[Federal Register Volume 86, Number 221 (Friday, November 19, 2021)]
[Rules and Regulations]
[Pages 64819-64825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25009]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 447

[CMS-2482-F2]
RIN 0938-AT82


Medicaid Program; Delay of Effective Date for Provision Relating 
to Manufacturer Reporting of Multiple Best Prices Connected to a Value 
Based Purchasing Arrangement; Delay of Inclusion of Territories in 
Definition of States and United States

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

ACTION: Final rule.

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SUMMARY: This final rule will delay for 6 months the January 1, 2022 
effective date for amendatory instruction 10.a., which addresses the 
reporting by manufacturers of multiple best prices connected to a value 
based purchasing (VBP) arrangement, of the final rule entitled, 
``Medicaid Program; Establishing Minimum Standards in Medicaid State 
Drug Utilization Review (DUR) and Supporting Value-Based Purchasing 
(VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and 
Third Party Liability (TPL) Requirements'', published in the December 
31, 2020 Federal Register to July 1, 2022. This final rule will also 
delay for 9 months the April 1, 2022 effective date of inclusion 
(hereinafter referred to as the inclusion date) of the U.S. territories 
(American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the 
Virgin Islands) in the amended regulatory definitions of ``States'' and 
``United States'' for purposes of the Medicaid Drug Rebate Program 
(MDRP), adopted in the interim final rule with comment period entitled, 
``Medicaid Program; Covered Outpatient Drug; Further Delay of Inclusion 
of Territories in Definitions of States and United States'', published 
in the November 25, 2019 Federal Register to January 1, 2023. We 
requested public comment on the proposed delays of the applicable 
effective date and inclusion date and discuss the comments received in 
this final rule.

DATES: These regulations are effective on December 20, 2021.

FOR FURTHER INFORMATION CONTACT: Christine Hinds, (410) 786-4578.

SUPPLEMENTARY INFORMATION:

I. Background

A. Summary of Proposed Delays in Effective and Inclusion Dates of 
Certain Regulation Provisions

    In the ``Medicaid Program; Establishing Minimum Standards in 
Medicaid State Drug Utilization Review (DUR) and Supporting Value-Based 
Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug 
Rebate and Third Party Liability (TPL) Requirements: Delay of Effective 
Date for Provision Relating to Manufacturer Reporting of Multiple Best 
Prices Connected to a Value Based Purchasing Arrangement; Delay of 
Inclusion of Territories in Definition of States and United States'' 
proposed rule that published in the May 28, 2021 Federal Register (86 
FR 28742) (hereinafter referred to as the proposed rule), CMS made two 
proposals. First, CMS proposed to delay the January 1, 2022 effective 
date for amendatory instruction 10.a. of the final rule entitled, 
``Medicaid Program; Establishing Minimum Standards in Medicaid State 
Drug Utilization Review (DUR) and Supporting Value-Based Purchasing 
(VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and 
Third Party Liability (TPL) Requirements'' (85 FR 87000) (hereinafter 
referred to as the December 31, 2020 final rule), for 6 months to July 
1, 2022. Second, CMS proposed to delay the April 1, 2022, inclusion 
date in the amended regulatory definitions of ``States'' and ``United 
States'', adopted in the interim final rule with comment period 
entitled ``Medicaid Program; Covered Outpatient Drugs; Further Delay of 
Inclusion of Territories in Definitions of States and United States'' 
(84 FR 64783), for 2 years until April 1, 2024, or in the alternative, 
to a date earlier than April 1, 2024, but not before January 1, 2023 
based on public comments.

B. Proposed Delay of Effective Date of Amendatory Instruction 10.a.

    The December 31, 2020 final rule advanced CMS' efforts to support 
state flexibility to enter into innovative value-based purchasing (VBP) 
arrangements with drug manufacturers for new and innovative, and often 
costly therapies, such as gene therapies, and codified new approaches 
required by section 1004 of the Substance Use-Disorder Prevention that 
Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and 
Communities Act (SUPPORT Act) (Pub. L. 115-271, enacted October 24, 
2018) and the existing Medicaid DUR program to improve the clinical use 
of opioids and reduce the potential for abuse in Medicaid patients. In 
addition, it codified in regulation several changes made in recent 
legislation and clarified other provisions of regulations relating to 
the Medicaid Drug Rebate Program (MDRP).
    The regulations included in the December 31, 2020 final rule went 
into effect on March 1, 2021, except for certain amendatory 
instructions, including instruction 10.a., which is effective on 
January 1, 2022. In the proposed rule, we proposed to delay the January 
1, 2022 effective date for amendatory instruction 10.a. of the December 
31, 2020 final rule on manufacturer reporting of multiple best prices 
connected to a VBP arrangement, to July 1, 2022, and sought public 
comment on the proposed delay. As discussed in the proposed rule, we 
believed a delay of 6 months is warranted to assure that stakeholders 
have the ability to implement the new VBP policy in a manner that 
assures patient access and quality of care are protected. We sought 
public comments on this proposed delay in the effective date, including 
the impact of this delay on affected beneficiaries. The primary reason 
for the original delay, and the proposed delay, was to provide more 
time for CMS, states, and manufacturers to make the complex system 
changes necessary to implement the new best price and VBP program, and 
assure patient access and quality of care, given the current need to 
devote resources to the public health emergency (PHE) relating to 
COVID-19 that has been in effect, and will likely remain in effect at 
least through 2021. On April 21, 2021, the Secretary of Health and 
Human Services (the Secretary) renewed the PHE initially declared on 
January 31,

