Tuesday, October 4, 2016

Additional Rebate for Generic Products Starts Q1 2017





Effective with the Q1 2017 Medicaid rebates, manufacturers of non-innovator products will be subject to an inflation penalty similar to the one already imposed on innovator products. This inflation penalty occurs when manufacturers raise their prices that go into the AMP calculation faster than inflation. Historically, price increases have not been an issue with generic products but in more recent years, for some drugs, increases are more common. This change was included in the Bipartisan Budget Act of 2015 (H.R. 1314).

To calculate the rebate for existing products, the baseline AMP will be the AMP reported by the manufacturer for Q3 2014. For new products, it will be the AMP of the fifth full quarter after the drug’s market date quarter. In response to this change, manufacturers questioned whether the additional penalty would apply retroactively to the first four quarters of sales under the new rule; however, in Manufacturer Release No. 101 CMS clarified that the inflation penalty is only applicable as of Q1 2017 for existing products or for new products, the quarter in which the baseline AMP is established.

In Release No. 101, CMS provides several examples of the timeline for calculating the additional penalty, and also notes that manufacturers must obtain baseline data, such as Market Date and Baseline AMP, for drug products approved under an NDA or ANDA that were purchased from other manufacturers. To determine if drugs should have the same baseline data, manufacturers may access the FDA Online Label Repository at http://labels.fda.gov/, and enter each drug’s NDC to determine if the drugs have the same NDA/ANDA.

For manufacturers, there are a few important things to keep in mind:


1. Accruals may need to be increased as of Q1 2017 to account for the Medicaid rebate liability.
2. Any inflation penalty assessed in Q1 2017 will impact the Q3 0217 PHS/340B prices.
3. If you are in the midst of a restatement that includes Q3 2014 (or the baseline AMP quarter), you’ll want to try to complete that prior to the Q1 2017 URA calculations by CMS

If you have not already done so, determining the impact of this new penalty is critical as it could significantly affect your organization’s total rebate liability. Be sure to communicate this to your finance team and other key leaders within your organization so they are not caught by surprise if there is an impact to your organization.

This year’s MDRP was full of information for manufacturers and as always, there’s a lot going on in the government programs, so if you need help or are overwhelmed by all of the information, give me a call. I can help you figure out what is relevant and how to ensure you’ve accounted for these potential changes! Katie Lapins, Government Pricing Specialists, LLC, 303.993.6456, K.Lapins@GP-Specialists.com.




Friday, September 30, 2016

AMP Final Rule: Puerto Rico in the Balance

The 2016 Final Rule expanded our definition of “states, allowing the five US territories to join the MDRP. John Shakow’s stimulating presentation at the Medicaid Drug Rebate Program summit 2016, on September 21, dealt with this component of the Final Rule, and identified several areas for concern, and evaluations that manufacturers need to do prior to the April 1, 2017 day of decision.

Expansion

Territories:

• May join MDRP
• May waive participation

Drug Activity:


• Utilization - Subject to Medicaid rebates
• Transactions - Eligible for inclusion in AMP and BP calculations

*Manufacturers must include transactions regardless of waiver status**

Demographics

Puerto Rico is the largest of the territories, with 3.5 million people. The other four territories total 348 thousand, less than 10% of Puerto Rico’s population.

Economics

Puerto Rico is very poor, and almost half are enrolled in Managed Medicaid (1.67 million). Comparable state Medicaid enrollments:
WA 1.8 million

  • AZ 1.8 million
  • NJ 1.7 million
  • TN 1.5 million


Puerto Rico has a $72 billion debt crisis. All public obligations are threatened with default.

Congress passes law in June 2016 to address this, called PROMESA (Puerto Rico Oversight, Management and Economic Stability Act). PROMESA (committee of 7) has the power to set fiscal policy, including waivers and Medicaid payments, and to cancel contracts.

Politics


Gubernatorial election is set for November 8. Current governor is not running, and neither candidate for office has taken a position on the waiver. The lame duck period runs into January 2017.

Applicable Medicaid Organizations


ASES - Puerto Rican Health Insurance Administration (Administracion de Seguros Salud de Puerto Rico) – responsible for Medicaid.

PSG - The Government Health Plan (Plan de Salud de Gobierno) - Puerto Rico’s Medicaid program

Abarca Health - The PBM that maintains, among other things, the prescription drug list and pharmacy benefit for PSG.

