CMS Publishes Implementation Date for Generic Inflation Penalty System Changes in DDR

| July 10, 2017                               

On Tuesday, June 20, 2017, the Centers for Medicare and Medicaid Services (CMS) sent an email to announce that the Drug Data Reporting (DDR)  for Medicaid system changes, related to the Bipartisan Budget Act of 2015 (BBA ’15) amended section 1927(c)(3) of the Social Security Act are now complete and were implemented on June 23, 2017.

CMS previously distributed an email on February 16, 2017, entitled Operational Guidance on Generic Inflation Penalty (login required), to provide clarity regarding the way they intended to operationalize the non-innovator multiple source (N) drug additional rebate requirements and provide operational guidance to manufacturers in order to implement any corresponding changes that relate to the BBA ’15. CMS expected to implement these system changes prior to calculating 1Q2017 URAs, however, on April 14, 2017, an email was sent to notify manufacturers of a temporary delay in implementation.

CMS noted a few important topics in their June 20, 2017 email that include:

  • DDR Changes: once the system changes are implemented you will see two new product data fields on the Manage Products screen in DDR: BBA’15 Base AMP Quarter and BBA’15 Base AMP. For N drugs, the BBA’15 Base AMP Quarter will be auto-populated and WILL NOT require labeler certification. The DDR system will also auto-populate the BBA’15 Base AMP field, using the labeler-reported quarterly pricing record in accordance with each NDC’s Market Date. These automatically populated BBA’15 Base AMP values WILL require labeler certification.
  • Accuracy of Market Date: CMS places major emphasis on the importance around accurate market date reporting within the DDR in their recent communication.  Prior to implementation of BBA’15, the “Market Date” for an N drug was defined as the date on which a drug was first marketed under a manufacturer’s rebate agreement. This definition resulted in manufacturers reporting a drug’s actual Market Date, however, for drugs that are purchased from another company, it could result in a purchasing company reporting the date on which they began marketing the drug under their labeler code, rather than the date the drug was first marketed by the original manufacturer. CMS further clarifies that for N drugs approved under an ANDA (i.e. COD status 01), the Market Date should be reported as the earliest date on which a drug was marketed under the ANDA by any labeler, or 9/30/1990, whichever is most recent.  For all other N drugs, the Market Date should be reported as the earliest date on which the drug was marketed by any labeler. With the implementation of the N drug additional rebate requirements, accurate Market Date reporting is imperative.

In the June 20 email, CMS specifically addresses findings from their recent review of DDR by stating the following: “A recent review of N drugs within the Medicaid Drug Rebate (MDR) system has identified many NDCs with a reported Market Date and Purchased Product Date that fall on the same day.  In most cases, these Market Dates are probably incorrect, as they may not reflect the date on which the drug was first marketed by the original manufacturer.  Consequently, these incorrect Market Dates could lead to the establishment of an incorrect BBA ’15 Base AMP.  Therefore, manufacturers of N drugs that have already been reported in DDR should review each NDC to ensure that the originally reported Market Date is accurate.  As a reminder, once certified, a Market Date that is more than 3 years in the past may not be changed without CMS review and approval.  If a manufacturer identifies a Market Date that needs to be changed and the date is more than 3 years in the past, please send an email to rxdrugpolicy@cms.hhs.gov to request the change.  Finally, as provided in Manufacturer Releases #90 and #101, manufacturers that purchase or otherwise acquire drugs from other manufacturers should be sure to obtain all necessary baseline information, including (but not limited to) the Market Date and the appropriate Base AMP value, from the selling company at the time of a drug’s purchase so that it can be reported as part of the drug’s product data in DDR.”

“Example: Company A was the first company to market an N drug under ANDA 12345 on 07/10/2010. On 12/14/2019, company B begins to market an N drug under ANDA 12345.  When reporting the NDC to CMS via DDR, company B should report the original Market Date of 07/10/2010 in the Market Date field along with the appropriate Base AMP value obtained from Company A, and report a value of 12/14/2019 in the Purchased Product Date (PPD) field.  This will ensure that an accurate BBA ’15 Base AMP is established for company B’s drug, and also that DDR does not expect quarterly pricing to be reported for the purchased drug for quarters earlier than 4Q2019.”

  • Impact on 1Q2017 Unit Rebate Amounts (URAs): due to the temporary delay in the implementation of the DDR system changes, the 1Q2017 URAs that CMS calculated for N drugs, reported in DDR and provided to states, did not include the new additional rebate portion of the calculation. Therefore, the 1Q2017 state rebates will only reflect the basic rebate amount for N drugs. Per the terms of the National Drug Rebate Agreement, labelers are responsible for calculating the URAs. Labelers are expected to correctly calculate 1Q2017 URAs for N drugs to include both the basic and the additional rebate amounts. These 1Q2017 URAs will be verified by state rebate invoices at the same time that the 2Q2017 URAs are calculated and the recalculated 1Q2017 URAs will be included as Prior Period Adjustments on the 2Q2017 state rebate files.
  • Establishing a Base AMP for Drugs that have had both an S/I and N drug category: in addition to the exception scenarios that CMS posted with their original guidance, this category was added to the recent notification. There are some drugs that are classified with a drug category of S/I for a period of time and as a drug category of N for another period of time. In this instance, the NDC will have one or more Base AMPs for the time the drug category was an S/I and also a BBA’15 Base AMP for the period the drug was classified as a category N (as long as the drug is classified as an N for at least one quarter in 1Q2017 or later). If an NDC falls into this category, the drugs reported Market Date will always define the quarterly AMP used to establish each Base AMP, as set forth in Section 1928(c)(2) and (3) of the Social Security Act.

CMS encourages manufacturers to send any questions related to these system changes to mdoperations@cms.hhs.gov.

For a summary of the operational guidance that was previously provided, please read the following blog, CMS publishes operational guidance on Generic Inflation Penalty that was published March 13, 2017.

Kaelyn Buck

Kaelyn Buck

As a Government Operations Lead, Kaelyn provides support services to pharmaceutical and biotechnological companies for compliance with complex federal and state government programs. She is an experienced professional with over 8 years of accounting experience, including over 6 years of compliance ...