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Covered Outpatient Drugs Policy

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

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 (PDF, 114.21 KB) 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

Page last updated on November 21, 2019