Wednesday, October 7, 2015

Medicaid Drug Rebate Program Summit (MDRP) 2015 Wrap Up!

John Shakow highlighted the “hot topics” from the various presentations that were provided prior to the conference. Some of the slides he referenced included:

From Miree Lee’s Government Pricing Basics, the numerous pharmaceutical price points, including AAC, EAC, UAC, MAC, SMAC, NADAC, AMP, FUL, BP, URA, 340B, ASP, NFAMP, and FCP. 

Alice Leiter (Hogan Lovells) highlighted the critical components of a 340B policy that can be applied to other GP Policies.

Steven Ruscus (Morgan Lewis) presented the only slide about biosimilars and Part B, highlighting how they will be reimbursed which is a special hybrid arrangement. This could define the next generation of reimbursement.

Chris Cobourn (Huron) discussed the recent results/trends of a GP diagnostic survey showing many companies have insufficient resources, inconsistent documentation, and no G/L reconciliations.

Connie Wilkinson & Alan Arville (Epstein Becker) highlighted the recent guidance regarding an the definition of an eligible patient for the 340B program.

Bill Sarraille (Sidley Austin) went over what that he’ll be looking for if/when the Final Rule is released.

Alice Valder Curran (Hogan Lovells) showed how manufacturers should be evaluating the Final Rule by looking at it with the thought, “Potential challenges if the Final Rule says…” Manufacturers should know that litigation is an option, but as John Shakow noted, only if you submitted a comment to the Proposed Rule, or potentially if you are part of an associated such as PhRMA that submitted comments.

David Tawes from the OIG, discussing the future work involving Medicaid drugs and the possibility of attaching an inflation penalty to generic products.

John Shakow’s own slide on the 340B Proposed Rule and the comments from the covered entities that an instance of overcharging should be defined as per unit, not per order.

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’re ready for the Final Rule! Katie Lapins, Government Pricing Specialists, LLC, 303.993.6456,

Friday, October 2, 2015

IIR's MDRP Summit 2015 | Day 2 – External Counsel

Friday morning, IIR arranged for a session made up of group of attorneys who serve as external counsel to pharmaceutical manufacturers, focusing in part on the government healthcare programs.  This powerhouse group was moderated by Sabrina Yohai (Pfizer), and the panelists were Alice Valder Curran (Hogan Lovells), John Shakow (King & Spalding) Jeff Handwerker (Arnold & Porter), and Bill Saraille (Sidley Austin).

First, Alice walked the attendees through the legislative process for those areas that affect pharmaceutical manufacturers, explaining the differences between legislation, regulations, rules, and guidance, and also the actual contracts with the government and the preamble of rules. Sabrina emphasized the need for manufacturers to understand all of the “documents” that can affect their operations.

The panelists then discussed the questions that are most frequently being asked of them these days:
John S – bona fide service fees, and when a drug manufacturer should blend AMPs across an NDC-9;
John H – also bona fide service fees, free goods/PAP, especially in the context of a past purchase vs. a future purchase, and outcomes-based contracting;
Bill – same as the others with the comment that outcomes-based contracting is fast becoming a big issue, and the other area is ESI offers;
Alice – besides the issues previously mentioned, she also sees questions around limited distribution plans for the 340B program.

With regards to the Final Rule, what issues are most concerning to you, and what would cause you the most heartburn:

John H – the proposed change to the definition of “bundled sales” with the possibility of it being applied retroactively, and the BP exclusions that currently allow any price to a 340B entity, but the proposed rule narrows to sales under the 340B contract.
Bill – agrees with John, especially with regards to bundled sales, and the lack of compliance by the Covered Entities in the 340B Program.
Alice – potential expansion beyond three years for restatement periods and when that might be allowed, Medicaid MCO reporting, and the potential for CMS to make rules based on the ease of implementation, not always the statutory standard.
John S – agreed with the list and added the issue of how specialty pharmacies are treated within the context of retail community pharmacies.

