CMS Proposed Rule to Delay Effective Date of Amended Regulatory Definitions under the Medicaid Drug Rebate Program – Lexology

On Friday, May 28, 2021 the Centers for Medicare & Medicaid Services (“CMS”) published a Proposed Rule that would delay the effective dates of certain amended regulatory definitions under the Medicaid Drug Rebate Program (“MDRP”) from a Final Rule published on December 31, 2020 and an interim final rule with comment period (“IFC”) published on November 25, 2019.


Under the MDRP, in exchange for Medicaid’s coverage of a manufacturer’s drugs, a manufacturer must pay rebates that ensure state Medicaid programs receive the “best price” for drugs. 42 U.S.C. § 1396r-8. The “best price” is the lowest price offered by the manufacturer for a drug to most purchasers, including “any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity,” (with certain exceptions). See 42 U.S.C. §1396r-8(c)(1)(C); 42 C.F.R. §447.505. The MDRP imposes drug price reporting obligations on manufacturers pursuant to the “best price” requirement.

On December 31, 2020, CMS issued a Final Rule which modified the MDRP regulations to offer flexibility for states to enter into innovative value-based purchasing (“VBP”) arrangements with drug manufacturers for new and innovative therapies in order to align pricing and/or payments with clinical or therapeutic outcomes. The Final Rule allows drug manufacturers to report a range of prices offered through VBP arrangements under the “best price” reporting requirement. Specifically, the Final Rule expands the definition of “best price” to state that a lowest price available from a manufacturer may include varying price