptions, 
as specified by the State, on the maximum daily morphine milligram 
equivalent for treatment of chronic pain, for initial and subsequent 
prescription fills.
    (iii) A retrospective claims review automated process that 
indicates prescription fills of opioids in excess of the prospective 
safety edit limitations specified by the state under paragraphs 
(h)(1)(i) or (ii) of this section to provide for the ongoing review of 
opioid claims data to identify patterns of fraud, abuse, excessive 
utilization, inappropriate or medically unnecessary care, or 
prescribing or billing practices that indicate abuse or provision of 
inappropriate or medically unnecessary care among prescribers, 
pharmacists and individuals receiving Medicaid benefits.
    (iv) A retrospective claims review automated process and, at the 
option of the state, prospective safety edits that monitor when an 
individual is concurrently prescribed opioids and:
    (A) Benzodiazepines; or
    (B) Antipsychotics.
    (v) A program to monitor and manage the appropriate use of 
antipsychotic medications by children enrolled under the State plan, 
including any Medicaid expansion groups for the Children's Health 
Insurance Program (CHIP).
    (vi) A process to identify potential fraud or abuse of controlled 
substances by individuals enrolled under the State plan, health care 
providers prescribing drugs to individuals so enrolled, and pharmacies 
dispensing drugs to individuals so enrolled.
    (vii) Prospective safety edits, retrospective claims review 
automated processes, or a combination of these approaches as determined 
by the state, to identify when:
    (A) A beneficiary is prescribed an opioid after the beneficiary has 
been prescribed one or more drugs used for Medication Assisted 
Treatment (MAT) of an opioid use disorder or has been diagnosed with an 
opioid use disorder, within a timeframe specified by the state, in the 
absence of a new indication to support utilization of opioids (such as 
new cancer diagnosis or entry into hospice care); and
    (B) A beneficiary could be at high risk of opioid overdose and 
should be considered for co-prescription or co-dispensing of naloxone.

[[Page 37322]]

    (2) Exclusion. The requirements in paragraphs (h)(1)(i) through 
(vii) of this section do not apply with respect to individuals 
receiving hospice or palliative care or treatment for cancer; 
individuals who are residents of long-term care facilities, 
intermediate care facilities for the intellectually disabled, or 
facilities that dispense frequently abused drugs through a contract 
with a single pharmacy; or other individuals the state elects to 
exempt. While States are not required to apply these requirements with 
respect to these individuals, States may elect to do so.
* * * * *
0
 17. Section 456.712 is amended by adding paragraph (c) to read as 
follows:


Sec.  456.712  Annual report.

* * * * *
    (c) Public availability. All FFS and managed care DUR reports 
received by CMS under paragraph (b) of this section and, as applicable, 
pursuant to Sec.  438.3(s) of this chapter, will be publicly posted on 
a website maintained by CMS for the sharing of reports and other 
information concerning Medicaid DUR programs.

    Dated: February 6, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: June 11, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-12970 Filed 6-16-20; 4:15 pm]
BILLING CODE 4120-01-P