[Federal Register Volume 86, Number 247 (Wednesday, December 29, 2021)]
[Rules and Regulations]
[Pages 73986-73990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28225]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 513

[CMS-5528-F]
RIN 0938-AT91


Most Favored Nation (MFN) Model

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

ACTION: Final rule.

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SUMMARY: This final rule rescinds the Most Favored Nation Model interim 
final rule with comment period that appeared in the November 27, 2020, 
Federal Register.

DATES: This final rule is effective February 28, 2022.

FOR FURTHER INFORMATION CONTACT: Lara Strawbridge, (410) 786-7400 or 
[email protected].

I. Background

    In the August 10, 2021 Federal Register (86 FR 43620), we published 
a proposed rule (86 FR 43618, hereafter, referred to as ``the August 
2021 proposed rule'') that would rescind the Most Favored Nation (MFN) 
Model interim final rule with comment period (85 FR 76180) that 
appeared in the November 27, 2020 Federal Register (hereafter, referred 
to as ``the November 2020 MFN Model interim final rule''). The November 
2020 MFN Model interim final rule established a 7-year nationwide, 
mandatory MFN Model to test an alternative way for Medicare to pay for 
certain Medicare Part B single source drugs and biologicals (including 
biosimilar biologicals), under section 1115A of the Social Security Act 
(the Act), with the model performance period beginning on January 1, 
2021. The MFN Model was not implemented on January 1, 2021 as 
contemplated following four lawsuits and a nationwide preliminary 
injunction. On December 28, 2020, the U.S. District Court for the 
Northern District of California issued a nationwide preliminary 
injunction in California Life Sciences Ass'n v. CMS, No. 3:20-cv-08603, 
which preliminarily enjoined HHS from implementing the MFN Model and 
the November 2020 interim final rule. For additional information on the 
MFN Model and the related lawsuits, see the August 2021 proposed rule, 
the November 2020 MFN Model interim final rule, and the MFN Model 
website.\1\
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    \1\ See the MFN Model website at https://innovation.cms.gov/innovation-models/most-favored-nation-model.
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II. Provisions of the Proposed Regulations and Analysis of and 
Responses to Public Comments

    Given that the nationwide preliminary injunction precluded 
implementation of the MFN Model on January 1, 2021, as contemplated, 
that multiple courts found procedural issues with the November 2020 
interim final rule, and that stakeholders expressed concern about the 
model start date,\2\ in the August 2021 proposed rule (86 FR 43620), we 
proposed to rescind the November 2020 MFN Model interim final rule and 
remove the regulations at 42 CFR part 513 (these actions would withdraw 
the MFN Model), and invited comments on our proposal. We received 34 
timely items of correspondence from health care providers (such as 
health systems, hospitals, physician practices, and infusion centers), 
physician specialty groups, drug manufacturers, pharmaceutical industry 
groups, pharmacy benefit managers, patient advocacy groups, and 
individuals.
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    \2\ For example, in response to the November 2020 interim final 
rule, commenters stated that the MFN Model should not start during 
the COVID-19 pandemic, and in addition that the model should not 
begin on January 1, 2021, while the public comment period for the 
November 2020 interim final rule was ongoing (until January 26, 
2021). Further, commenters stated that CMS failed to allow MFN 
participants sufficient time to prepare for model start and to 
develop and deploy new systems with distributors and customers to 
exclude model sales from average sales price (ASP) reporting.
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    The following is a summary of the public comments received as well 
as our responses.
    Comment: In general, the comments on the August 2021 proposed rule 
closely aligned with the comments we received in response to the 
November 2020 MFN Model interim final rule. Several commenters 
expressed general support for lowering drug prices. However, all but 
one of the commenters supported our proposal to rescind the November 
2020 MFN Model interim final rule and remove the associated regulatory 
text at 42 CFR part 513. A commenter supported advancing the MFN Model, 
stating that the model ``is a guarantee to every American that we are 
not overpaying for the life sustaining medications they need. . . . 
[G]ive Americans the same drugs for the same price as the rest of the 
world.'' Several commenters urged us not to implement the MFN Model or 
similar models, such as any model that would test international or 
domestic reference pricing now or in the future. Many commenters 
expressed concerns about the potential for beneficiaries to lose access 
to drugs included in the MFN Model if manufacturers did not lower 
prices to align with the model payment amount, the potential for an MFN 
Model start to exacerbate practice struggles during the COVID-19 
pandemic, and the potential financial hardship and administrative 
burden that hospitals, physician practices, and 340B covered entities 
may experience related to the MFN Model. Some commenters described 
legal concerns that were raised in the model-related lawsuits.
    Response: We appreciate commenters' support for our proposal to 
rescind the November 2020 MFN Model interim final rule and remove the 
associated regulatory text at 42 CFR part 513 (these actions would 
withdraw the MFN Model). We appreciate the commenter's concern that 
Americans are paying more for drugs than consumers in other countries 
pay, although we disagree with the commenter that the MFN Model would 
guarantee that Americans would pay the exact amount that others pay for 
drugs, as the MFN Model was designed as a 7-year model test that would 
phase in the MFN Price over time, and further, there is no one 
international price that others outside the United States pay. We will 
continue to carefully consider this commenter's feedback and other 
stakeholders' feedback that we received as we explore all options to 
incorporate value into payments for Medicare Part B drugs, improve 
beneficiaries' access to evidence-based care, and reduce drug spending 
for consumers and throughout the health care system. As stated in the 
Department of Health and Human Services' (HHS') Comprehensive Plan for 
Addressing High Drug Prices: A Report in Response to the Executive 
Order on Competition in the American Economy (September 9, 2021), there 
are many administrative tools that could be used to promote competition 
and reduce drug pricing, including testing models in Medicare Part B 
using value-based payments, in which payment for drugs