[[Page 64820]]

2020, to continue giving CMS programs (including Medicaid) flexibility 
to support beneficiaries during the COVID-19 pandemic. This PHE was 
most recently renewed on October 15, 2021. In response to the PHE, CMS 
put in place its own pandemic plan (https://www.cms.gov/files/document/covid-pandemic-plan.pdf) to address the needs of its stakeholders, as 
well as the beneficiaries of its various programs including Medicaid. 
As part of that plan, CMS provided that it may approve waivers, 
amendments, and flexibilities for U.S. states, including the District 
of Columbia, and U.S. territories to allow Medicaid and CHIP programs 
to adapt their operations as necessary to respond to the pandemic. The 
pandemic plan also provided that it may make adjustments to the 
agency's value-based payment initiatives to allow health providers, 
healthcare facilities, Medicare Advantage and Part D plans, and States 
to focus on providing needed care to beneficiaries. In addition to the 
flexibilities granted to states under the PHE, the President signed 
into law on March 11, 2021, the American Rescue Plan Act of 2021 (ARP) 
(Pub. L. 117-2) to address the health care and economic needs of the 
country during the pandemic. This law is one of the most significant 
expansions of Medicaid since enactment of the Patient Protection and 
Affordable Care Act (Pub. L. 111-148, enacted March 23, 2010), and 
includes several new mandatory benefit requirements on states that will 
take time to implement.
    We acknowledged in the December 31, 2020 final rule that the 
changes to the reporting of multiple best prices by manufacturers under 
the MDRP (a VBP policy) adopted under the amendatory instruction 10.a 
would require additional time to provide operational guidance and 
complex system changes to implement. Thus, we delayed the effective 
date of the VBP provision until January 1, 2022. States that opt to 
participate in VBP models offered by manufacturers under the multiple 
best price approach must ensure that beneficiaries have appropriate 
access to care under such arrangements by developing systems and 
methods to track beneficiaries and their outcomes, retrieving and 
evaluating the patient-specific outcomes data, and securing the 
cooperation of providers and beneficiaries to enter into some of the 
more complex outcome-based arrangements offered by the manufacturers. 
Thus, there will be requirements on states to develop significant 
capabilities to build an infrastructure that will be able to implement 
VBP.
    We also noted that we want to be sure that our own technology 
infrastructure will be ready to receive multiple VBP offers from 
manufacturers that will report them to CMS, and subsequently report 
them to states. We developed a new Medicaid Drug Program (MDP) system. 
This MDP system will replace CMS' current legacy system with certain 
aspects of the system expected to be transitioned in the summer of 
2022. However, because of other events that have transpired since the 
regulation was published on December 31, 2020, we explained in the 
proposed rule that we did not believe that certain aspects of the 
system necessary for states and manufacturers to operationalize the VBP 
multiple best price program would be transitioned at that time, making 
a January 1, 2022 effective date infeasible. We also noted that we 
believed that it is important to have a technically up-to-date system 
that is ready to support the data requirements necessary for states and 
manufacturers to operationalize the VBP multiple best price program. 
When the proposed rule was issued, we were concerned we could have a 
delay with operationalizing that part of the MDP system, which could 
mean we would not have the necessary CMS components in place by later 
this year to implement the program by January 1, 2022, and believed 
July 1, 2022, to be a more realistic target date. As noted in the 
proposed rule, the demands on researching, producing, and distributing 
COVID-19 drug treatments and vaccines have likely diverted some 
manufacturer financial and human resources from developing and 
implementing system changes that would be required to enter multiple 
best price offers in the MDP system.
    We also stated that in the proposed rule that we understand that 
there was interest among patient and consumer groups, states, and 
manufacturers in the new multiple best price policy, and that we were 
committed to implementing the VBP multiple best price policy in a 
manner that assures that Medicaid beneficiaries have access to 
medications and therapies that are appropriately administered and 
monitored. However, we remain concerned that there are several 
challenges the states, providers, and manufacturers are facing during 
the PHE. These included those resulting from the passage of the ARP, 
including those relating to implementing expanded eligibility and 
mandatory benefit requirements under Medicaid (as described below). In 
summary, states, providers and manufacturers, as well as CMS, will need 
additional time to operationalize the multiple best prices policy under 
amendatory instruction 10.a.
    Therefore, given the possible delay in the MDP system and the 
recent developments around the PHE and ARP, we explained in the 
proposed rule that we believe more time is critical to permit CMS and 
our partners--states, providers, and manufacturers--to successfully 
implement the multiple best prices approach so that Medicaid patients 
benefit from these programs to full extent possible.
    Specifically, CMS and all the parties involved with the multiple 
best prices policies will want to make sure Medicaid patients receive 
the drug therapies under the VBP approach that are prescribed for them 
in a timely manner; that the VBP program does not create unnecessary 
barriers or requirements on the patient to access the drug; that they 
receive appropriately scheduled doses of a therapy if the patient 
treatment under the VBP arrangement is based on multiple doses; and 
that patient outcomes are tracked so that optimal patient care is 
provided; and, the states can obtain any additional discounts due to 
them from manufacturers under the VBP arrangement. We also believe it 
is in the best interest of the Medicaid program and Medicaid 
beneficiaries, in particular, that states prioritize the Medicaid 
eligibility and benefit requirements under the ARP (for example, 
expanded optional Medicaid coverage for postpartum women, expansion of 
COVID-19 testing and treatment services, and expansion of vaccine 
administration to limited benefit groups), resulting from enactment of 
the ARP to address beneficiary needs during the COVID-19 pandemic. 
Therefore, we proposed a delay to the effective date for amendatory 
instruction 10.a. (the multiple best price approach) of 6 months 
(effective July 1, 2022). By allowing more time to address the needs of 
Medicaid beneficiaries during the PHE, states, CMS, providers, and 
manufacturers will also have more time to put in place appropriate 
beneficiary protections as part of the multiple best price approach. 
Again, by delaying the effective date of the amendment permitting 
multiple best price reporting for 6 months, the amendatory instruction 
10.a would be effective beginning July 1, 2022. In the proposed rule, 
CMS also stated it expects to issue additional guidance before that 
time on operational and policy aspects of the new VBP program, 
including specifications relating to beneficiary protections.

