United States: OIG Technical Assistance On Part B Inflation Rebates Implementation Barriers And CMS' Proposed Solutions In Recent Part B Inflation Rebate Initial Guidance

Key Takeaways:

• On February 7, 2023, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published a report outlining administrative challenges the Centers for Medicare & Medicaid Services (CMS) may encounter in implementing and operationalizing the Part B inflation rebates, together with solutions to these challenges.
• While the OIG's solutions were not binding on CMS, many of the OIG's recommendations were reflected in CMS' initial guidance regarding implementation of the Part B inflation rebates issued on February 9, 2023.

Overview

On February 7, 2023, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published a report entitled, "Technical Assistance Brief: Implementation of Inflation-Indexed Rebates for Part B Drugs." OIG had issued three earlier reports projecting how much Medicare could save if manufacturers paid rebates for Part B drugs similar to those owed under Medicaid. Following the enactment of Part B inflation-indexed rebates in the Inflation Reduction Act of 2022 (IRA), OIG is providing the Centers for Medicare & Medicaid Services (CMS) technical assistance as it implements the process for drug manufacturers to pay quarterly rebates to HHS for certain Medicare Part B drugs and biologicals if the Part B drug payment rises more quickly than inflation.

Specifically, the report outlines the following administrative challenges CMS may encounter in implementing and operationalizing the Part B inflation rebates including, identifying: (1) products subject to inflation rebates; (2) units that would also be subject to the Medicaid Drug Rebate Program; and (3) units purchased at discount prices under the 340B Drug Pricing Program. OIG notes that the potential solutions in the report are not official recommendations to CMS, and are instead findings based on prior OIG evaluations.

Below is a brief summary of these administrative challenges and OIG's solutions. Additionally, we have included how CMS has proposed to address these challenges based on the agency's initial guidance regarding implementation of the Part B inflation rebates issued on February 9, 2023. Note that comments on CMS' initial guidance are due by March 11, 2023.

Identifying Products Subject to Part B Rebates

Challenge Identified by OIG: According to OIG, one challenge CMS may face is that a single Healthcare Common Procedure Coding System (HCPCS) code may represent drugs from multiple manufacturers.

Under the IRA, only single source drugs (including certain biosimilars) are subject to Part B rebates. Single source drugs are generally brand name products without generic versions. Medicare pays for Part B drugs at the HCPCS code level, which defines the name of the drug and the amount of the drug represented by one unit of the code. However, according to OIG, CMS may find it difficult to determine which manufacturers owe rebates in addition to the number of units and amount of rebates associated with each drug using only HCPCS codes. For example, five of the 60 Part B rebates OIG calculated in a past study using HCPCS codes represented two or more single source drugs produced by more than one manufacturer. OIG also stated that CMS will likely face challenges determining the rebate amount each manufacturer owes.

OIG's Solutions: To address these challenges, OIG first proposed that CMS require providers to include National Drug Codes (NDCs) on claims, allowing the agency to identify the number of units and rebate amount owed by each manufacturer. Historically, this requirement has helped state Medicaid agencies collect additional Medicaid rebates on physician-administered drugs. Alternatively, if CMS decides not to require providers to include NDCs on claims, OIG proposed that CMS develop a methodology to apportion the number of units and amount of each rebate to the applicable drug manufacturer. OIG also proposed that CMS base its calculation on each single source drug's Average Sales Price, which is a manufacturer's average price to all purchasers, subject to certain exclusions.

CMS' Proposed Solution: In CMS' initial guidance regarding implementation of the Part B inflation rebate, where there is more than one manufacturer of a Part B rebatable drug, CMS stated the agency's intent "to apportion financial responsibility for the rebate amount among the manufacturers by dividing the sum of the individual manufacturer's billing units sold during the rebate quarter for all NDCs of the manufacturer assigned to the HCPCS code (as reported in the ASP data submissions) by the sum of all manufacturers' billing units sold during the rebate quarter for all NDCs of the rebatable drug assigned to the HCPCS code (as reported in the ASP data submissions)." Specifically, for each NDC assigned to the HCPCS code, CMS would multiply the number of units that are reported by the manufacturer in its ASP reporting (at the NDC-11 level) by the number of HCPCS code billing units of the NDC-11 to identify the billing units sold during the rebate quarter. CMS is soliciting comments on this proposed process.

