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DEPARTMENT OF HEALTH AND Mail Stop C4–26–05, 7500 Security analysis using the prescription drugs HUMAN SERVICES Boulevard, Baltimore, MD 21244–1850. and countries in the MFN Model For information on viewing public suggests Medicare Part B paid at least Centers for Medicare & Medicaid comments, see the beginning of the 2.05 times as much as other higher- Services SUPPLEMENTARY INFORMATION section. income countries in 2018.3 The Centers FOR FURTHER INFORMATION CONTACT: for Medicare & Medicaid Services’ 42 CFR Part 513 Andrew York, 410–786–7400. (CMS) Center for Medicare and [CMS–5528–IFC] SUPPLEMENTARY INFORMATION: Medicaid Innovation (Innovation Inspection of Public Comments: All Center) is taking action on President RIN 0938–AT91 comments received before the close of Trump’s goal to lower drug costs and seeking to realign financial incentives Most Favored Nation (MFN) Model the comment period are available for viewing by the public, including any by implementing the Most Favored AGENCY: Centers for Medicare & personally identifiable or confidential Nation (MFN) Model as described in Medicaid Services (CMS), HHS. business information that is included in this IFC. Medicare pays substantially more ACTION: Interim final rule with comment a comment. We post all comments than other countries for many of the period. received before the close of the highest-cost Medicare Part B drugs that comment period on the following beneficiaries receive in an outpatient SUMMARY: This interim final rule with website as soon as possible after they setting for which Medicare Part B allows comment period (IFC) implements the have been received: http:// separate payment.4 In many instances, Most Favored Nation (MFN) Model, a www.regulations.gov. Follow the search Medicare pays more than twice as much new Medicare payment model under instructions on that website to view for certain drugs as other countries section 1115A of the Social Security Act public comments. (the Act). The MFN Model will test do.5, 6 This is because Medicare whether more closely aligning payment I. Executive Summary generally establishes the payment for separately payable Medicare Part B for Medicare Part B drugs and A. Purpose biologicals (hereafter, referred to as drugs using the methodology in section ‘‘drugs’’) with international prices and High drug prices are impacting the 1847A of the Act. In most cases, this removing incentives to use higher-cost wallets of Medicare beneficiaries, means payment is based on the Average drugs can control unsustainable growth especially during the Coronavirus Sales Price (ASP) plus a statutorily in Medicare Part B spending without disease 2019 Public Health Emergency mandated 6 percent add-on. Under this adversely affecting quality of care for (PHE). Increases in drug prices are methodology, the Medicare program beneficiaries. accelerating at a rate that significantly does not get the benefit of the outpaces the growth in spending on substantial discounts provided in other DATES: Effective date: These regulations other Medicare Part B services, and are effective on November 27, 2020. prices in the United States (U.S.) for comparison-us-and-international-prices-top- Comment date: To be assured most Medicare Part B drugs with the medicare-part-b-drugs-total-expenditures. consideration, comments must be highest Medicare spending far exceed 3El-Kilani Z, Finegold K, Mulcahy A, and received at one of the addresses Bosworth A. Medicare FFS Part B and International prices in other countries. Specifically, Drug Prices: A Comparison of the Top 50 Drugs. provided below, no later than 5 p.m. on drugs have consistently been a major Washington, DC: Office of the Assistant Secretary January 26, 2021. contributor to the overall Medicare Part for Planning and Evaluation, U.S. Department of ADDRESSES: In commenting, please refer Health and Human Services. November 20, 2020 B spending trend. Medicare Part B Fee- (https://aspe.hhs.gov/pdf-report/medicare-ffs-part- to file code CMS–5528–IFC. Because of For-Service (FFS) spending for b-and-international-drug-prices). staff and resource limitations, we cannot separately payable physician- 4 ‘‘Comparison of U.S. and International Prices for accept comments by facsimile (FAX) administered drugs and drugs furnished Top Medicare Part B Drugs by Total Expenditures’’ transmission. in a hospital outpatient department accessed via https://aspe.hhs.gov/pdf-report/ Comments, including mass comment comparison-us-and-international-prices-top- represented about 11 percent of medicare-part-b-drugs-total-expenditures; El-Kilani submissions, must be submitted in one Medicare Part B FFS benefit spending in Z, Finegold K, Mulcahy A, and Bosworth A. of the following three ways (please 2015, but accounted for about 37 Medicare FFS Part B and International Drug Prices: choose only one of the ways listed): percent of the change in Medicare Part A Comparison of the Top 50 Drugs. Washington, 1. Electronically. You may submit DC: Office of the Assistant Secretary for Planning B FFS benefit spending from 2015 to and Evaluation, U.S. Department of Health and electronic comments on this regulation 2020, and spending on these Medicare Human Services. November 20, 2020 (https:// to http://www.regulations.gov. Follow Part B FFS drugs increased to represent aspe.hhs.gov/pdf-report/medicare-ffs-part-b-and- the ‘‘Submit a comment’’ instructions. roughly 14 percent of Medicare Part B international-drug-prices). 5 ‘‘Comparison of U.S. and International Prices for 2. By regular mail. You may mail 1 FFS benefit spending in 2019. In Top Medicare Part B Drugs by Total Expenditures’’ written comments to the following addition to the continued growth in accessed via https://aspe.hhs.gov/pdf-report/ address ONLY: Centers for Medicare & spending, the U.S. already pays almost comparison-us-and-international-prices-top- Medicaid Services, Department of twice as much on average as other medicare-part-b-drugs-total-expenditures; El-Kilani Health and Human Services, Attention: Z, Finegold K, Mulcahy A, Bosworth A. Medicare developed countries pay. In one FFS Part B and International Drug Prices: A CMS–5528–IFC, P.O. Box 8013, analysis of 27 drugs, acquisition costs in Comparison of the Top 50 Drugs. Washington, DC: Baltimore, MD 21244–8013. the U.S. were 1.8 times higher than in Office of the Assistant Secretary for Planning and Please allow sufficient time for mailed comparator countries.2 A more recent Evaluation, U.S. Department of Health and Human comments to be received before the Services. November 20, 2020 (https://aspe.hhs.gov/ pdf-report/medicare-ffs-part-b-and-international- close of the comment period. 1 2020 Annual Report of the Boards of Trustees drug-prices). 3. By express or overnight mail. You of the Federal Hospital Insurance and Federal 6 Individual countries differ in the regulatory may send written comments to the Supplementary Medical Insurance Trust Funds. processes and standards governing approval of following address ONLY: Centers for Accessed via: https://www.cms.gov/files/document/ drugs and biologicals. Use of international drug 2020-medicare-trustees-report.pdf. prices in the MFN Model should not be interpreted Medicare & Medicaid Services, 2 ‘‘Comparison of U.S. and International Prices for to connote FDA approval or to otherwise describe Department of Health and Human Top Medicare Part B Drugs by Total Expenditures’’ any scientific or regulatory relationship between Services, Attention: CMS–5528–IFC, accessed via https://aspe.hhs.gov/pdf-report/ U.S.-approved and non-U.S.-approved products.

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countries, because ASP is calculated suppliers that furnish separately billion in Medicaid 10 spending ($5.7 using only the prices that manufacturers payable Medicare Part B drugs are billion in federal payments and $4.3 charge to certain U.S.-based purchasers. physicians and non-physician billion in state payments). Overall, ASP-based payments may encourage the practitioners, supplier groups (such as a OACT estimates that the MFN Model use of more expensive drugs because the group of physicians or other will result in savings of $85.5 billion, dollar amount of the 6 percent add-on practitioners), hospital outpatient net of the associated change in the Part portion is larger for drugs with higher departments (HOPDs), including on- or B premium, in Medicare Part B ASPs.7 As MedPAC noted in its June off-campus provider-based departments spending. In addition, OACT estimates 2017 Report, ‘‘Although, in some cases, (PBDs), whether paid under the that all beneficiaries will save a total of drugs with patent protection may face outpatient prospective payment system $28.5 billion from a reduction in the competition from other brand drugs in (OPPS) or the physician fee schedule Medicare Part B premium as a result of the same therapeutic class, price (PFS), and ambulatory surgical centers the MFN Model, and will also see their competition between such products may (ASCs) paid under the ASC Payment coinsurance reduced. In the HHS Office be limited because the [Medicare] Part System. Claims from these providers of the Assistant Secretary for Planning B drug payment system is not structured and suppliers will encompass and Evaluation (ASPE) estimate, ASPE to facilitate competition among brand approximately 88 percent of the annual estimates roughly a net reduction of products with similar health effects.’’ 8 Medicare Part B spending on the drugs $87.8 billion in spending on MFN Thus, the ASP-based payment approach we selected for inclusion in the MFN Model drugs by the federal government, currently used in Medicare Part B may Model beginning in performance year 1. state governments, and beneficiaries not promote price competition or Other types of providers and suppliers over the 7 years of the model. We note provide sufficient incentive to minimize that furnish separately payable selected that there is much uncertainty around avoidable costs. drugs will also be required to participate the assumptions for both the OACT and The MFN Model aims to take a global in the MFN Model, but they may not ASPE estimates and refer readers to approach to calculating Medicare Part B often furnish the selected drugs or may section VI. of this IFC for a more drug payment amounts, by testing a new not typically receive separate payment complete discussion of potential payment methodology that takes into for Medicare Part B drugs. impacts of the MFN Model. account the discounts that other The MFN Model will— countries enjoy, and pays providers and • Calculate the payment amount for II. Background on Need for Regulatory suppliers with a fixed add-on amount MFN Model drugs based on a price that Action that does not reward the use of higher- reflects the lowest per capita Gross On May 11, 2018, President Trump cost drugs. We expect that this model Domestic Product-adjusted (GDP- released his Blueprint to Lower Drug will reduce Medicare program adjusted) price of any non-U.S. member Prices and Reduce Out-of-Pocket expenditures while preserving or country of the Organisation for Costs,11 which outlined the steps his enhancing quality of care furnished to Economic Co-operation and administration is taking to combat high Medicare beneficiaries, and will lower Development (OECD) with a GDP per drug prices, end foreign freeloading, and beneficiary cost-sharing through lower capita 9 that is at least sixty percent of spur biomedical innovation.12 drug payment amounts. The MFN the U.S. GDP per capita, based on On October 25, 2018, CMS released an Model will be tested in all states and available data; advance notice of proposed rulemaking U.S. territories by the CMS Innovation • Make an alternative add-on (ANPRM) (83 FR 54546) 13 (hereafter Center for 7 performance years, from payment for MFN Model drugs that will called the October 2018 ANPRM) January 1, 2021 to December 30, 2027. remove or reduce the financial incentive describing a potential model, referred to to prescribe higher-cost drugs more in the October 2018 ANPRM as the B. Summary of the Major Provisions frequently; and International Pricing Index Model (IPI), The MFN Model will focus on a select • Reduce beneficiary cost sharing on that would test whether changing the cohort of separately payable Medicare MFN Model drugs. payment amount for selected Medicare Part B drugs. This cohort will initially C. Summary of Costs and Benefits Part B drugs would reduce Medicare include 50 single source drugs and expenditures and preserve or enhance biologicals (including biosimilar We believe the MFN Model will quality of care. In the October 2018 biological products) that encompass a substantially lower drug payment ANPRM, we sought comment on a high percentage of Medicare Part B drug amounts for the most costly Medicare model test that would— spending. The MFN Model will require Part B drugs, thereby lowering program • Calculate the Medicare payment mandatory participation. Participants in expenditures and out-of-pocket costs for amount for selected Medicare Part B the MFN Model will include all beneficiaries. As discussed in more providers and suppliers that participate detail in section VI. of this IFC, we 10 Medicaid savings estimates do not include in the Medicare program and submit a estimate that the MFN Model will result impacts of changes in Average Manufacturer Price separately payable claim for an MFN in substantial overall Medicare savings (AMP) and Best Price on manufacturer rebates during the 7-year model performance under the Medicaid Drug Rebate Program. Model drug with limited exceptions, 11 American Patients First: The Trump such as providers and suppliers that are period (that is, 28 calendar quarters). In Administration Blueprint to Lower Drug Prices and paid for separately payable Medicare the CMS Office of the Actuary (OACT) Reduce Out-of-Pocket Costs, Available at: https:// Part B drugs based on reasonable costs. estimate, OACT estimates savings of www.hhs.gov/sites/default/files/ AmericanPatientsFirst.pdf?language=es. The vast majority of providers and roughly $64.4 billion in Medicare FFS benefits, $49.6 billion in Medicare 12 ‘‘President Donald J. Trump’s Blueprint To Lower Drug Prices,’’ accessed via: https:// 7 MedPAC, June 2017, ‘‘Medicare Part B Drug Advantage (MA) payments, and $9.9 www.whitehouse.gov/briefings-statements/ Payment Policy Issues,’’ accessed via http:// president-donald-j-trumps-blueprint-lower-drug- medpac.gov/docs/default-source/reports/jun17_ 9 For the purposes of this IFC, GDP means GDP prices/. ch2.pdf. based on purchasing power parity (PPP), rather than 13 International Pricing Index Model for Medicare 8 MedPAC, June 2017, ‘‘Medicare Part B Drug nominal GDP. A nation’s GDP at purchasing power Part B Drugs; Medicare Program, 83 Fed. Reg (210) Payment Policy Issues,’’ accessed via: http:// parity (PPP) exchange rate is the sum value of all 54246 (Oct 30, 2018) available at: https:// medpac.gov/docs/default-source/reports/jun17_ goods and services produced in the country valued www.govinfo.gov/content/pkg/FR-2018-10-30/pdf/ ch2.pdf. at prices prevailing in the U. S. 2018-23688.pdf.

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drugs to be phased down to more such as the Physician Fee Schedule channels that are not captured in the closely align with international prices; (PFS) (https://www.cms.gov/Medicare/ manufacturer-reported ASP. • Allow private-sector vendors to Medicare-Fee-for-Service-Payment/ Currently, under Medicare Part B, negotiate prices for drugs, take title to PhysicianFeeSched/index.html), the beneficiaries’ cost-sharing 18 is generally drugs, and compete for physician and Hospital Outpatient Prospective 20 percent of the Medicare-allowed hospital business; Payment System (OPPS) (https:// amount. The term ‘‘Medicare-allowed • Increase the drug add-on payment www.cms.gov/Medicare/Medicare-Fee- amount’’ means the maximum amount to reflect 6 percent of historical drug for-Service-Payment/ that a provider or supplier will be paid costs; and for a covered health care service or drug. • HospitalOutpatientPPS/index.html), or Pay physicians and hospitals the the Ambulatory Surgical Center However, for items and services paid add-on based on a set payment amount Payment System (https://www.cms.gov/ under the OPPS, beneficiaries are only financially responsible for a copayment structure. Medicare/Medicare-Fee-for-Service- We considered the comments that we amount up to the amount of the Payment/ASCPayment/index.html). received in response to the October inpatient hospital deductible.19 Medicare Part B also allows separate 2018 ANPRM in developing the MFN Medicare pays for the remaining portion payment for drugs in less common Model described in this IFC. In addition of the Medicare-allowed amount.20 situations such as osteoporosis drugs to considering these comments, we furnished by a home health agency, and B. Medicare and Beneficiary Spending considered feedback and suggestions from a broad set of stakeholders when a beneficiary does not have Medicare Part B spending for gathered through comments on the benefits available under the Part A separately payable physician- President’s Blueprint and through program. administered drugs and drugs furnished numerous meetings with stakeholders. The payment methodology for drugs in hospital outpatient departments President Trump discussed an described in section 1847A of the Act is represented about 11 percent of Executive Order (E.O.) regarding an generally based on the volume-weighted Medicare Part B FFS spending in 2015 MFN payment model for Medicare Part ASP for all National Drug Codes (NDCs) but increased to represent roughly 14 B drugs on July 24, 2020, and that are assigned to a Healthcare percent of Medicare Part B FFS subsequently published a superseding Common Procedure Coding System spending in 2019; spending on these Executive Order on Lowering Drug (HCPCS) code for the drug plus a 6 Medicare Part B separately payable Prices by Putting America First on percent add-on. The volume-weighted drugs accounted for about 37 percent of September 13, 2020.14 In response to the ASP for a HCPCS code is calculated the change in Medicare Part B FFS September 13, 2020 Executive Order, we quarterly using manufacturer-submitted spending from 2015 to 2019. will implement the MFN Model data 15 on sales to all purchasers (with Furthermore, Medicare Part B FFS described in this IFC. limited exceptions as articulated in spending per capita for separately section 1847A(c)(2) of the Act, such as payable drugs has increased at an A. Medicare Part B Drug Benefit and average annual rate of 11.5 percent over ASP Payment Methodology sales at nominal charge and sales exempt from Medicaid best price 16) this same period while Medicare Part B FFS spending per capita has increased Medicare Part B includes a limited with manufacturers’ rebates, discounts, by 3.8 percent. From 2015 to 2019, drug benefit for drugs and biologicals and price concessions included in the Medicare Part B spending for separately described in section 1861(t) of the Act. ASP calculation (that is, the sales price payable drugs increased from $19.4 The majority of drugs paid under is net of these rebates, discounts, and Medicare Part B generally fall into three billion to $29.8 billion (a nearly 55- price concessions). The ASP+6 percent categories: Drugs furnished incident to a percent increase) with per capita payment amount that Medicare pays for physician’s service in the physician spending increasing from $583 to $900. an individual Medicare Part B drug office, HOPD, or other outpatient This increase in Medicare Part B FFS claim generally does not vary based on setting; drugs administered via a spending for separately payable drugs the exact price an individual provider or covered item of durable medical during this period reflects increases in equipment (DME); and other categories supplier pays to acquire the drug. In the the prices of drugs, introduction of new of drugs specified by statute (generally case of multiple source drugs, the price drugs, changes in utilization of these in section 1861(s)(2) of the Act). of a brand name drug and its generic drugs, changes in Medicare Part B FFS Many drugs covered under Medicare equivalent(s) included in the same enrollment, and changes in the mix of Part B are administered via injection or billing code are averaged together to drugs for those beneficiaries who 17 infusion in a physician’s office, an determine the payment allowance. As received them.21 Since beneficiaries HOPD, and certain other outpatient noted earlier, this payment methodology settings, such as ASCs, and, when may create an incentive for the use of 18 Not including the annual deductible. Medicare allows separate payment for more expensive drugs, but, as noted in 19 Section 1833(t)(8)(C)(i) of the Act limits the the MedPAC report (and by sources amount of beneficiary copayment that may be these drugs, the payment limit is collected for a procedure performed in a year to the typically based on the methodology cited in the report; pages 68 and 79), an amount of the inpatient hospital deductible for that described in section 1847A of the Act. add-on may be needed to account for year. This limit is $1,408 in 2020. The payment amount for these drugs handling and overhead costs and 20 2020 Medicare Parts A & B Premiums and does not include payment for additional mark-up in distribution Deductibles: Fact Sheet, available at: https:// www.cms.gov/newsroom/fact-sheets/2020- administering the drug to a beneficiary; medicare-parts-b-premiums-and-deductibles. payment for drug administration 15 OMB Control Number 0938–0921. 21 The average annual growth in number of services is made in accordance with the 16 Best price is defined in section 1927(c)(1)(C) of Medicare Part B FFS beneficiaries was less than 0 applicable payment policy for the the Act. percent from 2015 to 2019, so the change in 17 Under section 3139 of the Affordable Care Act Medicare Part B beneficiaries does not fully account setting in which the drug was furnished, (Pub. L. 111–148) the add-on amount for a for the average annual growth (11.4 percent) in biosimilar is based on the ASP of the reference Medicare Part B spending for physician- 14 Executive Order 13948, https:// product. Biosimilars are not grouped together with administeredpayable drugs. Instead, the increase www.govinfo.gov/content/pkg/FR-2020-09-23/pdf/ one another or the reference product for payment during this period is more fully explained by 2020-21129.pdf. purposes. increases in the prices of drugs, introduction of new

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without supplemental insurance finding was generally consistent with The results of these reports typically pay 20 percent of the the existing evidence base as described demonstrate that, save for a few outlier Medicare-allowed amount, as described in the HHS analysis’s background cases, the U.S. prices used to calculate in section II.A. of this IFC, they have section, which found peer-reviewed ASP rates are significantly higher than faced similar increases in spending on literature on this topic to be relatively the prices in international comparator Medicare Part B drugs as has limited and dated, but with similar countries.31 Based on this significant Medicare.22 findings of higher drug prices in the difference, which aligns with the A new Issue Brief from the Office of U.S. compared to other countries.26 The analysis we present in this IFC, we will the Assistant Secretary for Planning and HHS analysis compared U.S. drug test the impact of more closely aligning Evaluation (ASPE) provides additional acquisition costs for a set of Medicare payment for Medicare Part B drugs and evidence of the need for the rule. Part B physician-administered drugs to biologicals with international prices in Between 2006 and 2017, Medicare Part acquisition costs in 16 other developed the MFN Model. B FFS drug spending per enrollee grew economies—Austria, Belgium, Canada, III. Provisions of the Interim Final Rule at 8.1 percent, more than twice as high Czechia, Finland, France, Germany, With Comment Period as per capita spending on Medicare Part Greece, Ireland, Italy, Japan, Portugal, D (3.4 percent) and nearly three times as Slovakia, Spain, Sweden, and the A. Model Performance Period 27 high as overall retail prescription per United Kingdom (UK). The main In part 513, we codify the MFN Model capita drug spending (2.9 percent). analysis in the HHS report focused on that will be tested for 7 performance Spending and enrollment projections by 27 drugs accounting for 64 percent of years. We define ‘‘model performance OACT for the 2021 President’s Budget total Medicare Part B drug spending in period’’ to mean January 1, 2021, the 28 suggest that per capita spending on 2016. Among the 27 drugs included in date the model will begin, through Medicare Part B physician-administered the analysis, acquisition costs in the December 31, 2027. We are testing a 7- drugs and separately payable hospital U.S. were 1.8 times higher than in year performance period because it will outpatient drugs will grow at a very comparator countries. Acquisition cost allow a smooth transition to the MFN similar annual rate of 8 percent between ratios ranged from U.S. prices being on Price (described in section III.E.5. of this 2020 and 2027, before consideration of par with international prices for one of 23 IFC) by performance year 4 and any COVID–19 pandemic impacts. the 27 drugs, to U.S. prices being up to adequate duration to understand the Because biologics account for about 77 7 times higher than the international impact of the MFN Model. As discussed percent of Medicare Part B FFS prices for others. There was variability in section III.N. of this IFC, we will prescription drug spending, there has across the 16 countries in the study as assess for potential impacts of the MFN been little opportunity to reduce well, with no one country consistently Model across quarterly time periods Medicare Part B spending growth acquiring drugs at the lowest prices. The throughout the performance period. through generic substitution, as has U.S. had the highest drug prices for 19 Further, we will assess initial impacts of occurred in Medicare Part D and in of the 27 products.29 24 the MFN Model on quality of care, retail pharmacy overall. A new ASPE Issue Brief updates the including access to drugs, prior to earlier analysis for the set of Medicare C. Relative High Price of Medicare Part beginning performance year 5. Part B drugs and the set of countries in B Drugs the MFN Model. In 2018, based on B. Defined Population Drug acquisition costs in the U.S. available data, ASP rates were at least Our goal is to include all beneficiaries exceed those in Europe, Canada, and 2.05 times the value-weighted average who are furnished an MFN Model drug Japan, according to an October 2018 price for these drugs in OECD countries 25 by an MFN participant and who, on the ASPE analysis of Medicare Part B with per capita GDP at least 60 percent date of service, are enrolled in Medicare physician-administered drugs. This of that in the U.S.30 Part B, have Medicare as the primary payer, and are not covered under drugs, changes in drug utilization, and changes in 26 ‘‘Comparison of U.S. and International Prices Medicare Advantage or any other group the mix of drugs than by increases in Medicare for Top Medicare Part B Drugs by Total enrollment. Expenditures’’ accessed via https://aspe.hhs.gov/ health plan, including a United Mine 22 In 2016, 8 in 10 beneficiaries in traditional pdf-report/comparison-us-and-international-prices- Workers of America health plan, Medicare (81 percent) had some type of top-medicare-part-b-drugs-total-expenditures. hereafter called MFN beneficiaries. supplemental insurance (which typically covers 27 Please refer to the HHS report (‘‘Comparison of Thus, the defined population for the some or all of Medicare Part A and Medicare Part U.S. and International Prices for Top Medicare Part B cost-sharing), including employer-sponsored B Drugs by Total Expenditures’’ accessed via MFN Model will be Medicare FFS insurance (30 percent), Medigap (29 percent), and https://aspe.hhs.gov/pdf-report/comparison-us-and- beneficiaries who receive an MFN Medicaid (22 percent). Nearly 1 in 5 beneficiaries international-prices-top-medicare-part-b-drugs- Model drug from an MFN participant in traditional Medicare (19 percent)—6.1 million total-expenditures) for more information on the where payment for such drug is allowed beneficiaries overall—had no source of countries selected for analysis. supplemental coverage in 2016. https:// 28 ‘‘Comparison of U.S. and International Prices under the MFN Model. We define the www.kff.org/medicare/issue-brief/sources-of- for Top Medicare Part B Drugs by Total term ‘‘MFN beneficiary’’ in § 513.2. supplemental-coverage-among-medicare- Expenditures’’ accessed via https://aspe.hhs.gov/ Testing the model in the population beneficiaries-in-2016/. pdf-report/comparison-us-and-international-prices- of beneficiaries who receive drugs with 23 ASPE analysis of OACT spending and top-medicare-part-b-drugs-total-expenditures. high annual Medicare Part B spending enrollment projections. 29 The ASPE report utilized ex-manufacturer 24 Nguyen X. Nguyen and Steve Sheingold. prices (sometimes called the ex-factory price) stated allows the MFN Model payment to Medicare Part B Drugs: Trends in Spending and in U.S. currency on the transaction date. The report apply to a broad set of conditions, Utilization, 2006–2017. Washington, DC: Office of defines ex-manufacturer prices as the price received drugs, medical specialties, clinical the Assistant Secretary for Planning and Evaluation, by manufacturers of a product, including discounts U.S. Department of Health and Human Services. applied at the point of sale. settings, and localities rather than November 20, 2020 (https://aspe.hhs.gov/pdf- 30 El-Kilani Z, Finegold K, Mulcahy A, and having MFN Model payment focused on report/medicare-part-b-drugs-spending-and- Bosworth A. Medicare FFS Part B and International a particular clinical presentation, course utilization). Drug Prices: A Comparison of the Top 50 Drugs. of treatment or single type of care 25 Comparison of U.S. and International Prices for Washington, DC: Office of the Assistant Secretary Top Medicare Part B Drugs by Total Expenditures’’ for Planning and Evaluation, U.S. Department of setting. Defining the population in this accessed via https://aspe.hhs.gov/pdf-report/ Health and Human Services. November 20, 2020 comparison-us-and-international-prices-top- (https://aspe.hhs.gov/pdf-report/medicare-ffs-part- 31 ASP is defined in statute, and based on sales medicare-part-b-drugs-total-expenditures. b-and-international-drug-prices). in the U.S.

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manner allows CMS to observe the under the PFS), and ASCs, these hospitals that participate in a CMS implications of a global approach to providers and suppliers will represent Innovation Center model under which calculating Medicare Part B drug the vast majority of MFN participants. they are paid for outpatient hospital payment amounts and an alternative Other types of providers and suppliers services furnished to Medicare FFS add-on approach across a broad set of (that are not excluded) also will be MFN beneficiaries, including MFN Model providers and suppliers and participants to the extent that they drugs, on a fully capitated or global beneficiaries, as well as a large set of submit a claim for an MFN Model drug budget basis in accordance with a manufacturers. Learnings from the MFN furnished to an MFN beneficiary. For waiver under such model of section Model will inform CMS and other example, a home health agency that 1833(t) of the Act will be excluded from stakeholders about the effect of applying receives separate payment for an the MFN Model if the parameters of the the innovative payment model to a osteoporosis drug (defined in section other CMS Innovation Center model broad set of drugs on a diverse set of 1861(kk) of the Act) will be an MFN adjust for the difference in payment for beneficiaries and to the Medicare participant if such drug is an MFN MFN Model drugs between the MFN program. Model drug and the home health agency Model and non-MFN Model drug furnishes such drug to an included C. MFN Participants payments such that savings under the beneficiary and a claim is submitted. MFN Model are incorporated into the 1. Eligible Providers and Suppliers We will exclude certain types of other CMS Innovation Center model’s A majority of Medicare spending on providers and suppliers that are parameters (for example, the annual separately payable Medicare Part B ultimately not paid for drugs based on global budget) for the duration of the drugs is for drugs that are furnished ASP as well as those who are subject to MFN Model. Thus, acute care hospitals incident to a physician’s service (see the hold harmless provision in section that are participating in the Maryland section 1861(s)(2)(A) of the Act), in a 1833(t)(7)(D)(ii) of the Act. Thus, in Total Cost of Care Model will not be HOPD (see section 1861(s)(2)(B) of the § 513.100(c), we exclude from the MFN MFN participants during the first two Act), including in an on- or off-campus Model the following providers and calendar quarters of 2021 while they are PBD (regardless of whether those PBDs suppliers: Children’s hospitals (defined paid on a fully capitated or global are excepted or nonexcepted),32 or in an under section 1886(d)(1)(B)(iii) of the budget basis. Further, if the parameters ASC (see section 1832(a)(2)(F)(i) of the Act); PPS-exempt cancer hospitals of the Maryland Total Cost of Care Act). Depending upon the (defined under section 1886(d)(1)(B)(v) Model have been updated to adjust for circumstances, Medicare Part B allows of the Act); critical access hospitals the difference in payment for MFN separate payment for drugs to other (CAHs) (defined under section 1820 of Model drugs between the MFN Model providers and suppliers, such as the Act); Indian Health Service (IHS) and non-MFN Model drug payments pharmacies, home health agencies, facilities (described in section 1880 of such that savings under the MFN Model hospices, radiation therapy centers, the Act), except when MFN Model are incorporated into the parameters for independent diagnostic testing facilities, drugs are furnished and such service is the Maryland Total Cost of Care Model ambulance suppliers, durable medical described in section 1880(e)(2)(B) of the (for example, the annual global budget) equipment (DME) suppliers, mass Act; Rural Health Clinics (RHCs) for the duration of the MFN Model, then immunization suppliers, inpatient (defined under section 1861(aa)(2) of the these acute care hospitals will remain hospitals (when Part A payment is not Act); Federally Qualified Health Centers excluded from the MFN Model permitted), and other types of providers (FQHCs) (defined under section beginning with the third quarter of and suppliers. Our goal is to broadly 1861(aa)(4) of the Act); hospitals that are performance year 1 and beyond. include providers and suppliers that not subsection (d) hospitals (as defined However, if the parameters of the receive separate payment for MFN in section 1886(d)(1)(B) of the Act) and Maryland Total Cost of Care Model Model drugs as MFN participants, with are paid on the basis of reasonable costs change such that the participating acute limited exceptions. MFN participants subject to a ceiling under section care hospitals are no longer paid on a will consist of Medicare participating 1886(b) of the Act; and extended fully capitated or global budget basis or providers and suppliers that submit a neoplastic disease care hospitals if a participating acute care hospital claim for a separately payable drug that (defined in section 1886(d)(1)(B)(vi) of leaves the Maryland Total Cost of Care is an MFN Model drug furnished to an the Act). In addition, for the first quarter Model such that they are paid under MFN beneficiary, unless otherwise and second quarter of performance year section 1833(t) of the Act, then such excluded.33 Because separately payable 1, we will exclude acute care hospitals hospitals would no longer fall under Medicare Part B drugs (that is, potential that participate in a CMS Innovation this exclusion. This exclusion also MFN Model drugs) are most often Center model under which they are paid applies on the same terms to acute care furnished by physicians, non-physician for outpatient hospital services hospitals participating in the practitioners, supplier groups (such as furnished to Medicare FFS beneficiaries, Pennsylvania Rural Health Model that group practices), hospitals that are paid including MFN Model drugs, on a fully otherwise meet the definition of MFN under the OPPS as defined in 42 CFR capitated or global budget basis in participant, unless the parameters of the 419.20 (including off-campus PBDs paid accordance with a waiver under such Pennsylvania Rural Health Model model of section 1833(t) of the Act. This change such that the participating acute 32 That is, regardless of whether those PBDs are exclusion, codified at § 513.100(c)(9), care hospitals are no longer paid on a excepted or nonexcepted under section will apply during the first quarter and fully capitated or global budget basis or 1833(t)(21)(B)(ii) of the Act, as added by section 603 second quarter of performance year 1, if a participating acute care hospital of the Bipartisan Budget Act of 2015 (Pub. L. 114– 74). and only if the hospital participates in leaves the Pennsylvania Rural Health 33 These providers and suppliers will be included a CMS Innovation Center model under Model such that they are paid under as participants in the MFN Model only if they which it is paid on a fully capitated or section 1833(t) of the Act. We expect participate in Medicare; this means that global budget basis. As codified at that the CMS Innovation Center will nonparticipating physicians and non-physician adjust the parameters of the Maryland practitioners will not be MFN participants and will § 513.100(c)(10), for the third quarter of continue to be paid in accordance with current performance year 1 (that is, beginning Total Cost of Care Model and the program policies. July 1, 2021) and beyond, acute care Pennsylvania Rural Health Model such

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that the participants in these CMS facilities (ORF), and certain other separately payable Medicare Part B Innovation Center models will remain providers and suppliers do not submit drugs by provider and supplier type excluded from the MFN Model for the claims for Medicare Part B drugs or are using available final action claims duration of the MFN Model. Further, as not paid separately for Medicare Part B where Medicare was the primary payer, discussed in section III.J.1. of this IFC, drugs; thus, an express exclusion for with limited exclusions as noted. This the CMS Innovation Center intends to these providers and suppliers is not table shows the distribution of Part B address model overlaps with other CMS necessary. We also note that including drug claims among provider and Innovation Center models whether or these providers and suppliers in the supplier types. To assign claims to a not the participants in other models are MFN Model would complicate the provider or supplier type, we MFN participants, for example we will model design and make it challenging to considered the type of Medicare account for changes in Medicare Part B test the impact of the MFN Model on Administrative Contractor (MAC) that drug payments that impact other these types of providers and suppliers processed the claim, type of bill, models’ financial calculations. because of the varied payment provider number, revenue center, line We note that community mental structures among these providers and place of service code, and specialty of health centers, comprehensive suppliers. the health care practitioner associated outpatient rehabilitation facilities Table 1 shows the distribution of 2019 with the drug claim line. (CORF), outpatient rehabilitation Medicare Part B allowed charges for BILLING CODE 4120–01–P

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BILLING CODE 4120–01–C To minimize the complexity of the MFN Model Medicare Part B drugs that MFN Model, we are not including in the are furnished in the inpatient setting,

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administered through covered DME, during the 3 days immediately generalizability of model results, as orally administered, or paid under the preceding admission to a hospital mandatory model participants may be End-Stage Renal Disease Prospective defined under section 1886(d) of the more broadly representative of all entity Payment System (ESRD PPS). Therefore, Act, the outpatient hospital services are types that could be affected by a model. in § 513.100(d), we provide an treated as inpatient services if the Requiring participation in the MFN exception for claims submitted by acute beneficiary has Medicare Part A Model will allow us to observe the care hospitals for separately payable coverage and such services are not experiences of providers and suppliers Medicare Part B drugs that were separately payable under Medicare Part with diverse characteristics, such as administered during an inpatient stay or B. We will apply this policy geographies, patient populations, and included on an inpatient claim, such as consistently under the MFN Model such specialty mixes. Mandatory when a beneficiary has exhausted their that if a beneficiary receives an MFN participation (with specified exceptions) Part A benefit days, claims administered Model drug in an HOPD that is an MFN by providers and suppliers submitting by the Durable Medical Equipment participant and is admitted to this claims for MFN Model drugs in a Medicare Administrative Contractors hospital within 3 days, then those nationwide model, as further discussed (DME MACs) as described in 42 CFR services, including drugs, will be treated in section III.C.3. of this IFC, will 421.404(c)(2), and claims paid under the as inpatient services (in accordance minimize administrative complexity ESRD PPS, including claims for drugs with Medicare inpatient payment and risk to the integrity of the MFN that are paid using the transitional drug policies) and will not be separately Model. add-on payment adjustment. payable under the MFN Model. We note In § 513.100(e) and § 513.100(f), we Under the approach set forth in that when a beneficiary receives are codifying MFN participant § 513.100(b), all Medicare participating outpatient hospital services during the requirements during and after the MFN providers and suppliers that submit a day immediately preceding a hospital Model. During the MFN Model claim for an MFN Model drug admission to a hospital not paid under performance period described in (excluding claims specified in the Inpatient Prospective Payment § 513.1(c), MFN participants must— § 513.100(d)) furnished to an MFN System (IPPS), such as psychiatric • Adhere to the beneficiary beneficiary will be included as MFN hospitals and units, inpatient protections requirements in § 513.410 to participants unless otherwise excluded rehabilitation hospitals and units, long- ensure beneficiaries’ access to care is (as specified in § 513.100(c)), regardless term care hospitals, children’s hospitals, not adversely impacted; of the volume of MFN Model drugs for and cancer hospitals, the statutory • Adhere to the MFN Model-specific which they submit claims. As Table 1 payment window is one day preceding billing instructions established by CMS shows, a significant proportion of the date of the patient’s admission; but and the MAC responsible for processing suppliers bill for a relatively lower because these categories of hospitals the MFN participant’s claims, including volume of MFN Model drugs, such as will be excluded from the MFN Model, without limitation those described in less than $2,000 in total annual allowed as discussed previously, the payment § 513.200, to ensure appropriate and charges, and will likely have limited window policy will not be applicable accurate Medicare payments; and claims paid under the MFN Model. We for this model. • Participate in MFN Model considered whether to make specific We are codifying these provisions in monitoring and evaluation activities in payment adjustments under the MFN §§ 513.100(a) through (d). accordance with 42 CFR 403.1110(b), Model for MFN participants that bill for We note that we include a limitation including collecting and reporting of a low volume of MFN Model drugs on the MFN Drug Payment Amount in information as the Secretary of Health during a historical period or whether § 513.210(d)(5) that will apply to certain and Human Services (the Secretary) low-volume providers and suppliers claims submitted by 340B covered determines is necessary to monitor and could have the option to opt into or out entities as described in section III.E.10. evaluate the MFN Model, including of the MFN Model. However, we believe of this IFC to ensure that beneficiaries without limitation ‘‘protected health that requiring participation in the model who are furnished MFN Model drugs by information’’ as that term is defined at only of providers and suppliers that bill a 340B covered entity do not face 45 CFR 160.103. for a higher volume of MFN Model increased cost-sharing under the MFN For 2 years after termination of the drugs would not allow us to observe the Model than would otherwise apply. MFN Model, MFN participants must impact of the MFN Model on a full participate in MFN monitoring activities 2. Mandatory Participation and range of providers and suppliers and as described in § 513.420. Requirements would create opportunities for shifting MFN participants will continue to bill sites of care and gaming. As such, we Model participation will be Medicare for separately payable MFN are including a broad set of providers mandatory for Medicare participating Model drugs furnished to MFN and suppliers as MFN participants, providers and suppliers that satisfy the beneficiaries and be responsible for regardless of their volume of billing for MFN participant definition. There will collecting beneficiary cost sharing MFN Model drugs. As described in be no specific enrollment activities for amounts for MFN Drug Payment section III.I.2. of this IFC, the MFN MFN participants; rather, their Amounts. As such, we anticipate MFN Model includes a financial hardship participation will be effectuated by the participants will have the same exemption in the form of a potential submission of a claim for an MFN administrative requirements for reconciliation amount for MFN Model drug furnished to an MFN collection of beneficiary cost-sharing participants that are significantly beneficiary, and we will apply the MFN amounts under the MFN Model as apply affected by their participation in the Model payment to such a claim. to collection of beneficiary cost-sharing MFN Model. As we have described in previous outside the MFN Model. We note that MFN Model drugs could rules implementing models with As discussed in section III.L. of this be furnished to a beneficiary in an required provider or supplier IFC, manufacturers will exclude from HOPD who is subsequently admitted to participation, such as the their calculation of ASP all units of an inpatient hospital stay. When a Comprehensive Care for Joint MFN Model drugs that are furnished to beneficiary receives outpatient hospital Replacement (CJR) Model, mandatory MFN beneficiaries and for which services, including MFN Model drugs, participation can enhance the payment under § 513.210 is allowed.

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Manufacturers will need to determine 1115A(a)(5) of the Act states that the appropriate for the MFN Model. Thus, the number of units to exclude and may Secretary may elect to limit testing of a we are codifying in § 513.120 that the adjust purchasing arrangements with model to certain geographic areas. It MFN Model geographic area includes all MFN participants in order to obtain follows that the Secretary could states and U.S. territories. information about such units. While similarly elect not to limit testing to As described in section VI. of this IFC, MFN participants are not required to certain geographic areas, and instead we anticipate that there could be provide data to manufacturers related to test a nationwide model. potential challenges associated with a the number of units of MFN Model The MFN Model requires mandatory, mandatory, nationwide model, namely drugs that were furnished to MFN nationwide participation of Medicare greater impacts on manufacturers, a beneficiaries and for which payment participating providers and suppliers greater number of MFN participants that under § 513.210 was allowed, we (with limited exclusions) to be able to potentially receive lower payments for anticipate that manufacturers may successfully test the model for the drugs under the model, and fewer non- establish mechanisms to obtain such reasons described later in this section. participants who potentially increase information, which also may create First, a nationwide scope avoids their patient volume should administrative burden for MFN additional administrative burden on beneficiaries need to locate alternative participants related to the MFN Model. MFN participants with some service sites of care. We have designed the For example, manufacturers could locations inside the MFN Model model to mitigate these potential require use of separate purchasing geographic area and others outside of challenges where possible. accounts, or reporting of information the MFN Model geographic area, which D. MFN Model Drugs about units of MFN Model drugs that could lead to such MFN participants were furnished to MFN beneficiaries needing to track and follow separate We will begin the MFN Model with and for which payment under § 513.210 requirements for how drugs are 50 Medicare Part B drugs, identified by was allowed in order to receive a more acquired, furnished, and billed, Healthcare Common Procedure Coding favorable purchase price. depending on the service location. System (HCPCS) codes with high annual 3. Model Geographic Area Second, a nationwide model geographic spending during 2019 (based on dates of service and after applying certain In the October 2018 ANPRM, CMS area eliminates the potential for MFN participants with service locations both exclusions), that will be included on the anticipated the geographic area MFN Model Drug HCPCS Codes List included in a potential IPI Model would inside and outside the MFN Model’s geographic area to seek to influence (described later in this section), and encompass 50 percent of Medicare Part maintain approximately 50 Medicare B drug spending. Several commenters beneficiaries’ choice of treatment location in response to the differences Part B drugs on the MFN Model Drug expressed concern that having model HCPCS Codes List during the 7-year participants subjected to multiple between non-model payments and the MFN Model payments. This potential model performance period. We will payment methodologies for included focus the model on the separately drugs based on having some but not all issue is of particular concern for the MFN Model given the broad use of MFN payable, physician-administered of their locations within the model’s Medicare Part B drugs with the highest geographic area would be Model drugs and the ambulatory settings in which these drugs may be annual spending which make up a administratively burdensome. portion of the roughly 550 HCPCS codes Additionally, some commenters furnished, which can be geographically distributed over wide areas. Third, CMS listed on the quarterly ASP pricing files, expressed concern at the idea of but encompass approximately three- requiring participation in some also believes that a nationwide model quarters of annual Medicare Part B drug geographic areas but not others, noting geographic area maintains continuity spending, 34 and are furnished by the that this approach would with current treatment patterns by types of providers and suppliers that disproportionately affect some providers limiting disruption to beneficiary and frequently bill under Medicare Part B. and suppliers and not others. Multiple health care provider treatment plans The MFN Model payments will apply commenters noted that reduced cost- that may arise due to potential changes only to MFN Model drugs when these sharing for patients in the model in the site of care. Fourth, a nationwide drugs are administered by MFN compared to those outside of the model model geographic area allows all participants to MFN beneficiaries and would create potential differences in eligible beneficiaries who receive an access for beneficiaries. One commenter MFN Model drug from an MFN Medicare Part B allows separate noted that there would be a risk of participant where separate payment is payment as the primary payer. patient steering if the model created a allowed to benefit from the cost-sharing In § 513.130(b), we exclude some financial incentive for providers and reductions under the MFN Model. categories of Medicare Part B drugs from suppliers to provide care at sites outside Finally, CMS believes that a nationwide the model, such as certain vaccines, of the model geographic area rather than model geographic area along with radiopharmaceuticals, oral drugs, at sites in the model geographic area. mandatory participation creates the compounded drugs, and intravenous Due to the administrative complexity necessary market participation to immune globulin products. We also and risk to model integrity associated increase the likelihood of MFN exclude drugs that are billed with with a limited scope, CMS believes that participants being able to acquire MFN HCPCS codes to which any generic the MFN Model cannot realize its full Model drugs at lower prices as drugs are assigned, including in potential in spending reductions for discussed in section VI. of this IFC. applicable instances where single Medicare and its beneficiaries and CMS notes that several of these points 34 CMS publishes a Medicare Part B Drug improvement in quality of care without were commented on by several Dashboard which can be used to view annual broad participation of Medicare respondents to the October 2018 spending on drugs by HCPCS code. The participating providers and suppliers ANPRM. These points highlight the downloadable file can be used to examine the through a nationwide scope. Section challenges that accompany a limited proportion of annual spending for the included drugs. See: https://www.cms.gov/Research- 1115A(b) of the Act gives the Secretary scope (non-nationwide) model Statistics-Data-and-Systems/Statistics-Trends-and- discretion in the design of models, geographic area. CMS therefore believes Reports/Information-on-Prescription-Drugs/ including the scope of models. Section a nationwide scope is the most MedicarePartB.

