Final CMS Guidance for the Part D Manufacturer Discount Program
On November 17, 2023, CMS issued its final guidance on the Medicare Part D Manufacturer Discount Program (MDP). You can download the guidance, and related documents, from our Resources page. Let's take this opportunity to review the key changes under MDP from the manufacturer perspective.
The new Manufacturer Discount Program is similar to the Coverage Gap Discount Program in many operational respects, and CMS is implementing it in a similar manner. The programs differ in several ways important for a manufacturer.
Benefit Design Changes
Beginning in 2025, the Part D prescription drug benefit design will have 3 phases:
- The Annual Deductible phase, where enrollees pay all of the drug costs until they meet their deductible.
- The Initial Coverage phase, where enrollees pay 25% coinsurance for Part D drugs, and the manufacturer pays a 10% discount to the plan sponsor for applicable drugs.
- The Catastrophic Coverage phase, entered once the enrollee reaches their out-of-pocket threshold ($2,000 for 2025). Enrollees do not pay anything further, and the manufacturer pays a 20% discount to the plan sponsor for applicable drugs.
Remember that a major provision of the IRA was to allow Medicare to negotiate prices for selected drugs directly with manufacturers. Given negotiated prices, these drugs are not subject to further discounts mentioned above, and are excluded from the definition of applicable drugs, to which most of the final guidance is dedicated.
Claims that "straddle" multiple benefit phases will have different discounts applied to each portion of the claim.
Manufacturer Discount Phase-Ins
The Initial and Catastrophic Coverage discounts are subject to gradual phase-ins over 4 and 6 years, respectively, for smaller manufacturers. "Specified Manufacturers" (as defined by the IRA) enjoy a phase-in when their drugs are dispensed to a Medicare enrollee eligible for Low Income Subsidies, and "Specified Small Manufacturers"
CMS published their Methodology for Identifying Specified Manufacturers and Specified Small Manufacturers, and will apply it by "analyzing Medicare Part B claims data, Part D PDE (prescription drug event) data, and ownership information submitted by manufacturers. All manufacturers that sign a Discount Program agreement in time ... will be considered, and do not need to submit a separate application."
If a manufacturer disagrees with the CMS phase-in eligibility determination, it has 30 days to request a CMS recalculation. CMS provided detailed guidance for how to do so. Further, CMS will provide all manufacturers who submit required ownership information by December 8, 2023, with preliminary, non-binding information regarding their eligibility for phase-ins.
Invoicing Operations
The quarterly invoicing and dispute process is largely unchanged from CGDP. CMS expanded the list of claim-level data fields that will be available to manufacturers. The final guidance also clarifies that, aside from disputes arising out of incorrect labeler codes included in an invoice, manufacturers are not permitted to withhold payment for any disputed invoiced amount.
Published on Nov. 25, 2023 by Sergei Krupenin