[[Page 64821]]

C. Proposed Delay of Inclusion Date of U.S. Territories in Amended 
Regulatory Definitions of ``States'' and ``United States''

    The Covered Outpatient Drug (COD) final rule, published in the 
February 1, 2016 Federal Register (81 FR 5170), amended the regulatory 
definitions of ``States'' and ``United States'' to include the U.S. 
territories (American Samoa, Northern Mariana Islands, Guam, Puerto 
Rico, and the Virgin Islands) for the purposes of the MDRP with a 
delayed effective date of April 1, 2017. We stated in the preamble to 
the final rule that U.S. territories may use existing waiver authority 
to elect not to participate in the MDRP consistent with the statutory 
waiver standards. Specifically, the Northern Mariana Islands and 
American Samoa may seek to opt out of participation under the broad 
waiver that has been granted to them in accordance with section 1902(j) 
of the Social Security Act (the Act). Puerto Rico, the Virgin Islands, 
and Guam may use waiver authority under section 1115 of the Act to 
waive section 1902(a)(54) of the Act, which requires state compliance 
with the applicable requirements of section 1927 of the Act (81 FR 5203 
through 5204).
    The change to the definition of ``States'' and ``United States'' 
under the COD final rule to include the territories would also impact 
the quarterly calculation of average manufacturer price (AMP) and best 
price by manufacturers. That is, the change requires manufacturers to 
include prices paid by entities in the U.S. territories in the same 
manner in which they include prices paid by entities located in one of 
the 50 states and District of Columbia (81 FR 5224) in AMP and best 
price. It requires manufacturers to include eligible sales and 
associated discounts, rebates, and other financial transactions that 
take place in the U.S. territories in their calculations of AMP and 
best price once the revised definitions of ``States'' and ``United 
States'' take effect, regardless of whether the U.S. territories seek 
to waive participation in the MDRP.
    Once the COD final rule became effective, CMS began discussions 
with the territories regarding their participation in the MDRP. Based 
on those discussions, it became evident that interested territories 
would not be ready to participate in the MDRP by April 1, 2017. 
Stakeholders also reiterated the concerns in the comments to the COD 
final rule (81 FR 5224) that drug manufacturers will likely need to 
increase drug prices paid by U.S. territory Medicaid programs once the 
territories are included in the definitions of ``States'' and ``United 
States'' to avoid setting a new, lower best price. That is because if 
prices for drugs in the territories are lower than those in the states, 
then those prices could become the Medicaid best price for that drug in 
the entire Medicaid program. The manufacturers may then increase their 
drug prices in the territories to avoid this outcome, and an increase 
in drug prices in the territories could result in an increase in 
territory Medicaid drug spending without the offsetting benefit of 
receiving Medicaid rebates. Furthermore, the increase in Medicaid drug 
spending could adversely impact the availability of drugs to patients 
in the territories because of their Medicaid funding cap.
    As a result of these initial and subsequent discussions on 
preparedness, the potential for increased Medicaid drug prices in 
certain territories, and later, due to additional impacts of natural 
disasters in several of the territories, CMS issued two interim final 
rules with comment period (IFC) to further delay the effective date for 
including the U.S. territories in the regulatory definitions of 
``States'' and ``United States'' for purposes of the MDRP. The first, 
the ``Medicaid Program; Covered Outpatient Drug; Delay in Change in 
Definitions of States and United States'' IFC, was issued on November 
15, 2016, amending the regulatory definitions of ``States'' and 
``United States'' to include the U.S. territories beginning April 1, 
2020, rather than to April 1, 2017 (81 FR 80003). The second, the 
``Medicaid Program; Covered Outpatient Drug; Further Delay of Inclusion 
of Territories in Definitions of States and United States'' IFC, was 
published on November 25, 2019, and further delayed the inclusion date 
for amending the regulatory definitions of ``States'' and ``United 
States'' to include the U.S. territories to April 1, 2022, rather than 
April 1, 2020 (84 FR 64783).
    For similar reasons, in addition to ensuring continued beneficiary 
access and quality of care protections, we proposed to amend 42 CFR 
447.502 to delay the April 1, 2022 inclusion date for the amended 
regulatory definitions of ``States'' and ``United States'' to April 1, 
2024, and sought public comment on the proposed delay. In the 
alternative, we proposed to finalize an earlier inclusion date, but no 
earlier than January 1, 2023, based on public comments received. We 
explained in the proposed rule that we believe an additional delay of 2 
years may be warranted because it would allow the territories to focus 
their human and financial resources on ensuring the health and well-
being of their beneficiaries during this PHE, rather than having to 
divert those resources to the development of systems required to 
participate in the MDRP, which can take several years to implement from 
start to finish, and sought public comments on the proposal.
    As discussed in the proposed rule, we believe that in light of the 
pandemic and the resource demands stemming from the PHE (including 
those established under the ARP) on the Medicaid program and its 
beneficiaries, it is imperative that the territories prioritize the 
Medicaid eligibility and mandatory benefit requirements brought about 
by the ARP to address beneficiary needs during the COVID-19. Therefore, 
we believe that a further delay in the inclusion date of the U.S. 
territories in the regulatory definitions of ``States'' and ``United 
States'' is warranted and proposed an inclusion date beginning April 1, 
2024. In the alternative, we proposed to finalize an inclusion date 
that may be earlier than April 1, 2024, but not before January 1, 2023, 
based on public comments received.
    We explained in the proposed rule that by delaying the inclusion 
date to April 1, 2024, or in the alternative, a date earlier than April 
1, 2024, but not before January 1, 2023, we are allowing the 
territories additional time to develop needed systems and policy 
changes, to avoid unintended increases in drug costs and access 
concerns. The needed systems must be capable of collecting, reporting, 
validating, and tracking drug utilization on an ongoing basis. In 
addition, they require extensive advance planning and budgeting.
    The proposed delay in inclusion date would also benefit those 
territories that choose not to participate in the MDRP, which would be 
required to use human and financial resources that are currently 
focused on responding to the PHE to complete the section 1115 and 
section 1902(j) waiver applications that are required to waive out of 
MDRP participation should the current April 1, 2022 date remain in 
effect.
    Moreover, as explained in the proposed rule, should the amended 
regulatory definitions of ``States'' and ``United States'' go into 
effect on April 1, 2022, all manufacturers' sales to the territories 
and prices paid will be included in the AMP and best price calculations 
at that time, regardless of whether the territory is participating in 
the MDRP. As discussed in the COD final rule (81 FR 5224), we heard 
from various stakeholders who stated concerns that drug manufacturers 
would likely be prompted to increase drug

