[Federal Register Volume 83, Number 57 (Friday, March 23, 2018)]
[Notices]
[Pages 12770-12799]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05947]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-2397-FN]
RIN-0938-ZB29


Medicaid Program; Announcement of Medicaid Drug Rebate Program 
National Rebate Agreement

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

ACTION: Final notice.

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SUMMARY: This final notice announces changes to the Medicaid National 
Drug Rebate Agreement (NDRA, or Agreement) for use by the Secretary of 
the Department of Health and Human Services (HHS) and manufacturers 
under the Medicaid Drug Rebate Program (MDRP). We are updating the NDRA 
to incorporate legislative and regulatory changes that have occurred 
since the Agreement was published in the February 21, 1991 Federal 
Register (56 FR 7049). We are also updating the NDRA to make editorial 
and structural revisions, such as references to the updated Office of 
Management and Budget (OMB)-approved data collection forms and 
electronic data reporting.

DATES: 
    Applicability Date: The updated National Medicaid Drug Rebate 
Agreement (NDRA) provided in the Addendum to this final notice will be 
applicable on March 23, 2018.
    Compliance Date: Publication of CMS-2397-FN serves as written 
notice of good cause to terminate all existing rebate agreements as of 
the first day of the full calendar quarter which begins at least 6 
months after the effective date of the updated NDRA (October 1, 2018). 
Manufacturers with an existing active

[[Page 12771]]

NDRA will have at least 2 full calendar quarters as of the effective 
date of this notice to sign and submit the updated NDRA. We will 
publish further guidance on this soon.

FOR FURTHER INFORMATION CONTACT: Terry Simananda, (410) 786-8144.

SUPPLEMENTARY INFORMATION: 

I. Background

    Under the Medicaid Program, states may provide coverage of 
outpatient drugs as part of the medical assistance furnished to 
eligible individuals as an optional benefit as described in sections 
1902(a)(10) and (a)(54) and 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 general, 
for payment to be made available under section 1903 of the Act for most 
drugs, manufacturers must enter into, and have in effect, a Medicaid 
National Drug Rebate Agreement (NDRA, or Agreement) with the Secretary 
of the Department of Health and Human Services (HHS) as set forth in 
section 1927(a) of the Act. Additionally, in order to meet the 
requirement for a rebate agreement in section 1927(a) of the Act, 
manufacturers must also meet the requirements of section 1927(a)(5) of 
the Act, which require a manufacturer to enter into an agreement that 
meets the requirements of section 340B of the Public Health Service 
Act, as well as section 1927(a)(6) of the Act, which requires a 
manufacturer to enter into a master agreement with the Secretary of 
Veterans Affairs in compliance with 38 U.S.C. 8126 (see section 
1927(a)(1) of the Act).
    Authorized under section 1927 of the Act, the Medicaid Drug Rebate 
Program (MDRP) 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 prescriptions drugs 
dispensed to Medicaid beneficiaries. Currently there are more than 650 
drug manufacturers who participate in the MDRP. The NDRA provides that 
manufacturers are responsible for notifying states of a new drug's 
coverage. Manufacturers are required to report all covered outpatient 
drugs under their labeler code(s) to the MDRP and may not be selective 
in reporting their national drug codes (NDCs) to the program. 
Manufacturers are then responsible for paying a rebate on those drugs 
that were dispensed and/or paid for, as applicable, under the state 
plan. These rebates are paid by manufacturers on a quarterly basis to 
states and are shared between the states and the federal government to 
partially offset the overall cost of prescription drugs under the 
Medicaid Program.
    Similarly, manufacturers that wish to terminate an NDRA that have 
active covered outpatient drugs must request termination for all 
associated labeler codes, and provide a reason for the request (for 
example, all covered outpatient drugs under the labeler code are 
terminated), or if the request for termination is only for certain 
labeler codes, provide justification for such request. Additionally, as 
with the current policy, for purposes of ensuring beneficiary access to 
single source drugs and/or drugs that are not otherwise available in 
the MDRP, we may choose to grant an exception to issuing or reinstating 
an NDRA for certain labeler codes of a manufacturer prior to issuing an 
NDRA for all of the labeler codes under the manufacturer, or 
terminating certain labeler codes as mentioned above.

II. Summary of Proposed Provisions and Analysis of and Responses to 
Public Comments on the Proposed Notice

    In the proposed notice, published in the November 9, 2016 Federal 
Register (81 FR 78816), we provided a draft agreement updating the NDRA 
to reflect the changes in the Covered Outpatient Drug final rule with 
comment period that was published in the February 1, 2016 Federal 
Register (81 FR 5170), as well as operational and other legislative 
changes that have occurred over the last 20 plus years since the NDRA 
was first issued in 1991. We indicated in the proposed notice that a 
sample of the finalized NDRA would be posted on the CMS website after 
we considered the public comments and published the final notice.
    In the proposed notice, we included in the Addendum, a draft of the 
updated NDRA for use in the MDRP, upon which we requested public 
comment. In the proposed notice, we indicated that if adopted, a drug 
manufacturer that seeks Medicaid coverage for its drugs would need to 
enter into the NDRA with the Secretary agreeing to provide the 
applicable rebate on those drugs for which payment was made under the 
state plan. The NDRA is not a contract. Rather, it should be viewed as 
an opt-in agreement that memorializes the statute and regulations. 
Therefore, we noted our intention to use the updated NDRA as a standard 
agreement that will not be subject to further revisions based on 
negotiations with individual manufacturers. For a complete and full 
description of the draft agreement of the NDRA, see the ``Addendum--
Draft Agreement: National Drug Rebate Agreement Between the Secretary 
of Health and Human Services (Hereinafter referred to as ``the 
Secretary'') and the Manufacturer'' published in the proposed notice in 
the November 9, 2016 Federal Register (81 FR 78818 through 78835).
    In response to the publication of the November 9, 2016 proposed 
notice, we received 13 timely public comments, some of which are beyond 
the scope of our proposals in that notice and will not be summarized 
and included in our responses below. Revisions made to the NDRA in 
response specific comments are noted in the applicable response to 
comments. Additionally, edits have been made to provide further clarity 
to the NDRA. A summary of revisions and edits made to the NDRA are 
provided as a summary to each section below. The following are a 
summary of the relevant public comments that we received related to the 
proposed notice, and our responses to the public comments.

A. Section I. Definitions

1. General Comments
    Comment: One commenter is concerned that it may be overly 
cumbersome to require the user of the Agreement to look up the 
referenced regulations to determine the definitions of the terminology 
used in the Agreement. The commenter suggested that CMS update the text 
of the definitions and reference existing statute and regulations, 
rather than just putting forward the latter. In particular, the 
commenter noted that its recommendation would be most usefully applied 
to the definitions of the following terms: ``average manufacturer price 
(AMP),'' ``best price,'' ``covered outpatient drug,'' ``monthly AMP,'' 
``quarterly AMP,'' and ``rebate period.''
    Response: We disagree with the commenter that the text of the 
definitions, and references to the relevant statutory and/or regulatory 
citations, be included in the definitions. We prefer to refer to 
statute and/or regulations, as well as agency guidance, as opposed to 
repeating such language in the NDRA, as we believe this decreases the 
chance of inaccurate or conflicting NDRA text. Additionally, although 
the updated NDRA cites definitions implemented most recently in the 
Covered Outpatient Drug final rule with comment period (Final Rule) 
published in the Federal Register on February 1, 2016 (81 FR 5170), and 
codified in 42 CFR part 447, subpart I, we believe that subsequent 
statutory and/or regulatory changes are

[[Page 12772]]

incorporated by section VIII.(a). of the Agreement, which provides that 
the Agreement is subject to any changes in the Medicaid statute or 
regulations that affect the rebate program.
Restore Depot Price and Single Award Contract Price Definitions
    Comment: A few commenters recommended that CMS not delete the 
definitions of ``Depot Price'' and ``Single-Award Contract Price'' from 
the Agreement as these terms are used but not defined in the MDRP 
statute and regulations. Specifically, the commenters stated that the 
MDRP statute defines best price to exclude ``Depot Price'' and 
``Single-Award Contract Price.'' These same terms are used in the 
regulatory definitions of best price and AMP, however they are not 
defined anywhere except in the current NDRA. Therefore, the commenters 
recommended that CMS maintain the current definition of ``Depot Price'' 
and ``Single-Award Contract Price'' in the NDRA.
    Response: We agree with the commenter that the definitions of 
``Depot Price'' and ``Single-Award Contract Price'' should be retained 
in the NDRA as they are used in determination of best price and AMP but 
are not defined anywhere except for the NDRA. In addition, since we are 
retaining the definition of ``Single-Award Contract Price'', we will 
also retain the definition of ``Single-Award Contract.'' These 
definitions are being retained without any revisions. The definitions 
read as follows:
     ``Depot Price'' means the price(s) available to any depot 
of the federal government, for purchase of drugs from the Manufacturer 
through the depot system of procurement.
     ``Single-Award Contract'' means a contract between the 
federal government and a Manufacturer resulting in a single supplier 
for a Covered Outpatient Drug within a class of drugs. The Federal 
Supply Schedule is not included in this definition as a single award 
contract.
     ``Single-Award Contract Price'' means a price established 
under a Single-Award Contract.
2. Marketed
    Comment: One commenter recommended that CMS retain the original 
NDRA definition of ``marketed'' so that the base date AMP ties to a 
sales transaction from which pricing data can be captured. The 
commenter noted the phrase ``first available for sale'' could be 
interpreted in a number of ways, including the date the drug receives 
Food and Drug Administration (FDA) approval, or when finished goods are 
ready to ship. Furthermore, the commenter stated that a first sale 
transaction might not occur for some time after those dates.
    Response: While the commenter used the phrase ``first available for 
sale'' in its comment, the definition of ``marketed'' in the proposed 
notice does not include the word ``first.'' Rather it states that 
marketed means that a covered outpatient drug is available for sale by 
the manufacturer in the states (81 FR 78818). We believe the use of the 
phrase ``available for sale'' in the definition of ``marketed'' is 
consistent with past operational guidance issued by us regarding 
manufacturer reporting of base date AMP (see Manufacturer Release #69, 
in the manufacturer frequently asked questions (FAQs) section where we 
provide information in the answer A3 concerning the correct reporting 
of Market Date.) Therefore, we are retaining and finalizing this 
definition as provided in the proposed notice. Program Releases are 
available on www.Medicaid.gov.
3. State Drug Utilization Data
    Comment: A few commenters supported the proposed definition of 
State Drug Utilization Data because it described the utilization on 
which rebates are due, and explicitly specified that the state invoice 
data must exclude drugs purchased under the 340B program. However, the 
commenters recommended that CMS make the following changes:
     Add the phrase ``consistent with the Unit Type reported by 
the manufacturer, for the NDC'' to the definition to minimize the 
significant volume of Unit of Measure disputes generated by state 
submissions of claimed units in forms different from the types reported 
by the manufacturers.
     Delete the phrase ``state utilization data is supplied on 
the CMS-R-144 form (that is, the state rebate invoice)'' because the 
format and data provided by the states on CMS-R-144 are not sufficient 
for accurate and timely validation of state claimed units submitted for 
rebate payments.
     Clarify that such data must exclude any Part D drug 
utilization by dual eligible individuals, in accordance with section 
1935(d)(1) of the Act because some states are reimbursing Part D 
copayments for dual eligible individuals and are including these 
copayments in state utilization data.
    Accordingly, the commenters suggested modifying the definition of 
``State Drug Utilization Data'' to read, ``the total number of both 
fee-for-service (FFS) and managed care organization (MCO) units of each 
dosage form and strength, consistent with the Unit Type reported by the 
manufacturer for the NDC, of the manufacturer's covered outpatient 
drugs reimbursed during a rebate period under a Medicaid State Plan, 
other than units dispensed to Medicaid beneficiaries that were 
purchased by covered entities through the drug discount program under 
section 340B of the Public Health Service Act and other than units of 
Part D drugs dispensed to Medicare and Medicaid dual eligibles.''
    Response: We disagree with the commenter that the proposed 
definition of ``State Drug Utilization Data'' should be changed to 
read, ``consistent with the Unit Type reported by the manufacturer for 
the NDC.'' Manufacturers do not always report the correct Unit Type for 
an NDC, and the state's drug utilization data reporting may serve to 
open the necessary dialogue to make manufacturers aware of the need to 
report the correct Unit Type, or to discuss the need for the state or 
the manufacturer to perform a conversion prior to rebate billing or 
payment.
    We further disagree with the commenter's suggestion to delete 
reference to the CMS-R-144 because that is the Office of Management and 
Budget (OMB)-approved format and fields to be included on the state's 
quarterly rebate invoice. The CMS-R-144 is not considered claims-level 
data (CLD), the exchange of which is sometimes necessary for rebate 
payment validation purposes.
    Finally, we disagree that adding a specific Medicare Part D 
exclusion is necessary since manufacturers have the right to dispute 
claims they believe are ineligible for rebate. If states and 
manufacturers cannot resolve disputes on their own, either party may 
ask the MDRP Dispute Resolution Program (DRP) team to assist by 
contacting the CMS Regional Office (RO) DRP Coordinator (a list of the 
RO DRP Coordinators can be found on www.Medicaid.gov).
    Comment: One commenter requested that the definition of State Drug 
Utilization Data be strengthened to explicitly exclude units dispensed 
to Medicaid beneficiaries that were purchased by covered entities 
through the 340B program and incorporate specifics into the definition 
including timeframe in which data must be provided, with cross 
references to later sections of the rebate agreement, and include the 
following data elements: Date of service (DOS), prescription number, 
and billed amount.
    Response: We updated the language in the proposed NDRA to 
explicitly