[[Page 73987]]

is directly linked to the clinical value they provide patients.\3\
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    \3\ https://aspe.hhs.gov/sites/default/files/2021-09/Drug_Pricing_Plan_9-9-2021.pdf.
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    Comment: Some commenters offered views on potential policies and 
alternative payment models that HHS and CMS could consider.
    Response: We thank stakeholders for their comments. These topics 
are outside the scope of this rule, but we may consider the comments in 
the future.
    Final Decision: After considering the comments on our proposal, we 
are finalizing our proposal as proposed. In this final rule, we rescind 
the November 2020 MFN Model interim final rule and remove the 
associated regulatory text at 42 CFR part 513. Thus, as a result of 
this final rule, the MFN Model is withdrawn, effective on the date 
specified in the DATES section of this final rule.

III. Collection of Information Requirements

    As stated in section 1115A(d)(3) of the Act, Chapter 35 of title 
44, United States Code shall not apply to the testing and evaluation of 
CMS Innovation Center Models. However, costs incurred through 
information collections were described in sections III.H., III.I.b., 
and VI.C.5. of the November 2020 MFN Model interim final rule (85 FR 
76221, 76222, and 76244, respectively). We are finalizing the 
provisions of the August 2021 proposed rule, which proposed to rescind 
requirements related to the information collection described in the 
November 2020 MFN Model interim final rule. As such, the estimate of 
the impact of this final rule in section IV.C. of this final rule 
includes the savings from rescinding the information collection 
requirements in the November 2020 MFN Model interim final rule. 
Further, the August 2021 proposed rule and this final rule do not 
impose information collection requirements, that is, reporting, 
recordkeeping, or third-party disclosure requirements. 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.).
    We did not receive comments on the discussion of information 
collection in the proposed rule.

IV. Regulatory Impact Analysis

A. Statement of Need

    The purpose of this final rule is to finalize the rescission of the 
Most Favored Nation Model interim final rule with comment period that 
appeared in the November 27, 2020 Federal Register, and remove the 
associated regulatory text at 42 CFR part 513 (these actions will 
withdraw the MFN Model).

B. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any one year, 
or adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    Based on our estimates, OMB's Office of Information and Regulatory 
Affairs has determined this rulemaking is ``economically significant'' 
as measured by the $100 million threshold, and hence also a major rule 
under Subtitle E of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (also known as the Congressional Review Act). Accordingly, 
we have prepared a regulatory impact analysis that to the best of our 
ability presents the costs and benefits of the rulemaking.

