Medicaid Drug Cap

Frequently Asked Questions – #4

  • FAQs also available in Portable Document Format (PDF)

INDEX

General Questions
Questions on Information Presented in 8/31/17 Webinar (Slide 6)
Statutory Provision Questions (§ 280 PHL)


General Questions

Q1. How does the new law interact with the state´s existing Magellan National Medicaid Pooling Initiative (NMPI) pool? And existing supplemental rebate contracts?

The Department considered rebates realized through the NMPI and other supplemental contracts when identifying drugs for possible Drug Utilization Review Board (DURB) referral. The Department will evaluate existing NMPI or new rebate offers as part of the negotiation process with manufacturers.

Q2. Can the state provide the aggregate amount of drug rebates, including supplemental rebates, in 2016 for both fee–for–service and managed care?

The State is using cash collections to calculate drug rebate amounts for the Medicaid Drug Cap. As reflected on Slide 6 of the August 31st Webinar PowerPoint, this includes all 2016 rebates, including those received via the Federal Rebate Program for Managed Care and Fee for Service (FFS) and FFS supplemental rebates.

Q3. According to the Frequently Asked Questions (FAQ) #1, brand drugs are evaluated based solely on cost information and the state is not evaluating offsets in other areas of medical spending from patient adherence to a treatment plan that may include prescription drugs. How is the state ensuring that any changes made under the Medicaid Drug Cap do not result in higher spending in other areas of Medicaid?

The evaluation of whether a drug will reduce the need for other medical care, including hospitalization, will be done via the DURB review process, if and when a drug is referred to the DURB, pursuant to PHL §280(5)(e). Further, reductions in medical spending, reflected as savings within the Global Medicaid cap, will be considered in the financial calculations to implement more aggressive tools to address pharmaceutical spending to achieve financial targets.

Q4. If Medicaid spending does not exceed the spending cap as projected, will the state refund supplemental rebates negotiated under this law to drug manufacturers?

Supplemental rebates will be pursued and assessed quarterly as long as total Medicaid drug expenditures are projected to exceed annual growth limitation of the Medicaid Drug Cap. The State will not provide refunds to drug manufacturers for previously collected supplemental rebates.

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Questions on Information Presented in 8/31/17 Webinar (Slide 6)

Q5. Why are expenses related to the HARP program projected to increase by over 55 percent from SFY17 to SFY18?

The over 55 percent projected increase in the HARP program is directly related to enrollment growth in the program. HARP enrollment has been effective since 10/1/15 in NYC, and 7/1/16 in Rest of State.

Q6. In the second footnote, the Per Member Per Month (PMPM) premium is referenced as part of the SFY18 drug spending calculation number. Is that the projected premium growth related to prescription drugs, or is it for overall premium growth?

The PMPM premium referenced as part of the SFY 17–18 Drug Cap calculation is the projected premium growth for only the pharmacy component of the premium.

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Statutory Provision Questions (§280 PHL)

Q7. What data sources and methods will be used to determine the Medicaid drug spending amount that serves as the base (i.e., the amount to which the 10–year rolling average of medical component of consumer price index plus 5 percent is applied) for calculating the "year to year...state funds Medicaid drug spending growth target" for SFY2018?

Data used to determine the Medicaid Drug Cap can be found in the August 31, 2017 Webinar PowerPoint presentation on Slide 6. The slide presentation is available on the DOH web–site posted here.

Will gross spending for drugs reflect amounts reported through the Drug Data Reporting for Medicaid (DDR) system for national rebate agreement purposes?

No, gross spending for drugs will not reflect amounts reported through the DDR system for Managed Care because Managed Care spending is based on the pharmacy portion of Managed Care capitation premiums paid. Gross spending for Managed Care reflected in the DDR system is based on the amount paid, as reported by plans for encounters that tie Medicaid Drug Rebate Program invoices.

If other data sources are used for gross spending, what additional Medicaid drug spending amounts will they reflect? For example, will they include 340B drugs for Medicaid enrollees?

As indicated in the answer to the question above, the data source used to determine Managed Care spending is the pharmacy portion of the Managed Care capitation premiums paid. The FFS data source is paid claims, and therefore, includes 340B reported claims.

