The final guidance weighs in at just under 200 pages. This alert focuses on key policies that changed, or that did not change despite what we understand to be significant stakeholder pushback. The final guidance is available here, the agreement here, and the updated proposed ICR is available here.[1]
What drugs are eligible for selection for negotiation?
When CMS issued its initial guidance, it specified that Section 30 of that guidance, governing the identification of drugs that are negotiation-eligible, was final and not subject to comment. Stakeholders were not dissuaded from commenting on Section 30, however, and CMS’s final guidance acknowledges the receipt of such comments. CMS made some revisions to what the agency issued in March, although most key definitions and standards remain unchanged. More specifically:
What about the bona fide marketing standard?
-
Initial guidance: A drug/biological product cannot be selected for negotiation where a generic/biosimilar biological product “is marketed” by the selected drug publication date or during the negotiation period. In addition, a selected drug generally will cease to be subject to the maximum fair price (MFP) at the start of the year that begins at least 9 months after a generic/biosimilar biological product “is marketed.” In the initial guidance, CMS indicated its intent to define “is marketed” under a qualitative standard based on the total volume of product on the market, and that CMS would use Medicare Part D prescription drug event (PDE) data for a specified 12-month period to determine whether a generic/biosimilar biological product is the subject of “bona fide marketing.”
-
What changed? Nothing fundamentally, but average manufacturer price (AMP) data will also be used to make the determination. CMS indicates that it intends to use AMP data, in addition to PDE data, to make its “bona fide marketing” determination. CMS confirms in the preamble to the final guidance that a “token” amount of sales on the market is insufficient to meet the “bona fide marketing” test and that it will continue to evaluate, on an ongoing basis, whether a generic/biosimilar biological product continues to meet the “bona fide marketing” test after a drug/biological product is determined ineligible for selection for negotiation on account of such test being met.
How will drugs be selected for negotiation?
-
Initial guidance:
-
For initial price applicability year (IPAY) 2026, CMS will identify the 50 qualifying single source drugs with the highest total Part D expenditures over a specified 12-month period (June 1, 2022, through May 31, 2023) using PDE data.
-
CMS will then rank these drugs, highest to lowest, and select the 10 highest ranked drugs on this list for negotiation, unless removed from the list on account of a delay in the selection of a biological product for negotiation.
-
What changed? Nothing. The final guidance did not make any changes in this regard. CMS declined a request by some commenters to notify manufacturers of selected drugs before publication of the selected drug list, noting that it would be “operationally infeasible due to the time constraints required to meet statutory deadlines and the complexity of the preparation that must be undertaken in advance.”
How will the negotiated price be set?
-
A specified percentage (discussed below) of average non-FAMP for 2021 (or, where there is no non-FAMP for 2021, the average non-FAMP for the first full year following market entry), increased by an inflation factor from September 2021 (or December of the first full year following market entry) to September of the year prior to the selected drug publication date, or
-
The sum of the plan specific enrollment weighted amounts, which CMS will calculate using the enrollment-weighted amount for each Part D prescription drug plan or Medicare Advantage prescription drug plan based on the Part D negotiated price of the selected drug under such plan net of price concessions received by such plan or its pharmacy benefit manager.
What is the timeline for negotiation?
What will happen after the negotiated price is set?
Other topics
-
Confidentiality and the proposed “gag” and record destruction proposals.
-
Initial guidance: CMS indicated it would prohibit manufacturers from disclosing to the public any information in offers from CMS, any justification from CMS, or the price contained in any offer. In addition, manufacturers would be prohibited from using such information for any purpose other than the Drug Price Negotiation Program and would have to destroy all information received from CMS during negotiations within 30 days after the drug no longer qualifies as a selected drug.
-
What changed? Gag and record destruction proposals abandoned. CMS no longer intends to prohibit manufacturers from disclosing to the public any information in offers from CMS, any justification from CMS, or the price contained in any offer. CMS does not intend to publicly discuss the negotiation process, but notes that it reserves the right to do so if a manufacturer makes such a disclosure first. CMS does not intend to disclose proprietary information of the manufacturer, but, if a manufacturer discloses such information, CMS will deem it no longer proprietary. Manufacturers further will not be required destroy all information received from CMS during negotiations.
-
Monitoring for compliance.
