CMS has announced that it is delaying until April 1, 2020 its controversial change in the definitions of “States” and “United States” included in the February 1, 2016 Medicaid covered outpatient drug final rule with comment period.  Specifically, in that rulemaking CMS defined “States” and “United States” to include the U.S. territories (American Samoa, the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the Virgin Islands) effective April 1, 2017.  The effect of this provision is to (1) include territories in the Medicaid drug rebate program (unless the territory obtains a waiver) and (2) require manufacturers to include eligible sales and associated discounts, rebates, and other financial transactions that take place in the U.S. territories in their calculations of average manufacturer price and best price.

CMS now acknowledges that “it has become evident that interested U.S. territories could not be ready to implement the program by April 1, 2017, although a few territories have expressed interest in participating once they have made the necessary systems changes.”  Without additional delay, CMS notes that “drug manufacturers will likely be prompted to increase drug prices, including prices paid by U.S. territory Medicaid programs.”  CMS therefore is issuing an interim final rule with comment period delaying until April 1, 2020 the inclusion of the territories in the definition of “States” and “United States.”  CMS will accept comments on the rule until January 17, 2017.