The Implications of the Mega-Reg on the Medicaid Managed Care Industry: 2016 & Beyond

2016 is a year of transformation for the healthcare ecosystem - over the past year we’ve seen the implementation of major ACA provisions, delivery system reforms, payment reforms, and states pursuing better value. There’s been a recent shift away from taking a budget-driven approach, and is now driven by the desire to improve quality and outcomes. The implications will be huge and will go beyond Medicaid. 

We’ve had a short Q/A with Jennifer Babcock, Vice President for Medicaid Policy and Director of Strategic Operations, Association for Community Affiliated Plans (ACAP), who will also be chairing and presenting at the Medicaid Managed Care Congress in May. 

What upcoming major trends are you excited about? 

Medicaid is undeniably undergoing a great deal of change right now, and there are many advancing trends keeping all Medicaid policy analysts on our toes. One of the most exciting, from my perspective, is efforts by Medicaid health plans to impact social determinants of health and to integrate within the health plan help for people to get jobs, housing, nutritional support, even support as they leave the criminal justice system. A substantial number of ACAP member plans are doing important work in these areas, as described in a fact sheet we produced in 2014. Efforts by health plans to impact social determinants underscore that 
our collective goal is to improve the health and well-being of people covered in Medicaid.

Secondly, I’m excited to learn about efforts by plans, states, and providers to look at improving quality of health at the population level. Again, these efforts offer a great opportunity to improve the health of the entire nation, given how expansive a coverage program Medicaid is. 

What do you think will be the major implications of the Mega-Reg? 

If finalized the way we at ACAP hope, the Mega Reg will erase any lingering questions about the crucial role MCOs play in Medicaid, leading the way to greater emphasis on the partnership between states and plans. I hope, for example, that CMS will require transparency between states and plans in general, and in particular with regard to the rate-setting process to ensure that all rates are set and approved in a timely and comprehensible manner. Also, I would like to see CMS move toward payment and coverage models that use MCOs to promote population health. Lastly, I would like to see movement toward standardized quality measurement that allows us to learn what Medicaid pays for, not just in MMC, but FFS as well.

Do you have any best practices of success stories you’d like to share? 

My colleagues at ACAP worked with a subset of ACAP plans last year on a substance use disorder collaborative, which resulted in this toolkit, which is available publicly for other health plans to use. This toolkit provides best practices for plans working with individuals impacted with SUD, including opioid addiction. It’s an example of how effectively and quickly Medicaid MCOs can respond to a significant population health problem. We are very proud of these plans’ efforts. 

For MMCC, what do you hope to learn more about? 

I am looking forward to hearing from the real experts about quality in Medicaid managed care and Medicaid. I am anxious to gain insights about how best to coordinate and standardize the myriad quality measurement and reporting efforts so that we can get on with the business of using results to improve care for people, and to improve Medicaid overall, and CHIP as well. While it’s fascinating to see the efforts many states are making to report on the adult and pediatric core measures sets (the CMS 2015 Annual Report on the Quality of Care for Adults in Medicaid and 2015 Annual Report on the Quality of Care for Children in Medicaid and CHIP were released in February of this year), I feel strongly that we all can do more to ensure that quality of care for Medicaid and CHIP enrollees is measured, reported, and improved.

Learn about the implications of the new regulations and beyond by joining the Medicaid Managed Care Congress (MMCC) in Baltimore, MD (May 18-20, 2016.) For more information about MMCC 2016 visit the website here.

Have a comment? Share your thoughts in the comments section or
follow us on Twitter: @healthcarebiz and #MMCC16

Four Major Managed Care Industry Concerns by Jennifer Babcock (ACAP)

The managed care landscape is evolving with the elections around the corner and the Mega-Reg stipulated to release. There is a lot going on in the industry. Read about the four major concerns of the industry by Jennifer Babcock, Vice President for Medicaid Policy and Director of Strategic Operations, Association for Community Affiliated Plans (ACAP):


1.    ACAP’s member plans are very innovative and nimble Safety Net Health Plans that have demonstrated a clear dedication to their enrollees, their communities and to safety net providers. Some Safety Net Health Plans have participated in Medicaid in their states for decades. The move toward consolidation in the industry poses a threat to this commitment, so one of ACAP’s primary goals is to provide support for and create efficiencies for these plans.

2.   The continued lack of an Affordable Care Act Medicaid expansion in many states has produced a drastically inequitable coverage system with multiple negative impacts on people, providers, and states alike. I’m heartened, though, to see the efforts our members and many others are making in those states to encourage governors and state legislatures to expand.

3.   Despite progress, it is still so difficult for people to access all the services they need to thrive, including not only health services, but services addressing social determinants of health as well. Many ACAP health plan members have moved boldly into this area by providing linkages to housing, nutrition, and employment services. CMS has provided leadership in this area as well – one example is last year’s guidance related to how Medicaid programs can fund housing activities.