DACO - Puerto Rican Department of Consumer Affairs (Departamento de Asuntos del Consumidor de Puerto Rico) has price control authority over wholesalers and pharmacies (Regulation 3707).

Medicaid in Puerto Rico


Manufacturers contract with Abarca Health for PDL access, and pay rebates for inclusion.

Many contracts expire December 31, 2016, but can be automatically renewed.
John Shakow has seen Abarca contracts with “Best Price rip cord clauses” and “termination provisions.”

Price Controls - DRACO


Targeted drugs

• High volume drugs
• Chronic disease drugs
• Drugs used by elderly or infants
• Currently 75 drugs (innovator and generic)
• List can be changed

Pharmacies must maintain public price lists

Waiver Decision


• The decision to participate in MDRP lies with AES leaders (appointed by governor)
• Decision in January, AFTER new governor is sworn in

Considerations in Decision


• Abarca rebates – Will they be higher or lower than the MDRP URAs?
• If lower, will AES set up supplemental rebates to compensate?

Implications for Manufacturers


 Waiver executed – Abarca rebates remain
 No waiver

  • URAs due on every unit reimbursed under PSG, possibly exceeding Abarca amounts
  • May join consortium of states to obtain supplemental rebates


All of this is up in the air. So many variables or outcomes make planning difficult, but mandatory. Manufacturers need to look at commercial pricing concessions for best price impact, and model potential liabilities for either scenario.

One more thought. After considering John’s presentation, it could be déjà vu. If manufacturers decide that doing business in Puerto Rico is no longer in their financial best interest, or offering rebates to these purchasers is no longer attractive, they may refuse to sell there. The CMS FAQ36 answer to this requirement to sell to the Territories was “The final rule does not require that a drug manufacturer sell its drugs to certain purchasers.” If enough manufactures apply this tactic to a territory with such a large vulnerable population, will we see another version of the Veteran’s Health Care Act of 1992?



John Bliss is a contributing writer for the Medicaid Drug Rebate Program Summit. He has extensive experience in the pharmaceutical industry, including AstraZeneca, Sanofi Aventis, Merck, Pfizer, Daiichi Sankyo, and Bristol-Myers Squibb (BMS). The bulk of John’s career was at BMS. When OBRA90 hit, Government Pricing took over his life. Government pricing, managed care contracting, rebates, and chargebacks continue to extend challenges and provide meaningful employment. John now works as a consultant, primarily subcontracted by other consulting firms, providing value added services to each of them and their clients.




Wednesday, September 28, 2016

Medicaid Drug Rebate Program Summit: A Final Review

For the last few years, the final session at the Medicaid Drug Rebate Program Summit (MDRP) has been handled by John Shakow (King and Spalding) who highlights many of the “hot topics” from the various presentations during the conference. This review gives a good overview of the key takeaways and is very helpful if you want to review any of the slides provided by the speakers from this last week. Some of the slides he referenced included:


All of Miree Lee’s Government Pricing Basics, since understanding the basics is critical for manufacturers to be able to understand the impact of anything discussed during the conference.

Elizabeth M. Wicyk-McGovern of Hospira discussed the requirements for manufacturers when it comes to 340B Ceiling Price reporting. One of her slides shows the complicated nature of the PHS/340B program and the way covered entities (CE) can order, such as through a GPO contract, at the 340B price, or for a non-340B outpatient, and how it has to all be tracked by the CE.

Jeremy Docken from Kalderos gave an outstanding presentation regarding duplicate discounts and managed markets. John found it difficult to identify a single slide as the entire presentation showed how there is still significant revenue leakage within the industry when it comes to the PHS/340B Program.

John Gould of Arnold & Porter gave a presentation regarding bundling and one slide especially highlighted the difficulty when durable medical equipment (DME) is involved. Of issue is how do you address GP concerns with a drug and a DME if the DME is free with a purchase, even if it’s required to dispense the product.

When it comes to Mergers & Acquisitions, Sanjida Chowdhury (Fresenius Kabi USA) and Kathleen Peterson (Hogan Lovells) not only gave a number of considerations regarding what to consider but also showed how dangerous it can be to blindly purchasing a company or even a product without doing the full due diligence.

