Life Science Compliance Update

January 26, 2016

CMS Final Rule on Covered Outpatient Drugs

The Centers for Medicare & Medicaid Services (CMS) issued the Covered Outpatient Drugs final rule with comment on January 21, 2016. The rule addresses important areas of Medicaid drug reimbursement, as well as some of the changes that were made to the Medicaid Drug Rebate Program by the Affordable Care Act. This final rule also requests comments on the definition of line extension, and that comment period expires on April 1, 2016.

This rule attempts to assist states and the federal government in managing drug costs and establishing a long-term framework for implementing the Medicaid drug rebate program.

Managing Drug Costs

While the Affordable Care Act increased the Medicaid rebates that are paid to the federal and state governments, this final rule went a step further in an attempt to ensure that the federal and state governments will save money in managing Medicare costs over the long term. One of those steps the final rule took was to create a regulatory definition for Average Manufacturer Price (AMP). The AMP is a key metric in the Medicaid drug rebate program, determining manufacturer rebates and pharmacy reimbursement for certain generic drugs that are subject to the Federal Upper Limit (FUL).

The new definition of AMP for inhalation, infusion, instilled, implanted, or injectable drugs (5i drugs) will permit states to collect additional rebates on more expensive infused and injected drugs. Some of these 5i drugs are a constantly increasing expense to the Medicaid program and are not commonly dispensed through a retail community pharmacy.

The final rule also creates an incentive for pharmacies to utilize generic drugs by updating the FUL formula for the payment of certain generic drugs. The rule also implements the Affordable Care Act provision that extended rebates to covered outpatient drugs provided to beneficiaries that are enrolled in Medicaid managed care organizations.

Lastly, the final rule expanded the definition of "states" to include United States territories so that territories like Puerto Rico and Guam can receive savings in their drug expenditures.

Sustain Medicaid Drug Rebate Program

The final rule attempts to clarify many of the changes that were made to the Medicaid Drug Rebate Program under the Affordable Care Act and provides pharmaceutical manufacturers with clear regulatory guidance to help calculate and report drug product and pricing information.

In addition to clarifying the definition of what is considered a manufacturer's "best price" and aligning that definition with the definition of AMP, the final rule clarifies the definitions of Retail Community Pharmacy and Wholesaler in determining AMP.

Pharmacy Reimbursement System

The final rule also attempts to align pharmacy reimbursement with the acquisition cost of drugs and work to ensure that the states pay an "appropriate" professional dispensing fee.

The final rule also creates an exception to the FUL calculation, allowing for the use of a higher multiplier than 175% for certain multiple source drugs, and establishes actual acquisition cost (AAC) as the basis by which states determine their ingredient cost reimbursement. One of the impetuses behind AAC being the ingredient cost reimbursement basis is so that payments are "based on a more accurate estimate of the prices available in the marketplace."

In addition, a professional dispensing fee will be initiated so that the dispensing fee paid to pharmacies reflects the cost of the pharmacist's professional services and cost to dispense the pharmaceutical product to a Medicaid beneficiary.

Comments Sought After

While most portions of the rule are considered final, as previously mentioned, CMS is still considering comments received on the definition of line extension. For the time being, manufacturers should rely on the statutory definition of line extension found at 1927(c)(2)(C) of the Act, and are permitted to use reasonable assumptions in determining whether their drugs qualify as a line extension drug.

While the definition of line extension is not yet solidified in the final rule, CMS did finalize two aspects of the line extension provision: specifying the rebate calculation requirements and requiring the alternative rebate be calculated if there is a corporate relationship between the manufacturer of the line extension drug and the manufacturer of the initial brand name listed drug.


January 20, 2016

CMS Updates 2014 Open Payments Data

Breaking months of silence on Open Payments data, Centers for Medicare and Medicaid Services (CMS) updated some of the Open Payments data available on its website.

CMS still plans to update the Open Payments data at least once a year to include updates from disputes and other data corrections that were made since the initial publication of the data. The updates by CMS affect all types of payments or transfers of value to physicians, teaching hospitals, and physician ownership and investment interests.

This updated Open Payments dataset reflects changes that were made to records, changes to delays in publication flags, changes to disputed records, and records that were deleted. The updated data was submitted by the applicable manufacturers and applicable group purchasing organizations (GPOs), and the accuracy of all data included in the update was attested to by the submitting applicable manufacturer or GPO.

Not only did CMS update the actual data, but the Open Payments data website itself was updated and enhanced with new added features. The new added features include: a homepage tool where you can search for physicians by name, a snapshot of Open Payment facts, and sections to explore and download data.

Updated Data Information

While CMS did a data refresh, that does not mean that all of the data on the Open Payments website is undisputed now. Currently, of the $3.49 billion in general payments, $5.94 million is in dispute; of the $4.81 billion in research payments, $19.07 million is in dispute; and of the $1.02 billion in investments, $1.19 million are in dispute.

For the 14.84 million records of general payments, 2,672 of them are under dispute; and of the 823,000 records of research payments, 1,378 of them are disputed.

New Interface – Sort of

In addition to updating the data CMS updated the opening page of Open Payment Data. Now the page goes directly to a picture which reads find your doctors payments, this is an updated version of the old screen in which you would also enter in the city, state, country and specialty. Now if your doctor's last name is Khan or Smith the patient gets to scroll through hundreds of pages of names. Though the old interface is still available if one presses the option to select by teaching hospital or company name, There is still little context on the home page as to what those payments are for, or why a patient would want to know about them. Overall the interface and subsequent data is still very confusing for a patient.