4.   The continued fragmentation of coverage and care complicates health care for families. Many of the families our plans serve are split between Medicaid, CHIP, Marketplace coverage, and Medicare. Certainly, plans can and do make the choice to operate in all of these programs to address overlap for families, but participation by plans in multiple programs is not a sure thing, and it is not an easy lift, particularly for Safety Net Health Plans. There aren’t always clear incentives for them to do so, which can mean that single families can have to manage two or more sources of coverage, networks, and so on. CMS’ efforts to align requirements across programs is appropriate and useful, although more work needs to be done in this area. Ultimately, enrollee families will benefit.



Hear more from Jennifer Babcock as she will be chairing and presenting at the Medicaid Managed Care Congress (MMCC) 2016, Baltimore, MD with the session "Dive Deep into the Implications of the Mega-Reg"

Download the brochure to see the most up-to-date agenda for the MMCC here.

Have a comment? Share your thoughts in the comments section or
follow us on Twitter: @healthcarebiz and #MMCC16

Earn a FREE pass to the IIR's MMCC 2016 in Baltimore, MD - Become a Guest Blogger!

Medicaid Managed Care Congress (MMCC ) 

May 18-20 2016
Baltimore Marriott Inner Harbor
Camden Yards, MD

Join the IIR's Medicaid Managed Care Congress 2016 (MMCC) to learn from the government officials, health plan executives and other key players of the healthcare industry who get together for an annual knowledge exchange and networking.

As a Guest Blogger, you’ll have access to the IIR’s MMCC 2016 comprehensive agenda attracting the best insights from around the world, right in Baltimore, MD in May.

We are looking for an industry expert with interest in the following topics:

• Mega Reg;
• Financial and operational success –rate setting, risk adjustments;
• Outcomes and Social determinants of Health (population Health);
• Co-ordination and integration of care – long term care, long term services and support;
• Pay for performance or value based payment strategies;
• Driving Performance at the Provider Level;
• New contract requirements, value based payment arrangements with provider networks
• Innovation Accelerator Program (super utilizers, behavioral health & physical health integration, LTSS);
• Medicaid Eligibility churn;
• Integration of physical and behavioral healthcare services;
• Transparency and rate setting;
• Risk Quarters;
• Medicaid expansion and what the future of that looks like (Exchange models);
• Mental health and substance disorder treatment;

....and who would like to learn about the current state and the future of Medicaid managed care!


The premise is to provide MMCC 2016 related blog posts (300-500 words), whitepapers, and overall light coverage of the event.

What You get is:

• FREE all-access pass to the conference (valued up to $2,695);
• Access to extensive learning activities with the top regulatory thought leaders and policy makers;

• Exclusive admission to a networking community in the industry of your interest!

You also have a chance to GAIN exposure through our Healthcare Insights blog with over 2000 unique visitors monthly and more than 20 healthcare LinkedIn groups.

Learn more about the IIR's Medicaid Managed Care Congress 2016 (MMCC) by visiting the website.

Interested & want to learn more about this opportunity? Please contact Ksenia Newton at knewton@iirusa.com 

We hope to have you join us in Baltimore, MD this May!

Subscribe to our blog or follow us on Twitter: 

@healthcarebiz and #MMCC16

Pricing of Prescription Drugs Debated

(This article "Pricing of Prescription Drugs Debated" originally appeared on the HealthLeaders website, January 18, 2016.)

By Christopher Cheney.

In the "Great Drug Pricing Debate of 2016," a semi-fictional duo goes head-to-head on whether the pricing of prescription drugs is spiraling out of control, whether price controls should be instituted, and whether drugs can be priced based on value. 

Pricing practices for prescription drugs are drawing intense scrutiny from inside and outside the healthcare industry.

Healthcare payers are apoplectic over the rising costs of prescription drugs. America's Health Insurance Plans, the trade association for healthcare payers, has been blasting pharmaceutical companies over drug pricing on a nearly daily basis.

Healthcare providers also are sounding the alarm, with the American Medical Association announcing in November that it would launch an "advocacy campaign to drive solutions and help make prescription drugs more affordable."

Drug pricing is already a hot topic in this year's presidential race, with Democratic Party contender Hillary Clinton calling for affordable drug pricing in political advertising and on her campaign's website. Her main opponent, Sen. Bernie Sanders (D, VT) has his own plan to lower prescription drug prices.

Capitation's Second Coming Debated 

To debate the issue, I have assembled a semi-fictional duo with opposing perspectives on drug-pricing trends and their impact on the healthcare industry. The debate format gives each participant about 500 words to answer a handful of questions.

