Regulatory Market Update

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Delays in CMS Final Rule Provisions: Value-Based Purchase Agreements Inclusion in Best Price & US Territories Inclusion in MDRP

On May 28, 2021, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule to delay the effective date for manufacturers to report multiple Best Prices (BP) associated with Value-Based Contracts (VBC) by 6 months to July 2022 as well as the effective date for the inclusion of the U.S. Territories in the definition of the “States” and “United States”, as defined in the Medicaid Drug Rebate Program (MDRP), to April 2024. Let’s break it down:

Proposed Delay of Value-Based Purchase Agreement Reporting and Treatment in Best Price

Under the Medicaid Drug Rebate Program (MDRP), manufacturers are responsible for reporting Best Price (BP) for Covered Outpatient Drugs (COD) sold to BP eligible customers located in the U.S. and DC. Best Price is the single lowest price offered to commercial customers after considering the total discounts and concessions to the BP eligible. On December 31, 2020, CMS published a final rule to advance CMS’ efforts to support states flexibility to enter into innovative value-based purchasing (VBP) arrangements with drug manufacturers for new, innovative, and often costly therapies, (such as gene therapies) and thus requiring manufacturers to report multiple BPs for government price (GP) reporting purposes. CMS postponed the effective date for manufacturers reporting multiple BPs associated with Value-Based Contracts for 6 months to July 1, 2022. CMS provided the following rationale for the delay:

  • Promotes additional time for stakeholders to develop strategies to implement the VBP arrangement
  • Allows for continued focus to be on increasing patient access and protect the quality of care with a VBC arrangement
  • Provide additional time for the agency to seek public comment and make necessary, complex changes to the system for VBC and reporting of multiple best prices
  • Continued devotion of tools and resources to deal with the current public health emergency (PHE) relating to COVID-19

Proposed Delay of U.S. Territories in the definition of ‘States’ and ‘United States’ to April 1, 2024

CMS proposed a postponement of April 1, 2022, effective date of inclusion (inclusion date) for U.S. territories (American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands) for two years in the amended regulatory definitions of “States” and “United States” for purposes of the Medicaid Drug Rebate Program (MDRP). With the proposed delay, the agency has also indicated that January 1, 2023, would be the earliest date Puerto Rico and the U.S. territories may opt into the MDRP. As CMS plans for the inclusion of territories, it is important that Manufacturers’ systems and policies are prepared for the future changes to MDRP (i.e., financial, operational, and legal/compliance perspectives).

CMS postponed the final rules effective date based on the following reasons:

  • Reiterated comments and concerns made it evident that interested territories would not be ready to participate in the MDRP by proposed timeline; however, interested parties may opt-in to participate
  • Provides additional time for the Agency to seek public comment and make necessary changes to systems
  • Continued devotion of tools and resources to deal with the current public health emergency (PHE) relating to COVID-19

With the inclusion of US territories, Manufacturers should keep the following considerations in mind:

  • What does the inclusion of the US territories in MDRP mean for commercial contracts that are in effect with wholesalers and distributors in these areas?
  • What are your current pricing and contracting policies and practices in the U.S. territories and are there any future considerations to change those contracting strategies based on the inclusion of territories in MDRP?
  • Would your current contracting strategies with US territories set BP with the inclusion of territories?
  • What is the impact to your gross to net accruals and forecasts with the inclusion of sales and discounts to eligible customers located in PR and US territories?
  • What is the impact on URA and PHS pricing if US territories enter the MDRP program sooner than April 1, 2024?


