CHA News Article

CMS Issues Medicaid Outpatient Covered Drugs Final Rule
Rule to take effect April 1

The Centers for Medicare & Medicaid Services (CMS) has issued the attached final rule implementing reforms to the rebate and reimbursement systems for Medicaid prescription drugs, as required by the Affordable Care Act (ACA). CMS estimates the final rule, which is intended to address the rising cost of prescription drugs, will save federal and state governments $2.7 billion over five years. The final rule creates a regulatory definition for Average Manufacturer Price, which is the program’s key metric for determining manufacturer rebates and pharmacy reimbursement for certain generic drugs that are subject to the federal upper limit (FUL). The final rule updates the FUL formula for the payment of certain generic drugs, which is intended to create an incentive for pharmacies to utilize generic drugs. The final rule also implements an ACA provision extending rebates to covered outpatient drugs provided to beneficiaries enrolled in Medicaid managed care organizations. 

Additionally, the rule requires states to specify in a Medicaid state plan that reimbursement methods to pharmacies that buy drugs through the federal supply schedule and the 340B drug discount program are consistent with actual acquisition cost requirements. The final rule is effective April 1; state Medicaid agencies must comply with the rule and submit a state plan that will be effective in April 2017. A fact sheet is available on CMS’ website.

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