All of the slides from Alice Valder Curran (Hogan Lovells) provided a great review of the current environment surrounding pharmaceutical manufacturers and pricing, including the political nature of what we do.

And John even mentioned his own slide on Puerto Rico and the Medicaid Program, showing how there remains a high level of uncertainty as to how this may impact manufacturers’ contracting strategies and bottom line.

This year’s MDRP was full of information for manufacturers and as always, there’s a lot going on in the government programs, so if you need help or are overwhelmed by all of the information, give me a call. I can help you figure out what is relevant and how to ensure you’ve fully and accurate implemented the Final Rule! Katie Lapins, Government Pricing Specialists, LLC, 303.993.6456, K.Lapins@GP-Specialists.com.




Monday, September 26, 2016

Unintended Consequences – AMP and 5i

It had humble beginnings. In 1991, Congress passed the Omnibus Budget Reconciliation Act (OBRA 90), setting up the Medicaid Drug Rebate Program (MDRP). The goal was to enlist the aid of pharmaceutical manufacturers in lowering the cost of pharmaceuticals prescribed to Medicaid patients, and financed by the Federal and state governments. Access to manufacturers’ “best price” was the goal, to help balance the Federal budget. The metric used to measure the best price differential was Average Manufacturer Price, or AMP.

AMP was defined in the statute as the average price paid to the manufacturer for the drug in the United States by wholesalers for drugs distributed to the retail class of trade. The calculation methodology worked reasonably well for the first fourteen years, without the benefit of regulations from CMS. CMS did provide some guidance through manufacturer notices, dealing with the classes of trade to be included in the retail class, and identifying the credits that could be applied to correctly compute this metric.

All that changed in 2007. In July, CMS released a final rule implementing the price reporting provisions of the Deficit Reporting Act (DRA) of 2005. The DRA modified the customer classes, and discounts, that could be included in AMP calculations. Not a huge deal. However, the DRA burdened the AMP with a new task; it was to become the basis for the Federal Upper Limit (FUL).


Consequences of AMP Final Rule and 5i on drug pricing
FULs are used to determine reimbursement values for generic drugs dispensed in the Medicaid program. Prior to this, FULs had always used Average Wholesaler Price (AWP) as the metric for paying pharmacies. CMS was concerned, for valid reasons, that AWP did not reflect marketplace reality, and that CMS was funding these transactions based upon some “suggested retail” pricing at the government’s expense.


The reaction in the retail industry was immediate. On December 19th, 2007, the U.S. District Court in Washington issued a preliminary injunction order to prevent the implementation of the new AMP rules and the AMP-based FUL, in response to a lawsuit filed by the National Association of Chain Drug Stores (NACDS). NACDS claimed the drug stores were likely to suffer irreparable harm if these rules were implemented.

ACA Proposed Rule…”Average Manufacturer Price (AMP) means, with respect to a covered outpatient drug of a manufacturer (including those sold under an NDA approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act (FFDCA)), the average price paid to the manufacturer for the drug in the United States by wholesalers for drugs distributed to retail community pharmacies and retail community pharmacies that purchase drugs directly from the manufacturer.” This rule was finalized this year intact, and solidified the concept of RCP.

Narrowly defining the marketplace class of drugs led to an obvious question…what happens to the drugs that rarely or never go through an RCP? Are they subject to the same calculation parameters? To resolve this dilemma, CMS had defined drugs that are “injected, infused, inhaled, instilled, or implanted.”

These are the new “5i” drugs, with their own AMP calculation methodologies, including which discounts are included, and how the entity classification is to be determined, all on a monthly basis. It raises several concerns, such as sharing the same Base AMP with “standard” AMP, determining the true split between pharmacy types when RCPs dispense 5i drugs, and the ability to make this determination monthly.
The beat goes on.


About the author:

John Bliss is a contributing writer for the Medicaid Drug Rebate Program Summit. He has extensive experience in the pharmaceutical industry, including AstraZeneca, Sanofi Aventis, Merck, Pfizer, Daiichi Sankyo, and Bristol-Myers Squibb (BMS). The bulk of John’s career was at BMS. When OBRA90 hit, Government Pricing took over his life. Government pricing, managed care contracting, rebates, and chargebacks continue to extend challenges and provide meaningful employment. John now works as a consultant, primarily subcontracted by other consulting firms, providing value added services to each of them and their clients.