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source drugs or biologicals were within using claims data for the subsequent for any applicable changes. We will use the same billing and payment code as of year. HCPCS codes to identify drugs because October 1, 2003. For purposes of the Compared to beginning with a smaller they are an established way to identify, MFN Model, we consider a drug to be number of drugs and phasing in bill, and pay for separately payable a generic drug if it is approved under an additional drugs in each subsequent Medicare Part B drugs in the Medicare abbreviated new drug application performance year, beginning with 50 claims processing system, and they are (ANDA) under section 505(j) of the Medicare Part B drugs simplifies the commonly used in other Medicare Part Federal Food, Drug, and Cosmetic Act. model design and reduces complexity B drug payment resources like the ASP In accordance with President Trump’s for MFN participants. Based on drug pricing files. For this process, we Blueprint to Lower Drug Prices, we are spending patterns over time for high will use final action Medicare Part B excluding such drugs because these spend Medicare Part B drugs,35 we claims for separately paid drugs with drugs are already subject to competitive expect the set of included Medicare Part dates of service within calendar year market forces and because the Medicare B drugs to remain relatively stable over 2019 and allowed charges greater than Part B payment allowances for these the model’s 7-year performance period, $0 where Medicare was the primary drugs already reflect price competition and we believe that a generally stable payer from all Medicare providers and from generic products. In addition, we set of MFN Model drugs will help MFN suppliers as the baseline period. This are excluding drugs for which there is participants plan their drug acquisition period is the most recent full calendar an Emergency Use Authorization (EUA) strategies. We believe the benefits of this year of claims data that was sufficiently or approval by the Food and Drug stability outweigh the incremental available prior to the model Administration (FDA) to treat patients challenge of beginning the MFN Model performance period start on January 1, with suspected or confirmed with a longer drug list than envisioned 2021. Accordingly, we arrayed drugs, coronavirus disease 2019 (COVID–19). in the October 2018 ANPRM, and allows using HCPCS codes, in descending Since there may likely be urgent, high Medicare and its beneficiaries to benefit order based on the aggregate Medicare demand for such drugs and available from the model payment methodology Part B total allowed charges in the 2019 supply may be targeted to certain sooner for more of the highest spend baseline period, after making the populations, this exclusion allows Medicare Part B drugs, if anticipated exclusions specified in § 513.130(b)(1) maximum flexibility for potential savings are realized. and (b)(2), and identified the 50 changes in drug distribution for such By focusing the MFN Model on Medicare Part B drugs (identified by drugs. separately payable Medicare Part B HCPCS codes) with the highest total To encourage introduction and use of drugs, payments for products that are Medicare Part B allowed charges. These biosimilars, the Trump Administration bundled or otherwise included in HCPCS codes are included on the MFN has taken several actions, including payment for a procedure or other Model Drug HCPCS Codes List for the services will not be affected by the MFN establishing separate HCPCS codes for beginning of performance year 1 as Model and payments for such bundled Medicare Part B biosimilar biological shown in Table 2 of this IFC. services will not have to be separated or products. We are not excluding The MFN Model uses an annual adjusted. This approach does not biosimilar biological products from the calendar year baseline period for exclude drugs that are packaged under MFN Model, however, given the relative purposes of identifying the drugs that a Medicare payment system in certain lower annual Medicare Part B spending will be added to the MFN Model Drug settings and separately payable in other for HCPCS codes for separately payable HCPCS Codes List for performance year biosimilar biological products through settings. However, the MFN Model 1 (and annually thereafter, using the 2019, only one biosimilar biological payment only applies to such drugs in next subsequent calendar year as the product is included among the settings where separate payment is baseline) because: The vast majority of performance year 1 MFN Model Drug allowed. HCPCS Code updates occur annually in HCPCS Codes List in Table 2. In § 513.130, we describe the creation the January HCPCS update; the model We further discuss the drugs that will and periodic updates of an MFN Model will use an annual baseline period to be included in or excluded from the Drug HCPCS Codes List, which calculate the alternative add-on MFN Model in the following four designates the MFN Model drugs that payment amount described in section subsections. are subject to the MFN Model payments III.F. of this IFC; and these baseline specified in § 513 subpart C. 1. MFN Model Drug HCPCS Codes List periods will be aligned for consistency Specifically, to select the list of drugs in the model design. We will use an approach for including included in the MFN Model for the This approach for identifying the drugs in the MFN Model that is similar beginning of performance year 1 (that is, drugs that are included in the MFN to what we described in the October beginning January 1, 2021), the Model at the beginning of performance 2018 ANPRM. However, rather than regulation text at § 513.130(a)(1) codifies year 1 captures most of the drugs listed beginning with approximately 27 drugs, that, after making the exclusions in the October 2018 ASPE report,36 as discussed in the October 2018 specified in § 513.130(b)(1) and (b)(2), ANPRM, and adding drugs annually, we CMS identifies the top 50 drugs by which used the Medicare Part B will include approximately 50 Medicare HCPCS code with the highest aggregate National Summary Drug file from 2016 Part B drugs in the MFN Model for each 2019 Medicare Part B total allowed to identify approximately 27 HCPCS performance year. We will identify the charges, and adds those HCPCS codes to codes associated with high amounts of top 50 Medicare Part B separately the MFN Model Drug HCPCS Codes spending, and nearly all the drugs listed payable drugs with the highest List, after updating such HCPCS codes in the November 20, 2020 ASPE report, aggregated Medicare Part B total which applied the criteria in the MFN allowed charges in the baseline period, 35 CMS publishes a Medicare Part B Drug Model to Medicare Part B claims data after excluding certain claims, to result Dashboard, which can be used to view annual in an initial set of drugs that will be spending on drugs by HCPCS code. See: https:// 36 ‘‘Comparison of U.S. and International Prices www.cms.gov/Research-Statistics-Data-and- for Top Medicare Part B Drugs by Total included in the model beginning in Systems/Statistics-Trends-and-Reports/ Expenditures’’ https://aspe.hhs.gov/pdf-report/ performance year 1. Thereafter, annual Information-on-Prescription-Drugs/ comparison-us-and-international-prices-top- additions will follow a similar process MedicarePartB.html. medicare-part-b-drugs-total-expenditures.

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for 2018.37 This approach also results in as a primary factor is a more • Medicare Part B vaccines specified the inclusion of a variety of drugs and transparent, consistent, and clear in section 1861(s)(10) of the Act (that is, biologicals (including biosimilar approach because attempting to identify influenza, pneumococcal pneumonia, biological products) that are used to drugs for inclusion in the MFN Model and Hepatitis B vaccines, and any future treat common conditions in the based on groups or classes of drugs vaccine for COVID–19). These Medicare Part B beneficiary population. could become complicated and preventive products are paid under These drugs and biologicals with high confusing for MFN participants. There section 1842(o)(1)(A)(iv) based on annual Medicare allowed charges are are numerous drug classification average wholesale price (AWP), a price frequently prescribed and administered approaches available; for example, drug that does not include discounts or by various physician specialties to classification can be based on a rebates. Including such drugs in the beneficiaries with various medical chemical class, site of action, MFN Model also would not comport conditions. Examples of uses of the mechanism of action, as well as other with our test of an alternative add-on drugs included in the MFN Model are: factors. These approaches can become payment amount (described in section Drugs and biologicals used to treat difficult to apply consistently when III.F. of this IFC) because the statutory cancer and related conditions, drugs from different chemical classes add-on percentage under section 1847A biologicals used for the treatment of are used to treat the same condition, of the Act does not apply to these drugs. rheumatoid arthritis and other immune when a drug has more than one • Radiopharmaceuticals. Many mediated conditions, and biologicals mechanism of action, or when radiopharmaceuticals are typically used to treat macular degeneration. conditions are treated with drugs having acquired outside of the traditional drug Beneficiaries who receive such drugs, more than one mechanism of action. For supply chain. Nuclear pharmacies are often on a recurring basis, face example, the Medicare Part B biological frequently involved in the preparation substantial cost-sharing liability directly products commonly used to treat of patient-ready doses of these drugs, or through their supplemental rheumatoid arthritis include a variety of and Medicare Part B payment is insurance, and such costs may be partly monoclonal antibodies. Using broad frequently based on contractor pricing. avoidable (that is, reduced) if Medicare terms such as monoclonal antibodies to We are excluding radiopharmaceuticals payment for these drugs were not based identify a ‘‘group’’ of MFN Model drugs from the MFN Model because it is on the current ASP methodology. would include a variety of biologicals unlikely that we will be able to obtain Beginning with 50 of the highest that are commonly also used in treating reliable international drug pricing spend HCPCS codes based on annual other conditions, such as Crohn’s information for radiopharmaceuticals. Medicare Part B allowed charges during disease, ulcerative colitis, cancer, and • Oral Medicare Part B drugs, 2019, after taking into account certain multiple sclerosis. Attempting to select including oral anticancer drugs exclusions, focuses the MFN Model on MFN Model drugs using more narrow described in section 1861(s)(2)(Q) of the a wide variety of frequently utilized terms, for example by specifying agents Act, oral antiemetic drugs described in Medicare Part B drugs and specialties that exert effects on more specific section 1861(s)(2)(T) of the Act and that administer such drugs to Medicare inflammatory pathways, such as tumor immunosuppressive drugs described in FFS beneficiaries, and allows CMS to necrosis factor and interleukins, would section 1861(s)(2)(J) of the Act. Oral test the MFN Model payment on a broad miss biologicals that affect other anticancer, antiemetic, and many set of drugs and biologicals that are pathways, like T cell stimulation. These immunosuppressive drugs are often furnished to many beneficiaries. We approaches may also miss products that used outside of the provider and believe that including single source are primarily used to treat other supplier settings (for example, these drugs and biologicals (including diseases, but may be used less drugs are often used at home); therefore, biosimilar biological products) that frequently in rheumatoid arthritis, and we are excluding these oral drugs from move into the top 50 HCPCS codes on these approaches may not be readily the MFN Model. an annual basis will capture potential adaptable for novel products that may • Compounded drugs including shifts in utilization to drugs that had not be introduced over the 7-year products prepared by outsourcing yet been included in the MFN Model, if performance period of the model. facilities.38 Although subject to certain such shifting were to occur, and will In § 513.130(a)(2), we are codifying FDA requirements, these products are mitigate the potential for medically the process for annual updates of the not approved by FDA per se, and with unnecessary shifts in utilization. MFN Model Drug HCPCS Codes List to one exception under the OPPS 39 are not In developing this approach, we also update the list of drugs that will be billed under drug-specific HCPCS considered comments we received in included in the MFN Model for the codes; they are typically billed using response to the October 2018 ANPRM subsequent performance year, as further under ‘‘not otherwise classified’’ (NOC) on using drug classes to help inform described in section III.D.3. of this IFC. codes. Also, compounded drugs are which drugs to include in the MFN typically acquired outside of the Model, as well as requests to consider 2. Exclusion of Certain HCPCS Codes traditional drug supply chain, and how access to Medicare Part B drugs (as and Claims Medicare Part B payment for a whole and for specific subsets of In the October 2018 ANPRM, we compounded drugs is generally based drugs) might be affected by inclusion in discussed the potential exclusion of on contractor pricing, such as invoice the model. We considered these several groups of drugs from the pricing. We are excluding these drugs suggestions and believe that using potential IPI Model (83 FR 54555). because it is unlikely that we will be annual Medicare Part B allowed charges Commenters generally agreed that these able to obtain reliable international drug drugs should be excluded. As codified pricing information for compounded 37 El-Kilani Z, Finegold K, Mulcahy A, and Bosworth A. Medicare FFS Part B and International in § 513.130(b)(1), the MFN Model drugs. Drug Prices: A Comparison of the Top 50 Drugs. excludes the following types of drugs, Washington, DC: Office of the Assistant Secretary by excluding claims at the HCPCS code 38 See section 503B of the Federal Food, Drug, for Planning and Evaluation, U.S. Department of level, before identifying the top 50 drugs and Cosmetic Act (21 U.S.C. 353b) with respect to Health and Human Services. November 20, 2020 the definition of outsourcing facilities and their (https://aspe.hhs.gov/pdf-report/medicare-ffs-part- with the highest aggregate annual regulation by FDA. b-and-international-drug-prices). Medicare Part B total allowed charges: 39 C9257 Injection, bevacizumab, 0.25 mg.

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• Intravenous immune globulin code).40 The place of service exclusion purposes of the MFN Model, and products. In response to the October applies only to professional claims determine the appropriate length of 2018 ANPRM, a commenter suggested because place of service codes are not such exclusion (for example, all that CMS exclude plasma-derived used on institutional claims to identify performance years or several years after products and stated such products have home use. Specifically, professional the drug is first sold in the U.S.). potential unique sourcing and claims with place of service codes 04— Some commenters have suggested that distribution, and past supply shortages. homeless shelter, 12—home, 13— drugs in short supply (based on We note that FDA has identified a assisted living facility, 14—group home, inclusion on the FDA drug shortages current shortage related to one of the 16—temporary lodging, and 33— list) should be excluded from drug HCPCS codes that is among the top custodial care facility will be excluded payment models. As discussed drugs with high aggregate 2019 prior to identifying the top 50 drugs (by previously, we are excluding Medicare Part B total allowed charges HCPCS code). intravenous immune globulin products (J1569, Gammagard liquid infusion). For future years of model from inclusion on the MFN Model Drug Three other immune globulin products implementation, we seek comment on HCPCS Codes List, because these are also among the top drugs in 2019, whether all blood related, plasma products are at higher risk of shortage J1459 (Inj ivig privigen 500 mg), J1561 derived, and human tissue products based on their complex sourcing and (Gamunex-c/gammaked), and J1568 should be included in or excluded from production. Otherwise, based on our (Octagam injection). After considering the MFN Model. We also seek comment experience with ASP pricing, shortages this concern, we are excluding on how CMS should define such of high cost single source drugs and intravenous immune globulin products products and what would be the biologicals are uncommon, of short from the MFN Model because these supporting rationale for such an duration, and generally apply to some products are at higher risk of shortage exclusion and how to address such but not all package sizes of a drug. As based on their complex sourcing and considerations in the future. We note described in section III.E.12. of this IFC production, and we are aware of the that we are also considering as a and codified in § 513.210(d)(2), we ongoing exploration of the potential potential addition to the model design include a quarterly payment exception benefit of plasma in the treatment of whether certain drugs, such as certain for MFN drugs that are in short supply patients with COVID–19. gene and cell therapies (for example, (based on inclusion on the FDA drug • Drugs that are subject to an EUA or chimeric antigen receptor T-cell (CAR– shortages list). We believe it will be less receive FDA approval to treat patients T) products) and drugs approved by disruptive to the MFN Model to include with suspected or confirmed COVID–19. FDA after the start of the MFN Model a quarterly payment exception for MFN The exclusion of these drugs will that are indicated for and used to treat Model drugs during the time they are in minimize any potential for the MFN rare diseases or conditions, should be short supply than to exclude such drugs Model to impact rapid, widespread excluded from the MFN Model for all from the MFN Model altogether because availability of such drugs in the U.S. to performance years, or for several years a quarterly payment exception approach treat patients with suspected or after the drug is first sold in the U.S. We will avoid changing the inclusion status confirmed COVID–19. note that under the MFN Model, annual of drugs should a shortage occur and • Drugs without drug-specific HCPCS Medicare Part B allowed charges would again when the shortage is resolved, codes, that is, those billed under ‘‘not have to exceed tens of millions of eliminate the need to consider otherwise classified’’ (NOC) codes, such dollars for such drugs to reach the top developing a process to add and remove 50 and be added to the MFN Model. We replacement drugs to maintain the as J3490. NOC codes are used to bill for also note that many of the top 50 drugs number of MFN Model drugs, and avoid drugs not assigned to a particular in 2019 are used to treat conditions with manufacturers having to change HCPCS code. NOC codes typically limited populations and were first processes for capturing sales of such include a variety of unrelated drugs that approved within the last 5 years. In drugs in their ASP calculations as cannot be easily separated for the addition, we note that while drugs may discussed in section III.L. of this IFC purpose of ranking allowed charges of initially be approved for one or a few (under this policy, manufacturers will the individual drugs. Also, significantly very narrow indications, subsequently not include in their calculation of the greater claims processing complexity for approved indications can quickly manufacturer’s ASP any units of MFN Medicare and MFN participants would expand the use of the drug to a much Model drugs billed by MFN participants result if we had to identify whether an larger patient population. We are where the MFN Drug Payment Amount MFN Model drug was billed under a considering whether we should exclude is paid by Medicare as the primary NOC code during MFN Model certain gene and cell therapies based on payer). operations. By excluding HCPCS codes supply chain criteria, similar to our Finally, we considered whether an for these types of drugs, these drugs will policy to exclude vaccines and exception to inclusion on the MFN be fully excluded from the MFN Model. compounded drugs. For future years, we Model Drug HCPCS Codes List might be While we intend that the MFN Model seek comment on whether we should appropriate for MFN Model drugs in drugs will encompass a wide variety of exclude certain gene and cell therapies cases where pharmaceutical frequently utilized Medicare Part B or new drugs for the treatment of rare manufacturers that distribute the drug drugs, we also intend that drugs will not diseases and conditions from the MFN in the U.S. do not own the rights to the be included on the basis of substantial Model, and how CMS would identify drug product for distribution outside the use at home. Thus, in § 513.130(b)(2), such drugs for exclusion, particularly U.S. and therefore do not control ex- we codify the exclusion of claims that how we would define such drugs, U.S. pricing for the drug product. To were processed and paid by the DME identify rare diseases and conditions for avoid a gaming opportunity whereby MACs as described in 42 CFR manufacturers’ new or recent business 421.404(c)(2), and professional claims 40 The DME MACs process Medicare Durable arrangements create such cases, this with a place of service code that Medical Equipment, Orthotics, and Prosthetics type of exception could be defined such indicates the drug was used in a home, (DMEPOS) claims for a defined geographic area or that only ownership rights that were including home-like settings, prior to ‘‘jurisdiction,’’ servicing suppliers of DMEPOS. Professional claims must comply with the ASC X12 transferred prior to the October 2018 identifying the top 50 drugs (by HCPCS 837 Professional guide (005010X222A1). ANPRM, when CMS announced a new

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Medicare Part B drug payment model with participating in the model. We such drugs to the MFN Model. In was being developed, would qualify. To believe that making fewer changes to the addition, this approach will serve as a avoid an exception being too broad, we MFN Model Drug HCPCS Codes List mechanism to identify newer drugs with are concerned that additional criteria will result in MFN participants having high annual Medicare Part B spending should be required to qualify for it, such to make fewer changes to acquisition for inclusion in the MFN Model. as whether the increase in the MFN arrangements, and this in turn will To maintain transparency, when we Model drug’s applicable ASP (a measure lessen any potential for disruption in add HCPCS codes that are new to the of U.S. prices) based on sales since workflow and care delivery compared to top 50 or are replacement codes for October 2018 has been slower than a quarterly update process. HCPCS codes that are listed on the MFN inflation (that is, the change in the CPI– Additionally, as specified in Model Drug HCPCS Codes List, we will U from the end of October 2018 through § 513.130(a)(4), some quarterly changes list the code’s start date for inclusion in the ASP calendar quarter for the first may be necessary to comport with the MFN Model. In addition, we will calendar quarter of the model), and HCPCS coding updates that are revise HCPCS codes on the MFN Model whether the U.S. manufacturer makes a applicable to the HCPCS codes on the Drug HCPCS Codes List as necessary to legally enforceable commitment to MFN Model Drug HCPCS Codes List, reflect quarterly HCPCS code updates future U.S. price increases being slower such as when a code is terminated and that are applicable to the HCPCS codes than inflation moving forward, if such a successor code is established. on the MFN Model Drug HCPCS Codes an exception were to be granted. In For each annual update for List, for example when a permanent code replaces a temporary code, a addition, to maintain the exception for performance years 2 through 7, as HCPCS code is terminated and a the remainder of the model, the increase described in § 513.130(a)(2), we will replacement code is established, or a in the MFN Model drug’s applicable array in descending order all separately HCPCS code is established for Medicare ASP since October 2018 would need to payable Medicare Part B drugs, using use. In such case, we will include an be assessed quarterly to determine HCPCS codes, based on total allowed end date on the MFN Model Drug whether it continues to be slower than charges after applying the exclusions HCPCS Codes List for the terminated inflation. Given the complex and codified in § 513.130(b)(1) and (b)(2), code. We will notify MFN participants numerous relationships that using the most recent full calendar manufacturers may have across U.S. and of updates to the MFN Model Drug year’s Medicare Part B claims from all international markets, we are not HCPCS Codes List no less frequently providers and suppliers. Those drugs (as including such an exception for the than quarterly by adding the updated identified by HCPCS codes) that have MFN Model. MFN Model Drug HCPCS Codes List to total allowed charges that fall in the top We seek comments for future years on the MFN Model website (https:// 50 drugs by spending for that calendar our approach to identifying and innovation.cms.gov/initiatives/most- year that are not already on the MFN maintaining the MFN Model Drug favored-nation-model). HCPCS Codes List and whether there is Model Drug HCPCS Codes List will be a need for an exception relating to added to the MFN Model Drug HCPCS 4. Approach for Removing Drugs From manufacturers’ ownership of drug Codes List to take effect on the first day the MFN Model Drug HCPCS Codes List products internationally, and if so, how of the next performance year and the We do not anticipate that drugs will such an exception might be defined and MFN Drug Payment Amount that will be removed from the MFN Model operated transparently. apply will be based on the applicable frequently. In accordance with MFN Price phase-in for that § 513.130(a)(3), we will remove drugs 3. Annual Updates to the MFN Model performance year and will follow the from the MFN Model Drug HCPCS Drug HCPCS Codes List annual payment updates thereafter. This Codes List only under the following As discussed in section III.D.1. of this process will be used only to add HCPCS limited circumstances, but no more IFC, the MFN Model will begin with 50 codes that are new to the top 50—to frequent than quarterly, to align with drugs and biologicals by HCPCS code on maintain consistency, we will not quarterly MFN Model payment updates: the MFN Model Drug HCPCS Codes List remove any codes from the MFN Model • If they are permanently withdrawn for performance year 1. We will keep Drug HCPCS Codes List on the grounds from the U.S. market; approximately 50 drugs by HCPCS code that the HCPCS code dropped out of the • If a specific HCPCS code included in the MFN Model during the 7-year top 50. We will keep all HCPCS codes on the MFN Model Drug HCPCS Codes performance period so that drugs that that were included on the MFN Model List is terminated with no replacement continue to account for a large portion Drug HCPCS Codes List for the prior code available or planned; or of Medicare Part B drug spending will performance year on the MFN Model • The drug is excluded from the MFN continue to be included in the model. Drug HCPCS Codes List, except in Model pursuant to the exclusions in However, we believe that some certain circumstances as noted in § 513.130(b)(1), for example a HCPCS adjustments to the MFN Model Drug section III.D.4. of this IFC, in order to code describes a generic drug approved HCPCS Codes List will likely be have greater stability in the set of drugs under an ANDA or a drug with an EUA required from time to time as drugs that are included in the MFN Model or FDA approval to treat patients with enter and exit the market and as across the performance years. As a suspected or confirmed COVID–19. utilization of Medicare Part B drugs result, in performance years 2 through 7, To maintain transparency, we will (measured by annual total allowed the number of HCPCS codes on the remove HCPCS codes by setting an end charges) changes. Thus, we will update MFN Model Drug HCPCS Codes List date on the MFN Model Drug HCPCS the MFN Model Drug HCPCS Codes List may be greater than 50. We believe this Codes List at the next quarterly update annually. The annual update process approach has the potential to identify after CMS becomes aware, through will occur prior to the beginning of each drugs that are alternative therapies to environmental scanning activities, that performance year rather than more MFN Model drugs, such as competitor all of the NDCs assigned to a HCPCS frequently, such as a quarterly process, products, where MFN participants may code have been withdrawn from the because less frequent changes to the shift utilization to avoid using drugs U.S. market and the drug is permanently MFN Model Drug HCPCS Codes List subject to the MFN Model payment, and withdrawn from the U.S. market, or the will decrease the burden associated will provide a mechanism for adding HCPCS code has been terminated with

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no replacement code available or 2019 Medicare Part B total allowed exclusion resulted in one HCPCS code, planned, or the exclusion in charges. This process excluded HCPCS J7192 (Factor viii recombinant nos), no § 513.130(b) applies. HCPCS codes that codes for two influenza vaccines (90662 longer falling within the top 50 drugs in are removed from the MFN Model Drug (Iiv no prsv increased ag im) and 90653 2019. HCPCS Codes List will no longer be (Iiv adjuvant vaccine im)), two Using this approach for selecting subject to the MFN Model payment, but pneumococcal pneumonia vaccines MFN Model drugs, the resulting rather will be subject to current (90732 (Ppsv23 vacc 2 yrs+ subq/im) performance year 1 MFN Model Drug Medicare payment policies. If the and 90670 (Pcv13 vaccine im)), and a HCPCS Codes List includes single conditions for removal no longer exist, radiopharmaceutical (A9606 (Radium source drugs and biologicals that the HCPCS code could again qualify for ra223 dichloride ther)) from the MFN accounted for approximately 75 percent inclusion on the MFN Model Drug Model Drug HCPCS Codes List. The of annual Medicare Part B drug allowed HCPCS Codes List at the next annual exclusion of intravenous immune charges for separately payable drugs update. globulin products excluded four HCPCS during 2019. Table 2 displays the list of codes: J1459, Inj ivig privigen 500 mg; 5. Performance Year 1 MFN Model Drug MFN Model drugs (by HCPCS code) that J1561, Gamunex-c/gammake; J1568, HCPCS Codes List are included on the MFN Model Drug Octagam injection; and J1569, HCPCS Codes List for the beginning of To create the MFN Model Drug Gammagard liquid injection. performance year 1, along with the top HCPCS Codes List for performance year Additionally, one HCPCS code that billing specialties. 1, we arrayed drug HCPCS codes by describes a generic drug (J9395, aggregate 2019 Medicare Part B total Injection, fulvestrant) was excluded. CMS will publish the MFN Model allowed charges 41 after applying the Excluding claims that were processed Drug HCPCS Codes List quarterly on the exclusions in § 513.130(b)(1) and (b)(2). and paid by the DME MACs resulted in MFN Model website (https:// We then identified the top 50 drugs by the following HCPCS codes no longer innovation.cms.gov/initiatives/most- HCPCS code with the highest aggregate falling within the top 50 drugs in 2019: favored-nation-model), in advance of J7605 (Arformoterol non-comp unit); the calendar quarter, along with MFN 41 We used 2019 final action claims data that were J7686 (Treprostinil, non-comp unit); and Model Payment amounts and other available in the CMS Chronic Conditions Data MFN Model information and materials. Warehouse in September 2020 where Medicare was J3285 (Treprostinil injection). Excluding the primary payer. claims based on the place of service BILLING CODE 4120–01–P

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BILLING CODE 4120–01–C and certain other limitations discussed accounted for within these data; E. Model Payment Methodology for MFN later in this section. therefore, existing sources for Model Drugs Section III.E.1. of this IFC identifies international drug sales data may the data sources for the MFN Model overstate actual prices realized by The MFN Model will test an drugs’ international drug pricing manufacturers. innovative approach to calculating drug information that we will use to calculate In the October 2018 ANPRM, we payment through use of a more the MFN Price for each drug. Section considered establishing a data collection comprehensive set of drug pricing data III.E.2. of this IFC outlines the system for manufacturers to report to to calculate an alternative payment international drug pricing information CMS their international drug sales data amount for MFN Model drugs, along we will include in these calculations for prices and units sold to support the with an alternative add-on payment, and the included countries. Section calculation of the model payment for which is described in section III.F. of III.E.3. of this IFC defines the MFN Drug each drug. In response to the October this IFC. Payment for drug Payment Amount. Section III.E.4. of this 2018 ANPRM, we received comments administration services, when IFC outlines our approach to calculating stating that CMS should use existing applicable, will continue to be each drug’s MFN Drug Payment data sources for international drug separately billed by model participants Amount. Section III.E.5. of this IFC pricing information in order not to place to Medicare; there will be no change in describes the phase-in of the MFN Price. burden on manufacturers. Some the payment for drug administration Section III.E.6. of this IFC describes the commenters expressed concerns that services under the MFN Model. alternative calculation for the MFN Drug new data reporting would greatly Providers and suppliers will continue to Payment Amount for situations where increase burdens and costs for purchase MFN Model drugs, furnish no international drug pricing manufacturers, further limiting their such drugs to beneficiaries, submit information is available for an MFN ability to invest in research and claims to Medicare, and collect Model drug. Section III.E.7. of this IFC development for innovative therapies, applicable beneficiary cost-sharing. provides illustrative MFN Drug Payment and would be impractical because Under the MFN Model, payments for Amounts for each drug on the defining price reporting for foreign separately payable Medicare Part B performance year 1 MFN Model Drug markets would be too complex and drugs will include the alternative drug HCPCS Codes List in Table 2 using could not adequately capture fluid payment amount and the alternative historical data. Section III.E.8. of this pricing policy changes. We appreciate add-on payment amount, both subject to IFC describes the timing of data and these concerns, and as such, we will sequestration, as applicable. MFN Drug Payment Amount updates. rely on existing data sources for Section III.E.9. of this IFC describes purposes of calculating MFN Drug Similar to the current approach under adjustments to the phase-in formula and Payment Amounts. We believe that section 1847A of the Act, the MFN incentives for manufacturers to address existing data sources are adequate for Model alternative payment limit for the rising U.S. drug prices. Section III.E.10. purposes of calculating country-level ‘‘drug portion’’ of payment for MFN of this IFC describes the limitation on prices, GDP-adjusted country-level Model drugs (that is, not including the the MFN Drug Payment Amount. prices, and the MFN Prices, as described add-on amount) will be calculated by Section III.E.11. of this IFC describes the in this IFC, that will be used to calculate CMS quarterly. This amount is called method for establishing MFN Drug the MFN Drug Payment Amount. the MFN Drug Payment Amount. The Payment Amounts for MFN Model Commenters also noted that one calculation of the MFN Drug Payment drugs added to the model for potential adverse reaction to the model Amounts is codified in § 513.210(b). performance year 2 and subsequent described in the October 2018 ANPRM Beneficiary cost-sharing will apply to performance years. Section III.E.12. of may be a shift internationally to a high the MFN Drug Payment Amount for this IFC describes the quarterly payment price and high rebate pricing strategy. included drugs. exception for MFN Model drugs in short Specifically, commenters expressed We will calculate an MFN Drug supply. Section III.E.13. of this IFC concern that if the international drug Payment Amount for each drug on the describes continued payment of the pricing information used to establish MFN Model Drug HCPCS Codes List blood clotting factor furnishing fee payment under a model relied on the based on an MFN Price, which will be under the MFN Model. list prices in the included countries, derived from the lowest GDP-adjusted then manufacturers would restructure 1. Data Sources on International Drug their pricing arrangements to increase country-level price, based on non-U.S. Pricing Information OECD member countries with a GDP per the list prices of the model’s drugs in capita that is at least 60 percent of the We will rely on existing data sources those countries, and offer higher rebates U.S. GDP per capita.42 We will use GDP to obtain data that we will use to to offset the increased list price. CMS per capita information that is based on calculate and update the MFN Drug appreciates this concern, and we will purchasing power parity. We are also Payment Amounts. We will use existing prioritize use of available international establishing limits such that the MFN data sources that contain international drug pricing information that Drug Payment Amount will not exceed drug pricing information, including list incorporate discounts and rebates to the non-model payment for the drug prices, sales and/or volume data (for extent possible, rather than just the list (excluding any non-model add-on example, package size and number of prices. payment amount), will not apply to packages sold), as available, in order to We have assessed several existing drugs that are not separately payable, optimize operational efficiency. Sales data sources to determine the may be based on ex-manufacturer prices availability and sufficiency of 42 Individual countries differ in the regulatory (sometimes called the ex-factory price), international drug pricing information. processes and standards governing approval of that represent actual or calculated prices In § 513.140(c), we are codifying the use drugs and biologicals. Use of international drug paid to the manufacturer by wholesalers of one or more international drug pricing information in the MFN Model should not and other distributors, retail prices, pricing data sources. Specifically, we be interpreted to connote FDA approval or to otherwise describe any scientific or regulatory prices for other distribution channels, or will use one or more data sources, relationship between U.S.-approved and non-U.S.- a combination thereof. Confidential available to CMS at least 20 business approved products. manufacturer rebates will not likely be days prior to the start of a calendar

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quarter, that utilize a standardized • A data source with sales and from 10 included countries, Data Source method for identifying drugs across volume data for the applicable ASP 2 contains sales and volume data for countries within that data source, such calendar quarter from at least one MFN Model drug X for the applicable as using an internationally recognized included country, that is, a non-U.S. ASP calendar quarter from 15 included method for identifying scientific and OECD member country at the end of the countries, Data Source 3 contains sales nonproprietary names (for example, applicable ASP calendar quarter with a and volume data from the third calendar active ingredient name) and a standard GDP per capita that is at least 60 percent quarter of 2020 for MFN Model drug X method for identifying drug forms that of the U.S. GDP per capita. from 16 included countries, and Data at a minimum distinguishes among • A data source that does not have Source 4 contains list price information injectable, oral, and other forms of a sales and volume data for the applicable for the applicable ASP calendar quarter drug. For example, the data source ASP calendar quarter, but contains sales from all included countries. In this might use the International and volume data for any prior calendar scenario, we would use information Nonproprietary Names (INN), as quarter beginning on or after October 1, solely from Data Source 2 to determine applicable.43 This process requires 2019 from at least one included country. the MFN Price for MFN Model drug X • mapping between the data source’s The extracted data used by CMS to by calculating unadjusted country-level standardized method for identifying determine the most recent MFN Price prices for each of the 15 countries for scientific and nonproprietary names and used to calculate an MFN Drug Payment which Data Source 2 contains HCPCS codes, as discussed and Amount posted on the MFN Model information, and we would not use Data illustrated in section III.E.7. of this IFC. website. • Sources 1, 3, or 4 to calculate the MFN Further, we will use one or more data A data source with ex-manufacturer Price for MFN Model drug X for that sources that contain international drug price data for the applicable ASP quarter. For further illustration of how pricing information stated in U.S. calendar quarter from at least one we will apply the hierarchy in currency, such as list prices, ex- included country. calculating MFN Drug Payment • A data source with list price data manufacturer prices (sometimes called Amounts, see section III.E.4.a. of this for the applicable ASP calendar from at the ex-factory price) that represents IFC. actual or calculated prices paid to the least one included country. We will use international sales and In each of these cases, if there is more manufacturer by wholesalers and other volume information from as early as the than one data source meeting the distributors, actual or calculated sales third calendar quarter in 2020 to requirements in § 510.140(c), we will for retail and other distribution minimize the possibility of having no use the data source at the highest level channels, or volume data (for example, international sales and volume of the hierarchy that contains number of units sold). information from the highest number of information with which to calculate the If more than one data source is included countries, and, if available, MFN Price and to mitigate the potential available for an MFN Model drug, as incorporates discounts and rebates into effect of manufacturers’ limiting the noted previously, we will prioritize the its drug pricing information. It is reporting of international drug pricing data sources using a hierarchy that we possible that we will use different data information during the model describe later in this section. Thus, for sources for different drugs over different performance period. each MFN Model drug, we will identify In addition, the one or more data quarters. We will use the data as and use the most comprehensive data sources we will use will have available from the data source, and we source available, using the hierarchy will not make adjustments to account mechanisms in place to maintain, codified in § 513.140(c)(3). We will use for differences between the data sources update, and correct, if necessary, the only one data source for an MFN Model or for confidential rebates. We note that, data source on at least a quarterly basis. drug for a quarter, meaning we will not based on the performance year 1 MFN Further, the data sources we will use combine data from different data Model Drug HCPCS Codes List shown in will be maintained by organizations that sources or time periods to calculate the Table 2, levels 4 and 5 of the hierarchy seek to limit the lag inherent in data to MFN Drug Payment Amount for an will only apply to MFN Model drugs no more than 180 days from the end of MFN Model drug for a quarter. that are added to the MFN Model Drug the calendar quarter for which drug Whenever possible, we will use HCPCS Codes List after performance pricing information is compiled to the international drug pricing information year 1 and perhaps for Q2043 time that the organization makes such from two calendar quarters prior to the (Sipuleucel-t auto cd54+) 44 and J2507 updates available to users of the data calendar quarter to which the MFN Drug (Pegloticase injection), because for other source. Payment Amount will apply since the MFN Model drugs in performance year We plan to monitor the ASP payment limits that apply to that 1, the first three levels of the hierarchy implementation of a World Health calendar quarter are based on will always result in an available data Assembly (WHA) resolution to manufacturers’ U.S. sales from two source as we consider the data used by ‘‘improve the transparency of markets calendar quarters prior such that the CMS to create the illustrative MFN for medicines, vaccines, and other U.S. and international drug pricing data Prices and MFN Drug Payment Amounts health products.’’ This resolution aims will be based on information from the in Table 6 of this IFC to satisfy level 3 to help Member States make more same calendar quarter. We use the term of our hierarchy. To illustrate: Suppose informed decisions when purchasing applicable ASP calendar quarter to we identified four data sources meeting health products, negotiate more mean the period that is two calendar the requirements of § 510.140(c), where affordable prices, and ultimately expand quarters prior to the calendar quarter to Data Source 1 contains sales and access to health products for their which the MFN Drug Payment Amount volume data for MFN Model drug X for populations. In particular, the WHA 45 will apply. the applicable ASP calendar quarter resolution — The hierarchy of data sources we will • Urges Member States to publicly use is as follows: 44 No data on international pricing or sales of share information on net prices paid for Sipuleucel-t auto cd54+ were available in the data 43 World Health Organization, International source used for Table 6, but international drug 45 World Health Assembly Update, 28 May 2019, Nonproprietary Names accessed via https:// pricing information for this drug could be available accessed via: https://apps.who.int/gb/ebwha/pdf_ www.who.int/medicines/services/inn/en/. in other sources. files/WHA72/A72_R8-en.pdf.

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health products, to promote greater the HCPCS code descriptor for the MFN observations. For data sources with transparency on pharmaceutical patents Model drug. In order to align with our international sales and volume data for and clinical trial results and to improve existing policies for how we utilize a given MFN Model drug, we will suppliers’ reporting of information such manufacturer-reported ASP data to exclude from the calculation of the as sales revenues and units sold; and, calculate payment limits, we may find unadjusted country-level price data that • Requests the WHO secretariat to it necessary to make adjustments to the fall below a minimum threshold or are support the development and data that we extract from international incomplete, that is, international pricing implementation of national policies drug pricing information data sources. data with less than $1,000 in quarterly relevant to transparency and to monitor For example, in calculating payment sales, with less than 1,000 units in the impact of transparency on amounts based on ASP we do not adjust quarterly volume, or where both sales affordability and availability of health the volume or units of a drug (that is, and volume data are not present. We products, including the effect of the amount of a drug in a package) for believe that $1,000 in quarterly sales differential pricing. intentional overfill (see 75 FR 73466). If and 1,000 units in quarterly volume for We will monitor developments we find that a data source from which a package size is an appropriate related to this WHA resolution and we obtain international drug pricing minimum necessary to establish assess its impact on the availability of information makes adjustments for sufficient sales and volume for data to data we will use to calculate and update overfill, we will make adjustments to be included in the calculation of a MFN Drug Payment Amounts. the data that we extract from such meaningful and reliable unadjusted As discussed previously, we will use source so that the extracted data is country-level price for an MFN Model a hierarchy when selecting from comparable to ASP data. There could be drug and will minimize inclusion of available data sources and start by using other cases where we will have to potential outlier data. We will exclude data sources that incorporate discounts examine the extracted data and make presentations with low volume or low and rebates to the extent possible in adjustments to align the data with a sales to prevent outlier presentations order to address commenters’ concerns HCPCS code descriptor for an MFN from exerting undue influence. about a shift internationally to a high Model drug. Specifically, we will adjust In developing the illustrative MFN price and high rebate pricing strategy. the extracted international drug pricing We believe that using one or more data Prices shown in Table 6, we applied information for MFN Model drugs when sources will help to ensure that we will these exclusions. Minimal sales and the data source shows the package size capture sufficient information to volume across all countries were of a drug product that is inconsistent monitor the international drug pricing excluded because of the low volume or with the manufacturer’s information landscape and to calculate and update sales exclusion criteria. We explored the about that product as determined by MFN Drug Payment Amounts. Data impact of different volume and CMS. In such cases where we confirm sources that include the information expenditure thresholds, and determined a difference, we will make adjustments described previously, as determined by that $1,000 in quarterly sales and 1,000 to the pricing, sales and volume data as CMS, will be considered sufficient, and units are a reasonable threshold to as such, we will calculate MFN Drug necessary before calculating the reduce risk associated with extremely Payment Amounts for MFN Model unadjusted country-level price for the low values. We found that data with drugs using information extracted from drug at the HCPCS code level. We potential outlier sales remained such data sources. Specifically, as believe that such cases will be rare. relatively common with lower necessary, for each MFN Model drug, However, we identified the need to thresholds (that is, below $1,000 in we will extract and use data that align make such adjustment to the quarterly sales). While using higher with the data sources’ standardized international drug pricing information thresholds may further reduce potential method for identifying scientific and we used to illustrate the MFN Drug inclusion of outlier sales data, doing so nonproprietary names and dosage forms Payment Amounts for J9311 (Inj would result in having less data to (for example, injectable forms), and with rituximab, hyaluronidase) shown in calculate unadjusted country-level the HCPCS code’s long descriptor, Table 6 to align the package size volume prices. including dosage form, for the HCPCS with manufacturer labeling and the The exclusion of international pricing codes on the MFN Model Drug HCPCS HCPCS code dosage descriptor. We note data with less than $1,000 in quarterly Codes List, as applicable. Further, we that there could be additional cases if sales or with less than 1,000 units in will only use the extracted data for international drug pricing data sources quarterly volume from the calculation of dosage formulations that could be that we will select show prices, sales or the unadjusted country-level price will described by the MFN Model drug’s volume data that are adjusted for greatly minimize the potential risk for HCPCS code descriptor as determined intentional overfill, include multiple including possible outlier or errant data. by CMS when such limitation is not ingredients for a single drug product, or To better understand this potential feasible prior to extracting the data. For are in error (for example, the package issue, we considered the impact of example, for a drug, one HCPCS code size represents the maximum volume of including or excluding data with less may include drug products that are a a vial instead of the volume of drug in than $1,000 in quarterly sales or less certain type of formulation, such as a package). than 1,000 units in quarterly volume in short-acting, intravenously administered We will only use the extracted data the calculation of the unadjusted drug products, and another HCPCS code that have complete package size country-level price. There was little may include drug products with the information. As discussed previously, impact from including these data but, as same scientific and nonproprietary we will use a hierarchy to determine a potential safeguard to prevent name but a different formulation (such which data source to use for each MFN inclusion of inappropriately low or high as a long-acting suspension for Model drug for a quarter, in which we international drug pricing information intramuscular injection), and the will select a data source that includes in our calculations for the MFN Model, extracted data contains international sales and volume data first. Data we will exclude such data from the drug pricing information for both without both sales and volume data will calculation of the unadjusted country- formulations. In such case, we will align not be able to be combined with other level price. Overall, where this the extracted data in accordance with data, therefore we will exclude such approach had more than a 1 percent

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impact, there tended to be an increase amount and beneficiary cost sharing countries. We received wide-ranging in the MFN Prices. will be recalculated to reflect the and helpful feedback in response to the We also considered whether pricing revised prices. If prior to calculating the October 2018 ANPRM regarding which information that is greater than or less unadjusted-country level prices for a countries’ data to include in a model. In than 95 percent of the mean across all quarter, the data source confirms that addition to comments received to the data for the drug at the equivalent of the there is an error that they plan to correct October 2018 ANPRM, we also HCPCS code billing unit level should be in a future version of the dataset and we conducted significant outreach to considered a possible outlier or error have the corrected information, we will stakeholders, such as stakeholder and whether trimming such data or make the correction to avoid the need to meetings and conference calls, to gather removing such data would be reprocess claims later. Therefore, we do targeted feedback. There was also a warranted. In our experience with not believe it is necessary to take further substantial number of media and press international drug pricing information steps to trim or remove potential outlier reports surrounding which countries’ data sources, outlier or potentially or erroneous international drug pricing data to include in the MFN Model. erroneous data appear only in isolated information before calculating the Generally, we received a significant instances and are often suggestive of unadjusted country-level prices. We number of comments that expressed unintended differences in the unit at note that CMS does not make outlier opposition to including data from which data is shown. For example, the adjustments to ASP data. countries that have health care systems pricing data for a product with a In addition, for future years, we seek that are substantially dissimilar to the standard unit of one gram in one comment on whether a threshold should U.S.’s health care system. Specifically, country could appear to be 1,000 times be applied to determine whether the many commenters stated that data from lower than the pricing data for that same MFN Drug Payment Amount should be countries utilizing government-run product from other countries in the data recalculated for a prior quarter. health care systems or imposing strict source; in such a case, it seems likely Specifically, we are interested in drug price controls should be excluded. that the data for the one country with a comments on whether recalculations Alternatively, other commenters noted very low relative price represents the should only occur when the that CMS should consider broadening price per milligram not per gram and international drug pricing information the scope to include more countries, such data would likely be corrected over data source used corrects its data and because the more countries that are time by the data source. We believe the impact on the MFN Price is more included in the index, the harder it international drug pricing data sources than a nominal amount. We seek would be for pharmaceutical companies have mechanisms to correct such comment on the appropriate amount of to manipulate or game the pricing discrepancies based on market research such threshold and how a nominal changes. Commenters also of currently available international drug amount should be defined. Finally, in recommended utilizing various criteria pricing information data sources. the event that the international drug for selecting the countries that would be Further, as codified in § 513.140(c), the pricing information data source that we included, such as the launching speed international drug pricing information used to calculate the MFN Drug of new drugs, the presence of rigorous data sources that we will obtain will Payment Amount for an MFN Model health technology assessment, the have mechanisms in place to maintain, drug for a quarter identifies an error in proportions of public and private update, and correct, if necessary, the their data and does not correct such markets, the economies of those information on international drug error within 180 days after the countries, and Human Development 47 pricing in the database on at least a applicable ASP calendar quarter, we Index (HDI). quarterly basis. As such, because we seek comment on whether CMS should Based on the comments received, we will revise the MFN Drug Payment recalculate the MFN Drug Payment believe the most appropriate criteria for Amounts quarterly, we will recalculate Amount for such MFN Model drug and considering a country for MFN pricing the MFN Drug Payment Amounts for up quarter using international drug pricing is membership in the OECD and GDP to four prior quarters when revised information in accordance with the per capita relative to the U.S. The international drug pricing information is hierarchy in § 513.140(c)(3) after current list of OECD countries includes available in the data source that we used excluding the data source we initially all countries included in the October 2018 ANPRM as well as Australia, to calculate the MFN Model drug’s MFN used. We also seek comment on whether Chile, Colombia, Estonia, Hungary, Price for the relevant quarter or ASP CMS should adopt an alternative Iceland, Israel, Latvia, Lithuania, updates for the relevant quarter are approach to remediating such data Luxembourg, New Zealand, Norway, available.46 In cases where an MFN errors. Poland, Portugal, Republic of Korea, Drug Payment Amount for a prior 2. International Data Included in the Slovakia, Slovenia, Spain, Switzerland, quarter is recalculated by CMS, CMS MFN Model and Turkey. OECD countries comprise a will prospectively apply the In the October 2018 ANPRM, for set of countries that share with the U.S. recalculations in the quarterly update purposes of a potential IPI Model, we democratic principles and commitment following the availability of revised stated that we were considering using to market-based economies, and these international drug pricing information pricing data from the following countries’ GDP per capita (based on and ASP updates, and will not countries: Austria, Belgium, Canada, purchasing power parity) range from automatically reprocess claims to apply Czechia, Denmark, Finland, France, the recalculation, but reserves the right Germany, Greece, Ireland, Italy, Japan, 47 The Human Development Index is utilized by to do so. To the extent that MFN Model Netherlands, and the United Kingdom. the United Nations and is ‘‘is a summary measure claims are reprocessed due to revisions We considered including these of average achievement in key dimensions of to the international drug pricing human development: a long and healthy life, being countries’ data as they are either knowledgeable and have a decent standard of information, the Medicare payment economies comparable to the U.S. or living. The HDI is the geometric mean of they are included in Germany’s market normalized indices for each of the three 46 We will apply the recalculations in the dimensions.’’ Please see the United Nations quarterly update following the availability of basket for reference pricing for their Development Programme’s Human Development revised international drug pricing information and drug prices, and existing data sources Reports for more information: http://hdr.undp.org/ ASP updates. contain pricing information for these en/content/human-development-index-hdi.

