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.

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

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.

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.

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 4^th 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.

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!

Unintended Consequences - 340B

It began with Medicaid.

In 1991, Congress passed the Omnibus Budget Reconciliation Act (OBRA 90). 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.

Manufacturers, commercial entities all, recognized that the “best prices” were the ones on the Federal Supply Schedule (FSS); the prices paid by the Veterans Administration (VA) and the Department of Defense (DOD). There was no legislated exemption for these, so manufacturers raised the FFS prices to list price. These actions severely impacted the DOD and VA budgets, so an amendment was added to exempt FSS prices from OBRA. On June 30, 1992, this amendment expired.

Subsequently, P.P 102-585, the Veteran’s Health Care Act (VHCA) of 1992 was passed. Sections 601 and 603 establish the pricing rules for DOD and VA. Section 602 amended the Public Health Service (PHS) Act by adding a “Subpart VII, Sec. 340B” to Part D of Title III. 340B was born!

Congress created a program to offer uninsured indigent patients better access to prescription drugs by providing these drugs at discounted prices to covered entities (CE) serving large numbers of this uninsured population. Intention….give these patients better access to these drugs.

Over time, for many reasons, the program has grown exponentially. HRSA sub-regulations, the Medicare Modernization Act (MMA), and the Affordable Care Act (ACA) have wrought significant changes in the program participants and their collective behaviors. The program has outgrown its mission.

The patient definition, or its interpretation, has expanded to include all outpatients of the CE, regardless of insurance coverage. The CE list has been broadened, and now includes hospital satellite locations, sole community hospitals, and free-standing cancer centers, to name a few. In 2010, CEs were allowed to begin utilizing multiple contract pharmacies to supply these drugs. Manufacturers concerns, other than the low pricing requirements, involve diversion and double dipping.


Diversion happens when a 340B-priced drug is dispensed to anyone not entitled to receive it. That list includes in-patients, and any outpatient that does not fit the HRSA definition. Diversion also happens if the drug is sold or transferred to another entity. Double dipping occurs when a Medicaid claim is filed with the state for a 340B drug, thereby duplicating the Medicaid rebate. Over time, states have improved the identification of 340B claims in the Fee-For-Service (FFS) arena, and have excluded them. However, since the ACA now requires manufactures to pay Medicaid rebates on Medicaid MCO utilization, double dipping is back in focus. The Office of Inspector General (OIG) issued a report in June stating that many state methods for identifying 340B drugs may create a risk of “duplicate discounts and foregone rebate.” Since the ACA now requires manufactures to pay Medicaid rebates on Medicaid MCO utilization, double dipping is back in focus, along with the potential for “forgone” rebates.

Concerns:

• CEs are profiting from the system. In any economic system, if access to low priced commodities is available, organizations will find ways to maximize them. And if the penalties for non-compliance are weak and non-existent, boundaries will be pushed. Consider: A CE can legitimately purchase drugs at 340B prices, and then bill the applicable insurance company. They cannot legally bill Medicaid, but all others are fair game.

• A retail store serving as a contract pharmacy has the potential to profit from the same situation. Oversight of these institutions is the duty of the CE whom it serves. Regular audits of these entities are expected by HRSA, but enforcement is apparently not currently a HRSA priority.

• A CE can acquire a physician oncology practice to gain access to 340B pricing on those drugs.

• Patient care may be impacted clinically by moving or scheduling a procedure on an out-patient facility or status to take advantage of the cheaper medications.

These are just a few of the concerns to be considered. The 340B Program has grown into something beyond what its creators had envisioned. 


The 21th MDRP Summit includes a full day pre-conference Symposia on 340B Guidance for Pharmaceutical Manufactures. Download the agenda to see a complete list of topics here. 



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.

Did you like the article? Subscribe to our newsletter here!
Join the conversation on Twitter

Election 2016: What Each Candidate Could Mean for Pharma

Every four years we are inundated with non-stop coverage of the presidential election, with both sides vying contentiously for control of the White House as well as Congress. Thankfully, each election year also brings us the Summer Olympics, which offer a brief but much-needed respite from the talking heads and partisan bickering. For two short weeks, Americans come together to support the heroes who motivate and inspire us all, before returning to the ones who polarize and divide us. It’s easy for all of us to rally behind Michael Phelps and Simone Biles, sharing in their successes and taking pride in the honor they bring to our country. However, reaching a consensus on Trump and Clinton is a different story.

