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Federal Register / Vol. 86, No. 221 / Friday, November 19, 2021 / Rules and Regulations C. Proposed Delay of Inclusion Date of U.S. Territories in Amended Regulatory Definitions of States and United States The Covered Outpatient Drug COD
final rule, published in the February 1, 2016 Federal Register 81 FR 5170, amended the regulatory definitions of States and United States to include the U.S. territories American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands for the purposes of the MDRP with a delayed effective date of April 1, 2017. We stated in the preamble to the final rule that U.S. territories may use existing waiver authority to elect not to participate in the MDRP consistent with the statutory waiver standards. Specifically, the Northern Mariana Islands and American Samoa may seek to opt out of participation under the broad waiver that has been granted to them in accordance with section 1902j of the Social Security Act the Act. Puerto Rico, the Virgin Islands, and Guam may use waiver authority under section 1115
of the Act to waive section 1902a54
of the Act, which requires state compliance with the applicable requirements of section 1927 of the Act 81 FR 5203 through 5204.
The change to the definition of States and United States under the COD final rule to include the territories would also impact the quarterly calculation of average manufacturer price AMP and best price by manufacturers. That is, the change requires manufacturers to include prices paid by entities in the U.S. territories in the same manner in which they include prices paid by entities located in one of the 50 states and District of Columbia 81 FR 5224 in AMP and best price. It requires manufacturers to include eligible sales and associated discounts, rebates, and other financial transactions that take place in the U.S. territories in their calculations of AMP and best price once the revised definitions of States and United States take effect, regardless of whether the U.S. territories seek to waive participation in the MDRP.
Once the COD final rule became effective, CMS began discussions with the territories regarding their participation in the MDRP. Based on those discussions, it became evident that interested territories would not be ready to participate in the MDRP by April 1, 2017. Stakeholders also reiterated the concerns in the comments to the COD final rule 81 FR 5224 that drug manufacturers will likely need to increase drug prices paid by U.S.
territory Medicaid programs once the
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territories are included in the definitions of States and United States to avoid setting a new, lower best price. That is because if prices for drugs in the territories are lower than those in the states, then those prices could become the Medicaid best price for that drug in the entire Medicaid program. The manufacturers may then increase their drug prices in the territories to avoid this outcome, and an increase in drug prices in the territories could result in an increase in territory Medicaid drug spending without the offsetting benefit of receiving Medicaid rebates. Furthermore, the increase in Medicaid drug spending could adversely impact the availability of drugs to patients in the territories because of their Medicaid funding cap.
As a result of these initial and subsequent discussions on preparedness, the potential for increased Medicaid drug prices in certain territories, and later, due to additional impacts of natural disasters in several of the territories, CMS issued two interim final rules with comment period IFC to further delay the effective date for including the U.S.
territories in the regulatory definitions of States and United States for purposes of the MDRP. The first, the Medicaid Program; Covered Outpatient Drug; Delay in Change in Definitions of States and United States IFC, was issued on November 15, 2016, amending the regulatory definitions of States and United States to include the U.S.
territories beginning April 1, 2020, rather than to April 1, 2017 81 FR
80003. The second, the Medicaid Program; Covered Outpatient Drug;
Further Delay of Inclusion of Territories in Definitions of States and United States IFC, was published on November 25, 2019, and further delayed the inclusion date for amending the regulatory definitions of States and United States to include the U.S.
territories to April 1, 2022, rather than April 1, 2020 84 FR 64783.
For similar reasons, in addition to ensuring continued beneficiary access and quality of care protections, we proposed to amend 42 CFR 447.502 to delay the April 1, 2022 inclusion date for the amended regulatory definitions of States and United States to April 1, 2024, and sought public comment on the proposed delay. In the alternative, we proposed to finalize an earlier inclusion date, but no earlier than January 1, 2023, based on public comments received. We explained in the proposed rule that we believe an additional delay of 2 years may be warranted because it would allow the territories to focus their human and
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financial resources on ensuring the health and well-being of their beneficiaries during this PHE, rather than having to divert those resources to the development of systems required to participate in the MDRP, which can take several years to implement from start to finish, and sought public comments on the proposal.
As discussed in the proposed rule, we believe that in light of the pandemic and the resource demands stemming from the PHE including those established under the ARP on the Medicaid program and its beneficiaries, it is imperative that the territories prioritize the Medicaid eligibility and mandatory benefit requirements brought about by the ARP to address beneficiary needs during the COVID19. Therefore, we believe that a further delay in the inclusion date of the U.S. territories in the regulatory definitions of States and United States is warranted and proposed an inclusion date beginning April 1, 2024. In the alternative, we proposed to finalize an inclusion date that may be earlier than April 1, 2024, but not before January 1, 2023, based on public comments received.
We explained in the proposed rule that by delaying the inclusion date to April 1, 2024, or in the alternative, a date earlier than April 1, 2024, but not before January 1, 2023, we are allowing the territories additional time to develop needed systems and policy changes, to avoid unintended increases in drug costs and access concerns. The needed systems must be capable of collecting, reporting, validating, and tracking drug utilization on an ongoing basis. In addition, they require extensive advance planning and budgeting.
The proposed delay in inclusion date would also benefit those territories that choose not to participate in the MDRP, which would be required to use human and financial resources that are currently focused on responding to the PHE to complete the section 1115 and section 1902j waiver applications that are required to waive out of MDRP
participation should the current April 1, 2022 date remain in effect.
Moreover, as explained in the proposed rule, should the amended regulatory definitions of States and United States go into effect on April 1, 2022, all manufacturers sales to the territories and prices paid will be included in the AMP and best price calculations at that time, regardless of whether the territory is participating in the MDRP. As discussed in the COD
final rule 81 FR 5224, we heard from various stakeholders who stated concerns that drug manufacturers would likely be prompted to increase drug
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