MDRP Pre-conference Day - Recap on the AMP Final Rule

A recap from the MDRP pre-conference Day on the AMP Final Rule by John Bliss, an independent government pricing consultant.


I spent most of the day in Symposia C. The focus was on the ”AMP rule: Application, Implementation and Impact of the Final Rule.” The first session was a panel of manufacturer representatives, and the rest of the sessions were led by members of various legal and consulting firms.

The panel discussed the various components of the final rule, and pointed out that 2016-2017 will be a transitional year. It will be critical to provide and archive a record of all the activities surrounding the actions taken to implement the final rule, including legal sources, consulting recommendations, policies and procedures, and contract changes. The goal is to also steer documentation into “non-privledged” files, to prevent complications if audited in the future.

Topics addressed by the panel were:

  • Retail Community Pharmacies (RCP) and Specialty Pharmacies
  • Oral Dosage Forms
  • Specialty Pharmacies Class of Trade Issues
  • 5I Drugs
  • Line Extensions
  • Best Price – Offered or Achieved?
  • Authorized Generics – who is doing the repackaging?


The rest of the day was spent digging into these topics, and others (Bundles and BFSF).

Comments:

Retail Community Pharmacies (RCP)


• Do not set up Specialty Pharmacy Class of Trade (COT) – not defined in rule
• If set up, set up two…mail and non-mail
• Learn the customer – pick up the phone

Oral Dosage Forms:

May need to go to the “Ship To” level

5i Drugs

• CMS does not understand them - may need to write it up and present it to CMS
• 70/30 ratio may be difficult to ascertain - evaluate status monthly
• Need created by NACDS lawsuit to limit AMP to RCP activities
• Not generally distributed through RCP
• Filter by Class of Trade (COT) only
• Restatements not requires

Line Extensions

• Waiting for CMS to finalize rule
• “We are clarifying” – scary words
• Congress wanted to captue dollars based on original base AMP
• Anti Dependency Formula disqualifies line extension status

Bundled Sales

• Bundles are pricing conditions based on products and performance
• Plenty of ambiguity within the definitions
• Communication critical among GP, Legal and Contracting

Bona Fide Service Fees

• Conceptually difficult

  • Bona Fide = Ignore, not included in AMP
  • Non Bona Fide = Include in AMP = reduce AMP

• Avoid putting legal definitions in contracts
• Look forward – involved Contracting personnel
• Critical – must have 4-part testing set up
• Review existing, catalog itemized services

OVERALL:

The main take away for all of these sessions is clear. Make the assumptions when required, and Document, Document, Document.


About the author:

John Bliss is a contributing writer for the Medicaid Drug Rebate Program Summit. He has extensive experience in the pharmaceutical industry, including AstraZeneca, Sanofi Aventis, Merck, Pfizer, Daiichi Sankyo, and Bristol-Myers Squibb (BMS). The bulk of John’s career was at BMS. When OBRA90 hit, Government Pricing took over his life. Government pricing, managed care contracting, rebates, and chargebacks continue to extend challenges and provide meaningful employment. John now works as a consultant, primarily subcontracted by other consulting firms, providing value added services to each of them and their clients.


Read more on this topic and about MDRP 2016 here:






Friday, September 23, 2016

Farewell to 2016's MDRP Summit

It’s Thursday night, the 2016 Medicaid Drug Rebate Program (MDRP) Summit has come to a close, and hopefully you are all safely at home and asleep in your beds – unless you took the opportunity to extend your stay in beautiful downtown Chicago, in which case I hope you have a wonderful stay! (If you are still at the lobby bar, my hat is off to you.)

It had been a few years since I’d attended the MDRP Summit, having spent some time broadening my healthcare compliance horizons, but this week felt like coming home. Throughout my consulting career I’ve witnessed many new analysts crash against the rocks of Government Pricing, only to request an immediate transfer as soon as their assignment on a GP project is complete. But once in a while you find the rare holdouts: the few, the proud, the GP geeks. My incomparable boss, Katie Lapins, tells the story of a former employer stopping by her desk to tell her she was going to have to do “something with Medicaid;” little did she know that it was the genesis of an illustrious GP career. Mine was the first time I took data files and a methodology grid, and tied my ASP calculation exactly to a client’s. Until that moment, I thought there were surely too many variables to expect to reach the same number independently. But then I did. I “found” ASP. To three decimal places. And that “ah ha” moment was all I needed – I was hooked.