After the Olympics are over and the kids are back in school, Government Pricing professionals will convene in Chicago once again for IIR’s 21st Annual Summit on the Medicaid Drug Rebate Program (MDRP). We will all come with our own opinions and political convictions, but we will also be wondering how our day-to-day responsibilities will be impacted by the election. Although we at Government Pricing Specialists (GPS) don’t have a crystal ball, we can compare and contrast the candidates’ platforms, and how they could change the face of GP. Here are their positions on a few GP-related issues:

The Patient Protection and Affordable Care Act (ACA)

• Clinton – Per her website, Clinton would “Defend and expand the Affordable Care Act, which covers 20 million people.”

• Trump – Per Trump’s website, “On day one of the Trump Administration, we will ask Congress to immediately deliver a full repeal of Obamacare.”

• Potential GP Impact:  

Under a Clinton presidency, if the ACA stands, the changes codified in the recent MDRP Final Rule would likely remain in effect but the “Cadillac Tax,” the excise tax on high-cost health insurance plans, would likely be repealed. 

Under a Trump presidency, the legitimacy of the Final Rule could be challenged if the ACA is repealed. However, repealing the ACA may be difficult since taking away a benefit is usually unpopular with voters. If the Republicans control both houses of Congress, it is more likely that substantial changes to the ACA would be introduced but if Democrats control the House of Representatives or the Senate, it is unlikely that we will see significant change.

Medicaid

• Clinton – Per Clinton’s website, she would “Fight for health insurance for the lowest-income Americans in every state by incentivizing states to expand Medicaid – and make enrollment through Medicaid and the Affordable Care Act easier.” 

• Trump – Trump has said that the Federal Government should provide block-grants to the states for Medicaid, that it should be entirely controlled by the states which he believes would reduce the fraud, abuse, and waste. 

• Potential GP Impact:

Under Clinton, if Medicaid enrollment increases, Medicaid sales would likely increase, as would the volume of Medicaid rebates. 

Under Trump, if federal funding is reduced, it could actually put pressure on manufacturers to provide more in terms of rebates. However, Trump believes that his plan to get more Americans working would actually reduce the need for Medicaid because more people would have access to health insurance through their employer.

Medicare

• Clinton – Per her website, Clinton would “require drug manufacturers to provide rebates for low-income Medicare enrollees that are equivalent to rebates in the Medicaid program.” She would also “Allow Medicare to negotiate drug and biologic prices… Clinton believes that we should drive the best bargain for Americans, and especially for senior citizens, by allowing Medicare to negotiate drug prices, notably for high-cost drugs with limited competition.” Clinton also supports the idea of allowing people to “buy into” Medicare if they do not meet the eligibility requirements.

• Trump – Although he does not specifically address allowing Medicare to negotiate prices on his website, at a January rally in NH Trump supported allowing Medicare to negotiate drug prices, saying, “Drugs with Medicare, they don’t bid ‘em out… They pay like this wholesale incredible number… They say like $300 billion could be saved if we bid ‘em out. We don’t do it…”

• Potential GP Impact – A proposal to create a rebate program for Medicare, similar to the MDRP, would likely take significant time to pass and be finalized (think of the 6 years we waited for the AMP Final Rule). More likely is an extension of the Medicaid rebate to prescription drugs for “dual eligibles” (participants eligible for Medicaid and Medicare), but even that may take a bit of time. A plan to allow Medicare to negotiate drug prices with manufacturers, which both candidates support, although not the GOP at large, could require manufacturers to manage Medicare contracts similar to how they manage their VA contracts.

This election may be the most interesting one in our lifetimes, at least to date. As healthcare and health insurance become a greater part of our nation’s economy, and our own budgets, these issues will continue to receive a lot of focus. Government Pricing has always been the image of that old saying, “May you live in interesting times,” but this election year has become the poster child for it!

We look forward to the MDRP Summit to hear more on the potential GP implications of the 2016 election, and to hear your questions and comments. 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!


Sources:
https://trumpcare.com/trumpcare-and-medicaid/
http://www.nytimes.com/2016/04/09/us/politics/donald-trump-health-care.html?_r=0 
https://www.hillaryclinton.com/issues/social-security-and-medicare/ http://www.ontheissues.org/Senate/Hillary_Clinton_Health_Care.htm http://www.nytimes.com/2016/05/11/us/politics/hillary-clinton-health-care-public-option.html 
http://www.ontheissues.org/2016/Donald_Trump_Health_Care.htm


About the Authors: 
Katie Lapins & Dana Zelig Collins, Government Pricing Specialists, LLC, 303.993.6456, K.Lapins@GP-Specialists.com. ; D.Collins@gp-specialists.com

Value Based Purchasing Session Added to MDRP Agenda

Increasingly, manufacturers have been reaching out to us at Government Pricing Specialists (GPS) to discuss value based purchasing (VBP) arrangements, and how this could impact their Government Pricing (GP) calculations. In response to these inquiries, IIR has added a session on VBP to its agenda for the upcoming conference in Chicago, 21st Annual Summit on the Medicaid Drug Rebate Program (MDRP), which will be led by Stephanie Trunk, Partner at Arent Fox. This session will cover the potential impact of VBP on manufacturer’s GP calculations, with a Q&A to allow attendees to ask questions and voice concerns.

