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Medicaid Drug Policy - Laws, Regulations, and Federal Register Notices

Federal law provides the basis for regulations, guidance, and policy related to pharmacy benefits and manufacturer requirements under Medicaid.

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

Notice of Proposed Rulemaking – On May 23, 2023, the Centers for Medicare & Medicaid Services (CMS) put on display a Notice of Proposed Rulemaking (NPRM), CMS-2434-P, which proposes regulations to address drug misclassification in accordance with the Medicaid Services Investment and Accountability Act (MSIAA) of 2019.  Additionally, we are making proposals to enhance program integrity and improve program administration.  This proposed rule also designates a time limitation on manufacturers initiating audits with States, clarifies and establishes requirements for State fee-for-service (FFS) pharmacy reimbursement, addresses conditions relating to States claiming federal financial participation (FFP) for physician-administered drugs (PADs), clarifies the requirement of accumulating price concessions and discounts (“stacking”) when determining best price, and establishes a drug price verification and transparency process through data collection.  Other proposals include two new requirements for contracts between States and their Medicaid managed care plans in connection with coverage of covered outpatient drugs.  In addition, this rule includes a proposal unrelated to the Medicaid Drug Rebate Program (MDRP) that would modify the third-party liability regulation based on the Bipartisan Budget Act (BBA) of 2018. Finally, we are soliciting comments relating to the issues, benefits and challenges of requiring inclusion of a diagnosis on Medicaid prescriptions. Please submit any comments on this proposed rule by July 25, 2023.  Additional information:

Inflation Reduction Act (IRA) of 2022

On August 16, 2022, President Biden signed into law the Inflation Reduction Act (IRA), which amended the Act to set forth significant drug pricing reforms for the Medicare program.  Three such reforms include those establishing a Part B inflation rebate, a Part D inflation rebate, and a program allowing the Medicare program to negotiate a maximum fair price (MFP) for certain single source drugs and biologicals with the highest spend in Part B or Part D.  The IRA also included specific conforming amendments to certain Medicaid drug rebate requirements.  On January 20, 2023, CMCS published a Manufacturer Release explaining these reforms.

Value-based Purchasing (VBP) and Drug Utilization Review (DUR)

Notice of Final Rulemaking – On November 19, 2021, the Centers for Medicare & Medicaid Services (CMS) published a Notice of Final Rulemaking CMS-2482-F2 which will delay for 6 months the January 1, 2022 effective date for amendatory instruction 10.a., which addresses the reporting by manufacturers of multiple best prices connected to a value based purchasing (VBP) arrangement, of the final rule entitled, “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”, published in the December 31, 2020 Federal Register to July 1, 2022. This final rule will also delay for 9 months the April 1, 2022 effective date of inclusion (hereinafter referred to as the inclusion date) of the U.S. territories (American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands) in the amended regulatory definitions of “States” and “United States” for purposes of the Medicaid Drug Rebate Program (MDRP), adopted in the interim final rule with comment period entitled, “Medicaid Program; Covered Outpatient Drug; Further Delay of Inclusion of Territories in Definitions of States and United States”, published in the November 25, 2019 Federal Register to January 1, 2023.

Notice of Final Rulemaking – On December 21, 2020, the Centers for Medicare & Medicaid Services (CMS) put on display a Notice of Final Rulemaking CMS-2482-F which advances CMS’ efforts to support state flexibility to enter innovative value-based purchasing arrangements (VBPs) with drug manufacturers for new expensive therapies, and to provide manufacturers with regulatory flexibility to enter into VBPs with commercial payers, which will benefit Medicaid programs. It also creates minimum standards in state Medicaid Drug Utilization Review (DUR) programs designed to reduce opioid-related fraud, misuse and abuse and makes changes to 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).

Notice of Proposed Rulemaking – On June 17, 2020, the Centers for Medicare & Medicaid Services (CMS) put on display a Notice of Proposed Rulemaking (NPRM) CMS-2482-P which proposes to advance CMS’ efforts to support state flexibility to enter innovative value-based purchasing arrangements (VBPs) with drug manufacturers for new expensive therapies, and to provide manufacturers with regulatory flexibility to enter into VBPs with commercial payers, which will benefit Medicaid programs. It also creates minimum standards in state Medicaid Drug Utilization Review (DUR) programs designed to reduce opioid-related fraud, misuse and abuse and proposes changes to 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). 

