On November 17, 2023, the Centers for Medicare and Medicaid Services (CMS) issued final guidance for the Part D Manufacturer Discount Program effective January 1, 2025 (link). CMS also released its methodology for identifying Specified Manufacturers and Specified Small Manufacturers (link) and the final agreements manufacturers must enter with CMS (link) and the third party administrator used to facilitate the program (link).

CMS plans to implement the Manufacturer Discount Program in a largely similar manner to the current Coverage Gap Discount Program. Notably, in the final guidance CMS includes additional detail related to the Specified Manufacturer and Specified Small Manufacturer discount phase-ins. In January 2024, CMS will provide manufacturers that submit and attest to required ownership information in HPMS by December 8, 2023, without yet entering into a Discount Program agreement, with preliminary non-binding information regarding their eligibility for the phase-ins. CMS will also allow manufacturers to request a recalculation of their phase-in eligibility determination.

Below, ADVI provides highlights from the final guidance. If you have any questions or would like further information, please do not hesitate to contact your ADVI Account Manager. 

Background

The Inflation Reduction Act (IRA) made several changes to the Part D benefit, including sunsetting the Coverage Gap Discount Program on December 31, 2024, and creating a new Manufacturer Discount Program (the “Discount Program”) beginning January 1, 2025, that will introduce manufacturer discounts in both the initial and catastrophic coverage phases. In this document, CMS provides final guidance to manufacturers and Part D plan sponsors on implementation of the new Discount Program. 

Highlights

CMS notes throughout the final guidance that they intend to implement the Discount Program in a similar manner to the Coverage Gap Discount Program.
Requirements for Participating Manufacturers
For 2025, the first year of the Discount Program, manufacturers must enter into agreements by March 1, 2024.
Agreements will be valid for 12-month terms, with the first beginning January 1, 2025, and ending December 31, 2025. Agreements will be renewed automatically for subsequent years on January 1, except in limited circumstances or if the agreement is terminated.
In the final guidance, CMS provides an overview of the agreement requirements, terms for renewal, terminations, and reinstatement.
Manufacturers will also be required to enter into an agreement directly with the third party administrator (TPA) used to facilitate program operations. CMS intends to use the existing Coverage Gap Discount Program TPA arrangement for the Discount Program.
CMS separately published the final Discount Program agreements manufacturers must enter with CMS (link) and the TPA (link).
Phase-In of Discounts for Specified Manufacturers and Specified Small Manufacturers
CMS will identify which manufacturers qualify for the Specified Manufacturer and Specified Small Manufacturer discount phase-ins by analyzing Part B and D claims and ownership data submitted by participating manufacturers. All manufacturers that enter into a Discount Agreement in time to participate in any year of the phase-in will be considered, and do not need to submit a separate application.
In future years, CMS will require participating manufacturers to notify CMS of a change in ownership within 30 days after the legal agreements are executed and no later than 45 days before the change in ownership takes effect.
CMS separately published the methodology (link) it will use to identify which manufacturers are eligible for the phase-ins, including the data sources and calculations used to determine the following:
Manufacturer’s percent share of Part D total expenditures
Manufacturer’s percent share of Part B total expenditures
Each drug’s percent share of the specified manufacturer’s Part D total expenditures.
In January 2024, CMS will provide manufacturers that submit and attest to required ownership information in HPMS by December 8, 2023, without yet entering into a Discount Program agreement, with preliminary non-binding information regarding their eligibility for the phase-ins.
CMS notes that information does not constitute an eligibility determination and is therefore not subject to the recalculation process outlined below.
CMS phrases this provision as an “opportunity to receive preliminary information”. All manufacturers that complete Discount Program agreements by March 1, 2024 (the deadline to enter a Discount Program agreement for 2025) will be considered for phase-in eligibility regardless of if they submitted ownership information by December 8, 2023.
CMS will notify manufacturers of their eligibility for the phase-ins after March 1, 2024.
CMS will allow manufacturers to request a recalculation of their phase-in eligibility determination within 30 days of receipt of their determination. After consideration of the issues raised in the recalculation request, CMS will notify the manufacturer of its final decision.
Applicable Discounts
CMS states that manufacturer discounts will not affect the application of the standard 25% beneficiary coinsurance or copayment amount during the initial coverage phase, as both the applicable discount and enrollee cost sharing are based on the negotiated price of the drug.
However, if enrollee cost sharing would exceed the price of the drug after the discount is applied, CMS notes that the enrollee would pay the lesser of the discounted price or the enrollee cost sharing.
If claims “straddle” multiple phases of the redesigned Part D benefit (e.g., deductible and initial coverage phase, initial coverage and catastrophic phase) manufacturers will be required to provide applicable discounts on each portion of the negotiated price based on the benefit phase.
Manufacturer Invoicing and Reimbursement of Part D Sponsors for Applicable Discounts
CMS notes that, based on feedback from manufacturers, they will provide additional detail on manufacturer invoices under the Discount Program, including the following elements:
Low-Income Cost Sharing Amount
Total Gross Covered Drug Cost Accumulator
True Out-of-Pocket Accumulator
Gross Drug Cost Below Out-of-Pocket Threshold (GDCB)
Gross Drug Cost Above Out-of-Pocket Threshold (GDCA)
Labeler Codes
CMS will maintain a list of all participating manufacturers and labeler codes covered by Discount Program agreements. CMS expects to make public a January 2025 labeler code list in Spring 2024, with updates incorporated by August 2024.
In the final guidance, CMS outlines labeler code requirements for manufacturers, including procedures for new codes, transferring existing codes between manufacturers, and removing obsolete codes.
Audits
While the IRA does not discuss allowing participating manufacturers to conduct audits of the TPA for the Discount Program, CMS states that they intend to allow periodic audits to be consistent with current processes under the Coverage Gap Discount Program.
CMS notes that they intend to audit participating manufacturers no more than annually and will provide manufacturers with 60 days’ advance notice.
Dispute Resolution
CMS will establish a dispute resolution process to resolve disagreements between manufacturers, Part D sponsors, and the HHS Secretary. CMS notes that it will use a similar framework to the dispute resolution process currently in place for the Coverage Gap Discount Program.

Pending Further Guidance 

CMS intends to issue future plan-focused guidance on a range of topics, including:

Policy and operational guidance related to Part D redesign, including how to operationalize changes at point-of-sale
Calculating Discount Program payments and submitting PDE records
Identifying NDCs that are eligible for discount phase-ins

CMS states that it will also release operational instructions for manufacturers related to:

Information submission in HPMS (expected before release of the updated HPMS Discount Program module in late 2023)
TPA agreement, TPA portal access, invoicing, payment, and related processes
Dispute filing and processing

ADVI will continue monitoring developments and the next steps. This is a delayed release. ADVI Instant content is distributed in real-time for retainer clients. Get in touch to learn more about how we can support your commercialization, market access, and policy needs.