To me, there is still no GP feeling better than tying out a parallel calculation; it feels like the ultimate assurance that you have done your job correctly. But even failing to tie out can be rewarding, because then you get to dig into your various data buckets, inclusions and exclusions, and formulas, and determine which model to adopt. On some level, that is what we do in Chicago every September. Although we all come in with the same statutes, regulations, and guidance, what we decide to do with them can feel profoundly different. Rival GP system providers vie for your business, consulting firms recommend their data analytics platforms, pundits make political predictions, and lawyers offer up (sometimes conflicting) legal advice.

There is no one-size-fits-all solution for the panoply of large and small, branded and generic pharmaceutical manufacturers that attend the Summit, and there is not always one right answer, so we are told repeatedly to draft policies and procedures, develop reasonable assumptions, and document our methodologies. To help shape your policy and methodology decisions, and to ensure that you continue to benefit from the Summit in the coming months, Knect365 will be providing the presentation slides to all attendees, so keep an eye on your inbox, and continue to check the Health Care Insights Blog for more updates in the coming weeks.

I hope you were able to glean some valuable insights from the MDRP Summit and receive helpful answers to all your questions. More than that, I hope you were able to meet a few new people, finally put faces to names, and reconnect with colleagues and friends. To my friends, thank you for welcoming me back to the GP community with such open arms – let’s not wait another year to do this again.


About the Author: Dana Z. Collins has worked in the Government Pricing space for almost a decade, as both a consultant and an in-house compliance professional. As a GP consultant, Dana’s areas of primary focus are audits/assessments, training, ongoing calculations, Medicaid rebate processing, and policies/procedures – oh, and blogging. After working with Katie Lapins, Principal/Owner of Government Pricing Specialists (GPS), on and off over the years, Dana joined GPS in 2016 and has never looked back.




Thursday, September 22, 2016

A Review with Some of the Top GP Legal Experts

One of my favorite sessions each year at MDRP is the “fireside chat” with the lawyers that are experts in government pricing. (I’m still waiting for the fire, but there are probably building code restrictions on this.) What becomes evident is that even those with extensive legal training can often have a different opinion on one issue. This year, Rick Zimmerer (KPMG) lead the panel and it consisted of Alice Valder Curran (Hogan Lovells), William Sarraille (Sidley Austin), John Shakow (King & Spalding) and Jeffrey Handwerker (Arnold & Porter). Here are some of the “hot topics” covered in this year’s session:

Best Price – In CMS’ most recently issued FAQ’s, they addressed the question manufacturers have had for years – is Best Price available the best price achieved or offered. Unfortunately, the response by CMS did not provide much clarity. The perception by some on the panel was that CMS’ response was most likely about stacking of discounts but others felt it wasn’t so straightforward. All panelists agreed that manufacturers must make, and document, reasonable assumptions.

This led to the question as to whether or not manufacturers should submit reasonable assumptions to CMS. All panelists agreed that this is a good idea, at least when manufacturers are having to make a determination with the gray areas we have. John pointed out that a client recently was investigated for a False Claims Act and when they showed that they had reached out to CMS on four separate occasions and did not receive a response, the investigation appears to have ended.

The purchasing by non-DSH hospitals that are Covered Entities (CEs) are to be excluded from the calculations according to a couple on the panel but the other others. A very strict interpretation of the legislation probably indicates they should be excluded but different interpretations are possible and as with everything else, manufacturers should document their assumptions. 

The panel also discussed the lack of guidance from CMS regarding line extensions. It sounds like all, or at least a majority, of the panel members have clients who have submitted a request for an exception but none have heard back from CMS. There is also suspicion that the Mylan issue with the Epi-pen may be stalling this at CMS and the overall issue may be politicized now more than ever.

We have an upcoming election and drug pricing has been a hot topic in the media this last year. Additionally, we have had a busy year when it comes to regulations, guidance and even legislation. So, given this current environment, Rick asked the panel what they see as the single biggest issue. Alice stated the lack of definition for line extensions. John couldn’t get it to just one single answer as he thought there are two issues. First, the treatment of authorized generics in AMP and second, the reserves manufacturers have been carrying for PHS/340B overcharges, awaiting a mechanism from HRSA to provide the refund. Jeff identified the stacking of discounts in Best Price, especially with the consolidation within industry. Bill thinks the focus on pricing in the media and the poor image of the industry is an issue, especially as the DOJ attempts to find ways to affect drug prices and tie manufacturers’ actions to potential violations of the law.

