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.

Read more about MDRP 2016 here:

MDRP 2016 Pre-Conference, Track C: The AMP Final Rule
Track D: 340B Guidance for Pharmaceutical Manufacturers: Fundamentals, Operations, and Compliance
Drug Pricing is Today's Environment
MDRP 2016: Day One - Government Agency Sessions
A Review with Some of the Top GP Legal Experts
Farewell to 2016's MDRP Summit

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.

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.

Track D: 340B Guidance for Pharmaceutical Manufacturers: Fundamentals, Operations, and Compliance

After a short introduction by Christopher Schott (Counsel, Hogan Lovells), the Symposia got off to a great start with Dennis Kim (Director, Dohmen Life Sciences) and “Addressing Key Areas Covered Within the 340B Guidance. Dennis went through an overview of the PHS/340B Program, including basics of the program and then moved to a review of the “Mega Guidance,” including administration of Medicaid Exclusion File, Manufacturer Restrictions (overcharges, limited distribution plans, recertification, potential audits). Activity expected in 2016 that is likely to be of interest to manufacturers is guidance regarding “penny pricing” and limited distribution arrangements. There are also two comment periods currently open related to civil monetary penalties and the administrative dispute resolution process.

Dennis also provided an explanation of Duplicate Discounts and Diversion, what constitutes a “Covered Patient,” and the use and growth of contract pharmacies which served as a great foundation for the next session.  In it, Steve Zielinksi (Director, Kalderos) discussed in-depth the Contract Pharmacy Model.  This model grew as covered entities (“CEs”) were allowed to use multiple contract pharmacies and the entire industry shifted as contract pharmacies and CEs were attempting to maximize revenue.   When serving as a contract pharmacy, the pharmacy can maintain either a physical or virtual inventory model.  In the physical inventory model, there can be no “borrowing” of inventory from the 340B inventory for non-340B patients, or vice versa.  In the virtual inventory model, the “reconciliation” or maintenance of inventory occurs electronically so a pharmacy only maintains one physical batch of inventory.  An overwhelming majority of contract pharmacies use the virtual inventory model today and software exists to assist.

Contract pharmacies fall into four categories.  The first is an independent pharmacy where the internal controls for compliance with the program requirements can vary significantly.  The CEs actually can have a fair amount of control in this relationship.  Chain pharmacies are the second type of contract pharmacy.  Chains pharmacies have a lot more control in the relationship with the CE and are heavily focused on the business outcome.  The third type of contract pharmacy is a former CE pharmacy that has been created by a restructuring of the facilities associated with the CE so they are a different legal entity.  The internal controls are usually stronger like a CE because of their familiarity with the program requirements.  And finally, specialty pharmacies can serve as a contract pharmacy.  These entities focus on complex products/diseases and the CEs have the least amount of control with them.

Manufacturer reporting requirements were covered by Elizabeth Wicyk-McGovern (Senior Analyst, Hospira).  Besides providing a good example of the 340B ceiling price calculations, including how a product can result in penny pricing.  One important issue is how to calculate a price when [AMP – URA] is less than $0.01/Medicaid unit.  Many manufacturers apply the “penny pricing” concept after the [AMP – URA] has been calculated but some apply it at the Medicaid unit level.  For example, if [AMP – URA] is $0.0002/Medicaid Unit and there are 1,000 units/package, the calculation would be either [$.0002 * 1,000 = $2.00] or [$0.01 * 1,000 = $10.00]. 

HRSA has scheduled five manufacturer audits scheduled for 2016 after having only one in 2015.  In the 2015 manufacturer audit, there were no findings.

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: Why You Can’t Miss It

It’s hard to believe that we’re only about two weeks away from the 21st Annual Summit on the Medicaid Drug Rebate Program (MDRP 2016), arguably the biggest Government Pricing event of the year. This event always provides invaluable insight into the challenges facing the GP community, and this year is no different. Here are a few things that set MDRP 2016 apart from all the others.

First, the biggest names in Government Pricing will be in attendance. Not only will subject matter experts from law firms, consulting firms, and third party vendors be speaking, Knect365 (former IIR) has also secured a number of pharma industry speakers and panelists to share their experiences. Additionally, members of key federal agencies like HHS, HRSA and a number of state Medicaid agencies will provide clarity into their rules, regulations, and processes. Are you looking for assistance from external counsel but don’t know anyone? This is the perfect opportunity to get to know the true experts in the field. If you are looking for a GP system provider, in the process of implementing a system, or want to ensure your system has been updated to reflect recent rulemaking, walk through the exhibit hall and strike up a conversation with one of the many vendors who offer these types of services. And besides the great networking opportunity to find out how your organization compares to your peers, or to larger or smaller manufacturers, there are opportunities to attend panel discussions that present multiple viewpoints. And if you want to hear more about recent rulemaking directly from agency heads, this is the place.

