New Medicaid Part D Manufacturer Discount Program Guidance

With the new Discount Program rolling out in 2025, there are a few key items pharmaceutical manufacturers and Part D plan sponsors should take note of.  Whether a Manufacturer is currently participating in the Coverage Gap Discount Program (“CGDP”) or they’re currently pursuing the FDA Approval of their first drug, it is important to be aware that the CGDP Program is ending 12/31/24 and will be replaced by this Discount Program.

A primary difference of the new Discount Program is the change to the Part D benefit design that eliminates the Coverage Gap and the related discounts participating manufacturers were subject to in the Coverage Gap (70% in 2023 and 2024).  A participating manufacturer’s rebate exposure beginning in 2025 will be 10% in the initial coverage phase and 20% in the catastrophic coverage phase.  Of note is that there is no spending cap on the catastrophic coverage phase, so the 20% rebate will continue through the entire calendar year once it begins.

To participate in this new Discount Program, manufacturers are being asked to sign a Manufacturer Discount Program Agreement and a TPA Agreement (the “Agreements”).  These were released by CMS recently and we can provide them to you if needed for review.  These agreements must be electronically signed and submitted via HPMS by March 1^st, 2024 to ensure participation and Part D coverage starting in 2025. Manufacturers should make sure that their “signatory authority” individual and other HPMS contacts are up to date and that the signatory authority individual has access in HPMS to perform the electronic signature by this date.

Also of note, a Manufacturer may qualify for reduced phased-in discounts (lower than the standard 10% and 20%) if they meet certain thresholds.  Specifically:

The IRA provides for lower applicable discounts for certain manufacturers’ applicable drugs marketed as of August 16, 2022.  The lower applicable discounts are over a phased in period which ends in 2031 (for example 1% discount in 2025 and 2% discount in 2026…).  There are two such phase-ins: one for certain applicable drugs of specified manufacturers dispensed to applicable beneficiaries who are eligible for LIS, and one for certain applicable drugs of specified small manufacturers dispensed to all applicable beneficiaries.

If your company potentially qualifies for the reduced discounts, we recommend you pursue the preliminary determination of eligibility by CMS for Phase-In discounts.  Below is the process to do this and it must be completed by Friday, December 15^th, 2023 should you choose to do so.

How to Evaluate if a Manufacturer may Qualify for Phase-In Discount Exception

Below is a list of questions to determine a Manufacturer’s potential eligibility for Phase-In discounts. This is an optional, non-binding submission in terms of participating in the Discount Program. The final determination of eligibility for Phase-In discounts is only available once the Manufacturer officially participates in the Discount Program and signs the Agreements by March 1^st, 2024.

1. Was the Manufacturer’s first drug approved and marketed before August 16, 2022?
2. Did the Manufacturer have a CGDP Agreement in place in 2021?
3. Were the Manufacturer’s products below 1% of all Part D drug spend in 2021?
4. Were the Manufacturer’s products below 1% of all Part B drug spend in 2021?
5. Did the Manufacturer have 1 product that made up at least 80% of all of the Manufacturer’s Part D drug spend in 2021?

If the Manufacturer answered YES to all the questions, then FCS would recommend they pursue the preliminary determination.  Even if the Manufacturer answered NO to any of the above questions, and would like to pursue a preliminary determination, we see no disadvantage to a Manufacturer going through the motions to get a preliminary determination from CMS in order to confirm that CMS agrees that the Manufacturer does not qualify.  CMS will provide a response regarding the preliminary determination by January 31, 2024.

Another item to note is that there is an option to request a “Recalculation” by CMS if a Manufacturer disagrees with CMS’s initial determination.  CMS may or may not do a recalculation, but if they do, this could help Manufacturers qualify for the Phase-In discounts.

Next Steps to Participate

For manufacturers who do not have a P Number, this is required to join the Manufacturer Discount Program.  FCS can provide further guidance on how to obtain a P Number and access to HPMS. 

All manufacturers who desire to participate should start reviewing the Manufacturer Discount Program Agreement and the Third Party Administrator (“TPA”) Agreement.  These will need to be electronically signed and submitted to CMS via HPMS by March 1^st, 2024. Once these are submitted, CMS will send out the Manufacturer’s final determination to ensure participation and coverage in the Manufacturer Discount Program later in 2024.

Key Dates for Manufacturers

Below is a list of key dates to be aware of for Manufacturers and Part D plan sponsors looking to implement the new Discount Program.

1. December 15^th, 2023: Deadline to submit responses to questions and attestations via HPMS to get a preliminary determination of Phase-In Discounts from CMS.  This is optional.
2. January 31^st, 2024: CMS will give a preliminary determination of Manufacturer’s eligibility for Phase-In Discounts.
3. March 1^st, 2024: Manufacturer Discount Program Agreement and TPA Agreement must be electronically signed and submitted via HPMS to ensure participation and coverage starting in 2025.  Manufacturers must answer and attest to certain ownership conditions by 3/1/24 as well.
4. December 31^st, 2024: Coverage Gap Discount Program ends.
5. January 1^st, 2025: Medicare Part D Manufacturer Discount Program goes into effect.