As always, this session provided a lot of substance for manufacturers to discuss when they return to their offices. 

About the author: Katie Lapins has worked in the pharmaceutical and medical device industries in the areas of commercial and government contracting, compliance, finance, and sales operations for over 15 years. As a GP consultant, Katie’s areas of primary focus are audits/assessments, training, ongoing calculations, and policies/procedures. Katie is the principal/owner of Government Pricing Specialists, LLC which she started in 2010 to provide a cost-effective consulting option for manufacturers.




MDRP 2016: Day One - Government Agency Sessions

The 2016 MDRP Summit is officially underway, and the theme of the morning was Government Agencies.  IIR always does an excellent job recruiting key members of the agencies with which we interact to provide updates and answer questions, and this year was no exception.  Sometimes these government updates take place at the end of Day Two, when we might not be quite as fresh or ready to absorb information as we would be, say, had we not spent most of the night in the lobby bar, so I really appreciated kicking Day One off with these detailed sessions.  No matter how much we read and dissect the statues, regs, and FAQs, there is no substitute for getting information directly from the horse’s mouth.  There is also the immediate gratification of standing up, asking a question, and getting an answer right away, as opposed to waiting months (or years) before our comments are addressed via rulemaking. 

This year’s Opening Keynote Address: A Conversation with Scott Gottlieb: Health Care Policy Winds in an Election Year: Payment, Reform, Data Sharing, and Patient Access was delivered by the aforementioned Scott Gottlieb, and covered in today’s Drug Pricing in Today’s Environment blog by Katie Lapins.  The keynote was followed by CMS Update: Update on the Final Regulation Implementation by John Coster, Director, Division of Pharmacy, CMS.  John, who called in remotely, covered CMS’ talking points on the AMP Final Rule, and opened the floor up to questions – a move he may have regretted after he was subjected to cross-examination on Puerto Rico’s Departamento de Asuntos del Consumidor (DACO) program by John Shakow, Partner at King & Spalding.  Finally, Commander Krista Pedley, Director, Office of Pharmacy Affairs (OPA), Health Resources and Services Administration (HRSA), delivered her annual HRSA 340B Update, which included information on the Audit Plan, and a Q&A session where some attendees expressed their concerns about elements of the 340B program. 

Following the agency sessions, Alice Valder Curran, Partner, Hogan Lovells presented a much-anticipated session entitled Oversight: Time to Get Ready.  Alice’s presentation was a helpful follow up to the morning sessions, because it provided information on recent government office studies and industry trends.  She touched on the topic of counting patient coupons in ASP, citing the recent U.S. Government Accountability Office (GAO) study on Medicare Part B coupon discounts.  She also discussed price changes among generic drugs covered under Medicare Part B, noting GAO study results showing that generic drug prices under Part D fell 59% from 2010 to 2015, with the exception of certain lower use drugs with complex manufacturing requirements that witnessed “extraordinary” price increases during this period.  Alice also discussed the PHS/340B program, describing the various audit functions performed by the OIG’s Office of Audit Services (OAS) and Office of Investigations (OI), noting that there have been no audit findings this year, and reminding manufacturers that a revised Pharmaceutical Pricing Agreement is coming, and that it must be signed.  Alice offered a number of strategic suggestions for manufacturers, recommending that they keep their management teams in the loop regarding these industry trends, identify areas of pricing risk (especially for drugs with high Medicaid or Part B spend), ensure that bundles, authorized generics, and line extensions are treated appropriately in GP calculations, maintain thorough documentation, and hire an outside firm to do a test audit to identify potential problem areas.  Alice also encouraged everyone to be nice to John Coster at CMS, a comment that was surely unrelated to the above-mentioned Q&A exchange.

Come back for more recaps of IIR’s 2016 MDRP Summit throughout the week and after the show, and for those of you who are here in person, keep coming to these fantastic sessions!