Will rebates reflect the amounts reported by the state to CMS on CMS–64 submissions?

In general, yes. The CMS–64 is sourced out of the drug rebate accounting system, while the rebates used for modeling in this initiative have come from cash collected by the Financial Management Group (FMG). The accounting group makes every effort to process all batches received by FMG; missing or incomplete supporting documentation could delay their work, causing a difference in totals between these sources.

If other data sources are used for rebates, will they reflect supplemental amounts separately negotiated between manufacturers and Managed Care Organizations (MCOs)?

Supplemental rebate amounts negotiated between manufacturers and MCOs are reflected in the Per Member Per Month (PMPM) premiums paid to managed care plans. The Department of Health surveys MCOs regarding supplemental rebate amounts to validate premium assumptions.

Will the medical component of consumer price index reflect calendar year values published by the Bureau of Labor Statistics, or will state fiscal years be calculated from the monthly values that are published?

The State fiscal years are calculated from the monthly data values that are published.

Since there is a lag in the availability of consumer price index data, at what point in time will the 10–year rolling average be determined? For example, will the growth target for SFY2018 reflect the medical component of consumer price index average for 2007 - 2016, the most recent 10–year period with complete data prior to the start of the state fiscal year?

Yes, the 10–year period is calculated on a year lag to reflect actual data and is updated each year.

Q8. The new law limits year–to–year spending growth to the 10–year rolling average of medical component of the consumer price index plus 5 percent in SFY2017–2018 and 4 percent in SFY2018–2019. Does the Department interpret "percent" to mean percentage or percentage points?

Percent means percentage points (e.g. 10 year rolling average of CPI–M plus 5 percentage points).

Q9. Will physician–administered drugs, both inpatient and outpatient drugs, that are included in the medical benefit be excluded from the prescription drug spending cap?

Expenditures for physician administered drugs were not included in the FY 2017 Base calculation as presented during the August 31, 2017 Webinar PowerPoint (Slide 6). However, physician administered drugs are not excluded from the Medicaid Drug Cap provisions and expenditures for physician administered drugs could be included in the Medicaid Drug Cap Base calculation in the future. The slide presentation is available on the DOH web–site posted here.

Q10. What data sources and methods will be used on a quarterly basis to determine the "projected total amount to be expended in the year...on a cash basis" for drugs in SFYs 2018 and 2019, as well as the 10–year rolling average medical component of the consumer price index?

Data and methods used to determine the Medicaid Drug Cap were presented during the August 31, 2017 Webinar PowerPoint (see Slide 6). The slide presentation is available on the DOH web–site posted here.

In quarterly assessments of drug spending, the projected annual amount of drug expenditures will be "on a cash basis." How will prior period adjustments be treated in such a calculation? For example, if rebates received on a cash basis in the current year are unusually high due to an update or correction of utilization data for a prior year (leading to net drug expenditures that are unusually low), would this be taken into account when determining whether the following year´s expenditures are in excess of the growth target?

Prior period adjustments will be reflected on a "cash basis" when they materialize in payments. The Department and the Division of the Budget will consider adjustments to future calculations to appropriately reflect significant one–time occurrences.

How soon after the end of a quarter will an updated assessment of the projected annual amount of drug expenditures be calculated?

The Department will aim to complete updated quarterly assessment calculations before the end of each subsequent quarter. However, there may be instances in which updated assessment calculations extend beyond the subsequent quarter to ensure sufficient time for all spending data to be included in the calculation. (e.g. Given all spending data is available, Q2 projections will be updated by the start of Q3).

Q11. How will the state determine MCO prescription drug spending as MCO claims data do not represent actual spending?

As presented in the August 31, 2017 Webinar PowerPoint presentation, the Managed Care premium is used to calculate the Medicaid Drug Cap as follows by multiplying projected Members Months by projected Per Member Per Month (PMPM) premium.

The slide presentation is available on the DOH web–site posted here.

Q12. As the state is monitoring prescription drug spending in its entirety to determine when the spending cap is pierced, how will the state determine which drugs to send to the drug utilization review board to determine a target supplemental Medicaid rebate?