With regards to enforcement and settlements, the panel sees the following as “HOT TOPICS”:

Bill – bona fide service fees remain a focal point as well as a shift from Best Price to AMP and ASP issues, and with regards to defending against potential investigations, the importance of documenting your methodology and assumptions.
John H - agrees with Bill and emphasized that the standard is reasonable, but the government has shifted to what you subjectively believed at the time of a submission. Documentation is the best way to demonstrate this, including advice of counsel.
Sabrina asked about how to submit assumptions and the panel agreed that it should be focused on those areas most critical to you, and when things change.
John S - ASP submissions should include reasonable assumptions.
Bill - submit early and often!
Alice - don’t assume, a prosecutor understands or interprets the statute/regulations like CMS, so make sure, you document your interpretations.
John H - US Attorney might look at how something impacts the government’s budget even if a pharmaceutical manufacturer does not consider this when making assumptions.
Sabrina - remember that being “conservative” in one program may not be conservative in another program and make sure, your internal documentation is solid.

If you were named general counsel of a major pharma tomorrow, what would you do to strengthen the GP area:

Alice – make sure, the rest of the business understands what you do and the importance of their role in GP (regulatory with product master, rebate team with BP and tracking customers.)
John S – educate company executives to understand the issues GP folks deal with (size, way commercial programs impact GP, risks of failing to fulfill the requirements.)
John H – look at documentation (policies, SOPs, assumptions) to make sure, it is sufficient for a government audit.
Bill – would add the need to audit the system setup for GPcalcs.

What’s a good way to get the conversation started with senior executives within an organization:

John S – focus on small pieces;
Alice – look at the gross-to-net impact of the programs to highlight this as a bigger piece of the business;
John H – has seen an increased focus by senior executives.

Questions form the audience were related to Texas price reporting, co-pay cards/programs, the new DOJ policy about filing criminal charges, and The First Amendment within the context of off-label promotion.

Final advice or comments from the attorneys: understand what it is others within your company do; the importance of making sure the GP team members feel valuable, especially for the women in this arena; we can be proud that we work in an industry that saves lives, and our job within these organizations is to make sure, our products are available to the most needy in a compliant manner.

As always, MDRP Summit has provided a vast amount of information and great opportunities for networking with others in the industry. If you would like more information on any of the topics that were covered this week, please contact me. As always, there’s a lot going on in the government programs, and I can help your organization figure out what is relevant, and how to ensure you’re ready for an audit! Katie Lapins, Government Pricing Specialists, LLC, 303.993.6456,

Thursday, October 1, 2015

MDRP Summit: Day 1. Morning Sessions & Keynote Address

The first day of the conference kicked off today with Edward McAdam from Fresenius Medical Care discussing current events in the pharmaceutical industry, including recent price increases that have been covered by all of the media outlets.

The keynote address was from Ezra Klein, Editor-in-Chief of and the central theme was, “Where is healthcare going?” within the context of politics, reform, and policy. 

Mr. Klein first spoke about Zoltan Esteban who is running for President of the United States and is going around country in a bus shaped like a coffin. “He is the only candidate whose sole issue is to conquer death.” Looking at historical elections, oftentimes, topics that were important then now seem ridiculous. To Mr. Klein, that may be the case with our current situation. All of the conversations about things like immigration reform may be viewed by historians as a waste. Obamacare, one of the biggest pieces of legislation in this administration, has been experienced as a slow moving political “trauma” by both sides of the aisle. Republicans have not been able to repeal it and Democrats have lost the House over it. This law is here to stay, especially since the US Supreme Court has made rulings on issues before it, and the best anyone can do is to change it, but neither side is comfortable with it.  Unfortunately, the most recent round of healthcare reform has not focused on what’s probably most important and that’s value within the healthcare system. 

Most people today, including political candidates, agree that the focus of healthcare reform should be on controlling cost, not increasing access. To. Mr. Klein, the belief that the central concern should be about controlling cost, there is something wrong. It should be focused on providing value. Consider these 2 scenarios:

1.    The federal government passes a law that bans all healthcare. Spending drops to a negligible amount of GDP as a result, or,
2.    Researchers invent a pill that guarantees a life span of 180 years with a good quality of life, but doing so raises healthcare costs to 45% of GDP.

Virtually everyone can agree that Option 1 costs the least but the outcome is not desirable. Option 2 costs a lot more but the outcome is more preferable to society as a whole and probably to each individual. 