-
Initial guidance: CMS intends to monitor manufacturer compliance with the Drug Price Negotiation Program.
-
What changed? Nothing fundamentally, but some procedural details were clarified. CMS states that it will provide manufacturers with reminder letters prior to deadlines with warnings of potential applicability of excise taxes or civil monetary penalties (CMPs), written requests for corrective action when applicable, and written notification that a Primary Manufacturer may be subject to enforcement action and/or written confirmation that a Primary Manufacturer may no longer be subject to enforcement action, as applicable.
-
Enforcement and Agreement termination.
-
Initial guidance: The statute subjects manufacturers to significant CMPs for:
-
Failing to offer the MFP with respect to a Medicare beneficiary.
-
Violating the terms of the negotiation agreement, including the requirement to submit the requisite information to CMS.
-
Knowingly providing false information with respect to certain aggregation rules for the small biotech exception and the biosimilar biological product delay provision.
-
What changed? A definition of “knowingly” was provided, and CMS clarified the process for declining to enter into, or terminating, the agreement, to avoid enforcement. CMS offers additional details as to how it will notify manufacturers of potential noncompliance, in addition to opportunities to address potential noncompliance, but did not otherwise make substantial changes to these proposals. In addition:
-
With respect to the small biotech drug exception and biosimilar biological product delay provisions, if CMS determines that any manufacturer knowingly provides false information with respect to the aggregation rules governing these provisions, such manufacturer shall be subject to a CMP equal to $100,000,000 for each item of such false information. CMS is defining “knowingly” as when a manufacturer “(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information. No proof of specific intent to defraud is required.”
-
Under the final guidance, a manufacturer that does not wish to enter into an agreement can issue a notice of decision not to participate in the program to CMS and a request to expeditiously terminate its Medicaid Drug Rebate Program, the Medicare Coverage Gap Discount Program, and the Manufacturer Discount Program agreements, which CMS will grant for good cause. CMS is establishing a similar process to terminate an executed agreement.
-
Part D plan requirements.
-
Initial guidance: Part D plans will be required to include negotiated drugs on their formularies, as required by statute.
-
What changed? CMS expects plans to not disadvantage selected drugs on formulary. CMS clarifies in the final guidance that the formulary requirement extends to all dosage forms and strengths to which the MFP applies. CMS will implement a formulary review process “to assess: (1) any instances where Part D sponsors place selected drugs on non-preferred tiers, (2) any instances where a selected drug is placed on a higher tier than non-selected drugs in the same class, (3) any instances where Part D sponsors require utilization of an alternative brand drug prior to a selected drug with an MFP (i.e., step therapy), or (4) any instances where Part D sponsors impose more restrictive utilization management (i.e., step therapy and/or prior authorization) for a selected drug compared to a non-selected drug in the same class.”
-
Reasonable assumptions.
-
Initial guidance: CMS did not address reasonable assumptions to support data submissions.
-
What changed? Use of reasonable assumptions denied. CMS states it will not allow manufacturers to rely on, and/or submit, statements of reasonable assumptions along with their submissions. CMS appears to believe that the standards it has set for the data submissions are sufficiently clear and uniformly applicable such that no reasonable assumptions will be needed. As a practical matter, it is unclear how CMS can prohibit a manufacturer from relying on such assumptions where it identifies ambiguities in CMS’s standards.
What’s next?
We will learn more about the selection process when the list of selected drugs is announced, no later than September 1, and the final ICR for the data submissions is issued shortly before then. Any manufacturer that anticipates selection of a drug/biological product for negotiation for IPAY 2026 or a later year should consider commenting on the updated proposed ICR, particularly in light of CMS’s statement that no reasonable assumptions will be needed. As a reminder, those comments are due by August 2, 2023.
* * * * *
We will monitor the implementation of this guidance, and any additional guidance CMS issues with respect to the Drug Price Negotiation Program. As always, it is important that you carefully review all such guidance to identify issues relevant to your organization.
Authored by Alice Valder Curran, Ken Choe, Allison Pugsley, Beth Halpern, Beth Roberts, Joy Sturm, Melissa Bianchi, Philip Katz, Stuart Langbein, James Huang, Kathleen Peterson, Samantha Marshall, Mahmud Brifkani, Abdie Santiago, Ashley Ifeadike, Katie Kramer, and Rianna Modi