Arguing in favor of the drug-pricing practices of pharmaceutical companies is Reginald Thump, wealthy Manhattan businessman and candidate for president of the United States.

Arguing against the drug-pricing practices of pharmaceutical companies is Jennifer Campbell, analyst for healthcare cost and delivery at the National Business Group on Health.

HLM: Are prescription drug prices trending at unsustainably high levels?

Thump: This country is not as great as it used to be and certainly not as great as I could make it again. Let's face it folks, the ability to innovate is one of America's greatest strengths, and it blows my mind that my opponent and others like her want to beat up on one of the most innovative sectors of our economy.

Screws Tighten on 340B Program 

If we want to focus on unsustainable healthcare costs, we should not be focusing on prescription drugs. Pharmacy-dispensed drugs account for about 10% of total healthcare spending, and the cost of those drugs pale in significance compared to the costs of ER visits and hospitalizations. Drugs keep people out of the hospital, which generates cost savings for the entire healthcare industry. That's an undeniable fact that pharma's critics want to ignore.

Campbell: The trend is unsustainable.

While drug pricing and utilization both continue to surge, drug spending will increase by 6% or more annually from now until 2022, according to the Centers for Medicare & Medicaid Services. In 2014, U.S. spending on prescription drugs hit $379 billion, a third of which can be attributed to specialty drugs.

Layering on top of this growing financial burden is that these drugs are now being formulated and targeted for chronic conditions affecting much larger patient populations, a trend that will spark continued discovery and growth of specialty drugs.

Under current law, the Food and Drug Administration grants brand-name biologic drugs a 12-year exclusivity period upon approval. Such a long exclusivity period essentially removes the benefits of price competition, resulting in higher drug prices and a failure of less-costly generic versions to reach the market—all of which will continue to endanger affordable coverage options.

When there is a lack of lower cost substitutes for these steeply priced drugs, health plans and employers alike will increasingly struggle to execute drug access and cost management strategies. More and more, we are seeing that even when efficacious, low-cost generics do exist, payment incentives are not always aligned to promote their use.

HLM: Should there be price controls or windfall-profit taxes in the pharmaceutical sector?

Thump: Price controls would harm patients. U.S. patients have more treatment options and earlier access to medications than patients in any other country on Earth.

The new hepatitis drugs, which we should be celebrating because they cure a dreaded disease, are a great example. The doomsday predictions about these drugs have not come true. All of the patients who need these drugs have gotten these drugs. The market does work.

Campbell: We support neither approach and believe, instead, that the current pricing models are unsustainable and that manufacturers and payers should come to a consensus on pricing.

One promising approach involves manufacturers taking on risk if medications don't deliver as promised and either fail to reduce downstream costs or increase them.

HLM: What is the best way to contain rising prescription drug costs?

Thump: The costs of life-saving medications are not the problem, and the health plans should look in the mirror before they start pointing fingers at pharmaceutical companies.

The way health plans craft benefit designs contributes to increased drug prices. Some health plans require doctors to use an expensive medication when there is a cheaper alternative. Other health plans have placed generic drugs in the highest tier of their drug-pricing benefit designs with brand-name medications.

Campbell: There are a number of best practices that employers follow. In conjunction with their pharmacy benefit manager and health plan provider, employers first seek to provide employees with tools and support to guide appropriate specialty medication management.

Second, [employers seek to] create a comprehensive utilization management framework, complete with prior authorization, step therapy, quantity limit, and exclusion protocols.

Third, [they] implement a custom drug formulary that is designed based on evidence of drug safety and efficacy, and promote patient access to appropriate treatments while effectively controlling costs.

Fourth, [they] promote a more dynamic relationship between patients and their physicians and pharmacists to ensure practical treatment recommendations and compliant drug utilization behavior.

And fifth, [they] focus on site-of-care strategies and the most cost-effective distribution channels, such as specialty pharmacy chains.

HLM: Can prescription drugs be priced based on value, such as how well one drug performs clinically compared to competing drugs?

Thump: Every sector of the healthcare industry is struggling with this challenge. Singling out pharma for the sector's struggle to price prescription drugs based on value is the height of hypocrisy. I'm just saying.

Campbell: In the new value-driven healthcare system, pharma companies are feeling the pressure to demonstrate real, measurable product value. Employers have long been clamoring for more alignment between purchasers and manufacturers.

Finally, we're starting to hear more chatter around this. There are multiple efforts in the United States to make drug price determinations based on value, including the Institute for Clinical and Economic Review and DrugAbacus.

HLM: Are the costs of prescription drugs taking up too large a share of patients' total cost of care?

Thump: Again, the health plans need to take their fair share of responsibility for what is happening with the price of prescription drugs. In this country, the cost of all medications has consistently accounted for about 14% of total healthcare spending.