New Interface                         

    Old Interface

Open Payments System Down

From Thursday, January 21, 2016 through Tuesday, January 26, 2016, the Open Payments system will be unavailable as CMS works to update and improve upon how the system works. While the Open Payments system will not be available for use during that time, you will still be able to see Open Payments data and use the data search tool on the website, and register at the Enterprise Portal (EIDM).


It is promising that CMS is yearly updating their data. Publishing outdated or incorrect data is not being transparent, but instead, can be considered to be unknowingly misleading.

As we have previously written, the push for transparency can have concerning ramifications for patients and physicians alike. Patients who rely on Open Payments data, and the doctors who serve those patients, deserve to, at the very least, have reliable information presented through the Open Payments website. We continue to advocate for life science companies and physicians keeping track of their reporting for Open Payments, to help cut down on the confusion for patients.

January 14, 2016

Health and Human Services Regulatory Agenda for 2016

The Department of Health and Human Services recently released their semi-annual regulatory agenda, a listing of rules the Department plans to issue in the foreseeable future. There are two separate lists, the shorter version in the Federal Register, and the lengthier version on the Office of Management and Budget website. Those on the Federal Register list are likely to affect a significant number of small entities.

This agenda focuses on HHS' six arcs for implementation of its strategic plan:

  • Leaving the Department Stronger;
  • Keeping People Healthy and Safe;
  • Reducing the Number of Uninsured and Providing Access to Affordable Quality Care;
  • Leading in Science and Innovation;
  • Delivering High Quality Care and Spending Out Health Care Dollars More Wisely; and
  • Ensuring the Building Blocks for Success at Every Stage of Life.

Below is a summary of some of the proposed and final rules by both the Centers for Medicare and Medicaid Services (CMS) and the Food and Drug Administration (FDA).

Centers for Medicare and Medicaid Services (CMS)

  • Hospital and Critical Access Hospital (CAH) Changes to Promote Innovation, Flexibility, and Improvement in Patient Care (RIN 0938-AS21), a proposed rule addressing Medicare and Medicaid participation requirements. Estimated February 2016.


  • Medicare Clinical Diagnostic Laboratory Test Payment System (RIN 0938-AS33), a final rule implementing the Protecting Access to Medicare Act of 2014, requiring Medicare payment for clinical laboratory tests to be based on private payor rates beginning January 1, 2017.


  • Merit-Based Incentive Payment System (MIPS) and Alternative Payment Models (APMs) in Medicare Fee-for-Service (RIN 0938-AS69), a proposed rule implementing the physician payment reforms that are part of the Medicare Access and CHIP Reauthorization Act (MACRA). The MACRA deadline for establishing physician-focused payment model criteria is November 1, 2016, the statutory deadline to establish MIPS policies is January 1, 2017, and the CMS proposed rule target date is March 2016.


  • Covered Outpatient Drugs (RIN 0938-AQ41), a final rule addressing several Affordable Care Act provisions, including requirements related to covered outpatient drugs and key aspects of Medicaid coverage, payment, and drug rebate programs. November 2015 target date.


  • Reform of Requirements for Long-Term Care Facilities (RIN 0938-AR61), a final rule with an update of Medicare and Medicaid participation requirements to reflect substantial advances that have been made in the theory and practice of service delivery and safety. September 2016 target date.


  • Home Health Agency Conditions of Participation (RIN 0938-AG81), a final rule that started with the Notice of Proposed Rulemaking in March 1997. The final rule focuses on the actual care delivered to patients and allows home health agencies a greater flexibility in meeting quality standards. October 2017 target date.


  • Emergency Preparedness Requirements for Medicare and Medicaid Participating Providers and Suppliers (RIN 0938-AO91), a final rule establishing emergency preparedness requirements to ensure providers and suppliers are adequately prepared to meet the needs of patients, residents, clients, and participants during disasters and emergency situations. December 2016 target date.

Food and Drug Administration (FDA)

  • Format and Content of Reports Intended to Demonstrate Substantial Equivalence (RIN 0910-AG96), July 2016 target date.


  • Investigational New Drug Application Annual Reporting (0910-AH07), a proposed rule revising the requirements of annual reports submitted to INDAs by replacing the current annual reporting requirement with a requirement that is generally consistent with the format, content, and timing submission of the development safety update report devised by the ICH. October 2016 target date.


  • Requirements for Foreign and Domestic Establishment Registration and Listing for Human Drugs (RIN 0910-AA49), a final rule set to reorganize, consolidate, clarify, and modify current regulations concerning who must register establishments and list human drugs and animal drugs. Target date April 2016.


  • Abbreviated New Drug Applications and 505(b)(2) (RIN 0910-AF97), a final rule that would make procedural changes to generic drug applications and patent certifications. August 2016 target date.


  • Electronic Distribution of Prescribing Information for Human Prescription Drugs Including Biological Products (RIN 0910-AG18), a final rule that would require electronic package inserts for human drug and biological prescription products with limited exceptions. October 2016 target date.


  • Human Subject Protection; Acceptance of Data From Clinical Investigations for Medical Devices (RIN 0910-AG48), a final rule that will amend the FDA's regulations on acceptance of data for medical devices to require that clinical investigations submitted are conducted in accordance with good clinical practice when conducted inside the United States. Target date May 2016.


  • Regulations on Human Drug Compounding under Sections 503A and 503B of the Federal Food, Drug, and Cosmetic Act (RIN 0910-AH10), a proposed rule that will define and implement statutory conditions under which compounded products may qualify for exemptions from certain requirements. December 2016 target date. 


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