C. Detailed Economic Analysis

    Removing the regulatory text at 42 CFR part 513, which withdraws 
the MFN Model, prevents realization of the annualized/monetized 
estimates of costs and transfers presented in the November 2020 MFN 
Model interim final rule (85 FR 76235 through 76248). The RIA of the 
November 2020 MFN Model interim final rule estimated that the MFN Model 
would result in substantial overall savings for the Medicare program, 
the Medicaid program, and beneficiaries, and that model participants 
would experience costs associated with complying with the regulations, 
survey completion, and potential requests for a financial hardship 
exemption.
    In the November 2020 MFN Model interim final rule, we presented 
estimates from the CMS Office of the Actuary (OACT) (85 FR 76236) and 
the HHS Office of the Assistant Secretary for Planning and Evaluation 
(ASPE) (85 FR 76240). We noted that there is much uncertainty around 
the assumptions for both the OACT and ASPE estimates, and refer readers 
to section VI.C. of the November 2020 MFN Model interim final rule for 
a more complete discussion of the estimated impacts of the MFN Model. 
These potential impacts were estimated to occur beginning January 2021 
through December 2028, in alignment with a January 1, 2021 model start. 
However, because the MFN Model was not implemented on January 1, 2021, 
as contemplated in the November 2020 MFN Model interim final rule, such 
effects have not occurred.

[[Page 73988]]

    Nevertheless and notwithstanding the nationwide preliminary 
injunction, this analysis uses a baseline in which the November 2020 
MFN Model interim final rule was implemented on January 1, 2021, to 
calculate the monetized estimates of the effects of this final rule. We 
maintain the analytical approach described in the RIA of the November 
2020 MFN Model interim final rule and August 2021 proposed rule, and 
for the purpose of quantifying the effects of this final rule, assume 
that the regulations added by the November 2020 MFN Model interim final 
rule would remain in full effect if this final rule was not finalized. 
By rescinding the regulations added by the November 2020 MFN Model 
interim final rule, this final rule prevents the occurrence of the 
estimated costs and transfers presented in the November 2020 MFN Model 
interim final rule. As presented in the August 2021 proposed rule (86 
FR 43621), we summarize this result in Tables 1 and 2, which 
illustrate, inversely, the monetized estimates contained in Table 17 
(85 FR 76247) and Table 18 (85 FR 76248) of the November 2020 MFN Model 
interim final rule. The period covered shown in Tables 1 and 2 begins 
January 2021 in alignment with the accounting statements and tables 
presented in the November 2020 MFN Model interim final rule and in the 
August 2021 proposed rule. This approach illustrates that this final 
rule prevents the realization of the annualized/monetized estimates of 
costs and transfers that were presented in the November 2020 MFN Model 
interim final rule. Because the MFN Model was not implemented, readers 
should understand that this final rule does not affect conditions in 
the past.