Instead of focusing on costs, the question should be, “Are we getting good value for our healthcare dollar spending?” Mr. Klein says no, we’re paying more to get less and the problem is in the value, not in the “abstract amount” of what we spend. In recent years, the growth in healthcare expenditures has been slowed but that’s been a result of making healthcare more expensive at the individual level through higher copays, deductibles, etc., and lowering the costs with the providers such as hospitals and drug companies and narrowing networks to enable insurance companies to be able to better negotiate rates. A tremendous amount of the focus currently is on increasing individual responsibility with regards to cost and making people more cognizant of their healthcare decisions.  These both lower cost at the government level but do nothing to improve healthcare

So what is good healthcare policy? The big “win” in healthcare is not dying, not getting an infection when you go to the hospital, finding a cure for Alzheimer’s. Very little spending occurs related to things such as research and cures, with more of an emphasis on treatment. Today, the most important thing in healthcare in Washington is not the care given as part of health but is the budget related to it.  This is true in other areas that include research and development – we will often not know the advancements and opportunities we missed. Viewing healthcare as a scientific issue, not a budget or social justice issue, is a different way of looking at it, and we don’t track how healthy we are and how healthy we could be. Many of the healthcare spending forecasts do not take into account the potential savings from investments in prevention and treatment. Sovaldi® is a good example. It was in the media when it first launched because of its high cost. It treats Hepatitis C and is an expensive drug but it’s cheaper than the ongoing treatment of someone with Hepatitis C. 

Chris Hatwig from Apexus, the company that handles the 340B Prime Vendor Program, next provided an overview of their services and then went through the Proposed Guidance recently issued. (See yesterday’s post for a lot more detail on this hot topic!) And next, although CMS was going to speak about recent updates, at the last minute, they were unable to make it, so Dave Tawes from the Office of Evaluation and Inspections, Office of the Inspector General, graciously stepped in and spoke about their recent initiatives and their work plan. This included information about recent Medicaid studies as well as an interesting study about the use of anti-psychotic drugs in children covered by Medicaid. In this study, 67% of the claims showed there was “quality of care” concerns, 53% poor monitoring, and other issues such as too many drugs being prescribed, the side effects, and the use of drugs not indicated for children.

Other topics included AMP reporting and a comparison of drug expenditures under Medicaid and Medicare Part D. Not surprisingly, drug costs under Medicaid are less than those under Part D. Also, the OIG reached a $12.64 million settlement with a manufacturer for misrepresenting ASP data to Medicare

The future work plan includes requests from Congress and HHS, mandatory OIG reviews, emerging issues such as price increases in the industry that made recent news, generic drug price increases, treatment of authorized generics, specialty drug pricing, audits of states’ collection of rebates for drugs from Medicaid MCOs, contractor oversight of covered uses for Part B drugs, and the spread for high cost drugs within the context of Part B and reimbursement.

Check back tomorrow for more updates from MDRP Summit and if you would like more information on any of these topics, please contact me. As always, there’s a lot going on in the government programs and I can help your organization figure out what is relevant and how to ensure you’re ready for an audit! Katie Lapins, Government Pricing Specialists, LLC, 303.993.6466,

Pre-Conference Workshop | Symposium C – 340B Mega Guidance

Today’s workshop was chaired by Mike Benedict, Vice President, Apexus, who opened with fundamentals of the 340B program and an overview of Apexus’ services which was helpful for those newer to the program. Next, an overview of the key areas within the Mega Guidance was covered by Connie Wilkson and Alan Arville (Epstein Becker Green) with a bit more detail on how we got to where we are today, including the purpose of the guidance, to provide clarity and address concerns of the program by the various stakeholders. Although this guidance was originally intended to be issued as a rule, it was issued as guidance because of PhRMA’s (successful) challenge that HRSA does not have the authority to promulgate a legislative rule related to orphan drugs. The guidance has been issued in part because of ongoing criticism by the OIG, the GAO, and Congress, including the lack of consistency with 340B eligibility, duplicate discounts, patient discounts, and what is being done with the revenues realized by the covered entities (“CEs”).

Other topics from the Mega Guidance that were reviewed were the definition of a “Covered Outpatient Drug,” the procedures manufacturers should follow in the event they need to issue refunds to the CEs, the necessary standards for limited distribution plans, recertification, records retention/audits, the GPO prohibition for CEs, contract pharmacies, and the definition of an eligible patient.