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approximately 25 percent of the U.S. Opportunity (FREOPP) recommended Factbook,51 the World Bank,52 and the GDP per capita to over 175 percent of an alternative approach called the International Monetary Fund.53 Upon the U.S. GDP per capita. Based on this Market-Based International Index (MBII) examining these sources, we noted that wide range of GDP per capita data, we as a benchmark for evaluating other the GDP data across these sources are believe it is most appropriate to include countries’ prescription drug pricing highly associated with one another. We available international drug pricing systems; 50 this approach would include will use the CIA World Factbook as our information for countries with a GDP data from the following countries that source for GDP data as it is issued by a per capita of at least 60 percent of the FREOPP identified as having market- U.S. government agency and includes U.S. GDP per capita, as codified in based health care systems: Austria, estimates for all OECD member § 513.140(b). We believe that applying a Belgium, Czechia, Denmark, France, countries. We will use the following minimum of 60 percent of the U.S. GDP process to determine the countries that Germany, Ireland, Japan, Netherlands, per capita strikes a balance between— were non-U.S. OECD member countries (1) having too low a GDP per capita Portugal, Singapore, Slovakia, and as of October 1, 2020, with a GDP per threshold and including data from Switzerland. capita that is at least 60 percent of the countries with economies that are Based on analyses examining U.S. GDP per capita. For each country, substantially different from the U.S., potential alternatives, we believe that we will assess the GDP per capita based while; (2) also not having such a high none of these alternative approaches on purchasing power parity that is GDP per capita threshold that the list of would be as objective and predictable available in the CIA World Factbook at countries would be very short, which for purposes of calculating MFN Prices the end of the applicable ASP calendar commenters suggested we should avoid. as our approach. Our approach will quarter. The CIA World Factbook To avoid creating a potential incentive result in a large set of countries that are contains the most recent estimate of for countries to discontinue their economically similar, have reasonably GDP per capita based on purchasing membership in the OECD, we will comparable purchasing power to the power parity for a country as well as include available international drug U.S., and generally have existing historical data. We will identify whether pricing information for countries that international drug pricing information a country has a GDP per capita that is at least 60 percent of the U.S. GDP per were OECD members as of October 1, that is available. We considered an 2020, regardless of whether they remain capita by dividing the most recent alternative that would phase-in OECD members after October 1, 2020, estimate of GDP per capita based on countries over time based on a defined unless the country’s GDP per capita, as purchasing power parity for a country set of characteristics, such GDP per determined by CMS quarterly, falls by the U.S. GDP per capita, using data below the threshold of 60 percent of the capita or average drug prices. We for the same year, and assessing the U.S. GDP per capita. Based on available believe that phasing in countries over results. We will use the GDP per capita data, this means that we will calculate time would create instability in the from the same year as the international the MFN Price for the first quarter of MFN Price. Thus we are adopting a set drug pricing information that is used to performance year 1 based on available of included countries that meet the calculate the unadjusted country-level international drug pricing information requirements in § 513.140(b), which price, if available, or the most recent from Australia, Austria, Belgium, allows for the inclusion of data from prior year. Canada, Denmark, Finland, France, countries that were non-U.S. OECD 3. Definition of the MFN Drug Payment Germany, Iceland, Ireland, Israel, Italy, member countries as of October 1, 2020, Amount Japan, Republic of Korea, Luxembourg, when CMS calculates the MFN Drug Netherlands, New Zealand, Norway, Payment Amounts for a calendar As described later in this section, we Spain, Sweden, Switzerland, and the quarter. That means that at the end of will calculate the MFN Drug Payment Amount for a calendar quarter for the United Kingdom.48 These 22 OECD each applicable ASP calendar quarter, MFN Model drug based on a phased-in countries are among the countries with CMS will assess the non-U.S. OECD the highest GDP per capita worldwide.49 blend of the applicable ASP and the member countries as of October 1, 2020, MFN Price, which we will determine by We considered alternative approaches that have a GDP per capita that is at to including data from countries for the selecting the lowest GDP-adjusted least 60 percent of the U.S. GDP per country-level price from the included MFN Model. Specifically, we capita. Because available GDP data are considered including all non-U.S. OECD countries for the applicable ASP updated infrequently, we believe this calendar quarter. countries or selecting countries based approach will result in a highly stable on factors such as World Health process for developing the MFN Prices. 4. Calculation of the MFN Drug Payment Organization (WHO) recognition as a Amounts Stringent Regulatory Authority (SRA) We will include available international drug pricing information We will calculate an MFN Drug and intellectual property protections. Payment Amount for each MFN Model from the included countries when such We also considered including data from drug for which there is international data are contained in the data sources only countries that may represent large drug pricing information from at least markets for drug manufacturers such as that we have described in § 513.140(c), one data source that meets our criteria the European Union, Canada, Japan, and as described in section III.E.1. of this for at least one included country. United Kingdom. Additionally, the IFC. Section III.E.6. of this IFC describes an Foundation for Research on Equal There are several existing sources for alternative approach for calculating the GDP data, including the Central MFN Drug Payment Amount for 48 The non-U.S. OECD countries that will not be situations where no international drug an included country for purposes of calculating the Intelligence Agency (CIA) World MFN Price for MFN Model drugs for the first quarter of performance year 1 will be Chile, 50 Roy, A. (2018) The Foundation for Research on 51 https://www.cia.gov/library/publications/the- Colombia, Czechia, Estonia, Greece, Hungary, Equal Opportunity, ‘‘What Medicare Can Learn world-factbook/fields/211rank.html. Latvia, Lithuania, Mexico, Poland, Portugal, From Other Countries on Drug Pricing,’’ accessed 52 https://data.worldbank.org/indicator/ Slovakia, Slovenia, and Turkey. via https://freopp.org/what-medicare-can-learn- ny.gdp.mktp.cd. 49 https://www.cia.gov/library/publications/the- from-other-countries-on-drug-pricing- 53 https://www.imf.org/external/pubs/ft/weo/ world-factbook/fields/211rank.html. bf298d390bc5. 2019/01/weodata/weoselgr.aspx.

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pricing information is available for an • Apply the GDP adjuster to the As previously discussed in this IFC, MFN Model drug, for example, because unadjusted country-level price; we will only use extracted data from the the MFN Model drug is not approved for • Select the lowest GDP-adjusted selected data source that appears marketing by any included country. country-level price for each MFN Model complete and represent dosage When using international drug pricing drug, which, if available, will be the formulations that could be described by information to calculate the MFN Drug MFN Price; the MFN Model drug’s HCPCS code Payment Amounts, we want to account • Identify the applicable ASP (which descriptor, as determined by CMS. For for the relative economic resources of we define as the payment amount example, J0178, Aflibercept injection, non-U.S. countries to be able to fairly determined in accordance with 1847A represents injectable ophthalmic compare country-level prices. We will of the Act, less the applicable add-on formulations whereas a data source may address relative economic resources in percentage, for the MFN Model drug’s contain data for aflibercept for both two ways: (1) We will only use available HCPCS code); 56 • ophthalmic and systemic formulations; international drug pricing information Compare the MFN Price to the only data for ophthalmic formulations from non-U.S. OECD member countries applicable ASP (to apply limit, if will be used to calculate the MFN Price with a GDP per capita that is at least 60 applicable); • for such drug. The international drug percent of the U.S. GDP per capita; and Identify the applicable phase-in pricing data used to calculate the MFN (2) we will adjust the extracted country- formula and adjustments; and Price will not be limited to distinguish • Apply the applicable phase-in level prices using a GDP adjuster that between products with different formula and adjustments, if applicable, adjusts for a country’s GDP per capita if inactive ingredients (for example, to calculate the MFN Drug Payment it is lower than that of the U.S. different excipients) or whether or not Specifically, to calculate the MFN Amount. The following paragraphs further the product is protein bound. However, Drug Payment Amounts for a calendar we will limit the international drug quarter in a performance year, we will describe how we will calculate the MFN Model Drug Payment Amounts for each pricing data for combination drugs that follow a multi-step process using the contain multiple active ingredients or corresponding quarterly ASP pricing MFN Model drug for each calendar quarter during the model: biological products to the extent file, as well as the available feasible, as determined by CMS. This international drug pricing information a. Identify the Available International approach is particularly relevant for for included countries for the applicable Drug Pricing Information for the MFN four of the MFN Model drugs for ASP calendar quarter, where available. Model Drug performance year 1, aflibercept injection The key steps to calculate the MFN Drug Using the data sources that we obtain (J0178), which represents ophthalmic Payment Amount for each MFN Model and applying the hierarchy described formulations compared to systemic drug will be— formulations; paclitaxel protein bound • Identify the available international previously in this IFC, we will extract (J9264), which represents protein bound drug pricing information for the MFN the available international drug pricing formulations compared to formulations Model drug (by applying the hierarchy information for an MFN Model drug for of data sources obtained by CMS and the applicable time period (that is, the of paclitaxel that are not protein bound; extracting the relevant data); 54 applicable ASP calendar quarter) by ferric carboxymaltos (J1439), which • Remove incomplete and low sales aligning the MFN Model drug’s HCPCS represents injected formulations and volume data, as applicable; code long description (in terms of name compared to oral formulations; and • Convert extracted volume data to and dosage form) with the data sources’ rituximab, hyaluronidase (J9311), which the HCPCS code unit level and adjust standard method for identifying represents formulations for for volume issues such as intentional scientific names or nonproprietary subcutaneous administration compared overfill, as applicable; names (such as the International to formulations of rituximab for • Calculate 55 the unadjusted country- Nonproprietary Names). That is, for an intravenous administration. level price (representing the average MFN Model drug, we will identify the In accordance with the hierarchy for price per unit of drug where the unit of data sources’ standardized scientific selecting international drug pricing drug is the same as the HCPCS code name or nonproprietary name for that information data sources, we will billing unit) for the MFN Model drug for drug, and then use that naming to prioritize use of international drug each included country with available identify data for all products within that pricing information that includes sales data in the selected data source for that data source with an applicable and volume data for the applicable ASP drug; formulation. We will extract the calendar quarter if such information is • Calculate the GDP adjuster for each applicable data (for example, data for all available for a drug for one or more included country; package sizes for injectable forms of the included countries. If more than one drug aligned with the identified such data source is available, we will 54 Applicable subsequent steps depend upon the scientific or nonproprietary name and select the data source with international level of the hierarchy for the selected data source. formulations, for the included drug pricing information for the For example, when there are no international sales countries) from the data source for the and volume data available for the drug for an applicable ASP calendar quarter, even if applicable ASP calendar quarter or from any quarter applicable ASP calendar quarter, and in another data source includes a higher beginning on or after October 1, 2019, in accordance accordance with our hierarchy, select number of included countries. For with level 3 of the hierarchy, we will use the the data source for the MFN Model drug extracted data used by CMS to determine the most example, if the applicable ASP calendar recent MFN Price used to calculate an MFN Drug for that quarter. quarter is the third quarter of 2021 and Payment Amount posted on the MFN Model an available data source has sales and website, including the data used by CMS to create 56 In general, the ASP Pricing File contains the illustrative MFN Prices and MFN Drug Payment payment limits based on 106 percent of the volume volume data for a drug for 20 of the Amounts in Table 6 of this IFC. In such case, it will weighted average of manufacturers’ ASP for a given included countries for the second not be necessary to redo steps to extract data from HCPCS code. To identify the applicable ASP, we quarter of 2021 and for 15 included the data source; however, CMS will follow the will divide the payment limit by 1.06 after countries for the third quarter of 2021, remaining steps in the MFN Drug Payment Amount removing the blood clotting factor furnishing fee, if calculation. applicable. For a biosimilar, we will remove the we would extract and then calculate 55 The calculation used depends upon whether amount that represents 6 percent of the reference unadjusted country-level prices for that volume data is available. biological product’s ASP. drug based on sales and volume data

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from the third quarter of 2021 only for adjusted volume of 6,000 units. The HCPCS code unit level, in calculating the 15 included countries for which volume for the 1 MG vial package is the unadjusted country-level price. data from that quarter are available. unchanged because the amount of drug If sales and volume data are available, If there are available data from a data in one package (that is, 1 MG) equals the we will first sum the adjusted volume source at the second level of our amount of drug in one HCPCS billing data for all package sizes for the drug. hierarchy (that is, no international sales unit. The volume for the 10 MG vial We will then sum the total sales for all and volume data for the applicable ASP package is changed to be 10 times package sizes for the drug, and divide calendar quarter, but sales and volume higher because the amount of drug in that sum by the sum the adjusted data from any quarter beginning on or one vial (that is, 10 MG) equals 10 times volume data for all package sizes for the after October 1, 2019), for a drug, we the amount of drug in one HCPCS drug, resulting in an average price per will use available international sales billing unit. unit of drug where the unit of drug is and volume data from that data source Before this step is performed, as the same as the HCPCS code billing for the most recent prior quarter that applicable, we will adjust the extracted unit. If the data source we select has ex- begins on or after October 1, 2019 for volume information before converting it manufacturer or list prices and does not that drug for included countries. to the HCPCS billing unit level when have volume data, we will calculate the If there are no international sales and the data source shows the package size number of HCPCS billing units in a volume data available for the drug, we of a drug product that is inconsistent package and divide the ex-manufacturer will use the extracted data used by CMS with the manufacturer’s information price or list price for a package by the to determine the most recent MFN Price about that product based on the number of HCPCS billing units in the used to calculate an MFN Drug Payment available product information, such as package, resulting in a price per unit of Amount posted on the MFN Model package labeling, compared to the data drug for each package listed in the data website, in accordance with the third extracted from the data source. In source. We will then sum the price per level of the hierarchy. addition, we will limit the number of unit of drug for each package listed in If no MFN Drug Payment Amount has billing units in a package when the the data source for the drug and divide been publicly posted for the drug, we available package labeling specifies use the sum by the number of packages will use a data source at the fourth level of a limited amount of drug is to be used listed in the data source for the drug, of our hierarchy if available (the data from the package. For example, we will resulting in an average price per unit of source contains ex-manufacturer price limit the number of billing units in a drug where the unit of drug is the same data but does not include volume data package for an aflibercept vial to one 2 as the HCPCS code billing unit. for the applicable ASP calendar mg dose in accordance with available We will repeat this process for each quarter). package labeling, which specifies that country specified in § 513.140(b), to the If ex-manufacturer price data for the each vial, regardless of the labeled extent international drug pricing applicable ASP calendar quarter are not volume, has one 2 mg dose. For information for the drug for the country available, we will use a data source at injectable formulations for HCPCS codes is available from the selected data the fifth level of our hierarchy (the data with dosage specified as per dose, we source. As explained previously and source contains list price data for the will limit the number of billing units in specified in § 513.140(c)(3)(i), we will applicable ASP calendar quarter). a package to no more than one per vial. use the highest tier data source, in This approach was applied to illustrate accordance with the hierarchy, which b. Remove Incomplete Low Sales and the MFN Prices for J7324 (Orthovisc inj includes data for the drug in at least one Volume Data, as Applicable per dose) in Table 6. included country. If the selected data If the data source we select has sales source for a drug for a calendar quarter and volume data at the package level for d. Calculate the Unadjusted Country- does not include data from a particular an included country, we will apply the Level Price for the MFN Model Drug’s included country, we will still calculate exclusions for data with incomplete HCPCS Code for Each Included Country the MFN Price for that drug using the data and low sales and volume. That is, With Available Data in the Selected data from the selected data source based we will exclude data without both sales Data Source for That Drug on the included countries from which and volume data, with less than $1,000 Using the data available after there are data for the drug. We will not in quarterly sales (expressed as U.S. completing the prior steps, we will include any information from countries currency), or with less than 1,000 units calculate the unadjusted country-level that did not have data in the selected in quarterly volume. price for each included country with data source for that drug. In cases where available data. The unadjusted country- there is no data source that meets our c. Convert the Extracted Volume Data to level price represents the average price criteria for using international drug the HCPCS Code Unit Level and Adjust per unit of drug where the unit of drug pricing information (that is, there are no for Volume Issues, Such as Intentional is the same as the HCPCS code billing international sales, volume, or other Overfill, as Applicable unit. pricing data available from any of the We will adjust the remaining volume We will use a calculation that is included countries in our international data to the same level as the HCPCS applicable to the data available at this drug pricing information data sources, billing unit, as applicable. For example, step. If volume data are available, we including data used by CMS to if the data for a package size shows the will use a calculation that includes determine the most recent MFN Price volume is 1,000 units and each unit volume-weighting across the different used to calculate an MFN Drug Payment represents a 1 MG vial package and for data (which often represent different Amount posted on the MFN Model another package size the volume is 500 package sizes) of the drug included in website, for an MFN Model drug for any units and each unit represents a 10 MG the data source for the country to quarter beginning on or after October 1, vial package, and both of these data are calculate the unadjusted country-level 2019 up to and including the model for a drug assigned to the same HCPCS price. If volume data are not available, performance period, we will not code with a HCPCS billing unit of 1 MG, we will use a calculation that treats all calculate an unadjusted country-level the adjusted volume data for these packages of the drug included in the price (or GDP-adjusted country-level packages would be 1,000 units and data source for the country equally, after price) and will instead use the 5,000 units, respectively, for a total converting the pricing data to the applicable ASP (which we will define as

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the payment amount determined in available from the CIA World Factbook country’s GDP per capita and the U.S. accordance with section 1847A of the at the end of the applicable ASP GDP per capita are not updated in the Act minus the applicable add-on calendar quarter. We will use the most CIA World Factbook at the same time, percentage, for the MFN Model drug’s recent GDP per capita data available for we will use the most recent GDP per HCPCS code) as the MFN Model Drug each included country and the U.S. GDP capita for the included country and the Payment Amount, as described in per capita from the same year as the U.S. GDP per capita from the same year section III.E.6. of this IFC. GDP per capita data that is available to ensure that the GDP adjuster for an from the included country. For example, e. Calculate the GDP Adjuster for Each included country is calculated using if the most recent GDP per capita from Included Country GDP data from both countries from the the comparison OECD country is from same time period. For example, if at the As discussed previously, we want the 2016 and the most recent U.S. GDP per end of an applicable calendar quarter a MFN Price to account for the relative capita is 2017, then we will use the GDP 2018 estimate of a country’s GDP per economic resources and purchasing per capita from 2016 for both countries capita based on purchasing power parity power for each included country to be when comparing. In cases where we use becomes available in the CIA World able to fairly compare country-level international drug pricing information Factbook but the most recent U.S. GDP prices. As such, we will calculate a GDP from a quarter other than the applicable per capita available in the CIA World adjuster, using a country’s GDP per ASP calendar quarter (that is, an earlier Factbook continues to be for 2017, we capita based on purchasing power time period) to determine the will continue to use data from 2017 for parity, that will be used to adjust the unadjusted country-level price, we will both countries to calculate the GDP unadjusted country-level price for each use the GDP per capita data for that time adjuster for that country. drug (whether based on international period, if available, or the most recent sales and volume data or international earlier data available. That is, CMS will The GDP adjuster will be capped at 1 ex-manufacturer or list prices) to reflect use the GDP per capita for the same year such that the adjuster will only increase the country’s economic resources as the data used to calculate the the unadjusted country-level price for a relative to the U.S. We believe that GDP unadjusted country-level price, if drug; it will not decrease it. We will cap per capita based on purchasing power available, or the most recent earlier year the GDP adjuster at 1 because its parity represents a broadly used and available. purpose is to adjust for countries’ reliable measure of a country’s To create a simple, easily economic resources when lower than economic resources to ensure a understandable GDP adjuster, each those of the U.S. Capping the GDP meaningful comparison of country-level country’s GDP adjuster will be a straight adjuster at 1 will ensure that we do not prices. ratio of its GDP per capita based on make an adjustment that would result in As previously mentioned, there are purchasing power parity divided by an amount that would be lower than the several existing sources for GDP data, U.S. GDP per capita, subject to the unadjusted country-level price. For including the CIA World Factbook,57 limitation described later in this section. example, if Country X with a higher the World Bank,58 and the International The U.S. GDP per capita for 2017, the GDP per capita based on purchasing Monetary Fund.59 Our analyses suggest most current data available, was power parity than the U.S., such as a that the GDP data across these sources $59,800. Table 4 presents GDP per GDP per capita ratio of 2, has an are highly associated with one another. capita for 2017 and the GDP adjusters unadjusted country-level price of $100 We will use the CIA World Factbook as for each non-U.S. OECD member for an MFN Model drug, we would use our source for GDP data as it is issued country, based on the U.S. GDP per a GDP adjuster of 1.0 and calculate a by a U.S. government agency and capita of $59,800 for 2017, that we will GDP-adjusted country-level price of includes estimates for all current OECD use to calculate the MFN Drug Payment $100 rather than using a GDP adjuster member countries. The GDP adjuster Amounts for performance year 1, of 2.0 and calculating a GDP-adjusted will be based on the GDP per capita quarter 1. In cases when an included country-level price of $50.

TABLE 4—NON-U.S. OECD MEMBER COUNTRY GDP PER CAPITA (BASED ON PURCHASING POWER PARITY) AND GDP ADJUSTERS FOR PERFORMANCE YEAR 1, QUARTER 1

CIA GDP per capita, GDP adjuster based on for performance OECD countries purchasing year 1, power parity quarter 1 (2017)

The following countries have a GDP per capita of at least 60 percent of U.S. GDP per capita:†

Australia ...... $50,400 0.843 Austria * ...... 50,000 0.836 Belgium * ...... 46,600 0.779 Canada * ...... 48,400 0.809 Denmark * ...... 50,100 0.838 Finland * ...... 44,500 0.744 France * ...... 44,100 0.737 Germany * ...... 50,800 0.849 Iceland ...... 52,200 0.873 Ireland * ...... 73,200 ** 1.000 Israel ...... 36,400 0.609

57 https://www.cia.gov/library/publications/the- 58 https://data.worldbank.org/indicator/ 59 https://www.imf.org/external/pubs/ft/weo/ world-factbook/fields/211rank.html. ny.gdp.mktp.cd. 2019/01/weodata/weoselgr.aspx.

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TABLE 4—NON-U.S. OECD MEMBER COUNTRY GDP PER CAPITA (BASED ON PURCHASING POWER PARITY) AND GDP ADJUSTERS FOR PERFORMANCE YEAR 1, QUARTER 1—Continued

CIA GDP per capita, GDP adjuster based on for performance OECD countries purchasing year 1, power parity quarter 1 (2017)

Italy * ...... 38,200 0.639 Japan * ...... 42,900 0.717 Republic of Korea ...... 39,500 0.661 Luxembourg ...... 105,100 ** 1.000 Netherlands * ...... 53,900 0.901 New Zealand ...... 39,000 0.652 Norway ...... 72,100 ** 1.000 Spain ...... 38,400 0.642 Sweden ...... 51,200 0.856 Switzerland ...... 62,100 ** 1.000 United Kingdom * ...... 44,300 0.741

The following countries have a GDP per capita below 60 percent of U.S. GDP per capita:

Chile ...... 24,600 0.411 Colombia ...... 14,400 0.241 Czechia * ...... 35,500 0.594 Estonia ...... 31,700 0.530 Greece * ...... 27,800 0.465 Hungary ...... 29,600 0.495 Latvia ...... 27,700 0.463 Lithuania ...... 32,400 0.542 Mexico ...... 19,900 0.333 Poland ...... 29,600 0.495 Portugal ...... 30,500 0.510 Slovakia ...... 33,100 0.554 Slovenia ...... 34,500 0.577 Turkey ...... 27,000 0.452 * Indicates countries that were listed as potential included countries in the October 2018 ANPRM (83 FR 54557). ** Indicates that the GDP adjuster is capped at 1.000. † The 2017 U.S. GDP per capita is $59,800.

f. Apply the Applicable GDP Adjuster h. Compare the MFN Price to the process to calculate the MFN Drug To Calculate the GDP-Adjusted Country- Applicable ASP Payment Amount, we will determine the applicable phase-in formula and Level Price for the MFN Model Drug As a safeguard for beneficiaries, we whether any of these adjustments will will compare the MFN Price to the Next, we will apply the country- apply. specific GDP adjuster to the unadjusted applicable ASP in order to ensure that country-level price for that country by beneficiaries are always paying the j. Calculate the MFN Drug Payment lowest amount of coinsurance available. Amount dividing the unadjusted country-level If the applicable ASP is less than the price by the country’s GDP adjuster. The As the last step, we will calculate the MFN Price, we will establish the MFN MFN Drug Payment Amount for the result will be the GDP-adjusted country- Price as equal to the applicable ASP. level price for the MFN Model drug for MFN Model drug using the applicable that country. We will repeat this i. Identify the Applicable Phase-In phase-in formula, which blends the calculation to produce a GDP-Adjusted Formula and Adjustments applicable ASP and the MFN Price as described in section III.E.5. of this IFC. Price for every country for which we As described in section III.E.5. of this This calculation, including any have calculated an unadjusted country- IFC, we will phase-in the use of the adjustments that apply, will result in level price for the MFN Model drug. MFN Price over the course of the MFN the MFN Drug Payment Amount for the g. Identify the Lowest GDP-Adjusted Model. As discussed in section III.E.9. MFN Model drug (except as otherwise of this IFC, we will also accelerate the Country-Level Price for the MFN Model specified). applicable phase-in formula when the Drug applicable ASP for an MFN Model drug 5. Phase-In of the MFN Price We will examine the GDP-adjusted rises faster than both a designated We will use a phase-in approach that country-level prices for the MFN Model inflation factor and the change in MFN will blend the MFN Price with the drug, and identify the lowest GDP- Price, and lower the MFN Drug Payment applicable ASP to allow MFN adjusted country-level price for the Amount below the MFN Price by a participants time to adjust to the model MFN Model drug. The lowest GDP- certain percentage if the applicable ASP payment amounts and processes. The adjusted country-level price will be the for an MFN Model drug continues to phase-in formula will be stable for a increase faster than the inflation factor given performance year, whereas the MFN Price for the MFN Model drug. and the MFN Price after the full phase- MFN Price and applicable ASP will vary in of the MFN Price. In this step of the quarterly based on fluctuations in drug

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prices in the U.S. and in included accelerates the phase-in applies as Price over a 7-year model performance countries. We will phase-in the MFN described in section III.E.9. of this IFC. period. As noted in section III.E.11. of Price by 25 percent per year for Thus, the phase-in represents the outer this IFC, when MFN Model drugs get performance years 1 to 3 of the model, bound in terms of the amount of time added to the MFN Model Drug HCPCS reaching 100 percent of the MFN Price it will take for the MFN Drug Payment Codes List during the model for performance years 4 through 7 of the Amount to transition to 100 percent of performance period, their MFN Drug model. The phase-in formula uses a the MFN Price. Payment Amount gets determined as set blend of the applicable ASP and MFN We believe that a phase-in approach forth for the corresponding performance Price for an MFN Model drug as shown during the initial years of the model will year, meaning that if an MFN Model in Table 5. The MFN Drug Payment enable MFN participants and the drug were to be added during Amount will be based on 100 percent of markets to adjust to the model’s performance year 4, the MFN Drug the MFN Price starting in performance payment methodology, while enabling Payment Amount will equal 100 percent year 4, unless an adjustment that CMS to test the full phase-in of the MFN of the MFN Price.

TABLE 5—PHASE-INOFMFN PRICES BY PERFORMANCE YEAR

Performance year Blend of the ASP and MFN price for an MFN model drug at the HCPCS code level

Year 1 ...... 75 percent applicable ASP and 25 percent MFN Price. Year 2 ...... 50 percent applicable ASP and 50 percent MFN Price. Year 3 ...... 25 percent applicable ASP and 75 percent MFN Price. Year 4 ...... 100 percent MFN Price. Year 5 ...... 100 percent MFN Price. Year 6 ...... 100 percent MFN Price. Year 7 ...... 100 percent MFN Price.

We are codifying the phase-in formula monitor changes to the MFN Model international drug pricing information in § 513.210(b)(8). Drug HCPCS Codes List, and will avoid from 2019 for the included countries, creating an opportunity for and the MFN Model performance year 1 6. Alternative Calculation for the MFN manufacturers to get their products out phase-in formula. Table 6 shows Drug Payment Amount of the model by stopping the reporting illustrative data for applicable ASPs, Over the course of the MFN Model, of international drug pricing MFN Prices, and MFN Drug Payment we may determine that the international information. Based on our experience Amounts for one billing unit for the drug pricing information data sources with international drug pricing HCPCS codes that are included on the that we obtain do not contain any information data sources, we expect the performance year 1 MFN Model Drug international drug pricing information potential of no international drug HCPCS Codes List in Table 2. Actual (meaning no sales, volume, ex- pricing information for an MFN Model MFN Drug Payment Amounts per billing manufacturer price, or list price data drug across all included countries will unit for performance year 1, quarter 1, from any included country from any be limited. We note that our approach and thereafter will be calculated as quarter beginning in the fourth calendar may increase model payments specified in § 513.210. We will publish quarter of 2018 through the applicable compared to non-model payments for the quarterly MFN Drug Payment quarter in the model performance MFN Model drugs with no international Amounts on a CMS website (such as the period) for an MFN Model drug, for drug pricing information because the MFN Model website), similar to how the example, because the MFN Model drug alternative add-on payment, a single flat ASP Drug Pricing Files are posted is not approved for marketing in the add-on amount per dose (see section online prior to the start of the calendar included countries. For such cases, we III.F. of this IFC), could be greater than quarter. The performance year 1, quarter will establish the MFN Drug Payment the add-on payment outside of the 1 MFN Drug Payment Amounts will be Amount at the applicable ASP for the model. published on a CMS website before the applicable calendar quarter, subject to 7. Illustrative MFN Drug Payment start of the MFN Model. any adjustment in § 513.210(d) that Amounts Illustrative MFN Drug Payment applies, until international drug pricing Amounts per billing unit are listed in To illustrate how CMS will calculate information is available. Table 6 by HCPCS code. For this the MFN Drug Payment Amounts under Because international drug pricing illustration, we partnered with ASPE, information may become available for a the MFN Model in accordance with §§ 513.130 and 513.140, we applied the which purchases licenses to data subsequent calendar quarter, we will products maintained by IQVIATM use this method to establish the MFN methodology for determining the applicable ASPs, MFN Prices, and MFN (formerly known as Quintiles-IMS). Drug Payment Amount instead of IQVIA’s proprietary MIDAS data set 61 is excluding or removing drugs without Drug Payment Amounts using historical ASP-based payment limits,60 available a widely used source of drug sales and any international drug pricing volume data. information from the model until 60 We used the 2019 Quarter 3 and Quarter 4 and international drug pricing information 2020 Quarter 1 and Quarter 2 ASP data that align Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/ becomes available. We believe having a with manufacturer-reported data based on sales index.html. stable list of MFN Model drugs will be during 2019 to identify the applicable ASPs. The 61 https://www.iqvia.com/solutions/ ASP pricing files are posted at links available here: commercialization/brand-strategy-and- more predictable for MFN participants, https://www.cms.gov/Medicare/Medicare-Fee-for- lessening MFN participants’ need to management/market-measurement/Midas.

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MIDAS data contain estimates of drug called ‘‘Molecule List’’ (also called drug pricing information was available sales (called ‘‘Monetary Value ’’ within ‘‘Moleculelist’’) which identifies in the MIDAS data. In Table 6, the the MIDAS data set) and volume (called scientific and nonproprietary names for illustrative MFN Prices, calculated ‘‘Quantity’’ within the MIDAS data set) drug and biological products. Users using available international drug that are based on audits of drug extract data from the MIDAS database pricing sales and volume information at transactions in different countries and by selecting report filters, which are the ex-manufacturer level, represent the distribution channels (for example, values for various data fields included lowest of the GDP-adjusted country- retail pharmacies and hospitals). The in the database, such as ‘‘Molecule List’’ level prices available in the single data audits underlying the MIDAS data and ‘‘NFC123’’ (or ‘‘New Form Code,’’ a source we used. For a complete collect sales and volume information at 3-digit code which identifies the dosage discussion of how CMS used 63 the ex-manufacturer (that is, prices as form ). The database has a standard international drug pricing information drugs are sold by manufacturers), ex- method for identifying drugs within the available through IQVIA and CMS data U.S. and across countries, and a wholesaler, and/or retail levels. IQVIA to calculate the illustrative applicable standard method for identifying drug applies a set of country- and channel- ASPs, MFN Prices, and MFN Drug forms. MIDAS data is updated monthly specific assumptions on markups Payment Amounts displayed in Table 6, between manufacturer, wholesale, and and retains up to 12 years of history. CMS obtained a MIDAS data extract we refer readers to the supplemental retail prices to estimate ex-manufacturer documentation available on the MFN and retail sales. Sales information of available 2019 international drug pricing information for the included Model website.64 We also refer readers within the database is stated in local to the Medicare Part B Drug Spending and U.S. currency, as of the transaction countries for the MFN Model drugs for performance year 1 from ASPE. After Dash board 65 that can be used to search date or current date, and are expressed identifying the MFN Price for each drug, for brand name or generic name; search as ex-manufacturer, trade, and public we applied the phase-in formula for results present certain manufacturer (retail) sales.62 MIDAS uses a variable performance year 1 (75 percent of the information when available. applicable ASP and 25 percent of the BILLING CODE 4120–01–P 62 Ex-manufacturer sales are: Manufacturer MFN Price) and applied the exceptions Selling Price or Wholesaler Purchasing Price or Price to Wholesaler (PTW). Trade sales are: in § 513.210(d) when no international 64 See: https://innovation.cms.gov/initiatives/ Wholesaler Selling Price or Pharmacy Purchase most-favored-nation-model/. Price or Price to Chemist (PTC). Public (retail) sales 63 For more information on the New Form Codes 65 See: https://www.cms.gov/Research-Statistics- are: Pharmacy Selling Price or Consumer Purchase see: https://www.ephmra.org/classification/new- Data-and-Systems/Statistics-Trends-and-Reports/ Price or Price to the Public (PTP). form-codes/. Information-on-Prescription-Drugs/MedicarePartB.

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BILLING CODE 4120–01–C

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We note that, as codified in Under the reporting requirements sources for international drug pricing § 513.210(d)(5), and described in section outlined in section 1927(b)(3)(A)(iii), information that we will use. This III.E.10. of this IFC, the MFN Drug manufacturers that report ASPs are approach will consistently correspond Payment Amount will not exceed the required to submit them to CMS no later to the two-quarter lag used for the ASP non-model drug payment amount for than 30 days after the last day of the pricing files when an international drug line items submitted with the JG previous quarter. CMS uses these data to pricing information data source at the modifier (or any successor modifier calculate the ASP-based Medicare highest level of the hierarchy specified used to identify drugs purchased under payment amounts for the next calendar in § 513.140(c)(3) is available. Table 7 the 340B program) after removing any quarter. As a result, there is a two- illustrates how the information we will quarter lag between the time when sales add-on amount, if applicable. use to calculate the MFN Drug Payment reflected in the ASP occur and the time Amounts for each calendar quarter 8. Timing of Data and MFN Drug when these sales become the basis for Payment Amount Calculations Medicare payment amounts. during performance year 1 using data As discussed in section III.E.4. of this We will use international drug pricing from the applicable ASP calendar IFC, we will calculate the MFN Drug information from the same time period quarter will align when an international Payment Amounts on a calendar quarter (that is, the same calendar quarter), if drug pricing information data source at basis using the most recent ASP and available in accordance with the the highest level of the hierarchy correlated international drug pricing hierarchy specified in § 513.140(c)(3), in specified in § 513.140(c)(3) is available. information (that is, data from the order to align information across the We will use the same approach for each highest level of hierarchy available). ASP Drug Pricing files and the data performance year.

TABLE 7—ALIGNMENT OF PERFORMANCE YEAR CALENDAR QUARTERS FOR ASP AND MFN PRICE DATA BASED ON JANUARY 2021 MODEL START

Performance year calendar ASP pricing file for calendar Applicable ASP calendar MFN price for calendar Performance year quarter quarter quarter quarter*

1 ...... 2021, Quarter 1 ...... 2021, Quarter 1 ...... 2020, Quarter 3 ...... 2020, Quarter 3 1 ...... 2021, Quarter 2 ...... 2021, Quarter 2 ...... 2020, Quarter 4 ...... 2020, Quarter 4 1 ...... 2021, Quarter 3 ...... 2021, Quarter 3 ...... 2021, Quarter 1 ...... 2021, Quarter 1 1 ...... 2021, Quarter 4 ...... 2021, Quarter 4 ...... 2021, Quarter 2 ...... 2021, Quarter 2 *When an international drug pricing information data source at the highest level of the hierarchy specified in § 513.140(c)(3) is available.

For example, for the initial the potential impacts of a potential increases in ASP that outstrip not only calculations to calculate payment model on other markets—including the U.S. inflation but also changes in amounts for the start of the MFN Model potential for cost-shifting to other international prices over time would on January 1, 2021, the beginning of the segments of the Medicare program, the reduce our ability to test the phase-in of first calendar quarter in 2021, we will Medicaid program, and the commercial the MFN Price over time, as the MFN use the January 2021 ASP Pricing File market. The commenters recommended Price’s contribution to the MFN Drug (which will be based on manufacturers’ that in order to avoid unintended Payment Amount could be obscured by ASP for the third quarter of 2020, from consequences and cost-shifting, CMS a significant increase in the MFN Model July 1, 2020, to September 30, 2020) and should closely monitor prices for drug’s ASP. international drug pricing information included drugs and consider additional As discussed in section III.E.5. of this for the third quarter of 2020, from July policies or actions if drug prices in other IFC, we will phase-in the MFN Prices to 1, 2020, to September 30, 2020. For each markets rise above certain pricing allow MFN participants time to adjust to subsequent calendar quarter for a thresholds (for example, above the the MFN Model payment amounts and performance year, the MFN Drug Consumer Price Index (CPI) or processes. Calculating the MFN Prices Payment Amount will be established by inflation). and MFN Drug Payment Amounts each calculating the MFN Price based on We appreciate these concerns, as it is calendar quarter will allow more recent international drug pricing possible that, in response to the MFN manufacturers to address the large information, using data for the Model, manufacturers may take steps to difference between prices in the U.S. applicable ASP calendar quarter, if increase U.S. prices outside of the MFN and in other countries for MFN Model available, as illustrated in Table 7, and Model, such as in the commercial and drugs during the course of the MFN calculating the MFN Drug Payment Medicare Advantage markets, which Model and serves as an incentive for Amount. may be seen in increases in manufacturers to refrain from raising 9. Adjustments to Phase-In Formula and manufacturers’ ASPs. In response to the U.S. prices faster than a reasonable Incentives for Manufacturers To concerns expressed in the October 2018 inflation allowance. Furthermore, as Address Rising U.S. Drug Prices ANPRM comments and to minimize the discussed in section III.M. of this IFC, possibility of a spillover impact on we are waiving requirements of section In response to the October 2018 beneficiaries outside of the MFN Model, 1847A in order to exclude units of MFN ANPRM, we received several comments we will make adjustments to the phase- Model drugs from the calculation of the asking that we consider including in formula in order to mitigate cost- manufacturer’s ASP. However, if these model design features to address shifting in the market and incentivize incentives prove to be insufficient to potential spillover effects and cost- manufacturers of MFN Model drugs to deter manufacturers from raising U.S. shifting to the commercial market and maintain stable ASPs of MFN Model prices for MFN Model drugs faster than Medicare payment outside of the model drugs to minimize the potential for a reasonable inflation allowance, we geographic area. The commenters spillover impacts. In addition to will adjust the calculation of the MFN requested that CMS carefully consider creating spillover impacts, rapid Drug Payment Amount by adjusting the

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phase-in formula for MFN Model drugs through June 2021) will have a baseline percent applicable ASP and 35 percent where such concerns are observed. of the fourth calendar quarter of 2020 MFN Price for quarter 3 of performance Specifically, to preserve the integrity (October 2020 through December 2020). year 1, and 60 percent applicable ASP of the model test as described The cumulative percentage change and 40 percent MFN Price for quarter 4 previously, we will make an adjustment will be calculated from the end of the of performance year 1. The accelerated to the phase-in formula for an MFN baseline to the end of the applicable phase-in of the MFN Price will not be Model drug if the applicable ASP or ASP calendar quarter. We will apply the reversed, but will remain in place for monthly U.S. list price (defined as adjustment to the phase-in formula the duration of the model performance Wholesale Acquisition Cost (WAC) similarly for all MFN Model drugs period for that drug, even if the available in a U.S. drug pricing regardless of when the MFN Model drug manufacturer lowers its ASP and U.S. compendium or if WAC is not available, is added to the MFN Model Drug list prices after the accelerated phase-in other available list prices, such as HCPCS Codes List. is in effect. Average Wholesale Price (AWP) Further, if both conditions are not Further, after the full phase-in of the available in a U.S. drug pricing met, such as the cumulative percentage MFN Price is reached, if both of the compendium) increases faster than both increase in any monthly U.S. list prices trigger conditions are met, there will be inflation and the MFN Price. CMS will for the NDCs assigned to the MFN a decrease in MFN Model Drug Payment accelerate the phase-in of the MFN Price Drug’s HCPCS code outpaces the Amount equal to the largest difference by 5 percentage points at the next cumulative percentage increase in CPI– in the cumulative percentage increase in quarterly update for each MFN Model U but is less than the cumulative the applicable ASP or any of the drug with: (1) A greater cumulative percentage increase in the MFN Price, monthly U.S. list prices for the NDCs percentage increase in either the then the trigger conditions will not be assigned to the MFN Model drug’s applicable ASP 66 or any monthly U.S. met and the phase-in formula will not HCPCS code compared to the list price for any of the NDCs assigned be accelerated. If the cumulative cumulative percentage increase in the to the MFN Model drug’s HCPCS code percentage change in the CPI–U or MFN CPI–U and in the MFN Price. This compared to the cumulative percentage Price is negative, we will use zero as the additional adjustment will lead to the increase in the Consumer Price Index cumulative percentage increase in the affected drug’s MFN Drug Payment for All Urban Consumers (CPI–U) 67 CPI–U or MFN Price, as applicable, for Amount falling below the MFN Price for based on all items in U.S. city average the relevant quarter. that drug. For example, for an MFN and not seasonally adjusted; and (2) a We will accelerate the phase-in Model drug, if 100 percent of the MFN greater cumulative percentage increase formula by 5 percentage points as we Price was already applied in the in either the applicable ASP or any believe this amount strikes a balance calculation of the MFN Model Drug monthly U.S. list price for any of the between moving the MFN Drug Payment Payment Amount for a quarter and its NDCs assigned to the MFN Drug’s Amount more quickly toward the MFN applicable ASP cumulatively increased HCPCS code compared to the Price while still retaining the stepwise by 14 percent, the largest cumulative cumulative percentage increase in the nature of the phase-in. As an example, percentage increase of any of the MFN Price. To apply these conditions in the case that both trigger conditions monthly U.S. list prices for the NDCs for an MFN Model drug, we will are met for an MFN Model drug during assigned to the HCPCS code was 13 identify the cumulative percentage the applicable ASP calendar quarter for percent, the CPI–U cumulatively increase from a baseline to the the second quarter of performance year increased by 12 percent, and the MFN applicable ASP calendar quarter. For all 1, the phase-in formula would be 70 Price cumulatively increased by 11 MFN Model drugs with an applicable percent applicable ASP and 30 percent percent, we would reduce the MFN ASP for the first quarter of performance MFN Price for that quarter and Drug Payment Amount for the quarter year 1, we will set the baseline as the remaining quarters in performance year (in this case, previously established as ASP calendar quarter for the applicable 1, assuming both trigger conditions are to equal the MFN Price) by 3 percent ASP for the first quarter of performance not met in the ASP calendar quarters for (that is, the difference between 14 and year 1 (that is, the third calendar quarter the third and fourth quarter of 11) of the MFN Price. of 2020 (July 2020 through September performance year 1. Any such additional adjustment will 2020)). For all MFN Model drugs that do We will apply the acceleration of the apply for the duration of the model not have an applicable ASP for the first phase-in formula for each calendar performance period, unless a larger quarter of performance year 1 (for quarter of the MFN Model where both additional adjustment is triggered. As example, a drug that is first marketed in trigger conditions are met. That is, for with the adjustment before the full the U.S. after the start of the model), the an MFN Model drug that is subject to phase-in is reached, we will update the baseline will be the ASP calendar the accelerated phase-in of the MFN calculation for the additional quarter for the first applicable ASP Price, we will further accelerate the adjustment for each additional calendar based on the manufacturer’s average phase-in of the MFN Price by an quarter of the model. That is, for an sales price for that MFN Model drug additional 5 percentage points at the MFN Model drug that is subject to the that occurs after the third quarter of next quarterly update if the cumulative additional adjustment of the MFN Price, 2020. For example, the baseline for an percentage increase in the applicable each calendar quarter thereafter, we will MFN Model drug with its first ASP or any of the monthly U.S. list calculate the largest difference between applicable ASP based on the prices for the NDCs assigned to the MFN the cumulative percentage increase in manufacturer’s average sales price Model drug’s HCPCS code continues to the applicable ASP or any of the occurring in the second quarter of be greater than the cumulative monthly U.S. list prices for the NDCs performance year 1 (that is, April 2021 percentage increase in the CPI–U and assigned to the MFN Model drug’s MFN Price. In the previous example, if HCPCS code and the cumulative 66 We note that the manufacturers’ ASPs will be both of the trigger conditions were met percentage increase in CPI–U and in based on non-model sales only as codified in for the same MFN Model drug during MFN Price and increase the additional § 513.600(b) and as discussed in section III.M. of this IFC. the applicable ASP calendar quarter for adjustment if the result of the updated 67 All references to CPI–U are based on all items quarters 3 and 4 of performance year 1, calculation results in a larger additional in U.S. city average and not seasonally adjusted. the phase-in formula would be 65 adjustment. CMS will not reduce the

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additional adjustment based on the policy of paying ASP minus 22.5 to enable us to test the full phase-in of results of the updated calculation. We percent for 340B-acquired drugs. If CMS the MFN Price by performance year 4. believe this policy will serve as a strong finalizes this alternative proposal, the We also believe that MFN participants incentive for manufacturers to avoid MFN Drug Payment Amount for an are aware of which separately payable taking steps that could cause spillover MFN Model drug furnished by an MFN Medicare Part B drugs have high annual impacts and will help to address participant and billed with the JG spending and therefore will have a basis commenters’ concerns. modifier will be capped at ASP minus for assessing which drugs that are not 22.5 percent (85 FR 48890). In such on the MFN Model Drug HCPCS Codes 10. Limitation on MFN Drug Payment cases, the MFN participant will also List in performance year 1 are more Amount To Protect Beneficiaries receive the per-dose add-on payment likely be added to the MFN Model Drug To avoid potentially increasing amount described in section III.F. of this HCPCS Codes List in a later beneficiary cost-sharing or coinsurance, IFC. performance year. For future years, we we are codifying in § 513.210(b)(6) to seek comment on whether additional 11. Method for Establishing MFN Drug compare the MFN Price to the information that CMS could provide Payment Amounts for Drugs Added to applicable ASP in order to ensure that would be helpful to MFN participants the MFN Model beneficiaries are always paying the for their planning purposes, for example lowest amount of coinsurance available. We will add annually any top 50 drug utilization reports developed If the applicable ASP is less than the drugs that are not already included on through the model monitoring activities MFN Price, we will establish the MFN the MFN Model Drug HCPCS Codes that CMS could make available on the Price as equal to the applicable ASP. In List, after taking the exclusions in model website. addition, in § 513.210(a), we are § 513.130(b) into account. In accordance codifying that the allowed MFN Drug with§ 513.210, we will calculate the 12. Payment Exceptions for MFN Model Payment Amount will not exceed the MFN Price that will apply to drugs that Drugs in Short Supply billed amount on the claim for the MFN are added to the list of MFN Model Rather than broadly excluding drugs Model drug. In addition, to maintain drugs and the applicable phase-in that are in short supply from the model, beneficiary protections for all claims formula for a given performance year we will keep MFN Model drugs in the paid under the OPPS, we are codifying and adjustments will apply. We will model while they are in short supply, in § 513.210(d)(4) that the MFN Drug apply the applicable phase-in formula but revert the MFN Drug Payment Payment Amount cannot exceed the for drugs that are added to the MFN Amount to the applicable ASP, which non-model drug payment amount for Model Drug HCPCS Codes List, in order could be the amount determined under line items submitted with the JG to simplify and maintain consistent section 1847A(e) of the Act if the modifier (or any successor modifier payment policies for all MFN conditions set forth in that provision are used to identify drugs purchased under participants and MFN Model drugs. For met, beginning with the first day of the the 340B program) after removing any example, for a drug added as an MFN next calendar quarter after the date on add-on amount, if applicable. We will Model drug for performance year 2, the which the MFN Model drug is reported apply this limitation to line items phase-in formula will be a blend of 50 as ‘‘Currently in Shortage’’ by FDA, as submitted with the JG modifier. We percent of the ASP and 50 percent of the available on these websites: https:// refer readers to the Calendar Year (CY) MFN Price for the drug. Thus, Medicare www.accessdata.fda.gov/scripts/ 2021 OPPS/ASC Notice of Proposed Part B drugs that will be added to the drugshortages/ and https:// Rulemaking (CMS–1736–P) 68 (85 FR MFN Model Drug HCPCS Codes List for www.fda.gov/vaccines-blood-biologics/ 48880) for a discussion of CMS’s performance year 2 and beyond will safety-availability-biologics/cber- proposal for CY 2021 and subsequent have an MFN Drug Payment Amount regulated-products-current-shortages, years to pay for drugs acquired under that will start more heavily based on the and continuing for subsequent calendar the 340B program at ASP minus 34.7 MFN Price than drugs that were quarters as warranted. Once the MFN percent, plus an add-on of 6 percent of included in earlier performance years. Model drug is no longer reported as the product’s ASP, for a net payment We believe this approach is appropriate ‘‘Currently in Shortage’’ by FDA, the rate of ASP minus 28.7 percent based on because the MFN Model seeks to test a MFN Model payment will resume the the results of the Hospital Acquisition new payment methodology that takes first day of the next quarter after the Cost Survey for 340B—Acquired into account the discounts that other date on which it is no longer reported Specified Covered Drugs. If CMS countries enjoy and delaying the phase- in shortage. For example, as noted in finalizes the proposed OPPS payment in of the MFN Price for drugs that will section III.D.2. of this IFC, one of the policy to pay for drugs acquired under be added to the MFN Model Drug HCPCS codes with high aggregate 2019 the 340B program at ASP minus 34.7 HCPCS Codes List for performance year Medicare Part B total allowed charges percent, plus an add-on of 6 percent of 2 and beyond will not allow CMS to (J1569, Gammagard liquid infusion) the product’s ASP, the MFN Drug fully evaluate the model payment test represents a drug that is currently on the Payment Amount for an MFN Model for such drugs during the model FDA shortages list. If this HCPCS code drug furnished by an MFN participant performance period. were to be included on the MFN Model and billed with the JG modifier will be For drugs added to the MFN Model Drug HCPCS Codes List and remain on capped at ASP minus 34.7 percent. In Drug HCPCS Codes List in a later the FDA shortages list, the MFN Drug such cases, the MFN participant will performance year, this approach could Payment Amount will be the applicable also receive the per-dose add-on result in a more significant change in ASP until the first day of the next payment amount described in section payment for the drug upon entry to the quarter of the model performance period III.F. of this IFC. model compared to drugs that are after it is no longer reported as In the CY 2021 OPPS/ASC Notice of included from the beginning of the ‘‘Currently in Shortage’’ by FDA. Proposed Rulemaking, CMS proposed in model. Although there is the potential However, we note that we are excluding the alternative to continue its current for a larger change in payment for drugs HCPCS codes that describe intravenous that are added later in the model, we immune globulin from the MFN Model 68 https://www.govinfo.gov/content/pkg/FR-2020- believe that it is necessary to maintain Drug HCPCS Codes List as discussed in 08-12/pdf/2020-17086.pdf. the same phase-in for all included drugs section III.D.2 of this IFC.