[[Page 64822]]

prices, including prices paid by the U.S. territory Medicaid programs, 
once the territories are included in the definitions of ``States'' and 
``United States.'' This is because, as currently drafted, section 1927 
of the Act requires that eligible sales of drugs within the United 
States be included in the drug manufacturers calculation of AMP and 
best price. The inclusion of these prices in AMP and best price could 
result in the territories that receive a waiver realizing an increase 
in their Medicaid drug costs without the offsetting benefit of 
receiving Medicaid rebates. Furthermore, the increase in Medicaid costs 
could adversely affect territories because of their Medicaid funding 
cap. As noted previously in the proposed rule, that could result in an 
increase in drug prices in the territories, making drugs less 
affordable, and making it more difficult for the territories to address 
their own public health needs during the PHE. We believe this provides 
further rationale for delaying the effective date of the inclusion of 
the territories in the regulatory definitions of ``States'' and 
``United States.'' It will ensure that during this PHE, which has the 
potential to extend into 2022, those territories that opt to waive 
participation from the MDRP will not face the additional financial 
burdens associated with increased Medicaid drug costs from drug 
manufacturers increasing drug prices to the territories.
    We proposed a new inclusion date of April 1, 2024, for the amended 
regulatory definitions of ``States'' and ``United States'' to include 
the U.S. territories for purposes of the MDRP. In the alternative, we 
proposed to finalize an inclusion date that may be earlier than April 
1, 2024, but before January 1, 2023, based on public comments received. 
We specifically requested comments on whether April 1, 2024, or an 
earlier inclusion date, but not earlier than January 1, 2023, would be 
more appropriate for the amended regulatory definitions. More 
specifically, we requested public comments that will assist us in 
understanding all relevant concerns related to establishing a new 
inclusion date, including whether territories are ready to participate 
in the MDRP, and whether CMS is able to execute appropriate and 
necessary waivers for territories that do not want to participate. In 
any case, manufacturers would be required to include their sales to the 
territories in their AMP and best price calculations based on the 
inclusion date finalized in a final rule, which we proposed to be April 
1, 2024, or possibly earlier, but no earlier than January 1, 2023 based 
on public comments.

II. Response to Public Comments and Provisions of the Final Rule

    In response to the proposed rule, we received 29 public comments.