Table 1--Accounting Statement: Estimated Impacts From CY 2021 to CY 2028 as a Result of Provisions of This Final
                                         Rule Based on the OACT Estimate
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                                                                                  Units
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               Category                    Estimates                     Discount rate
                                                          Year dollar         (%)            Period covered
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Costs:
    Annualized Monetized ($million/              -29.4            2018               7  January 2021-December
     year).                                                                              2028.
                                                 -27.1            2018               3  January 2021-December
                                                                                         2028.
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To Whom...............................  Hospital/physicians.
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    Annualized Monetized ($million/               -0.4            2018               7  January 2021-December
     year).                                                                              2027.
                                                  -0.4            2018               3  January 2021-December
                                                                                         2027.
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Transfers:
    Annualized Monetized ($million/           11,502.5            2018               7  January 2021-December
     year).                                                                              2027.
                                              11,906.3            2018               3  January 2021-December
                                                                                         2027.
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From Whom to Whom.....................  Federal Government to hospitals/physicians and MA plans.
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    Annualized Monetized ($million/            4,087.2            2018               7  January 2021-December
     year).                                                                              2027.
                                               4,228.3            2018               3  January 2021-December
                                                                                         2027.
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From Whom to Whom.....................  Beneficiaries to hospitals/physicians and MA plans.
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    Annualized Monetized ($million/              577.5            2018               7  January 2021-December
     year).                                                                              2027.
                                                 596.5            2018               3  January 2021-December
                                                                                         2027.
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From Whom to Whom.....................  States to hospitals/physicians and MA plans
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 Table 2--Accounting Statement: Estimated Impacts From CY 2021 to CY 2028 as a Result of the Provisions of This
                                      Final Rule Based on the ASPE Estimate
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                                                                                  Units
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               Category                    Estimates                    Discount  rate
                                                          Year dollar         (%)            Period covered
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Costs:
    Annualized Monetized ($million/              -29.4            2018               7  January 2021-December
     year).                                                                              2028.
                                                 -27.1            2018               3  January 2021-December
                                                                                         2028.
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To Whom...............................  Hospital/physicians.
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    Annualized Monetized ($million/               -0.4            2018               7  January 2021-December
     year).                                                                              2027.
                                                  -0.4            2018               3  January 2021-December
                                                                                         2027.
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Transfers:
    Annualized Monetized ($million/            7,058.3            2018               7  January 2021-December
     year).                                                                              2027.
                                               7,276.5            2018               3  January 2021-December
                                                                                         2027.
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From Whom to Whom.....................  Federal Government to hospitals/physicians and MA plans.
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[[Page 73989]]

 
    Annualized Monetized ($million/            4,504.9            2018               7  January 2021-December
     year).                                                                              2027.
                                               4,638.6            2018               3  January 2021-December
                                                                                         2027.
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From Whom to Whom.....................  Beneficiaries to hospitals/physicians and MA plans.
                                       -------------------------------------------------------------------------
    Annualized Monetized ($million/              342.4            2018               7  January 2021-December
     year).                                                                              2027.
                                                 351.6            2018               3  January 2021-December
                                                                                         2027.
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From Whom to Whom.....................  States to hospitals/physicians and MA plans.
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    Comment: A few commenters stated that, based on their own or 
others' analyses, the OACT and ASPE estimates shown in the November 
2020 MFN Model interim final rule underestimate the negative financial 
impact that certain healthcare providers would likely experience had 
the MFN Model been implemented. Many commenters expressed concern that 
some of the estimated savings would be related to reduced access to 
care. We did not receive comments on our approach to illustrate, 
inversely, the monetized estimates contained in Table 17 (85 FR 76247) 
and Table 18 (85 FR 76248) of the November 2020 MFN Model interim final 
rule in Table 1 and Table 2 of the August 2021 proposed rule, 
respectively.
    Response: We thank stakeholders for their comments. As we noted in 
the November 2020 MFN Model interim final rule and the August 2021 
proposed rule, there is much uncertainty around the assumptions for 
both the OACT and ASPE estimates that were presented in those rules.
    Final Decision: After considering the comments on the RIA of our 
proposal, and because we are finalizing our proposal as proposed, we 
are finalizing the RIA without change; that is, as presented in the 
August 2021 proposed rule.