[[Page 12773]]

exclude units dispensed to Medicaid beneficiaries that were purchased 
by covered entities through the drug discount program under section 
340B of the Public Health Service Act (PHSA). We believe this reference 
is sufficient. As this is an agreement between the Secretary and the 
manufacturer, not the state, we do not believe it is necessary to 
include the statutory timeframe for states to transmit the CMS-R-144, 
or rebate invoice. However, section III.(a)., ``Secretary's 
Responsibilities'' does include reference to the 60-day timeframe for 
state reporting of utilization data. Additionally, DOS, prescription 
number, and billed amounts are not required to be reported on the CMS-
R-144; however, manufacturers may request the minimum CLD required to 
validate the utilization data received from the state. As discussed in 
Manufacturer Release #95 and State Release #173, we continue to 
encourage the exchange of the minimum CLD in such situations. Program 
Releases are available on www.Medicaid.gov.
    Comment: One commenter expressed concern that the exclusion of 
340B-purchased drugs from the definition of State Drug Utilization Data 
may be misunderstood by 340B covered entities as absolving the covered 
entities of their responsibility to avoid duplicate discounts under the 
340B program, and instead placing such responsibility exclusively on 
state Medicaid agencies. The commenter further recommended that when 
updating the definition of State Drug Utilization Data in the 
Agreement, CMS should express that the update in no way affects the 
covered entities obligation under the 340B program to avoid duplicate 
discounts. The commenter further noted that while the administration of 
the 340B program is primarily the responsibility of the Health 
Resources and Services Administration (HRSA), the commenter asserted 
that section 1927(a)(5)(C) of the Act indicates that CMS shares 
responsibility for providing guidance to 340B covered entities on how 
to avoid duplicate discounts. The commenter requested that CMS take 
additional steps to guide 340B covered entities by establishing, in the 
Medicaid managed care context, a uniform means for 340B claims to be 
identified, as well as establish specific procedures for states, 
Medicaid MCOs, and 340B covered entities to follow to ensure that 340B 
claims are excluded from the data submitted to manufacturers for 
request rebates.
    Response: We disagree that we should discuss 340B covered entity 
requirements in the NDRA, because those requirements are appropriately 
communicated by HRSA, the agency that is responsible for administration 
and oversight of the 340B program. We continue to work with HRSA, 
manufacturers, states, data vendors, PBMs, and other interested parties 
to try to identify and ensure exclusion of 340B FFS and MCO units from 
rebate billing.
    Comment: One commenter stated that CMS should revise the definition 
of State Drug Utilization Data to specifically refer to the statutory 
prohibition on duplicate discounts in section 340B(a)(5)(A) of the 
PHSA. The commenter further recommended that CMS reference the 
duplicate discount prohibition in every instance throughout the revised 
NDRA in which it is implicated, emphasizing the need for states to 
request rebates only on FFS and MCO covered outpatient drugs that have 
not been purchased under the 340B program.
    Response: While we appreciate the commenter's concern regarding 
duplicate discounts, we do not believe that the NDRA is the appropriate 
avenue to remind states of their obligation to exclude both FFS and MCO 
340B claims from their manufacturer rebate requests, as the NDRA is an 
agreement that applies to manufacturers, not the states. Furthermore, 
while we added reference to the specific exclusion of 340B units from 
State Drug Utilization Data, we do not believe that it is necessary, as 
suggested by the commenter, to add a specific reference to section 
340B(a)(5)(A) of the PHSA.
    Comment: One commenter recommended that CMS incorporate additional 
specifics into the definition of State Drug Utilization Data to guide 
its operationalization including both the applicable timeframe in which 
the state's drug utilization data must be provided--states are often 
able to provide drug utilization data within a 7-calendar day 
timeframe--and the following list of minimum claims-level data elements 
that should be provided: Provider ID; Provider Name and Address; Date 
of Service; Paid Date; Billed Amount; Prescription Number; and National 
Drug Code (NDC) 11. Other data elements that the commenter recommended 
CMS should include in this minimum set are: Original claim quantity; 
conversion factor; invoice quantity; Healthcare Common Procedure Coding 
System (HCPCS) code; claim type; days' supply; allowed amount; third-
party amount reimbursed; Dispensed-As-Written (DAW) indicator; and 
Medicaid plan name and identification number (BIN/Processor Control 
Number). The commenter further recommended that these data be made 
available in a standardized, downloadable format, and should be 
provided in addition to those indispensable data elements that are 
already consistently made available by states.
    Response: As this is an agreement between the Secretary and the 
manufacturer, and not the state, we do not believe it is necessary nor 
appropriate to include the statutory timeframe for states to transmit 
the CMS-R-144, or rebate invoice; however, section III.(a)., 
``Secretary's Responsibilities'' does include reference to the 60-day 
timeframe for state reporting of utilization data. We disagree with the 
commenter that there is a minimum set of CLD that should be expected 
along with State Drug Utilization Data, as different CLD fields are 
needed depending on variables such as provider setting, third-party co-
pays, and the type of dispute or potential dispute. We continue to 
encourage states to share the appropriate minimum CLD for payment 
validation purposes on a case-by-case basis.
4. Unit
    Comment: A few commenters disagreed with our proposed change to the 
definition of ``unit'' from ``drug unit in the lowest identifiable 
amount'' to ``drug unit in the lowest dispensable amount'' and the 
removal of the examples in the current definition (for example, tablet, 
capsule, milliliter, and gram). The commenters stated that the change 
to ``lowest dispensable amount'' does not define nor clearly address 
the two product unit data elements reported by manufacturers to CMS and 
is not consistent with current CMS guidance, including Drug Data 
Reporting for Medicaid (DDR) system Data Guides, where CMS provides 
that manufacturers use eight unit types: Injectable anti-hemophilic 
factor; capsule; each; gram; milliliter; suppository; tablet; and 
transdermal patch. The commenters suggest renaming ``unit'' to ``unit 
type'' and adding the specific eight reporting types for consistency 
with CMS manufacturer product reporting requirements. Specifically, one 
commenter suggested that ``Unit Type'' means ``one of the eight 
possible unit types by which the covered outpatient drug, form, and 
strength will be dispensed, as reported by the manufacturer consistent 
with the product reporting instructions from CMS (CMS 367-c). The eight 
possible unit types are injectable anti-hemophilic factor, capsule, 
each, gram, milliliter, suppository, tablet, and transdermal patch.''

[[Page 12774]]

    The commenter indicated that if CMS does not accept the suggested 
changes, then CMS should explain the purpose of the change and whether 
it implies any change in the unit types reported by manufacturers 
because the ``unit type'' selected by the manufacturer is the basis for 
the pricing metrics data and unit rebate amount (URA) calculation.
    Response: While we appreciate the comments, we have decided to 
retain the changes to the definition of ``Unit,'' set forth in the 
proposed notice as we believe this is more accurate and descriptive of 
what states receive on their claim than ``lowest identifiable amount.'' 
We are not including any of the eight specific unit types that are 
currently used, as those are subject to being updated by operational 
instruction, including DDR system Data Guides. Our intent is to update 
the NDRA as appropriate and ensure that we are able to keep pace with 
the changes in drug delivery processes and manufacturer and drug 
innovation. We seek to ensure that manufacturers that need a change in 
unit types based on future products are able to participate in the MDRP 
and to report their prices accurately in conjunction with necessary 
unit types, and that our beneficiaries have access to such drugs. 
``Unit'' is meant to identify the lowest dispensable ``Units Per 
Package Size'' field of the ``Unit Type'' reported on the CMS-367. This 
is meant to better clarify the manufacturer's drug product reporting 
requirements.
5. Unit Rebate Amount (URA)
    Comment: One commenter agreed with the proposed definition of 
``Unit Rebate Amount'' as ``the computed amount to which the state drug 
utilization data is applied by states in invoicing the manufacturer for 
the rebate payment due,'' but recommended that CMS include additional 
text indicating CMS's longstanding position that manufacturers remain 
solely responsible for calculating the URA that is necessary to pay a 
rebate. Similarly, another commenter suggested that CMS clarify in the 
definition of ``Unit Rebate Amount'' that this is the amount computed 
``by CMS'' to which the State Drug Utilization Data is applied by 
states and that CMS provide this URA information to states as a 
courtesy and drug manufacturers remain responsible for correctly 
calculating the URA for their covered outpatient drugs. The commenter 
stated this is important because manufacturers face Civil Monetary 
Penalties and potential False Claims Act liability for any late or 
misreported prices, and that there are adequate safeguards in place to 
ensure manufacturer compliance.
    Response: We do not believe it is necessary to add language to the 
definition of ``Unit Rebate Amount'' to specify the manufacturer's 
responsibility to calculate a URA for each covered outpatient drug for 
which a state made a payment, or was dispensed, in a rebate period. 
However, we agree that the manufacturer's responsibility to calculate a 
URA should be strengthened, and this is carried out in section II, 
``Manufacturer's Responsibilities.'' Therefore, in this updated NDRA, 
we are revising section II.(b)., by changing the last sentence of the 
proposed paragraph to state that ``[f]urthermore, except as provided 
under section V.(b). of this agreement, manufacturers are required to 
calculate a URA and make a rebate payment in accordance with each 
calculated URA to each State Medicaid Agency for the manufacturer's 
covered outpatient drug(s) by NDC paid for by the state during a rebate 
period.'' Additionally, we have added the following sentence to the end 
of the paragraph to further clarify our calculation of the URA: ``CMS 
may calculate a URA based on manufacturer-submitted product and pricing 
data and provide the URA to states in order to facilitate rebate 
billing. However, CMS's URA calculation does not relieve the 
manufacturer of its responsibility to calculate the URA.''

B. Section II. Manufacturer's Responsibilities

1. Point of Contact
    Comment: Several commenters suggested allowing manufacturers the 
flexibility to identify more than one contact related to rebate invoice 
issues. Another commenter recommended that CMS clarify that the 
reference to a single point of contact refers only to a contact for 
rebate invoice issues. The commenters suggested that CMS develop more 
flexible language to allow manufacturers to identify more than one 
point of contact or permit a general mailbox for communications. 
Another commenter indicated that CMS should consider establishing both 
primary and secondary points of contact to ensure consistency of 
communication between the state and manufacturers in the event the 
designated contact becomes unavailable. The commenters stated such 
flexibility would facilitate communication between states and 
manufacturers while allowing for differences in business models and 
accommodating the reality of turn-over and employee absences or non-
availability.
    Response: The CMS-367(d) allows the manufacturer to identify one 
main contact for each of the following issues: Legal, Invoice, and 
Technical, and the NDRA has been updated at section II.(a). to specify 
the three contacts required on the CMS-367(d). Therefore, section 
II.(a). will now specifically state that ``[t]he manufacturer shall 
identify an individual point of contact for the Legal, Invoice, and 
Technical contacts at a United States address to facilitate the 
necessary communications with states with respect to rebate invoice 
issues.''
    The requirement of the three official manufacturer contacts is to 
ensure accountability and to facilitate communications between CMS, the 
states, and manufacturers regarding all aspects of the MDRP. 
Manufacturers and states often exchange additional contacts with each 
other; however, for purposes of the MDRP, only one official contact 
will be submitted for each of the manufacturer's roles. In an effort to 
ensure there are no delays regarding invoice processing and rebate 
payments, we allow a general email address to be listed for the invoice 
contact, but requires that a direct contact name and telephone number 
be submitted on the CMS-367(d) for the official contact. The official 
Legal and Technical Contacts are required to list their direct email 
address and telephone numbers. Although it is the manufacturer's 
responsibility to ensure that their official contacts on file with CMS 
are updated at all times, many manufacturers do not update the official 
contacts on file in a timely manner. It is especially important for 
manufacturers to notify CMS of Technical Contact changes since the 
CMS's MDRP staff includes the manufacturer's Technical Contact on all 
communications with the manufacturer to ensure that the manufacturer's 
Technical Contact is aware of what is being requested by others with 
respect to its data.
2. Manufacturer Price Reporting and Rebate Payments
    Comment: A few commenters recommended that CMS clarify that a 
rebate payment under the NDRA is only due on covered outpatient drugs 
paid for by the state ``under a Medicaid State Plan or approved waiver 
program'' or ``under Medicaid'' since some states have multiple, non-
Medicaid programs under which they pay for covered outpatient drugs.
    Response: We agree with the commenter that rebates negotiated as 
part of a state-only pharmacy program are not subject to the rebate 
provisions. We believe that the introductory