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13. Payment of Blood Clotting Factor alternative add-on, including but not participants and potential confusion for Furnishing Fee Under the MFN Model limited to: An amount based on drug beneficiaries. Currently, payment for the blood class, the physician’s specialty, or the We will pay MFN participants a clotting factor furnishing fee under 42 practice’s historical billing patterns, single add-on payment amount per dose CFR 410.63(c) is made along with with a possible bonus pool tied to of an MFN Model drug; this payment payment for the blood clotting factor. clinically appropriate utilization. We will not vary based on the amount of drug furnished in a dose, billing units Under the MFN Model, a HCPCS code requested feedback on several design billed on the claim line, or by MFN that is used to bill for a blood clotting topics, such as how we could best participant or specialty. The goals for factor may be an MFN Model drug if define and determine the alternative the model’s approach to the alternative such HCPCS code is included on the add-on payment amount, whether CMS add-on payment are to test an MFN Model Drug HCPCS Codes List. To should develop an encounter-based or innovative way to pay the add-on maintain the current payment approach monthly add-on payment approach, and portion of the drug payment, boost add- for the blood clotting factor furnishing potential inclusion of a quality bonus on revenue for MFN participants on fee during the MFN Model, we are pool to incentivize evidence-based care. We stated that our goal was to maintain average based on historical overall add- codifying in § 513.210(e), that when relative stability in provider and on revenue, create an incentive to applicable, the blood clotting furnishing supplier revenue through an alternative encourage appropriate drug utilization fee under § 410.63(c) will be payable drug add-on payment for furnishing by breaking the link between the along with the MFN Drug Payment drugs that removes the current manufacturer’s drug price and the Amount. We believe this approach will percentage-based drug add-on calculation of the Medicare Part B eliminate the need to establish different payments. payment for the add-on amount, and billing instructions for MFN Model In response to the October 2018 remove or reduce the incentive to drugs that are blood clotting factors. ANPRM, we received feedback from a furnish higher-cost drugs inherent in the F. MFN Model Alternative Add-On number of stakeholder groups on the current methodology. Payment structuring of an alternative add-on With the MFN alternative add-on payment. Overall, there was no payment, we will test a single add-on 1. Overview of the Alternative Add-On consensus on the best approach to payment amount that will paid per Payment designing an alternative add-on dose, where ‘‘dose’’ for the purposes of In the October 2018 ANPRM, we payment, though several commenters the MFN alternative add-on payment is sought public comment on testing an supported calculating the alternative defined as the number of HCPCS billing alternative add-on payment to the add-on payment in such a way that units reported on a claim line 70 (also current system, required by section model participants would be held called service line or line item). We are 1847A of the Act, under which harmless. Some commenters supported codifying this alternative add-on Medicare Part B pays a fee based on 6 the idea of testing an alternative add-on payment at § 513.220. We will waive percent of the ASP of the drug so that payment that is not tied to increases in beneficiary cost-sharing for the add-on the dollar amount of the add-on drug prices over time, with one payment. As such, the add-on approach increases with the price of the drug commenter noting that this could will test a separate standardized add-on rather than reflecting the service being promote revenue stability. One payment amount per dose that is not performed. In general, the amount of commenter noted an approach that tied to the Medicare Part B payment add-on realized by providers and varies the alternative add-on payment amount for a drug. We will start with an suppliers has been described by between different drugs would risk amount that is calculated based on commenters as 4.3 percent as a result of creating perverse incentives in 6.1224 percent of historical applicable sequestration.69 In the October 2018 prescribing decisions between ASPs for 2019 final action claim lines ANPRM, we described our belief alternative treatment options. Several for the selected MFN Model drugs for regarding how a potential model could commenters supported a flat fee with the beginning of performance year 1 as pay a drug add-on amount that would more than one tier. Several commenters further described in § 513.220, trended be different from the current drug add- expressed concern about linking a forward using an inflationary on amount. We sought public comment bonus pool to prescribing lower cost adjustment for the start of performance on potential ways to structure the drugs. One commenter opposed year 1. With this approach, the per-dose reducing the add-on amount to allow for add-on payment amount will be 69 Stakeholders have reported that the add-on a bonus pool. calculated once at the beginning of the percentage is slightly further reduced when the After considering the comments we model and will not be recalculated as OPPS beneficiary cost-sharing limitation applies. received, we were persuaded that the MFN Model Drug HCPCS Codes List Further, we note that current payments under the potential model requirements to qualify OPPS for certain drugs when the drug is acquired changes. For each calendar quarter under the 340B program are made based on ASP– for a modest quality bonus would be thereafter, beginning with performance 22.5 percent and are not considered to include a challenging and may be burdensome for year 1, quarter 2, we will update the drug add-on payment amount. We refer readers to MFN participants to implement and per-dose add-on payment amount using to the Calendar Year (CY) 2021 OPPS/ASC Notice adhere to consistently for all MFN of Proposed Rulemaking (CMS–1736–P) (85 FR an inflation factor. 48880) for a discussion of CMS’s proposal for CY beneficiaries, and would add potential For the MFN Model drugs for the 2021 and subsequent years to pay for drugs financial risk for MFN participants, beginning of performance year 1 that are acquired under the 340B program at ASP minus which is not necessary for purposes of biosimilar biological products, we will 34.7 percent, plus an add-on of 6 percent of the testing an alternative add-on payment product’s ASP, for a net payment rate of ASP minus use 6.1224 percent of the historical 28.7 percent based on the results of the Hospital approach under the MFN Model. Thus, applicable ASPs for the reference Acquisition Cost Survey for 340B-Acquired we are not including a quality bonus in biological product in the calculation of Specified Covered Drugs. We also refer readers to the MFN Model. We were also the per-dose add-on amount rather than the alternative proposal in the CY 2021 OPPS/ASC persuaded that the alternative add-on Notice of Proposed Rulemaking (85 FR 48890) to 6.1224 percent of the historical continue the current policy of paying ASP–22.5 should be designed in as straightforward percent for 340B drugs and biologicals under the a manner as possible to minimize 70 An exception is when a claim line is billed OPPS. administrative burden for MFN with the modifier JW, indicating discarded drug.

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applicable ASPs for the biosimilar was not the primary payer. We included calendar quarter during the MFN Model biological product to align with the all relevant claim lines for an MFN to account for inflation over time by determination of the add-on amount to Model drug with an allowed charge using a cumulative inflationary factor as such products under section 1847A. greater than zero dollars in the described in this section of this IFC. We Based on the performance year 1 MFN calculation. As we used nearly all 2019 will not use changes in ASP or MFN Model Drug HCPCS Codes List in Table claims for drugs included on the MFN Drug Payment Amount to trend forward 2, this applies to Q5111 (Injection, Model HCPCS Codes List for the the single per-dose add-on payment udenyca 0.5 mg). beginning of performance year 1 amount to align with our intention to We selected 6.1224 percent because furnished from any eligible Medicare- test the removal of the link between a that amount results in an add-on pool participating provider or supplier, we drug’s add-on payment and its price. that will allow MFN participants to believe that one calendar year provided As specified in § 513.220(b)(7), after realize, on average, a 6 percent add-on sufficient data for purposes of calculating the single per-dose add-on per dose after sequestration, which calculating a single per-dose add-on payment amount, we multiplied the generally applies.71 In the absence of payment amount. Calendar year 2019 single per-dose add-on payment amount actual drug acquisition costs for eligible represents the same baseline year that ($146.55) by an inflationary factor, providers and suppliers, we believe it is we used to select the MFN Model drugs which equals the percentage increase in appropriate to use an amount for the for the beginning of performance year 1, the CPI–U from the midpoint of the add-on pool that represents, on average, as identified in Table 2. baseline year (2019) through the first a 40 percent increase compared to 4.3 Once all relevant 2019 claim lines month of the calendar quarter prior to percent of ASP in use in the baseline were identified for each drug (by HCPCS the start of the model (that is, the period to achieve a goal of the model to code) on the MFN Model HCPCS Codes percentage increase in CPI–U from July provide increased add-on revenue for List for the beginning of performance 2019 through October 2020). The MFN participants on average. year 1, we multiplied the number of resulting per-dose alternative add-on HCPCS units billed on each claim line payment amount for the first calendar 2. Per-Dose Add-On Payment Amount by 6.1224 percent of the 2019 applicable quarter of performance year 1 (January Methodology ASP (which we define as the payment 1, 2021 through March 31, 2021) is a. Calculation of the Single Per-Dose amount determined in accordance with $148.73. Add-On Payment Amount 1847A of the Act less the applicable To calculate the per-dose alternative add-on percentage for the MFN Model add-on payment amount for each In § 513.220(b), we specify how we drug’s HCPCS code) for the calendar subsequent calendar quarter during the calculated a single per-dose add-on quarter that matches the claim line’s model performance period, as specified payment amount for the start of the date of service and then summed across in § 513.220(c), we will multiply the MFN Model. Using 2019 historical all claim lines for that drug to yield a performance year 1, quarter 1 alternative claims data, we calculated a per-dose total add-on spending amount for that add-on payment amount by a add-on payment amount by applying drug. For biosimilar biological products, cumulative inflation factor that will the applicable ASP (that is, the payment we used the applicable ASP for the ensure the amount will remain equal to amount determined in accordance with reference biological product. or greater than the alternative add-on section 1847A of the Act for a quarter Then we pooled together the total payment amount calculated for minus the applicable add-on add-on spending amounts for all drugs performance year 1, quarter 1. We will percentage) to the identified 2019 on the MFN Model HCPCS Codes List calculate a cumulative inflation factor as claims lines, based on the calendar for performance year 1 and the total equal to the percentage increase in the quarter in which the claim’s date of number of claim lines for those drugs CPI–U from October 2020 through the service falls, which corresponds to the (excluding claim lines billed with the first month after the end of the manufacturer-reported ASPs from two JW modifier). Lastly, we calculated the applicable ASP calendar quarter. If the calendar quarters prior, with an per-dose add-on payment amount as the cumulative percentage change in the exception for biosimilar biological total pooled add-on spending amount CPI–U is negative, we will use an products as described previously. We divided by the total pooled number of inflation factor of 1. For example, the used all 2019 Medicare Part B FFS claim lines. cumulative inflation factor for claims lines for separately paid drugs Using the drugs (by HCPCS code) performance year 1, quarter 2 (that is, (by HCPCS code) included on the MFN included on the performance year 1 April 1, 2021 through June 30, 2021) Model HCPCS Codes List for the MFN Model Drug HCPCS Codes List in will be the percentage increase in the beginning of performance year 1 that Table 2, available 2019 claims data CPI–U from October 2020 through were furnished by eligible Medicare- subject to the exclusions and exception January 2021. Similarly, the cumulative participating providers and suppliers previously noted, and applicable ASPs inflation factor for performance year 1, (that is, entities that are eligible to be an from 2019, we calculated a single per- quarter 3 will be the percentage increase MFN participant). We excluded claims dose add-on payment amount in the in the CPI–U from October 2020 through submitted by excluded providers and amount of $146.55. This amount April 2021. suppliers described in § 513.100(c) represents the single per-dose add-on As discussed in section III.G. of this (such as CAHs, and cancer hospitals) as payment amount for a dose of any MFN IFC, MFN participants will use a new well as certain claims described in Model drug prior to application of the HCPCS code (M1145, MFN drug add-on, § 513.100(d) (such as claims processed inflationary factor as described in per dose) to bill for and receive the by the DME MAC), as applicable in section III.F.2.b. of this IFC. alternative add-on payment amount for 2019, as well as claims where Medicare each dose of an MFN Model drug that b. Trending the Single Per-Dose Add-On is billed on the claim. 71 Note that Section 3709 of the Coronavirus Aid, Payment Amount Forward Each Relief, and Economic Security (CARES) Act Calendar Quarter During the MFN 3. Discussion of the Per-Dose Add-On temporarily suspends Medicare sequestration from Model Payment Approach May 1, 2020 to December 31, 2020. Available at: https://www.govinfo.gov/content/pkg/BILLS- We will trend forward the single per- The per-dose add-on payment amount 116hr748enr/pdf/BILLS-116hr748enr.pdf. dose add-on payment amount each approach will test an alternative way to

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calculate the add-on payment that is not Certification Number (‘‘CCN’’) or Based on the single per-dose add-on tied to the sales price of the drug that Taxpayer Identification Number payment amount of $146.55 (prior to the is furnished. This approach also aims to (‘‘TIN’’). To examine the potential application of the inflationary factor boost add-on revenue, on average, for impact of the single per-dose add-on that applies during the model) and MFN participants by setting the per- payment amount at the specialty level, using 2019 drug utilization, MFN dose add-on payment amount based on we assigned claims to a specialty participants will fare, on average, 40 6.1224 percent of historical ASP category based on the primary specialty percent better overall across all payment allowances trended forward for of the National Provider Identifier (NPI) specialties with the per-dose add-on inflation. However, the impact on MFN associated with the furnishing of the payment amount than they did participants will vary based on the MFN drug as listed in the Medicare Provider historically based on 4.3 percent of ASP participant’s prescribing patterns, Enrollment, Chain, and Ownership after sequestration. Some MFN including the amount and types of MFN System (PECOS). Eligible providers participants will see more than a 40 Model drugs they furnish to Medicare were assigned to the specialty that was percent increase in revenue related to FFS beneficiaries. most frequently associated with their the MFN add-on payment amount Compared with the current add-on 2019 claims for the drugs (by HCPCS payment policy, on an average per dose code) identified in Table 2. We also compared to their 2019 historical Part B basis based on 2019 historical claims, used the type of bill to examine the drug claims, and others will see less the single per-dose add-on approach potential impacts on various types of than a 40 percent increase, including will initially decrease add-on payments providers and suppliers. some who will see a reduction in add- for MFN Model drugs with relatively These analyses highlight that different on revenue. Based on our analysis, in higher historical applicable ASP-based subsets of providers and suppliers will general, physician practices will be payment amounts per dose and increase potentially gain (or lose) under the better off under the per-dose add-on add-on payments for MFN Model drugs single per-dose add-on approach. For payment approach than hospital with relatively lower historical 340B covered entities that were paid outpatient departments, and single applicable ASP-based payment amounts under the OPPS during calendar year specialty practices will be better off than per dose. Average 2019 historical add- 2019, the entirety of the alternative add- multi-specialty practices. Table 8 shows on payment amounts per dose for the on payment amount represent an the estimated variation in impacts for MFN Model drugs for performance year increase in payment when drugs are the top specialties by comparing 2019 1 ranged from $10.44 to $2,575.47 per acquired under the 340B program. Thus, baseline add-on payments based on 4.3 average dose for a drug. Based on 2019 we removed these entities from the percent of the applicable ASP with a claims, on average, a single per-dose following analyses. post-sequestration single per-dose add- add-on payment amount, calculated as To explore the potential entity level on payment amount (that is, for this described in this IFC and after change in the add-on amount for the comparison, we used the per-dose add- sequestration is applied, will represent single per-dose add-on payment on payment amount prior to the approach, we assigned each CCN or TIN an increase in the add-on payment application of the inflationary factor to only one specialty based on the amount for 70 percent of doses on ($146.55) and applied the effects of average compared to the effective specialty code with the highest total sequestration for this comparison). The historical add-on amount of 4.3 percent allowed spending for the entity’s claim Entity-Level Percentage Change By of the applicable ASP after lines, regardless of setting (for example, sequestration. hospitals, ASCs, and physician office). Percentile portion of Table 8 shows the To examine the potential impact of We also assigned each specialty a value distribution of entities based on size of the single per-dose add-on approach on of ‘‘low,’’ ‘‘medium,’’ or ‘‘high,’’ based the difference between their 2019 MFN participants using 2019 claims on the percentage of its Medicare baseline add-on payments (based on 4.3 data, we considered the overall revenue that is related to Part B drugs, percent of the applicable ASP) and the potential change in the add-on payment such that ‘‘high’’ means the specialty’s single per-dose add-on amount (post- amount at the eligible entity level, drug revenue is more than 50 percent of sequestration). Each row shows the size specialty level, and type of provider and its total Medicare revenue, ‘‘medium’’ of the impact for the given specialty. supplier. That is, for this entity level means the specialty’s drug revenue is 25 The 5th percentile will experience the analysis, we grouped 2019 claim lines to 50 percent of its total Medicare largest negative impact whereas the 95th for the drugs (by HCPCS code) revenue, and ‘‘low’’ means the percentile will experience the largest identified in Table 2 based on the specialty’s drug revenue is less than 25 positive impact. provider’s or supplier’s CMS percent of its total Medicare revenue. BILLING CODE 4120–01–P

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BILLING CODE 4120–01–C Based on these data, as shown in specialties (in terms of overall 2019 Table 8, all but 9 of the top 35 allowed dollars) impacted by the MFN

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Model will on average see increases in 4. Beneficiary Cost-Sharing one claim line to bill for a furnished add-on revenue compared to 4.3 percent Responsibilities drug dose, and using billing modifiers of the applicable ASP with a single In response to the October 2018 when doing so may be necessary to payment amount (the exceptions are ANPRM, which suggested continuing comply with billing instructions. In hematology/oncology, medical beneficiary cost-sharing for the certain situations, a second claim line oncology, neurology, hematology, alternative add-on payment, some may be necessary to report the amount gastroenterology, gynecological/ commenters suggested that CMS should of drug that was furnished, for example, oncology, infectious disease, ensure any alternative add-on payment when the number of billing units hematopoietic cell transplantation & does not increase out-of-pocket costs for necessary to indicate the dosage given cellular therapy, and dermatology). At beneficiaries. Other commenters noted exceeds the character size of the units the 25th percentile, 57 percent of the that an alternative add-on payment field or when appropriately discarded entities will see increased add-on could be confusing to beneficiaries since drug is billed. When applicable, a revenue for the top 35 specialties with currently they pay cost-sharing based on separate line item is billed with the the single per-dose add-on payment a single amount, versus separate modifier JW to identify the amount of amount; whereas at the 50th percentile, amounts, such as the MFN Model Drug unused drugs (or biologicals) from 83 percent of the entities will see Payment Amount and alternative add- single use vials or single use packages increased add-on revenue for the top 35 on that we are including in the MFN that was appropriately discarded. The specialties with the single per-dose add- Model. We appreciate these Medicare claims processing system on payment amount. Please note that commenters’ feedback. calculates payment for the amount of some of the large percentage increases To support reducing out-of-pocket discarded drug when the modifier JW is seen shown in the 95th percentile drug costs and minimizing potential present. MFN participants will be column are likely driven by the small confusion for MFN beneficiaries related required to submit a separate claim line using a new model-specific HCPCS code volume of drugs furnished by entities in to the alternative add-on payment (M1145, MFN drug add-on, per dose) to this percentile. amount, and decreasing administrative burden for MFN participants, we will bill for and receive the alternative add- We observed that volume is not waive beneficiary cost-sharing on payment amount for each dose of an consistently associated with whether an (coinsurance and deductible amounts) MFN Model drug that is billed on the entity will be better or worse off under on the portion of the allowed MFN claim. The MFN participant will the per-dose add-on payment approach Model Payment amount that is based on indicate in the units field of the claim when we look at the single per-dose the alternative add-on payment. Under line with HCPCS code M1145 the add-on amount approach for the top five the MFN Model, the MFN Drug Payment number of doses of a separately payable specialties in terms of total aggregate Amount will be subject to beneficiary MFN Model drug that are billed on the Medicare spending on MFN Model coinsurance and the annual deductible claim. To do so, the MFN participant drugs in 2019: internal medicine, amount. MFN participants will continue will count the number of claim lines hematology/oncology, ophthalmology, to collect beneficiary cost-sharing with a HCPCS code that is included on rheumatology, and medical oncology. applicable to the portion of the allowed the applicable MFN Model Drug HCPCS When we specifically looked at the top, payment amount that is based on the Codes List (based on the date of service), middle, and bottom of a distribution of MFN Drug Payment Amount. For the including all claim lines when the all entities based on how much better or alternative add-on, Medicare will pay number of billing units necessary to worse off each entity will be under the the entire allowed payment amount that indicate the dosage given exceeds the per-dose add-on payment amount is based on the alternative add-on character size of the units field and the compared to their add-on revenue payment to ensure that beneficiaries do claim has more than one claim line for (based on their 2019 claims), we found not experience an increase in cost- such MFN Model drug (we note that this that entities in the top 5 percent (that is, sharing under the MFN Model as a is expected to be a rare situation), and those that will do the best) had very low result of testing an alternative add-on excluding the number of claim lines volume (that is, few claims for these amount. That is, beneficiaries will not billed with the JW modifier. This drugs in 2019 claims). Entities in the owe any coinsurance or amount for the approach will allow the Medicare bottom 5 percent (that is, those that will annual deductible for the per-dose add- claims processing system to apply the do the worst) tended to have lower on payment amount. alternative add-on payment amount for volume than the middle 10 percent, each dose, and not apply beneficiary though volume was highest in the G. Billing and Claims Processing cost-sharing to the alternative add-on bottom 5 percent of entities in the Approach payment amount. MFN participants will internal medicine and ophthalmology We intend to issue model-specific still bill for wastage as they otherwise specialties. Overall, entities that will be claims submission instructions that would, using a separate claim line and worse off compared to their add-on MFN participants will be required to the JW modifier, and the payment for revenue (based on their 2019 claims) follow. Currently, for separately payable such claim lines will be based on the under the per-dose add-on payment Part B drugs, providers and suppliers MFN Drug Payment Amount (the approach tended to furnish more drugs submit separate claim lines for each alternative add-on payment amount is with higher drug add-on payment drug. Among the information included not applicable to such claim lines). amounts per dose more frequently than in each claim line for the applicable bill This billing and claims processing the entities that will be better off. We type, providers and suppliers specify approach will initiate from the MFN estimate that similar impacts will be the appropriate HCPCS code to indicate participant’s billing system and will experienced across the performance the drug that was furnished, the number establish a clear mechanism for MFN years unless ASPs for MFN Model drugs of billing units to indicate the total participants to track when the rise faster than inflation, in which case amount of the drug that was furnished, alternative add-on amount was billed the overall increase in add-on revenue billing code modifiers as necessary, and and paid. This approach will simplify compared to non-model add-on revenue a billing amount (or charge). In general, Medicare claims processing changes for will diminish over time. providers and suppliers routinely use the MFN Model. However, this

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approach may increase administrative management measures, medication will collect only one quality measure, burden for MFN participants and adherence measures, and measures focused on patient experience, to help requires MFN participants to count the related to patient access and utilization. better understand the impact of the number of claim lines for MFN Model We sought public input on ways to MFN Model on beneficiary access and drugs included on a claim, indicate this assess quality of care for purposes of quality of care. This survey will be number in the units field of the claim real-time monitoring of utilization, fielded by CMS to avoid any quality line for the alternative add-on (using hospitalization, mortality, shifts in site- measure reporting burden for MFN HCPCS code M1145), and submit a of-service and other important participants, although there will be billing amount (or charge) on the claim indicators of patient access and reporting burden on beneficiaries. CMS line for the alternative add-on. In outcomes, without requiring providers will also monitor for quality as outlined addition, the alternative add-on or suppliers to report additional data. in section III.I.4. of this IFC, including payment amount will be updated We received numerous comments in monitoring access to medications quarterly. Because Medicare allows the response to the October 2018 ANPRM through rapid analysis of claims data, lesser of the applicable payment amount on this topic. Several commenters using monthly claims extracts that will or the billed amount, MFN participants expressed concern that testing provide frequent assessments of will have to ensure that they submit an alternative payments for Part B drugs in beneficiary access to MFN Model drugs appropriate billing amount (or charge) general may impact beneficiaries’ access and that complement existing methods for the alternative add-on for the to care and may impact the overall to receive, assess, and respond to applicable quarter. Because the same patient experience of care. Some beneficiary and health care provider HCPCS code will be used to bill for the commenters requested that any quality feedback on the MFN Model. alternative add-on for all MFN Model measurement not add burden to model For the patient experience focused drugs, we believe this approach participants. Some commenters also quality measure, we will use a patient minimizes, but does not eliminate, the discussed the importance of adherence experience survey, which we will field additional administrative burden for to nationally recognized clinical periodically to a sample of Medicare MFN participants. guidelines in treatment decisions, beneficiaries, beginning in performance We are waiving program requirements stating that adherence to nationally year 1. The patient experience survey in section 1833(a)(1)(S), section recognized clinical guidelines would will be administered to these 1833(a)(1)(G) and section 1833(t) of the reduce drug spending while also beneficiaries by a third party contractor Act, respectively to allow flexibility in maintaining and possibly increasing throughout the model performance the way in which claims subject to the quality of care. period. A sample of beneficiaries will be MFN Model payment will be processed. surveyed regarding their experience of Section 1833(a)(1)(S) of the Act specifies We appreciate the public feedback on care, access, or other issues they that the Medicare payment for drugs ways we could structure a model to experienced under the MFN Model, and and biologicals not paid on a cost or enhance and monitor quality of care. In we may also sample beneficiaries who prospective payment basis is 80 percent the MFN Model, we will implement are not in the MFN Model. Beneficiaries of the lesser of actual charge or the robust monitoring activities, such as will not be required to complete the amount established in section 1842(o) of analyzing claims data, using patient survey. the Act. Similarly, section 1833(a)(1)(G) survey data, and site visits, to identify Survey results will be used to monitor of the Act specifies that the amounts any unintended consequences and the impact of the MFN Model on MFN paid with respect to facility services ensure that MFN beneficiaries’ access to beneficiaries’ care experience and furnished in connection with certain medications is not impeded and that potentially to inform educational surgical procedures and with respect to quality of care is preserved or enhanced. materials for MFN participants. As is services furnished to an individual in an Further, we believe the following outlined in section III.I.4. of this IFC, ASC shall be 80 percent of the lesser of principles are appropriate for a quality claims data will also be monitored to the actual charge for the services or the measurement approach for the MFN assess patient access and outcomes. amount determined by the Secretary Model: (1) Use quality measures for the If during the model the patient under such revised payment system. purpose of monitoring quality of care experience of care quality measure and Section 1833(t) of the Act specifies how and beneficiary access to treatment and claims-based monitoring strategies are payment under the OPPS is calculated experience with care; (2) avoid found to be insufficient to adequately including beneficiary copayment. unnecessary participant reporting measure the quality of care that MFN Specifically, we are waiving these burden as many providers and suppliers beneficiaries are receiving or MFN program requirements to the extent are currently reporting quality measures participants are providing, CMS may necessary to allow the total allowable to other programs and payers, for specify additional measures to monitor model payment for the service as example, the MFN Model should use quality. If additional quality measures specified in § 513.210 and § 513.220 claims-based measures where are added, they will meet the following (that is, the sum of the allowed MFN appropriate; and (3) establish standards criteria: (1) Additional measures would Drug Payment Amount and the allowed for adding quality measures, if be among one or more of the following alternative add-on payment amount) necessary, during the model. We believe categories: Patient experience of care, and to not apply beneficiary cost- that this approach will allow CMS to patient activation, shared decision sharing to the alternative add-on test the MFN Model’s alternative drug making, adherence, utilization, and payment amount. payment methodology, while creating a process measures; (2) Additional safeguard for beneficiary access and measures would not add significant H. Quality Measures quality of care, as well as a means to burden to MFN participants or The October 2018 ANPRM stated our monitor patient access and quality of beneficiaries; and (3) Additional intention to include quality measures as care. We are also sensitive to concerns measures would utilize an instrument part of the potential IPI Model, and our regarding adding administrative burden that CMS has used previously in a interest in several categories of potential to MFN participants and beneficiaries model to adjust payment or for measures, specifically: patient and, thus, seek to minimize burden on monitoring or evaluation. We are experience measures, medication them. As such, in § 513.400(b)(1) we codifying the inclusion of the patient

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experience quality measure and its use processes. If a beneficiary receives an • Evidence of methods used to obtain as well as the criteria for adding MFN Model drug from an MFN each MFN Model drug that was measures during the MFN Model in participant it does not mean that he or furnished by the MFN participant § 513.400. she should lose this right, but instead during the performance year to any this right should necessarily be patient; I. Beneficiary Protections and applicable to included beneficiaries as it • Average net acquisition cost for Monitoring Actions would be if they were not a part of the each MFN Model drug (inclusive of all We are interested in enhancing MFN Model. on-invoice prices and price reductions, protections for beneficiaries included in off-invoice discounts, any adjustments the MFN Model. In addition to existing b. Financial Hardship Exemption thereto, and any other price concessions beneficiary protections, we will actively To include financial protection for related to the purchase of the MFN monitor the MFN Model to ensure it is physicians and other MFN participants, Model drug) that was furnished by the operating effectively and meeting the specifically those who furnish MFN participant during the needs of beneficiaries, providers and substantial amounts of MFN Model performance year to MFN beneficiaries; suppliers, and the Medicare program. drugs as part of the services they furnish • Average net acquisition cost for We will coordinate with the Medicare to Medicare FFS beneficiaries, each MFN Model drug (inclusive of all Beneficiary Ombudsman and other especially MFN Model drugs with the on-invoice prices and price reductions, customer facing components to ensure greatest difference between the MFN off-invoice discounts, any adjustments that any MFN Model-related beneficiary Price and the applicable ASP, we are thereto, and any other price concessions complaints, grievances, or requests for including a financial hardship related to the purchase of the MFN information submitted are responded to exemption codified in § 513.230. The Model drug) that was furnished by the in an appropriate and timely manner, financial hardship exemption process MFN participant during the per CMS protocol. for MFN participants will be available performance year to patients who were We believe it will also be necessary to in the event unintended consequences not MFN beneficiaries; have additional protections in place in arise to ensure access to MFN Model • Statement of any remuneration the MFN Model to ensure that drugs for MFN beneficiaries and received by the MFN participant from beneficiaries retain their existing rights financial protections for MFN manufacturers of MFN Model drugs, and are not harmed by the model test. participants who are unable to obtain wholesalers, and distributors that is not Further, we believe it is important for MFN Model drugs at or below the MFN reflected in the MFN participant’s beneficiaries to know and understand Model Payment for such drugs and are average net acquisition costs with a their rights as beneficiaries who are significantly affected by their justification of why such remuneration receiving care from MFN participants. participation in the MFN Model. should not be treated as a price We therefore believe it is necessary to The financial hardship exemption concession related to the purchase of an include certain policies regarding process will occur independently of MFN Model drug; beneficiary choice, appeals, and the existing Medicare claims processing and • Administrative information, availability of services. appeals processes. In § 513.230(a), we including: MFN participant’s name, TIN codify that a financial hardship 1. Beneficiary Freedom of Choice or CCN (as applicable), contact name, exemption for a performance year may phone number, and email address; and A beneficiary’s ability to choose his or be granted to an MFN participant by • The MFN participant’s attestation her provider or supplier is an important CMS, in its sole discretion and will not that— principle of Medicare fee-for-service be subject to appeal, when the ++ It experienced a reduction in and is reflected in section 1802 of the provisions in § 513.230 are met. This Medicare Part B FFS payments for Act. We are codifying in § 513.410(a) means that a financial hardship separately payable drugs on a per that any MFN participant must not exemption, if granted, will be applied at beneficiary basis during the commit any act or omission, nor adopt the MFN participant level (as defined in performance year as compared to the any policy that inhibits a beneficiary § 513.2). As further described in this prior year (that is, the four calendar from exercising his or her freedom to section of this IFC, a financial hardship quarters immediately preceding the choose to receive care from any exemption will be limited to cases performance year) due to its inability to Medicare participating provider or where the MFN participant experienced obtain one or more of the MFN Model supplier or any provider or supplier a financial loss. drugs at or below the MFN Model who has opted out of Medicare. We Specifically, to be eligible for a Payments for such drugs during the believe these provisions are necessary to financial hardship exemption, the MFN performance year; ensure the MFN Model does not prevent participant must submit its request for ++ It has not received and will not beneficiaries from the general rights and a financial hardship exemption to CMS receive any remuneration from guarantees provided under Medicare. in accordance with the submission manufacturers of MFN Model drugs, 2. Appeals Processes and Financial process that CMS will post on the MFN wholesalers, and distributors related to Hardship Exemption Model website prior to October 1, 2021, the purchase of an MFN Model drug and in the form and manner and with that was furnished by the MFN a. Appeals Processes the content that will be specified by participant during the performance year In § 513.410(b), we are codifying that CMS, including without limitation the that is not reflected in the MFN MFN beneficiaries and their assignees requirements specified in § 513.230(b). participant’s submission; and will have access to the existing formal Such requests must be submitted to ++ Its submission is true, accurate, claims appeals process under 42 CFR CMS within 60 calendar days following and complete. part 405, subpart I. In other words, once the end of the performance year for In addition, MFN participants must an MFN Model drug is furnished by an which the MFN participant seeks a use a template that CMS will post on the MFN participant to a beneficiary and a financial hardship exemption. The MFN MFN Model website for submission of claim is submitted and processed for participant must include the following their net acquisition costs for MFN payment, that claim will be eligible for in its request for a financial hardship Model drugs and administrative the current Medicare claims appeals exemption: information. This template will be

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similar to the template CMS provided percent of the MFN participant’s total separately payable Medicare Part B for the 2020 Hospital Survey for Medicare Part A and Medicare Part B drugs for the performance year from the Specified Covered Outpatient Drugs FFS allowed charges on a per MFN participant’s average per (SCODs) Average Acquisition Cost.72 beneficiary basis during the prior year. beneficiary total allowed charges for The MFN participant will submit the We are establishing a threshold of 25 separately payable Medicare Part B other required materials to CMS along percent of the MFN participant’s total drugs for the prior year. This difference with the template. Medicare Part A and Medicare Part B will then be compared to 25 percent of In § 513.230(c), we codify the FFS allowed charges on a per the MFN participant’s average per standards that CMS will use to beneficiary basis as a criterion to qualify beneficiary total allowed charges for all determine if an MFN participant is for the financial hardship exemption Medicare Part A and Part B claims with granted a financial hardship exemption. because the exemption is designed to be dates of service within the prior year, Specifically, to be eligible for the limited to MFN participants that using subtraction as described in financial hardship exemption, we codify experience a significant year-to-year § 513.230(d)(6). The latter quantity will in § 513.230(c)(2)(i) that the MFN reduction in total allowed charges as a be calculated by identifying 25 percent participant must submit a timely, result of the MFN Model. We believe of the MFN participant’s total allowed complete request for a financial this threshold will protect MFN charges for all Medicare Part A and Part hardship exemption in accordance with participants from significant financial B claims with dates of service within the requirements specified in hardship under the MFN Model while the prior year, then dividing this § 513.230(b) that in the sole discretion also preserving the model test of amount by the total number of of CMS demonstrates all of the aligning payment for Medicare Part B beneficiaries that had at least one claim following: drugs with the lowest international for a service furnished by the MFN • The MFN Participant exhausted all prices using a phase-in approach. participant with a Medicare Part A or reasonable methods to obtain the MFN Incomplete financial hardship Medicare Part B allowed charge greater Model drugs at or below the MFN exemption requests will not be than $0 with a date of service within the Model Payments for such drugs during considered by CMS. prior year. If the resulting amount, the performance year. In § 513.230(d), we are codifying how called the excess reduction amount per • The MFN participant’s average net CMS will calculate the MFN beneficiary, is greater than zero, then acquisition cost for each MFN Model participant’s excess reduction amount the MFN participant will meet this drug (including on- and off-invoice per beneficiary. CMS will calculate the eligibility criterion for the financial discounts or adjustments) that was MFN participant’s excess reduction hardship exemption. furnished by the MFN participant amount per beneficiary using available In § 513.230(e)(1), we are codifying during the performance year to patients final action claims data that are that if CMS in its sole discretion grants who were not MFN beneficiaries was estimated to be more than 90 percent a financial hardship exemption to an not less than the MFN participant’s complete (claims are generally complete MFN participant for a performance year, average net acquisition costs for such within 2 months after the service CMS shall provide to such MFN MFN Model drug (including on- and off- month) where Medicare was the participant, a reconciliation payment for invoice discounts or adjustments) that primary payer, as determined by CMS. the performance year. To calculate the was furnished by the MFN participant This approach will not include non- reconciliation amount for the MFN during the performance year to MFN claims based payments or other participant, CMS will multiply the beneficiaries. transactions, for example, performance- excess reduction amount per beneficiary • Any remuneration the MFN based payment or repayments. CMS will by the total number of beneficiaries that participant received from manufacturers calculate, for dates of service within the had at least one claim for a service of MFN Model drugs, wholesalers, and performance year, the MFN participant’s furnished by the MFN participant with distributors that was not reflected in the total allowed charges for separately a Medicare Part A or Medicare Part B MFN participant’s average net payable Medicare Part B drugs, and the allowed charge greater than $0 with a acquisition costs was not a price total number of beneficiaries that had at service date within the performance concession related to the purchase of an least one claim for a service furnished year. MFN Model drug. by the MFN participant with a Medicare The reconciliation payment amount In addition, in § 513.230(c)(2)(ii), we Part A or Medicare Part B allowed will be paid by a CMS contractor using are codifying that the agency in its sole charge greater than $0. Then, CMS will Medicare Part B funds as soon as discretion must also determine that the divide the MFN participant’s total practical after CMS notifies the MFN MFN participant’s excess reduction allowed charges for separately payable participant of CMS’s decision regarding amount per beneficiary (as determined Medicare Part B drugs for dates of the MFN participant’s financial by CMS in accordance with service within the performance year by hardship exemption request and the § 513.230(d)(6)) is greater than zero. the total number of beneficiaries that amount of the reconciliation payment, if That is, the MFN participant must have had at least one claim for a service any, to be made to the MFN participant. experienced a reduction in Medicare furnished by the MFN participant with In § 513.230(e)(2), we are codifying that FFS allowed charges for separately a Medicare Part A or Medicare Part B there will be no appeal of the amount payable Medicare Part B drugs on a per allowed charge greater than $0 with a of the reconciliation payment, if any, to beneficiary basis during the service date within the performance be made to the MFN participant. In performance year as compared to the year. CMS will repeat this calculation addition, the reconciliation payment prior year (that is, the four calendar using the available claims data for the amount will not be subject to quarters immediately preceding the prior year, to calculate the MFN beneficiary cost sharing (including any performance year) that is greater than 25 participant’s average per beneficiary deductible or coinsurance) because the total allowed charges for separately reconciliation payment will not be tied 72 The template for the 2020 Hospital Survey for payable Medicare Part B drugs for the to specific beneficiary claims, Specified Covered Outpatient Drugs (SCODs) (CMS–10709; OMB 0938–1374) available at: https:// prior year. Then, CMS will subtract the beneficiaries will have been responsible www.cms.gov/Medicare/Medicare-Fee-for-Service- MFN participant’s average per for 20 percent cost-sharing on the Payment/HospitalOutpatientPPS/index. beneficiary total allowed charges for allowed payment amounts for the

