The Medicare system proposed by the Biden administration to verify negotiated drug prices reach eligible individuals is generating concerns about compliance and operational challenges for manufacturers and dispensing entities.
The Centers for Medicare & Medicaid Services (CMS) continues to swiftly roll out its drug price negotiation program after publishing a draft guidance earlier this month for the next cycle of its price-setting scheme. The plan, created under the Inflation Reduction Act, is expected to lower the costs of 10 Medicare Part D drugs as of 2026 and another 15 drugs in 2027.
The guidance introduced new details on the implementation of the maximum fair price (MFP) of selected drugs and the use of a Medicare transaction facilitator (MTF) to streamline the exchange of data and payments among pharmaceutical supply chain entities to verify drug prices are dispensed to eligible individuals.
The agency is asking the public to weigh in on the guidance by July 2, but feedback already is underscoring the slew of responsibilities handed to drugmakers and dispensing entities, such as pharmacies, to carry out the drug’s maximum fair price.
“The prior finalized guidance from last year had left open a bunch of questions that were to be addressed in this next round. It was really important that all of those issues were addressed in this round because the clock is ticking,” said William Sarraille, a veteran pharmaceutical defense lawyer, now a regulatory consultant at Saraille & Associates.
But the guidance “pulls back from significant portions of what needs to be done and sort of dumps those critical activities on manufacturers, covered entities, contract pharmacies, and the rest of the players in the distribution channel,” Sarraille said. “That’s really unfortunate. It may suggest that the start of this program might be very bumpy, very rocky.”
Manufacturers must comply with requirements such as following a prompt payment window, recording and documenting claims, and avoiding duplicate discounts that may occur between the maximum fair price and the federal 340B Drug Pricing Program—all of which could be subject to a dispute process or civil monetary penalties if not properly executed.
The CMS did not respond to a request for comment in time for publication.
Data, Payment Facilitation
The facilitator’s primary focus is to collect and send claim-level data to manufacturers and receive payment information from manufacturers. The CMS proposes drugmaker participation for the MTF data exchange is mandatory to verify that the drug’s price was carried out in each instance.
But drugmakers “may need to invest in new systems, enhance coordination with dispensing entities and other manufacturers, and navigate complex regulatory requirements to ensure compliance and avoid penalties,” said Eliza Biedziak, senior manager in the forensic and integrity services at Ernst & Young LLP.
Manufacturers are also up against the “complexities of receiving and processing claim-level data elements, conducting secure data exchanges, calculating accurate refunds, and maintaining compliance with statutory obligations,” Biedziak said in an email.
The agency requires drugmakers to meet a “14-day prompt MFP payment window” for executing the MFP refund for each claim. Manufacturers may be liable for civil monetary penalties if the price is not available to a dispensing entity or if the report with payment-related data is not provided to the facilitator within that window.
That window period may also pose as a concern for dispensing entities because the “true-up” payment a manufacturer pays a pharmacy to fulfill their obligation to make the MFP available to dispensers “could actually be much longer than 14 days,” said Ronna Hauser, senior vice president of policy and pharmacy affairs for the National Community Pharmacists Association.
“We’re very concerned about floating this program” because “manufacturer refund payments could take up to four to six weeks to arrive in pharmacies,” Hauser said.
“Providing patient care and counseling for these drugs is very important, and we want to make sure patients are getting the benefit of using these drugs. We have to remain a viable partner in dispensing these drugs,” she said.
NCPA represents over 19,000 independent pharmacies, which feeds into the thousands of other dispensing entities and providers that distribute Part D drugs.
The CMS also seeks comments on using the MTF as a voluntary payment facilitator to address the “lack of connection” between manufacturers and dispensing entities.
The agency weighs two payment options: the first requires the MTF to collect dispensing entities’ banking information and provide it to manufacturers, and the second option requires the MTF to receive aggregated refund amounts from manufacturers and pass them through to dispensing entities.
The Pharmaceutical Research and Manufacturers of America, a top drugmaker industry group, said it welcomes the opportunity to provide input on the guidance.
“We appreciate the consideration CMS is giving to operationalizing the maximum fair price,” said Nicole Longo, deputy vice president of public affairs for PhRMA. “The proposal to use a Medicare Transaction Facilitator to help with the exchange of data and as an option to facilitate access to the maximum fair price is a step in the right direction.”
Avoiding Duplicate Discounts
Section 340B of the Public Health Service Act requires drugmakers to discount drugs for qualifying providers that treat low-income and uninsured patients. Under the plan, eligible health-care organizations can receive certain drugs at discounted prices from manufacturers.
The 340B statute prohibits duplicate discounts.
Drugmakers are required to provide access of the MFP to 340B covered entities in a nonduplicated amount to the 340B ceiling price if the MFP is lower than the 340B ceiling price for the selected drug.
The agency said it won’t assume responsibility for “deduplicating” discounts, and it is handing that task to the drugmakers. The CMS intends to provide “a process to identify applicable 340B eligible claims through the reporting of payment elements to the MTF.” The eligible claims can be voluntarily supplied by a dispensing entity.
The voluntary nature of providing 340B claims, though, “will pose a significant challenge for the manufacturers to identify 340B claims, and they will be at risk to possibly extend double discounts via MFP and 340B,” Biedziak said. “The current framework requires manufacturers to validate 340B claims and ensure compliance with pricing obligations yet does not equip them with the necessary data to efficiently identify 340B utilization.”
If it is later determined that the MFP of a drug was provided to a 340B-eligible individual and the 340B ceiling price is lower, manufacturers must promptly refund the difference to the 340B covered entity.
“We think the objective is entirely reasonable—duplicate and cumulative discounts not be part of the system moving forward,” said Mark E. Miller, executive vice president of health care for Arnold Ventures. “CMS has created a transition system, and manufacturers will be required to utilize it in order to properly litigate these discounts.”
For a more detailed exploration of the concerns and additional perspectives, see the full article on Bloomberg Law.