[[Page 12775]]

language of section II., ``Manufacturer's Responsibilities,'' offers 
these assurances where it provides that ``[i]n order for the Secretary 
to authorize that a state receive payment for the manufacturer's drugs 
under Title XIX of the Act, 42 U.S.C. Section 1396 et seq., the 
manufacturer agrees to the requirements as implemented by 42 CFR 
447.510. . .'' Therefore, if a manufacturer receives a request for 
payment under this agreement that it does not believe is billed under 
federal Medicaid, we recommend the manufacturer contact the state for 
clarification.
3. Reporting Inner and Outer NDCs
    Comment: A few commenters did not support the additional language 
that manufacturer drug product pricing reports must ``include all 
applicable NDCs identifying the drug product which may be dispensed to 
a beneficiary, including package NDCs (outer package NDCs and inner 
package NDCs).'' One commenter indicated that sales are based upon the 
outer NDC, therefore, CMS should remove the language indicating 
manufacturers have to report information on both inner and outer 
package NDCs. Another commenter disagreed with using the undefined and 
often misconstrued terms for describing product NDC-11s as ``outer 
package'' and ``inner package'' because reporting extraneous 
information increases the risk of potential error.
    In particular, the commenter recommended that we delete the last 
sentence in section II.(c). which states, ``Reports to CMS should 
include all applicable NDCs identifying the drug product which may be 
dispensed to a beneficiary, including package NDCs (outer package NDCs 
and inner package NDCs)'' and replace it with the following, 
``Manufacturer product data reporting to CMS should include all 
applicable NDCs identifying the drug product, as available for product 
sales in the states and as listed on the product label, which may be 
dispensed to a beneficiary.''
    Response: We disagree with the comments summarized above in which 
commenters do not support the addition of the language in II.(c). 
regarding the inclusion of inner and outer NDCs for package NDCs be 
reported to us. We issued agency guidance clarifying the requirement 
for reporting of inner and outer NDCs in Manufacturer Release #106 and 
State Release #183. Manufacturer sales of NDCs do not determine whether 
the NDC is reported to us, or the NDC's status as a covered outpatient 
drug. As we indicated in the above releases, in accordance with section 
1927(b)(3)(A) of the Act, manufacturers that have signed a rebate 
agreement are required to report certain pricing information for all 
covered outpatient drugs. As was stated in the aforementioned guidance, 
manufacturers must report all of their NDCs that meet the definition of 
a covered outpatient drug as described in statute at sections 
1927(k)(2) through 1927(k)(4) of the Act, and regulation at Sec.  
447.502, to ensure compliance with the applicable reporting and payment 
requirements.
    Also, in accordance with section 1927(b)(1)(A) of the Act, such 
manufacturers are required to make rebate payments for covered 
outpatient drugs dispensed after December 31, 1990, for which payment 
was made under the state plan for such a period. This includes drugs 
dispensed to Medicaid MCO enrollees. Additionally, per 1927(b)(2)(A) of 
the Act, states are required to report to manufacturers at the end of 
each rebate period, 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 or 
which was dispensed under the plan, including information reported by 
each Medicaid managed care organization. Therefore, if a state has 
reimbursed a provider for FFS claims for an inner NDC, or if an inner 
NDC was dispensed for an MCO claim, the state is required to report or 
invoice the inner NDC to the manufacturer, and the manufacturer is 
subsequently required to pay rebates in accordance with section 
1927(b)(1)(A) of the Act.
    We further disagree that describing an NDC as an inner or outer NDC 
could be misconstrued, or that reporting information on both inner and 
outer NDCs is extraneous and could lead to potential errors. As noted 
above, we believe both NDCs may be evaluated as covered outpatient 
drugs, and if an NDC is a covered outpatient drug, then it should be 
reported as our guidance further clarifies. In other words, when states 
receive a claim from and pay a provider for dispensing an inner NDC, 
the state is required to invoice the manufacturer for that NDC and the 
manufacturer is subsequently required to pay rebates in accordance with 
1927(b)(1)(A) of the Act. Program Releases are available on 
www.Medicaid.gov.
    Comment: One commenter requested that CMS clarify the purpose of 
the following text, proposed for addition in section II.(c). to read, 
``CMS uses drug information listed with FDA, such as Marketing Category 
and Drug Type, to be able to verify in some cases that an NDC meets the 
definition of a covered outpatient drug . . . [.]'' The commenter 
stated that this statement may be unnecessary and could lead to 
confusion if not omitted from the updated NDRA revision. In the absence 
of such a clarification, the commenter recommended CMS delete this 
clause.
    Also with regard to section II.(c)., the commenter requested that 
CMS clarify whether the ``reports'' referenced in the text--that is, 
``[r]eports to CMS should include all applicable NDCs identifying the 
drug product . . .''--are meant to be distinct from reports adding 
product information into the DDR system. The commenter noted this 
clarification is necessary given that, currently, products must be 
listed with the FDA before being added to the DDR system.
    Response: We have decided to remove the phrase ``in some cases'' 
from the sentence regarding use of FDA information so that the 
provision now reads, ``CMS uses drug information listed with FDA, such 
as Marketing Category and Drug Type, to be able to verify that an NDC 
meets the definition of a covered outpatient drug . . . [.]'' We 
believe that the use of the phrase ``in some cases'' is neither 
necessary nor consistent with the discussion surrounding covered 
outpatient drugs in the final rule (81 FR 5184). We believe that when 
the entire sentence is considered (that is, ``CMS uses drug information 
listed with FDA, such as Marketing Category and Drug Type, to be able 
to verify that an NDC meets the definition of a covered outpatient 
drug, therefore, manufacturers should ensure that their NDCs are 
electronically listed with FDA.''), it is clear to manufacturers how we 
use drug information listed with FDA, and why it is in a manufacturer's 
best interests to ensure that their NDCs are electronically listed with 
FDA. Manufacturers should ensure that their NDCs are electronically 
listed with FDA for us to have access to information to be able to 
verify that an NDC meets the definition of a covered outpatient drug.
    As for the commenter's request for clarification on the ``reports 
to CMS'' reference, this text is meant to instruct manufacturers to 
report all NDCs to CMS that may be dispensed to a beneficiary. This 
includes, but is not limited to NDCs on inner components within a 
larger container, if that NDC on the inner component represents a drug 
that meets the definition of a covered outpatient drug. NDCs must be 
listed with FDA in order for a manufacturer to be able to certify the 
product data in DDR. Manufacturers may contact

[[Page 12776]]

[email protected] if they encounter difficulty with this 
requirement.
4. Quarterly Pricing Adjustment Reporting
    Comment: Several commenters stated that the proposed language in 
section II.(d). could be read to require that manufacturers restate 
their AMP, best price, customary prompt pay discount data, and nominal 
price data within 30 days of the end of each quarter in which any 
adjustment can be made in the last-reported figures. The commenters 
recommended that CMS not finalize this provision because a requirement 
to make restatements each quarter whenever an adjustment can be made 
conflicts with the current regulations at 42 CFR 447.510(b) which 
provide that ``a manufacturer must report to CMS any revision to AMP, 
best price, customary prompt discounts, or nominal prices for a period 
not to exceed 12 quarters from the quarter in which the data were due. 
Any revision request that exceeds 12 quarters will not be considered . 
. . A manufacturer must report revised AMP within the 12-quarter time 
period, except when the revision would be solely as a result of data 
pertaining to lagged price concessions.''
    The commenters noted that the regulation does not require that 
restatements be filed more than once within that 3-year window--only 
that the information must be restated by the end of the window. The 
commenters stated that our proposed language could conflict with the 
regulations and eliminate the flexibility the regulations provide to 
manufacturers regarding the timing of restatements, as it suggests that 
manufacturers would be required to make restatements more frequently 
than required by the regulations. To ensure that the Agreement aligns 
with the regulations, the commenters recommended that CMS not finalize 
this proposed change.
    Response: We agree with the commenters that this phrase as 
originally worded could be misinterpreted. Therefore, we are revising 
the last sentence of section II.(d). to state that ``adjustments to all 
prior quarterly pricing data must be reported for a period not to 
exceed 12 quarters from when the pricing data were originally due as 
required under Sec.  447.510(b).''
5. Increases and Decreases of Rebate Payment Amounts
    Comment: Several commenters disagreed with our proposal to add the 
following sentence to section II.(f).: ``To the extent that changes in 
product, pricing, or related data cause increases to previously 
submitted total rebate amounts, the manufacturer will be responsible 
for timely payment of those increases in the same 30-day time frame as 
the current rebate invoice.'' The commenters stated that rebate 
payments must be adjusted when information changes causing either 
increases or decreases in previously submitted total rebate amounts and 
the Agreement must address both scenarios to be consistent with 
existing standards and that manufacturers continue to be entitled to 
recoup rebate overpayments as well.
    Response: The purpose of this addition to section II.(f). is to 
state the manufacturers obligations when pricing or product data 
changes submitted by the manufacturer cause an increase in the amount 
owed to the state from previously paid rebate amounts. Manufacturer 
Release #58 provided guidance clarifying that interest applies when 
manufacturers fail to pay increases due to Prior Period Adjustments 
(PPAs) timely, and this is reflected in the proposed and updated NDRA. 
Program Releases are available on www.Medicaid.gov.
    When PPAs cause a decrease to the amount of rebates previously paid 
by manufacturers, states will issue a credit upon agreement with the 
manufacturers about where the manufacturer would like the credit 
applied. To facilitate timely credits being applied by states, we 
encourage manufacturers to communicate which NDC line item(s) the 
credit(s) should be applied to with states. In response to public 
comment, and consistent with existing guidance, we have revised the 
updated NDRA at section II.(f). to add: ``To the extent that changes in 
product, pricing, or related data cause decreases to previously 
submitted total rebate amounts, the manufacturer should communicate 
with the states regarding where to apply the line-item (NDC-level) 
credit.'' to the end of the paragraph. Furthermore, we continue to 
encourage manufacturers and states to work together to ensure that 
appropriate payments are made, and credits applied, timely.
    Comment: One commenter requested that CMS explain what changes 
cause decreases to previously submitted total rebate amounts.
    Response: As previously stated, when PPAs cause a decrease to the 
amount of rebates previously paid by manufacturers, states will issue a 
credit upon agreement with the manufacturers about where the 
manufacturer would like the credit applied. We continue to encourage 
manufacturers and states to work together to ensure that appropriate 
payments are made, and credits applied, timely.
    Comment: A few commenters urged CMS to clarify that the 30-day 
rebate does not conflict with the existing guidance provided under the 
Medicaid Rebate Data Guide for Labelers (April 2016), which provides 
that timely rebate payments must be made within 37 calendar days from 
the date a state receives the adjustment from CMS on the current 
quarterly URA data file. CMS should clarify that the existing policy 
permitting manufacturers to make rebate payments within 37 calendar 
days from the rebate invoice postmark date remain intact. Any confusion 
to the timeline for rebate payment could have a significant, negative 
operational impact on manufacturers and create additional 
administrative burden for manufactures, states, and CMS.
    The commenters further noted that CMS recently reminded 
manufacturers of this ``38th day rule'' in a March 10, 2014 Program 
Notice, which stated that: ``[f]or purposes of calculating interest on 
late rebate payments, previously issued guidance (for example, 
Manufacturer Release #7 and State Release #29) has noted that 
manufacturers have 37 calendar days (as evidenced by the postmark by 
the U.S. Postal Service on the envelope) to pay rebates before interest 
begins to accrue.''
    The commenters recommended that the updated NDRA include a new 
subsection (g) to follow the revised subsection (f) in which the 30-day 
payment requirement is stated (all other subsections re-lettered 
accordingly) to read, ``(g) For purposes of calculating interest on 
late rebate payments, manufacturers have 37 calendar days to pay 
rebates before interest begins to accrue. Based upon the state's 
invoice transmission method, manufacturers should use the state's email 
notification date, or the postmark by the U.S. Postal Service on the 
envelope.''
    Response: While we appreciate the comment, we do not believe that 
the NDRA is the appropriate vehicle to relay such operational guidance. 
However, we are clarifying that the statutory requirements have not 
changed, nor has the language from the current rebate agreement, with 
respect to the rebate payment being made by the manufacturer in the 
proposed NDRA. The operational guidance relating to interest 
application after the 37th day from the postmark date of the invoice 
can be found in various Program Releases, including State Releases #29, 
and #166, as well as Manufacturer Release #7. Program Releases are 
available on www.Medicaid.gov.