Of importance with the Mega Guidance is that it is not binding but it must be considered in the event a case is before a court, recognizing that the agency has expertise in this area. 

John Shakow (King & Spalding) covered HRSA’s Proposed Rule, not the Proposed Guidance, for Ceiling Prices & Manufacturer Civil Monetary Penalties (CMPs). These topics were those that HRSA believed they still had authority to make a rule about after the determination they did not have the authority related to orphan drugs. This included two areas. The first is the determination of the 340B Ceiling Price, including penny pricing and the pricing of new drugs. HRSA continues to believe that charging $0 is unreasonable and $0.01 is reasonable and that no other viable options exist when AMP minus URA is zero or negative. Additionally, it includes the requirement for manufacturers to estimate the 340B price and retroactively refund the difference of the actual and estimated price, even if a CE does not request one.

For CMPs, the Proposed Rule imposes a penalty of up to $5,000 for each instance of “knowingly and intentionally” overcharging by manufacturers. Areas of concern for manufacturers include the requirements that manufacturers must “police” intermediaries, including wholesalers, and the prices a CE is charged for a manufacturer’s product by a third party. Also in the Proposed Rule is the change to the definition of a 340B drug as one that is at or below the ceiling price.

Comments to the Proposed Rule by CEs of interest to manufacturers included:

1.   An instance of overcharging should be based on a per unit basis, not per order basis;
2.   CMPs should be imposed on manufacturers who overcharge based on “deliberate ignorance” and “recklessness,” not just “knowing and intentional.”

While comments by manufacturers and trade associations included:

1.    HRSA lacks the statutory authority to issue ceiling prices;
2.    Penny pricing is not reasonable;
3.    New drugs should have a 340B Ceiling Price using the minimum rebate percentage (e.g., WAC minus 23.1% for S & I products);
4.    An instance of overcharging should be per ceiling price report, not per order;
5.    Refunds should take into account a “de minimis” exception and allow offsetting/netting.

In most cases, McKesson (as a wholesaler) and HDMA agreed with manufacturers in their comments.

Kathleen Black (Pfizer) spoke about manufacturer’s 340B Ceiling Price reporting requirements and then Alice Leiter (Hogan Lovells) went through a “policy and procedure compliance checklist.”  Kathleen focused on the mechanics for the calculations and reporting by manufacturers, and Alice went through the things a manufacturer should have such as a 340B policy, that includes the ceiling price calculation as well as the manufacturer’s specific policies including things such as limited distribution plans, the definition of a covered outpatient drug, new product pricing, product acquisition and divestitures, restatements, and audits of CEs. She stressed that this is especially valuable when the “right” way has not been clearly defined by the government. 

In the afternoon, the workshop focused more on the operational side with regards to manufacturers, including best practices and lessons learned from audits of CEs from Debbie Walters-Francique (Pfizer), the opportunities and challenges for manufacturers because of the potential overlap of Medicaid and the 340B program, and duplicate discounts that may occur (Lisa Norton from Lilly USA, Glen Huttar from Johnson & Johnson Health Care Systems, Jeremy Docken, from IMS Health, and Daksha Bogdon from Genentech). Besides CEs being required to prevent diversion and duplicate discounts related to their own purchases, CEs must also ensure compliance with the program requirements if they use contract pharmacies for the 340B program. For manufacturers to audit a CE, there must be reasonable cause and a manufacturer must submit an audit plan and obtain approval from the OPA. Audits have not been heavily utilized by manufacturers. So far, there have only been seven audits by manufacturers, although there have been many others conducted by the OPA. The best defense for manufacturers may be the establishment and following of policies and procedures to identify duplicate discounts and diversion when they occur.

Finally, the workshop ended with a discussion of the 340B “hot topics”, moderated by Erin Estey Hertzog (Biotechnology Industry Organization). Many of the topics covered earlier in the day were raised again with greater input and discussion from the audience. And as always with the various government programs, it was reinforced that where regulations and guidance are silent, manufacturers must and should make reasonable assumptions, and these should be well documented.

Check back tomorrow for more updates from MDRP and if you would like more information on the proposed changes to the 340B program, please reach contact me. There’s a lot going on in this program, and I can help your organization figure out what is relevant and how best to prepare! Katie Lapins, Government Pricing Specialists, LLC, 303.993.6466,