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Medicare Part B drugs they received extent provided by law. However, CMS Innovation Center, CMS or its during the performance year, and steps may make public descriptive designee(s) monitors model participants to seek additional cost-sharing from information about MFN participants to assess compliance with model terms beneficiaries would likely cause that are granted a financial hardship and with other applicable program laws significant confusion and burden for exemption and the extent to which they and policies. We believe our monitoring beneficiaries and MFN participants. were unable to obtain MFN Model drugs efforts help ensure that model We do not foresee that many MFN at or below the MFN Model Payment for participants are furnishing medically participants will qualify for a such drugs. We do not intend to make necessary covered services and are not reconciliation payment for performance such information available in an falsifying data, increasing program year 1, because the estimated overall individually identifiable manner. costs, or taking other actions that reduction in Medicare Part B drug compromise the integrity of the model 3. Availability of Services payment during performance year 1 is 7 or are not in the best interests of the percent on average. This reflects the The MFN Model is designed to test model, the Medicare program, or MFN Price phase-in formula in section potential improvements to the delivery Medicare beneficiaries. III.E.5. of this IFC which will begin with of and payment for healthcare to reduce In § 513.420, we are codifying a the MFN Price making up 25 percent of Medicare expenditures while preserving framework for conducting compliance the MFN Drug Payment Amount and the or enhancing the quality of care for monitoring activities for the MFN Model alternative add-on payments in section beneficiaries. As such, an important that is consistent with the standard III.F. of this IFC will represent a 40 aspect of testing models is that practices in other CMS Innovation percent increase on average for MFN beneficiaries must continue to have Center models. Under the monitoring participants relative to historical access to and receive needed care. policy at § 513.420(b), MFN participants Medicare add-on payments. Given the In § 513.410(c), we are codifying that will be monitored to assess compliance financial hardship execption threshold MFN participants must not take any with the MFN Model requirements, to of 25 percent of the MFN participant’s action to select or avoid treating determine the effects of the MFN Model total Medicare Part A and Medicare Part beneficiaries based on their diagnoses, on MFN beneficiaries, providers, B FFS allowed charges on a per care needs, income levels, or other suppliers, and on the Medicare program beneficiary basis in the prior year will factors that would render them ‘‘at-risk and to facilitate real time identification be determined at the entity level, MFN beneficiaries’’ as that term is defined at and response to potential issues. participants with a high proportion of 42 CFR 425.20 (‘‘lemon dropping’’). We Further, under § 513.420(a)(2), an MFN their overall Medicare payments related will use monitoring to ensure that MFN participant will be required to notify to MFN Model drugs will be more likely participants are complying with this CMS within 15 calendar days after to qualify for the hardship exemption if requirement. We believe that this is a becoming aware that the MFN their Medicare Part B drug allowed necessary precaution to protect participant is under investigation or has charges on a per beneficiary basis beneficiaries against potential been sanctioned by the federal, state, or during a performance year were to beneficiary selection bias from MFN local government, or any licensing decrease significantly compared to the participants and ensure that MFN authority (including, without limitation, prior year. MFN participants that are beneficiaries retain access to medically the imposition of program exclusion, hospitals will likely have significant necessary treatment. debarment, civil monetary penalties, Medicare Part A revenues and 4. Monitoring and Compliance corrective action plans, and revocation purchasing abilities that will lessen the Activities of Medicare billing rights). likelihood that they will qualify for a In § 513.420(b)(2), we are codifying financial hardship exemption based on Consistent with other CMS Innovation that when we are conducting their experience in the MFN Model Center models, CMS will implement a compliance monitoring and oversight during performance year 1. Non- monitoring program for the MFN Model activities, CMS or our designees will be hospital MFN participants will be more to ensure that the MFN Model is authorized to use any relevant data or likely to potentially qualify in later implemented safely and appropriately. information, including without performance years. Given that MFN participants will limitation Medicare claims submitted For future years, we seek comment on receive model-specific payments and for items or services furnished to MFN whether an alternative threshold might access to payment rule waivers while beneficiaries. In § 513.420(b)(3), we are better protect beneficiary access to MFN participating in the MFN Model, we codifying that MFN participants will be Model drugs or mitigate impacts on believe that enhanced compliance required to cooperate with the model physicians and other MFN participants review and monitoring of MFN monitoring and evaluation activities, under the MFN Model. For example, we participants is necessary and comply with the government’s right to are interested in whether a uniform appropriate to ensure the integrity of the audit, inspect, investigate, and evaluate threshold should be applied for all MFN MFN Model. In addition, as part of the any documents or other evidence participants, and whether certain CMS Innovation Center’s assessment of regarding implementation of the MFN physician specialties or types of MFN the impact of new models such as the Model, and to retain and provide the participants would find the threshold MFN Model, we have a special interest government with access to records. insufficient in protecting beneficiary in ensuring that model tests do not In § 513.420(b)(1), we are codifying access to MFN Model drugs. For future interfere with ensuring the integrity of that monitoring activities will include, rulemaking, we also seek comment on the Medicare program. Our interests but will not be limited to: (1) how CMS could refine the design of the include ensuring the integrity and Documentation requests sent to the financial hardship exception to advance sustainability of the MFN Model and the MFN participant, including surveys and the model goals to reduce program underlying Medicare program from both questionnaires; (2) audits of claims data, expenditures and maintain or improve a financial and policy perspective, as medical records, and other data from the quality of care. well as protecting the rights and MFN participant; (3) interviews with CMS pledges to maintain interests of Medicare beneficiaries. For any individual or entity participating in confidentiality of individual financial these reasons, as a part of the models the MFN Model, including members of hardship exemption requests to the currently being tested by the CMS the MFN participant’s leadership,

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management, and staff; (4) interviews Finally, CMS or its designee can excluded. To the extent that the use of with beneficiaries and their caregivers; perform unannounced site visits to all a patient experience survey includes (5) site visits to the MFN participant; physical locations of MFN participants items focused on access, we will and (6) tracking complaints and appeals. at any time to investigate concerns analyze these data as well to determine We believe these specific monitoring related to the health or safety of whether MFN beneficiaries continue to activities, which align with those beneficiaries or other patients or other be able to access the right drug at the currently used in other models being program integrity issues, right time. We will use these data to tested by the CMS Innovation Center, notwithstanding these provisions. promote transparency and develop an are necessary in order to ensure Further, nothing in part 513 will limit understanding of the MFN Model’s compliance with the terms and CMS from performing other site visits as effects. We intend to review and audit conditions of the MFN Model and to allowed or required by applicable law. MFN participants if we have reason to protect beneficiaries from potential We believe that, regardless of the model believe that they are compromising harms that may result from activities of being tested, CMS must always have the beneficiary access to care. an MFN participant, such as attempts to ability to timely investigate concerns We intend to conduct analyses of reduce access to medically necessary related to the health or safety of claims data, such as monthly updates covered services or appropriate drugs. beneficiaries or other patients, or and historic comparisons of trends We anticipate that monitoring of the program integrity issues, and to perform including drug utilization, program MFN Model activities will include functions required or authorized by law. spending, and prescribing patterns gathering and analyzing data captured In particular, we believe that it will be (including observing for any shift to through the Ombudsman’s service, the necessary for us to monitor, and for compounded or other categories of evaluation of the MFN Model, the MFN participants to be compliant with drugs that are not included in the MFN patient experience survey, and audits of our monitoring efforts, to ensure that Model) as well as changes in site of charts, claims data, medical records, they are not denying or limiting the service delivery, mortality, hospital among other data as available. As coverage or provision of medically admissions, and other indicators present previously noted in this IFC, one necessary covered services to in claims data. We will monitor purpose of monitoring and analyzing beneficiaries in an attempt to change the physician visits, days in a hospital, and these data sources will be to provide MFN Model results or their MFN Model other services as part of the thorough timely information about the effects of payments, including discrimination in look at how MFN beneficiaries are the MFN Model on MFN beneficiaries, the provision of services to at-risk receiving care to determine whether any providers, suppliers, and on the beneficiaries (for example, due to treatment patterns are changing Medicare program, and to facilitate real eligibility for Medicaid based on systematically. We will use the time identification and response to disability). monitoring results to detect potential potential issues. We anticipate that We intend to monitor MFN issues with beneficiary access to care or these findings will inform model participants through any of the potential provider and supplier oversight and the potential need for previously described monitoring payment issues. action to address identified issues. activities (such as documentation In § 513.420(c), we outline parameters requests, audits of claims data, audits of b. Quality of Care Monitoring for site visits. We will require that MFN medical records, etc.) to ensure that We anticipate that quality monitoring participants cooperate in periodic site MFN Model drugs are not being activities may include claims and visits conducted by CMS or its designee. inappropriately billed (for example, survey data analytics, site visits, Such site visits will be conducted to excessive doses or units). We anticipate medical record review, and tracking facilitate the model implementation. that this monitoring activity will patient complaints and appeals. We will In order to operationalize this model, discourage MFN participants from also use the most recent claims data CMS or its designee will provide the furnishing smaller and more frequent available to track utilization and MFN participant with no less than 15 doses of MFN Model drugs to beneficiary outcomes under the MFN calendar days advance notice of a site beneficiaries in order to maximize the Model. We believe this type of visit, to the extent practicable. alternative add-on payments. If it is monitoring is important as we want to Furthermore, to the extent practicable, found that an MFN participant has been ensure to the greatest extent possible CMS will attempt to accommodate a engaged in inappropriate billing, then that patients continue to receive high- request that a site visit be conducted on we will use applicable remedial actions quality care. a particular date, but that the MFN set forth in § 513.440(a)(2). We believe that this set of monitoring participant will be prohibited from We may employ longer-term analytic activities will allow us to promptly requesting a date that was more than 60 strategies to confirm our ongoing identify any unintended consequences calendar days after the date of the initial analyses and detect more subtle or hard- of the MFN Model. We anticipate that site visit notice from CMS. We believe to-determine changes in care delivery by identifying unintended potential the 60-calendar day period will and beneficiary outcomes. Some consequences of the MFN Model, that reasonably accommodate MFN Model determinations of beneficiary outcomes we will then be able to determine participants’ schedules while not or changes in treatment delivery methods to address or alleviate those interfering with the operation of the patterns may not be able to be built into potential consequences. MFN Model. Further, we will require ongoing claims analytic efforts and may c. Remedying Improper Payment MFN participants to ensure that require longer-term study. personnel with the appropriate We anticipate that our monitoring responsibilities and knowledge a. Reduced Access activities may identify instances of pertaining to the purpose of the site visit We will monitor claims data from incorrect MFN Model payments. As be available during any and all site MFN participants—for example, to such, we are codifying that CMS is visits. We believe this is necessary to compare MFN participants’ case mix authorized to correct model-specific ensure an effective site visit and prevent relative to a pre-model historical payments under § 513.420(d). the need for unnecessary follow-up site baseline to determine whether complex Specifically, under this section if CMS visits. patients are being systematically discovers that it has made or received

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an incorrect model-specific payment connection with any aspect of the MFN CMS Innovation Center, among other under the terms of the MFN Model, then Model; things, the Secretary must first CMS may make payment to, or demand • Has avoided at-risk beneficiaries, as determine that such expansion would payment from, the MFN participant. this term is defined in § 425.20; not deny or limit the coverage or Should these monitoring activities • Has avoided patients on the basis of provision of benefits under the identify a need for additional payer status; applicable title for applicable protections, we will consider • Is subject to any sanctions or final individuals. Thus, there is a particular appropriate action. actions of an accrediting organization or need for CMS to be able to audit, a Federal, State, or local government inspect, investigate, and evaluate d. Compliance With Laws agency; records and materials related to MFN participants will remain subject • Takes any action that CMS participation in CMS Innovation Center to all existing requirements and determines for program integrity reasons models to allow us to ensure that the conditions for Medicare participation as is not in the best interests of the MFN model is not denying or limiting the set out in Federal statutes and Model, or the Medicare program, or fails coverage or provision of benefits for regulations and provider and supplier to take any action that CMS determines beneficiaries. agreements, unless waived under the for program integrity reasons should We note that there are audit and authority of section 1115A(d)(1) of the have been taken to further the best record retention requirements under the Act solely for purposes of testing the interests of the MFN Model or Medicare Medicare Shared Savings Program (42 MFN Model. In § 513.420(a)(1), we program; CFR 425.314) and in current models therefore require that MFN participants • Is subject to investigation or action being tested under section 1115A (such must comply with all applicable laws by HHS (including the HHS Office of as under 42 CFR 510.110 for the CMS and regulations. We note that a law or the Inspector General (OIG)) or the Innovation Center’s Comprehensive regulation is not ‘‘applicable’’ to the Department of Justice due to an Care for Joint Replacement Model). extent that its requirements have been allegation of fraud or significant Building off those existing waived under section 1115A(d)(1) of the misconduct, including being subject to requirements, in § 513.430(a), the Act solely for purposes of testing the the filing of a complaint, filing of a Federal Government, including, but not MFN Model. criminal charge, being subject to an limited to, CMS, HHS, and the indictment, being named as a defendant Comptroller General, or their designees, 5. Enforcement Authority and Remedial in a False Claims Act qui tam matter in have a right to audit, inspect, Action which the Federal Government has investigate, and evaluate any documents We are codifying at § 513.440(b) that intervened, or similar action; and other evidence regarding nothing contained in the terms of the • Is the subject of administrative implementation of the MFN Model. MFN Model or part 513 will limit or enforcement action imposed by CMS; or Additionally, in order to align with the • restrict the authority of the HHS Office Has failed to demonstrate improved policy of current models being tested by of Inspector General (OIG) or any other performance following any remedial the CMS Innovation Center, we are Federal Government authority, action imposed by CMS. codifying in §§ 513.430(b) and (c) that including its authority to audit, In § 513.440(a)(2), we are codifying MFN participants must— evaluate, investigate, or inspect the that if CMS determines that one or more • Maintain and give the Federal MFN participant. grounds for remedial action exists, CMS Government, including, but not limited It is necessary for CMS to have the may take one or more of the following to, CMS, HHS, and the Comptroller remedial actions: General, or their designees, access to all ability to impose remedial actions to • address non-compliance with the Notify the MFN participant of the documents (including books, contracts, violation. and records) and other evidence requirements of the MFN Model and to • ensure that the MFN Model does not Require the MFN participant to sufficient to enable the audit, interfere with the program integrity provide additional information to CMS evaluation, inspection, or investigation or its designees. of the MFN Model, including without interests of the Medicare Program. Thus, • in § 513.440(a)(1), CMS may take Require the MFN participant to limitation, documents and other remedial action against an MFN develop and implement a corrective evidence regarding all of the following: participant if CMS determines, in CMS’ action plan in a form and manner and ++ The MFN participant’s sole discretion, that the MFN by a deadline specified by CMS. compliance with the terms of the MFN • Subject the MFN participant to participant— Model, including new subpart E of part • additional monitoring, auditing, or both. 513. Has failed to comply with any • Remove the MFN participant from applicable Medicare program ++ Quality measure information and the MFN Model; the quality of services performed under requirement, rule, or regulation; • • Recoup model-specific payments. the terms of the MFN Model, including Has failed to comply with any of • Such other action as may be the terms of the MFN Model, including new subpart E of part 513. permitted under the terms of § 513.420. ++ Patient safety. applicable requirements of part 513; • 6. Audits and Record Retention ++ The accuracy of model-specific Systematically engaged in the under payments under the MFN Model. delivery or over delivery of an MFN By virtue of participation in the MFN ++ Utilization of items and services Model drug; Model, MFN participants will receive furnished under the MFN Model. • Has taken any action that threatens model-specific payments and access to ++ Any other program integrity the health or safety of an MFN payment rule waivers. We therefore issues. beneficiary or other patient; believe that CMS’ ability to audit, • Maintain the documents and other • Has undergone a change of control inspect, investigate, and evaluate evidence for a period of 6 years from the that presents a program integrity risk; records and other materials related to last payment received by the MFN • Has submitted false data or made participation in the MFN Model is participant under the MFN Model or false representations, warranties, necessary and appropriate. In order to from the date of completion of any certifications or attestations in expand a phase 1 model tested by the audit, evaluation, inspection, or

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investigation, whichever is later, Medicare beneficiary who receives an targets, and reconciliation unless— MFN Model drug will also be assigned, methodologies may not be necessary, ++ CMS determines there is a special aligned, or attributed to another CMS and will be determined by each other need to retain a particular record or Innovation Center model or CMS model, program, or initiative as group of records for a longer period and program. Overlap could also occur appropriate. notifies the MFN participant at least 30 among providers and suppliers at the However, we recognize that the calendar days before the normal individual or organization level, for design of some other models, programs, disposition date; or example, a health care practitioner or a and initiatives could create unique ++ There has been a termination, physician group practice could challenges at the organization, clinician, dispute, or allegation of fraud or similar participate in multiple CMS Innovation or beneficiary level. As a result, we will fault against the MFN participant in Center models and CMS programs work with such models, programs, or which case the records must be concurrently. Of note, some existing initiatives to resolve any potential maintained for an addition 6 years from models and programs will not have overlaps that could result in the date of any resulting final resolution overlap at the health care practitioner or overpayment of savings due to double of the termination, dispute, or allegation participant level due to the way in counting of the impact of a result that of fraud or similar fault. which the model or program operates could be attributed to the interventions If CMS notifies the MFN participant and makes payments. from two different models. For example, of the special need to retain records or We believe that the MFN Model is OCM focuses on improved care group of records at least 30 calendar operationally compatible with existing management and coordination for days before the normal disposition date, models and programs that provide Medicare beneficiaries with cancer who the records must be maintained for such opportunities to improve care and receive chemotherapy during 6-month period of time determined by CMS. reduce spending, especially total cost of episodes of care. An OCM practice has care-focused CMS programs and the opportunity to receive a J. Interaction With Other Models and Innovation Center models. The MFN performance-based payment if it Programs Model will test an innovative way to reduces the total cost of care in its OCM 1. Approach for Overlap With Other pay for Medicare Part B drugs that seeks episodes compared to a target. Based on Models to address any existing incentives for the performance year 1 MFN Model prescribing higher cost drugs and ways Drug HCPCS Codes List, we anticipate In designing each CMS Innovation to lower costs for beneficiaries and the substantial overlap between MFN Center model, CMS considers potential Medicare program; total cost of care- participants and MFN beneficiaries with overlap between a new model and other focused CMS programs and Innovation OCM practices and OCM beneficiaries. ongoing and potential models and Center models incentivize more To avoid paying performance-based programs. Based on the type of overlap, appropriate provision of care across payments in OCM that are due simply such as health care provider or multiple clinical areas, including use of to the drug payment change that will beneficiary, operating rules may be Medicare Part B drugs; the MFN Model occur under the MFN Model and not to established for whether or not health addresses only use of certain Medicare changes in care delivery, for OCM, we care providers and beneficiaries can be Part B drugs. To some degree, incentives will adjust reconciliation calculations part of both models as well as how to for inappropriate use of higher cost such that the drug payments included in handle overlap when it occurs. These drugs are reduced, and intended effects OCM episode expenditures will be policies help to ensure that the of the MFN Model are already built into calculated as if the MFN Model were evaluation of model impact is not total cost of care-focused models, so the not occurring. OCM participants will be compromised by issues of model addition of the MFN Model should not notified and provided with further overlap and that double counting of have further effects in those programs. information through OCM’s typical beneficiaries and dollars across different We do not plan to make adjustments to channels of communication. models does not occur. the MFN Drug Payment Amount or As discussed in the section III.C.1. of In response to the October 2018 MFN alternative add-on payment due to this IFC, CMMI has already waived ANPRM, several commenters expressed overlap between the MFN Model and section 1833(t) of the Act for certain concern regarding model overlap, another model or program, unless such acute care hospitals due to their specifically with the Oncology Care model tests an alternative approach to participation in models under section Model (OCM) and initiatives involving the add-on portion of payment for 1115A of the Act for which payment for accountable care organizations (ACOs). Medicare Part B drugs as specified in outpatient hospital services furnished to Some commenters noted that OCM § 513.220(d)(2). However, for certain Medicare FFS beneficiaries, including participants should be excluded from models and programs, adjustments to MFN Model drugs, is made under such the potential IPI Model or excluded those models and programs may be model on a fully capitated or global from mandatory participation. Some necessary to account for payment budget basis. For the first and second commenters also requested that ACO changes under the MFN Model. quarters of performance year 1, we will initiatives take precedence in terms of Because the MFN Model will focus on exclude these entities from the MFN calculating shared savings as well as for approximately 50 separately payable Model with limitation. That is, the acute clarity on how overlap between ACO Medicare Part B drugs, when claims are care hospitals that participate in another initiatives and the potential IPI Model considered from all beneficiaries CMS Innovation Center model under would work. aligned with or assigned to some other which they are paid for outpatient We appreciate commenters’ request Innovation Center models or CMS hospital services furnished to Medicare for detailed information about model programs that focus on total cost of care, FFS beneficiaries, including MFN overlap policies. In developing the MFN such as the Medicare Shared Savings Model drugs, on a fully capitated or Model, CMS conducted an internal Program, we do not expect that the MFN global budget basis under a waiver review of which models will have Model will have a significant impact on under such model of section 1833(t) of potential overlap with the MFN Model. shared savings, total cost of care, or the Act, such as the Maryland Total Cost As a result of our review, we expect other benchmarks and measures. of Care Model and the Pennsylvania there will be situations where a Therefore, changes to benchmarks, Rural Health Model, will be excluded

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from the MFN Model. For the third the APM and is not a Medical Home price and could potentially lower best quarter of performance year 1 and Model expanded under section price and possibly increase Medicaid beyond, acute care hospitals that 1115A(c) of the Act. The MFN Model rebates. participate in a CMS Innovation Center also will not qualify as a MIPS APM, Specifically, if the manufacturer model under which they are paid for because it does not hold participant lowers prices available to an MFN outpatient hospital services furnished to health care providers financially participant at or below the MFN Drug Medicare FFS beneficiaries, including accountable for both the cost and Payment Amount, such prices will be MFN Model drugs, on a fully capitated quality of care provided to Medicare considered in the manufacturer’s or global budget basis under a waiver beneficiaries. determination of best price and may under such model of section 1833(t) of reset the manufacturer’s best price if the the Act will be excluded from the MFN K. Interaction With Other Federal reduced price is lower than the Model if the parameters of the other Programs manufacturer’s best price that would CMS Innovation Center model adjust for The MFN Model may have impacts on otherwise apply. This is particularly the difference in payment for MFN other federal programs, such as possible because the MFN Drug Model drugs between the MFN Model Medicaid, the 340B Program, the Payment Amount, which is expected to and non-MFN Model drug payments Veterans Health Administration, the be lower than the payment amounts for such that savings under the MFN Model Department of Defense, the Public the same drugs outside of the model, are incorporated into the other CMS Health Service, the Coast Guard, and will include the impact of pricing Innovation Center model’s parameters Medicare. outside of the U.S., which is typically (for example, the annual global budget) lower than prices in the U.S., and will for the duration of the MFN Model. 1. Impact on Medicaid likely impact the prices made available These exclusions will apply only during a. Impact on Medicaid ‘‘Best Price’’ by the manufacturer in the U.S. the period of the hospital’s participation With respect to single source or b. Impact on Average Manufacturer in such model under which it is paid on innovator multiple source drugs (which Price (AMP) a fully capitated or global budget basis. Medicaid recognizes to include AMP is defined at section 1927(k)(1) Upon termination of such participation biologicals), the term ‘‘Medicaid Best for any reason or if the model is revised of the Act. Generally, AMP is Price’’ is the lowest price available from such that the waiver of section 1833(t) determined based on the average price the manufacturer during the rebate of the Act no longer applies under such paid to the manufacturer for a covered period to any wholesaler, retailer, model, the hospital—if it otherwise outpatient drug in the U.S. by provider, health maintenance meets the definition of MFN wholesalers for drugs distributed to organization, non-profit entity or participant—will be required to retail community pharmacies and retail governmental entity within the U.S. participate in the MFN Model. community pharmacies that purchase We anticipate model overlap may with certain exclusions. That is, a drugs directly from the manufacturer occur between the MFN Model and manufacturer’s best price determination with certain exclusions. Because the future CMS models or programs not yet represents the lowest price available MFN Model will focus on certain Part implemented. As discussed in section from the manufacturer during a rebate B drugs that are furnished in the III.F.5. of this IFC, if there are MFN period (a quarter) to best price eligible outpatient setting and these drugs are participants that concurrently entities or purchasers in the U.S. only. most likely injected or infused, the AMP participate in a future CMS model that Since the MFN Drug Payment for an MFN Model drug is likely also tests an alternative approach to the Amount will be paid to MFN determined using the AMP computation add-on portion of payment for Part B participants for each MFN Model drug for 5i drugs,73 which includes sales that drugs, we will not make the MFN as a Medicare payment, and it will not are not generally dispensed through alternative add-on payment to those be a ‘‘price available from the retail community pharmacies (see MFN participants for those MFN Model manufacturer,’’ the MFN Drug Payment section 1927(k)(1)(B)(i)(IV) of the Act, drugs that overlap with the other model. Amounts themselves will not be 42 CFR 447.504(d)), such as sales to Instead, we will follow the other included in the manufacturer’s physicians, pharmacy benefit managers model’s approach to making an determination of best price. However, in (PBMs) and hospitals. Thus, a alternative add-on payment. We expect order for MFN participants to purchase manufacturer’s sales of MFN Model this overlap policy will maintain the MFN Model drugs at prices that does drugs to MFN participants (or price paid intended financial effects of the MFN not lead to financial loss, the by MFN participants) will be included Model, while allowing operational manufacturer will need to make in the AMP or 5i AMP. If, as described compatibility with other models that available prices that are competitive in section III.K.1.a. of this IFC, the test alternative approaches to Medicare with the MFN Drug Payment Amounts. manufacturer lowers prices available to Part B drug payment. We expect that the MFN Drug Payment an MFN participant at or below the Amounts will likely drive manufacturer 2. Quality Payment Program MFN Drug Payment Amount, the drug prices available to MFN manufacturer’s AMP for an MFN Model The MFN Model will not qualify as an participants down over the course of the drug may be lower. If a drug’s AMP Advanced APM under the Quality model, and the model may indirectly decreases, it may result in potentially Payment Program. Specifically, the impact a manufacturer’s best price to lowering the applicable Medicaid drug MFN Model does not require participant the extent that a manufacturers’ U.S. rebate paid (the rebate, in part, is based health care providers to use CEHRT, best price will be lower than what it on a percentage of AMP). However, the does not base payment to participant would be otherwise. In other words, if MFN Model may also lower a health care providers on quality during the course of the MFN Model, manufacturer’s best price for an MFN measures, and does not satisfy the market forces result in manufacturers Model drug as previously discussed. financial risk criteria because it does not reducing prices available to MFN The resulting effect on the Medicaid involve requiring participating APM participants, such available prices to Entities to bear risk for monetary losses MFN participants will be considered in 73 Inhalation, infusion, instilled, implanted or of more than nominal amounts under a manufacturer’s determination of best injectable drugs.

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drug rebate will depend upon the participants that are non-340B covered Medicare FFS expenditures and relationship of any AMP change and entities. beneficiaries’ Part B premiums. any best price change. We are including certain 340B As discussed in section III.K. of this We also note that if the AMP for an covered entities in the MFN Model in IFC, manufacturers’ ASPs for MFN MFN Model drug is lowered it may be order to test the innovative payment Model drugs may be higher or lower more likely that, in accordance with approach, including the alternative (per- than they otherwise would be absent the MFN Model. In turn, non-model section 1847A of the Act, the Inspector dose) add-on payment amount, broadly. Medicare Part B FFS payment for MFN General may find that the ASP for an MFN participants that are 340B covered Model drugs could be higher or lower. MFN Model drug exceeds the AMP for entities may need to enhance their We are excluding from the calculation such drug, and that the circumstances in direct contracting with manufacturers in of the manufacturer’s ASP any units of which 103 percent of AMP is order to obtain MFN Model drugs an MFN Model drugs furnished to MFN substituted for ASP in CMS’s within the MFN Drug Payment Amount. beneficiaries and billed by MFN determination of the non-model Our analyses estimate that 340B covered participants. Thus, during the MFN payment allowance for such drug would entities will realize a total add-on Model, manufacturers’ ASPs for MFN occur. We refer readers to section III.L. percentage amount of 4.5 percent in the Model drugs could be higher or lower of this IFC for a discussion of excluding first year of the model due to the mix units of MFN Model drugs from than they might be absent the model, of MFN Model drugs they historically resulting in Medicare payments to manufacturers’ ASP, which may also furnish. The amount of the alternative increase the likelihood that the ASP for providers and suppliers that are not add-on that 340B entities realize will be MFN participants that would be higher an MFN Model drug will be greater than an increase in revenue compared to the AMP for such drug. or lower than what the payments would their historical baseline. However, these have been absent the model. 2. Interaction With 340B Program entities will face the same or increased We note that if the AMP for an MFN burden from model participation. Thus, Model drug is lowered it may be more The Health Resources and Services we believe the modest increase in add- likely that, in accordance with section Administration (HRSA) administers the on revenue that will be paid to these 1847A of the Act, the Inspector General 340B Drug Pricing Program that allows entities through the alternative add-on may find that the ASP for an MFN certain hospitals and other health care payment approach will potentially be Model drug exceeds the AMP for such providers (‘‘covered entities’’) to obtain offset through higher facility costs for drug, and that the circumstances in discounted prices on ‘‘covered acquiring included drugs (for example, which 103 percent of AMP is outpatient drugs’’ (as defined at higher costs for direct contracting). substituted for ASP in CMS’s 1927(k)(2) of the Act) from drug Programs that support vulnerable determination of the non-model manufacturers. HRSA calculates a 340B Americans are a vital safety net. We payment allowance for such drug would ceiling price for each covered outpatient refer readers to section III.C. of this IFC occur. drug, which represents the maximum where we discuss providers and price a manufacturer can charge a suppliers that will be MFN participants. b. Medicare Advantage covered entity for the drug that is We discuss potential impacts on 340B Medicare Advantage (MA) plans will provided to an eligible patient. Several covered entities in more detail in not be MFN participants. We note that types of hospitals as well as clinics that section VI. of this IFC. when MA plans pay non-contracted, out receive certain federal grants from the of network providers who have HHS may enroll in the 340B program as a. Impact on 340B Ceiling Price administered an MFN model drug to an covered entities. Such entities will be Covered entities that enroll in the enrollee, the amount paid will be based included in the MFN Model and will be 340B Program can purchase covered on the non-model Medicare FFS subject to the MFN Model payment test. outpatient drugs at no more than a payment amount (that is, the amount That is, these 340B covered entities will ‘‘ceiling price,’’ which is calculated as that MA plans pay to these providers be MFN participants and receive the AMP minus Medicaid unit rebate will not be the MFN Model payment MFN Drug Payment Amount and amount. We note that a ceiling price is amounts). alternative add-on payment. To the just a ceiling; some 340B hospitals can As discussed in section VI. of this extent these entities receive payment obtain covered outpatient drugs at less IFC, we expect the MFN Model will under the model that is lower than their than the ceiling price. Since the lower overall Medicare FFS current Medicare payment, there may be Medicaid unit rebate amount is based expenditures; that is, Medicare Part B fewer resources available for their 340B partly on AMP minus best price, to the MFN Drug Payment Amounts will be program activities. extent the MFN Model affects a drug’s lower than such payment would be Under the MFN Model, MFN AMP and best price, the 340B prices absent the model, the Medicare Part B participants will be paid for MFN Model will be affected. We discuss the alternative add-on payments will be drugs according to the payment potential impacts on a drug’s AMP and greater than such payment would be approach discussed in section III.E. of best price in section III.K.1. of this IFC. absent the model, there could be this IFC. If the MFN participant is a increases in Medicare Part A spending, 340B covered entity, the drug portion of 3. Interaction With Medicare and taken together the model will result the model payment will be the lower of a. Medicare Part B in an overall reduction in Medicare the MFN Drug Payment Amount or the expenditures. The overall decrease in non-model payment amount paid to As discussed in section VI. of this Medicare FFS expenditures will be 340B covered entities for 340B drugs IFC, we believe the MFN Model will considered in determining the historical under the OPPS for the MFN Model result in lower Medicare spending for FFS claims experience for calculating drug for that corresponding calendar MFN Model drugs, including lower the rates for plan service areas. quarter. The MFN alternative add-on program spending and lower beneficiary Payments to Medicare Advantage payment will be paid to MFN cost-sharing, and in overall reduced Organization plans are anticipated to be participants that are 340B covered Medicare Part B Trust Fund lower than they would be absent the entities in the same way as MFN expenditures, which in turn will lower model. At a high level, the FFS

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component of the non-ESRD MA rates is report most ASP data by National Drug Model. To conduct the MFN Model test based on the product of the projected Code (NDC), which identifies products it is necessary to minimize this potential national per-capita spending and a in terms of the labeler, product, and spillover effect for providers and county-level relative cost index. Thus, package size and type. The reported supplier that are not MFN participants the MA ratebook calculations will ASP data are used to establish the to best observe the impacts of the reflect changes in actual FFS spending Medicare payment amounts. In general, payment change. Thus, we will exclude due to the impact of the MFN Model. Medicare’s payment limit for most from the calculation of the We note that this approach is consistent separately payable Part B drugs is based manufacturer’s ASP any units of MFN with treatment of payments made under on the methodology in section 1847A of Model drugs billed by MFN participants other CMS Innovation Center models the Act, that is, 106 percent of the where the MFN Drug Payment Amount and the Medicare Shared Savings volume-weighted average of is based on available international drug Program. manufacturers’ ASP for a drug (at the pricing information and Medicare Part B As discussed in more detail in section billing and payment code level), and is is the primary payer. policy will only VI. of this IFC, we estimate that total updated quarterly. The payment apply when the MFN Price is based on payments to MA plans over the 7-year requirements in section 1847A of the available international drug pricing course of the model will be substantially Act will be waived for purposes of information. That is, the policy will not lower as a result of reduced FFS testing the MFN Model as discussed in apply when there is no available spending under the MFN Model, that is, section III.M.1. of this IFC, but will international drug pricing information total payments to MA plans may be continue to apply outside of the model and the MFN Price is equal to the approximately $49.6 billion lower in the as discussed in this section. applicable ASP because there will be no OACT estimate and $28.5 billion lower Section 1115A of the Act authorizes concern for spillover impacts in such in the ASPE estimate. We note that there the CMS Innovation Center to test cases. We are waiving requirements of is much uncertainty around the innovative payment and service section 1847A of the Act as necessary to assumptions for these estimates. delivery models to reduce program exclude such units of MFN Model drugs expenditures, while preserving or L. Exclusion of Certain MFN Model from the calculation of the enhancing the quality of care furnished Sales From Manufacturers’ Calculation manufacturer’s ASP. We will also to beneficiaries. The MFN Model will of ASP for MFN Model Drugs indicate the MFN Drug Payment test an alternative approach for Amounts that are (and are not, when In accordance with sections 1847A determining Medicare’s payment limit applicable) based on available and 1927(b)(3)(A)(iii) of the Act, for MFN Model drugs, which will phase international drug pricing information manufacturers 74 75 submit ASP data for down the Medicare payment amount for within the quarterly MFN Model drug their products to CMS on a quarterly selected Part B drugs to more closely pricing files posted on a CMS website. basis. The manufacturer’s ASP is based align with available international prices, This approach is responsive to on sales to all purchasers in the U.S. and test an alternative add-on payment. comments we received in response to with limited exceptions (that is, Under the MFN Model, the model’s the October 2018 ANPRM. Several exclusions are limited to sales exempt payment test will apply when Medicare commenters requested clarification from best price (as defined in section makes separate payment for an MFN about how sales for purposes of the 1927(c)(1)(C)(i) of the Act), sales at a Model drug that was furnished on an model would be taken into account in nominal charge, and units sold to a CAP outpatient basis by an MFN participant computing the ASP under section vendor), and is net of discounts such as to an MFN beneficiary within the 1847A of the Act. Some commenters volume discounts, prompt pay model’s nationwide geographic area. who expressed concern about potential discounts, cash discounts, free goods In designing the MFN Model, we spillover effects of the potential model that are contingent on any purchase considered ways to mitigate potential payment test recommended that requirement, chargebacks, and rebates impacts on manufacturers’ ASPs purchases made for use under the (other than certain rebates specified in stemming from price concessions given potential model be excluded from the section 1927 of the Act). Specific ASP to MFN participants for purchases ASP calculation. Based on our reporting requirements are set forth in related to the MFN Model and on interactions with stakeholders, section 1927(b)(3) of the Act. In Medicare payment for units of MFN particularly those with experience accordance with sections 1847A and Model drugs that are not subject to the operating chargebacks related to the 1927(b)(3) of the Act, manufacturers MFN Model payment test. For example, 340B program, we believe our exclusion sales to MFN participants may include of units of MFN Model drugs that are 74 For the purposes of reporting under section larger price concessions than are typical billed by MFN participants and have the 1847A of the Act, the term ‘‘manufacturer’’ is today, resulting in lower net sales prices MFN Drug Payment Amount paid by defined in section 1927(k)(5) of the Act and means any entity engaged in the production, preparation, as compared to what net sales prices Medicare from manufacturers’ ASPs propagation, compounding, conversion or would be absent the MFN Model. As will be feasible. Manufacturers have processing of prescription drug products; either such, the manufacturer’s ASP for an existing processes and tools to exclude directly or indirectly by extraction from substances MFN Model drug, which will reflect the various prices from the calculation of of natural origin, or independently by means of average price for all non-excluded chemical synthesis, or by a combination of their ASPs, and excluding certain MFN extraction and chemical synthesis; or in the sales—including sales to MFN Model related units of MFN Model packaging, repackaging, labeling, relabeling, or participants to the extent applicable— drugs could be similar. distribution of prescription drug products. The term may be lower than the manufacturer’s Distribution management systems are manufacturer does not include a wholesale ASP would be absent the MFN Model. employed throughout the drug distributor of drugs or a retail pharmacy licensed under State law. However, manufacturers that also Because CMS will base the non-model distribution system to order drugs, track engage in certain wholesaler activities are required Medicare payment limit for an MFN sales and shipments, trace custody, to report ASP data for those drugs that they Model drug on 106 percent of the manage price and customer lists, record manufacture. Note that the definition of manufacturer’s ASP, payment to financial transactions, and support other manufacturers for the purposes of ASP data reporting includes repackagers. providers and suppliers for such drug industry processes. Separate purchasing 75 Manufacturer is also defined in 42 CFR outside of the model may be lower than accounts are often used to align with 447.502. it otherwise would be absent the MFN purchasing arrangement terms, and

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through a process called the Payment Amount applied by Medicare MFN Model drug administered to an ‘‘chargeback process,’’ manufacturers is based on available international drug MFN beneficiary and billed by MFN reduce the final drug prices to pricing information and Medicare is the participants where the MFN Drug wholesalers and other distributors to primary payer will minimize the Payment Amount applied by Medicare reflect the purchasing terms and potential for manufacturers to choose to is based on available international drug contract prices that apply to the end increase purchase prices for non-model pricing information and Medicare is the purchaser. End purchasers of drugs who participants and for MFN participants’ primary payer. Consistent with section purchase under more than one contract purchases of MFN Model drugs for use 1847A(c)(5) of the Act, we will issue use virtual inventory or replenishment outside of the MFN Model. program instructions to further describe purchasing tools or business processes Additionally, we believe that the how the waiver will impact to manage their purchases under their adjustments to the MFN Price phase-in, manufacturers’ calculation of the various contract arrangements. For as described in section III.E. of this IFC, manufacturer’s ASP. For example, we example, a provider or supplier that will also minimize the potential for envision that manufacturers will take belongs to more than one group manufacturers to increase prices for reasonable steps and make reasonable purchasing organization could use such non-model participants and non-model assumptions to exclude applicable tools or business processes to track drug purchases. We also believe this policy is units. We note that all other existing purchasing, maintain records toward necessary for a rigorous test of the statutory requirements and regulations volume targets and, should the need to model payment for MFN drugs because will continue to apply. For example, return a product occur, conduct returns. price concessions tied to the model will manufacturers who misrepresent or fail However, based on stakeholder not lower Medicare payment when MFN to report manufacturer ASP data will feedback, we understand that all MFN Model drugs are purchased for use remain subject to civil monetary participants are unlikely to have such outside the model, which would limit penalties, as applicable and described in tools in place. Hospitals, particularly our ability to observe the impacts of the sections 1847A and 1927(b) of the Act those that participate in the 340B payment change. and codified in regulations at § 414.806. program, are more likely to currently We will not collect the number of have these tools compared to other units that manufacturers exclude from M. Program Waivers and Model hospitals, physician offices and ASCs. ASP as part of their ASP submission to Termination Thus, manufacturers may establish CMS to avoid establishing a new data 1. Waivers of Medicare Program mechanisms to obtain information from collection effort and to minimize Requirements for Purposes of Testing MFN participants about the number of administrative burden for the Model units of MFN Model drugs that were manufacturers. furnished to MFN beneficiaries and for As an alternative approach, we We will test the MFN Model under which payment under § 513.210 was considered whether manufacturers the authority of section 1115A of the allowed, which would increase MFN should exclude from the manufacturer’s Act and waive certain Medicare participants’ activities related to the ASP for the MFN Model drug price program requirements as necessary model. concessions on units of an MFN Model solely for purposes of testing the model. CMS also seeks to minimize the drug billed by MFN participants where Under section 1115A(d)(1) of the Act, potential for excessive increases in non- the MFN Drug Payment Amount applied the Secretary may waive the model Medicare drug payment amounts by Medicare is based on available requirements of Titles XI and XVIII and during the MFN Model. For example, international drug pricing information of sections 1902(a)(1), 1902(a)(13), during the model, manufacturers’ ASPs and Medicare is the primary payer. We 1903(m)(2)(A)(iii), and 1934 of the Act may increase causing a concomitant believe that excluding from the (other than subsections (b)(1)(A) and increase in non-model Medicare drug manufacturer’s ASP price concessions (c)(5) of such section) as may be payment amounts outside of the model on units of an MFN Model drug billed necessary solely for purposes of carrying if: (1) The policy that manufacturers not by MFN participants where the MFN out section 1115A of the Act with include units of an MFN Model drug Drug Payment Amount applied by respect to testing models described in billed by MFN participants where the Medicare is based on available section 1115A(b) of the Act. The MFN Drug Payment Amount is paid by international drug pricing information purpose of these waivers will be to Medicare and Medicare Part B is the and Medicare is the primary payer, and allow Medicare to test the MFN Model primary payer in the manufacturer’s not excluding the manufacturer’s ASP described in this IFC, with the goal of ASP for the MFN Model drug results in the units of an MFN Model drug billed reducing Medicare expenditures while higher ASPs; or (2) manufacturers raise by MFN participants where the MFN improving or maintaining the quality of drug prices or lower existing discounts Drug Payment Amount is applied by beneficiaries’ care. for U.S. sales that are not subject to the Medicare is based on available In § 513.500, we waive program model’s payment test. Because international drug pricing information requirements that are necessary solely manufacturers will continue to have the and Medicare is the primary payer for purposes of testing the MFN ability to set their own drug prices, as would inappropriately raise the ASP. Model— a behavioral response to the MFN We believe this is the case because those • Sections 1833(t)(6) and 1833(t)(14) Model, manufacturers could raise prices units would likely be factored into the of the Act and 42 CFR 419.62 and for MFN Model drugs in the United manufacturer’s ASP calculation as 419.64 related to Medicare payment States in part to make up for price undiscounted sales. Thus, this amounts for drugs and biologicals under concessions that may be given to model approach, while it may be less complex, the OPPS as necessary to permit testing participants. would likely lead to inappropriately of an adjusted payment amount for MFN We believe the policy for higher Medicare payment outside of the Model drugs using the pricing manufacturers not to include in the model. approaches described in this IFC; manufacturer’s ASP units of an MFN We are waiving requirements in • Section 1833(i)(2)(D) of the Act Model drug administered to an MFN section 1847A(c) to the extent necessary related to Medicare payment to ASCs for beneficiary and billed by MFN to exclude from the calculation of the drugs and biologicals as necessary to participants where the MFN Drug manufacturer’s ASP any units of an permit testing of an adjusted payment

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amount for MFN Model drugs using the using volume for drugs included in the one of the MFN Model drugs based on pricing approaches described in this MFN Model for purposes of the budget recent diagnoses and/or prior treatment. IFC; neutrality calculations under the OPPS One possible prescriber behavior change • Sections 1847A(b) and 1847A(c) of beginning in 2022, but would utilize the due to the MFN Model could be shifts the Act and 42 CFR 414.904 and applicable OPPS payment amount for from prescribing MFN Model drugs to 414.802 related to use of the ASP-based, the drug or biological, rather than the other alternative Part B or Part D drugs WAC-based, or other applicable MFN Drug Payment Amount. We or vice versa. A population defined by payment methodology and calculation believe a waiver of the OPPS budget recent diagnoses and/or prior treatment of manufacturers’ ASP as necessary to neutrality requirements for Part B drugs will capture the model’s impact on permit testing of an adjusted payment furnished under the MFN Model is beneficiaries affected by these for MFN Model drugs and to exclude necessary solely for purposes of testing prescribing behavioral changes due to certain units of MFN Model drugs from the MFN Model because if reductions in the model. Other populations such as, manufacturers’ ASPs; Medicare Part B drug expenditures were but not limited to, MFN Model drug • Section 1833(a)(1) of the Act related redistributed through the OPPS budget users and subgroups of particular to Medicare payment portion of the neutrality process to non-drug Part B patient populations (for example, allowed payment amount for an services under the OPPS, the model cancer, rheumatoid arthritis, included MFN Model drug that is would change pricing for numerous ophthalmologic conditions) will be determined under § 513.220 as other services that are not related to Part considered in the evaluation. necessary to permit testing of an B drugs. This would make it difficult to For each of the populations of innovative payment approach for the determine the independent impact of a interest, we will create separate impact alternative add-on payment amount; change in Part B drug payment levels to estimates for two types of outcomes: • Section 1833(a)(1)(S) related to MFN Model pricing if there is also a Medicare spending and drug/other Medicare payment for drugs and corresponding change in the payment health care utilization. Medicare biologicals at 80 percent of the lesser of amount for all non-drug hospital spending will be examined in terms of actual charge or the amount established outpatient items and services as a result total Part B drug spending for MFN in section 1842(o) of the Act as of the OPPS budget neutrality Model drugs, total Part B drug spending necessary to allow CMS to not apply requirements. for any Part B drugs, total Parts A and beneficiary cost-sharing to the Our intent is to include a waiver for B spending, and potentially other alternative add-on payment amount; all program requirements in title XVIII spending measures for specific types of • Section 1833(a)(1)(G) of the Act of the Act as may be necessary solely to health care services (for example, related to the amounts paid with respect test separate payment for MFN Model inpatient hospital spending). The to facility services furnished in drugs furnished to MFN beneficiaries by evaluation of the model’s impact on connection with certain surgical MFN participants. To the extent that quality of care will examine drug access, procedures and with respect to services MFN participants receive separate measured by utilization (for example, furnished to an individual in an ASC payment for MFN Model drugs under rates of any use and duration of use) of shall be 80 percent of the lesser of the program requirements that we have not both Part B (both MFN Model drug and actual charge for the services or the listed in § 513.500, we waive such non-MFN Model drugs) and Part D amount determined by the Secretary requirements as necessary to effectuate drugs. We will also examine non-drug under such revised payment system as part 513. health care utilization that may change necessary to allow CMS to not apply as a result of the MFN Model to estimate beneficiary cost-sharing to the 2. Model Termination any impacts on access to care. Examples alternative add-on payment amount; CMS may terminate the MFN Model of other non-drug health care utilization • Section 1833(t) of the Act related to for reasons including, but not limited to, include hospitalizations, emergency how Medicare payment under the OPPS the following: CMS determines that it department visits, and condition- is calculated including beneficiary no longer has the funds to support the specific utilization related to a given copayment to allow CMS to not apply model; or CMS terminates the model in subgroup of beneficiaries. The impact beneficiary cost-sharing to the accordance with section 1115A(b)(3)(B) estimates will reflect the collective alternative add-on payment amount; of the Act. As provided by section effect of the MFN Model’s changes to and 1115A(d)(2) of the Act, termination of Medicare payments and beneficiary • Section 1833(t)(9)(B) of the Act the model under section 1115A(b)(3)(B) cost-sharing for MFN Model drugs. related to the requirement that Medicare of the Act is not subject to Because the MFN Model will be a account for adjustments to ensure that administrative or judicial review. We nationwide, mandatory model, we must the amount of expenditures under the are codifying these policies in employ an evaluation design that does OPPS for the year does not increase or § 513.1000. not require an independent comparison decrease from the estimated amount of group to establish the counterfactual expenditures under the OPPS that N. Evaluation (what would have happened in the would have been made if the We will conduct an evaluation of the absence of the model). The term adjustments had not been made (that is, MFN Model, as required under section ‘‘interrupted time series’’ (ITS) refers to OPPS budget neutrality). CMS intends 1115A(b)(4) of the Act. The evaluation the situation in which multiple to continue to maintain budget of the MFN Model will include an observations for the treatment group are neutrality under the OPPS as it analysis of the quality of care furnished available both before and after the currently does, including as described under the model and the changes in intervention is implemented.76 ITS in 42 CFR 419.32(d)(1). This includes spending under Medicare by reason of models can be employed both with and continuing to use the applicable the model. payment amount for each separately There will be several populations of 76 Wagner, A.K., Soumerai, S.B., Zhang, F. and payable drug under that payment interest for the MFN Model evaluation. Ross-Degnan, D. (2002), Segmented regression analysis of interrupted time series studies in system, rather than the MFN Drug A population of interest for the medication use research. Journal of Clinical Payment Amount and alternative add- evaluation will be Medicare Pharmacy and Therapeutics, 27: 299–309. doi: on payment amount. CMS may consider beneficiaries who are likely to receive 10.1046/j.1365–2710.2002.00430.x.