[[Page 12777]]

    Comment: One commenter requested revisions to section II.(f). to 
identify the parties' respective responsibility in the event that 
changes in product, pricing, or related data cause decreases to 
previously submitted total rebate amounts, and any credits to the 
manufacturer that may occur as a result of such decreases. The 
commenter noted CMS should clearly establish a single process and 
timeline for resolving changes in data regardless of whether they 
result in decreases or increases in the submitted total rebate amounts.
    Response: As stated in previous responses to comments on decreases 
in rebate liability necessitated by manufacturer changes to pricing 
and/or product data, manufacturers are responsible for informing states 
to which line-item credits are to be applied. State responsibility is 
not included in the NDRA as the agreement is between the manufacturer 
and the Secretary and is not the appropriate vehicle for such guidance.
6. Comply With Statute, Regulation, Agency Guidance and Rebate 
Agreement
    Comment: Several commenters noted that CMS should not include 
``agency guidance'' among the items listed in section II.(g). as such a 
provision would circumvent the Administrative Procedures Act (APA), 
exceed the Secretary's authority under the Medicaid statute, be 
inconsistent with fundamental principles of contract law, fundamentally 
unfair, and over broad. The commenters further noted that under the 
APA, subregulatory guidance does not have the force of law and is not 
binding. Furthermore, commenters have indicated that the Medicaid 
rebate statute does not authorize CMS to override the APA, which serves 
to ensure that binding law is issued through a careful, deliberative 
process with stakeholder input.
    Response: We do not believe that including a reference to agency 
guidance in this provision implicates the APA. Agency guidance is a 
reference to the interpretive guidance published by the agency, 
interpreting the Medicaid Drug Rebate statute and implementing 
regulations. Including a reference to ``agency guidance'' in this 
provision in the Agreement is simply a term of the Agreement, and does 
not suggest that agency guidance carries the force of law, as statutes 
and regulations do so. Therefore, we have retained ``agency guidance'' 
in section II.(g). of the rebate agreement.
    Comment: A few commenters did not agree with our deletion of the 
requirement that CMS provide ``actual prior notice to the 
manufacturer'' before the manufacturer has to meet any change in its 
compliance obligations. The commenters were concerned that the lack of 
notice only exacerbates the concern over the addition of ``agency 
guidance'' to this provision in section II.(g). of the NDRA and as a 
result, even when manufacturers regularly check on their compliance 
obligations, they may not succeed in complying with all changes to 
agency guidance obligated to do under the updated NDRA. The commenters 
requested that CMS finalize the NDRA with such a notice requirement 
restored.
    Response: We disagree with the commenters that this language 
remains necessary in the NDRA, as the laws and recently implemented 
final regulations provide the legal framework for the program. 
Furthermore, as stated previously, agency guidance is a reference to 
the interpretive guidance published by the agency, interpreting the 
Medicaid Drug Rebate statute and implementing regulations. Including a 
reference to ``agency guidance'' in this provision in the Agreement is 
simply a term of the Agreement, and does not suggest that agency 
guidance carries the force of law, as statutes and regulations do.

C. Section III. Secretary's Responsibilities

1. States' Reporting of Drug Utilization Information
    Comment: Several commenters were concerned that the language CMS 
proposed in section III.(a). appears to weaken states' reporting 
requirements, could impact the reporting of state drug utilization data 
and conflicts with the Medicaid statute. While commenters acknowledged 
that CMS are the party to the NDRA, not states, and therefore could not 
bind states via the NDRA, they asserted that CMS must maintain 
consistency between the NDRA and the statute, which is binding on the 
states. Therefore, the commenters noted that CMS should incorporate 
state obligations by reference or specifically quote section 
1927(b)(2)(A) of the Act instead of adopting language that differs 
substantively from the statute.
    The commenters further noted that CMS should use the term 
``shall,'' since it is consistent with the statutory requirement, 
rather than the draft revised NDRA's more permissive ``employ best 
efforts'' language. The commenters believe the revised text ``employ 
best efforts'' is open for broad interpretation, and as such lends 
significant uncertainty to the exact CMS activities that will be 
undertaken to ensure state compliance with rebate invoice reporting 
requirements. The commenters noted that CMS should strengthen the 
language to reflect our responsibility to ensure state's compliance 
with the applicable statutory provisions. However, if CMS continue to 
use the language ``employ best efforts'' in the updated NDRA, the 
commenters urged CMS to issue draft guidance simultaneously to the 
finalization of the NDRA to provide manufacturers with a more concrete 
definition of how the Agency will comply with existing statutory 
obligations.
    Response: We agree with the commenter and are updating section III. 
of the NDRA to reflect that state utilization data are due no later 
than 60 days from the end of the rebate period. While we appreciate the 
comments, we do not believe that the description in section III.(a). of 
the proposed NDRA of the Secretary's responsibilities in regards to 
states reporting requirements to manufacturers conflicts with the 
statute. Section 1927(b)(2)(A) of the Act provides the 60-day timeframe 
for the states reporting obligations under the MDRP to provide relevant 
information in a format established by the Secretary and section 
III.(a). reflects that requirement. The rebate invoice (CMS-R-144) or 
alternative information described is that established format. 
Furthermore, we believe that the updated section III.(a). does not 
weaken states' reporting requirements because states are not subject to 
the agreement. States that opt to cover drugs are subject to applicable 
statutory, regulatory and sub-regulatory guidance. While we updated the 
paragraph in the proposed NDRA to be more inclusive of details, we have 
not changed or noted a change in state process. Additionally, we 
disagree that retaining the language that the Secretary ``. . . will 
employ best efforts,'' which is similar to language in the current 
rebate agreement, is contradictory to the statute or that it will lead 
to confusion and be open for misinterpretation. The NDRA is an 
agreement between the Secretary and the manufacturer, and is not the 
appropriate vehicle to specifically address state reporting 
requirements.
    Comment: One commenter urged CMS to revise the new language at 
section III.(a). to eliminate any perception that the timeliness 
requirements apply only to FFS rebate claims since the new language 
refers to information about Medicaid utilization of covered outpatient 
drugs that were ``paid for'' during the rebate period. The commenter 
noted that CMS distinguishes between manufacturer

[[Page 12778]]

rebate obligations which accrue for FFS units based on the date of 
payment to pharmacies and MCO units based on the date of dispensing to 
Medicaid enrollees. The commenter further noted that the statute refers 
back to the number of units ``dispensed . . . for which payment was 
made under the plan during the period, including such information 
reported by MCOs . . . .'' Accordingly, the commenter recommended that 
section III.(a). be revised to read, ``. . . that is, information about 
Medicaid utilization of covered outpatient drugs that were dispensed 
and for which payment was made under a Medicaid State plan or approved 
waiver during the rebate period.''
    Response: We agree with the commenter that the language in section 
III.(a). could be misinterpreted to apply only to FFS rebate claims. 
Therefore, we are revising section III.(a). to state ``. . . 
information about Medicaid utilization of covered outpatient drugs that 
were dispensed and/or paid for, as applicable during the rebate 
period'' to clarify that timeliness requirements apply to both FFS and 
MCO rebate claims.

D. Section IV. Penalty Provisions

1. Civil Monetary Penalties (CMPs)
    Comment: One commenter recommended that CMS keep the phrase ``in 
connection with a survey'' in the provision of the NDRA on Civil 
Monetary Penalties (CMPs) in section IV.(a). because the underlying 
statutory authority only authorizes the Secretary to impose CMPs on a 
manufacturer that refuses a request for information in connection with 
a survey about drug charges or prices. The commenter noted that the 
Medicaid rebate statute states at section 1927(b)(3)(B) of the Act 
that:
    ``The Secretary may impose a civil monetary penalty in an amount 
not to exceed $100,000 on a wholesaler, manufacturer, or direct seller, 
if the wholesaler, manufacturer, or direct seller of a covered 
outpatient drug refuses a request for information about charges or 
prices by the Secretary in connection with a survey under this 
subparagraph or knowingly provides false information.''
    The commenter believes that the language in the NDRA should 
accurately reflect this statutory authority.
    Response: We agree that the language in the NDRA should accurately 
reflect the statutory language. Therefore, we are adding back in to 
this section the phrase ``in connection with a survey''. Section 
IV.(a). now reads as follows: ``The Secretary may impose a civil 
monetary penalty under section III.(b)., as set forth in 1927(b)(3)(B) 
of the Act and applicable regulations, on a wholesaler, manufacturer, 
or direct seller of a covered outpatient drug, if a wholesaler, 
manufacturer, or direct seller of a covered outpatient drug refuses a 
request by the Secretary, or the Secretary's designee, for information 
about covered outpatient drug charges or prices in connection with a 
survey or knowingly provides false information, including in any of its 
quarterly reports to the Secretary. The provisions of section 1128A of 
the Act (other than section (a) (for amounts of penalties or additional 
assessments) and (b)) shall apply as set forth in section 1927(b)(3)(B) 
of the Act and applicable regulations.''
    Comment: One commenter appreciated our reference to existing 
statute and regulations in updating the penalty provisions of the NDRA, 
but questioned the proposal to only cite relevant statute/regulation 
without reference or summary of the text to which the user is referred. 
In particular, the commenter noted that these revisions may prove 
overly cumbersome in section IV.(c). that describes the CMPs that may 
be imposed for failure to provide timely information on AMP, best 
price, or base date AMP, and if CMS included only a reference to the 
relevant statute, users would need to separately look up the different 
penalty amounts referenced in the NDRA text, rather than be able to 
reference them without requiring a document other than the NDRA itself. 
Thus, the commenter requested that CMS update the text of the 
provisions with specific dollar values and reference existing statute 
and regulations, rather than just putting forward the latter.
    Response: We disagree that the statutory and/or regulatory text be 
restated in section IV.(c). of the NDRA, and that otherwise the 
provision is overly cumbersome. As stated previously in response to 
comments, our approach in the proposed and updated NDRA is to refer to 
statute and/or regulations, as well as agency guidance, as opposed to 
repeating such language in the NDRA, as we believe this decreases the 
chance of inaccurate or conflicting NDRA text. The general provisions 
of the NDRA incorporate such statutory requirements not explicitly 
referenced in the NDRA. We have added language in the general 
provisions to reflect this approach.
2. Remedies Available for Violations of the Agreement
    Comment: One commenter recommended that CMS revise the language in 
section IV.(d). to be even-handed and provide the same protection to 
manufacturers. The commenter specifically recommended revising this 
sentence to add ``or manufacturers'' to read, ``[n]othing in this 
Agreement shall be construed to limit the remedies available to the 
United States, states, or manufacturers for a violation of this 
Agreement or any other provision of law.''
    Response: Manufacturers are afforded protections under section V. 
of the NDRA, which addresses dispute resolution procedures in the event 
a manufacturer wishes to dispute state drug utilization data on the 
rebate invoice. Therefore, we are not adding the reference to ``or 
manufacturers'' as requested by the commenter.

E. Section V. Dispute Resolution Process

1. Timing of Dispute
    Comment: One commenter requested greater clarification around the 
timing and process of dispute resolution.
    Response: We agree with the commenter with respect to clarifying 
the timing of dispute resolution. Based on many years of experience in 
assisting with dispute resolution efforts when asked by manufacturers 
and states, we realize that 60 days is not enough time for a typical 
dispute to be resolved. Therefore, section V.(c). of the updated NDRA 
is changed from requiring a dispute to be resolved within 60 days 
before moving to the state hearing process, to being resolved ``within 
a reasonable time frame.'' Additionally, as noted in previous 
responses, we encourage interested parties to go to our DRP web page, 
https://www.medicaid.gov/medicaid/prescription-drugs/medicaid-drug-rebate-program/dispute-resolution/index.html, for more information 
about our suggestions and information regarding dispute resolution.
2. Audit of State Drug Utilization Data
    Comment: A few commenters noted the importance of manufacturers' 
access to CLD and the need to ensure the accuracy of state-reported 
data as critical mechanisms to avoid disputes in the first place, and 
where they cannot be avoided, resolve them more efficiently and 
expeditiously for all program participants. The commenter noted that 
CMS requires that state invoices to manufacturers include certain 
information but permit states to furnish that data at an aggregate 
level in the rebate invoice. Commenters noted further that CMS also 
makes it clear in the Final Rule that ``states will need to have 
detailed, prescription-level information or other mutually-agreeable

[[Page 12779]]