  
About the Author: Dana Z. Collins has worked in the Government Pricing space for almost a decade, as both a consultant and an in-house compliance professional.  As a GP consultant, Dana’s areas of primary focus are audits/assessments, training, ongoing calculations, Medicaid rebate processing, and policies/procedures – oh, and blogging.  After working with Katie Lapins, Principal/Owner of Government Pricing Specialists (GPS), on and off over the years, Dana joined GPS in 2016 and has never looked back.




Wednesday, September 21, 2016

Drug Pricing in Today’s Environment

MDRP’s keynote speaker, Scott Gottlieb (Resident Fellow, American Enterprise Institute) focused on drug spending and the politics in today’s environment. This topic seems to dominate many of my conversations when people hear that I work in the world of pharmaceutical pricing. In recent years, there has been great scrutiny on the increase in pharmaceutical prices. In fact, Mylan’s CEO Heather Bresch is scheduled to appear today before the US House Committee on Oversight and Government Reform where she will be questioned about how the company recently raised the price of their EpiPen allergy shot by more than 400%, from $57/shot in 2007 to $300/shot.

Although there has been a lot of media attention regarding drug pricing with the EpiPen price increase this year and Daraprim last year by Turing Pharmaceuticals, LLC, overall drug prices are actually in line with current inflation rates. However, the perception that drug prices are rising at unrealistic rates are fueled by the high publicity cases as well as the fact that drug spending is rising as a component of total medical spending. This is due to a few reasons…

Pharmacotherapy is more prevalent as a treatment option because there are more drugs available today that are more effective than other treatments. For manufacturers, changes in approval mechanisms at the FDA and better efficacy of these products are often driving decisions related to research efforts. For example, today’s treatments for asthma are more expensive than those used 10 or 20 years ago, but they are also more effective, reducing hospitalization of patients and the overall cost to treat the individual patient.

Within the insurance world, changes are also taking place. For those purchasing their insurance through the marketplace or exchanges, insurance coverage has shifted to high and very high deductible plans as a result of the Affordable Care Act (ACA). These were first offered as part of the state exchanges and are now being adopted by commercial and Medicare plans. There has also been a shift from a copayment to coinsurance where a patient pays a percentage of a drug’s total cost rather than a fixed copay and many plans are moving towards closed drug formularies which means patients have no coverage for a product not on formulary. As the use of specialty products expands and insurance plans shift more of the burden to the patient, the out-of-pocket expense is making the cost of drugs untenable for some consumers. For the asthma patient in the previous paragraph, with older therapies, this patient may have been hospitalized and only been responsible for a copayment of $100 or so. However, with the new pharmacological treatments, if the drug that works best for this patient is not on her plan’s formulary, her cost may be hundreds of dollars each month to keep her asthma under control. With this improvement in care, the patient’s individual cost has now risen considerably but the insurance plan’s cost has dropped.

One additional item of interest is the use of rebates in the pharmaceutical industry. Many health insurance plans negotiate rebates with manufacturers. They receive this rebate even if the beneficiary pays for the product as part of their deductible. In this situation, the insurance company still receives the rebate with no benefit being passed along to the beneficiary.

Anyone working within the pharmaceutical industry who is familiar with pricing and contracting can attest to the complexity of the current system. In Government Pricing, we often say, “Follow the dollar, follow the pill.” In this dynamic environment, the complexity to “follow the dollar” continues to be even more difficult.



About the author:
Katie Lapins has worked in the pharmaceutical and medical device industries in the areas of commercial and government contracting, compliance, finance, and sales operations for over 15 years. As a GP consultant, Katie’s areas of primary focus are audits/assessments, training, ongoing calculations, and policies/procedures. Katie is the principal/owner of Government Pricing Specialists, LLC which she started in 2010 to provide a cost-effective consulting option for manufacturers.




MDRP 2016 Pre-Conference, Track C: The AMP Final Rule

It’s the most wonderful time of the year!  That’s right, MDRP Summit has kicked off at The Palmer House Hilton in Chicago and, despite the fact that the conference doesn’t officially kick off until Wednesday, the industry’s premier subject matter experts wasted no time providing their most valuable insights to the GP community.  After four years of waiting for the AMP Final Rule, and countless presentations urging us to be ready for it, we finally have some definitive language to review.  For those of us who have (obviously) read every word of the final rule, but want to make sure that we implemented all the key changes, the Track C: Full Day Symposium on The AMP Final Rule: Application, Implementation and Impact of the Final Rule provided the perfect prelude to the Summit.