D. Regulatory Flexibility Act (RFA)

    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $8 million to $41.5 million in any 1 year. Individuals and 
States are not included in the definition of a small entity. For 
details, see the Small Business Administration's ``Table of Small 
Business Size Standards'' at https://www.sba.gov/document/support-table-size-standards. The rule of thumb used by HHS for determining 
whether an impact is ``significant'' is an adverse effect equal to 3 
percent or more of total annual revenues.
    This final rule affects the vast majority of Medicare-participating 
providers and suppliers that submit claims for separately payable 
Medicare Part B drugs by preventing the impacts described in the 
November 2020 MFN Model interim final rule (85 FR 76246) from being 
realized. Over 20,000 small entities would have been included or 
affected by the MFN Model if the model had been implemented. We refer 
readers to Table 3 and Table 8 in the November 2020 MFN Model interim 
final rule (85 FR 76195 and 76219, respectively) to see the number of 
entities, as well as the types of providers and suppliers, that most 
likely would have been impacted by the MFN Model had it been 
implemented. This final rule withdraws the MFN Model, and therefore 
likely impacts these same entities. Accordingly, we have determined 
that a Regulatory Flexibility Analysis is required. As its measure of 
significant economic impact on a substantial number of small entities, 
HHS uses a change in revenue of more than 3 to 5 percent. We believe 
that this threshold will be reached by the requirements in this final 
rule. Therefore, the Secretary has certified that the August 2021 
proposed rule and this final rule will have a significant economic 
impact on a substantial number of small entities. The Regulatory 
Flexibility Analysis presented in the November 2020 MFN Model interim 
final rule (85 FR 76245) describes the potential impact of the MFN 
Model, if it had been implemented, on small entities. This final rule 
prevents those impacts from being realized. Specifically, the lower 
drug payments and alternative add-on payments described in section 
III.F. of the November 2020 MFN Model interim final rule will not 
occur. Instead, payment for submitted claims will be made under the 
applicable Medicare payment methodology. This Regulatory Flexibility 
Analysis, together with the preamble, constitutes the required 
analysis.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 604 of the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a Metropolitan Statistical Area for Medicare 
payment regulations and has fewer than 100 beds. We estimate that this 
final rule will have a significant impact on small rural hospitals by 
preventing the impacts described in the November 2020 MFN Model interim 
final rule (85 FR 76246) from being realized. Specifically, these rural 
entities will not experience drug payment reductions and overall 
payment reductions. Instead, payment for submitted claims will be made 
under the applicable Medicare payment methodology. We estimate that 
this final rule will have a parallel significant impact on urban 
entities.
    We welcomed comments on our estimate of significantly affected 
providers and suppliers and the magnitude of estimated effects for the 
proposed rule.
    Comment: Several commenters stated that our estimate of 
significantly affected providers and suppliers and the magnitude of 
estimated effects presented in the November 2020 MFN Model interim 
final rule underestimated the potential financial losses and 
operational impacts that health care

[[Page 73990]]

providers, such as hospitals, physicians and infusion centers, would 
have experienced had the MFN Model been implemented as contemplated.
    Response: We thank stakeholders for their comments. As we noted in 
the November 2020 MFN Model interim final rule and the August 2021 
proposed rule, there is much uncertainty around the assumptions for 
both the OACT and ASPE estimates that were presented in those rules.
    Final Decision: After considering the comments on the estimate of 
significantly affected providers and suppliers and the magnitude of 
estimated effects of our proposal, and because we are finalizing our 
proposal as proposed, we maintain our analysis, as presented in the 
August 2021 proposed rule, for this final rule.

E. Unfunded Mandates Reform Act (UMRA)

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2021, that 
threshold is approximately $158 million. As discussed in section V.C. 
of the August 2021 proposed rule and section IV.C. of this final rule, 
the financial impacts for States (that is, an estimated overall 
reduction in State spending) presented in the November 2020 MFN Model 
interim final rule (85 FR 76235 through 76248) will not be realized. 
The August 2021 proposed rule and this final rule did not mandate any 
spending by State, local, or tribal governments, or by the private 
sector, and hence an UMRA analysis is not required.

F. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. As discussed in section V.C. of the August 2021 proposed 
rule and section IV.C. of this final rule, the financial impacts for 
States (that is, an estimated overall reduction in State spending) 
presented in the November 2020 MFN Model interim final rule (85 FR 
76235 through 76248) will not be realized. Since this rule does not 
impose any costs on State or local governments, preempt State law, or 
otherwise have Federalism implications, the requirements of Executive 
Order 13132 are not applicable.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on December 14, 2021.

List of Subjects for 42 CFR 513

    Administrative practice and procedure, Health facilities, Medicare, 
Reporting and recordkeeping requirements.

PART 513--[REMOVED]

0
For the reasons set forth in the preamble and under the authority at 5 
U.S.C. 301, the Centers for Medicare & Medicaid Services removes 42 CFR 
part 513.

    Dated: December 21, 2021.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2021-28225 Filed 12-27-21; 4:15 pm]
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