• Medicaid Rebates: CMS Releases The Long-Anticipated Proposed AMP Rule
  • January 31, 2012 | Authors: John Gould; Jeffrey L. Handwerker; Kristin Hicks; Rosemary Maxwell
  • Law Firm: Arnold & Porter LLP - Washington Office
  • The Patient Protection and Affordable Care Act, as amended (PPACA), made major changes in the methodology for determining Medicaid rebates that pose operational challenges and compliance risks for manufacturers. Effective October 1, 2010, PPACA changed the definition of the Average Manufacturer Price (AMP), which is a key driver of pharmaceutical manufacturers’ rebate liability. Effective December 15, 2010, the Centers for Medicare and Medicaid Services (CMS) withdrew most of the pre-PPACA AMP regulations, but directed manufacturers to comply with PPACA.1 Since then, manufacturers have been calculating AMPs in a “regulatory vacuum,” making reasonable assumptions in areas where the statute is ambiguous or silent. On January 27, 2012, CMS released a proposed rule to interpret and implement the new statutory provisions on AMP.2 In addition to defining AMP, the new rule proposes changes to CMS’ Best Price regulations, and adds new provisions on the calculation of Medicaid rebates and Medicaid drug reimbursement amounts. After providing a brief background, this advisory summarizes the key changes proposed in the rule relating to: (a) calculation of AMP for standard drugs; (b) calculation of AMP for so-called “5i” drugs; (c) determination of Best Price; (d) identification of so-called “new formulations” and calculation of the unit rebate amount (URA) for such drugs; and (e) issues relating to Medicaid reimbursement. CMS will accept comments on this proposed rule through April 2, 2012. Given the number of important issues addressed and the proposals that CMS has made, it will be important for pharmaceutical companies to submit comments on the proposed rule. www.arnoldporter.com