Joe Birdsall of Dohmen Life Science Services kicked off the day by introducing a panel discussion on Deconstructing the AMP Final Rule: A Step by Step Analysis of the Key Implications of the Final Rule, moderated by Kristin Hicks of Arnold & Porter, with panelists Frank Prybeck (Celgene), Josh O’Harra (Eli Lilly), and Kave Niksefat (Amgen).  I always enjoy panel discussions because they give us a sense not just of the regulations, but of the day to day operational challenges manufacturers might face when implementing them.  Panelists discussed the pain of identifying Mail Order and Specialty Pharmacies, which might require a thorough review of contract language, or even picking up the phone to ask the entities what products and services they provide.  The participants also stressed the importance of establishing consistent processes, whether you are assigning class of trade or identifying 5i products, to ensure determinations are consistent and unbiased.

Next up was Christopher Schott of Hogan Lovells, with an excellent presentation on Identification & Alternate Rebate Formula for Line Extensions.  I was particularly excited for this session because I promised one of my clients, who was unfortunately unable to attend the Summit this year, that I would explain everything he need to know about calculating AMP for line extensions when I got back.  I was able to catch up with Chris after the session, and I will be posting a more thorough recap of his presentation and this topic after the conference for our readers at home.

John Shakow of King & Spalding was up next, expounding on everything we should know about 5i AMP, Eligibility, Calculations & Implications.  This is another area that has been a hot topic among my clients, as many manufacturers are acquiring new products, and may be identifying 5i products, performing the 70/30 determination, and calculating 5i AMP for the first time.  John demystified the calculation, providing a background on the genesis of 5i AMP, and reminding us that it’s really just a matter of inclusions and exclusions.  Oh, and there’s the pesky, monthly requirement to calculate when 5i eligible products are considered not generally dispensed through a retail community pharmacy.  Although some in the room disagreed, John suggested that manufacturers not back out their government sales when performing the 70/30 calculations, a position supported by language in the AMP Final Rule, to identify an accurate percentage of “not generally dispensed” sales.

The next two sessions, Bundling by John Gould of Arnold & Porter, and Impact of the Final Rule on COT with Jesse Mendelsohn and Dhirendra Jena of Model N, provided helpful insights for those responsible for GP within their organizations.  Perhaps more importantly, they identified other covered employees within pharmaceutical organizations who should be aware of the impact their contracting and operations decisions have on the company’s GP calculations.  It might not be a bad idea to review these presentations with your shared services groups to give them an idea of how their work impacts you.

Finally, King & Spalding and EY partnered up to close the Pre-Conference Day with Service Fees: Bona Fide or Constructive Price Concession?  They walked us through the four (seven?) part test for determining whether fees to wholesalers and other AMP, BP, and ASP eligible entities can be considered bona fide.  This is another presentation you might want to pass on to your colleagues after the Summit, particularly those in Managed Markets and Commercial Contracting – if they don’t modify their contracting strategies, you can at least be aware of what to expect.  As always, document your methodologies and reasonable assumptions to ensure that your results are consistent and transparent, and don’t be shy about soliciting advice and industry data from legal counsel and FMV consultants.

After we filled our brains with all the GP information we could handle, IIR officially welcomed us to Chicago with the Grand Opening Reception in the 4th floor exhibit hall.  As I made my way through the room catching up with old friends and colleagues, I couldn’t help but laugh at how far the booths have come since I began my career; it seems like just yesterday that I was awkwardly slapping Velcro panels to an un-structurally sound frame, but now the booths look seamlessly professional (some are even complete with interactive iPads!).  What hasn’t changed is the quality of the SMEs in the booths (and those roaming the room), who are ready to answer your questions and offer solutions to your most pressing problems.

That’s all for today, kids.  Stay tuned for live blog updates throughout the 2016 MDRP Summit, from your friendly neighborhood Government Pricing Specialists!


About the Author: Dana Z. Collins has worked in the Government Pricing space for almost a decade, as both a consultant and an in-house compliance professional.  As a GP consultant, Dana’s areas of primary focus are audits/assessments, training, ongoing calculations, Medicaid rebate processing, and policies/procedures – oh, and blogging.  After working with Katie Lapins, Principal/Owner of Government Pricing Specialists (GPS), on and off over the years, Dana joined GPS in 2016 and has never looked back.