data available for dispute resolution purposes, if requested by a 
manufacturer in accordance with the state provision of information 
requirements of section 1927(b)(2)(A) of the Act'' (81 FR 5272).
    The commenters suggested that CMS specify in the NDRA that minimum 
CLD elements needed to facilitate dispute resolution include (in 
addition to the NDC, period covered, and whether the prescription is 
fee-for-service or managed care) elements such as the pharmacy ID 
(including pharmacy name and address), units, dispense date, 340B 
identifier, unit of measure, provider ID (NPI) and any third party 
payment. Commenters also recommended that CMS specify that states 
provide CLD in a standard format, and electronically or in a 
downloadable format on a quarterly basis.
    Response: We disagree with the commenters' suggestions to revise 
the updated NDRA to include specific requirements related to the CLD 
that may be requested of states and used for payment validation. We 
also do not believe that it is appropriate to include such detail in 
the NDRA as it is an agreement between the Secretary and the 
manufacturer, and is not the appropriate vehicle to specifically 
address these issues. Manufacturers retain the right to request the 
minimum CLD required to validate the utilization data received from the 
state. We further disagree with the commenter that there is a minimum 
set of CLD that should be expected along with State Drug Utilization 
Data, as different CLD fields are needed depending on variables such as 
provider setting, third-party co-pays, and the type of dispute or 
potential dispute. Consistent with Manufacturer Release #95 and State 
Release #173, we continue to encourage states to share the appropriate 
minimum CLD for payment validation purposes on a case-by-case basis. 
Program Releases are available on www.Medicaid.gov.
    Comment: One commenter suggested that CMS recognize the need for 
states to acknowledge disputes within a specified time period and to 
provide relevant CLD to manufacturers within a specified time frame and 
that CMS should revise our changes to section V.(d). so that it reads 
as follows: ``Nothing in this section shall preclude the right of the 
manufacturer to audit the state drug utilization data reported (or 
required to be reported) by the state. The Secretary encourages the 
manufacturer and the state to develop mutually beneficial audit 
procedures.'' Commenters further suggested that at a minimum, however, 
CMS shall require the state to make available to the manufacturer 
claim-level data necessary to review or audit the State drug 
utilization data.
    Response: As the NDRA is an agreement between the Secretary and the 
manufacturer, we disagree that we should incorporate a state's 
obligation into the NDRA. However, as referenced in Manufacturer 
Release #95 and State Release #173, as well as the ``Medicaid Drug 
Rebate Data Guide for Labelers'' and ``Medicaid Drug Rebate Data Guide 
for States'' (available as a download in the DDR system), we encourage 
both manufacturers and states to share such information with others 
involved in rebate payment and disputes. Official disputes must be 
entered into by manufacturers via the Reconciliation of State Invoice 
(ROSI) (Form CMS-304) or Prior Quarter Adjustment Statement (PQAS) 
(Form CMS-304a), and operational instructions for the ROSI and PQAS are 
provided in these data guides. Program Releases are available on 
www.Medicaid.gov.
3. State Hearing Process
    Comment: One commenter stated it is critical that CMS provide more 
transparency about the state hearing process that is supposed to be 
used to resolve disputes that cannot be resolved in good faith within 
60 days. The commenter indicated that under current section V.(c). of 
the current Rebate Agreement, if disputes cannot be resolved after this 
60-day period, CMS shall require the state to make available to the 
manufacturer the state hearing mechanism available under 42 CFR 
447.253(e). However, the proposed rebate agreement deletes the 
reference to Sec.  447.253(e) and instead refers to the state hearing 
mechanism ``available to providers for Medicaid payment disputes.'' The 
commenter indicated that this deletion may have been intended to be a 
substantive change, since Sec.  447.253(e) concerns the appeal 
procedure for providers to receive administrative review of ``payment 
rates'' and would appreciate CMS clarifying whether the change it 
proposes is substantive and (if so) what effect it would have.
    The commenter further stated it is difficult to determine what the 
process is that CMS are referencing with its proposed language and is 
not certain whether CMS confirmed that such a process exists in each 
state. The commenter further recommended that if CMS does not intend 
for the proposed language to constitute a substantive change, CMS 
should provide more clarity around the practical details regarding how 
the dispute process available under Sec.  447.253(e) would work, such 
as how a manufacturer would begin the dispute process, what procedures 
would be used to facilitate dispute resolution, and where to look for 
guidance on the process. Even if the proposed changes to section V.(c). 
are meant to constitute a substantive change, the commenter indicated 
it would still appreciate receiving guidance about the process 
``available to providers for Medicaid payment disputes.''
    Response: The current NDRA references the incorrect paragraph for 
state hearings as Sec.  447.253(c); the commenter is correct that Sec.  
447.253(e) is the correct provider hearing reference. The deletion of 
the reference to the CFR cite was not intended to be a substantive 
change. We have added the correct CFR cite (Sec.  447.253(e)) to 
section V.(c). in the updated NDRA. Furthermore, we have issued 
guidance for the state hearing process via State Release #181 and 
Manufacturer Release #105. In these releases, we reminded states and 
manufacturers that the state hearing process is an option available to 
both states and manufacturers when they have reached an impasse through 
the normal dispute resolution process, or when one of the parties is 
not being responsive to another's efforts to engage in dispute 
resolution. Given the variability in the states' hearing processes, we 
recommended that each state make manufacturers aware of the process to 
request such a hearing in that state. Program Releases are available on 
www.Medicaid.gov.
4. Retain Section V.(e). From Current NDRA
    Comment: A few commenters questioned the intent of removing section 
V.(e). of the existing rebate agreement, which states, ``adjustments to 
Rebate Payments shall be made if information indicates that either 
Medicaid Utilization Information, AMP or Best Price were greater or 
less than the amount previously specified.'' One commenter questioned 
if it means disputed amounts are not subject to adjustment (either an 
increase or decrease). Another commenter recommended that CMS retain 
the current section (e) in the current section V and make adjustments 
to the language to allow for adjustments that constitute both increases 
and decreases in the rebate amount since Sec.  447.510(b)(1) requires 
that ``a manufacturer must report to CMS any revision to AMP, best 
price, customary prompt pay discounts, or nominal prices for a period 
not to exceed 12 quarters from the quarter in which the data were 
due.'' Another commenter specifically also

[[Page 12780]]

recommended including section (e) from the current NDRA but also 
suggested that CMS revise the sentence to read, ``[t]o the extent that 
changes in product, pricing, or related data cause increases or 
decreases to previously submitted total rebate amounts, the 
manufacturer will make appropriate payment adjustments in the same 
timeframe as the current rebate invoice (that is, 38 days after the 
state mails the state utilization data).''
    Response: We do not believe that any revisions are necessary, as we 
believe section V.(b). of the updated NDRA captures these concerns and 
addresses these issues. As stated earlier in response to comments, we 
updated language in section II.(f). regarding increases and decreases 
in rebate amount, and believe that this provides sufficient information 
on processing rebate increases and decreases.
5. General Request for DRP Guidance
    Comment: One commenter recommended that CMS take this opportunity 
to issue additional guidance that can facilitate dispute resolution. 
Currently, this process can be costly for manufacturers and states, and 
can delay payment of rebates in cases where disputed utilization data 
turns out to be correct. The commenter further noted that the HHS 
Office of Inspector General (OIG) has recommended additional steps to 
prevent and resolve disputes and found that certain disputes occur 
frequently due to poor-quality data (disputes over drugs with 
complicated unit-of-measure conversions, physician-administered drugs, 
340B purchased drugs, and terminated drugs). The commenter stated that 
CMS could accelerate dispute resolution by revising the NDRA to 
identify minimum steps that states could take to facilitate dispute 
resolution and to provide that manufacturers will not be responsible 
for interest payments during periods before these minimum steps are 
taken.
    Response: While we appreciate the comments, we disagree that 
additional guidance on the dispute resolution process be set forth in 
the NDRA. Dispute resolution is an alternative to the state hearing 
mechanism, and is a process between the state and manufacturer. We have 
no formal role in dispute resolution, but continue to assist to the 
extent possible, when manufacturers and/or states request support in 
resolving a dispute. Therefore, we will continue in our role as 
facilitator when practical, and we encourage interested parties to 
review our DRP web page, https://www.medicaid.gov/medicaid/prescription-drugs/medicaid-drug-rebate-program/dispute-resolution/index.html, for more information about our suggestions regarding 
dispute resolution.
    Comment: One commenter requested more information about our role in 
facilitating dispute resolution between states and manufacturers. More 
specifically, the commenter requested additional clarity around our 
voluntary dispute resolution program process for states and 
manufacturers such as how the (dispute) program works, how a 
manufacturer can facilitate use of the program, our role in the dispute 
process, and our point of contact for the program.
    Response: As noted previously, this type of information is 
generally distributed through operational guidance. In this case, we 
release information about our role in dispute resolution, the process 
to request our facilitation of disputes, and our points of contact on 
our website at https://www.medicaid.gov/medicaid/prescription-drugs/medicaid-drug-rebate-program/dispute-resolution/index.html.
6. Retain Section VI. From Current NDRA
    Comment: Several commenters stated CMS should not finalize the 
deletion of section VI.(a). of the current NDRA, which pertains to 
patient access to outpatient prescription drugs. The commenters stated 
this provision recognizes that the access requirements in the rebate 
statute are the reason that manufacturers sign the Medicaid rebate 
agreement, and CMS has a responsibility to take action if states do not 
fulfill their obligations under the rebate statute. One commenter 
suggested that rather than deleting this provision, it should be 
reinforced and further strengthened in the updated NDRA to conform to 
the drug access requirements of section 1927 of the Act. The commenter 
noted that CMS reaffirmed the states' statutory obligation to cover 
covered outpatient drugs for which the relevant manufacturer has a 
Medicaid drug rebate agreement in State Release #172 (https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Prescription-Drugs/Downloads/Rx-Releases/State-Releases/state-rel-172.pdf) in response to Hepatitis C virus (HCV) therapies being 
unreasonably restricted by the states. This commenter suggested CMS 
explicitly refer to the text of State Release #172 that states provide 
Medicaid beneficiaries with access to prescribed medicines as described 
under section 1927 of the Act. The commenter stated that CMS may choose 
to continue to include this text in the ``dispute resolution'' section 
of the NDRA, or include the text under section III, ``Secretary's 
Responsibilities[.]''
    Response: As stated previously in response to comments, our 
approach in the proposed and updated NDRA is to refer to or cite 
statute and/or regulations, as well as agency guidance, as opposed to 
repeating such language expressly in the NDRA, as we believe this 
decreases the chance of inaccurate or conflicting NDRA text. We believe 
section VIII, the General Provisions section of the NDRA incorporates 
such statutory requirements not explicitly referenced in other sections 
of the NDRA. However, in order to ensure clarity on this point, we have 
updated paragraph (a) of Section VIII, General Provisions to add an 
introductory sentence that reads: ``This agreement is authorized by the 
applicable provisions in sections 1902, 1903, 1905, and 1927 of the 
Act, and the implementing regulations at 42 CFR part 447.'' Therefore, 
in updating the NDRA we do not believe that the current section VI is 
necessary. Moreover, the drug access requirements in section 1927 of 
the Act continue to be binding on states, regardless of the inclusion 
of the state requirement in the NDRA between the Secretary and 
manufacturers. As the commenter noted, when specific drug access issues 
arise, as most recently on the HCV drugs referenced in State Release 
#172, we release agency guidance reminding states of drug access 
requirements. We have published such guidance over the years, such as 
State Release #38, about coverage of a new multiple sclerosis drug. 
Also, we issued State Release #51, in response to proposed state 
legislation that would limit drug coverage for states seeking to 
leverage discounts from manufacturers, clarifying that such legislation 
would not supersede drug coverage requirements in section 1927 of the 
Act. We will continue, when circumstances arise, to remind states of 
their coverage requirements under the MDRP. Program Releases are 
available on www.Medicaid.gov.

F. Section VI. Confidentiality Provisions

    Comment: One commenter agreed with our updated section VI.(b)., 
which states that, ``[t]he manufacturer will hold state drug 
utilization data confidential. If the manufacturer audits this 
information or receives further information on such data, that 
information shall also be held confidential. Except where otherwise 
specified in the Act or Agreement, the

[[Page 12781]]

manufacturer will observe confidentiality statutes, regulations, and 
other properly promulgated policy concerning such data.'' However, the 
commenter recommended that CMS amend the section to recognize the 
reality that manufacturers must often share drug utilization data with 
contractors for various business reasons by adding language to section 
VI.(b). to read, ``[t]his confidentiality provision does not prevent a 
manufacturer from sharing drug utilization data with a contractor or 
other agent that helps the manufacturer perform audits or otherwise 
assess drug utilization data, provided that the contractor or agent 
agrees to treat the drug utilization data confidentially.''
    Another commenter requested that CMS clarify how the 
confidentiality provisions relate to a manufacturers' use of third 
parties for dispute resolution and outsourcing claims processing.
    Response: We do not believe that the edits suggested by the 
commenter are necessary as section VIII.(g). of the updated NDRA 
provides for the incorporation of contractors in the terms ``State 
Medicaid Agency'' and ``Manufacturer.'' However, we are revising 
section VIII.(g). to provide further clarification on this matter. 
Therefore, section VIII.(g). is being revised to read as follows: 
``[t]he terms ``State Medicaid Agency'' and ``Manufacturer'' 
incorporate any contractors which fulfill responsibilities pursuant to 
the agreement unless such contractors are specifically excluded in the 
rebate agreement or such exclusion is specifically agreed to by an 
appropriate CMS official.''

G. Section VII. Nonrenewal and Termination

1. Re-Entrance After Termination
    Comment: One commenter is concerned that the language in section 
VII.(d). which states that the manufacturer must make ``good faith 
efforts to appeal or resolve matters pending with the OIG'' could be 
misinterpreted to include ``matters pending with the OIG'' that are 
unrelated to violations of a previous Medicaid rebate agreement. 
Therefore, the commenter suggested revising the sentence to say that a 
manufacturer may not enter into another rebate agreement until at least 
one rebate period from the effective date of termination, ``and 
provided that the manufacturer has addressed to the satisfaction of CMS 
any outstanding violations from any previous rebate agreements, 
including but not limited to payment of any outstanding rebates and 
good faith efforts to appeal or resolve any disputes pending with the 
OIG concerning violations of a previous rebate agreement.''
    Response: We understand the commenter's concerns and have revised 
the language in section VII.(d). to create two sentences which now 
reads: If this rebate agreement is terminated, the manufacturer is 
prohibited from entering into another rebate agreement as set forth in 
section 1927(b)(4)(C) of the Act for at least one rebate period from 
the effective date of the termination. The manufacturer must also 
address to the satisfaction of CMS any outstanding violations from any 
previous rebate agreement(s), including, but not limited to, payment of 
any outstanding rebates and also make good faith efforts to appeal or 
resolve matters pending with the OIG relating to the MDRP or exclusion 
as referenced in subsection (c) of this section, unless the Secretary 
finds good cause for earlier reinstatement.