Patients are enduring higher out-of-pocket costs for their medications because of the way health plans are crafting benefit designs, including high deductibles. The prescription-drug share of the healthcare spend has been consistent, but the patient share of the healthcare spending burden is going up because of the way health plans are changing their benefit designs.

Campbell: The simple answer is yes, although the question is not quite that simple. As one of our forward-thinking employer members has pointed out, we need to understand the downstream costs associated with medications such as medical side effects in addition to the "value add" of the drug. 

However, in general, on a per-member, per-month basis, "specialty drugs" are having an impact on patients' total cost of care. In general, increasing drug costs are driving higher costs to health plans as well as to members, both on the medical and pharmacy side.

The better question might be, "how has specialty pharmacy had an impact on the member's total medication cost share over the course of the last year or so?" To which one member responded, "It's going up, and with no end in sight."

By Christopher Cheney, the senior finance editor at HealthLeaders Media.

Contributor Biography: Christopher Cheney has been a professional journalist for 20 years. He currently works as senior finance editor at Danvers, Massachusetts-based HealthLeaders Media. Prior to joining the staff at HLM, he worked in multiple roles at several newspapers in New England, including the Boston Herald, Cape Cod Times and Concord Monitor. Cheney began his career in healthcare research administration at Children's Hospital Boston. He holds three university degrees, including a master's degree in journalism from Boston University. Cheney is a native of the Red Sox side of Connecticut and lives in New Hampshire with his wife, Jennifer.

The AMP Final Rule is out of OMB - Prepare for CMS' final Regulations

Have you heard? The OMB has completed their review of the AMP Final Rule and CMS is expected to publish the final regulations soon. As the industry prepares for its impact, IIR’s all-new MDRP AMP Final Rule Digital Week 4-day digital event will provide you with the best coverage of the AMP Final Rule and its many implications.

Join us on January 25-28, 2016 and hear experts from Celgene, Fresenius Kabi, Pfizer, King & Spalding, NACDS and more, as they dissect the rule, covering some of the expected topic areas to be affected:

• Default Rule
• Alternative AMP Calculation for 5i drugs
• 90/10 Rule for Determination of “Not Generally Dispensed”
• Line Extension/New Drug Formulation Rebate Calculation
• Treatment of Authorized Generics
• Specialty Pharmacies, Home Infusion Pharmacies, and Home Health Providers
• Inclusion of US Territories
• Definition of Bundled Sale
• Definition of Bona Fide Service Fee and More!

The best part is that you won’t need to leave the office to attend as this event will be available live and on-demand, streaming to wherever you’re sitting. (It means you SAVE on hotel and travel costs too and we all know how critical that is!)

Subscribe and stay tuned as we add more experts and content to the program, and we get more details in on CMS' final regulations.

Plus! For the first time ever, we're offering special pricing per organization site! Don't miss out, use code P2068LINK to secure your spot now.

Earn a complimentary pass to IIR's FDA/CMS Summit in Washington, DC - Become a Guest Blogger!

FDA/CMS Summit and co-located Regulatory Information Management Summit (RIM)

December 14 - 15 2015

Washington, DC

Join the biopharma FDA/CMS Summit that facilitates direct dialogue between biopharma executives, investors and FDA/CMS regulators to explain complex regulatory and reimbursement policy.

As a Guest Blogger, you’ll have access to the IIR’s FDA/CMS Summit and RIM's comprehensive agenda attracting the best insights from around the world, right in Washington, DC in December.

We are looking for an industry expert with interest in the following topics:
• Healthcare policy and regulations;
• Breakthrough Therapies;
• Patient-focused drug development programs;
• Drug pricing;
• Medicare & Medicaid;
• Drug reimbursement models...

....and who would like to learn about the current and future trends in Healthcare Regulation!

The premise is to provide FDA/CMS Summit and co-located RIM related blog posts (never more than 300 words), whitepapers, and overall light coverage of the event.

What You get is:
• FREE all-access pass to the conference (valued up to $2,195);
• Access to extensive learning activities with the top regulatory thought leaders and policy makers;
• Exclusive admission to a networking community in the industry of your interest!

You also have a chance to GAIN exposure through our healthcareinsightsblog.iirusa.com blog with over 2000 unique visitors monthly and more than 20 healthcare LinkedIn groups.

Learn more about the IIR's FDA/CMS Summit by visiting the website.

Interested & want to learn more about this opportunity? Please contact Alexandria Pump at apump@iirusa.com 

We hope to have you join us in Washington, DC this December!

Subscribe to our blog or follow us on Twitter: 

@healthcarebiz and #FDACMS15

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MDRP Summit: Day 1. Morning Sessions & Keynote Address

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

While comments by manufacturers and trade associations included:

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

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

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

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

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

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