Legal Matters

HHS Tightens Scrutiny of Compliance With Medicaid Drug Rebate Program Regulations (Part 3 of 6)

From Drug Benefit Trends®Posted 02/12/2004

By Diane Ung, JD; George Kenny, JD


Manufacturer Reporting and Record-Keeping Requirements

Under the rebate agreement, the manufacturer is subject to various reporting requirements. Among them, the manufacturer must submit to CMS on a quarterly basis a list of all of the manufacturer's outpatient drugs, and the corresponding AMP and best price for each drug.

On September 19, 1995, CMS published a proposed rule that introduced additional requirements states and pharmaceutical manufacturers must meet in order to participate in the MDRP.[5] CMS published a final rule with a comment period on August 29, 2003, which finalized 2 provisions of the 1995 proposed rule, announced the intention of CMS to continue its efforts to finalize all drug rebate regulations, and responded to comments received regarding the administration of the MDRP for states and manufacturers.[6]

The 2 finalized provisions relate to the timeliness of reporting revised drug pricing data and the retention of pricing data. The first requires pharmaceutical manufacturers to report any revised drug pricing data within 3 years, whereas previously, a manufacturer could revise its data without any time restriction. Starting in 2004, manufacturers have only 12 quarters (3 years) from the quarter in which the data was originally due to submit any revisions.[7] CMS believes that the 3-year limit will provide pharmaceutical manufacturers a sufficient window to collect, calculate, and submit any changes to pricing data resulting from updated sales data or changes in the methodology used to establish AMP or best price. The 3-year limitation is intended to streamline the calculation and collection of drug rebates by eliminating the states' need to reopen accounts that are more than 3 years old. Because changes in pricing data often result in changes to the rebates due from the manufacturer, the time limit will enable states to track and report their Med icaid expenditures more accurately.

Under the second finalized provision, pharmaceutical manufacturers in most cases will only be required to retain drug pricing data for 3 years. Absent this regulatory requirement, manufacturers were, in effect, required to retain pricing data indefinitely. Starting in 2004, manufacturers will be able to close their books within reasonable timeframes, thereby easing record-keeping burdens associated with participation in MDRPs.[8] The exceptions to this retention rule are when the records are the subject of an audit or government investigation (of which the manufacturer is aware) related to reported AMP or best price data, or in cases in which the audit findings or investigations have not yet been resolved. Under such circumstances, a manufacturer will be required to retain the relevant records beyond the 3-year period.

CMS initially stated that the requirements would be effective October 1, 2003. However, in a subsequent correction to the final rule, CMS delayed implementation of these new data and record-keeping requirements until January 1, 2004.[9]


Drug Benefit Trends 16(1):16-18, 2004. © 2004 Cliggott Publishing, Division of CMP Healthcare Media

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