H. Section VIII. General Provisions

1. Transfer of Ownership
    Comment: One commenter requested that CMS make it clear that the 
automatic assignment of rebate liability (as specified in section 
VIII.(c). applies only when there is a transfer of ownership of the 
manufacturer as a whole, and not a transfer of specific products or 
product lines.
    Response: Section VIII.(c). of the General Provisions section only 
speaks to transfer of ownership of the manufacturer, and does not 
reference transfer of specific products or product lines. We do not 
believe any revisions to section VIII.(c). of the updated NDRA are 
necessary.
2. Due Date Falls on Weekend or Federal Holiday
    Comment: One commenter sought clarification from CMS regarding what 
is meant by ``other item'' in the section that reads, ``In the event 
that a due date falls on a weekend or federal holiday, the report or 
other item will be due on the first business day following that weekend 
or federal holiday.''
    Response: The reference to ``other item'' is intended to refer to 
anything due from the manufacturer to us per the rebate agreement.
3. Request for New Subsection: Rebate Payment Deadline
    Comment: One commenter recommended that CMS include a new 
subsection under section VIII in the NDRA to clarify the number of days 
manufacturers have to pay late rebates before interest begins to 
accrue. The commenter stated that this subsection should incorporate 
the guidance CMS provided to manufacturers in Manufacturer Release #7 
and #89, which states that, ``[i]nterest will begin accruing on 
disputed or unpaid amounts 38 calendar days from the date the state 
mails the state utilization data, as evidenced by the postmark by the 
United States Postal Service or other common mail carrier on the 
envelope (not a postage stamp).''
    Response: As stated in response to previous comments, statute, 
regulation, and agency guidance, such as Program Releases, are 
incorporated by reference in section VIII, General Provisions. As 
stated previously, we have updated paragraph (a) of Section VIII, to 
add an introductory sentence that reads: ``This agreement is authorized 
by the applicable sections of 1902, 1903, 1905 and 1927 of the Act, and 
the implementing regulations at 42 CFR part 447.'' Therefore, we do not 
believe it is necessary to specifically incorporate the language 
suggested by the manufacturer in the updated NDRA.

I. Section IX. CMS-367 Forms of the Drug Rebate Agreement

    Comment: One commenter stated that CMS should amend any forms 
referenced in or attached to the NDRA through the same process by which 
CMS is required to amend the NDRA itself (bilaterally). For example, 
CMS proposed that the NDRA would include as an attachment certain CMS 
forms (CMS-367a, CMS-367b, CMS-367c, and CMS-367d) that are used for 
reporting data required by the NDRA. Additionally, CMS incorporated by 
reference in section I.(t). of the proposed NDRA the CMS-R-144 form 
(state rebate invoice).
    While the commenter recognized that CMS has changed these forms in 
the past through the Paperwork Reduction Act process, without 
officially amending the rebate agreement, the commenter recommended 
that CMS amend all forms associated with this NDRA in the same way that 
CMS amend the NDRA itself. The commenter noted that section VIII.(h). 
of the proposed NDRA states that ``except for the conditions specified 
in sections II.(g). and VIII.(a). (which concern changes to the rebate 
statute or implementing regulations), this agreement will not be 
altered except by an amendment in writing signed by both parties . . . 
,'' which means that (apart from changes associated with statutory and 
regulatory changes) any changes made to the NDRA, including its 
attachments, must be in writing and signed by both parties.

[[Page 12782]]

The commenter recommended that CMS extend these same requirements to 
any forms that CMS choose to incorporate by reference, to ensure that 
the substance of the NDRA cannot be altered by changes in standard CMS 
forms that technically are not considered part of the NDRA itself.
    Response: OMB-approved forms, when changed, are subject to a notice 
and comment period as required by the Paperwork Reduction Act. We have 
complied with these requirements and will continue to comply for future 
updates to these forms. Therefore, we believe it is appropriate to 
revise section VIII.(h). to include as part of the exclusions all 
applicable OMB-approved forms. We have revised VIII.(h). to state that 
``[e]xcept for the conditions specified in II.(g). and VIII.(a)., as 
well as all applicable OMB-approved forms, this agreement will not be 
altered except by an amendment in writing signed by both parties. No 
person is authorized to alter or vary the terms unless the alteration 
appears by way of a written amendment, signed by duly appointed 
representatives of the Secretary and the manufacturer.''

J. Miscellaneous Comments

    Comment: One commenter urged CMS to include in the updated NDRA the 
existing mechanism that permits manufacturers to notify CMS of state 
Medicaid program compliance concerns regarding drug coverage 
requirements or if there is a pattern or history of inaccuracy in 
Medicaid utilization reporting.
    Response: We disagree with the commenter's suggestion that we 
memorialize in the NDRA the details of how a manufacturer may contact 
us regarding concerns with compliance with drug coverage requirements 
or patterns/historical inaccuracies in state drug utilization data 
reporting. We will continue to update any operational instructions on 
the options available or suggestions for manufacturers to communicate 
such issues to us.
    Comment: Several commenters requested that CMS revise the NDRA to 
more specifically enumerate state requirements with regard to the MDRP.
    Response: We disagree that state requirements be enumerated in the 
NDRA, as this is an agreement between the manufacturers and the 
Secretary and is not the appropriate vehicle to specifically address 
state requirements.

III. Provisions of the Final Notice

    As stated previously, we are updating the NDRA to reflect the 
changes in the Covered Outpatient Drugs final rule with comment period 
that was published in the February 1, 2016 Federal Register (81 FR 
5170), as well as operational and other legislative changes that have 
occurred over the last 20 plus years since the NDRA was first issued in 
1991. A sample of the finalized NDRA will be posted on the 
www.Medicaid.gov. The publication of the final notice in the Federal 
Register constitutes written notice of good cause to terminate all old 
rebate agreements as of the first day of the full calendar quarter 
which begins at least 6 months after the effective date of the updated 
NDRA. As noted in the proposed notice, the updated NDRA will need to be 
signed by all participating manufacturers, as well as new manufacturers 
joining the program (81 FR 78817). Therefore, all currently 
participating manufacturers wishing to maintain their participation in 
the MDRP will need to work with CMS to sign and effectuate an updated 
NDRA for each labeler code by the compliance date specified in the 
DATES section of this public notice. For any current manufacturer that 
does not sign and effectuate an updated NDRA within the time frame 
specified above, the result would be termination of the existing NDRA. 
Per section 1927(b)(4)(B)(iii) of the Act, termination of a rebate 
agreement does not affect rebates due under that agreement before the 
effective date of its termination. We will be providing additional 
instructions and guidance pertaining to how to sign and effectuate the 
updated NDRA through subregulatory guidance.
    Furthermore, prospective manufacturers that request a new NDRA, or 
reinstatement of a previously active NDRA once the updated NDRA is 
available, would be subject to the current process of data submission 
and verification prior to the execution of a NDRA.
    Additionally, we are further clarifying that, in keeping with the 
requirements in the previous and updated NDRA and CMS's policy guidance 
in Manufacturer Releases #13 and #48, manufacturers that wish to 
participate in the MDRP are required to report all their covered 
outpatient drugs to CMS, regardless of labeler code. Therefore, in an 
effort to prevent selective reporting of NDCs, manufacturers must 
ensure that all associated labeler codes with covered outpatient drugs 
enter into a rebate agreement in order to comply with the terms of the 
NDRA. This requirement is found under section II, Manufacturer's 
Responsibilities, subsection (a) of the previous NDRA, and in section 
II, Manufacturer's Responsibilities, subsection (b) of the updated 
NDRA. When a participating manufacturer requests an agreement for a 
newly acquired labeler code that has covered outpatient drugs, that 
NDRA request will be subject to verification of their proposed covered 
outpatient drug list. Program releases are available at 
www.Medicaid.gov.
    A copy of the updated NDRA is included in the Addendum of this 
notice. Below is a summary of the revisions and edits to the updated 
NDRA that have been made as a result of comments or to provide 
conforming or clarifying edits.

A. Definitions

     In response to a comment, we are retaining the definitions 
of ``Depot Price,'' ``Single-Award Contract,'' and ``Single-Award 
Contract Price,'' without any revisions to the definitions. As such all 
numbering is adjusted to account for the retention of these 
definitions.
     We are adding an opening quotation mark to the definition 
of ``Marketed'' as it was omitted from the draft NDRA.
     The definition of ``Rebate Period'' is revised to add 
``section 1927(k)(8) of the Act as implemented by'' after the word 
``in'' and before ``42 CFR 447.502.''
     The definition of ``State Drug Utilization Data'' is 
revised to replace the word ``reimbursed'' with ``dispensed and/or paid 
for, as applicable'' so that it now reads: ``. . . covered outpatient 
drugs dispensed and/or paid for, as applicable during a rebate period. 
. . .''
     The definition of ``State Drug Utilization Data'' is also 
revised to add ``(OMB control number: 0938-0582)'' after ``CMS-R-144'' 
in order to properly identify the form as being OMB approved.
     The definition of ``State Medicaid Agency'' is revised to 
add ``and 1927(k)(9) of the Act'' after ``sections 1902(a)(5)'' and 
before ``to administer'' so that it now reads ``. . . under sections 
1902(a)(5) and 1927(k)(9) of the Act to administer . . .''.
     The definition of ``Unit'' is revised to add ``(OMB 
control number 0938-0578)'' after ``CMS-367c form'' in order to 
properly identify the form as being OMB approved.

B. Manufacturer Responsibilities

     Subsection (a)--Has been revised to add ``for the Legal, 
Invoice, and Technical contacts'' between the words ``contact'' and 
``at'' so that it now reads: ``. . . point of contact for the Legal, 
Invoice, and Technical contacts at a United States address . . . .''
     Subsection (b)--Is revised to add ``for all covered 
outpatient drugs in all labeler codes of a manufacturer'' after ``is 
signed'' and before ``calculated'' so that it now reads ``. . . 
Beginning with

[[Page 12783]]

the quarter in which the National Drug Rebate Agreement (rebate 
agreement) is signed for all covered outpatient drugs of all labeler 
codes of a manufacturer, calculate, and report . . .''. It is also 
revised to add the words ``calculate a URA and'' after ``required to'' 
and before ``make'' so that it now reads ``. . . manufacturers are 
required to calculate a URA and make a rebate payment . . . ,'' and is 
revised to add the following sentences to the end of the subsection: 
``CMS may calculate a URA based on manufacturer-submitted product and 
pricing data and provide the URA to states in order to facilitate 
rebate billing. However, CMS's URA calculation does not relieve the 
manufacturer of its responsibility to calculate the URA.''
     Subsection (c)--Has been revised to remove the phrase ``in 
some cases'' from the third sentence so that it now reads, ``CMS uses 
drug information listed with FDA, such as Marketing Category and Drug 
Type, to be able to verify that an NDC meets the definition of a 
covered outpatient drug, therefore, manufacturers should ensure that 
their NDCs are electronically listed with FDA.''
     Subsection (d)--First, the first sentence is revised to 
add ``(OMB control number 0938-0578)'' after ``CMS-367a form'' in order 
to properly identify the form as being OMB approved. Second, the third 
sentence is revised to read, ``[t]he manufacturer agrees to provide 
such information not later than 30 days after the end of each rebate 
period beginning with the effective date quarter.'' Third, the fourth 
sentence is revised to read, ``[a]djustments to all prior quarterly 
pricing data must be reported for a period not to exceed 12 quarters 
from when the pricing data were originally due as required under 42 CFR 
447.510(b).''
     Subsection (e)--First, the first sentence is revised to 
add ``(OMB control number 0938-0578)'' after ``CMS-367b form'' in order 
to properly identify the form as being OMB approved. Second, the second 
sentence is revised to read, ``[t]he manufacturer agrees to provide 
such information not later than 30 days after the end of the month of 
the effective date, and not later than 30 days after the end of each 
month thereafter.''
     Subsection (f)--First, in accordance with section 
1927(b)(3)(A) of the Act, the first sentence is revised to replace the 
word ``within'' with ``not later than'' after ``payments'' and before 
``30 days'' so that it now reads ``Except as provided under V.(b)., to 
make rebate payments not later than 30 days after receiving the state 
rebate invoice.'' Second, it is revised to add the following sentence 
to the end of the subsection: ``To the extent that changes in product, 
pricing, or related data cause decreases to previously submitted total 
rebate amounts, the manufacturer should communicate with the states 
regarding where to apply the line-item (NDC-level) credit.''
     Subsection (i)--Is revised to add ``(OMB control number 
0938-0578)'' after ``CMS-367d form'' in order to properly identify the 
form as being OMB approved.
     Subsection (k)--The reference to ``42 CFR 447.534'' in the 
last sentence of the subsection is replaced with ``42 CFR 447.510'' as 
this is the valid regulatory reference.

C. Secretary Responsibilities

     Subsection (a)--In accordance with section 1927(b)(2)(A) 
of the Act, the first sentence is revised to replace the word 
``within'' with ``not later than'' after ``manufacturer,'' and ``60 
days'' and to add ``dispensed and/or'' before ``paid for,'' and to add 
the ``as applicable'' after ``paid for'' so that it now reads: ``The 
Secretary will employ best efforts to ensure the State Medicaid Agency 
shall report to the manufacturer, no later than 60 days of the last day 
of each rebate period, the rebate invoice (CMS-R-144) or the minimum 
utilization information as described in section II.(f). of this 
agreement, that is, information about Medicaid utilization of covered 
outpatient drugs that were dispensed and/or paid for, as applicable, 
during the rebate period.''.

