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.

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.

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Call for Papers: 17th Annual Medicaid Drug Rebate Program Summit

The Institute for International Research is looking for suggested sessions for our upcoming 17th Annual Medicaid Drug Rebate Program Summit, September 10-12, 2012 at the Swissotel in Chicago.

MDRP is the industry-leading event, with more government – led sessions and government attendance, and more pharmaceutical and generic manufacturers than any other event in this space.

We invite you to submit a proposal for a speaking opportunity directly to Heather King, by March 1, 2012. Please send to hking@iirusa.com.

We are currently recruiting pharmaceutical and generic manufacturer executives, state officers, and industry insiders who can share NEW DATA through detailed case studies related to Medicaid Rebate Operations, 340B Regulations, State Contracts and Reporting, and Systems usage.

 Submission Guidelines & Details In your abstract, please provide the following:
 Proposed Title of Session: Objective and purpose
 • A descriptive paragraph of 3-4 sentences describing what is unique or special about the information you plan to share- aka Background Information
• 3-4 bullet points highlighting the strategies, tools and techniques attendees will walk away with- aka Key Takeaways

These are just a few things we cover at MDRP. Please feel free to suggest other timely and relevant topics.

For more information about the MDRP Summit, please visit the website.

We look forward to welcoming you to the event this fall.

Medicaid Drug Rebate Program (MDRP) Summit 2011 Photos

We are back from the 16th Annual MDRP Summit, which took place in Chicago last week. We'd like to thank all of our speakers, sponsors and partners, and every one who attended for yet another wonderful event this year. Here are some photos from the event below:

 

 Also, don't forget to mark your calendars for 2012, the 17th Annual MDRP Summit will take place September 10-12, 2012, in Chicago.

We hope you to see you there! Visit www.medicaiddrugrebates.com for upcoming news on next year's event.

The New 2011 MDRP Summit Agenda is Now Available

If you haven't seen the agenda for the 16th Annual Summit on Medicaid Drug Rebate Program and Other Public Sector Reimbursements Program yet, we've just updated it. It's available here and only requires a quick sign up.

So why is this the ONE MDRP Event you Must Attend?

• The Most senior policy and operational experts on over 110 person speaking faculty
• The Most USDOJ, NAMFCU, HHS & VA OIG Compliance officials
• The Most access to government contacts for MDRP, 340B, VA, & DoD
• The Most dispute resolution meetings with 16 states and counting!
• The Most Exhibitors and Sponsors and expanded networking time
• Don’t miss the All New Healthcare Reform Compliance Symposium

** Also don't forget to...

submit your nomination for the 2011 MDRP Lifetime Achievement Awards

take a guess at the keynote for a chance to win an iPad 2! Click here to compete

Mark McClellan to Keynote the 15th Annual MDRP Summit

We're excited to announce that Dr. Mark McClellan will a keynote presenter at this September's Medicaid Drug Rebate Program.

As the Chief of Medicare/Medicaid Services, Dr. Mark McClellan led the agency through the most important Medicaid reforms in the program’s 40-year history. In a compelling presentation offering possible solutions to the Medicaid crisis, McClellan reviews how states’ respond, while providing innovative approaches to dispensing Medicaid benefits, including expansions of coverage, providing “dual-eligible” (Medicare and Medicaid) coverage and long-term care reforms.

The Medicaid Drug Rebate Program will be taking place September 15-17, 2010 in Chicago, Illinois. For more information on Mark McClellan and the other speakers at MDRP, visit our webpage.

Complimentary Webinar Today: Overcoming the Challenges of Government Pricing, Compliance Reporting and Medicaid Rebate Processing

Thursday, October 15
2-3PM EST
Space is limited.

Reserve your Webinar seat now at:

https://www1.gotomeeting.com/register/286708561

Priority Code: P1458W1BLOG/TWITTER

About the web seminar:
All pharmaceutical product manufacturers who sell to various agencies of the federal government and/or who participate in Medicaid, 340B, Medicare or other public sector reimbursement programs face significant requirements and challenges with respect to their government-mandated pricing calculations and compliance reporting processes. Huge penalties and fines can be levied for miscalculating or incorrectly applying the various government price types to government-contracted sales and/or for compliance reporting mistakes.

The Seminar will address the complexities and challenges associated with automating Government Pricing and Medicaid Rebate system(s) as well as the pros and cons of using a packaged-software approach versus a custom-development approach. An overview of a leading-edge enterprise solution, developed as a fully-integrated component of the SAP® Enterprise Resource Planning (ERP) System, will be presented, accompanied by a live software demonstration and followed by a Question & Answer discussion of the issues.

What you will learn:
• An appreciation of the historical and legal background and context for the government-mandated price calculations and compliance reporting requirements;
• An understanding of the various price types that must be calculated, used in sales transaction processing and reported under each corresponding government program;
• Why automating and managing these processes using a packaged solution, based upon a fully-integrated enterprise architecture, is the lowest risk and lowest Total Cost of Ownership (TCO) approach;

About the speaker:

Sanjay Shah, C.P.A., is the President/CEO and Chief Solution Architect of Vistex, Inc., a global SAP Software Solution Partner.

Prior to founding Vistex, Mr. Shah spent several years as a Platinum Consultant in SAP America’s Professional Services Organization and in SAP AG’s Product Development Organization. That experience provided him with a comprehensive and unique understanding of the functionality gaps in SAP’s “core” offering as well as SAP’s product development strategy. Mr. Shah also worked in finance/accounting management at a major global manufacturing company.