National Drug Rebate Agreement

Final Notice - On March 22, 2018, CMS put on display a Final Notice CMS-2397-FN that announced changes to the Medicaid National Drug Rebate Agreement (NDRA) which will be applicable as of the March 23, 2018 publication in the Federal Register.  The updated NDRA incorporates legislative and regulatory changes that have occurred since the NDRA was last published on February 21, 1991, and also makes editorial and structural revisions, such as references to the updated Office of Management and Budget (OMB)-approved data collection forms and electronic data reporting.  Manufacturers with an existing active NDRA(s) as of the applicability date of the notice have until September 30, 2018 to complete (including the CMS-367d), sign and submit the updated NDRA in order to continue participation in the Medicaid Drug Rebate Program (MDRP).

Affordable Care Act

Interim Final Rule with Comment Published – On November 21, 2019, CMS issued the Interim Final Rule with Comment: Covered Outpatient Drug; Further Delay of Inclusion of Territories in Definitions of State and United States (CMS-2345-IFC3). This rule further delays the inclusion of the U.S. territories (American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands) in the definitions of “States” and “United States” from April 1, 2020 until April 1, 2022 which is effective on November 25, 2019. There is a 60-day comment period for this interim final rule that will end on January 24, 2020.

Final Rule and Interim Final Rule with Comment Period Published – On March 28, 2019 CMS issued the Final Rule and Interim Final Rule with Comment Period: Medicaid Program; Covered Outpatient Drug; Finalization of Line Extension Definition; and Change to the Rebate Calculation for Line Extension Drugs (CMS-2345-F2 and CMS-2345-IFC2). The final rule responds to comments on the definition and identification of line extension drugs for which we requested additional comments in the Covered Outpatient Drug Final Rule with Comment Period (COD final rule) published in February 2016. Additionally, CMS is issuing an interim final rule with comment period (IFC) that revises the portion of the MDR program’s regulatory text that describes the line extension rebate calculation (§447.509(a)(4)) to accurately reflect the statutory language in section 1927(c)(2)(C)(i)-(iii) of the Act, which was revised by section 53104 of the BBA of 2018. There is a 60 day comment period which ends May 31, 2019.

Interim Final Rule with Comment Period Published - On November 14, 2016 CMS issued the Covered Outpatient Drug; Delay in Change in Definitions of States and United States Interim Final Rule with Comment Period (CMS-2345-IFC) that delays the inclusion of the U.S. territories (American Samoa, the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands) in the definitions of “States” and “United States” from April 1, 2017 until April 1, 2020 which is effective on November 15, 2016. There was a 60-day comment period for this interim final rule that ended on January 17, 2017.

Final Rule with Comments Published – On January 21, 2016 CMS issued the Covered Outpatient Drugs final rule with comment that addresses key areas of Medicaid drug reimbursement and changes made to the Medicaid Drug Rebate Program by the Affordable Care Act. This final rule also requests additional comments on the definition of line extension, and had a 60-day public comment period which ended on April 1, 2016. View the Fact Sheet to learn how this final rule assists states and the federal government in managing drug costs, establishing the long-term framework for implementation of the Medicaid drug rebate program, and creating a more fair reimbursement system for Medicaid programs and pharmacies. 

Deficit Reduction Act (DRA)

Other Resources

For questions referencing Medicaid Drug Policy - Laws, Regulations, and Federal Register Notices, please email RxDrugPolicy@cms.hhs.gov

Disclaimer: Please note that the information provided on this web page does not bind or obligate the Centers for Medicare and Medicaid Services (CMS).  The statements included on this web page are intended to provide information on Medicaid Drug Policy - Laws, Regulations and Federal Register Notices and do not in any way revise or modify the requirements set forth in Section 1927 of the Act, the national drug rebate agreement (NDRA), regulations, or program releases.

Page last updated on May 23, 2023