Thursday, September 16, 2010

MDRP 2010 Conference - Government Pricing Program Audits, Restatements, Adjustments, and Disclosures: The Needle has Moved – Have You?

Constance Wilkinson, Member – Epstein Becker & Green

The Health and Human Services agency has released the Fiscal Year 2010 work plan for their audits of the pharmaceutical industry. If you are an eligible participant in a government program, you are also an eligible participant for their audit groups. This additional participation means that you may want to make adjustments and become compliant before you get that knock on the door.

The first focus will be on the AMP Calculations and will be done by the Office for Audit Services. One of the issues that may trigger an audit would be if you restated with a significant change to the number. But having said that it is not a certain trigger and far from the complete list of reasons for an audit. With many areas of AMP being left to reasonable assumptions it is imperative that you document, document, document! When the auditor does come to your door and asks you why the AMP calculation was done the way it was done in Q303, you better be able to not only justify your reasons for the calculation actions, but also be able to recreate them.

The second focus will be done by the Office of Evaluation and Inspections to look for those companies who are participating in the Medicaid Reimbursement Program with Unapproved Drugs. There are drugs out there that are so old (e.g., grandfathered drug) they do not have an NDA and the company has failed to submit a new one to the FDA bringing their product into the Approved drug category. If the state is reimbursing pharmacies for this drug, with the assumption that it is approved and you are allowing that action, it can be considered fraud. There has already been one settlement on this issue and with future audits coming, it is imperative that you update your drugs with the FDA and ensure you are compliant with all government program participation.

The last area of focus will be for the Impact on Medicaid Rebates for Authorized Generic Drugs and will also be done by the Office of Evaluations and Inspections. There are still some companies that do not understand the difference between an Authorized and an Unauthorized Generic and how each should be treated differently. If you think you may be treating your generic incorrectly, and thus paying the incorrect rebate amount, you need to take action to restate those rebate numbers and true-up any monetary adjustments as a result. Be sure to work with your regulatory department to understand how your product is categorized in the eyes of the FDA and thus CMS, and then make any necessary changes.

Be sure to understand that with the tight budgets we have all seen these past few years, it is more and more important for the government to ensure they are getting all the discounts and reimbursements they are owed. And with the new money being funneled into the offices that do the overseeing and auditing of the pharmaceutical industry, you can bet there will be more chances for your door to be next on which to be knocked. Make sure you are prepared.

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