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without comparison groups, and be and trend (slope). After the model i = unit of analysis (for example, beneficiary, used to imply causality without begins, the data may exhibit changes in HRR) ¥ ¥ comparison groups.77 The design is any one of these features. The t = time quarter ( 12, 11 . . . 0, 1, 2, 3 used when data are available both for fundamental idea behind segmented . . .) using a 3 year pre-model time the pre-intervention period and the period, with 0 indicating the start of the regression is to estimate a regression model post-intervention period, and the specification with a linear trend for the b0, b1, b2, a1 .... an are the statistical model intervention takes place at a specific, data points before the model and coefficients 78 identifiable point in time. The time- estimate a regression specification with b0 = the statistical model intercept relationship between the data points can a linear trend for the data points after b1 = vector of estimates for the adjustment then be used to estimate treatment the model start. The level and trend factors effects. The trends from the pre- before and after the model start will b2 = estimate of the time trend f(t) across the intervention period establish a baseline then be compared. We will use quarterly pre-period and model performance that is used to project what would be observations for the pre- and post- period a thru a = estimate of change per model expected in the absence of the model start time periods ending with 1 n intervention. The typical ITS approach performance period quarter (t) relative to the most recent data that will be entire pre-period assumes linear trends before and after currently available. Given the MFN the intervention, but ITS models can be Model design, we provide our With the statistical model made more general to address potential specification in this section of this IFC specification as previously described, in non-linear trends.79 80 Intervention for the longitudinal regression using a an initial, exploratory data assessment, effects are demonstrated when more general specification of the trends the null hypothesis (Ho: a1 = a2 = a3 = observations gathered after the to capture the non-linear nature of the a4 = . . . = an = 0) will be that there is intervention start period deviate from data. no change in each of the model the baseline projections. In the longitudinal regression performance period quarters when Using this design for evaluating the equation provided in this section of this compared to the pre-period after effects of an intervention—that is, IFC, the vector Xit consists of factors that adjusting for the time trend and the implying a causal relationship between will change from the pre-model time other factors. The corresponding the intervention and its target period to the model performance period alternate hypothesis (Ha: a1 or a2 or a3 outcomes—relies on a strict set of and may include, but is not necessarily or a4 or . . . an ≠ 0) will be that any of conditions. As previously described, limited to, the medical care component the model performance period quarters when there is no comparison group, the of the Consumer Price Index (CPI–U), is statistically significantly different counterfactual is established as the national unrelated policy changes, than the pre-model time period, continuation of the pre-intervention economic factors (for example, suggesting that the model either trend for the treated group. The unemployment rate). The unit of positively or negatively impacted intervention impact is estimated as the analysis (for example, a hospital referral Medicare spending and quality of care difference between the actual post- region (HRR) as defined by the in at least one model performance intervention trend and the pre- Dartmouth Atlas 83 or beneficiary) on period quarter. These null and alternate intervention trend extended. which the quarterly observations are hypotheses will apply to each outcome The most common statistical method measured will be allowed to vary in and population of interest. for analyzing ITS data is called The assessment just described will 81 82 order to estimate the model’s impact at segmented regression. Segmented these different levels of aggregation. The not directly indicate success or failure regression focuses on two parameters, anticipated statistical model of the model. CMS will need to observe the level (intercept) and the trend specification includes a polynomial a consistent statistically significant (slope). For observations before the time trend variable f(t) to account for directional pattern over multiple model, we will have a level (intercept) trends in spending and utilization over consecutive time periods for the time. In addition, the statistical model outcome and population of interest in 77 Sheingold, S., Bir, A, (2019), Evaluation for order to draw sound conclusions about Health Policy and Health Care: A Contemporary includes separate indicator variables Data Driven Approach, Sage Publications. (It=k) for each of the model performance the model’s impact. Based on a 78 Bernal, J.L., Cummins, S., Gasparrin, A., (2017) period quarters, which will allow for combination of results from exploratory Interrupted time series regression for the evaluation estimates of the model’s impact in each data assessment and policy goals, CMS of public health interventions: A tutorial, will set a hypothesis that encompasses International Journal of Epidemiology, 2017, Vol. performance period quarter relative to 46, No. 1: 348–355, doi: 10.1093/ije/dyw098. the entire pre-period after adjusting for the chosen outcome and population of 79 Kontopantelis, E., Doran, T., Springate, D.A., the time trend and other factors. interest. This hypothesis will be tested Buchan, I Reeves, D, (2015), Regression based quasi- using data that is different from what Yit = b0 + b1 · Xit + b2 · f(t) + a1 · It=1 experimental approach when randomisation is not was used in the exploratory + a2 · It=2 + a3 · It=3 + a4 · It=4 + ... an option: Interrupted time series analysis, BMJ assessment—for instance, due to being 2015;350:h2750, doi: 10.1136/bmj.h2750. + uit 80 gathered later in time or consisting of a Valsamis, E.M., Ricketts, D., Husband, H., and Where: Rogers, B.A. (2019), Segmented linear regression different randomly assigned subset of models for assessing change in retrospective studies Yit = outcome (see the previous section for contemporaneous data. in healthcare. Computational and Mathematical cost and utilization measures), for a Statistical inference will be conducted Methods in Medicine. doi: 10.1155/2019/9810675. particular unit of analysis in a specific using cluster-robust standard errors.84 81 Wagner, A.K., Soumerai, S.B., Zhang, F. and quarter Ross-Degnan, D. (2002), Segmented regression Xit = vector of adjustment factors Cluster-robust standard errors account analysis of interrupted time series studies in f(t) = polynomial function to account for time for serial correlation as well as spatial medication use research. Journal of Clinical trend correlation within geographies (such as Pharmacy and Therapeutics, 27: 299–309. doi: I = = denotes an indicator for time period k 10.1046/j.1365–2710.2002.00430.x. t k an HRR). We will conduct hypothesis (all after model implementation) 82 Valsamis, E.M., Ricketts, D., Husband, H., and testing using an alpha-level of 5 percent Rogers, B.A. (2019), Segmented linear regression uit = unaccounted variation models for assessing change in retrospective studies 84 Cameron, A.C., & Miller, D.L. (2015). A in healthcare. Computational and Mathematical 83 https://www.dartmouthatlas.org/faq/#research- practitioner’s guide to cluster-robust inference. Methods in Medicine. doi: 10.1155/2019/9810675. methods-faq. Journal of Human Resources, 50(2), 317–372.

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and CMS will report the p-value and CMS will have the sample sizes needed process on whether or not to continue standard error to allow for inferences at in these two populations to detect small the MFN Model into performance years other alpha-levels. changes in Medicare total cost of care 5 to 7. As an illustration of a potential (approximately a 1 percent change), The evaluation may require that MFN subgroup analysis and the expected drug access, and other important participants collect and submit changes that could be detected in the measures of quality of care. With additional data specifically for the MFN Model evaluation, CMS identified multiple quarterly assessments of the evaluation (please see § 513.100(e) and two groups of Medicare cancer patients impact of the model on subgroup § 513.100(f)). Such requirements for using 2018 data. CMS defined the first populations, CMS will be able to additional data to carry out model narrower group as Medicare cancer intervene early in the model’s evaluation will be in compliance with patients who received an MFN Model performance period should any 42 CFR 403.1110(b), which requires drug. CMS defined the second broader potential unintended consequences be entities participating in the testing of a group as Medicare cancer patients who detected in the potential subgroups of model under section 1115A to collect either received an MFN Model drug or interest. Although CMS uses the cancer and report such information, including would have been considered eligible to subgroup patient population in the protected health information (as defined receive an MFN Model drug. previously discussed example, we at 45 CFR 160.103), as the Secretary Specifically, CMS estimated that in recognize that other patient populations determines is necessary to monitor and 2018 approximately 400,000 Medicare (for example, patients diagnosed with evaluate the model. beneficiaries were being treated for the rheumatoid arthritis and wet macular most prevalent cancer types (that is, degeneration) and certain types of O. Limitations on Review colorectal, endometrial, breast, lung, providers could be differentially In § 513.450, we are codifying the prostate, and certain forms of leukemia impacted by the MFN Model. These preclusion of administrative and and lymphoma) and received an MFN other patient and provider subgroups judicial review under section Model drug. These 400,000 Medicare will be of interest in the evaluation. The 1115A(d)(2) of the Act. Section beneficiaries were identified using the model’s impact on the Medicaid 1115A(d)(2) of the Act states that there inclusion and exclusion criteria for the program and commercial insurance is no administrative or judicial review model, including the use of an MFN (including Medicare Advantage) under section 1869 or 1878 of the Act Model drug. Cancer treatment was population is also of interest. or otherwise for the all of the following: determined by the utilization of Part B The evaluation will explore the • The selection of models for testing and/or Part D cancer drugs and the experiences of MFN participants or expansion under section 1115A of the presence of cancer diagnosis codes on (beneficiaries and providers) and other Act. Parts A and B claims. A subgroup stakeholders affected by the changes in • The selection of organizations, sites, analysis that requires MFN Model drug payment and conditions included in the or participants to test models selected. use, as in the narrower definition that model. In particular, CMS will • The elements, parameters, scope, identified 400,000 Medicare interview MFN participants and and duration of such models for testing beneficiaries being treated for cancer beneficiaries, either by focus groups, or dissemination. and who received an MFN Model drug, surveys, or one-on-one stakeholder • Determinations regarding budget would exclude cancer patients using an interviews, to assess the model’s neutrality under section 1115A(b)(3) of alternative non-MFN Model drug cancer influence on access to and quality of the Act. therapy. A broader cancer population care, and administrative burden from • The termination or modification of definition based on any Part B and/or their perspectives. Further, CMS intends the design and implementation of a Part D cancer drug use or just an to ask beneficiaries about their total out model under section 1115A(b)(3)(B) of incident cancer diagnosis based on new of pocket costs under the MFN Model to the Act. evidence of diagnosis codes on Parts A determine if those costs were reduced. • Determinations about expansion of and B claims in the current year would MFN participants will be asked for their the duration and scope of a model under capture the model’s impact on opinions about the MFN Model’s section 1115A(c) of the Act, including beneficiaries affected by prescribing payment changes to the drug and add- the determination that a model is not behavioral changes due to the model. on payment amounts separately. The expected to meet criteria described in This second broader cancer subgroup evaluation will also include qualitative paragraph (1) or (2) of such section. population definition applied to analyses of primary data collected from We interpret the preclusion from approximately 1.1 million Medicare MFN participants and beneficiaries. The administrative and judicial review beneficiaries in 2018. results of the qualitative analyses will regarding the CMS Innovation Center’s CMS believes that looking for be used to provide additional context selection of organizations, sites, or unintended consequences will be for the results of the quantitative participants to test models selected to critical for the monitoring and analyses on health care spending and to preclude from administrative and evaluation of the MFN Model. In the help further explain the observed judicial review CMS’ selection of an narrower definition of the cancer changes. MFN participant, as well as CMS’ subgroup, CMS expects that Evaluation reports detailing the decision to terminate an MFN approximately 100,000 Medicare cancer results and findings will be developed participant, as these determinations are patients who receive a MFN Model drug and publicly posted on the CMS part of CMS’ selection of participants for will be eligible for inclusion in the website. The evaluation reports will CMS Innovation Center model tests. quarterly evaluation analysis. In the include the results of the quantitative We interpret the preclusion from broader cancer subgroup population, and qualitative analyses of the MFN administration and judicial review CMS expects that approximately Model’s impact on spending and quality regarding the elements, parameters, 280,000 Medicare cancer patients will of care and the model’s implementation scope, and duration of models for be included in the quarterly evaluation as described in this section. The testing or dissemination to preclude analysis. With a nationwide MFN Model evaluation reports covering the earlier from administrative and judicial review (and the assumptions of an alpha-level performance years of the MFN Model the following CMS determinations made of 5 percent and power of 80 percent), will be used in the decision making in connection with the MFN Model:

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• The selection of the model its beneficiaries pay generally equity). Section 3(f) of Executive Order geographic area for the MFN Model by comparable prices for Medicare Part B 12866 defines a ‘‘significant regulatory CMS; drugs relative to certain other countries. action’’ as an action that is likely to • The selection of MFN Model drugs As detailed in section III of this IFC, result in a rule: (1) Having an annual by CMS; and this IFC will establish a 7-year effect on the economy of $100 million • The selection of included nationwide MFN Model alternative or more in any 1 year, or adversely and international data, including selection payment test for approximately 50 materially affecting a sector of the of countries, international drug pricing separately payable Medicare Part B economy, productivity, competition, databases, and international drug drugs furnished by certain providers jobs, the environment, public health or pricing information. and suppliers. As discussed in section safety, or state, local or tribal In addition, we interpret the III.C. of this IFC, MFN participants will governments or communities (also preclusion from administrative and include Medicare-participating referred to as ‘‘economically judicial review regarding the elements providers and suppliers that furnish significant’’); (2) creating a serious of the MFN Model to preclude from MFN Model drugs, with certain inconsistency or otherwise interfering administrative and judicial review the exclusions. Most of the MFN with an action taken or planned by methodology for determining MFN participants will be: Physicians; non- another agency; (3) materially altering Prices, MFN Drug Payment Amounts, physician practitioners; supplier groups; the budgetary impacts of entitlement Alternative Add-on Amounts, and HOPDs (including on- and off-campus grants, user fees, or loan programs or the reconciliation payments related to outpatient provider-based departments, rights and obligations of recipients financial hardship exemptions. but excluding cancer hospitals, thereof; or (4) raising novel legal or V. Collection of Information children’s hospitals, CAHs, and other policy issues arising out of legal Requirements hospitals exempt from the OPPS); and mandates, the President’s priorities, or ASCs. When other providers and the principles set forth in the Executive As stated in section 1115A(d)(3) of the suppliers that are not excluded bill for Order. This IFC triggers these criteria. Act, Chapter 35 of title 44, United States separately payable MFN Model drugs Code, shall not apply to the testing and A regulatory impact analysis (RIA) (for example, pharmacies and must be prepared for major rules with evaluation of CMS Innovation Center independent diagnostic testing Models. As a result, the information economically significant effects ($100 facilities), they will be included in the million or more in any 1 year). We collection requirements contained in MFN Model as MFN participants; based this IFC need not be reviewed by the estimate that this rulemaking is on 2018 Medicare Part B claims data, ‘‘economically significant’’ as measured Office of Management and Budget. their aggregate annual volume of However, costs incurred through by the $100 million threshold and hence separately payable Part B drugs was less also a major rule under the information collections are included in than $3.6 million. MFN participants section VI.C.5. of this IFC. Congressional Review Act. Accordingly, will be subject to the participation we have prepared a RIA that, to the best V. Response to Comments requirements described in section III. of of our ability, reflects the economic Because of the large number of public this IFC. impact of the policies contained in this comments we normally receive on B. Overall Impact IFC. documents, we are not able to We have examined the impacts of this C. Detailed Economic Analysis acknowledge or respond to them IFC, as required by Executive Order individually. We will consider all 12866 on Regulatory Planning and The MFN Model will test different comments we receive by the date and Review (September 30, 1993), Executive payment rates for certain separately time specified in the DATES section of Order 13563 on Improving Regulation payable Medicare Part B drugs and their this preamble, and, when we proceed and Regulatory Review (February 2, associated drug add-on payment. The with a subsequent document, we will 2013), the Regulatory Flexibility Act payment rates for these Medicare Part B respond to the comments in the (RFA) (September 19, 1980, Pub. L. 96– drugs will be phased in over 4 years, preamble to that document. 354), section 1102(b) of the Act, section ultimately arriving at the lowest price VI. Regulatory Impact Analysis 202 of the Unfunded Mandates Reform for a particular drug from a selected Act of 1995 (UMRA) (March 22, 1995, group of countries. Eligible providers A. Statement of Need Pub. L. 104–4), Executive Order 13132 and suppliers participating in the 340B This IFC is necessary to address the on Federalism (August 4, 1999), and the program will be paid the lesser of this current Medicare Part B payment system Congressional Review Act (5 U.S.C. amount or the payment outside the for separately payable Medicare Part B 804(2)), and Executive Order 13771 on model for MFN Model drugs they drugs, which has several features that Reducing Regulation and Controlling purchase under the 340B program. This may be incentivizing avoidable costs Regulatory Costs (January 30, 2017). IFC includes a single alternative add-on and causing greater utilization of higher Executive Orders 12866 and 13563 payment, with MFN participants priced drugs. By testing ways to address direct agencies to assess all costs and receiving an amount that represents 6 these payment issues, the MFN Model benefits of available regulatory percent (after sequestration) of the seeks to improve quality of care, address alternatives and, if regulation is average sales price (ASP) baseline for features of the current payment system necessary, to select regulatory the initial set of included drugs trended that may be incentivizing unnecessary approaches that maximize net benefits forward. The phased-in MFN Price Medicare Part B drug spending and (including potential economic, discount relative to applicable ASP is utilization of high cost drugs, and environmental, public health and safety shown in Table 9, assuming the ensure that the Medicare program and effects, distributive impacts, and relationship remains constant.

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TABLE 9—MOST FAVORED NATION DISCOUNT FROM ASP BY CALENDAR YEAR

Calendar year 2021 2022 2023 2024 2025 2026 2027

MFN Price impact ...... ¥16% ¥33% ¥49% ¥65% ¥65% ¥65% ¥65%

The model will require participation and ASPE estimated the financial responsibility, add-on payments, and by eligible providers and suppliers for impacts separately. Similarly, both federal payments relative to ASP. These the selected separately payable analyses calculated the impact of the values are on a pre-COVID–19 basis, and Medicare Part B drugs included in the drug add-on payment separately from the baseline is not are adjusted for the model. Certain provider types, defined the MFN Price impact. Since the drug effects of the pandemic. Similarly, the previously in this IFC, will be excluded add-on payment inside the model will impact analysis does not include the from the model. We assume that acute not be subject to beneficiary cost effects of the COVID–19 pandemic. care hospitals that are paid for sharing, and will be an additional Many assumptions such as utilization, outpatient hospital services on a fully payment to 340B covered entities, the mortality, and morbidity are more capitated or global budget basis under a associated Medicare expenditures are uncertain than usual due to the waiver under such model of section higher. pandemic. The direction and magnitude 1833(t) of the Act will be excluded from The baseline for these analyses is of the financial impact of the pandemic the MFN Model. shown in Table 10, separately for OPPS on Part B drug spending is uncertain. Because current payment rates for 340B providers, OPPS non-340B For example, higher mortality due to 340B covered entities that are paid providers, and physician settings. These COVID–19 could lead to lower drug under the OPPS (hereafter called 340B values include all drugs, exclude utilization. A COVID–19-related drug providers) are different from those for providers and suppliers that are exempt discovery could lead to higher drug other providers and suppliers (hereafter from the model, and assume that 53% utilization. Beneficiaries seeking called non-340B providers), the impact of the hospital outpatient claims will be treatment for quality of life of the MFN Model varies between the from 340B providers. These payments improvement may defer care during the two provider types, and therefore OACT were then adjusted for beneficiary pandemic.

TABLE 10—BASELINE EXPENDITURES FOR CLAIMS INCLUDED IN THE MFN MODEL

(In billions) 2020 2021 2022 2023 2024 2025 2026 2027 2020–27

OPPS Non-340B Providers ...... $6.1 $6.7 $7.5 $8.3 $9.2 $10.1 $11.2 $12.3 $71.4 OPPS 340B Providers...... 6.9 7.6 8.4 9.4 10.4 11.4 12.6 13.9 80.5 Other Providers and Suppliers ...... 19.4 21.2 23.3 25.7 28.1 30.8 33.8 37.0 219.3

Total ...... 32.4 35.5 39.2 43.4 47.6 52.4 57.5 63.2 371.3

As the model does not dictate the provider for this drug under the current the OACT estimate as a different price that a drug manufacturer must system is $104.30, inclusive of the discount relative to ASP compared with charge an MFN participant, there are federal payment for the drug and the the values in Table 9. For drugs with many possible behavioral responses by add-on, beneficiary cost-sharing, and significant use outside of Medicare, manufacturers, providers, suppliers, and net of sequestration. Now suppose the manufacturers may be willing to beneficiaries. Because the estimates are MFN Price of this drug is also $100. The sacrifice utilization and revenue within highly sensitive to these behavioral total payment to the provider under the the model. For drugs that are used assumptions, OACT provided three model would be $104.40. Under the primarily in the Medicare program, scenarios: (i) An OACT estimate; (ii) an model, the drug payment after manufacturers may believe that offering illustrative estimate based on pricing- sequestration is unchanged ($98.40) but some pricing relief is necessary to effects only; and (iii) an additional the add-on increases from $5.90 to preserve a significant portion of their illustration under the assumption that $6.00. revenue. manufacturers will refuse to change 1. OACT Estimate Eligible providers and suppliers will prices and MFN participants will be need to decide if the difference between unwilling to administer drugs for which Manufacturers could adopt several the amount that Medicare will pay and model payment will be below their strategies in response to the model, such the price that they must pay to purchase acquisition cost. ASPE also developed a as (i) charging a lower price to providers the drugs would allow them to continue bottom-up estimate built from analysis and suppliers inside the model; (ii) offering the drugs. For 340B providers, of the IFC’s likely potential effects on refusing to adjust their price from the the payment rates in the first year will different types of separately payable non-model amounts; or (iii) altering the match their payments outside the Part B drugs. availability and terms of their model. Accordingly, no change to To better understand the values international prices. Given that the utilization or costs is expected under shown in the three OACT scenarios, the international price data represent a the model in the first year for 340B ASPE estimate, and the policy of the challenge to their U.S. market revenues, providers. In later years, the impact model, consider the following example. manufacturers are expected to devote varies depending on the assumed Suppose the current ASP for a given considerable resources to the third change to international price data. For drug is $100. The total payment to the option. This assumption is included in non-340B providers, some may be

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willing to provide the drugs under a cause strong resistance to the model. payments will see a 3-percent reduction lower payment rate to retain utilization The OACT assumptions reflect that compared to the current Medicare on other associated services. some manufacturers will adhere to their payment in 2022 and subsequent years. Should an eligible provider or current pricing instead of lowering sales This 3-percent reduction represents the supplier be unable to offer access to the prices in response to the model. This impact of the 25-percent MFN Price included drugs, beneficiaries will be left behavior may persist in spite of pricing discount relative to the OPPS payment with several options. They could seek in other sectors of the market or other to 340B providers of ASP less 22.5 access to the drugs by traveling to an countries that demonstrates an ability to percent, as that is the current payment excluded provider or supplier, access offer the drug at the model payment formula for 340B providers. This the drugs through a 340B provider in rates, and would result in unmet represents a relatively small price the model, or forgo access. demand for these Medicare Part B drugs. change and is assumed to occur later in It should be noted that this model After considering the relative size of the the model, so will be more predictable does not have a reliable precedent in the Medicare Part B market, the current than the payment changes for non-340B U.S. market; consequently, there is an price control of drug manufacturers, the providers. As a result, manufacturers unusually high degree of uncertainty in size of the model price reductions, the and 340B providers are assumed to these assumptions, particularly with nature of the Medicare Part B drug come to an agreement to continue to respect to the behavioral responses. To providers and suppliers, the flexibility provide for all of their utilization. illustrate this uncertainty, three that manufacturers may have in potential financial effects are included adjusting pricing and arrangements in Because all regions are covered under in this analysis; a full range of potential other countries, and many other factors, the model, beneficiaries seeking a behavioral effects are presented under actuarial judgment was applied to provider outside of the model will be an Extreme Disruption scenario where determine the assumptions that are limited to an excluded provider or non-340B utilization of affected drugs reflected in the OACT estimate, as supplier, such as a critical access drops to zero percent and under a shown in Table 11. hospital. Based on the historical trend of Pricing-Effects Only scenario where all Beneficiaries lacking continued drug spending by excluded providers currently projected utilization is availability of their drugs through their and suppliers as a percentage of total assumed to be retained. The OACT current provider or supplier are Medicare Part B drugs, the OACT estimate reflects one reasonable set of assumed to seek access outside the estimate reflects only 1 percent of use assumptions for potential changes in model, to obtain their drugs through shifting to non-model providers. manufacturer, provider, and supplier 340B providers, or to forgo access. The Furthermore, because the OPPS behavior. Other estimates outside the schedule of the phase-in to the MFN payment to 340B providers will be range of the three scenarios could be price gives manufacturers incentive to reduced year two through year seven of reasonable as well, due to the wide adjust or reduce access to international the model, and because their capacity is range of potential responses. price data quickly. Accordingly, limited, 10 percent of use is assumed to The OACT assumptions consider that manufacturers are assumed to raise the shift to 340B providers. Other the separately payable Medicare Part B published international prices utilization not covered by providers and drugs make up approximately 5 percent beginning in 2022 and to retain a 25- suppliers continuing to provide access of the overall U.S. prescription drug percent MFN Price discount relative to in the model or by excluded providers market. Drug manufacturers could see applicable ASP. and suppliers is assumed to be this model as an obstacle to their pricing As a result of this expected behavior utilization not covered by the Medicare throughout the market, which could from manufacturers, 340B provider benefit.

TABLE 11—ASSUMPTIONS REFLECTED IN OACT ESTIMATE

2021 2022 2023 2024 2025 2026 2027 (%) (%) (%) (%) (%) (%) (%)

Non-340B providers: Behavior: Continued Availability...... 80 75 70 70 70 70 70 Altered Availability: Move to non-MFN...... 1 1 1 1 1 1 1 Move to 340B...... 10 10 10 10 10 10 10 No Access...... 9 14 19 19 19 19 19 Total ...... 100 100 100 100 100 100 100 MFN Price impact ...... ¥16 ¥25 ¥25 ¥25 ¥25 ¥25 ¥25 340B providers: Behavior: Continued Availability...... 100 100 100 100 100 100 100 MFN Price impact ...... 0 ¥3 ¥3 ¥3 ¥3 ¥3 ¥3

Table 12 shows the estimated not accessing their drugs through the To the extent that manufacturers financial impacts under the model Medicare benefit, along with the discount their products for Medicare based on the assumptions in Table 11. associated lost utilization. This estimate sales, there may be a reduction in Medicare savings are estimated to be does not capture any impacts to other Medicaid Best Price or AMP. $85.5 billion, net of the premium offset. program costs as a result of lower Reductions in Best Price could result in While there are significant savings as a utilization. This estimate is on a pre- increased Medicaid rebates and thus result of this model, a portion of the COVID–19 basis, and is not adjusted for lower Medicaid costs. However, savings is attributable to beneficiaries the effects of the pandemic. reductions in AMP generally result in

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lower statutory and inflationary rebates Furthermore, the effects on AMP may be a result of the changes in Medicare under the Medicaid program. Therefore, reduced or eliminated, if manufacturers payments under the model in part due if the manufacturer discounts a drug so respond by increasing prices in the to the significant uncertainty around that it is closer to the Medicaid best private health insurance market. These manufacturer pricing behavior in price, there is a possibility of increased estimates do not include secondary response to this model. Medicaid costs as a result of the model. impacts to other sectors of the market as

TABLE 12—ESTIMATED FINANCIAL IMPACT OF MFN MODEL

(In billion dollars) 2021 2022 2023 2024 2025 2026 2027 2021–27

Drug price reduction: FFS impact * ...... ¥4.7 ¥7.5 ¥9.3 ¥10.2 ¥11.2 ¥12.3 ¥13.5 ¥68.7 Gross impact (FFS+MA) ** ...... ¥4.7 ¥7.5 ¥17.6 ¥19.5 ¥21.6 ¥24.0 ¥26.5 ¥121.4 Net of premium offset *** ...... ¥3.5 ¥5.6 ¥13.2 ¥14.6 ¥16.2 ¥18.0 ¥19.9 ¥91.1 Medicaid impact ...... ¥0.4 ¥0.6 ¥1.3 ¥1.5 ¥1.6 ¥1.8 ¥2.0 ¥9.1 Federal ...... ¥0.2 ¥0.3 ¥0.8 ¥0.8 ¥0.9 ¥1.0 ¥1.1 ¥5.2 State ...... ¥0.2 ¥0.2 ¥0.6 ¥0.6 ¥0.7 ¥0.8 ¥0.9 ¥3.9 Drug add-on payment: FFS impact...... 0.6 0.6 0.5 0.6 0.6 0.7 0.8 4.4 Gross impact (FFS+MA)...... 0.6 0.6 1.0 1.1 1.2 1.4 1.5 7.4 Net of premium offset...... 0.4 0.4 0.7 0.8 0.9 1.0 1.2 5.6 Medicaid impact ...... ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.2 ¥0.8 Federal ...... ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.5 State ...... 0.0 0.0 0.0 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.4 Total impact: FFS impact ...... ¥4.1 ¥7.0 ¥8.8 ¥9.6 ¥10.6 ¥11.6 ¥12.7 ¥64.4 Gross impact (FFS+MA) ...... ¥4.1 ¥7.0 ¥16.6 ¥18.4 ¥20.4 ¥22.6 ¥25.0 ¥114.0 Net of premium offset ...... ¥3.1 ¥5.2 ¥12.4 ¥13.8 ¥15.3 ¥16.9 ¥18.7 ¥85.5 Medicaid impact ...... ¥0.4 ¥0.7 ¥1.4 ¥1.6 ¥1.8 ¥1.9 ¥2.1 ¥9.9 Federal ...... ¥0.3 ¥0.4 ¥0.8 ¥0.9 ¥1.0 ¥1.1 ¥1.2 ¥5.7 State ...... ¥0.2 ¥0.3 ¥0.6 ¥0.7 ¥0.8 ¥0.8 ¥0.9 ¥4.3 * Projected spending impact in the traditional Medicare FFS program under the model. ** Projected spending impact in both Medicare FFS and Medicare Advantage (MA). *** Premium offset represents the change in the Part B premium income that would result from the change in Part B drug expenditures.

These impacts are based on the spending each year and will account for assumptions underlying the estimated President’s Fiscal Year 2021 Budget roughly 73 percent of Medicare Part B financial impacts. To show the effects of baseline for Medicare Part B drugs, drug spending in each affected year. the model absent any provider or including those dispensed by 340B • All included providers and beneficiary behavioral responses, OACT providers. Due to rounding, the sum of suppliers receive an add-on payment of calculated the impacts of the payment values in the table may differ slightly 6 percent (after sequestration) of the changes alone. These values reflect the from the total results in the table. In average sales price (ASP) and this add- pricing changes inside the model, as addition to the behavioral assumptions on payment is not subject to beneficiary shown in Table 9, and the assumption in Table 11, these estimates reflect a cost sharing. that manufacturers and MFN • The impacts reflect changes to number of other technical assumptions, participants are able to continue to including the following: payments to Medicare Advantage plans • Amounts illustrate the potential starting in 2023. provide access to all drugs. Again, impact on Medicare Part B drug • The premium offset is 25 percent of because 340B providers will receive the spending, assuming the reductions are the gross impact. lesser of the model payment amount or achievable and realized. • The Medicaid impact represents the the amount outside the model for the • Amounts are presented by calendar portion of beneficiary cost sharing paid drug, no impact to their costs is year and are based on the date the on behalf of dual-eligible beneficiaries expected for the first year. Results for service is incurred and have therefore (split 57 percent/43 percent between this illustration are shown in Table 13, not been adjusted to reflect when Federal and State). and they reflect the same technical payment is made. • The Medicaid impact does not assumptions as the OACT estimate. The • The model runs from January 1, account for the potential impacts to net impact on Medicare after the 2021 through December 31, 2027. If any AMP or Best Price in the Medicaid premium offset is a savings of $155.6 of the provisions of this rule are not program. billion over the 7-year period, and none effective on January 1, 2021, the impacts a. Pricing Effects Only Illustration of the impact would be due to lost will differ. utilization. • The model will include the top 50 As mentioned previously, there is Medicare Part B drugs with the highest much uncertainty around the behavioral

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TABLE 13—ESTIMATED IMPACT OF PRICING EFFECTS ONLY ILLUSTRATION

(In billion dollars) 2021 2022 2023 2024 2025 2026 2027 2021–27

Drug price reduction: FFS impact * ...... ¥3.1 ¥7.3 ¥13.1 ¥20.1 ¥23.0 ¥25.3 ¥27.7 ¥119.7 Gross impact (FFS+MA) ** ...... ¥3.1 ¥7.3 ¥24.7 ¥38.5 ¥44.4 ¥49.2 ¥54.5 ¥221.8 Net of premium offset *** ...... ¥2.4 ¥5.5 ¥18.5 ¥28.9 ¥33.3 ¥36.9 ¥40.9 ¥166.4 Medicaid impact ...... ¥0.2 ¥0.5 ¥1.9 ¥2.9 ¥3.3 ¥3.7 ¥4.1 ¥16.6 Federal ...... ¥0.1 ¥0.3 ¥1.1 ¥1.6 ¥1.9 ¥2.1 ¥2.3 ¥9.5 State ...... ¥0.1 ¥0.2 ¥0.8 ¥1.2 ¥1.4 ¥1.6 ¥1.8 ¥7.2 Drug add-on payment: FFS impact...... 0.9 1.0 1.1 1.2 1.3 1.4 1.6 8.3 Gross impact (FFS+MA)...... 0.9 1.0 2.0 2.2 2.5 2.8 3.1 14.4 Net of premium offset...... 0.7 0.7 1.5 1.7 1.9 2.1 2.3 10.8 Medicaid impact ...... ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.8 Federal ...... 0.0 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.5 State ...... 0.0 0.0 0.0 0.0 ¥0.1 ¥0.1 ¥0.1 ¥0.3 Total impact: FFS impact ...... ¥2.3 ¥6.4 ¥12.0 ¥19.0 ¥21.7 ¥23.9 ¥26.2 ¥111.4 Gross impact (FFS+MA) ...... ¥2.3 ¥6.4 ¥22.7 ¥36.3 ¥41.9 ¥46.5 ¥51.4 ¥207.4 Net of premium offset ...... ¥1.7 ¥4.8 ¥17.0 ¥27.2 ¥31.5 ¥34.9 ¥38.6 ¥155.6 Medicaid impact ...... ¥0.3 ¥0.6 ¥2.0 ¥3.0 ¥3.5 ¥3.8 ¥4.2 ¥17.4 Federal ...... ¥0.2 ¥0.4 ¥1.1 ¥1.7 ¥2.0 ¥2.2 ¥2.4 ¥9.9 State ...... ¥0.1 ¥0.3 ¥0.8 ¥1.3 ¥1.5 ¥1.6 ¥1.8 ¥7.5 * Projected spending impact in the traditional Medicare FFS program under the model. ** Projected spending impact in both Medicare FFS and Medicare Advantage (MA). *** Premium offset represents the change in the Medicare Part B premium income that would result from the change in Medicare Part B expenditures.

b. Extreme Disruption Illustration there are a small number of excluded as this payment is retrospective and the To cover the spectrum of possible providers and suppliers, OACT assumed losses prior to the payment would be outcomes, the impact of a greater they only have capacity for a 25 percent severe, it is unclear whether providers behavioral response from manufacturers increase in utilization. Additionally, will be in a position to request the and MFN participants was also manufacturers are assumed to not exemption. considered. Under this scenario, it is change the international prices; as a The illustrative results under these assumed that non-340B providers and result, 340B providers will have assumptions are shown in Table 14. suppliers will not be able to obtain any reduced reimbursement beginning in They weredeveloped with the same of the current drugs inside the model. 2022, when the MFN Price dips below technical assumptions listed under the All non-340B utilization will then be the baseline payment of ASP less 22.5 OACT estimate. The overall impact of divided among the three beneficiary percent—leading to reduced beneficiary the model would be a substantial choices of traveling to an excluded access through 340B providers as well. savings to Medicare of $286.3 billion, provider or supplier, using a 340B The financial hardship exemption could but nearly half of that impact would be provider, or forgoing access. Because possibly apply under this scenario, but due to lost utilization.

TABLE 14—ESTIMATED IMPACT OF EXTREME DISRUPTION ILLUSTRATION

(In billion dollars) 2021 2022 2023 2024 2025 2026 2027 2021–27

Drug price reduction: FFS impact * ...... ¥17.6 ¥21.2 ¥26.9 ¥30.5 ¥33.7 ¥37.0 ¥40.6 ¥207.5 Gross impact (FFS+MA) ** ...... ¥17.6 ¥21.2 ¥50.9 ¥58.4 ¥65.0 ¥72.0 ¥79.7 ¥364.8 Net of premium offset *** ...... ¥13.2 ¥15.9 ¥38.2 ¥43.8 ¥48.7 ¥54.0 ¥59.8 ¥273.6 Medicaid impact ...... ¥1.3 ¥1.6 ¥3.8 ¥4.4 ¥4.9 ¥5.4 ¥6.0 ¥27.4 Federal ...... ¥0.8 ¥0.9 ¥2.2 ¥2.5 ¥2.8 ¥3.1 ¥3.4 ¥15.6 State ...... ¥0.6 ¥0.7 ¥1.6 ¥1.9 ¥2.1 ¥2.3 ¥2.6 ¥11.8 Drug add-on payment: FFS impact ...... ¥0.6 ¥0.8 ¥1.2 ¥1.5 ¥1.6 ¥1.8 ¥1.9 ¥9.4 Gross impact (FFS+MA) ...... ¥0.6 ¥0.8 ¥2.3 ¥2.8 ¥3.1 ¥3.4 ¥3.8 ¥16.9 Net of premium offset ...... ¥0.5 ¥0.6 ¥1.8 ¥2.1 ¥2.3 ¥2.6 ¥2.9 ¥12.7 Medicaid impact ...... ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.2 ¥0.8 Federal ...... ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.5 State ...... 0.0 0.0 0.0 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.4 Total impact: FFS impact ...... ¥18.2 ¥22.0 ¥28.2 ¥32.0 ¥35.3 ¥38.7 ¥42.5 ¥217.0 Gross impact (FFS+MA) ...... ¥18.2 ¥22.0 ¥53.2 ¥61.2 ¥68.1 ¥75.5 ¥83.5 ¥381.7 Net of premium offset ...... ¥13.7 ¥16.5 ¥39.9 ¥45.9 ¥51.1 ¥56.6 ¥62.6 ¥286.3 Medicaid impact ...... ¥1.4 ¥1.7 ¥3.9 ¥4.5 ¥5.0 ¥5.5 ¥6.1 ¥28.2 Federal ...... ¥0.8 ¥1.0 ¥2.2 ¥2.6 ¥2.9 ¥3.2 ¥3.5 ¥16.1

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TABLE 14—ESTIMATED IMPACT OF EXTREME DISRUPTION ILLUSTRATION—Continued

(In billion dollars) 2021 2022 2023 2024 2025 2026 2027 2021–27

State ...... ¥0.6 ¥0.7 ¥1.7 ¥1.9 ¥2.2 ¥2.4 ¥2.6 ¥12.1 * Projected spending impact in the traditional Medicare FFS program under the model. ** Projected spending impact in both Medicare FFS and Medicare Advantage (MA). *** Premium offset represents the change in the Medicare Part B premium income that would result from the change in Medicare Part B expenditures.

c. Additional Considerations effective treatments for beneficiaries assumed that manufacturers of currently Because the model will make either by negotiating lower prices, marketed drugs outside but near the top substantial changes to payment for accepting reduced revenue, or finding 50 Medicare Part B drugs based on Medicare Part B drugs, there are many effective Medicare Part B or Part D annual allowed charges (with certain other potential responses not considered alternative treatments. exclusions and exemptions) will lower in this analysis. It is possible that To assess the likelihood of each of the their U.S. prices in an attempt to manufacturers could increase prices for alternative manufacturer responses to prevent them from becoming MFN non-Part B drugs, which would affect the MFN Model, ASPE reviewed Model drugs. To compensate for this both private market and Part D published literature on the impacts and response, ASPE assumed that expenditures, although that potential interviewed a small cohort of experts manufacturers will increase prices for impact has not been quantified for this regarding the potential impacts. non-MFN Model drugs. Since estimate. It is also possible that moving Published literature suggests that when companies often sell many different to a flat add-on payment from a a large country establishes an drugs, ASPE assumed they will have percentage of drug cost will have international reference price, smaller some flexibility to allocate discounts additional effects, which are not reference countries experience price between different drugs to ensure no considered in the OACT analysis. The increases and longer launch delays for currently marketed non-MFN Model 85 analysis is on a pre-COVID–19 basis, new products. ASPE’s conversations drugs enter the top 50 while and neither the baseline nor the impact with experts suggested that as a result maintaining near constant revenues. In analysis are adjusted for the effects of of the MFN Model, prices in other some cases, there are relatively new the pandemic. countries could increase at the ex- drug products that may not have manufacturer level, potentially up to launched or may be recently launched 2. ASPE Estimate current ASP levels, and manufacturers in the included countries that may enter The behavioral responses of could change formulations of MFN the top 50. In those cases, ASPE manufacturers, providers, suppliers, and Model drugs to lessen the impact of the assumed the manufacturers will re- beneficiaries to the MFN Model are model. The experts generally believe evaluate their international pricing critical to estimating its impact on key that manufacturers will be able to price strategies to ensure the MFN Price is outcomes. Lack of direct experience discriminate between the Medicare Part comparable to ASP absent of the MFN with policies such as the MFN Model, B market and other markets within the Model. ASPE assumed that these however, results in great uncertainty for U.S. Potential utilization impacts will changes to U.S. prices of non-MFN making these behavioral assumptions. thus be limited to Medicare Part B Model drugs will ultimately fully offset For a robust approach, ASPE made a beneficiaries, as payments to providers one another in terms of Medicare Part B number of assumptions based on and suppliers for drugs provided to drug spending as well. published literature and expert other patients will not be affected by the For the 50 MFN Model drugs, the consensus, and applied such model. MFN Price ultimately depends on the assumptions on a drug-by-drug basis. Considering this information, ASPE prices for the drugs in the included Please note that ASPE has not adjusted made a series of assumptions for a base countries. The exact mechanisms in the assumptions and estimates based on analysis. First, ASPE considered a static which prices are determined in the effects of the COVID–19 pandemic. group of 50 drugs for this analysis. included countries differ by country and The behavioral assumptions in this Based on the literature and interviews sometimes by product. These approach first address manufacturers’ with experts, ASPE assumed mechanisms include national (or sub- 86 responses in the international market manufacturers of newly launched brand national tendering ), therapeutic-level that might increase MFN Prices; and products that become MFN Model drugs reference pricing, international then the potential responses to the MFN would adjust their international pricing reference pricing, cost-effectiveness Drug Payment Amounts by the strategies so that the MFN Payment analysis, and negotiation. These manufacturers and providers and Amount will be equal to ASP absent of mechanisms generally result in lower suppliers that purchase MFN Model the MFN Model. This assumption does observed prices in other countries drugs and submit a claim to Medicare not necessarily mean that net compared to the U.S., and these after administering such drugs to international prices (ex-manufacturer differences tend to be larger for products beneficiaries. In general, these sales prices minus the value of rebates that have more competition than in the assumptions represent the proposition or other financial concessions) will be U.S. (such as more biosimilar that manufacturers prefer to sell their equal to the ASP. In addition, ASPE competition) or have only a marginally products, even at lower prices, as long better clinical profile than a cheaper as net revenues (net sales prices minus 85 Patricia M. Danzon, ‘‘The Economics of the Biopharmaceutical Industry’’, in Sherry Glied and 86 Tendering is a formal procedure to purchase production and distribution costs) Peter C. Smith (eds.), The Oxford Handbook of medications using competitive bidding for a remain positive; and that providers and Health Economics, Oxford University Press 2011, particular contract.https://www.ncbi.nlm.nih.gov/ suppliers are committed to maintaining pp. 520–554. pmc/articles/PMC5628685/.