North Dakota Adds State Price Transparency Reporting Through HB 1032

North Dakota has become the next state to pass a bill for State Price Transparency. North Dakota passed House Bill 1032 on April 27th. This bill requires three new reports to be submitted to North Dakota Insurance Commissioner: 

Price Increase Report:

  • Increase in the wholesale acquisition cost of forty percent or greater over the preceding five calendar years
  • Ten percent or greater in the preceding twelve months for a prescription drug with a wholesale acquisition cost of seventy dollars
  • Submit within 30 days of the effective date for the price increase

New Drug Report:

  • Submit notice of a new drug with a WAC that exceeds the $670 threshold
  • The notice must include a concise statement of rationale regarding the factor or factors that caused the new drug to exceed the Medicare part D program price
  • Within three calendar days following release into the commercial market 

Quarterly WAC Report:

  • Manufacturers must submit the current WAC for each prescription drug sold in or into the state
  • Reports are due by the 15th day of January, April, July, and October of each calendar year (quarterly basis)

This bill becomes effective 8/1/2021 and the state is in the process of developing the web portal for submissions and creating reporting templates for Manufacturers. Penalties for noncompliance may reach up to $10,000 for each violation.

Source: Enrolled House Bill No. 1032 – Sixty-seventh Legislative Assembly of North Dakota – LC Number 21.0006.09000 (

VA Public Law Guidance

On May 4, 2021, the Department of Veteran Affairs (VA) Pharmaceutical Benefits Manager (PBM) provided clarification for drug manufacturers on the topic of New Product Package Size (NPS) and NDC Number Change Designation. In addition, the VA PBM reiterated its stance on a number of key aspects of the VA rules, regulations, and guidance (i.e. NFAMP Smoothing Letter Approval) as detailed below: 

New Package Size (NPS)

Following inquiries from the industry, the VA PBM updated its guidance on NPS in the following areas:

  • Newly Approved NDA: New FDA-approved products that have a New Drug Application (NDA), new drug application authorized generic (NDA-AG), or new Biologic License Application (BLA). 
  • Unbranded Biologics: Products with a new NOC approved under an existing BLA without the brand name (proprietary name) on its label. The product should not be different in strength, dosage form, route of administration, or presentation. 
  • Reformulated Products: Products that have been issued a new Notice of Action (NLA) or BLA. 
  • Returning NOA: Products that have been off the market and have had no sales for more than 1 year, where none of the product remains in the pipeline and/or the last lot produced has expired. 
  • Authorized Generics (AG): Products manufactured under the original NOA referred to as New Drug Application-Authorized Generic (NOA-AG), as long it has its own separate identity (unique trade name), marketing, and pricing (it must not be priced and/or marketed as if it were the same product as the “branded” covered drug). 

Furthermore, the VA PBM reiterated its October guidance on the products that will follow the pricing on NPS or continue the established FCP of the ‘original’ product

Non-FAMP Smoothing:

  • Submitting a new request for smoothing methodologies changes has been VA long-standing policy 
  • Restate your prior year non-FAMP with the appropriate methodology that is approved methodology

Application of transfer relief:

  • Covered Drug transfers from one manufacturer to another
  • Two types of relief: no additional discount or no dual calculation
  • Product transfers in the first three quarters of the year, the transfer relief is allowed in the first year
  • Product transfers in the fourth quarter, relief is allowed in the second year after the transfer

No offset on overcharges:

  • No offsets are permitted when determining the number of overcharges owed to the government for manufacturing errors in the non-FAMPs and FCP calculations relating to the Public Law and VA guidance
  • The Public Law establishes the maximum price that can be charged, not a minimum 
  • Non-FAMP calculations are the sole responsibility of the manufacturer
  • Adjusting pricing because of undercharges is not and is problematic because price changes may have impacted VA’s purchasing and contracting decisions.

TAA Compliant Reminder

  • Covered drugs with a non-TAA status must continue to report Non-FAMP data annually
  • Covered drug NDCs should be offered procurement on the FSS regardless of TAA status

Source: Public Law Policy Group MFRC Covered Drug Guidance (

About the Author

Rupal Patel

Rupal Patel

Executive Director, Operational Consulting

Rupal Patel is Executive Director in IntegriChain’s Operational Consulting practice, responsible for overseeing and leading the Government Pricing Advisory team. She is a recognized trusted advisor to Life Sciences manufacturers with an extensive record of success delivering strategic solutions that improve organizational accuracy, efficiency, and compliance. Currently she oversees more than 150 small- to mid-sized manufacturers and has extensive experience in leading pre-commercial launch projects for both Government Pricing and State Price Transparency.