As presented in the August 31, 2017 Webinar PowerPoint presentation, the criteria used to narrow the number of drugs is illustrated on Slide 8. The slide presentation is available on the DOH web–site posted here.

Q13. What is the process and timing for the state to reach an agreement with a manufacturer prior to referring a drug to the drug utilization review board for review?

The process to reach an agreement prior to a drug being referred to the DURB can be found on Slide 11 of the August 31, 2017 Webinar PowerPoint Presentation: here.

Also see FAQ #2 Q8 through Q12.

Q14. How will "actual cost to the state" interact with the language in §280(4), which requires the state to consider both federal and state rebates when determining if there should be an extra rebate? Will this be limited to the state share of Medicaid spending and rebates?

In determining drug costs and whether to seek additional rebate for a drug, the State´s share was evaluated. This is consistent with §280(3)(d), which indicates that prior to seeking an additional rebate, a drug´s actual cost to the state, net of current rebate amounts, will be considered, as well as whether the manufacturer of the drug is providing significant discounts relative to other drugs covered by the Medicaid program. If the State has determined that it will seek additional rebates, §280(4) enables the DURB to also consider the state´s net cost of the drug, amongst other things, as indicated in §280(4)(a)(b)(c).

As presented in the August 31, 2017 Webinar PowerPoint presentation (Slide 6), the Medicaid Drug Cap model is calculated based on the "Total State Rx Spend." The presentation is available on the DOH web–site posted here.

Q15. How will the state determine "significant discounts relative to other drugs covered by the Medicaid program"?

As referenced in the August 31, 2017 Webinar PowerPoint Presentation (Slide 9), there were 12 manufacturers and 30 drugs identified for possible DURB referral. The state evaluated rebate levels for other drugs made by these 12 manufacturers by comparing their rebates as a percentage of spend in their respective classes. Manufacturers were given credit where rebate levels for other drugs were more than 10 percent greater than the average rebate levels provided in the class.

Q16. Will the state consider offsets in other areas of Medicaid spending (e.g., prevented hospitalizations) in determining the actual cost of a drug to the state?

As stated in Q3 of this document, the DURB may consider "offsets" in other areas of Medicaid spending when recommending a target rebate amount. These offsets will also be reflected in the overall fiscal management within the Medicaid Global cap.

Q17. How will the state notify manufacturers that any targeted supplemental rebates and provisions under §280(3)(e) or §280(7)(e) will be rescinded if future quarter spending is projected to be under the cap?

As stated above, supplemental rebates will be sought so long as total Medicaid drug expenditures are projected to exceed the annual growth limitation of the Drug Cap. Projected drug expenditures will be assessed quarterly by the Division of Budget and the Department. The State will notify manufacturers and other stakeholders of this quarterly review, via the MRT listserv and a web posting.

Q18. Are there other items the state plans to consider in considering the actual cost of a drug? If so, what are those items?

The State will consider other items, consistent with statutory provisions, as referenced in FAQ #2, Q22.

Q19. Would the state´s determination of a drug´s price point relative to its therapeutic benefits under §280(4)(c) amount to price fixing?

The Department does not view the DURB´s consideration of a drug´s price in comparison to its therapeutic benefits, for purposes of recommending a target supplemental rebate amount, to constitute the fixing of a drug´s price.

Q20. PhRMA interprets the requirements under §280(5) to mean that a drug may be removed from a preferred drug list, but patients would still be able to access drugs not on the preferred drug list per the requirements of Section 1927(a) of the Social Security Act. Is this interpretation correct?

§280(5)(c) authorizes the commissioner to waive "prescriber prevails" provisions for no more than two drugs in a given time. If such authority was utilized, current prior authorization processes would be used to ensure members have access to medically appropriate medication.

Q21. If a target rebate amount has been established, is the manufacturer prohibited from paying any other rebate to an MCO or PBM for purposes of Medicaid claims?