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therapy. Since the U.S. price under this MFN Model drugs. When the MFN Price lower prices for MFN beneficiaries if model depends on the prices in other was calculated using international drug doing so threatens its ability to sell in countries, the model will likely result in pricing information for a non-innovator other segments of the U.S. at a positive increased observed prices in other unbranded product, ASPE assumed that margin. That is, would the loss in countries. This does not mean that net the MFN Price would not increase. This revenues from selling for all purchasers prices will necessarily increase as assumption applied to 6 of the 50 MFN at a reduced price exceed the loss in countries will try to find ways to Model drugs. revenues from losing the MFN prevent spending increases while After analyzing price changes beneficiary share of business for that limiting disruption in their drug internationally, ASPE analyzed the drug? To examine this issue, ASPE markets. In this analysis, ASPE potential for beneficiaries to switch to estimated the Medicare Part B share of considered the potential impact at the other products with, for example, the each MFN Model drug compared with drug-level because the context of each same active ingredient within the U.S. the estimated U.S. market. If it seemed drug may determine the MFN Price. and billed with HCPCS codes that are likely that a manufacturer will have ASPE modeled the pricing response to not among the MFN Model drugs. First, higher revenues selling to all purchasers the change in direct drug payment for ASPE assumed that when a at prices slightly above the MFN Drug each of the 50 MFN Model drugs shown manufacturer has multiple branded Payment Amount than not selling to in Table 6 of this IFC. ASPE assumed products with different indications MFN participants for MFN beneficiary that any changes in international sales represented by the same HCPCS code, use, ASPE assumed the manufacturer prices for included countries would not the manufacturer will work to obtain a will not restrict MFN beneficiaries’ occur until the beginning of the second new HCPCS code for the product in access to an MFN Model drug under performance year of the MFN Model. which Medicare Part B makes up a Medicare Part B. This included ASPE modeled the manufacturer pricing smaller portion of its overall market. In examining if the MFN Model drugs had response based on available 2019 addition, the manufacturer will restrict U.S. competitors. Since MFN international drug pricing information, the amount of product sold that could participants likely treat both Part B using the sales and volume data that be billed under this new HCPCS code so beneficiaries and non-Part B CMS used to calculate the MFN Prices that such products will not become beneficiaries (including individuals shown in Table 6 of this IFC. ASPE did included in the MFN Model. This with employer, individual market, or not model how manufacturers and assumption applied to one of the MFN Medicaid coverage), an MFN participant providers might take into account the Model drugs. ASPE also assumed that if may select an alternative therapy changes to the add-on. an MFN Model drug is available within marketed by a competitor that can be If there was only one related brand for the U.S. in a formulation that will be provided to both types of patients. As a the included countries,87 then ASPE covered under Medicare Part D, the result, manufacturers will have an assumed the MFN Price for a drug will manufacturer will work to shift 90 incentive to work to maintain utilization increase to the average price of the drug percent of the utilization from Medicare so long as the MFN Payment Amount is for the included countries plus 10 Part B to Medicare Part D. This not too low. percent (with the cap of ASP). ASPE assumption impacted 2 of the 50 MFN In cases where manufacturers might made this assumption because at this Model drugs. refuse to lower U.S. prices sufficiently point the market size of the included In addition to these assumptions, to make it financially feasible for MFN countries is roughly the size of the ASPE made assumptions about potential participants to furnish the drug and Medicare Part B market for many of the generic entry for some of the MFN receive the MFN Payment Amount, MFN Model drugs. ASPE applied this Model drugs. ASPE assumed that MFN ASPE examined whether there were approach to 34 of the 50 MFN Model Model drugs with generic drugs products that had similar therapeutic drugs. ASPE assumed that the MFN approved within the included countries effects to a MFN Model drug. ASPE Price will not likely increase by more or currently subject to on-going assumed that Medicare Part B than this because, even if the net price Paragraph 4 patent challenges would beneficiaries will be switched to the is constant for purchasers in the have generic competition by potential alternative products. ASPE included countries, these countries may performance year 3. This assumption made these assessments for each seek to avoid larger increases in impacted 6 of the 50 MFN Model drugs. performance year. ASPE assumed that transaction prices. In the case of drugs After examining the potential price half of Medicare Part B beneficiaries with no international spending in 2019, impacts and other utilization changes will continue accessing their current ASPE assumed that the model would described previously, ASPE examined drugs through 340B providers. Such have no impact. ASPE applied this the potential for utilization impacts. In changes in drug utilization or service approach to 2 of the 50 MFN Model general, economic theory and the providers will likely result in additional drugs. When the MFN Price was experts ASPE interviewed suggested burdens for patients. ASPE did not calculated based on international drug that manufacturers will adjust U.S. quantify these impacts. pricing information for a country with prices to maintain sales as long as price Additionally, for biological drugs for access to biosimilar products or a is greater than marginal costs of which there are licensed biosimilar competitor brand product that is not one producing and distributing the drug. products, ASPE assumed that there will of the MFN Model drugs, ASPE ASPE also assumed that manufacturers be at least one biosimilar manufacturer will have substantial ability to price assumed smaller international price that is willing to provide its product at discriminate—that is, adjust pricing for increases because the MFN Model MFN payment levels if the reference Medicare-participating providers and would reduce the incentive for the manufacturer would not supply this suppliers to reflect discounts for their manufacturer of an MFN Model drug to drug. We note however that if reference Medicare Part B patient share as compete in those international markets. manufacturers are willing to sell at MFN opposed to all patients. Nonetheless, This approach applied to 8 of the 50 payment levels, providers may not have ASPE still considered the potential that any incentive to use biosimilar 87 For this analysis, we included available sales price discrimination will be less than products. The extent to which providers and volume data for the brand drug manufacturer perfect for some drugs. In these cases, a may use biosimilar products will and any parallel importers of the brand drug. manufacturer might refuse to negotiate depend on whether they are easier to

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access instead of a product subject to MFN Model drugs. These impacts MFN Model, there will be no continued the model. The biosimilar reflect, on a drug by drug basis, the impacts because Medicare Part B manufacturers will need to balance assumptions outlined previously. payments for MFN Model drugs will those considerations with the possibility Specifically, where estimates reduced immediately be based on non-model that sufficiently large sales may also utilization, it reflects assumptions that payment policies at the end of the MFN result in that product becoming an MFN either manufacturers will be unwilling Model. Given the predictable 7-year Model drug. ASPE assumed any to reduce prices to MFN participants, model performance period, ASPE utilization changes that occur will result viable substitute drugs are not available assumed manufacturers and MFN in zero net changes in spending. ASPE for all affected patients, or both. In such participants will have sufficient time to made no assumptions about the cases, ASPE assumed that half of the structure their agreements to ensure a potential entry of biosimilar products impacted beneficiaries will be able to seamless transition after the end of the for reference products that currently do still access the MFN Model drug not have biosimilar competition in the through a 340B provider. MFN Model. U.S. or referenced countries. ASPE calculated the potential impacts Table 15 summarizes the results of the The overall utilization impact is the of the MFN Model by calendar year. ASPE analysis. sum of the impacts for each of the 50 ASPE assumed that at the end of the

TABLE 15—ASSUMPTIONS REFLECTED IN ASPE ESTIMATE

2021 2022 2023 2024 2025 2026 2027 (%) (%) (%) (%) (%) (%) (%)

Non-340B providers: Behavior: Continued Availability...... 100.0 100.0 97.7 95.9 96.2 96.5 96.7 Altered Availability: Shift to other drugs...... 0.0 0.0 1.1 2.1 1.9 1.8 1.6 Move to 340B...... 0.0 0.0 1.1 2.1 1.9 1.8 1.6 No Access...... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total ...... 100 100 100 100 100 100 100 MFN Price impact ...... ¥11.4 ¥14.3 ¥18.1 ¥20.5 ¥19.4 ¥17.9 ¥16.5 340B providers: Behavior: Continued Availability...... 100 100 100 100 100 100 100 MFN Price impact ...... 0 0 0 0 0 0 0

ASPE estimated the Medicare FFS ASPE used the direct reduction in changes in beneficiary premiums, and program impacts of the change from Medicare Part B payments due to lower changes to cost-sharing associated with ASP-based payment to MFN-based MFN payment amounts and translated the add-on payment. These transfers on payment.88 The Medicare FFS impact that into transfers from the healthcare net balance out with reduced revenues includes changes in spending for system to the government, beneficiaries, for healthcare providers (which may be Medicare Parts B and D. and Medicaid. In addition to the direct completely or mostly offset by the For patients that switch to 340B effects of lower payments and reduced cost of acquiring drugs), providers, ASPE estimated the spending associated cost-sharing, the model reduced revenues for pharmaceutical change based on the difference in the results in downstream transfers manufacturers, and reduced revenues MFN Model payment for drugs acquired associated with changes in Part B for MA plans. under the 340B program and the current premiums and government payments to Based on our estimates of annual Medicare Part B OPPS payment policy. Medicare Advantage Plans. Like OACT, impacts on prescription drug pricing These impacts are generally ASPE estimated Medicaid impacts and annual add-on payments, ASPE did considered transfer impacts of the based on changes to federal and state not model any impacts from the model. To estimate these impacts, ASPE shares of prescription drug costs for provider hardship payments. Eligibility took an approach similar to OACT. dual eligibles but did not estimate for the hardship exemption will be impacts on Medicaid that may result based on year-over-year losses above 25 88 An indirect benefit of this IFC may be reduced from changes in net payments under the percent of total Medicare Part A and distortions in the labor markets taxed to support the Medicaid Drug Rebate Program. Medicare Trust Fund. Such distortions are Part B payments, including payments sometimes referred to as marginal excess tax burden Overall, the model results in changes for Medicare Part B drugs outside the (METB), and Circular A–94—OMB’s guidance on to federal spending in Medicare model and payments for Medicare Part cost-benefit analysis of federal programs, available (including Part B, and Part D) from the A and Medicare Part B services other at https://www.whitehouse.gov/sites/ whitehouse.gov/files/omb/circulars/A94/a094.pdf- model price and utilization impacts, than prescription drugs. We expect that suggests that METB may be valued at roughly 25 changes in federal and state spending on few, if any, providers will have annual percent of the estimated transfer attributed to a Medicaid resulting from changes to the losses above this level, and that those policy change; the Circular goes on to direct the governmental obligation of Medicare who do may be insolvent and therefore inclusion of estimated METB change in supplementary analyses. If secondary benefits— cost-sharing for dual eligible unable to obtain retrospective hardship such as reduced marginal excess tax burden is, in beneficiaries, and changes in federal payments. We note in this regard that a the case of this IFC—are included in regulatory spending associated with add-on hypothetical provider could experience impact analyses, then secondary costs must be as payment changes in the model. The revenue losses of 24.9 percent per year well, in order to avoid inappropriately skewing the net benefits results, and including METB only in model also results in changes to in each of the model’s seven years, supplementary analyses provides some beneficiary spending resulting from resulting in an 86.5 percent loss of acknowledgement of this potential imbalance. changes in cost-sharing for drugs, revenue in Performance Year 7

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compared with the pre-model base year Table 16 shows the net transfer beneficiary, federal government, and and a 62.7 percent loss of revenue over impacts resulting from changes in state government spending over the 7 the seven-year demonstration period, Medicare B, and D. According to the years of the model. without qualifying for the hardship ASPE estimate, this model would result payments in any year. in a net reduction of $87.8 billion in

TABLE 16—ESTIMATED TRANSFER IMPACT OF MFN MODEL—ASPE ESTIMATE

2021 2022 2023 2024 2025 2026 2027 2021–27

Part B Drug Price Reduction: Federal Government Spending ...... ¥2.4 ¥3.4 ¥8.4 ¥10.0 ¥10.3 ¥10.7 ¥10.8 ¥56.0 State Government Spending ...... ¥0.1 ¥0.1 ¥0.4 ¥0.4 ¥0.4 ¥0.5 ¥0.5 ¥2.4 Beneficiary Spending * ...... ¥1.4 ¥2.0 ¥5.0 ¥5.9 ¥6.2 ¥6.4 ¥6.4 ¥33.4 MA Plan Revenue ...... 0.0 0.0 ¥4.8 ¥5.9 ¥6.1 ¥6.5 ¥6.5 ¥29.8 Health Care System Revenue ** ...... ¥4.0 ¥5.5 ¥8.9 ¥10.5 ¥10.9 ¥11.1 ¥11.1 ¥61.9 Part D Drug Switching: Federal Government Spending...... 0.0 0.0 0.3 0.3 0.3 0.3 0.3 1.7 State Government Spending...... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 Beneficiary Spending* ...... 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.7 Health Care System Revenue** ...... 0.0 0.0 0.5 0.5 0.5 0.5 0.5 2.5 Add-on Payment Impact: Federal Government Spending...... 0.2 0.2 0.4 0.3 0.4 0.4 0.4 2.2 State Government Spending...... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ¥0.3 Beneficiary Spending * ...... ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.5 MA Plan Revenue...... 0.0 0.0 0.2 0.3 0.3 0.3 0.3 1.3 Health Care System Revenue** ...... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 Total Impact: Federal Government Spending ...... ¥2.2 ¥3.2 ¥7.7 ¥9.3 ¥9.7 ¥10.0 ¥10.0 ¥52.1 State Government Spending ...... ¥0.1 ¥0.2 ¥0.4 ¥0.4 ¥0.5 ¥0.5 ¥0.5 ¥2.5 Beneficiary Spending * ...... ¥1.6 ¥2.1 ¥4.9 ¥5.9 ¥6.1 ¥6.3 ¥6.3 ¥33.2 MA Plan Revenue ...... 0.0 0.0 ¥4.6 ¥5.6 ¥5.8 ¥6.2 ¥6.2 ¥28.5 Health Care System Revenue ** ...... ¥3.9 ¥5.5 ¥8.4 ¥10.0 ¥10.3 ¥10.6 ¥10.6 ¥59.3 * Beneficiary spending includes spending by beneficiary Medigap plans. ** Health care system revenue includes revenue accrued by health care providers, hospitals, pharmacies, and pharmaceutical manufacturers.

Based on this analysis, the model has impacted. Because the extent to which measures to reduce their operating the potential to generate impacts other payers align with Medicare Part B costs. Given the uncertainty of internationally. In particular, this model drug payments is unknown, we are not manufacturers’ potential behavioral may result in higher prices or longer able to quantify the potential impacts of responses to the MFN Model, we are launch delays for new products in other the MFN Model in this regard. unable to quantify these potential OECD countries. ASPE did not attempt Private secondary payers that pay for spillover effects of the MFN Model. We to quantify the impact of higher prices beneficiary cost-sharing, such as welcome comments on these potential on utilization or the impact of these Medigap plans and employer retiree impacts and evidence on how this rule delays. The health effects of such delays coverage, will likely be impacted by the could affect other payers, patients, and depend on which products experience MFN Model. For MFN beneficiaries, drug manufacturers. these delays and the potential cost-sharing on MFN Model drugs Some of this final rule’s important alternative treatments. In addition, would be less than the amount that will tradeoffs occur over the long run. We foreign governments may seek to apply outside of the model. If request comment on whether the drug mitigate these impacts by accepting manufacturers generally raise drug products affected by this IFC are likely higher prices for the products or prices in response to the MFN Model, to be currently over- or under- pursuing alternative price arrangements the amount of cost-sharing paid by incentivized, including evidence from that are less transparent. beneficiaries and secondary payers may the research literature on optimal patent increase; the opposite will occur if length, and on the effects of the IFC on 3. Aggregate Effects on the Market manufacturers decrease drug prices. drug manufacturers’ incentives. There may be spillover effects in the Similarly, private primary insurers may non-Medicare market, or even in the be impacted if manufacturers change 4. Estimated Effect and Burden of MFN Medicare market outside Part B as a drug pricing as a result of the MFN Model Changes on Medicare result of the MFN Model. Testing Model. Market-wide changes in drug Beneficiaries changes in Medicare Part B drug prices, including drugs not covered by We estimate that aggregate beneficiary payment policy may have implications Medicare Part B, will impact any Medicare Part B cost-sharing within the for non-Medicare payers. During the individual who receives such drugs. In context of the MFN Model will decrease MFN Model, manufacturers’ ASPs may addition, to the extent manufacturers as the MFN Drug Payment Amount will increase or decrease, which may cause lower their overall prices for drugs, not exceed 100 percent of the amount the payment limits in the quarterly manufacturers may realize lower that applies outside the MFN Model Medicare ASP payment files to increase revenue as a result of the MFN Model. (that is, the applicable ASP or WAC or or decrease. Other payers that align their It is possible that manufacturers will payment limit that applies to drug payments for drugs included in the increase international or domestic drug acquired under the 340B program) and MFN Model with the quarterly Medicare prices, reduce marketing and other that beneficiaries will not have a cost- ASP payment files could therefore be expenses, or implement other efficiency sharing liability for the alternative drug

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add-on payment amount. Coinsurance The patient experience survey will be for the purposes of monitoring the MFN for most separately payable drugs is set based on a standardized instrument, Model. at 20 percent of the payment rates, designed to assess patients’ experiences During the model performance period, subject to limitation in the hospital with health care providers and staff in MFN participants must participate in outpatient and ASC settings. To the an ambulatory setting. We will use the MFN Model monitoring and evaluation extent that prescribing patterns shift most current version of the instrument activities in accordance with 42 CFR toward lower cost drugs under the MFN plus additional survey questions as 403.1110(b), as the Secretary determines Model, in aggregate, beneficiaries could applicable to meet CMS’s monitoring is necessary to monitor and evaluate the benefit along with the Medicare needs. MFN Model, including without program. If prescribing patterns shift Based on drug claims analyses and limitation collecting and reporting of toward Part D drugs, beneficiary cost- the scope of the MFN Model, we assume information, including ‘‘protected sharing may increase or decrease the patient experience survey will be health information’’ as that term is depending upon the drugs they take, administered to 75,000 beneficiaries and defined at 45 CFR 160.103. These which phase of the Part D benefit such be completed by 30,000 beneficiaries monitoring activities may include a use occurs in, the beneficiary’s per year. The survey will take sample of site visits to verify any eligibility for help with drug costs, and approximately 30 minutes to complete. monitoring concerns. We anticipate that their plan choice. In addition, as a result Therefore, the annual total number of these monitoring and compliance of the MFN Model, we expect Medicare hours for this information collection requirements will not diverge from Part B premiums to decrease. will be 15,000 hours (30,000 general monitoring requirements for Beneficiaries will benefit from 25 beneficiaries times 0.5 hours per Medicare Part B providers. We believe percent of any premium reduction that beneficiary responding). that these requirements do not add additional burden or impose regulatory may result as this is the portion of To derive average costs for impact on participants. The MFN Model annual premiums that beneficiaries pay. individuals we used data from the U.S. If MFN participants choose not to monitoring will likely include Bureau of Labor Statistics’ May 2019 provide MFN Model drugs or prescribe beneficiaries and eligible providers and National Occupational Employment and alternative therapies instead, suppliers completing surveys. Burden Wage Estimates for our salary estimate beneficiaries may experience access to for the patient survey is described (www.bls.gov/oes/current/oes_nat.htm). care impacts by having to find previously, and burden for any provider We believe that the burden will be alternative care providers locally, and supplier survey will depend on the having to travel to seek care from an addressed under All Occupations length, complexity, and frequency of excluded provider, receiving an (occupation code 00–0000) at $25.72 per surveys administered as needed to alternative therapy that may have lower hour since the group of individual ensure confidence in the survey efficacy or greater risks, or postponing respondents varies widely from working findings. We will make an effort to or forgoing treatment. There is and nonworking individuals and by minimize the length, complexity, and significant uncertainty with these respondent age, location, years of frequency of any provider and supplier potential effects of the MFN Model. employment, and educational surveys. A typical survey on average CMS will carefully monitor for evidence attainment, etc. We are not adjusting requires about 20 minutes of the of these potential effects and conduct this figure for fringe benefits and respondent’s time. In other evaluations beneficiary surveys to assess impacts of overhead since the individuals’ of models where a survey is required, the MFN Model on beneficiaries. activities will occur outside the scope of the frequency of surveys varies from a Given the uncertainty of these their employment. Therefore, the minimum of one round of surveys to impacts, we are unable to quantify these estimated cost for this information annual surveys. We estimate the burden potential effects of the MFN Model. collection will be $385,800 (15,000 for annual surveys from clinicians, × In section III.H. of this IFC, we hours $25.72). Beneficiaries will have assuming one per eligible provider and describe our intention to include quality annual costs associated with responding supplier, will be 7 surveys [annual] measures as part of the MFN Model, and to the patient experience survey, which times 1⁄3 hour [20 min.] times $200 our plan to collect one quality measure, we estimate will be $385,800 annually [median physician/surgeon hourly rate focused on patient experience, to help during the model. plus fringe benefits] times 22,888 better understand the impact of the 5. Estimated Effect and Burden on MFN [eligible providers and suppliers] = MFN Model on beneficiary access and Participants and Manufacturers $10,702,429. quality of care. This information Finally, MFN participants may choose collection will be one part of robust MFN participants and drug to apply for a financial hardship monitoring activities to ensure that manufacturers will have administrative exemption that requires the submission MFN beneficiaries’ access to costs related to adjusting to and of a timely, complete request for a medications and quality of care is complying with the regulations. These financial hardship exemption. We think preserved or enhanced. We will use a costs may include adjusting purchasing that approximately 900 MFN patient experience survey, which we arrangements, which for some affected participants will submit a request for a will field to a sample of MFN businesses may mean substantially financial hardship exemption each beneficiaries, beginning in performance changing their pricing models and performance year of the model. We year 1. We will include additional items engaging in negotiations with other expect that a medical health service in the patient experience survey that businesses; tracking units of MFN manager will need approximately 15 focus on patient access, to the extent Model drugs that are paid under the hours to compile the necessary that valid and reliable items are MFN Model and excluded from supporting documentation and submit a available. The patient experience survey manufacturers’ ASPs; recordkeeping complete financial hardship exemption will be administered to these requirements, which may require request. We estimate the burden for beneficiaries by a third party contractor acquisition of new tools and applying for the financial hardship throughout the model performance information sharing; and adjusting to exemption per year for all performance period. Beneficiaries will not be any spillover effects. Additionally, MFN year of the model will be 900 [number required to complete the survey. participants may be subject to site visits of MFN participants that submit

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hardship exemption requests in each small business status under the Small Medicare Part B drugs and will not be performance year] times 15 hours times Business Administration standards. (For MFN participants. $111 [medical health service manager details, see the SBA’s website at http:// There are a number of providers and hourly rate plus fringe benefits] = www.sba.gov/content/table- suppliers, including various physician $1,498,500. Note, the financial hardship smallbusiness-size-standards (refer to specialties, that will see reduced drug exemption requests for performance the 620000 series)). Individuals and component payments of 3 percent or year 1 (2021) will be submitted in 2022, states are not included in the definition more in performance year 1. Please refer and the requests for performance year 7 of a small entity. The RFA requires that to Table 3 to see the number of entities will occur in 2028. CMS analyze regulatory options for impacted, as well as the types of We expect that manufacturers will small businesses and other entities providers and suppliers that will be need to update their ASP reporting. unless CMS certifies that a rule will not most likely impacted by the rule. Lower However, we expect the burden to be de have a significant economic impact on MFN Model drug payments will likely minimis compared to existing ASP a substantial number of small entities. be a fraction of these entities’ total reporting requirements and can likely be The analysis must include a justification revenues, taking into account non- automated based on existing processes. concerning the reason action is being Medicare patients and all other services provided. Moreover, the alternative add- 6. Regulatory Review Cost Estimation taken, the kinds and number of small entities the rule affects, and an on payments could offset such In order to comply with the regulatory explanation of any meaningful options reductions to some extent, as described changes in this IFC, affected businesses that achieve the objectives with less in section III.F. of this IFC. We will need to review the rule and MFN significant adverse economic impact on considered potential impacts on small participants will need to review MFN- the small entities. The vast majority of entities; we expect that the model’s specific billing guidance on how to bill MFN participants are considered to be impact on an MFN participant’s revenue for the alternative add-on payment. We small entities, based upon the SBA will be driven by the proportion of expect that a medical health service standards. There are over twenty Medicare payments to the MFN manager reading 250 words per minutes thousand MFN model participants that participant that is related to could review the rule in approximately will be included or affected by the MFN administering Medicare Part B drugs 6 hours [(approximately 300 pages * 300 Model. Because many of the affected rather than its size. Further, to provide words/per page)/250 words per minute)/ entities are small entities, the analysis financial protection for MFN 60 minutes)]. We estimate 1 hour to and discussion provided in this section, participants, we are including a review the relevant MLN matters as well as elsewhere in this IFC is financial hardship exemption for MFN publication and 2 hours to read MFN intended to comply with the RFA participants (regardless of size) that Model billing guidance for a total of 3 requirements regarding significant experience significant financial hours of billing specific training. Since hardship as a result of the model test, all MFN participants have experience impact on a substantial number of small entities. as described in section III.I.2. of this billing HCPCS codes to Medicare, we do IFC. It is likely that many, if not all, not expect any additional specific The RFA requires that a Regulatory included providers and suppliers will burden related to the alternative add-on Flexibility Analysis (RFA) be prepared see an overall decrease in revenue for payment M code during model if an IFC will have a ‘‘significant impact MFN Model drugs of 3 percent or more implementation after the MFN-specific on a substantial number’’ of small over the course of the model. billing guidance is reviewed. We entities. HHS interprets the statute as Accordingly, we have determined that a estimate the salary of a medical and mandating this analysis only if the Regulatory Flexibility Analysis (RFA) is health service manager is $111 per hour, impact is adverse, though there are required. This RIA, together with the using the wage information from the differing interpretations. For purposes preamble, constitutes the required 2019 BLS including overhead and fringe of the RFA, most practitioners, analysis. benefits (BLS occupation code 11– hospitals, and other providers and As a result of the model, we expect 9110). For each provider or supplier that suppliers are small entities, either by total allowed charges for Medicare Part reviews the rule and MFN-specific nonprofit status or by having annual B drugs for small entities to go down billing guidance, the estimated cost revenues that qualify for small business commensurate with the phase-in of the based on the expected time and salary status under the Small Business MFN Price in the calculation of the of the person reviewing the rule is $999 Administration standards (having MFN Drug Payment Amount (Year 1: 75 ($111 * 9 [6 hours for reviewing the rule revenues of less than $7.5 million to percent applicable ASP and 25 percent and 3 hours for billing training). We $38.5 million in any 1 year). For details, MFN Price; Year 2: 50 percent estimate that the cost for providers and see the Small Business Administration’s applicable ASP and 50 percent MFN suppliers to review this IFC and MFN- ‘‘Table of Small Business Size Price; etc.). Although the alternative specific billing guidance will be Standards’’ at https://www.sba.gov/ add-on payment was designed to hold approximately $117.9 million (118,101 document/support—table-size- MFN participants harmless based on entities times $999). standards. The rule of thumb used by current revenue to the greatest extent HHS for determining whether an impact possible, as shown in Table 8, some 7. Regulatory Flexibility Act (RFA) is ‘‘significant’’ is an adverse effect specialties will benefit from a higher The RFA requires agencies to analyze equal to 3 percent or more of total aggregate add-on payment amount, options for regulatory relief for small annual revenues. Because the majority while for other specialties some portion entities. For purposes of the RFA, small of providers/suppliers in the U.S. of such specialties will have a decrease entities include small businesses, qualify as ‘‘small,’’ and this model in aggregate add-on payment. We nonprofit organizations, and small includes all eligible providers/suppliers estimate that MFN participants, on governmental jurisdictions. Most that submit claims for separately average, will see an approximate 40 hospitals, practitioners and most other payable Medicare Part B drugs, we percent increase in historical revenue providers and suppliers are small expect the majority of MFN participants related to the alternative add-on portion entities, either by nonprofit status or by to be small entities. However, some of of the MFN Model payments, which having annual revenues that qualify for these small entities may not administer will total approximately $4.4 billion in

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the OACT estimate and $2.2 billion in also requires that agencies assess parameters in the October 2018 ANPRM the ASPE estimate over the 7-year anticipated costs and benefits before for a potential IPI Model for Medicare model. In these estimates, the total issuing any rule whose mandates Part B Drugs; 89 and (4) not Medicare FFS impact, as indicated in require spending in any 1 year of $100 implementing the model. In addition, Tables 12 and 16, would be a reduction million in 1995 dollars, updated when developing the parameters for the of approximately $85.5 billion in annually for inflation. In 2020, that October 2018 ANPRM and this IFC, we Medicare FFS spending in the OACT threshold is approximately $156 noted that there are a range of methods estimate and a majority of the $52.1 million. This IFC does not mandate any to implement external reference pricing, billion in reduced federal spending in spending by State, local, or tribal and these different approaches would governments, or by the private sector, the ASPE estimate over the 7-year affect the impact of the model.90 91 In model, and will apply mainly to urban and hence an UMRA analysis is not examining potential variations of certain and non-340B MFN participants. We required. note that there is much uncertainty parameters included in this IFC, we 10. Federalism around the assumptions for these considered potential differences such estimates. Finally, we have and will Executive Order 13132 establishes variations would have on the impacts continue to take steps to minimize the certain requirements that an agency presented in sections VI.C.1. and VI.C.2. impact of this IFC on administrative and must meet when it promulgates a final of this IFC. We note that a potential reporting burdens for small businesses. rule that imposes substantial direct model design with a longer MFN Price We welcome comments on our estimate costs on State and local governments, phase-in would have a lower estimate of of significantly affected providers and preempts state law, or otherwise has overall Medicare savings; for example, a suppliers and the magnitude of Federalism implications. We have 7-year phase-in of the MFN Price over estimated effects. We also welcome examined the provisions in the MFN a 7-year model performance period comments on adjustments to the MFN Model included in this IFC in would reduce estimates of Medicare Model that could be considered for accordance with Executive Order 13132, savings in the OACT estimate by future rulemaking while preserving the and have determined that they will not approximately 25 percent. As noted in innovative approach to payment in the have a direct effect on state, local or section III.E.5. of this IFC, our policy is MFN Model. tribal governments, preempt state law, to phase-in the MFN Price more quickly or otherwise have a Federalism during the initial years to allow CMS to 8. Effects on Small Rural Hospitals implication. test the full phase-in of the MFN Price. Section 1102(b) of the Act requires D. Reducing Regulation and Controlling CMS to prepare a regulatory impact In considering the scope of the model, Regulatory Costs analysis if a rule may have a significant we actively assessed whether to pursue impact on the operations of a substantial Executive Order 13771, titled a smaller geographic scope. As we number of small rural hospitals. This Reducing Regulation and Controlling discuss in section III.C.3. of this IFC, we analysis must conform to the provisions Regulatory Costs, was issued on January reviewed the comments that we of section 604 of the RFA. For purposes 30, 2017, and requires that the costs received on the October 2018 ANPRM, of section 1102(b) of the Act, we define associated with significant new where we considered 50 percent of the a small rural hospital as a hospital that regulations ‘‘shall, to the extent country in a model. We weighed is located outside of a metropolitan permitted by law, be offset by the whether the ability to have a research statistical area and has 100 or fewer elimination of existing costs associated design where we would compare beds. We estimate that this IFC will with at least two prior regulations.’’ changes in drug spending and have a significant impact on small rural This IFC is considered an E.O. 13771 utilization relative to a comparison hospitals. regulatory action. Details on the group, a design that CMS uses As described in section III.C. of this estimated costs of this IFC can be found frequently in its models, would in the preceding and subsequent IFC, we will exclude CAHs from the outweight the concerns we highlight in analyses. types of providers and suppliers that section III.C.3. of this IFC. We will be MFN participants. Slightly less E. Alternatives Considered ultimately concluded that operational than 10 percent ($3.35 billion) of total concerns such as administrative Medicare Part B drug allowed charges in This IFC contains a range of policies. 2019 are associated with rural providers It also provides descriptions of the complexity as well as the risk to model and suppliers (other than CAHs) based statutory provisions that are addressed, integrity associated with a limited on claims with ZIP codes associated identifies the final policies, and geographic scope, as described in with areas that are not assigned to presents rationales for our policies and, section III.C.3. of this IFC, necessitate a metropolitan core based statistical areas where relevant, alternatives that we test with a nationwide scope using a (CBSA) identified by the Office of considered in section III of this IFC. different evaluation design. Management and Budget; of that Several alternatives we considered The estimates for the impact of this included: (1) The parameters included amount, less than 0.015 percent ($4.87 IFC show a substantial reduction in in this IFC; (2) variations of certain million) is for drugs furnished in the Medicare Part B spending over a 7-year parameters included in this IFC, such as U.S. territories outside of the model. metropolitan areas of Puerto Rico. These lengthening the phase-in of the MFN rural entities will experience drug Price (described in section III.E.8. of this 89 https://www.federalregister.gov/documents/ payment reductions and overall IFC) to occur over 5–7 performance 2018/10/30/2018-23688/medicare-program- payment reductions similar to urban years, limiting the model performance international-pricing-index-model-for-medicare- entities under the MFN Model. period to 5 performance years, part-b-drugs. expanding or limiting the Medicare Part 90 https://jasmin.goeg.at/432/1/EURIPID_ 9. Unfunded Mandates Reform B drugs that would be eligible for GuidanceDocument_V8.1_310718.pdf. Section 202 of the Unfunded inclusion in the MFN Model and a 91 https://ec.europa.eu/health/sites/health/files/ Mandates Reform Act of 1995 (UMRA) different geographic area; (3) the systems_performance_assessment/docs/ pharmaproductpricing_frep_en.pdf.

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In comparison, the parameters circulars_a004_a-4/) in Tables 17 and 18 provided in this regulatory impact considered in the October 2018 ANPRM we have prepared two accounting analysis in Table 12 and the accounting were estimated to result in a less statements, based on the OACT and statement in Table 18 is based on substantial reduction in Medicare Part B ASPE estimates respectively, showing estimates in Table 16. Tables 17 and 18 spending over a 5-year model.92 The the classification of transfers, benefits, include the estimated effect and burden alternative of not implementing the and costs associated with the provisions estimates on beneficiaries outlined in model would not have an impact in this IFC. The transfer from section VI.C.4. of this IFC and on compared to existing policy. beneficiaries to providers and MA plans participants and manufacturers in represents the premium change section VI.C.5. of this IFC. The costs F. Accounting Statements and Tables attributable to the drug price, i.e., the shown in Table C18 reflect additional As required by OMB Circular A–4 difference between the gross impact and medical expenses incurred as a result of under Executive Order 12866 (available the net impact in the drug price section the potential loss of access to certain at https:// of Table 12. The accounting statement drugs for some beneficiaries in the obamawhitehouse.archives.gov/omb/ in Table 17 is based on estimates ASPE estimate.

92 https://www.federalregister.gov/documents/ international-pricing-index-model-for-medicare- 2018/10/30/2018-23688/medicare-program- part-b-drugs.

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G. Conclusion may choose not to offer access to the spending and beneficiary spending on MFN Model drugs, causing these Medicare premiums. The changes in this IFC will affect beneficiaries to seek alternative In accordance with the provisions of providers and suppliers that furnish providers, treatment alternatives, or E.O. 12866, this IFC was reviewed by separately payable Medicare Part B forgo access. The financial hardship the Office of Management and Budget. drugs in the outpatient setting for which exemption is designed to mitigate this annual Medicare FFS spending is high. VII. Waiver of Proposed Rulemaking risk. These providers and suppliers are and Delay in Effective Date mostly physicians (including physician The changes in this IFC will also Under 5 U.S.C. 553(b) of the practices), non-physician practitioners, affect MA organizations, drug Administrative Procedure Act (APA), supplier groups, HOPDs (including on- manufacturers, primary and secondary the agency is required to publish a and off-campus outpatient provider- payers, and potentially non-Medicare notice of the proposed rule in the based departments, but excluding patients. MA organizations will Federal Register before the provisions cancer hospitals, children’s hospitals experience lower payments as a result of of a rule take effect. Similarly, section and CAHs), and ASCs. We estimate that the MFN Model because the MA 1871(b)(1) of the Act requires the the effect of the MFN Model on ratebook calculations will reflect Secretary to provide for notice of the providers and suppliers willvary, changes in actual FFS spending due to proposed rule in the Federal Register depending on their type, location, what the impact of the model. Drug and provide a period of not less than 60 drugs they furnish, their clinical manufacturers may have lower revenue, days for public comment. Section patterns, and the alternative add-on depending upon their behavioral 553(b)(B) of the APA provides for payment for the MFN Model. We response to the MFN Model. Other exceptions from the notice and estimate that eligible providers and payers, including State Medicaid comment requirements; in cases in suppliers will experience a decrease in Programs, and patients who take which these exceptions apply, section overall payment related to the MFN prescription drugs may experience 1871(b)(2)(C) of the Act provides for Model. We estimate that beneficiaries direct or indirect spillover effects that exceptions from the notice and 60-day who receive included drugs from MFN may increase or decrease their costs. In comment period requirements of the Act participants will experience a decrease addition, as shown in Tables 12 and 16, as well. Section 553(b)(B) of the APA in cost-sharing, however, some the changes we are adopting in this IFC and section 1871(b)(2)(C) of the Act beneficiaries’ providers and suppliers will reduce state and federal Medicaid authorize an agency to dispense with

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normal rulemaking requirements for improper medication adherence or beneficiaries without supplemental good cause if the agency makes a skipped treatment. The consequences of coverage and over 12 million finding that the notice and comment these behaviors can result in poor beneficiaries dually eligible for process is impracticable, unnecessary, clinical outcomes for chronic disease Medicare and Medicaid.108 109 110 or contrary to the public interest. management.100 The COVID–19 Already facing increased financial High drug prices in the U.S. have pandemic has rapidly exacerbated these burden, this population is in need of serious economic and health problems. The risk of severe illness from urgent relief from high drug prices in consequences for beneficiaries in need COVID–19 increases with age and the order to prevent stinting on care and of treatment. Increasing premiums, out- presence of chronic illnesses, putting alleviate general financial instability of-pocket costs in both Part B and Part many older adults at the highest risk worsened by the COVID–19 pandemic. D, and increases in drug prices are levels.101 102 This is of particular This need is exacerbated in causing beneficiaries to divert scarce concern given that 84 percent of communities of color and among resources to pharmaceutical treatments individuals over the age of 65 having at women, wherein Black, Latino, and and away from other needs, or least one chronic health condition, and Hispanic adults face higher economic prompting them to skip doses of their more than 53 million adults over the age insecurity than their white medications, take less than the of 65 are enrolled in Medicare.103 104 counterparts.111 The economic recommended doses, or abandon With adults 65 and older comprising 8 disruptions caused by the COVID–19 treatment altogether.93 94 In Medicare out of 10 COVID–19 deaths reported in pandemic have increased the burdens Part B, drug spending increased by over the U.S., COVID–19 has placed on America’s seniors and other 9 percent between 2009 and 2017. Over disproportionately impacted Americans Medicare Part B beneficiaries and given two thirds of that increase in spending 65 or older.105 rise to an urgent need for swift action to was based on increases in drug prices Furthermore, the COVID–19 reduce drug prices. Though we have alone, and only one third due to pandemic has led to historic levels of seen some positive economic and increases in utilization.95 Prices of unemployment in the U. S., with both employment trends since the initial certain drugs have increased by double- the unemployment rate and number of peak in April,112 we are currently seeing digit percentages over time.96 These unemployed persons remaining nearly a new surge in COVID–19 cases that dramatic increases are on prices where twice their Feburary (pre-pandemic) may lead to additional hardship and the U.S. already pays significantly more numbers.106 The COVID–19 pandemic requires immediate action.113 As such, than other countries.97 When CMS has also led to an increase in food we find that there is good cause to announced the 2020 Part B Premiums prices, straining budgets for many of waive the notice and comment and Deductibles, we noted that the America’s seniors, particularly those requirements under sections 553(b)(B) increases in Part B premiums and who live on fixed incomes,107 such as of the APA and section 1871(b)(2)(C) deductibles was largely due to rising the 6 million Medicare fee-for-service because of the particularly acute need spending on physician-administered for affordable Medicare Part B drugs drugs.98 Commonwealth Fund, May 12, 2017, https:// now, in the midst of the COVID–19 With more than 25 million Medicare www.commonwealthfund.org/publications/issue- pandemic. Implementation of this beneficiaries living at or below 200 briefs/2017/may/medicare-beneficiaries-high-out- pocket-costs-cost-burdens-income?redirect_ model will provide immediate relief to percent of the Federal Poverty Line source=/publications/issue-briefs/2017/may/ Medicare beneficiaries through reduced (FPL),99 high drug prices could lead to medicare-out-of-pocket-cost-burdens. copays for MFN drugs due to lower drug 100 https://www.cdc.gov/mmwr/volumes/66/wr/ payments and no beneficiary cost- 93 Kirzinger A, Neuman T, Cubanski J, Brodie M. mm6645a2.htm. sharing on the alternative add-on Data Note: Prescription Drugs and Older Adults, 101 https://www.cdc.gov/coronavirus/2019-ncov/ Aug 09, 2019, Kaiser Family Foundation https:// need-extra-precautions/older-adults.html#:∼:text= payment. www.kff.org/health-reform/issue-brief/data-note- Risk%20for%20Severe%20Illness%20 We also usually provide for a delay in prescription-drugs-and-older-adults/. Increases%20with%20Age&text=The%20 effective date under section 553(d) of 94 Kirzinger A, Lopes L, Wu B, Brodie M. KFF greatest%20risk%20for%20severe%2cas%20 the APA and section 1871(e)(1)(B) of the Health Tracking Poll—February 2019: Prescription having%20underlying%20medical%20conditions. Act. However, such delay in effective Drugs, Kaiser Family Foundation, Mar 01, 2019, 102 https://www.cdc.gov/coronavirus/2019-ncov/ https://www.kff.org/health-costs/poll-finding/kff- need-extra-precautions/people-with-medical- date may be waived for good cause, health-tracking-poll-february-2019-prescription- conditions.html. drugs/. 103 National Council on Aging, https:// 108 MMCO Statistical & Analytic Reports, 95 Medicare Payment Advisory Commission, www.ncoa.org/economic-security/money- Managed Care Enrollment Trends (2006–2018 Data), Report to Congress ‘‘Chapter 3: Medicare payment management/debt/senior-debt-facts/. https://www.cms.gov/Medicare-Medicaid- strategies to improve price competition and value 104 MMCO Statistical & Analytic Reports, Coordination/Medicare-and-Medicaid- for Part B drugs,’’ June 2019, http:// Managed Care Enrollment Trends (2006–2018 Data), Coordination/Medicare-Medicaid-Coordination- www.medpac.gov/docs/default-source/reports/ https://www.cms.gov/Medicare-Medicaid- Office/Analytics. jun19_ch3_medpac_reporttocongress_ Coordination/Medicare-and-Medicaid- 109 An Overview of Medicare, Kaiser Family sec.pdf?sfvrsn=0. Coordination/Medicare-Medicaid-Coordination- Foundation, Feb 12, 2019, https://www.kff.org/ 96 Hernandez I, San-Juan-Rodriguez A, Good CB, Office/Analytics. medicare/issue-brief/an-overview-of-medicare/. Gellad WF. Changes in List Prices, Net Prices, and 105 https://www.cdc.gov/coronavirus/2019-ncov/ 110 Note: The number of Medicare beneficiaries Discounts for Branded Drugs in the US, 2007–2018. need-extra-precautions/older-adults.html#:∼:text= without supplemental insurance is from 2016 while JAMA. 2020;323(9):854–862. doi:10.1001/ Risk%20for%20Severe%20Illness%20 the dual eligible numbers are from 2018. jama.2020.1012. Increases%20with%20Age&text=The%20 111 Center on Budget and Policy Priorities, 97 Comparison of U.S. and International Prices for greatest%20risk%20for%20severe%2cas%20 Tracking the COVID–19 Recession’s Effects on Top Medicare Part B Drugs by Total Expenditures’’ having%20underlying%20medical%20conditions. Food, Housing, and Employment Hardships. https://aspe.hhs.gov/pdf-report/comparison-us-and- 106 U.S. Bureau of Labor Statistics. Economic November 9, 2020. https://www.cbpp.org/research/ international-prices-top-medicare-part-b-drugs- News Release.The Employment Situation—October poverty-and-inequality/tracking-the-covid-19- total-expenditures. 2020. November 06, 2020. https://www.bls.gov/ recessions-effects-on-food-housing-and. 98 CMS Newsroom. 2020 Medicare Parts A & B news.release/empsit.nr0.htm. 112 U.S. Bureau of Labor Statistics. Economic Premiums and Deductibles. https://www.cms.gov/ 107 54 million people in America face food News Release.The Employment Situation- October newsroom/fact-sheets/2020-medicare-parts-b- insecurity during the pandemic. It could have dire 2020. November 06, 2020. https://www.bls.gov/ premiums-and-deductibles. consequences for their health. AAMC. October 15, news.release/empsit.nr0.htm. 99 Schoen C, Davis K, Willink A, Medicare 2020. https://www.aamc.org/news-insights/54- 113 Center for Disease Control. COVID–19 Beneficiaries’ High Out of Pocket Costs: Cost million-people-america-face-food-insecurity-during- Forecasts: Cases. https://www.cdc.gov/coronavirus/ Burdens by Income and Health Status, pandemic-it-could-have-dire-consequences-their. 2019-ncov/cases-updates/forecasts-cases.html.

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when such delay is impracticable, Authority: 42 U.S.C. 1302, 1315(a), and Days means calendar days. unnecessary, or contrary to the public 1395hh. DME stands for Durable Medical interest, and the agency incorporates a Equipment. statement of the finding and a brief Subpart A—General Provisions FDA stands for Food and Drug statement of the reasons therefore in the § 513.1 Basis, scope, and duration. Administration. notice. We find that delaying GDP stands for gross domestic (a) Basis. This part implements the product. implementation of this IFC is contrary test of the Most Favored Nation (MFN) to the public interest for the same GDP-adjusted country-level price Model under section 1115A of the Act. means the country-level price adjusted reasons that we find good cause to Except as specifically noted in this part, waive prior notice and comment. by the GDP adjuster as calculated in the regulations under this part do not accordance with § 513.210(b)(4). List of Subjects in 42 CFR Part 513 affect payment, coverage, program GDP adjuster means the country- integrity, or any other requirements that Administrative practice and specific adjuster as calculated in otherwise apply to providers of services procedure, Health facilities, Medicare, accordance with § 513.210(b)(3). and suppliers under this chapter. Reporting and recordkeeping HCPCS stands for Healthcare (b) Scope. This part sets forth the requirements. Common Procedure Coding System. following: HCPCS code level means the specified ■ For the reasons set forth in the (1) The types of providers and drug and amount described in the preamble and under the authority at 5 suppliers required to participate in the HCPCS code long descriptor. U.S.C. 301, the Centers for Medicare & MFN Model and applicable MAC stands for Medicare Medicaid Services amends 42 CFR requirements. Administrative Contractor. Chapter IV by adding part 513 to read (2) The beneficiaries included in the Manufacturer’s average sales price as follows: MFN Model. has the same meaning as under 42 CFR SUBCHAPTER H—HEALTH CARE (3) The drugs included in the MFN Subpart J. INFRASTRUCTURE AND MODEL Model. MFN stands for most favored nation. PROGRAMS (4) The methodologies for establishing MFN beneficiary means an individual Medicare payment amounts for and who is furnished an MFN Model drug PART 513—Most Favored Nation (MFN) making payments for MFN Model drugs, by an MFN participant and who, on the MODEL including an alternative add-on date of service, is enrolled in Medicare payment. Part B, has Medicare as his or her Sec. (5) Beneficiary protections. primary payer, and is not covered under Subpart A—General Provisions (6) Beneficiary cost-sharing. Medicare Advantage or any other group 513.1 Basis, scope, and duration. (c) Duration. The MFN Model has a health plan, including a United Mine 513.2 Definitions. performance period of 7 performance Workers of America health plan. years. The first performance year MFN Drug Payment Amount means Subpart B—Inclusion in the Model (performance year 1) begins on January the portion of the total allowed payment 513.100 MFN Model payments and MFN 1, 2021, and the final performance year amount for an MFN Model drug participants. ends on December 31, 2027, unless determined in accordance with 513.120 MFN Model geographic area. sooner terminated in accordance with § 513.210. 513.130 MFN Model drugs, updates, MFN Model drug means a separately categories and exclusions. § 513.1000. 513.140 Included international data. payable Medicare Part B drug or § 513.2 Definitions. biological described by a HCPCS code Subpart C—Payment Process and For the purpose of this part the included on the MFN Model Drug Methodology following definitions are applicable HCPCS Codes List. 513.200 Payment process and beneficiary unless otherwise stated: MFN Model Drug HCPCS Codes List cost-sharing. Add-on percentage means the means the list of drugs included in the 513.210 Model payment methodology for percentage above 100 percent. MFN Model for a given calendar quarter MFN Model drugs. Alternative add-on payment means of a performance year established under 513.220 Model alternative add-on payment. 513.230 Financial Hardship Exemptions, the payment described in § 513.220. § 513.130. Request Process, and Reconciliation Applicable ASP means the payment MFN participant means a Medicare Payment. amount determined in accordance with participating provider or supplier, section 1847A of the Act for a quarter identified by its CCN or TIN, that is Subpart D—[Reserved] minus the applicable add-on percentage. required to participate in the MFN Subpart E—Quality Strategy, Beneficiary ASP stands for average sales price. Model in accordance with § 513.100(b). Protections, and Compliance Activities ASP calendar quarter means the MFN Model Payment means the total 513.400 Quality measures. period that is two calendar quarters payment to an MFN participant for an 513.410 Beneficiary protections. prior to the calendar quarter to which MFN Model drug in accordance with 513.420 Monitoring and compliance the MFN Drug Payment Amount will subpart C of this part, inclusive of the activities. apply. MFN Drug Payment Amount and the 513.430 Audits and record retention. CCN stands for CMS Certification Alternative Add-on Payment. 513.440 Enforcement authority. Number. MFN Price means the lowest GDP- 513.450 Limitations on review. Country-level price means the adjusted country-level price of the Subpart F—Waivers unadjusted country-level price for an countries specified in § 513.140(b) for 513.500 Waivers of Medicare program MFN Model drug at the HCPCS code an MFN Model drug. requirements for purposes of testing the level as calculated in accordance with Model performance period means the MFN Model. § 513.210(b)(2). 7-year period of time beginning on Subparts G through J—[Reserved] CPI–U stands for Consumer Price January 1, 2021, through December 31, Index for All Urban Consumers based 2027. Subpart K—Model Termination on all items in U.S. city average and not NOC stands for not otherwise 513.1000 Termination of the MFN Model. seasonally adjusted. classified.