A. Delay of Effective Date of Amendatory Instruction 10.a. (Sec.  
447.505(a))

    The following is a summary of the comments received and our 
responses on proposed delay of effective date of amendatory instruction 
10.a., which addresses the reporting by manufacturers of multiple best 
prices connected to value based purchasing (VBP) arrangements.
    Comment: Several commenters supported the proposal to delay for 6 
months the January 1, 2022 effective date for amendatory instruction 
10.a. of the December 31, 2020 final rule, which addresses the 
reporting by manufacturers of multiple best prices connected to a VBP 
arrangement. These commenters supported the proposed delay because of 
both the time as well as the state and federal resources that have been 
taken up by the emergence of the pandemic, implementation of Medicaid 
expansion under the ARP, and the focus on development, production, and 
distribution of vaccination efforts related to controlling the spread 
of the COVID-19 virus. Some commenters indicated that they do not 
believe that states, providers, and CMS have the infrastructure in 
place at this time to be able to track the necessary data related to 
health outcomes to properly implement VBP arrangements. They believe 
that the proposed delay will allow for some of this work (for example, 
work associated with pandemic efforts and infrastructure work to 
collect adequate patient data with appropriate privacy protections) to 
be finished without compromising care for those who need it in the 
interim. The commenters also noted that the proposed delay will allow 
CMS, states, and manufacturers time to develop and test the new MDP 
system, and allow CMS to develop operational guidance to facilitate 
multiple best price reporting.
    Response: We appreciate the support of the proposed delay of the 
effective date of amendatory instruction 10.a. to July 1, 2022, and 
continue to believe that the proposed delay is necessary for CMS, 
manufacturers, states, and providers to engage in the work necessary to 
facilitate the multiple best price reporting approach. As commenters 
noted, we are implementing a new MDP system and, as part of that new 
system, will include the necessary changes to address multiple best 
price reporting. The additional 6 months will give us time to upgrade 
our new MDP system to collect multiple best prices, as well as explore 
and test these changes with the manufacturers and states that have been 
anxious to commit to the multiple best price approach. We will also use 
this time to issue operational guidance for states and manufacturers on 
reporting and accessing the multiple best price information in the MDP 
system.
    For commenters' concerns regarding infrastructure and data 
collection, while we plan to provide general operational guidance, we 
do not plan to issue guidance on how to operationalize, evaluate, or 
monitor specific VBP arrangements as each arrangement will have its own 
set of specific facts and circumstances associated with the 
arrangement, such as the drug, the anticipated outcomes, and population 
included in the arrangement. A ``one size fits all'' approach to 
operationalizing a VBP arrangement is not possible because of the many 
different arrangements on the marketplace (85 FR 87018).
    Comment: A few commenters urged CMS to effectuate the multiple best 
price reporting option as established in the final rule, but no later 
than the proposed delay in effective date of July 1, 2022. Several 
commenters, while agreeing with the proposed delay, continue to believe 
that the multiple best price reporting flexibility is essential to 
ensuring that patients benefit from VBP arrangements. One commenter in 
particular was disappointed that CMS was considering the proposed 6 
month delay in effective date, but understood that putting in place the 
necessary systems and modifications for a seamless adoption of this new 
program is challenging. This commenter encouraged CMS to work 
diligently to ensure the proposed effective date of July 1, 2022 was 
achievable. Another commenter indicated that any further delay in 
effective date, beyond the 6 months proposed, will result in 
substantial negative repercussions for patient access to therapies that 
address significant unmet need, especially for Medicaid beneficiaries, 
and therefore, should be a one-time delay.
    Response: This delay rule allows states additional time to ensure 
patient access by Medicaid beneficiaries to certain higher cost 
therapies. We will continue to assess system readiness for states, 
manufacturers and CMS to ensure the reporting by manufacturers of 
multiple best prices connected to a VBP arrangement can be effectuated 
in

[[Page 64823]]

