Medicare Coverage Gap Discount Program Guidance Beginning in 2011
Patient Protection and Affordable Care Act (PPACA)
On April 30, 2010, the Centers for Medicare and Medicaid (CMS) released its draft guidance memorandum implementing §3301 of the Patient Protection and Affordable Care Act (PPACA), as amended by §1101 of the Health Care and Education Reconciliation Act of 2010. CMS issued this draft guidance for public comment through close of business on May 14, 2010. Comments should be directed to firstname.lastname@example.org. CMS will issue final guidance after considering all public comments.
The PPACA implements a Part D coverage gap program. The program is designed to help defray the Medicare beneficiary drug costs once they reach the Part D doughnut hole, i.e. coverage gap. The law requires that manufacturers of drugs and biologics provide financial assistance to Medicare beneficiaries that reach the coverage gap through discounts on the negotiated prices for drugs and biologics. As these discounts will be provided at point of sale, the manufacturer discounts will count towards the Medicare patient’s true-out-of-pocket (TrOOP) costs.
Effective January 1, 2011, the Discount Program will make manufacturer discounts available to applicable Medicare beneficiaries receiving applicable covered Part D drugs while in the coverage gap. In general, the discount on each applicable covered Part D drug is fifty (50) percent of an amount equal to the negotiated price. With the exception of 2011 due to unresolved process glitches and only under CMS discretion, a Part D drug will only be covered under Part D if the manufacturer has a signed agreement with CMS to provide the discount on coverage gap claims for all of its applicable drugs and remains compliant with the terms of that agreement. In the final rule, CMS will provide sample coverage gap agreements for use by Part D plans and manufacturers.
Discount Program Management
CMS will coordinate the collection of discount payments from manufacturers and payment to Part D sponsors that provided the discount to applicable beneficiaries through a contractor. This coordination will involve a standard process for paying Part D sponsors based on new information submitted to CMS.
The CMS contractor(s) will invoice each manufacturer quarterly on the behalf of Part D sponsors.
Each manufacturer will be invoiced for the aggregate manufacturer discount amounts reported on the prescription drug event (PDE) records submitted to CMS during the applicable quarter
The invoices will be itemized at either the 9 digit or 11 digit NDC level as determined by CMS. Manufacturers will be required to pay the invoiced amounts to Part D sponsors directly
Manufacturers must pay the entire invoiced amount within 15 days or receipt including any amounts in dispute.
CMS specifically requests comments on this proposed approach for manufacturer payments.
The deadline for establishing a rebate agreement with CMS is November 1, 2010. “CMS is considering a range of options for those manufacturers that fail to solicit an agreement for 2011. CMS expects that under its final guidance all manufacturers will enter into rebate agreements for 2011.”
Beginning January 1, 2011, Part D coverage will be limited only to those Part D drugs of manufacturers that have:
Agreed to participate in the Discount Program (All covered Part D drugs must be covered under a manufacturer discount agreement with CMS for coverage to be available under Part D);
Entered into and have in effect an agreement with CMS to pay the discounts under the Discount Program; and
Entered into and have in effect a contract with CMS’ Part D prescription drug plan (PDP) or Medicare Advantage prescription drug (MA PD)contractor.
CMS will maintain an updated list of the labeler codes (first five digits of a drug product’s 11 digit NDC) that are covered by the manufacturer discount agreements, distribute the list to Part D sponsors and post the list on the CMS website.
Manufacturers will provide a discount for “applicable drugs” with respect to “applicable beneficiaries.”
An applicable drug is:
A covered Part D drug that is either approved under a new drug application (NDA) under section 505(b) of the Federal Food, Drug, and Cosmetic Act or, in the case of a biologic product, licensed under section 351 of the Public Health Service Act (BLA); or,
Covered Part D drugs covered by a Part D sponsor under transition and emergency fill policies.
CMS will inform Part D sponsors if any Part D drug not covered by a manufacturer agreement has been determined to be essential for the health of Part D enrollees and exempt from the manufacturer agreement requirement.
Drugs excluded from Part D under section 1860D-2(e)(2)(A) are not applicable drugs subject to an applicable discount even if covered by the Part D sponsor under an enhanced benefit.
This draft guidance defines an “applicable beneficiary” as an individual who, on the date of dispensing a covered Parr D drug is:
Enrolled in a prescription drug plan of MA-PD plan
Not enrolled in a qualified retiree prescription drug plan
Not entitled to an income-related subsidy
In the Part D coverage gap, i.e. doughnut hole and not exceed their TrOOP costs
Reporting and EOB Form Changes
In order to capture the point of sale discount information, CMS will require changes to the Drug Data Processing System (DDPS). Although all Part D contractors must update their processing systems to comply with changes to the DDPS, these changes will not affect the Part D contractor bid submissions. All entries to DDPS translate to CMS prescription drug event (PDE) which is the patient specific reporting mechanism that tracks all patient activity related to Part D and issues the patient explanation of benefits (EOB).
The 2011 model EOB will provide detail on the amount of the monthly prescription drug costs funded by the manufacturers through the Discount Program to provide transparency to the beneficiary.
Healthcare reform continues to change the payor landscape. It is likely that changes to the payor landscape will tangentially affect manufacturer business models and contracting. The Aequitas Group continues to monitor healthcare reform, as well as changes to the Federal payors. We would be happy to help you understand the impact of the above changes on your business. Please feel free to contact me if you have any questions.
 Manufacturers should understand that failure to execute the appropriate coverage gap agreements will likely result in elimination of their products from Medicare Part D formularies.
 It is likely that the function of this contractor will be to reconcile coverage gap reporting and manufacturer billings. CMS will probably contract this function to an entity outside the current PDP and MA PD group of contractors.
 As part of the Part D payment and reconciliation process, reconciled discount program payments will be subject to the reopening and appeals provisions in 42 CFR 423.346 and 42 CFR 423.350.
 Medicare Coverage Gap Discount Program beginning in 2011, April 30, 2010.
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