Second, the MDRP 2016 offerings are more innovative and exciting than ever. This year, Knect365 (former IIR) has organized its sessions into streams like Fundamentals of Government Pricing Programs, 340B Guidance Symposia for Pharmaceutical Manufacturers, Generic Drug Manufacturers Workshop, and the AMP Rule Symposia. But you’re not “stuck” to one track. To help you pick the sessions that will best meet your needs, Knect365 has created a fantastic Interactive Agenda to allow you to mix and match the presentations right for you. The agenda even allows you to select the format, to allow you to identify presentations, panel discussions, and networking events. Don’t just pick a track and hope it tells you what you want to know. Pull up the interactive agenda before you head to MDRP and build your own customized track. If you are representing your GP team at the conference, you can also ask your teammates to pull up the agenda and create a wish list of sessions they would like you to attend. With its new agenda, Knect365 has given you the tools to ensure you won’t miss out – take advantage of it!

And last but not least, you just can’t miss MDRP 2016 because this year, after 6 years of holding our breaths, we finally got the AMP Final Rule we’d been waiting for! But it’s not just the AMP Rule GP teams have been talking about, this year we also got the 340B Drug Pricing Program Ceiling Price Proposed Rule, as well as a number of CMS Manufacturer Releases and FAQs that have been included in alerts by GPS. If all these changes in such a short period of time make your head spin, you’re not alone. Come to MDRP 2016 to make sure none of this information falls through the cracks, potentially putting your organization at risk.

We look forward to seeing you at MDRP 2016 at the Palmer House Hilton in Chicago. If you have not already registered, do so today and use code XP2158MISC to get an additional $100 off of the current registration fee. GPS will be onsite and blogging for the 2nd year in a row, so we look forward to seeing you there!

HRSA Releases Proposed “Mega” Guidance

On Thursday, August 27, 2015, the Health Resources and Services Administration (“HRSA”) issued a copy of the much anticipated Proposed Guidance for manufacturers and Covered Entities (“CEs”) regarding the 340B/PHS Program. A summary of the most important points for pharmaceutical manufacturers is below but as always, I strongly recommend a thorough review by each organization to determine what issues affect your organization. Comments are due October 27, 2015.

340B Program Eligibility and Registration
The Proposed Guidance details the eligibility for hospital and non-hospital sites, as well as “parent” and “child” sites and the effect when an associated facility loses its eligibility. It also goes on to allow three exceptions to the GPO Prohibition for DSH hospitals, children’s hospitals, and free standing cancer hospitals:

1. An off-site outpatient clinic of a 340B hospital that does not participate in the 340B Program itself and purchases drugs through a separate account from the 340B hospital;
2. A GPO-purchased drug provided to an inpatient who, upon subsequent review, results in the designation of that patient as an outpatient for payment purposes; or
3. A hospital which can only access a covered outpatient drug through a GPO contract and has documented its attempts to purchase the drug at the 340B price and WAC, and has notified HHS of its attempts.

Drugs Eligible for Purchase Through the 340B Program
The 340B Program has used the definition of, “Covered Outpatient Drugs” based on the Medicaid Drug Rebate Program and excludes those drugs that are reimbursed as part of an associated service, regardless of the payer. With the Proposed Guidance, this limiting definition would apply only to those products when the payer is Medicaid.

Individuals Eligible to Receive 340B Drugs (Patient Definition)
With the Proposed Guidance, the requirements for individuals who are eligible to receive 340B drugs are stricter. To be considered an eligible patient, all of the criteria listed below must be met:

1. The patient receives a health care service at a CE site;
2. The health care service is from a provider employed by the CE or who is an independent contractor of the CE “such that the CE may bill for services on behalf of the provider;”
3. The patient receives a drug that is ordered or prescribed by the provider as a result of the service described in 2. above, but not if the only health care received is the infusion or dispensing of a drug;
4. The patient receives a service that is consistent with the CE’s scope of grant, project, or contract;
5. The patient is considered an “outpatient” when the drug is ordered or prescribed. However, patients who are self-pay, uninsured, or whose cost of care is provided by the CE will be considered an patient if the CE has clearly defined policies and procedures that it follows to classify these patients consistently;
6. The individual has a relationship with the CE, auditable health care records are maintained that demonstrate the provider-to-patient relationship, the CE has a responsibility of care, and that “each element of this patient definition in this section is met for each 340B drug.”

One exception to the patient definition is for AIDS Drug Assistance Programs (“ADAPs”) which considers patients as any individual enrolled in a Ryan White HIV/ADAP funded by Title XXVI of the PHS Act. A second exception is in the case of a public health emergency.

CE Requirements
CEs are already prohibited from receiving duplicate discounts from manufacturers (when a state obtains a rebate on a drug that was also purchased at the discounted 340B rate). The Proposed Guidance would expand the Medicaid exclusion file currently in use to include Medicaid Managed Care Organization (“MCO”) patients. However, CEs would be able to make this determination by location as well as MCO and could make a different election than the Medicaid Fee for Service patients.

