Manufacturers wondering how to define inhalation, infusion, instilled, implanted and injectable drugs – known as the “5i drugs” – that are not generally dispensed through retail pharmacies will find a detailed answer in CMS’ proposed rule for Medicaid covered outpatient drugs published in the Feb. 2 Federal Register.

In addressing submission of average manufacturer price data for 5i drugs, CMS says it plans to rely on FDA’s routes of administration list for guidance in determining which drugs fall in the 5i category. As for defining “not generally dispensed” through a retail pharmacy, CMS is proposing to stipulate that if 90% or more of a manufacturer’s sales for a drug are to other than retail community pharmacies during a given period, then the drug would be classified as “not generally dispensed” through a retail pharmacy for the purposes of submitting AMP data.

Since the Affordable Care Act specified that the calculation of average manufacturer prices should be based on prices paid by retail community pharmacies, such a definition could have meant the 5i drugs, which are often not dispensed through retail community pharmacies, would not have AMPs. However, Congress mandated in follow-up legislation that manufacturers would also need to calculate AMP for the 5i drugs not generally dispensed through retail community pharmacies Also see "Medicare And Medicaid In Brief" - Pink Sheet, 30 August, 2010..

Manufacturers are required to submit accurate AMP data to CMS, which it uses as the basis for determining manufacturer rebates for drugs used in Medicaid as well as the basis for determining reimbursement to pharmacies for generic drugs dispensed to Medicaid enrollees. ACA revised the calculation of AMP and changed drug rebates; those provisions are defined and implemented in the proposed rule.

[Editor’s note: For additional coverage of the contents of the Medicaid drug proposed rule, see our previous stories in “The Pink Sheet” DAILY – Also see "AMP Rule Tells Manufacturers To “Make Reasonable Assumptions” In Determining Fair Market Value For Service Fees" - Pink Sheet, 31 January, 2012., Also see "CMS Expands Meaning Of “Retail Community Pharmacy” In AMP Rule" - Pink Sheet, 30 January, 2012., Also see "CMS’ Long-Awaited AMP Rule Seeks To Clarify Uncertainties In Affordable Care Act’s Definition" - Pink Sheet, 27 January, 2012..]

In the proposed rule, CMS notes that there are four main issues in need of clarification on the topic of 5i drugs: identification of 5i drugs; clarification of the term “not generally dispensed”; determination of sales, discounts and rebates included in the 5i calculation; and identification of dispensing entities other than retail community pharmacies included in the definition.

CMS received requests from manufacturers and pharmacies seeking guidance specifically on how to interpret “not generally dispensed through a retail pharmacy” and how to identify 5i drugs.

After considering different options for defining 5i drugs, CMS is proposing to use as a guide FDA's routes of administration list, which is found on FDA’s website. The list includes 104 routes of administration that fall within the various 5i categories. CMS is seeking comments on this approach, “including other FDA routes of administration that could be used to identify 5i drugs that are not reflected on the provided list.”

The 90% Principle

As for “not generally dispensed,” CMS is adapting a definition used in a different context from the draft “Amended Master Agreement” between the Department of Veterans Affairs and drug firms. CMS notes that manufacturers, pharmacies and their respective associations have repeatedly referred to this agreement when requesting guidance on the 5i issue.

VA has a “90% principle” that guides manufacturers in determining if a buyer is considered a wholesaler for the purposes of calculating non-federal average manufacturer price (non-FAMP) for drugs. CMS proposes to adapt this 90% principle to the context of determining if a drug is not generally dispensed through a retail community pharmacy.

The proposed rule states that “for 5i drugs, our understanding of the 90% principle would be that if 90% or more of the manufacturer’s sales for the respective drug were to an entity other than a wholesaler for distribution to retail community pharmacies or retail community pharmacies that purchase drugs directly from the manufacturer, then the drug would be classified as ‘not generally dispensed’ through a retail community pharmacy.” For those drugs meeting the 90% threshold, manufacturers would need to submit AMP data based on the pricing available to the entities listed below.

CMS explains that it believes providing a quantitative method would be preferable to a more qualitative drug-specific approach “as it provides a more definitive meaning” to the term “not generally dispensed.” It adds that it has some concerns about whether the 90% threshold is reasonable “because it might result in a portion of drugs eligible for the 5i alternate AMP calculation to be omitted from AMP because the percentage of sales required to classify a drug as ‘not generally dispensed through a retail community pharmacy may be too high.”

Furthermore, since manufacturers are responsible for reporting AMP on a monthly and quarterly basis, the determination of a 5i drug’s status as “not generally dispensed” through a retail pharmacy will need to be evaluated on a monthly and quarterly basis.

CMS asks for comments on its approach, including whether it should consider other options for quantitative thresholds, such as 75% or 50%, and why those options would be appropriate. It also seeks comments on whether manufacturers should evaluate a drug’s status on a monthly or quarterly basis.

Calculating AMP For 5i Drugs Not Generally Dispensed At Retail Pharmacies

Under the proposed rule, AMP for 5i drugs considered not generally dispensed by a retail pharmacy will include all sales, rebates, discounts or other financial transactions proposed for the determination of AMP sold through retail community pharmacies as well as the sales, rebates, etc., provided to the following non-retail pharmacy entities:

Direct sales to physicians.
Sales to pharmacy benefit managers, including their mail-order pharmacy purchases.
Sales to HMOs, including MCOs.
Sales, discounts or rebates paid directly to insurers.
Sales to hospitals.
Sales to clinics and outpatient facilities.
Sales to mail-order pharmacies.
Sales to long-term care providers.
Sales to hospices.
Sales to other manufacturers who conduct business as wholesalers or retail community pharmacies.

AMP Rule Answers Questions On Collecting Pricing Data For “5i” Specialty Drugs Raised By Manufacturers

More from United States

More from North America