CMS Engagement Opportunities in Discarded Drug Refund Implementation

Summary

Manufacturers should assess liability to drug waste refunds and engage with CMS as it considers an increased applicable percentage for specific product types.

In the Calendar Year (CY) 2023 Medicare Physician Fee Schedule (MPFS) final rule, the Centers for Medicare & Medicaid Services (CMS) issued a requirement that manufacturers provide refunds to CMS for any amount of discarded single-dose vial or single-use drug over 10% of the total allowed charges in each calendar quarter beginning January 1, 2023.

In the final rule, CMS finalized a higher applicable wastage threshold of 35% for one drug that is reconstituted with a hydrogel and has variable dosing based on patient-specific characteristics. CMS clarified that it does not have the authority to carve out products from the refund requirement, but it may be appropriate to adjust wastage thresholds for additional products. CMS acknowledged its intent to engage stakeholders and address potential threshold adjustments in future rulemaking.

Key Takeaways from the CMS Town Hall

On February 1, CMS hosted a town hall to collect stakeholder feedback on unique circumstances that may justify a higher applicable percentage. Specifically, CMS sought input on potential criteria for a decision framework in unique circumstances; product qualities the agency should consider; and whether a categorical, product-by-product, or hybrid approach would be most appropriate.

Nine stakeholders comprising life sciences manufacturers, trade associations, and professional societies offered comments at the town hall. Most stakeholders expressed support for applying a higher applicable percentage to low-volume products. Stakeholders also proposed an increased applicable percentage or exemption for ophthalmic products, cell and gene therapies, and wound-care products. Proposed approaches included both categorical and product-by-product considerations. Additionally, one manufacturer proposed a specific framework for decision making in unique circumstances.

Considerations for Manufacturers

As CMS considers how to use stakeholder input to build a framework for an increased applicable percentage for unique circumstances and continues to deliberate the operationalization of a higher applicable percentage under the discarded drug refund policy, manufacturers should consider the actions described in Figure 1.

Figure 1. Considerations for Manufacturers Ahead of CY 2024 Rulemaking Cycle

Assess your portfolio’s exposure to the refund and determine whether any of impacted Part B products may present a compelling justification for an increased applicable percentage

If a potential justification exists, consider engaging CMS prior to upcoming MPFS rulemaking cycles as the agency contemplates whether products are eligible for a higher applicable threshold

Assess how implications of a proposed framework could shape future product packaging strategy

Monitor rulemaking and sub-regulatory guidance for additional operational clarifications (e.g., invoicing processes)

Understand further guidance from CMS on the implementation of the JZ modifier and appeals processes for products not classified as unique during a rulemaking cycle

Consider potential spill-over of Medicare’s discarded drug refund policy in Medicare Advantage, commercial, and other relevant markets

Identify strategies to support provider awareness of coding and modifier requirements

Next Steps

Avalere’s robust market access expertise and data assets can support manufacturers in adapting to the policy, and our policy expertise can support strategic planning and a CMS engagement strategy. To learn more about how Avalere’s Part B reimbursement experts can help assess your financial risk, identify mitigation solutions, and develop strategies for engagement with CMS, connect with us.