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Physician Fee Schedule Final Rule for 2022: What Pharma Needs To Know

The Centers for Medicare & Medicaid Services (CMS) calendar year 2022 rule finalizing changes to payment policies under the Physician Fee Schedule (PFS) and Medicare Part B (the Final Rule) was published on November 19, 2021. The Final Rule takes effect January 1, 2022. Arent Fox analyzed the portions of the proposed rule most relevant to pharmaceutical manufacturers in a previous blog post. 
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What to Know

  • Manufacturers must remember that mandatory ASP reporting begins January 1, 2022 – whether you have an MDRP agreement or not
  • CMS did not move forward with any new payment policies regarding Sec. 505(b)(2) drugs 

The Final Rule can be found here. Arent Fox's analysis from a previous blog post can be found here

Mandating ASP Reporting and Penalties

CMS finalized regulatory amendments to clarify that beginning January 1, 2022, manufacturers – regardless of whether they have executed a Medicaid drug rebate program (MDRP) agreement or not – must report average sales price (ASP) information to CMS for drugs or biologicals payable under Medicare Part B. Currently manufacturers without an MDRP agreement are not required to report ASP, though some choose to do so voluntarily. CMS has noted on its website that manufacturers who have not previously reported ASP must first report ASP data no later than April 30, 2022 (within 30 days of the close of the first quarter of 2022) for inclusion in the July 2022 ASP Drug Pricing File.

While neither the proposed nor Final Rule set forth substantial revisions to the regulations applicable to ASP reporting, the Final Rule does revise the definition of "drug" found at 42 C.F.R. § 414.802 to mean "a drug or biological, and includes an item, service, supply, or product that is payable under Medicare Part B as a drug or biological."

Section 401(b)(2) of the Consolidated Appropriations Act, 2021 (CAA) amended section 1847A(c)(6)(A) of the Social Security Act (the Act) to permit the Secretary to exclude repackagers from the definition of "manufacturer" and, therefore, potentially exempt repackagers from ASP reporting. The Final Rule clarifies that the Secretary has declined to exert that authority at this time.

Finally, the Final Rule implements corresponding changes to existing regulations to clarify that civil monetary penalties would apply to manufacturers without MDRP agreements that fail to report timely and accurate ASP data, making the civil monetary penalties consistent with the civil money penalties currently in place sections 1927(b)(3)(C)(i) and (ii) of the Act for manufacturers with MDRP agreements that fail to report timely and accurate ASP data.

Codification of 'Lesser of' Payment Methodology for Self-Administered Drugs

The Final Rule also clarifies payment policies for self-administered drugs. The Final Rule confirms codification of Section 405 of Division CC, Title IV of the CAA, 2021, which "directs [the Office of the Inspector General (OIG)] to conduct periodic studies to identify NDCs for drug or biological products that are identified to be self-administered for which payment may not be made under Part B …and that OIG determines should be excluded from the determination of" ASP. If the OIG identifies such an NDC, the agency must notify HHS and then the Secretary shall, as appropriate, apply the "lesser of" payment methodology to such NDC. In order to determine the appropriate reimbursement amount for those drugs identified by the OIG, CMS will conduct two separate calculations in order to compare the value of the ASP of the drug or biological both with and without the inclusion of the NDCs that have been identified as drugs that are self-administered. Whichever calculation is the lesser of "will be used as the payment limit for the applicable billing and payment code for that quarter's ASP pricing files."

CMS stated in the Final Rule that "beginning July 1, 2021, the ASP-based payment limit for billing codes representing Cimzia® (certolizumab pegol) and Orencia® (abatacept) as identified in a July 2020 OIG report adhere to the "lesser of" methodology. CMS has applied this methodology for these billing codes beginning in the July 2021 ASP Drug Pricing files."

CMS Declines to Finalize Section 505(b)(2) Payment Policy

As it did in last year's PFS proposed rule, CMS proposed to "codify" at least one payment policy regarding drugs that are approved under the Section 505(b)(2) pathway of the FFDCA (currently meeting the definition of single-source drug) that appears to be at odds with applicable law found in the Act. Last year's proposed rule sought feedback on whether such proposed framework was appropriate. The agency stated that a framework is necessary as some products approved under section 505(b)(2) (biologicals) are not easily categorized as "multiple source drugs" or "single source drugs" – a distinction which is important for Part B reimbursement. However, CMS has declined to finalize the framework "and will continue to evaluate" their approach on this issue.

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