Identifying Units That Would Be Subject to Medicaid Drug Rebates

Challenge Identified by OIG: OIG also identified that CMS may find it difficult to identify units that would be subject to Medicaid drug rebates. The IRA requires CMS to exclude units from Part B inflation rebate calculations if those units are subject to discounts under the Medicaid Drug Rebate Program. Units on a Part B claim could be subject to Medicaid drug rebates if any portion of the claim is paid by Medicaid. Notably, dual-eligible enrollees—typically low-income individuals enrolled in both Medicare and Medicaid—could present such claims. Because Part B claims do not contain fields that indicate whether Medicaid will pay for a portion of the claim, CMS may find it difficult to determine which units are subject to Medicaid drug rebates.

OIG Solutions: To address these potential challenges, OIG proposed that CMS take the following actions:

• First, CMS could use its MMA File in the Integrated Data Repository to identify whether a Part B claim is for a dual-eligible enrollee because the MMA File contains Medicare enrollee identification numbers for dual-eligible enrollees. [1]OIG proposed matching Medicare enrollee identification numbers in the MMA File for dual-eligible enrollees to Medicare identification numbers on Part B claims. If the claim date falls within the period of dual enrollment, any associated claims should be excluded from rebate consideration.
• Second, CMS could add a field to Part B claims so that it is clear whether Medicaid will pay for a portion of the claim. If CMS adds this field to Part B claims indicating dual eligible status, providers could indicate on the claim whether a patient is dually enrolled in Medicaid and Medicare Part B. Afterward, CMS could use this information to exclude all Part B claims for dual-eligible enrollees.
• Third, CMS could develop an automated mechanism to identify Part B claims that will be partially paid by Medicaid. For example, CMS could develop a system that automatically flags Part B claims Medicaid will partially pay. This process may require the integration of (1) Medicare claims processing systems; (2) Medicaid claims processing systems; and (3) real-time enrollment data.

CMS' Proposed Solution: In CMS' initial guidance regarding the Part B inflation rebates, the agency indicated its intent "to identify the dates for which a beneficiary has Medicaid coverage using available information (for example the State Medicare Modernization Act File ("MMA file") of dual eligible beneficiaries) at the time the rebate amount is being calculated for a calendar quarter." CMS also solicited comments "on the exclusion of all drug units for the dates of service during a quarter when an individual has dual coverage under Medicare and Medicaid" and "on other state data sources that would facilitate identification of drug units for which a state received a Medicaid drug rebate for a dual eligible individual."

Identifying Units Purchased at Discount Prices Under the 340B Drug Pricing Program

Challenge Identified by OIG: The third challenge CMS may face involves identifying units purchased at discount prices under the 340B Drug Pricing Program. The IRA requires CMS to exclude units already subject to discounts under the 340B Drug Pricing Program from Part B rebate calculations. The 340B Drug Pricing Program requires drug manufacturers to offer outpatient pharmaceuticals to statutorily defined covered entities (including certain hospitals and certain federal grantees, such as federally qualified health centers) at a deeply discounted 340B ceiling price.

Accordingly, the challenge is that certain Part B claims for 340B-purchased drugs may not be readily identifiable in 2023. To provide background, in 2018, CMS instituted a requirement that hospitals participating in the 340B Drug Pricing Program include modifiers on Part B claims to indicate that the claim is for a drug purchased at a discounted 340B price to implement a (now defunct) unique payment policy for Part B drugs purchased by 340B hospitals. While recent CMS rulemaking requires hospitals participating in the 340B Drug Pricing Program to continue using modifiers in 2023, CMS encourages—though, does not require—covered entities that are not hospitals in addition to affiliated providers and suppliers to use modifiers beginning in 2024. Because the modifier requirement is new for these entities—and does not take effect until 2024—implementing this requirement may take time.

OIG Solution: To address this potential challenge, OIG proposed that CMS monitor the use of 340B modifiers, especially among covered entities, providers, and suppliers that are not required to use modifiers on Part B claims.

CMS' Proposed Solution: As outlined in CMS' initial guidance, for claims with dates of service during 2023, CMS intends to remove units in all institutional claim lines that were billed with the "JG" or "TB" modifiers and all other units in institutional claims submitted by critical access hospitals, Maryland waiver hospitals, and non-excepted off-campus provider-based departments (PBDs). For professional claims with dates of service during 2023, CMS intends to remove all units in claims for Medicare suppliers that are listed by the Health Resources and Services Administration (HRSA) as participating in the 340B Drug Pricing Program, by using employer identification numbers to identify these suppliers' Medicare Identification Numbers and the claims submitted with such identifiers. CMS is soliciting comments on the identification and removal of 340B units for calendar quarters in 2023.

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