D. Penalty Provisions

     Subsection (a)--Is revised to add ``in connection with a 
survey'' after ``prices'' and before ``or'' in the first sentence.
     Subsection (d)--Is revised to add ``government'' after 
``United States.''

E. Dispute Resolutions

     Subsection (a)--Is revised to add the OMB Control number 
associated with CMS-304 and CMS-304(a) forms after the reference to 
each form. The paragraph now read: ``In the event a manufacturer 
discovers a potential discrepancy with state drug utilization data on 
the rebate invoice, which the manufacturer and state in good faith are 
unable to resolve prior to the payment due date, the manufacturer will 
submit a Reconciliation of State Invoice (ROSI) form, the CMS-304 (OMB 
control number: 0938-0676), to the state. If such a discrepancy is 
discovered for a prior rebate period's invoice, the manufacturer will 
submit a Prior Quarter Adjustment Statement (PQAS) form, CMS-304a (OMB 
control number: 0938-0676), to the state.''
     Subsection (c)--The phrase ``shall require'' is replaced 
with ``will employ best efforts to ensure,'' and the phrase ``within 60 
days'' is replaced by ``within a reasonable time frame'' in both 
instances, and the reference to ``42 CFR 447.253(e)'' is added in 
parentheses to the end of the subsection so that it now reads: ``The 
state and the manufacturer will use their best efforts to resolve a 
dispute arising under (a) or (b) above within a reasonable time frame 
after the state's receipt of the manufacturer's ROSI/PQAS. In the event 
that the state and manufacturer are not able to resolve the dispute 
within a reasonable time frame, CMS will employ best efforts to ensure 
the state makes available to the manufacturer the same state hearing 
mechanism available to providers for Medicaid payment disputes (42 CFR 
447.253(e)).''.

F. Confidentiality Provisions

    This section is finalized as proposed.

G. Nonrenewal and Termination

     Subsection (a)--Is revised to add ``from the date 
specified in section II.(h).,'' between ``year'' and ``unless'' so that 
in now reads: ``. . . successive terms of one year from the date 
specified in section II.(h)., unless the manufacturer . . . .''
     Subsection (b)--The first paragraph is revised to add 
``and section 1927(b)(4)(B)(ii) of the Act'' after ``this agreement'' 
and before ``the manufacturer'' so that it now reads: ``In accordance 
with section VII.(a). of this agreement and section 1927(b)(4) of the 
Act, the manufacturer may terminate the agreement for any reason . . 
.''. The second paragraph, is revised to add an ``s'' to the end of 
``cause'' to make it plural in both instances.
     Subsection (d)--Is revised to add a period after the word 
``termination'' and create a new sentence that begins ``The 
manufacturer must also address . . .''
     Subsection (d)--Is also revised to add ``also make'' 
before ``good faith efforts in this new second sentence.
     Subsection (d)--Is further revised to add ``per subsection 
(c) of this section'' between ``the OIG'' and ``unless'' so it now 
reads ``. . . resolve matters pending with the OIG per subsection (c) 
of this section, unless the Secretary finds . . .''.

H. General Provisions

     Subsection (a)--Is revised to add the following sentence 
to the beginning of the subsection: ``This agreement is authorized by 
the applicable provisions

[[Page 12784]]

of sections 1902, 1903, 1905, and 1927 of the Act, and the implementing 
regulations at 42 CFR part 447.''.
     Subsection (f)--Is changed to replace the word ``scheme'' 
with ``construct''.
     Subsection (g)--Is revised to add ``such contractors are'' 
between ``unless'' and ``specifically,'' to replace ``provided for'' 
with ``excluded,'' and to add ``such exclusion is'' between ``or'' and 
``specifically'' so that it now reads: The terms ``State Medicaid 
Agency'' and ``Manufacturer'' incorporate any contractors which fulfill 
responsibilities pursuant to the agreement unless such contractors are 
specifically excluded in the rebate agreement or such exclusion is 
specifically agreed to by an appropriate CMS official.
     Subsection (h)--Is revised to add ``as well as applicable 
OMB-approved forms,'' between ``VIII.(a).,'' and ``this agreement'' and 
to remove ``except by an amendment in writing signed by both parties. 
No person is authorized to alter or vary the terms unless the 
alteration appears by way of a written amendment, signed by duly 
appointed representatives of the Secretary and the manufacturer.'' so 
that it now reads: ``(h) Except for the conditions specified in II.(g). 
and VIII.(a)., as well as applicable OMB-approved forms, this agreement 
will not be altered.''.

I. CMS-367

    This section is finalized as proposed.

J. Signatures

    This section is finalized as proposed.

IV. Collection of Information Requirements

    As stated in section 4711(f) of the Omnibus Budget Reconciliation 
Act of 1990, Chapter 35 of title 44, United States Code, and Executive 
Order 12291 shall not apply to information and regulations required for 
purposes of carrying out this Act and implementing the amendments made 
by this Act. Consequently, there is no need for review by the Office of 
Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).
    As discussed in sections I and II of this final notice, we have 
revised the NDRA to add references to the appropriate CMS forms, 
consisting of: CMS-R-144 (OMB control number: 0938-0582), CMS-367 (OMB 
control number 0938-0578), and CMS-304 (OMB control number: 0938-0676). 
While the forms are referenced within the NDRA, there are no new or 
revised collection of information requirements or burden resulting from 
the updated NDRA. The forms are simply being referenced for clarity.

Addendum--Updated Agreement:

National Drug Rebate Agreement Between the Secretary of Health and 
Human Services (Hereinafter Referred to as ``the Secretary'') and the 
Manufacturer

    The Secretary, on behalf of the U.S. Department of Health and 
Human Services and all states which have a Medicaid State Plan 
approved under 42 U.S.C. 1396a, and the manufacturer, on its own 
behalf, for purposes of section 1927 of the Social Security Act 
(``the Act''), 42 U.S.C. 1396r-8, hereby agree to the following:

I. Definitions

    The terms defined in this section will, for the purposes of this 
agreement, have the meanings specified in section 1927 of the Act 
and implementing Federal regulations, as interpreted and applied 
herein:
    (a) ``Average Manufacturer Price (AMP)'' will have the meaning 
set forth in section 1927(k)(1) of the Act as implemented by 42 CFR 
447.504.
    (b) ``Base Consumer Price Index-Urban (CPI-U)'' is the CPI-U for 
September, 1990. For drugs approved by the Food and Drug 
Administration (FDA) after October 1, 1990, ``Base CPI-U'' means the 
CPI-U for the month before the month in which the drug was first 
marketed.
    (c) ``Base Date AMP'' will have the meaning set forth in 
sections 1927(c)(2)(A)(ii)(II) and 1927(c)(2)(B) of the Act.
    (d) ``Best Price'' will have the meaning set forth in section 
1927(c)(1)(C) of the Act as implemented by 42 CFR 447.505.
    (e) ``Bundled Sale'' will have the meaning set forth in 42 CFR 
447.502.
    (f) ``Centers for Medicare & Medicaid Services (CMS)'' means the 
agency of the U.S. Department of Health and Human Services having 
the delegated authority to operate the Medicaid Program.
    (g) ``Consumer Price Index-Urban (CPI-U)'' will have the meaning 
set forth in 42 CFR 447.502.
    (h) ``Covered Outpatient Drug'' will have the meaning set forth 
in sections 1927(k)(2), (k)(3) and (k)(4) of the Act as implemented 
by 42 CFR 447.502.
    (i) ``Depot Price'' means the price(s) available to any depot of 
the federal government, for purchase of drugs from the Manufacturer 
through the depot system of procurement.
    (j) ``Innovator Multiple Source Drug'' will have the meaning as 
set forth in section 1927(k)(7)(A)(ii) of the Act as implemented by 
42 CFR 447.502.
    (k) ``Manufacturer'' will have the meaning as set forth in 
section 1927(k)(5) of the Act as implemented by 42 CFR 447.502.
    (l) ``Marketed'' means that a covered outpatient drug is 
available for sale by a manufacturer in the states.
    (m) ``Monthly AMP'' will have the meaning as set forth in 42 CFR 
447.510.
    (n) ``Multiple Source Drug'' will have the meaning as set forth 
in section 1927(k)(7)(A)(i) of the Act as implemented by 42 CFR 
447.502.
    (o) ``National Drug Code (NDC)'' will have the meaning as set 
forth in 42 CFR 447.502.
    (p) ``Non-innovator Multiple Source Drug'' will have the meaning 
as set forth in section 1927(k)(7)(A)(iii) of the Act as implemented 
by 42 CFR 447.502.
    (q) ``Quarterly AMP'' will have the meaning as set forth in 42 
CFR 447.504.
    (r) ``Rebate period'' will have the meaning as set forth in 
section 1927(k)(8) of the Act as implemented by 42 CFR 447.502.
    (s) ``Secretary'' means the Secretary of the U.S. Department of 
Health and Human Services, or any successor thereto, or any officer 
or employee of the U.S. Department of Health and Human Services or 
successor agency to whom the authority to implement this agreement 
has been delegated. In this agreement, references to CMS indicate 
such successor authority.
    (t) ``Single-Award Contract'' means a contract between the 
federal government and a Manufacturer resulting in a single supplier 
for a Covered Outpatient Drug within a class of drugs. The Federal 
Supply Schedule is not included in this definition as a single award 
contract.
    (u) ``Single-Award Contract Price'' means a price established 
under a Single-Award Contract.
    (v) ``Single Source Drug'' will have the meaning set forth in 
section 1927(k)(7)(A)(iv) of the Act as implemented by 42 CFR 
447.502.
    (w) ``State Drug Utilization Data'' means the total number of 
both fee-for-service (FFS) and managed care organization (MCO) units 
of each dosage form and strength of the manufacturer's covered 
outpatient drugs dispensed and/or paid for, as applicable during a 
rebate period under a Medicaid State Plan, other than units 
dispensed to Medicaid beneficiaries that were purchased by covered 
entities through the drug discount program under section 340B of the 
Public Health Service Act; state utilization data is supplied on the 
CMS-R-144 form (OMB control number: 0938-0582) (that is, the state 
rebate invoice).
    (x) ``States'' will have the meaning as set forth in 42 CFR 
447.502.
    (y) ``State Medicaid Agency'' means the agency designated by a 
state under sections 1902(a)(5) and 1927(k)(9) of the Act to 
administer or supervise the administration of the Medicaid program.
    (z) ``Unit'' means drug unit in the lowest dispensable amount. 
The manufacturer will specify the unit information associated with 
each covered outpatient drug per the instructions provided in CMS-
367c (OMB control number 0938-0578).
    (aa) ``Unit Rebate Amount (URA)'' means the computed amount to 
which the state drug utilization data is applied by states in 
invoicing the manufacturer for the rebate payment due.
    (bb) ``United States'' will have the meaning as set forth in 42 
CFR 447.502.
    (cc) ``Wholesaler'' will have the meaning as set forth in 
section 1927(k)(11) of the Act as implemented by 42 CFR 447.502.

