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CMS Proposes Revisions to Drug Pricing Policies

In the CY 2022 Physician Fee Schedule Proposed Rule, released yesterday (https://public-inspection.federalregister.gov/2021-14973.pdf) CMS is proposing two changes to its long-standing policies on drug pricing. 


First, CMS is proposing to require manufacturers of drugs covered under Part B to report ASP data even if the manufacturer does not have a Medicaid rebate agreement. Noting that many manufacturers without a Medicaid rebate agreement currently report ASP data to CMS, CMS believes its proposed will cause little upset to manufacturers and would in fact preserve the status quo. 

In a 2017 report (http://medpac.gov/docs/default-source/reports/jun17_ch2.pdf), MEDPAC presented findings many repackagers do not report ASP data to CMS and that this failure to report could be skewing Medicare payment rates. In this year’s proposal, CMS presents its own findings that exempting repackagers from reporting ASP data could increase errors in ASP calculations and delay CMS’s ability to timely publish Part B drug pricing data. Therefore, CMS proposes to not exclude repackagers from this requirement – effectively requiring repackagers to report ASP data to CMS.

Section 505(b)(2) of the Federal Food Drug and Cosmetics Act provides an approval pathway for new drugs whose application relies full reports of investigations of safety and effectiveness but where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference.  

In the CY 2021 Physician Fee Schedule Proposed Rule, CMS proposed that for these so-called 505(b)(2) drugs, they would continue to determine if the 505(b)(2) drug is assigned to a single- or multiple-source drug code based on the similarities (or differences) between the new drug’s ingredients, route of administration and frequency of administration. After reviewing stakeholder comments, CMS chose to delay finalizing its policy in order to more thoughtfully review the issue.

In this year’s proposed rule, CMS revisits its CY 2021 proposal and provides a process that it proposes to use to determine when a drug approved under 505(b)(2) would be considered a multiple source drug for Medicare Part B payment purposes. 

In short, drugs which CMS determines “match” one another in terms of active ingredient, dosage form, salt form, and other ingredients would move to a verification phase. In this phase CMS would determine, based on pharmacokinetic and clinical studies of the drug whether it could be assigned to a multiple source drug code. Finally, after verification, CMS will make its determination to assign the drug to a multiple source drug code.

CMS is soliciting feedback and comments on both of these proposal through September 13, 2021. For more information about these, and other proposals included in the proposed rule, contact me at john@policypros.net.

John Warren is the owner and principal consultant at Gettysburg Healthcare Consulting. Located in Hanover, Pennsylvania. He focuses on issues affecting the Medicare program -- including coverage, coding, and reimbursement of diagnostic tests, prescription drugs and other Medicare covered services. 


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