Background:

So what do we mean by value based purchasing arrangements? In this type of agreement, payment is linked to an outcome of a medication instead of another value such as a contract price based on volume or formulary. The better the outcome, the higher the price. Of course, in this type of agreement, there must be clearly defined standards regarding how the outcomes will be defined and measured. Products that are more likely to fall under this type of arrangement are those such as medications for high cholesterol, asthma, hypertension, or treatment of tumors – conditions that can be objectively measured.

In 2010, the Affordable Care Act established CMS’ Hospital VBP program, which rewards hospitals with incentive payments for the quality of care they provide to Medicare beneficiaries. On July 14, 2016, CMS issued Manufacturer Release No. 99 and State Technical Release No. 176, encouraging states “to consider entering into (VBP) arrangements as a means to address, as well as offset, Medicaid’s high cost drug treatments,” and reminding states “that they may extend their Medicaid supplemental rebate agreement to some or all of their managed care prescription claims.” These VBP arrangements are meant to reduce the government’s health spending, but it is unclear what impact they will have on pharmaceutical manufacturers.

Best Price Implications:

On the commercial side, if a manufacturer enters into a VBP agreement and a drug is shown to be less effective than anticipated, there could be an impact to Best Price (BP). Manufacturer Release No. 99 and State Technical Release No. 176 also respond to questions pharmaceutical manufacturers have raised about this possibility. The releases note that “CMS has concluded that the impact on a manufacturer’s best price will differ depending on the structure of the VBP arrangement,” and “recommends that when manufacturers negotiate such arrangements with entities, they consult both the statute and implementing regulations regarding the determination of best price.” CMS specifically references Section 1927(c)(1)(C) of the Social Security Act, 42 CFR 447.505(a), and 42 CFR 447.510 for BP requirements.

The releases also encourage manufacturers to enter into VBP arrangements with state Medicaid programs, noting that supplemental rebates provided as a result of VBP would be excluded from BP.

Additional Guidance:

Although CMS has not offered definitive guidance on VBP’s impact to BP, the agency did say it is available to address questions on specific arrangements, and encourages manufacturers to submit questions to the CMCS Division of Pharmacy at RxDRUGPolicy@cms.hhs.gov. CMS also indicated that additional guidance based on manufacturer feedback could be forthcoming in future releases.

If your company is exploring VBP arrangements, or you just want to network with you peers and to hear more on this and other hot topics, I strongly recommend you attend IIR’s 21st Annual Summit on the Medicaid Drug Rebate Program (MDRP) . This event is one of the best well-attended conferences each year and attracts top speakers from the industry. And if you register using code XP2158MISC, you 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!



About the Authors:
Katie Lapins & Dana Zelig Collins, Government Pricing Specialists, LLC, 303.993.6456, K.Lapins@GP-Specialists.com. ; D.Collins@gp-specialists.com

MDRP 2016: Final Agenda Available!

Medicaid Drug Rebate Program
September 20-22, 2016 | Chicago, IL
Download the final agenda: http://bit.ly/1TY7XCQ 

Now in its 21st year, IIR's MDRP Summit (http://bit.ly/1ZdEll3) has continued to be THE authoritative MDRP Event for Everything Government Pricing, Rebates and Regulation. MDRP provides unparalleled access to the government regulators creating the rules, the industry leaders interpreting them, and the pharmaceutical executives implementing them.

Don't miss out on your opportunity to benchmark best practices and gain solutions to overcome new operational challenges brought on by AMP Final Rule, 340B, Medicaid Expansion, Class of Trade, Fair Market Value, FSS, VA, OIG, and other critical government programs.

Why should you attend MDRP?

Learn:
• AMP Final Rule Implementation
• 120+ Speakers
• 6 Keynote Presentations
• 340B Guidance Updates

Benchmark:
• State Dispute Resolution Meetings
• New Executive Leadership Boardroom
• Town Hall between Manufacturers and States

Connect:
• 14+ Federal and State Agencies
• 600+ MDRP Executives
• 20+ States
• 30+ Solution Providers

Access the final agenda: http://bit.ly/1TY7XCQ

$400 savings ends Friday, July 1st! Click here to register: http://bit.ly/1RNJ5rF

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, K.Lapins@GP-Specialists.com.