II. Manufacturer's Responsibilities

    In order for the Secretary to authorize that a state receive 
payment for the

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manufacturer's drugs under Title XIX of the Act, 42 U.S.C. 1396 et 
seq., the manufacturer agrees to the requirements as implemented by 
42 CFR 447.510 and the following:
    (a) The manufacturer shall identify an individual point of 
contact for the Legal, Invoice, and Technical contacts at a United 
States address to facilitate the necessary communications with 
states with respect to rebate invoice issues.
    (b) Beginning with the quarter in which the National Drug Rebate 
Agreement (rebate agreement) is signed for all covered outpatient 
drugs of all labeler codes of a manufacturer, calculate, and report 
all required pricing data on every covered outpatient drug by NDC in 
accordance with section 1927 of the Act and as implemented by 42 CFR 
447.510. Furthermore, except as provided under section V.(b). of 
this agreement, manufacturers are required to calculate a URA and 
make a rebate payment in accordance with each calculated URA to each 
State Medicaid Agency for the manufacturer's covered outpatient 
drug(s) by NDC paid for by the state during a rebate period. CMS may 
calculate a URA based on manufacturer-submitted product and pricing 
data and provide the URA to states in order to facilitate rebate 
billing. However, CMS's URA calculation does not relieve the 
manufacturer of its responsibility to calculate the URA.
    (c) In accordance with the specifications pursuant to Office of 
Management and Budget (OMB)-approved CMS-367c form, report all 
covered outpatient drugs and corresponding drug product, pricing, 
and related data to the Secretary, upon entering into this 
agreement. This information is to be updated as necessary to include 
new NDCs and updates to existing NDCs. CMS uses drug information 
listed with FDA, such as Marketing Category and Drug Type, to be 
able to verify that an NDC meets the definition of a covered 
outpatient drug, therefore, manufacturers should ensure that their 
NDCs are electronically listed with FDA. Reports to CMS should 
include all applicable NDCs identifying the drug product which may 
be dispensed to a beneficiary, including package NDCs (outer package 
NDCs and inner package NDCs).
    (d) Beginning with the effective date quarter and in accordance 
with the specifications pursuant to OMB-approved CMS-367a form (OMB 
control number 0938-0578), report quarterly pricing data to the 
Secretary for all covered outpatient drugs in accordance with 42 CFR 
447.510. This includes reporting for any package size which may be 
dispensed to the beneficiary. The manufacturer agrees to provide 
such information not later than 30 days after the end of each rebate 
period beginning with the effective date quarter. Adjustments to all 
prior quarterly pricing data must be reported for a period not to 
exceed 12 quarters from when the pricing data were originally due as 
required under 42 CFR 447.510(b).
    (e) In accordance with the OMB-approved CMS-367b form (OMB 
control number 0938-0578), report information including monthly AMPs 
and monthly AMP units for all covered outpatient drugs in accordance 
with 42 CFR 447.510. The manufacturer agrees to provide such 
information not later than 30 days after the end of the month of the 
effective date, and not later than 30 days after the end of each 
month thereafter.
    (f) Except as provided under V.(b)., to make rebate payments not 
later than 30 days after receiving the state rebate invoice. The 
manufacturer is responsible for timely payment of the rebate within 
30 days so long as the state invoice contains, at a minimum, the 
number of units paid by NDC in accordance with 1927(b)(1) of the 
Act. To the extent that changes in product, pricing, or related data 
cause increases to previously-submitted total rebate amounts, the 
manufacturer will be responsible for timely payment of those 
increases in the same 30-day time frame as the current rebate 
invoice. To the extent that changes in product, pricing, or related 
data cause decreases to previously-submitted total rebate amounts, 
the manufacturer should communicate with the states regarding where 
to apply the line-item (NDC-level) credit.
    (g) To comply with the conditions of 42 U.S.C. 1396r-8, changes 
thereto, implementing regulations, agency guidance and this 
Agreement.
    (h) In accordance with 1927(a)(1) of the Act, rebate agreements 
between the Secretary and the manufacturer entered into before March 
1, 1991 are retroactive to January 1, 1991. Rebate agreements 
entered into on or after March 1, 1991 shall have a mandatory 
effective date equal to the first day of the rebate period that 
begins more than 60 days after the date the agreement is entered 
into. Rebate agreements entered into on or after November 29, 1999 
will also have an effective date equal to the date the rebate 
agreement is entered into that will permit optional state coverage 
of the manufacturer's NDCs as of that date.
    (i) To obtain and maintain access to the system used by the 
Medicaid Drug Rebate program, use that system to report required 
data to CMS, and ensure that their contact information is kept 
updated as required in the OMB-approved CMS-367d form (OMB control 
number 0938-0578).
    (j) To continue to make a rebate payment on all of its covered 
outpatient drugs for as long as an agreement with the Secretary is 
in force and state utilization data reports that payment was made 
for that drug, regardless of whether the manufacturer continues to 
market that drug. If there are no sales by the manufacturer during a 
rebate period, the AMP and best price reported in the prior rebate 
period should be used in calculating rebates.
    (k) To keep records (written or electronic) of the data and any 
other material from which the calculations of AMP and best price 
were derived in accordance with 42 CFR 447.510, and make such 
records available to the Secretary upon request. In the absence of 
specific guidance in section 1927 of the Act, federal regulations 
and the terms of this agreement, the manufacturer may make 
reasonable assumptions in its calculations of AMP and best price, 
consistent with the purpose of section 1927 of the Act, federal 
regulations and the terms of this agreement. A record (written or 
electronic) explaining these assumptions must also be maintained by 
the manufacturer in accordance with the recordkeeping requirements 
in 42 CFR 447.510, and such records must be made available to the 
Secretary upon request.
    (l) To notify CMS of any filing of bankruptcy, and to transmit 
such filing to CMS within seven days of the date of filing.

III. Secretary's Responsibilities

    (a) The Secretary will employ best efforts to ensure the State 
Medicaid Agency shall report to the manufacturer, not later than 60 
days after the last day of each rebate period, the rebate invoice 
(CMS-R-144) or the minimum utilization information as described in 
section II.(f). of this agreement, that is, information about 
Medicaid utilization of covered outpatient drugs that were dispensed 
and/or paid for, as applicable, during the rebate period. 
Additionally, the Secretary will expect any changes to prior 
quarterly state drug utilization data to be reported at the same 
time.
    (b) The Secretary may survey those wholesalers and manufacturers 
that directly distribute their covered outpatient drugs to verify 
manufacturer prices and may impose civil monetary penalties as set 
forth in section 1927(b)(3)(B) of the Act and section IV of this 
agreement.
    (c) The Secretary may audit manufacturer information reported 
under section 1927(b)(3)(A) of the Act.

IV. Penalty Provisions

    (a) The Secretary may impose a civil monetary penalty under 
section III.(b). as set forth in 1927(b)(3)(B) of the Act and 
applicable regulations, on a wholesaler, manufacturer, or direct 
seller of a covered outpatient drug, if a wholesaler, manufacturer, 
or direct seller of a covered outpatient drug refuses a request by 
the Secretary, or the Secretary's designee, for information about 
covered outpatient drug charges or prices in connection with a 
survey or knowingly provides false information, including in any of 
its quarterly reports to the Secretary. The provisions of section 
1128A of the Act (other than subsection (a) (with respect to amounts 
of penalties or additional assessments) and (b)) shall apply as set 
forth in section 1927(b)(3)(B) of the Act and applicable 
regulations.
    (b) The Secretary may impose a civil monetary penalty, for each 
item of false information as set forth in 1927(b)(3)(C)(ii) of the 
Act and applicable regulations.
    (c) The Secretary may impose a civil monetary penalty for 
failure to provide timely information on AMP, best price or base 
date AMP. The amount of the penalty shall be determined as set forth 
in 1927(b)(3)(C)(i) of the Act and applicable regulations.
    (d) Nothing in this Agreement shall be construed to limit the 
remedies available to the United States government or the states for 
a violation of this Agreement or any other provision of law.

V. Dispute Resolution

    (a) In the event a manufacturer discovers a potential 
discrepancy with state drug utilization data on the rebate invoice, 
which the manufacturer and state in good faith are

[[Page 12786]]

unable to resolve prior to the payment due date, the manufacturer 
will submit a Reconciliation of State Invoice (ROSI) form, the CMS-
304 (OMB control number: 0938-0676), to the state. If such a 
discrepancy is discovered for a prior rebate period's invoice, the 
manufacturer will submit a Prior Quarter Adjustment Statement (PQAS) 
form, CMS-304a (OMB control number: 0938-0676), to the state.
    (b) If the manufacturer disputes in good faith any part of the 
state drug utilization data on the rebate invoice, the manufacturer 
shall pay the state for the rebate units not in dispute within the 
required due date in II.(f). Upon resolution of the dispute, the 
manufacturer will either pay the balance due, if any, plus interest 
as set forth in section 1903(d)(5) of the Act, or be issued a credit 
by the state by the due date of the next quarterly payment in II(f).
    (c) The state and the manufacturer will use their best efforts 
to resolve a dispute arising under (a) or (b) above within a 
reasonable time frame after the state's receipt of the 
manufacturer's ROSI/PQAS. In the event that the state and 
manufacturer are not able to resolve the dispute within a reasonable 
time frame, CMS will employ best efforts to ensure the state makes 
available to the manufacturer the same state hearing mechanism 
available to providers for Medicaid payment disputes (42 CFR 
447.253(e)).
    (d) Nothing in this section shall preclude the right of the 
manufacturer to audit the state drug utilization data reported (or 
required to be reported) by the state. The Secretary encourages the 
manufacturer and the state to develop mutually beneficial audit 
procedures.
    (e) The state hearing mechanism is not binding on the Secretary 
for purposes of the Secretary's authority to implement the civil 
money penalty provisions of the statute or this agreement.

VI. Confidentiality Provisions

    (a) Pursuant to section 1927(b)(3)(D) of the Act and this 
agreement, information disclosed by the manufacturer in connection 
with this agreement is confidential and, notwithstanding other laws, 
will not be disclosed by the Secretary or State Medicaid Agency in a 
form which reveals the manufacturer, or prices charged by the 
manufacturer, except as authorized under section 1927(b)(3)(D).
    (b) The manufacturer will hold state drug utilization data 
confidential. If the manufacturer audits this information or 
receives further information on such data, that information shall 
also be held confidential. Except where otherwise specified in the 
Act or agreement, the manufacturer will observe confidentiality 
statutes, regulations, and other properly promulgated policy 
concerning such data.
    (c) Notwithstanding the nonrenewal or termination of this 
agreement for any reason, these confidentiality provisions will 
remain in full force and effect.

VII. Nonrenewal and Termination

    (a) Unless otherwise terminated by either party pursuant to the 
terms of this agreement, the agreement shall be effective beginning 
on the date specified in section II.(h). of this agreement and shall 
be automatically renewed for additional successive terms of one year 
from the date specified in section II.(h)., unless the manufacturer 
gives written notice of intent not to renew the agreement at least 
90 days before the end of the current period.
    (b) In accordance with section VII.(a). of this agreement and 
section 1927(b)(4)(B)(ii) of the Act, the manufacturer may terminate 
the agreement for any reason, and such termination shall become 
effective the later of the first day of the first rebate period 
beginning 60 days after the manufacturer gives written notice 
requesting termination, or CMS initiates termination via written 
notice to the manufacturer.
    The Secretary may terminate the agreement for failure of a 
manufacturer to make rebate payments to the state(s), failure to 
report required data, for other violations of this agreement, or 
other good causes upon 60 days prior written notice to the 
manufacturer of the existence of such violation or other good 
causes. The Secretary shall provide, upon request, a manufacturer 
with a hearing concerning such a termination, but such hearing shall 
not delay the effective date of the termination.
    (c) Manufacturers on the Office of Inspector General's (OIG's) 
List of Excluded Individuals/Entities (Exclusion List) will be 
subject to immediate termination from the Medicaid drug rebate 
program unless and until the manufacturer is reinstated by the OIG. 
Appeals of exclusion and any reinstatement will be handled in 
accordance with section 1128 of the Act and applicable regulations. 
Manufacturers that are on the OIG Exclusion List and are reinstated 
by the OIG under certain circumstances may be evaluated for 
reinstatement to the Medicaid drug rebate program by CMS. 
Reinstatement to the Medicaid drug rebate program would be for the 
next rebate period that begins more than 60 days from the date of 
the OIG's reinstatement of the manufacturer after exclusion.
    (d) If this rebate agreement is terminated, the manufacturer is 
prohibited from entering into another rebate agreement as set forth 
in section 1927(b)(4)(C) of the Act for at least one rebate period 
from the effective date of the termination. The manufacturer must 
also address to the satisfaction of CMS any outstanding violations 
from any previous rebate agreement(s), including, but not limited 
to, payment of any outstanding rebates and also make good faith 
efforts to appeal or resolve matters pending with the OIG relating 
to the MDRP or exclusion as referenced in subsection (c) of this 
section, unless the Secretary finds good cause for earlier 
reinstatement.
    (e) Any nonrenewal or termination will not affect rebates due 
before the effective date of termination.

VIII. General Provisions

    (a) This agreement is authorized by the applicable provisions of 
sections 1902, 1903, 1905, and 1927 of the Act, and the implementing 
regulations at 42 CFR part 447. This agreement is subject to any 
changes in the Medicaid statute or regulations that affect the 
rebate program.
    (b) Any notice required to be given pursuant to the terms and 
provisions of this agreement will be permitted in writing or 
electronically.
    Notice to the Secretary will be sent to: Centers for Medicaid 
and CHIP Services, Disabled & Elderly Health Programs Group, 
Division of Pharmacy, Mail Stop S2-14-26, 7500 Security Blvd., 
Baltimore, MD 21244.
    The CMS address may be updated upon notice to the manufacturer.
    Notice to the manufacturer will be sent to the email and/or 
physical mailing address as provided under section X of this 
agreement and updated upon manufacturer notification to CMS at the 
email and/or address in this agreement.
    (c) In the event of a transfer in ownership of the manufacturer, 
this agreement and any outstanding rebate liability are 
automatically assigned to the new owner subject to the conditions as 
set forth in section 1927 of the Act.
    (d) Nothing in this agreement will be construed to require or 
authorize the commission of any act contrary to law. If any 
provision of this agreement is found to be invalid by a court of 
law, this agreement will be construed in all respects as if any 
invalid or unenforceable provision were eliminated, and without any 
effect on any other provision.
    (e) Nothing in this agreement shall be construed as a waiver or 
relinquishment of any legal rights of the manufacturer or the 
Secretary under the Constitution, the Act, other federal laws, or 
state laws.
    (f) The rebate agreement shall be construed in accordance with 
Federal law and ambiguities shall be interpreted in the manner which 
best effectuates the statutory construct.
    (g) The terms ``State Medicaid Agency'' and ``Manufacturer'' 
incorporate any contractors which fulfill responsibilities pursuant 
to the agreement unless such contractors are specifically excluded 
in the rebate agreement or such exclusion is specifically agreed to 
by an appropriate CMS official.
    (h) Except for the conditions specified in II.(g). and 
VIII.(a)., as well as applicable OMB-approved forms, this agreement 
will not be altered.
    (i) In the event that a due date falls on a weekend or Federal 
holiday, the report or other item will be due on the first business 
day following that weekend or Federal holiday.

IX. CMS-367

    CMS-367 attached hereto is part of this agreement.

X. Signatures

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    Dated: February 20, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: March 16, 2018.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-05947 Filed 3-22-18; 8:45 am]
 BILLING CODE 4120-01-P