CEs would also continue to be able to use a “replenishment model” for their purchases as long as they maintain auditable records.

Contract Pharmacy Arrangements
Currently CEs may enter into an agreement with an unlimited number of contract pharmacies and the Proposed Guidance does not change this. It does require CEs to, “conduct quarterly reviews and annual independent audits of each contract pharmacy location…” placing the responsibility for program compliance with the CE.

Manufacturer Responsibilities
Manufacturers must enter into an agreement (Pharmaceutical Pricing Agreement, or “PPA”) to participate in the 340B Program. The PPA is expected to be revised to include requirements of the Affordable Care Act but no mention is made of these changes. The Proposed Guidance includes a “must offer” provision that would require manufacturers to submit to HRSA a “limited distribution plan” if a product is distributed through, “a specialty pharmacy or a restricted distribution network, or needing to limit distribution due to potential or actual shortages.” There’s no criteria listed as to when this would be required so all products that are distributed through specialty pharmacies might qualify.

In the event that a manufacturer overcharges a CE, regardless of the reason, the manufacturer will be expected to refund the difference within 90 days of this determination and must notify HHS. Refunds must be calculated by NDC and manufacturers would not be allowed to aggregate purchases, offset undercharges nor could they exclude de minimis amounts. In the event that a CE does accept a direct repayment amount within 90 days of receipt, the CE has in effect waived its right to the repayment.

The Proposed Guidance also includes a provision that manufacturers review and update their 340B database on an annual basis.

Rebate Option for AIDS Drug Assistance Programs
ADAPs can access the 340B price through a rebate or through the 340B contract. Most choose the rebate option which would be allowed to continue along with a “hybrid” model for those ADAPs that act as a secondary payer for patients. For ADAPs receiving rebates, the following is required:

1. The ADAP must indicate that it will participate in the rebate or hybrid option;
2. The ADAP is expected to make a “qualified payment” for an eligible patient; and
3. The ADAP is expected to submit claims level detail to the manufacturer with a rebate request.

A “qualified payment” is defined as either a direct purchase of a covered outpatient drug by the ADAP at a price greater than the 340B ceiling price, or a payment by the ADAP for the client’s health insurance premium, copayment, coinsurance, or deductible.

As with other CEs, an ADAP is not allowed to receive a duplicate discount.

Program Integrity
The Proposed Guidance reiterates the previous guidance issued that manufacturers may audit CEs if there is “reasonable cause” and the manufacturer and CE cannot resolve the issue. An audit plan must be submitted to HHS and an “independent certified public accountant” must be used to perform the audit.

For all participants in the 340B Program, all documentation and supporting records would be required to be retained for five years.

It’s important to note that this is “Proposed Guidance” and not a “Proposed Rule” and there is no clear indication as to the enforceability of these items. When HRSA issued the orphan drug rule, PhRMA challenged their ability to impose requirements based on solely on interpretation. We are awaiting a decision in that case which may help clarify how stakeholders are to interpret this Proposed Guidance. As with all things GP-related, it is important that each manufacturer determine what is best and appropriate for their organization.

If you would like more information or assistance in developing comments for submission before the October 27 deadline, please reach out to me. And I look forward to seeing you in Chicago at MDRP where I’m sure we’ll have a great discussion about this topic! Katie Lapins, Government Pricing Specialists, LLC, 303.993.6466, K.Lapins@GP-Specialists.com.

Katie Lapins

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 15 years. As a consultant, Katie’s areas of primary focus are government programs, corporate compliance and commercial operations. Within these areas, she has developed policies and procedures, assisted manufacturers with voluntary disclosures/restatements, led audits and assessments, calculated and submitted statutory pricing requirements (AMP, BP, ASP, Non-FAMP, PHS and TRICARE), processed Medicaid/ SPAP/ Supplemental invoices, validated PHS eligibility, handled Class of Trade projects with over 100K entities, and created training for onsite and web-based instruction for 2 – 200 employees. Katie’s experience within the industry includes government contract administration, pricing analysis, commercial operations, specialty pharmaceutical distribution agreements and commercial contract management.

MDRP Podcast: Katie Lapins, Principal, Government Pricing Specialists

MDRP has teamed up with several of the speakers at this year's Medicaid Drug Rebate Program to share some of their insights on the current healthcare reform and how it will effect the industry leading up to the conference.

Katie Lapins, Principal, Government Pricing Specialists shared her insights on these questions with us:

- We often hear the terms, “Medicaid” and “Government Programs” used interchangeably. What is meant by each of these terms, how are they similar and how are they different?
- Tell us about your current work and focus on the MDRP and Government Programs.
- You are leading a panel session at September MDRP on Translating the GP Impact of Healthcare Reform for Senior Management; tell us a little about the session and why it is important.
- With all of the changes introduced by healthcare reform, what recommendations do you have for a manufacturer if they were already unsure about their compliance status and are unsure where to begin?

To download the podcast, visit the MDRP webpage.
For a transcript of the podcast, click here.