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.

State Programs and Government Pricing

Guest Author: Katie Lapins
 
Keeping track of all of the reporting requirements associated with Government Pricing can be daunting. Is your product a brand, authorized generic, generic, injectable or otherwise administered in a clinic or doctor’s office? Not only are these important questions that dictate what reporting must be done on a monthly, quarterly, and/or annual basis, but manufacturers must also comply with various state reporting requirements, currently New Mexico (Q3 only), Vermont (Quarterly) and Texas (Monthly and Quarterly). Here’s a review of the current state reporting requirements:

New Mexico originally required quarterly reporting but this has changed to just the third quarter of each year, due by January 15 of the following year. New Mexico requires the following information for all Covered Outpatient Drugs from all manufacturers:

• - Quarterly Average Manufacturer Price (“AMP”),
• - Greatest wholesaler prompt pay discount percentage,
• - Lowest indirect price through a New Mexico wholesaler, and
• - Lowest prices to wholesalers, Pharmacy Benefits Managers and any other New Mexico entity that purchases directly from the manufacturer without the use of a wholesaler.

Vermont requires quarterly reporting within 30 days of the quarter end (January 30, May 1, August 1, and November 1). AMP and BP, if applicable, must be reported for each Covered Outpatient Drug. Additionally, manufacturers must report the undiscounted price paid by Vermont wholesalers for product received in Vermont during the quarter (the Vermont WAC). Vermont also requests that each manufacturer provide the methodology utilized to perform the calculations. For manufacturers, it may be worth including a note as to the confidentiality and proprietary nature of their methodology that is submitted.

Texas has two different reporting requirements. The first is simply that manufacturers must submit AMP on a quarterly basis. The second requirement is due by the 10th day of each month and must include the following information:

• - Direct Price to Chain Pharmacy
• - Direct Price to Long Term Care (“LTC”) Pharmacy
• - Direct Price to Pharmacy
• - Price to Wholesaler/Distributor

In the event a manufacturer reports a price range for these price points, they must also report a weighted average, based on unit sales. Texas also has requested that manufacturers submit pricing data for eligible pharmacies in Texas only. Last year, at IIR’s MDRP Summit, a Texas representative announced that this reporting requirement would most likely be going away and just this month, the Texas Health & Human Services Commission (“TX HHSC”) Vendor Drug Program announced that they will propose the following changes to the reporting requirement:

1. - If a manufacturer wants to place its products on the Texas Code Index, they would be required to submit AMP, AWP, Direct Price to LTC Pharmacy, Direct Price to Pharmacy, and Price to Wholesaler/Distributor
2. - No future prices would need to be submitted unless requested from the TX HHSC and at that point, the manufacturer would have 10 days to provide the information

Remember, these changes are proposed and as of today, pharmaceutical manufacturers should still be reporting to Texas the required data outlined above.

Also of note is New York’s EPIC and Pennsylvania’s PACE Programs. They also require quarterly submissions that contain the same information as your DDR submission.

And speaking of states, MDRP is the perfect time to bring your documentation to resolve any outstanding disputes with representatives from the following states who will be attending: Alabama, California, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Montana, Nevada, North Carolina, Oregon, Utah, Virginia, Wisconsin, and Wyoming.

If you need more information on the various state requirements or assistance in handling a dispute, please feel free to reach out to me. Katie Lapins, Government Pricing Specialists, LLC, 303.993.6466, K.Lapins@GP-Specialists.com. I look forward to seeing you in Chicago at MDRP!

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.