On May 12, 2023, the Centers for Medicare and Medicaid Services (CMS) issued draft guidance for the Part D Manufacturer Discount Program effective January 1, 2025 . CMS plans to implement the Manufacturer Discount Program in a largely similar manner to the current Coverage Gap Discount Program. Notably, the draft guidance includes information on the “Phase-In of Discounts for Specified Manufacturers and Specified Small Manufacturers.”

Comments on the draft guidance are due June 12, 2023.

Below, ADVI provides highlights from the draft guidance.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 initial guidance to manufacturers and Part D plan sponsors on implementation of the new Discount Program. 

Highlights

CMS notes throughout the guidance that they intend to implement the Discount Program in a similar manner to the Coverage Gap Discount Program to promote transparency and operational consistency.
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.
Applicable Discounts
• CMS clarifies 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 (i.e., 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. For instance, if a claim fell into both the initial coverage and catastrophic phase, the manufacturer would provide a 10% and 20% discount on the corresponding parts of the claim.
Phase-In of Discounts for Specified Manufacturers and Specified Small Manufacturers
• CMS states that they 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 will be considered for the phase-ins, and do not need to submit a separate application.
• CMS will provide manufacturers that submit and attest to ownership information by a yet-to-be-announced date with information regarding their eligibility for phase-ins prior to March 1, 2024.
Before releasing the revised Health Plan Management System (HPMS) Discount Program module (expected in late 2023), CMS will release additional information explaining the methodology for identifying manufacturers eligible for the phase-ins. CMS also intends to publish a list of manufacturers eligible for the phase-ins before 2025.
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
List of up-to-date labeler codes required to be maintained by manufacturers with CMS:
• New labeler codes submitted through HPMS no later than 3 business days after receipt or written notification from the FDA, prior to pricing compendia notification.
• Transferring existing labeler codes request submitted through HPMS by initial owner with date of transfer. Once approved by both manufacturers, change in ownership will be reflected in the next quarterly invoice (if completed 45 days prior to invoice date) or the following quarterly invoice (if completed less than 45 days prior to invoice date).
Removing obsolete labeler codes can be completed during the annual approved codes review process between CMS and manufacturer.
Audits
• While the IRA does not discuss allowing participating manufacturers to conduct audits of the Third-Party Administrator (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.
Terminations
• Manufacturers may elect to terminate Discount Programs for any reason.
  • If submitted before January 31, will terminate effective January 1 of the following calendar year.
  • If submitted on or after January 31, will terminate effective January 1 of the second calendar year.
CMS may terminate Discount Programs for cause or violation of agreements.
Termination will be effective no fewer than 30 calendar days after notice of termination sent to manufacturer.

Pending Further Guidance

Topics to be addressed in future guidance include:

Guidance for plans on how to report the Discount Program applicable discounts.
Operational guidance on the submission of required information in HPMS for the Discount Program (expected before release of the updated HPMS Discount Program module in late 2023).
Operational instructions related to the TPA agreement, portal access, invoicing, payment, and related processes (expected date not listed).
Operational guidance on dispute filing and processing (expected date not listed).

ADVI will continue monitoring developments and 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.