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OIG stands for the Department of (6) Rural Health Clinics (RHCs) (1) Adhere to the beneficiary Health and Human Services Office of (defined under section 1861(aa)(2) of the protections requirements under Inspector General. Act). § 513.410. Outpatient prospective payment (7) Hospitals that are not subsection (2) Adhere to the MFN Model-specific system (OPPS) means the payment (d) hospitals (as defined in section billing instructions requirements system for designated hospital 1886(d)(1)(B) of the Act) and are paid on established by CMS and the MAC outpatient items and services and the basis of reasonable costs subject to responsible for processing the MFN certain Medicare Part B services a ceiling under section 1886(b) of the participant’s claims, including without furnished to hospital inpatients when Act. limitation those described in § 513.200. Part A payment cannot be made as (8) Extended neoplastic disease care (3) Participate in MFN Model defined by section 1833(t) of the Act. hospitals (defined in section monitoring and evaluation activities in Performance year means each 12- 1886(d)(1)(B)(vi) of the Act). accordance with § 403.1110(b) of this month period beginning on January 1 (9) For the first quarter and second chapter, including collecting and and ending on December 31 during the quarter of performance year 1, acute reporting information as the Secretary performance period for the MFN Model care hospitals that participate in any determines is necessary to monitor and specified in § 513.1(c). model authorized under section 1115A evaluate the MFN Model, including Provider means a ‘‘provider of of Act for which payment for outpatient without limitation ‘‘protected health services’’ as defined under section hospital services furnished to Medicare information’’ as that term is defined at 1861(u) of the Act and codified at FFS beneficiaries, including MFN 45 CFR 160.103. § 400.202 of this chapter. Model drugs, is made under such model (f) MFN participant requirements after Supplier means a supplier as defined on a fully capitated or global budget the MFN Model. For 2 years after in section 1861(d) of the Act and basis under a waiver of section 1833(t) termination of the MFN Model, MFN codified at § 400.202 of this chapter. participants must participate in MFN TIN stands for taxpayer identification of the Act. (10) Beginning with the third quarter Model monitoring activities as number. described in § 513.420. WAC means wholesale acquisition of performance year 1, acute care cost as defined at section 1847A(c)(6)(B) hospitals that participate in any model § 513.120 MFN Model geographic area. authorized under section 1115A of Act of the Act. The MFN Model geographic area is all for which payment for outpatient states and U.S. territories. Subpart B—Inclusion in the Model hospital services furnished to Medicare FFS beneficiaries, including MFN § 513.130 MFN Model drugs, updates, § 513.100 MFN Model payments and MFN Model drugs, is made under such model categories and excluded drugs. participants. on a fully capitated or global budget (a) MFN Model drugs. CMS creates (a) General. Subject to the exceptions basis under a waiver of section 1833(t) and periodically updates the MFN specified in paragraph (d) of this of the Act, where the parameters of such Model Drug HCPCS Codes List as section, the MFN Model payments model adjust for the difference in described in this section. The MFN specified under this part apply only to payment for MFN Model drugs between Model Drug HCPCS Codes List claims for an MFN Model drug the MFN Model and non-MFN Model designates the MFN Model drugs, which furnished to an MFN beneficiary by an drug payments such that savings under are subject to the MFN Model payments MFN participant. the MFN Model are incorporated into (b) MFN participants. Subject to the specified in subpart C of this part. the other CMS Innovation Center (1) Initial MFN Model Drug HCPCS exclusions specified in paragraph (c) of model’s parameters (for example, the this section, the MFN Model requires Codes List. For the beginning of annual global budget) for the duration of performance year 1, CMS identifies the participation by each Medicare the MFN Model. participating provider and supplier that top 50 drugs by HCPCS code with the (d) Exceptions. The MFN Model highest aggregate 2019 Medicare Part B submits a claim (except for claims payments specified under this part do specified in paragraph (d) of this total allowed charges after making the not apply to any of the following: exclusions specified in paragraphs (b)(1) section) for a separately payable drug (1) Claims for MFN Model drugs that is an MFN Model drug furnished to and (b)(2) of this section, and adds the furnished in the inpatient hospital remaining HCPCS codes, after updating an MFN beneficiary. setting under those circumstances (c) Excluded providers and suppliers. such HCPCS codes for any applicable where Part A would not pay for hospital The following are excluded from changes, to the MFN Model Drug services. participation in the MFN Model: HCPCS Codes List. Final action claims (1) Children’s hospitals (defined (2) Claims for MFN Model drugs with dates of service within calendar under section 1886(d)(1)(B)(iii) of the administered during an inpatient year 2019 and allowed charges greater Act). hospital stay or included on an than $0 are used to determine aggregate (2) PPS-exempt cancer hospitals inpatient hospital claim. 2019 Medicare Part B total allowed (defined under section 1886(d)(1)(B)(v) (3) Claims administered by the DME charges. of the Act). MACs as described in § 421.404(c)(2) of (2) Annual Update of the MFN Model (3) Critical access hospitals (CAHs) this chapter. Drug HCPCS Codes List. For the start of (defined under section 1820 of the Act). (4) Claims paid under the End-Stage each subsequent performance year, (4) Indian Health Service (IHS) Renal Disease Prospective Payment using Medicare Part B total allowed facilities (as described in section 1880 of System, including claims paid using the charge from the next subsequent the Act)), except when MFN Model transitional drug add-on payment calendar year, CMS identifies the top 50 drugs are furnished and such service is adjustment. drugs by HCPCS code with the highest described in section 1880(e)(2)(B) of the (e) MFN participant requirements aggregate Medicare Part B total allowed Act. during the MFN Model. During the charges, after making the exclusions (5) Federally Qualified Health Centers model performance period described in specified in paragraphs (b)(1) and (b)(2) (FQHCs) (defined under section § 513.1(c), MFN participants must do all of this section, for the most recent full 1861(aa)(4) of the Act). of the following: calendar year, and adds any remaining

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HCPCS codes not already on the MFN (i) Professional claims with a place of specified in paragraph (b) of this Model Drug HCPCS Codes List to the service code indicating a home setting, section. MFN Model Drug HCPCS Codes List, including home, homeless shelter, (2) Such data sources must, as after updating such HCPCS codes for assisted living facility, group home, determined by CMS— any applicable changes, effective on the temporary lodging, and custodial care (i) Utilize a standardized method for first day of the performance year. facilities. identifying drugs across countries (3) Removal. No more frequently than (ii) Claims administered by the DME within that data source, such as using quarterly, CMS removes HCPCS codes MACs as described in § 421.404(c)(2) of internationally recognized scientific and from the MFN Model Drug HCPCS this chapter. nonproprietary product names; Codes List when CMS becomes aware (ii) Utilize a standard method for § 513.140 Included international data. that all of the National Drug Codes identifying drug forms that at a assigned to the HCPCS code have been (a) General. (1) CMS uses drug pricing minimum distinguishes among permanently withdrawn from the U.S. information from international data injectable, oral, and other forms of a market and the drug has been sources, available to CMS at least 20 drug; and permanently withdrawn from the U.S. business days prior to the start of a (iii) Be maintained by an organization market, the specific HCPCS code calendar quarter, meeting the that seeks to limit the lag inherent in included on the MFN Model Drug requirements in paragraph (c) of this data to no more than 180 days from the HCPCS Codes List is terminated with no section for MFN Model drugs from end of the calendar quarter for which replacement code available or planned, countries included in paragraph (b) of drug pricing information is compiled to or an exclusion in paragraph (b)(1) of this section. the time that the organization makes (2) For purposes of selecting a data this section applies. such updates available to users of the source for each MFN Model drug for a (4) Maintenance. No more frequently database. calendar quarter, CMS identifies than quarterly, CMS revises HCPCS (iv) Contains international drug available international drug pricing codes on the MFN Model Drug HCPCS pricing information stated in U.S. information data sources for the MFN Codes List as necessary to reflect currency, such as the following: Model drug, by aligning the MFN Model quarterly HCPCS code updates that are (A) Sales data, which may be based on drug’s HCPCS code long description applicable to the HCPCS codes on the ex-manufacturer prices (sometimes (including dosage form) with the data MFN Model Drug HCPCS Codes List, called ex-factory prices) that represent sources’ standardized method for including adding replacement codes for actual or calculated prices paid to the identifying scientific names or HCPCS codes that were terminated. manufacturer by wholesalers and other nonproprietary names and dosage (b) Exclusions. (1) The following are distributors, or retail prices that formulations, as applicable. excluded from the MFN Model: (b) Non-U.S. member countries of the represent actual or calculated sales for (i) Vaccines specified in section Organisation for Economic Co-operation retail purchasers, or prices paid by other 1861(s)(10) of the Act (influenza, and Development (OECD). (1) CMS uses purchasers in the distribution channels. pneumococcal pneumonia, coronavirus available international sales, volume, (B) Volume data (for example, number disease 2019 (COVID–19), and Hepatitis and pricing data for countries that were of packages or units sold). B vaccines). non-U.S. OECD member countries as of (C) List prices. (ii) Radiopharmaceuticals. October 1, 2020 with a GDP per capita (v) Have mechanisms in place to (iii) Oral anticancer chemotherapeutic that is at least 60 percent of the U.S. maintain, update, and correct, if agents described in section 1861(s)(2)(Q) GDP per capita as determined by CMS necessary, the information on of the Act. in accordance with this paragraph (b). international drug pricing in the data (iv) Oral anti-emetic drugs described (2) Each country’s GDP per capita is source on at least a quarterly basis. in 1861(s)(2)(T) of the Act. assessed using data available at the end (3) For each MFN Model drug for a (v) Oral immunosuppressive drugs of the applicable ASP calendar quarter. calendar quarter, CMS selects a data described in section 1861(s)(2)(J) of the (3) Subject to the limitation specified source using the following hierarchy. Act. in paragraph (b)(4) of this section, the (i) The data source contains sales and (vi) Compounded drugs. GDP per capita for a country is the the volume data for the applicable ASP (vii) Intravenous immune globulin most recent estimate of GDP per capita calendar quarter from at least one products. based on purchasing power parity for country described in paragraph (b) of (viii) Drugs billed with HCPCS codes that country available in the U.S. this section. that describe a drug product that was Central Intelligence Agency (CIA) World (ii) The data source does not have approved under an abbreviated new Factbook. sales and volume data for the applicable drug application under section 505(j) of (4) The country’s GDP per capita and ASP calendar quarter, but contains sales the Federal Food, Drug, and Cosmetic U.S. GDP per capita selected from the and volume data for any prior ASP Act; CIA World Factbook must be for the calendar quarter beginning on or after (ix) Drugs for which there is an same year. October 1, 2019 from at least one Emergency Use Authorization (EUA) (5) CMS identifies countries with a country described in paragraph (b) of from FDA, or FDA approval, to treat GDP per capita that is at least 60 percent this section. If sales and volume data patients with suspected or confirmed of the U.S. GDP per capita by dividing from a prior ASP calendar quarter are COVID–19; or the GDP per capita for a country by the used, CMS uses sales and volume data (x) Drugs billed using a not otherwise U.S. GDP per capita and assessing the from the most recent ASP calendar classified (NOC) or not otherwise results. quarter for which both sales and volume specified (NOS) billing and payment (c) Identification of international data data are available. code. sources. (1) CMS obtains data from one (iii) The extracted data used by CMS (2) The following claims are excluded or more international drug pricing to determine the most recent MFN Price from the determination of whether a information data sources for purposes of used to calculate an MFN Drug Payment drug is to be included on the MFN identifying available international drug Amount posted on the MFN Model Model Drug HCPCS Codes List: pricing information for the countries website.

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(iv) The data source contains ex- International Drug Pricing Data. CMS (2) Calculate the unadjusted country- manufacturer price data for the selects an available international drug level price for the MFN Model drug by applicable ASP calendar quarter from at pricing information data source country. least one country described in described in § 513.140(c) for at least one (i) Using the drug pricing data paragraph (b) of this section. country specified in § 513.140(b) for an extracted and adjusted in accordance (v) The data source contains list price MFN Model drug, and calculates, in with paragraph (b)(1) of this section, data for the applicable ASP calendar advance of each calendar quarter for a CMS calculates the unadjusted country- quarter from at least one country performance year, the applicable MFN level price for the MFN Model drug by described in paragraph (b) of this Drug Payment Amount for one billing country, using the calculation that is section. unit of an MFN Model drug using the applicable. (vi) If there is more than one data following steps: (ii) If an international drug pricing source for an ASP calendar quarter, for (1) Available international drug information data source with sales and each MFN Model drug, CMS selects the pricing data. (i) For the MFN Model volume data is used, the applicable data source at the highest level of the drug, using the data source selected in calculation is as follows: hierarchy that contains information accordance with § 513.140(c)(3) (except (A) CMS sums the adjusted volume from the highest number of countries for a data source described in data (as specified in paragraph (b)(1)(iii) described in paragraph (b) of this § 513.140(c)(3)(iii)), CMS identifies of this section) for the drug. section and, if available, incorporates available international drug pricing data (B) CMS sums the total sales for the discounts and rebates into its drug for the MFN Model drug, by aligning the drug (that remain after performing the pricing information, and uses this data MFN Model drug’s HCPCS code long exclusions in paragraph (b)(1)(ii) of this source to calculate the MFN Price as description (including dosage form) section). described in § 513.210(b). with the data sources’ standardized (C) CMS divides the sum determined method for identifying scientific names in paragraph (b)(2)(ii)(B) of the section Subpart C—Payment Process and or nonproprietary names and dosage by the sum determined in paragraph Methodology formulations, as applicable. CMS (b)(2)(ii)(A) of this section, resulting in extracts available drug pricing data for an average price per unit of drug, where § 513.200 Payment process and the unit of drug is the same as the beneficiary cost-sharing. the countries specified in § 513.140(b) from the selected international drug HCPCS code billing unit. (a) General. For purposes of the MFN pricing information data source. CMS (iii) If an international drug pricing Model, the allowed MFN Drug Payment uses the extracted data that have information data source with ex- Amount does not exceed the billed complete package size information and manufacturer or list prices is used, the amount on the claim for the MFN Model only for dosage formulations that could applicable calculation is as follows: drug. (A) For each extracted ex- be described by the MFN Model drug’s (b) Model-specific billing instructions. manufacturer or list price, CMS HCPCS code descriptor, as determined MFN participants submit claims for calculates the number of HCPCS billing by CMS. If a data source described in MFN Model drugs to the applicable units in the package by dividing the § 513.140(c)(3)(iii) is selected, CMS uses MAC in the form and manner specified amount of drug in the package by the such extracted data. by CMS in model-specific billing amount of drug represented in one (ii) When international drug pricing instructions. HCPCS billing unit. (c) Beneficiary cost-sharing. data with sales and volume data are (B) CMS divides the ex-manufacturer Beneficiary coinsurance does not apply available, CMS excludes from the or list price, as applicable, by the to the portion of the allowed payment calculation of the unadjusted country- number of HCPCS billing units in the amount for an MFN Model drug that is level price under paragraph (b)(2) of this package, resulting in a price per unit of determined under § 513.220. section international drug pricing data drug where the unit of drug is the same without both sales and volume data, as the HCPCS code billing unit. § 513.210 Model payment methodology for with less than $1,000 in quarterly sales (C) CMS sums the price per unit of MFN Model drugs. (expressed as U.S. currency), or with drug calculated in paragraph (a) Payment amount. The total less than 1,000 units in quarterly (c)(3)(iii)(B) of this section. allowed payment amount for an MFN volume. (D) CMS divides the sum calculated Model drug furnished to an MFN (iii) CMS converts the extracted in paragraph (c)(3)(iii)(C) of this section beneficiary by an MFN participant on a volume data to the MFN Model drug’s by the number of ex-manufacturer or list given date of service within a calendar HCPCS code billing unit level, as prices that were summed in paragraph quarter is determined in accordance applicable. (c)(3)(iii)(C) of this section, resulting in with this section. The total allowed (iv) CMS adjusts the extracted volume an average price per unit of drug where payment equals— data, as applicable, before converting the unit of drug is the same as the (1) For each billing unit in the HCPCS the extracted volume data to the MFN HCPCS code billing unit. code descriptor of the MFN Model drug, Model drug’s HCPCS code billing unit (iv) CMS performs the applicable the MFN Drug Payment Amount level when the data source shows the calculation for each country specified in determined in accordance with package size of a drug product that is § 513.140(b) for which international paragraphs (b), (c) and (d) of this inconsistent with the manufacturer’s drug pricing information is available in section, as applicable, where the information about that product, as the selected data source. allowed MFN Drug Payment Amount determined by CMS. (3) Calculate the GDP adjuster for does not exceed the billed amount on (v) CMS limits the number of HCPCS each country. (i) CMS calculates the the claim for the MFN Model drug as code billing units when— GDP adjuster by dividing the country’s described in § 513.200(a); and (A) The package labeling indicates a GDP per capita by the U.S. GDP per (2) The alternative add-on payment limited amount of drug is to be used capita for the same year. determined under § 513.220. from the package; and (ii) In cases where the resulting ratio (b) Calculation of the MFN Drug (B) The HCPCS code dosage is per exceeds 1.0, the GDP adjuster is set to Payment Amount with Available dose. 1.0.

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(iii) Subject to the limitations to the applicable ASP and the MFN MFN Price by 5 percentage points at the specified in paragraph (b)(3)(iv) of this Price. Subject to any applicable next quarterly update to calculate the section, the GDP per capita for a country adjustments as provided in paragraph MFN Drug Payment Amount for the is the most recent estimate of GDP per (d) of this section, the amount MFN Model drug where both of the capita based on purchasing power parity determined in this paragraph is the following conditions are met: for that country available in the CIA MFN Drug Payment Amount. (A) There is a greater cumulative World Factbook at the end of the (ii) Subject to the limitation in percentage increase in either the applicable ASP calendar quarter. paragraph (b)(iii) in this section, CMS applicable ASP or any of the monthly (iv) Limitations. (A) The country’s recalculates the MFN Drug Payment U.S. list prices for the NDCs assigned to GDP per capita and U.S. GDP per capita Amounts for prior quarters when the MFN Model drug’s HCPCS code must be for the same year. revised international drug pricing compared to the cumulative percentage (B) The GDP per capita used must be information is available in the data increase in the CPI–U. for the same year as the data used to source that was used to calculate the (B) There is a greater cumulative calculate the unadjusted country-level MFN Price and applicable ASP updates percentage increase in either the price, if available, or the most recent are available from CMS. CMS applicable ASP or any of the monthly earlier year available. prospectively applies the recalculations U.S. list prices for the NDCs assigned to (4) Apply the GDP adjuster to in the quarterly update following the the MFN Model drug’s HCPCS code calculate the GDP-adjusted country- availability of revised international drug compared to the cumulative percentage level price. CMS applies the applicable pricing information and ASP updates. increase in the MFN Price. GDP adjuster identified in paragraph (iii) MFN Drug Payment Amounts (C) For purposes of paragraphs (b)(3) of this section to each unadjusted may be recalculated for the prior four (d)(3)(i)(A) and (B) of this section, the country-level price identified in calendar quarters of the model. cumulative percentage increase means paragraph (b)(2) of this section to (c) Frequency of MFN Drug Payment the cumulative percentage change from calculate the GDP-adjusted country- Amount updates. CMS updates the the end of the baseline to the end of the level price by dividing each unadjusted MFN Drug Payment Amounts on a applicable ASP calendar quarter. country-level price by the applicable calendar quarter basis. CMS publishes (D) The baseline in paragraph GDP adjuster. the quarterly MFN Drug Payment (d)(3)(i)(C) of this section for an MFN (5) Identify the lowest GDP-adjusted Amounts on the MFN Model website in Model drug is the ASP calendar quarter country-level price. CMS identifies the advance of the calendar quarter in for the applicable ASP for the first lowest GDP-adjusted country-level price which the MFN Drug Payment Amounts quarter of performance year 1. If there for the MFN Model drug. Except as apply, along with any recalculated MFN is not an applicable ASP for the first provided in paragraph (b)(7) of this Drug Payment Amounts for prior quarter of performance year 1 for an section, the price identified is the MFN quarters. MFN Model drug, the baseline for that Model drug’s MFN Price. (d) Exceptions. (1) Payment for MFN MFN Model drug is the ASP calendar (6) Identify Applicable ASP. CMS Model drugs for which no international quarter for the first applicable ASP identifies the applicable ASP for the drug pricing data are available. If, as of based on the manufacturer’s average applicable quarter. the first calendar quarter during which sales price for that MFN Model drug (7) Compare the MFN Price to the an MFN Model drug has been included that occurs after the ASP calendar applicable ASP. CMS compares the in the MFN Model Drug HCPCS Codes quarter for the applicable ASP for the price determined in paragraph (b)(5) of List in accordance with § 513.130, no first quarter of performance year 1. this section to the applicable ASP international sales, volume or pricing (ii) For purposes of paragraph (d)(3)(i) identified in paragraph (b)(6) of this information meeting the requirements of this section, if the cumulative section. The MFN Price equals the described in § 513.140(c)—including percentage increase in CPI–U or MFN applicable ASP if the applicable ASP is data used by CMS to determine the most Price is negative, CMS uses zero as the less than the price determined in recent MFN Price used to calculate an cumulative percentage increase in paragraph (b)(5) of this section. MFN Drug Payment Amount posted on CPI–U or MFN Price, as applicable. (8) Phase-in. CMS identifies the the MFN Model website—is available (iii) The application of an acceleration applicable phase-in formula based on from any country described in of the phase-in formula continues for the applicable performance year as § 513.120(b) for any calendar quarter the duration of the model performance follows: beginning on or after October 1, 2019 period. (i) Performance year 1: 75 percent through the applicable quarter, the MFN (iv) CMS applies an additional applicable ASP and 25 percent MFN Drug Payment Amount is the applicable acceleration of the phase-in formula for Price. ASP. each calendar quarter where the (ii) Performance year 2: 50 percent (2) Payment for MFN Model drugs conditions specified in paragraph (i) are applicable ASP and 50 percent MFN that are in short supply. If an MFN met. Price. Model drug is reported as ‘‘Currently in (4) Adjustment for rapid increases in (iii) Performance year 3: 25 percent Shortage’’ by FDA, beginning with the the applicable ASP or any monthly U.S. applicable ASP and 75 percent MFN first day of the next calendar quarter list prices beyond inflation and MFN Price. after the date on which it is reported in Price after the full phase-in of the MFN (iv) Performance year 4: 100 percent shortage, the MFN Drug Payment Price. If the conditions described in MFN Price. Amount is the applicable ASP. CMS paragraphs (d)(3)(i)(A) and (B) of this (v) Performance year 5: 100 percent calculates payment in accordance with section are met after the full phase-in of MFN Price. paragraph (b) of this section as of the the MFN Price for an MFN Model drug, (vi) Performance year 6: 100 percent first day of the calendar quarter after the for each calendar quarter thereafter, MFN Price. date upon which the drug is no longer CMS decreases the MFN Drug Payment (vii) Performance year 7: 100 percent reported as ‘‘Currently in Shortage’’ by Amount equal to largest difference in MFN Price. FDA. the cumulative percentage increase in (9) Final calculation steps. (i) CMS (3) Adjustment to phase-in formula. the applicable ASP or any of the applies the applicable phase-in formula (i) CMS accelerates the phase-in of the monthly U.S. list prices for the NDCs

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assigned to the MFN Model drug’s (3) CMS multiplies the number of form and manner and with the content HCPCS code compared to the units billed for each claim line specified by CMS, including without cumulative percentage increase in the described in paragraph (b)(1) of this limitation the requirements of this CPI–U and in the MFN Price, section by 6.1224 percent of the paragraph (b). respectively, determined quarterly. applicable ASP identified in paragraph (1) Timing and form of request. The (5) Limitation on MFN Drug Payment (b)(2) of this section for the HCPCS code MFN participant must submit its request Amount. The MFN Drug Payment on the claim line and date of service. for a financial hardship exemption to Amount cannot exceed the non-model (4) CMS sums the products calculated CMS in accordance the submission drug payment amount for claim lines in paragraph (b)(3) of this section for all process posted on the MFN Model submitted with the JG modifier (or any claim lines for each MFN Model drug to website and such request must be successor modifier used to identify calculate the total add-on spending submitted within 60 calendar days drugs purchased under the 340B amount for each MFN Model drug. following the end of the performance program) after removing any add-on (5) CMS sums the amounts calculated year for which the MFN participant amount, if applicable. in paragraph (b)(4) of this section to seeks a financial hardship exemption. (e) Blood clotting factor furnishing calculate the total pooled add-on (2) Request content. The MFN fee. When applicable, the blood clotting spending amount for all MFN Model participant’s request a financial furnishing fee under § 410.63(c) of this drugs. hardship exemption must include, at a chapter is payable along with the MFN (6) CMS divides the amount minimum, all of the following: (i) Evidence of methods used to obtain Drug Payment Amount. calculated in paragraph (b)(5) of this section by the total number of claim each MFN Model drug that was § 513.220 Model alternative add-on lines retained in paragraph (b)(1) of this furnished by the MFN participant payment. section, excluding claim lines billed during the performance year to any (a) Payment amount. (1) The total with the JW modifier. patient. allowed alternative add-on payment (7) CMS trends the amount calculated (ii) Average net acquisition cost for amount for a separately payable dose of in paragraph (b)(6) of this section each MFN Model drug (inclusive of all an MFN Model drug furnished to an forward to the applicable ASP calendar on- and off-invoice discounts or MFN beneficiary by an MFN participant quarter for quarter 1 of performance year adjustments, and any other price on a given date of service within a 1 using the percentage change in CPI– concessions related to the purchase of calendar quarter is determined in U from July 2019 through October 2020. the MFN Model drug) that was accordance with this section. (c) Frequency of alternative add-on furnished by the MFN participant (2) The total allowed alternative add- payment amount updates. For each during the performance year to MFN on payment amount for a claim line calendar quarter after quarter 1 of beneficiaries. (iii) Average net acquisition cost for does not exceed the billed amount on performance year 1, CMS updates the each MFN Model drug (inclusive of all that claim line. alternative add-on payment by applying on- and off-invoice discounts and (b) Calculation of the per-dose a cumulative inflation factor based on adjustments, and any other price alternative add-on payment amount. the cumulative percentage change in concessions related to the purchase of CMS calculates the per-dose alternative CPI–U from October 2020 through the the MFN Model drug) that was add-on payment for performance year 1, first month of the prior calendar quarter. furnished by the MFN participant quarter 1 for MFN Model drugs using If the cumulative percentage change in during the performance year to patients the following steps: the CPI–U is negative, CMS uses an inflation factor of 1. who were not MFN beneficiaries. (1) CMS identifies available Medicare (iv) Statement of any remuneration Part B fee-for-service final action claims (d) Limitation on the alternative add- on payment. The alternate add-on received by the MFN participant from lines, with dates of service in 2019, for manufacturers of MFN Model drugs, drugs on the initial MFN Model HCPCS payment is not payable for claim lines billed— wholesalers, and distributors that is not Codes List described in § 513.130(a)(1), reflected in the MFN participant’s excluding claims for providers and (1) With the JW modifier; or (2) By MFN participants that receive average net acquisition costs with a suppliers specified in § 513.100(c), and an alternative add-on payment for an justification of why such remuneration claims specified in § 513.100(d), that MFN Model drug under any other should not be treated as a price were furnished by Medicare- model authorized by section 1115A of concession related to the purchase of an participating providers and suppliers, the Act that tests an alternative MFN Model drug. have a separately paid allowed charge approach to the add-on portion of (v) Administrative information, greater than $0, and for which Medicare payment for Medicare Part B drugs. including: MFN participant’s name, TIN Part B was the primary payer. If a or CCN (as applicable), contact name, HCPCS code on the initial MFN Model § 513.230 Financial hardship exemptions, phone number, and email address. HCPCS Codes List was not in use during request process, and reconciliation (vi) The MFN participant’s attestation any calendar quarter in 2019, CMS uses payment. that: the HCPCS code that was applicable for (a) General. For purposes of the MFN (A) The MFN participant experienced the MFN Model drug during 2019. Model, a financial hardship exemption a reduction in Medicare Part B FFS (2) CMS identifies the applicable ASP for a performance year may be granted payments for separately payable drugs for each calendar quarter of 2019 for the to an MFN participant by CMS, in its on a per beneficiary basis during the drugs (by HCPCS code as specified in sole discretion and not subject to performance year as compared to the paragraph (b)(1) of this section) appeal, when the provisions in this prior year (that is, the four calendar included on the initial MFN Model section are met. quarters immediately preceding the HCPCS Codes List. In the case of a (b) Request for financial hardship performance year) due to its inability to biosimilar biological product, the exemption. To be eligible for a financial obtain one or more of the MFN Model applicable ASP for the reference hardship exemption, the MFN drugs at or below the MFN Model biological product is identified and used participant must submit a request for Payments for such drugs during the in paragraph (b)(3) of this section. financial hardship exemption in the performance year;

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(B) The MFN participant has not separately payable Medicare Part B calculated in paragraph (d)(5) of this received and will not receive any drugs, and the total number of section) from the difference calculated remuneration from manufacturers of beneficiaries that had at least one claim in paragraph (d)(4) of this section, to MFN Model drugs, wholesalers, and for a service furnished by the MFN calculate the MFN participant’s excess distributors related to the purchase of an participant with a Medicare Part A or reduction amount per beneficiary. MFN Model drug that was furnished by Medicare Part B allowed charge greater (e) Reconciliation payment. (1) If CMS the MFN participant during the than $0. in its sole discretion grants a financial performance year that is not reflected in (2) CMS divides the MFN hardship exemption to an MFN the MFN participant’s submission; and participant’s total allowed charges for participant for a performance year, CMS (C) The MFN participant submission separately payable Medicare Part B provides such MFN participant a is true, accurate and complete. drugs for dates of service within the reconciliation payment for the (c) Standard of review. (1) Incomplete performance year by the total number of performance year that equals the requests for a financial hardship beneficiaries that had at least one claim amount calculated by multiplying the exemption, as determined by CMS, are for a service furnished by the MFN excess reduction amount per beneficiary not reviewed. participant with a Medicare Part A or specified in paragraph (d)(6) of this (2) CMS grants a financial hardship Medicare Part B allowed charge greater section by the total number of exemption to an MFN participant for a than $0 with a service date within the beneficiaries that had at least one claim performance year, if the agency in its performance year, to calculate the MFN for a service furnished by the MFN sole discretion determines the following participant’s average per beneficiary participant with a Medicare Part A or requirements have been met: total allowed charges for separately Medicare Part B allowed charge greater (i) The MFN participant submits a payable Medicare Part B drugs for the than $0 with a service date within the timely, complete request for financial performance year. performance year. hardship exemption in accordance with (3) CMS divides the MFN (2) The amount of a reconciliation the requirements of this section which participant’s total allowed charges for payment provided in accordance with separately payable Medicare Part B in the sole discretion of CMS this section is— drugs for dates of service within the demonstrates all of the following: (i) Not subject to appeal; (A) The MFN participant exhausted prior year by the total number of all reasonable methods to obtain MFN beneficiaries that had at least one claim (ii) Not subject to beneficiary cost- Model drugs at or below the MFN for a service furnished by the MFN sharing, including any deductible or Model Payment for such drugs during participant with a Medicare Part A or coinsurance; and the performance year. Medicare Part B allowed charge greater (iii) Made by CMS (or a CMS (B) The MFN participant’s average net than $0 with a service date within the contractor) as soon as practical. acquisition cost for each MFN Model prior year, to calculate the MFN Subpart D—[Reserved] drug (including invoices and off-invoice participant’s average per beneficiary discounts or adjustments) that was total allowed charges for separately Subpart E—Quality Strategy, furnished by the MFN participant payable Medicare Part B drugs for the Beneficiary Protections, and prior year. during the performance year to patients Compliance Activities who were not MFN beneficiaries was (4) CMS subtracts the MFN not less than the MFN participant’s participant’s average per beneficiary § 513.400 Quality measures. average net acquisition costs for such total allowed charges for separately (a) General. Quality measures do not payable Medicare Part B drugs for the MFN Model drug (including invoices adjust model payments to MFN performance year (as calculated in and off-invoice discounts or participants and are used for monitoring paragraph (d)(2) of this section) from the adjustments) that was furnished by the purposes. MFN participant’s average per MFN participant during the (b) Collection of quality measures. (1) beneficiary total allowed charges for performance year to MFN beneficiaries. CMS administers a patient experience separately payable Medicare Part B (C) Any remuneration the MFN survey to a sample of beneficiaries who drugs for the prior year (as calculated in participant received from manufacturers receive an MFN Model drug. A sample of MFN Model drugs, wholesalers, and paragraph (d)(3) of this section). (5) CMS calculates 25 percent of the of non-MFN beneficiaries may also be distributors that was not reflected in the surveyed. MFN participant’s average net MFN participant’s total allowed charges (2) If during the MFN Model CMS acquisition costs was not a price for all Medicare Part A and Part B determines that the quality measures concession related to the purchase of an claims with dates of service within the specified in paragraph (b) of this section MFN Model drug. prior year and divides that amount by (ii) The MFN participant’s excess the total number of beneficiaries that are not sufficient to adequately monitor reduction amount per beneficiary (as had at least one claim for a service the quality of care that MFN determined in paragraph (d)(6) of this furnished by the MFN participant with beneficiaries are receiving from MFN section), is greater than zero. a Medicare Part A or Medicare Part B participants or that MFN participants (d) Excess reduction amount per allowed charge greater than $0 with a are providing, CMS may specify beneficiary. CMS calculates the MFN service date within the prior year, to additional measures. CMS applies the participant’s excess reduction amount calculate 25 percent of the MFN following criteria when specifying per beneficiary using available final participant’s average per beneficiary additional quality measures: action claims data where Medicare was total allowed charges for all Medicare (i) Additional measures are among the primary payer that is estimated to be Part A and Part B claims with dates of one or more of the following categories: more than 90 percent complete in service within the prior year. (A) Patient experience of care. accordance with the following steps: (6) CMS subtracts 25 percent of the (B) Patient activation (1) CMS calculates, separately for MFN participant’s average per (C) Shared decision making. dates of service within the performance beneficiary total allowed charges for all (D) Adherence. year and prior year, the MFN Medicare Part A and Part B claims with (E) Utilization. participant’s total allowed charges for dates of service within the prior year (as (F) Process measures.

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(ii) Additional measures will not add response to potential issues. Such § 513.430 Audits and record retention. significant burden to MFN participants monitoring activities may include, (a) Right to audit. The Federal or beneficiaries. without limitation, the following: Government, including CMS, HHS, and (iii) Additional measures utilize an (i) Documentation requests sent to the the Comptroller General, or their instrument that CMS has used MFN participant including, without designees, has the right to audit, previously in a model to adjust payment limitation, surveys and questionnaires. inspect, investigate, and evaluate any or for monitoring or evaluation. (ii) Audits of claims data, medical documents and other evidence records, and other data from the MFN § 513.410 Beneficiary protections. regarding implementation of the MFN participant. Model. (a) Beneficiary choice. (iii) Interviews with any individual or (b) Access to records. MFN (1) MFN participants must not restrict entity participating in the MFN Model participants must maintain and give the beneficiaries’ ability to choose to receive including members of the MFN Federal Government, including CMS, care from any Medicare participating participant’s leadership, management, HHS, and the Comptroller General, or provider or supplier or any provider or and staff. their designees, access to all such supplier who has opted out of Medicare. (iv) Interviews with beneficiaries and documents and other evidence (2) The MFN participant must not their caregivers. sufficient to enable the audit, commit any act or omission, nor adopt (v) Site visits to the MFN participants, evaluation, inspection, or investigation any policy that inhibits a beneficiary performed in a manner consistent with of the implementation of the MFN from exercising his or her freedom to § 513.420(c). Model, including without limitation, choose to receive care from any (vi) Tracking patient complaints and documents and other evidence Medicare participating provider or appeals. regarding the following: supplier or any provider or supplier (2) In conducting monitoring and (1) The MFN participant’s compliance who has opted out of Medicare. oversight activities, CMS or its with the terms of the MFN Model, Notwithstanding the foregoing, MFN designees may use any relevant data or including this subpart. participants may communicate to information including without beneficiaries the benefits of receiving limitation, all Medicare claims (2) Quality measure information and care from an MFN participant, if submitted for items or services the quality of services performed under otherwise consistent with the furnished to beneficiaries in the MFN the terms of the MFN Model, including requirements of this part and applicable Model. this subpart. law. (3) The MFN participant must (3) Patient safety. (b) Appeals. An MFN beneficiary and cooperate with evaluation and (4) The accuracy of model-specific his or her assignees retain their right to monitoring activities as may be payments made under the MFN Model. appeal claims in accordance with part necessary to enable CMS to evaluate the (5) Utilization of items and services 405 subpart I of this chapter. MFN Model in accordance with section furnished under the MFN Model. (c) Availability of services. MFN 1115A(b)(4) of the Act and to conduct (6) Other program integrity issues. participants must not take any action to monitoring activities under this section. (c) Record retention. The MFN select or avoid treating beneficiaries (c) Site visits. (1) To the extent participant must maintain the based on their diagnoses, care needs, practicable, CMS or its designee documents and other evidence income levels or other factors that provides the MFN participant with no described in paragraph (b) of this would render the beneficiary an ‘‘at-risk less than 15 days advance notice of any section and other evidence for a period beneficiary’’ as defined at § 425.20 of site visit. To the extent practicable, CMS of 6 years from the last payment this chapter. attempts to accommodate a request for received by the MFN participant under particular dates in scheduling site visits. the MFN Model or from the date of § 513.420 Monitoring and compliance However, the MFN participant may not completion of any audit, evaluation, activities. request a date that is more than 60 days inspection, or investigation, whichever (a) Compliance with laws. (1) after the date of the initial site visit is later, unless— Agreement to comply. The MFN notice from CMS. (1) CMS determines there is a special participant must comply with all (2) The MFN participant must ensure need to retain a particular record or applicable laws and regulations. that personnel with the appropriate group of records for a longer period and (2) Notification. The MFN participant responsibilities and knowledge notifies the MFN participant at least 30 must notify CMS within 15 days after associated with the purpose of the site days before the normal disposition date; becoming aware that the MFN visit are available during all site visits. or participant is under investigation or has (3) Notwithstanding the foregoing, (2) There has been a termination, been sanctioned by the federal, state, or CMS may perform unannounced site dispute, or allegation of fraud or similar local government, or any licensing visits at all physical locations of the fault against the MFN participant, in authority (including, without limitation, MFN participant at any time to which case the records must be the imposition of program exclusion, investigate concerns about the health or maintained for an additional 6 years debarment, civil monetary penalties, safety of beneficiaries or other patients from the date of any resulting final corrective action plans, and revocation or other program integrity issues. resolution of the termination, dispute, of Medicare billing privileges). (4) Nothing in this part must be or allegation of fraud or similar fault. (b) CMS monitoring and compliance construed to limit or otherwise prevent activities. (1) CMS conducts monitoring CMS from performing site visits § 513.440 Enforcement authority. activities to ensure compliance by MFN permitted or required by applicable law. (a) Remedial action—(1) Grounds for participants with the terms of the MFN (d) Right to correct. If CMS discovers remedial action. In addition to any other Model, to obtain timely information that it has made or received an incorrect grounds for remedial action that are about the effects of the MFN Model on model-specific payment under the terms permitted under the terms of this part, MFN beneficiaries, providers, suppliers, of the MFN Model, CMS may make CMS may take one or more of the and on the Medicare program and to payment to, or demand payment from, remedial actions set forth in paragraph facilitate real time identification and the MFN participant. (a)(2) of this section if CMS determines,

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in CMS’ sole discretion, that an MFN action plan in a form and manner and Subpart F—Waivers participant: by a deadline specified by CMS. (i) Has failed to comply with any § 513.500 Waivers of Medicare program (iv) Subjecting the MFN participant to requirements for purposes of testing the applicable Medicare program additional monitoring, auditing, or both. requirement, rule, or regulation. MFN Model. (ii) Has failed to comply with any of (v) Removing the MFN participant CMS waives the Medicare program the terms of the MFN Model, including from the MFN Model. requirements in the following applicable requirements of this part. (vi) Recouping model-specific provisions that are necessary solely for (iii) Has systematically engaged in the payments. purposes of testing the MFN Model: under delivery or over delivery of an (a) Sections 1833(t)(6) and 1833(t)(14) (vii) Other action as may be permitted MFN Model drug. of the Act and §§ 419.62 and 419.64 of (iv) Has taken any action that under the terms of this part. this chapter related to Medicare threatens the health or safety of an MFN (b) OIG authority. Nothing contained payment amounts for drugs and beneficiary or other patient. in the terms of the MFN Model or this biologicals under the hospital outpatient (v) Has undergone a change of control part limits or restricts the authority of prospective payment system (OPPS) as that presents a program integrity risk. the HHS Office of Inspector General or necessary to permit testing of an (vi) Has submitted false data or made any other Federal Government authority alternative payment amount for MFN false representations, warranties, or agency, including its authority to Model drugs. certifications or attestations in audit, evaluate, investigate, or inspect (b) Section 1833(i)(2)(D) of the Act connection with any aspect of the MFN model participant for violations of any related to Medicare payment to ASCs for Model. statutes, rules, or regulations drugs and biologicals as necessary to (vii) Has avoided at-risk beneficiaries, administered by the Federal permit testing of an alternative payment as this term is defined in § 425.20 of this Government. amount for MFN Model drugs. chapter. (c) Sections 1847A(b) and 1847A(c) of (viii) Has avoided patients on the § 513.450 Limitations on review. the Act and §§ 414.904 and 414.802 of basis of payer status. There is no administrative or judicial this chapter related to use of the ASP- (ix) Is subject to sanctions or final review under sections 1869 or 1878 of based, WAC-based, or other applicable actions of an accrediting organization or the Act or otherwise for any of the payment methodology and calculation Federal, State, or local government following: of manufacturers’ ASP as necessary to agency. permit testing of an alternative payment (x) Takes any action that CMS (a) The selection of models for testing or expansion under section 1115A of the for MFN Model drugs and to exclude determines for program integrity reasons certain units of MFN Model drugs from is not in the best interests of the MFN Act. manufacturers’ ASPs. Model or the Medicare program, or fails (b) The selection of organizations, (d) Section 1833(a)(1) of the Act to take any action that CMS determines sites, or participants, including MFN related to Medicare payment portion of for program integrity reasons should participants, to test the MFN Model, the allowed payment amount for an have been taken to further the best including a decision by CMS to remove included MFN Model drug that is interests of the MFN Model or Medicare an MFN participant from the MFN determined under § 513.220 as program. Model. necessary to permit testing of an (xi) Is subject to investigation by HHS innovative payment approach for the (including the HHS Office of Inspector (c) The elements, parameters, scope, General (OIG)) or the Department of and duration of such MFN Model for alternative add-on payment amount. (e) Section 1833(a)(1)(S) of the Act Justice due to an allegation of fraud or testing or dissemination, including related to Medicare payment for drugs significant misconduct, including being without limitation all of the following: and biologicals is 80 percent of the subject to the filing of a complaint, (1) The selection of the model lesser of the actual charge or the filing of a criminal charge, being subject geographic area for the MFN Model by payment amount established in section to an indictment, being named as a CMS. defendant in a False Claims Act qui tam 1842(o) of the Act as necessary to permit (2) The selection of MFN Model drugs testing of an innovative payment matter in which the Federal by CMS. Government has intervened, or similar approach for the total allowable MFN action; (3) The selection of included Model payment as determined under (xii) Is the subject of administration international data, including selection subpart C. enforcement action imposed by CMS; or of countries, international drug pricing (f) Section 1833(a)(1)(G) of the Act (xiii) Has failed to demonstrate databases, and international drug related to the amounts paid with respect improved performance following any pricing data. to facility services furnished in remedial action imposed under this (d) Determinations regarding budget connection with certain surgical section. neutrality under section 1115A(b)(3) of procedures and with respect to services (2) Taking remedial actions. If CMS the Act. furnished to an individual in an ASC determines that one or more grounds for must be 80 percent of the lesser of the (e) The termination or modification of remedial action described in paragraph actual charge for the services or the the design and implementation of an (a)(1) of this section exist, CMS make amount determined by the Secretary MFN Model under section take one or more of the following under such revised payment system as 1115A(b)(3)(B) of the Act. remedial actions: necessary to permit testing of an (i) Notifying the MFN participant of (f) Determinations about expansion of innovative payment approach for the the violation. the duration and scope of the MFN total allowable MFN Model payment as (ii) Requiring the MFN participant to Model under section 1115A(c) of the determined under subpart C. provide additional information to CMS Act, including the determination that (g) Section 1833(t) of the Act related or its designees. the MFN Model is not expected to meet to how beneficiary copayment is (iii) Requiring the MFN participant to criteria described in paragraphs (c)(1) or calculated under the OPPS as necessary develop and implement a corrective (2) of such section. to permit testing of an innovative

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payment approach for the total Subparts G through J—[Reserved] the model in accordance with section allowable MFN Model payment as 1115A(b)(3)(B) of the Act is not subject determined under subpart C of this part. Subpart K—Model Termination to administrative or judicial review. (h) Section 1833(t)(9)(B) of the Act § 513.1000 Termination of the MFN Model. Dated: November 18, 2020. related to the requirement that Medicare (a) CMS may terminate the MFN Seema Verma, account for adjustments to ensure that Model for reasons including, but not Administrator, Centers for Medicare & the amount of expenditures under the limited to, the following: Medicaid Services. OPPS for the year does not increase or (1) CMS determines that it no longer Dated: November 18, 2020. decrease from the estimated amount of has the funds to support the MFN Alex M. Azar II, expenditures under the OPPS that Model. would have been made if the (2) CMS terminates the model in Secretary, Department of Health and Human Services. adjustments had not been made. accordance with section 1115A(b)(3)(B) of the Act. [FR Doc. 2020–26037 Filed 11–20–20; 4:15 pm] (b) As specified in section BILLING CODE 4120–01–P 1115A(d)(2) of the Act, termination of

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