This evening, the Centers for Medicare and Medicaid Services (CMS) released a final rule and interim final rule relate to line extensions for covered outpatient drugs in the Medicaid program. This release is in response to a final rule with comment period that was released in early 2016.

No Definition of Line Extension Adopted by CMS

On February 1, 2016, CMS released a final rule with comment period on covered outpatient drugs (CODS). This rule implemented portions of the Affordable Care Act (ACA) as well as requirements for CODs related to Medicaid coverage and payment and the Medicaid Drug Rebate program. However, this 2016 final rule did not finalize a regulatory definition of “line extension” but instead requested additional public comments on the definition.

The ACA required manufacturers calculate an alternate rebate amount for oral solid dosage line extension drugs and CMS was responsible for defining “line extension.” CMS initially proposed to define a line extension based on chemical types, as indicated in a product’s FDA approval records, instead of defining it by whether a manufacturer received a patent extension. CMS received strong opposition to this proposal and chose not to finalize their definition in the February 2016 final rule.

No additional regulation was released following the February 2016 rule, but CMS did release Medicaid Drug Rebate Program Notices when the Comprehensive Addiction and Recovery Act of 2016 (CARA) and the Bipartisan Budget Act (BBA) of 2018 included statutory changes related to line extensions. CARA included a provision to exclude abuse-deterrent formulations from the definition of line extension while the BBA of 2018 updated the rebate amount calculation.

The final rule and interim final rule released by CMS this evening does not finalize a definition of line extension in light of the changes to relevant statute. Comments provided in 2016 would not be reflective of all of the current statutory framework for line extensions. Instead, CMS is reiterating the guidance in the original covered outpatient drug final rule that manufacturers rely on the statutory definition and where appropriate, may use “reasonable assumptions” to determine if a drug qualifies as a line extension drug. Statute says that the term line extension means:

“with respect to a drug, a new formulation of the drug, such as an extended release formulation, but does not include an abuse-deterrent formulation of the drug (as determined by the Secretary), regardless of whether such abuse-deterrent formulation is an extended release formulation.”

The agency notes that if it should decide to develop a regulatory definition of line extension drug, the normal rulemaking process will be utilized.

Interim Final Rule Updates Regulatory Text to Reflect Current Statute

In the interim final rule, CMS is updating regulations to reflect current statutory language that was passed in the BBA of 2018.

As required by the BBA, rebate periods beginning on or after October 1, 2018 will use the greater of the following to determine the unit rebate amount calculation (URA) for a line extension drug:

• Standard URA: the basic rebate plus the additional rebate for the line extension drug
• Alternative URA: the basic rebate plus the product of the quarterly AMP of the line extension drug and the highest additional rebate for any strength of the original single source drug or innovator multiple source drug

There is a 60-day public comment period for the update in the interim final rule that ends on May 31, 2019.