As indicated in PHL §280(5)(d), where the department and a manufacturer enter into a rebate agreement pursuant to PHL §280, which may be in addition to existing rebate agreements entered into by the manufacturer with respect to the same drug, no additional rebates shall be required to be paid by the manufacturer to a managed care provider or any of a managed care provider´s agents, including but not limited to any pharmacy benefit manager, while the department is collecting the rebate pursuant to PHL §280.

Q22. How will the state make a determination that a drug is the "only treatment for a particular disease or condition"?

Please see FAQ # 2 Q23 for more information.

Q23. Will there be exemptions for and specific definitions of therapies for orphan indications/rare disorders?

There are no exemptions for and specific definitions of therapies for rare disorder exceptions within PHL §280.

Q24. How will the state determine the two drugs for which they will waive the prescriber prevails provisions? Is this for two drugs total? Two drugs per disease? Per class? Per manufacturer?

The state will only waive prescriber prevails provisions for two drugs in a given time, and only if the DURB recommends a target rebate amount, and if after taking into account all rebates and supplemental rebates received, including rebates under PHL §280, total Medicaid drug expenditures are still projected to exceed the Drug Cap.

Q25. How will the state define and consider items (i) through (x) of PHL §280(5)(e)?

As stated in FAQ #2 Q22, consistent with the current process of conducting DURB reviews, the Department will work with its contracted experts to develop evidenced based reviews aligned with the statutory provisions in PHL §280(5)(e). The DURB will make recommendations for target supplemental rebates based on these reviews, which will include publicly available information, information provided in the public comment portion of the DURB meeting, and the confidential financial information that will be reviewed in the Executive Session portion of the meeting.

Q26. Will there be an appeals process for both biopharmaceutical manufacturers and the public to appeal determinations made by the state on the target rebate amount for a drug?

Please see FAQ #2 Q17. Consistent with the current DURB process, there is a 5–day comment period after a DURB meeting summary is posted. These comments are evaluated by Department staff in determining additional actions.

Q27. What will the Department do with the information disclosed under this section? How would this information be used to further the goals of the Medicaid program?

The Department may use this information to further evaluate the target rebate amount determined by the DURB. All information provided by a manufacturer will be considered confidential and will not be disclosed by the Department in a form that identifies a specific manufacturer or prices charged for drugs by such manufacturer.

Q28. PhRMA interprets the requirements under §280(7)(a) to mean that a drug may be removed from an MCO preferred drug list, but patients would still be able to access drugs not on the preferred drug list per the requirements of Section 1927(a) of the Social Security Act. Is this interpretation correct?

Current prior authorization processes will remain in place to ensure members have access to medically appropriate medication. (See FAQ #1 Q11).

Q29: If the first step in the review is to assess whether spending is projected to exceed $5M, why would all FDA approved drugs need to be considered?

Pursuant to PHL §280(3), the Department and the Division of Budget must project the annual expenditures for all drugs in Medicaid Program. As such, all FDA approved drugs would be considered for the purposes of completeness and monitoring/projecting spending for new drugs without utilization within the data time frame.

Q30: Referring to August 31, 2017 webinar slide #8, does this indicate that all drugs utilized in Medicaid formularies and all FDA approved drugs on the market (not included in the formularies) are considered in evaluation of the Medicaid programs drug spending?

Yes, all FDA approved drugs for which there is New York Medicaid utilization and any new drugs without utilization, were considered in the evaluation of drug spending.

Q31: Referring to the August 31, 2017 webinar slide #9, does 7,662 indicate the number of drugs utilized by Medicaid recipients and other drugs not included in the formulary that were evaluated?

Yes; this includes drugs without utilization in SFY 2016–2017.

Q32: The law states that, "Under no circumstances shall the commissioner be authorized to waive such provisions with respect to more than two drugs in a given time." Does this refer to two drugs total or two drugs within a therapeutic class?

§280(5)(c) authorizes the commissioner to waive "prescriber prevails" provisions for no more than two drugs in a given time, irrespective of therapeutic class.

Q33: How long can the commissioner waive these provisions for?

Pursuant to PHL §280(7)(a)(b), the Commissioner shall be authorized to take the actions so long as total Medicaid drug expenditures are projected to exceed the annual growth limitation.

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February 6, 2018