the timeframe established in this delay rule, and we may consider 
further delays in future rulemaking if systems are not ready.
    Comment: Several commenters provided input as to how CMS, states, 
and manufacturers should utilize the time associated with the proposed 
6 month delay in effective date. One commenter encouraged CMS to 
utilize the proposed 6 month delay to issue subregulatory guidance 
regarding whether an arrangement would qualify as a VBP arrangement if 
a State Medicaid Agency is not able to access the same type of patient 
and outcomes data utilized in the commercial contract that resulted in 
the multiple best price. In other words, the commenter questioned if 
the state and the manufacturer will be allowed to modify the commercial 
sector agreement to better fit the Medicaid population, and how 
manufacturers will report multiple best prices when multiple commercial 
and/or state agencies enter into similar contracts but have different 
outcomes, resulting in different rebates and multiple best prices.
    Response: We appreciate the commenters' recommendations for how 
CMS, states, and manufacturers should utilize the time associated with 
the proposed 6 month delay in effective date; however, these comments 
and recommendations are outside of the scope of this rulemaking. We 
note, however, that CMS plans to provide further operational guidance 
for states and manufacturers in the near future regarding the 
implementation of the multiple best price reporting.
    Comment: A few commenters requested that CMS take this additional 
time to consult with Medicaid agencies and other stakeholders to ensure 
the necessary systems and technology needed to facilitate the 
collection and reporting of patient clinical outcomes are in place. The 
commenters further commented that CMS should encourage and incentivize 
consistency (for example, standard data reporting requirements) in 
these systems across states.
    Response: We agree with the commenters, and as noted in the 
December 31, 2020 final rule, we plan to develop operational guidance 
regarding the final policy permitting multiple best price reporting. To 
that end, we have been available to manufacturers, states, and other 
stakeholders to discuss what is needed in MDP systems to effectuate the 
reporting of multiple best prices and intend to issue operational 
guidance associated with the MDP system changes. We expect to also 
provide states with guidance regarding existing Medicaid access and 
beneficiary protections when engaging in VBP arrangements.
    With respect to the standardization of reporting systems across 
states, we understand that such systems would benefit states, patients, 
and manufacturers, as it would facilitate implementation of VBP 
programs, and avoid duplication of efforts. Since the MDP systems 
operated by CMS will not be collecting patient-specific or outcomes 
data associated with VBP arrangements, we will not be encouraging or 
providing incentives to standardized data collection reporting 
associated with VBP arrangements as part of the MDP system. However, we 
expect that states, working with their supplemental rebate contractors 
or other VBP vendors, as well as manufacturers, will attempt to create 
standardized reporting templates and formats that may become industry 
standards over time.
    Comment: A few commenters indicated their appreciation of CMS' 
December 31, 2020 final rule to enhance flexibility in creating VBP 
arrangements; however, the commenters do not believe a 6 month delay in 
the effective date allows CMS sufficient time to adequately address the 
operational complexities and other legal hurdles (giving examples such 
as the federal Anti-Kickback Statute or Medicare Part B requirements) 
that impede adoption of VBP arrangements in a timely fashion. 
Therefore, the commenters stated that to leverage the full benefit of 
VBP arrangements, additional flexibilities and clarity are needed that 
cannot be provided via subregulatory guidance and urged CMS to withdraw 
the December 31, 2020 final rule and issue a revised proposed rule, or 
reopen the December 31, 2020 final rule for further public comment. A 
commenter indicated that while they appreciate CMS' interest in and 
effort to modernize the MDRP to support innovation that advances high 
value, patient-centered care through VBP arrangements, the final VBP 
multiple best price policy lacks clarity and does not consider a full 
range of operational hurdles. The commenter also indicated that the 
changes to the MDRP alone are not sufficient to reduce current barriers 
to VBP arrangements in the commercial market, and therefore, CMS must 
address the Anti-Kickback Statute (AKS), impact to Average Sales Price 
(ASP), and other government price reporting barriers to realize the 
full potential of VBP arrangements.
    Another commenter expressed concerns regarding how the final rule 
on VBP arrangements could be gamed by manufacturers. The commenter 
suggested and encouraged CMS withdraw the December 31, 2020 final 
regulation, prohibit manufacturers from reporting multiple best prices, 
limit outcomes-based arrangements under a bundled approach, and clarify 
requirements regarding stacking discounts. The commenter expressed 
concern that CMS' VBP regulations, as finalized in the December 31, 
2020 final rule, are not related to the Medicaid program and instead 
are designed to encourage specific types of contracting in the 
commercial market. This commenter suggested that the VBP regulations 
change Medicaid program requirements to achieve a goal outside of the 
Medicaid program and asserted that it is not appropriate to harm the 
Medicaid program to promote commercial contracting flexibility.
    Response: The proposed rule only proposed a delay in effective date 
related to the VBP multiple best price reporting policy finalized in 
the December 31, 2020 final rule. The underlying policy itself was not 
a subject of the proposed rule open to public comment. Thus, comments 
related to the underlying policy are outside the scope of this 
rulemaking. At this time, we believe the 6 month delay beyond the 
initial delay in inclusion date from the COD final rule will be 
adequate for manufacturers to provide the data necessary to report 
multiple best prices in MDP system. Any other legal requirements that 
manufacturers may be subject to, such as the federal anti-kickback 
statute or Medicare Part B requirements, are outside of the scope of 
this rulemaking. However, we do intend to issue additional guidance on 
the interaction between VBP and Medicare Part B ASP calculations.
    Comment: Some commenters continue to request additional clarity on 
whether, and to what extent, new VBP arrangements run afoul of the 
federal anti-kickback statute. The commenters indicate that CMS should 
work to remove barriers imposed by AKS that limit or prevent adoption 
of VBP arrangements.
    Response: While we appreciate the comments received, these issues 
are outside the scope of this rulemaking. As noted above, the 
underlying policy regarding VBP arrangements was not a subject of the 
proposed rule open to public comment. Rather, the proposed rule 
specifically proposed a 6 month delay to the effective date for the 
policy permitting manufacturers to report multiple best prices related 
to a VBP arrangement. Questions regarding these

[[Page 64824]]

issues should be directed to the Office of the Inspector General (OIG).
    Comment: A couple of commenters reiterated their comments provided 
on the ``Establishing Minimum Standards in Medicaid State Drug 
Utilization Review (DUR) and Supporting Value-Based Purchasing (VBP) 
for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third 
Party Liability (TPL) Requirements'' proposed rule that appeared in the 
June 19, 2020 Federal Register (85 FR 37256), including comments 
regarding the drug utilization review requirements.
    Response: The DUR requirements set forth in the December 31, 2020 
final rule were not a subject of this proposed rule and were not 
impacted by the proposed delay.
    After consideration of the comments received regarding the proposed 
delay to amendatory instruction 10.a. of the December 31, 2020 final 
rule, we are finalizing the proposed July 1, 2022 effective date.

B. Delay of Inclusion Date of U.S. Territories in Amended Regulatory 
Definitions of ``States'' and ``United States'' (Sec.  447.502)

    The following is a summary of the comments received and our 
responses on the proposed delay of the inclusion date for the U.S. 
territories in the definition of ``States'' and ``United States'' at 
Sec.  447.502 to April 1, 2024, or, alternatively, a date that is 
earlier than April 1, 2024, but not before January 1, 2023 based on 
public comments received.
    Comment: Several commenters supported the proposed delay of the 
April 1, 2022 inclusion date to April 1, 2024, or, alternatively, to a 
date earlier than April 1, 2024, but not before January 1, 2023 based 
on public comments. These commenters supported the proposed delay 
because of the territories' current need to focus on the PHE relating 
to COVID-19 and the time needed to prepare for the technology 
infrastructure changes necessary to support participation in the MDRP. 
The commenters also noted concern that manufacturers may increase their 
drug prices in the territories as a result of their participation in 
the MDRP. One commenter specifically noted concern as to whether the 
territories would be capable of participating in the MDRP prior to 
April 1, 2024.
    Another commenter supported the proposed delay, given the various 
programs and processes that a state has to put in place to effectively 
and efficiently participate in the MDRP, such as establishing a drug 
manufacturer rebate billing mechanism, a state drug utilization 
reporting mechanism, a process to assure that all drugs of a 
manufacturer that sign a rebate agreement with the Secretary of HHS are 
covered, a dispute resolution process, and a Drug Utilization Review 
(DUR) program.
    Another commenter supported a proposed delay of the April 1, 2022 
inclusion date and suggested October 1, 2023 as an alternative 
inclusion date. The commenter stated that an October 1, 2023 inclusion 
date would provide an additional eighteen months beyond April 1, 2022 
before the territories are included in the amended regulatory 
definitions of ``States'' and ``United States'', and believed that an 
October 1, 2023 inclusion date is justified because some interested 
territories have requested more time to prepare for MDRP participation 
and suggested potential policy changes to address increases in drug 
prices. In addition, the commenter indicated that the territories and 
manufacturers will need this additional time because their resources 
continue to be diverted to the COVID-19 pandemic response.
    Another commenter found it difficult to envision territories having 
the infrastructure or funding in place to fully transition to the MDRP 
given the PHE. The commenter also noted that even if a territory was 
prepared to make this transition, the providers, including hospitals 
and others across the healthcare marketplace that prescribe and provide 
prescription drugs, would need to update their systems, resulting in 
significant confusion and patient access barriers. The commenter 
believed further guidance is necessary to prepare the territories for 
this transition, as well as the providers of care within those 
programs. The commenter restated these reasons for prior delays in 
implementing this requirement as rationale for reversing the 2016 COD 
final rule including territories in the definition of ``States'' and 
``United States.''
    Other commenters indicated that they did not support the proposed 
delay because one territory in particular, Puerto Rico, has made 
significant efforts to prepare for participation in the program. The 
commenter indicated that the proposed delay would be financially 
harmful to that territory because it has already written a request for 
proposal (RFP) to procure a vendor to manage participation in the MDRP, 
which has an expected launch date of July 1, 2022, and a delay would 
result in the need for multiple modifications to the territory's RFP. 
The commenter also noted that the territory has undertaken a 
significant amount of budgeting and financial forecasting as part of 
their efforts, which indicated that there would be a financial loss as 
a result of unrealized federal rebates for both brand and generic drugs 
if there is a delay beyond the territory's FY 2023, which runs from 
July 2022 through June 2023.
    Response: In proposing this delay, and in finalizing a new 
inclusion date of January 1, 2023, we considered all public comments 
received, the needs of all the stakeholders, including territories and 
manufacturers, while considering the impact that the delay could have 
on access to necessary and affordable medications for the citizens of 
the territories, both those that would and would not participate in 
MDRP.
    To balance the willingness of territories that want to participate, 
while accommodating the time to prepare waivers for those that do not, 
we have determined that the January 1, 2023 date, which falls within 
the scope of the alternative proposal, is appropriate.
    Based on the information available to us at this time, we believe 
that of the five territories, only two will make efforts to participate 
in MDRP, regardless of the ultimate inclusion date, and the others will 
require additional time to request the applicable waivers. Of the two 
territories that we anticipate will make efforts to participate in 
MDRP, only one (Puerto Rico) has definitively indicated that they are 
ready and will be able to participate in MDRP as early as July 1, 2022, 
while the other (U.S. Virgin Islands) has previously expressed 
interest, but may or may not have decided whether to participate by 
January 1, 2023.
    Those territories that do not participate will need time to prepare 
to waive out of the program through the appropriate Medicaid waiver 
mechanism.
    To accommodate the resource needs of the territories during the 
PHE, we believe a January 1, 2023 inclusion date gives Puerto Rico the 
ability to participate sooner than the April 1, 2024 inclusion date, 
while giving the other territories a firm deadline to make a final 
decision to participate or waive out of the program. The timeline also 
recognizes the work done to date by Puerto Rico to prepare to 
participate in the program. Therefore, the new inclusion date for U.S. 
Territories in the amended regulatory definitions of ``States'' and 
``United States'' for purpose of the Medicaid Drug Rebate Program will 
be January 1, 2023, which is the earliest new inclusion date that we 
could have finalized given our proposals in the proposed regulation.

[[Page 64825]]

    We note the suggestion for a delayed inclusion date of October 1, 
2023 made by one of the commenters in light of the additional time 
needed and requested by some territories. we believe that further delay 
beyond January 1, 2023 negatively impacts the progress Puerto Rico has 
made to prepare to participate in the program (for example, Puerto Rico 
has already invested significantly in consulting costs and begun the 
request for proposal process for a system contractor). For example, 
Puerto Rico has indicated it could be ready to participate in the MDRP 
as early as July 1, 2022, and therefore, an effective date of October 
1, 2023 would push back MDRP participation by over a year from that 
date for the territory that has the overwhelming majority of drug 
spending, and which stands to benefit most from participation in MDRP.
    As for the commenter's request for additional guidance, the delay 
can be used to help any territory that plans on participating in the 
program more time to prepare its beneficiaries, pharmacies, and 
providers. That is because participation in the MDRP will increase the 
availability of medications that are available in participating 
territories, but the territories can also use various utilization 
management techniques, and providers and patients may need time to be 
educated on how these programs will work. Moreover, a territory 
participating in MDRP may need technical help from us on reporting its 
state drug utilization data, and, for example, assuring that all its 
physician administered drug claims also include National Drug Code 
(NDC) numbers. Like our state partners, we are available to guide 
territories that want to participate in MDRP to assure beneficiary 
access to drugs, as well as to properly invoice participating 
manufacturers for federal rebates.
    Comment: A few commenters noted their general opposition to the 
expansion of the MDRP beyond the 50 states and DC to include the 
territories. One commenter remarked that at most, CMS should limit the 
expansion to only requiring that rebates be paid by the manufacturers 
to the territories, but not require manufacturers to include sales to 
the territories in calculation of their AMP or determination of their 
Best Price because of the enormous burden and compliance concerns that 
such an expansion would pose on the manufacturer.
    A couple of commenters, while supporting the proposed delay of the 
participation of the territories in the MDRP to April 1, 2024, were 
still concerned with the decision to include the territories in the 
definition of ``States'' and ``United States'' in the first place, and 
urged CMS to address their prior comments requesting the agency to 
reverse its decision to add the territories to the Medicaid rebate 
program.
    Response: We note that the definitions of ``States'' and ``United 
States'' at Sec.  447.502 were amended to include the U.S. territories 
for purposes of the MDRP in the COD final rule with a delayed inclusion 
date. We did not propose to change the underlying policy, only to delay 
the inclusion date. As such, comments requesting that we revisit the 
underlying policy are outside the scope of this rulemaking.
    After consideration of the comments received regarding the proposed 
delay of inclusion date for the U.S. territories in the definitions of 
``States'' and ``United States'' at Sec.  447.502, we are finalizing an 
inclusion date of January 1, 2023.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on October 27, 2021.

List of Subjects in 42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs--health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 447--PAYMENT FOR SERVICES

0
1. The authority citation for part 447 continues to read as follows:

    Authority:  42 U.S.C. 1302 and 1396r-8.


0
2. Amend Sec.  447.502 by revising the definitions of ``States'' and 
``United States'' to read as follows:


Sec.  447.502  Definitions.

* * * * *
    States means the 50 States and the District of Columbia and, 
beginning January 1, 2023, also includes the Commonwealth of Puerto 
Rico, the Virgin Islands of the United States, Guam, the Commonwealth 
of the Northern Mariana Islands, and American Samoa.
    United States means the 50 States and the District of Columbia and, 
beginning January 1, 2023, also includes the Commonwealth of Puerto 
Rico, the Virgin Islands of the United States, Guam, the Commonwealth 
of the Northern Mariana Islands, and American Samoa.
* * * * *

0
3. Effective July 1, 2022, in paragraph (a), by revising the definition 
of ``Best price'' to read as follows:


Sec.  447.505  Determination of best price.

    (a) * * *
    Best price means, for a single source drug or innovator multiple 
source drug of a manufacturer (including the lowest price available to 
any entity for an authorized generic drug), the lowest price available 
from the manufacturer during the rebate period to any wholesaler, 
retailer, provider, health maintenance organization, nonprofit entity, 
or governmental entity in the United States in any pricing structure 
(including capitated payments) in the same quarter for which the AMP is 
computed. If a manufacturer offers a value-based purchasing arrangement 
(as defined at Sec.  447.502) to all states, the lowest price available 
from a manufacturer may include varying best price points for a single 
dosage form and strength as a result of that value based purchasing 
arrangement.
* * * * *

    Dated: November 4, 2021.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2021-25009 Filed 11-17-21; 4:15 pm]
BILLING CODE 4120-01-P