Pharmaceutical Commerce - May/June 2013 - (Page 28)

Legal & Regulatory Common types of fees for services So, why is there so much scrutiny on this area now? The government program price points are now more visible and under a great deal of public and government scrutiny. Just as importantly, the financial impact of certain price points is inconsistent across government payers and providers. A common approach for manufacturers used to be that if they were uncertain whether a payment should be considered a price incentive, they would be “conservative,” consider it as such, and include the payment in the AMP and Medicaid Best Price (BP) analysis. These statutory reporting requirements are used to determine the Unit Rebate Amount (URA), which is a rebate that the manufacturer pays to the state for Medicaid utilization. Then, in 2007 CMS published its Final Rule implementing the Deficit Reduction Act (DRA), which required AMP to be used, not just to define the URA, but also to determine the Federal Upper Limit Any payment by a manufacturer to a customer for (FUL) for multiple-source drugs services should be evaluated, but especially: (most, but not all of which are • Distribution service fees generics). • Administrative fees FULs, considered in the • Stocking allowances/fees aggregate, set a cap on the federal • Marketing/tradeshow fees share of the costs incurred by a • Centralized or specialty distribution fees state Medicaid program for generic • System setup and start-up fees prescriptions. To ensure consistent • Information and data service fees compliance with that cap, many • Financial management fees states also use FULs on a drug• Storage and handling fees specific basis to set the maximum • New store fees reimbursement available to • Chargeback fees pharmacies for multiple source drugs dispensed to a Medicaid According to the Patient Protection and Affordable patient. The dual role assigned to Care Act (ACA), these are specific examples of AMP effectively eliminated that bona fide service fees, paid by manufacturers to potential for taking a conservative wholesalers or retail community pharmacies, course in the face of uncertainty including (but not limited to): about requirements for calculating • Distribution service fees AMP—requirements like those • Inventory management fees associated with the definition of • Product stocking allowances a BFSF—since AMPs that are too • Fees associated with administrative services low would reduce Medicaid rebate agreements and patient care programs (such revenues and AMPs that are too as medication compliance programs and high would cost the state Medicaid patient education programs) programs money when they pay References: Patient Protection and Affordable Care Act (ACA). See Pub. pharmacies for generic drugs L. 111-148, 124 Stat. 310 (to be codified in scattered sections of U.S.C.). dispensed to Medicaid patients. AMP’s dual role caused the retail pharmacy industry to hone in on the could be unfavorable. For example, higher potentially adverse financial implications AMPs generally mean higher Medicaid rebate of AMP-based FULs under the DRA. The payments but also higher costs to Medicaid in industry sought and got an injunction against pharmacy reimbursement. Further, although the use of AMPs calculated in accordance higher AMPs usually generate more rebate with the DRA Final Rule for reimbursement money for Medicaid, they typically hurt purposes, but the concept of using AMP for PHS entities by raising their costs for drugs. rebates and reimbursement was reintroduced The exclusion of a BFSF (which is defined in 2010 with the enactment of the Patient somewhat differently by the VA) from the Protection and Affordable Care Act (PPACA), calculations that support FSS pricing also which also redefined AMP, further increasing leads to higher costs for federal agencies the public and government scrutiny of AMP. buying the product for their own use. So what we are left with now is that improper designation of a payment to a customer as This puts the manufacturer between a a BFSF or a discount can have a dramatic rock and a hard place. impact on various price points across the There has always been a serious lack of government programs, including AMP, BP, clear guidance surrounding the inclusion or the Medicare Average Sales Price (ASP), the exclusion of fees in the various calculations. PHS price and the VA FSS pricing. If you In the recent court ruling, US ex rel. Streck were to treat a specific payment as a BFSF v. Allergan (aka the Streck case), the court and exclude it, the result would most often be clearly stated that prior to the 2007 CMS Final raising the affected price points. Rule, the manufacturer had to make “good The effect on one price point could be faith efforts” to evaluate the fees paid. This favorable to the government, where the effect court finding, as well as recent reports by on another price point of the same decision the OIG and the GAO, demonstrate that the now obligated to provide information of upcoming shortages to FDA (something many did voluntarily prior to passage of the FDA Safety and Innovation Act last summer). And while the Drug Shortage team at FDA undoubtedly is working hard to address shortages, overall, the situation is only marginally better, if that. On March 22, the shortages list maintained at the American Soc. of Health-System Pharmacists contained 241 products in short supply (a handful of these are actually containers or devices for delivering meds to patients). In late 2011, FDA commissioner Margaret Hamburg noted that staff had addressed more than 100 potential shortages. Back then, the shortage count was approaching 300. FDA’s site also lists 51 shortages that have been ameliorated in some fashion from early 2012 to early 2013. The April 1 issue of the Am. J. of HealthSystem Pharmacy will have a survey, conducted by the Hematology/Oncology Pharmacy Assn. and authored by James Hoffman, PharmD, of the St. Jude Dept. of Pharmaceutical Sciences, showing that shortages of oncology products “are taking a heavy toll on cancer patients, forcing treatment changes and delays that for some patients mean worse outcomes, more therapy-related complications and Lessons learned on bona fide service fees and fair market value—is there a “right answer”? continued from page 1 sales, and payments to third parties, such as wholesalers, group purchasing organizations (GPOs), managed care organizations (MCOs) and pharmacy benefit managers (PBMs). Currently, the math involved can be seen as a “gross to net” exercise, where the manufacturer starts with its gross direct sales and finds a net price to a certain class of customer, typically retail customers in the case of Medicaid Average Manufacturer Price (AMP). If the manufacturer does not perform and submit accurate calculations, this could cause government overpayment, and the government could pursue a False Claims Act (FCA) action against the manufacturer. Substantial fines and penalties could result. Therefore, manufacturers have to get the calculations correct. They must know with as much certainty as possible what is considered a discount and taken into a calculation (lowering AMP, for example), and what is considered a BFSF and excluded from the calculation (raising a price point like AMP). The problem is this: the Centers for Medicare & Medicaid Services (CMS), the federal agency that runs the Medicaid and Medicare programs and issues the rules for how to calculate these statutory pricing statistics, has issued limited guidance for manufacturers to use when determining which payments constitute BFSFs. This is particularly true with respect to FMV, which CMS has repeatedly stated it will not define. CMS did publish criteria for BFSF determinations in the 2007 AMP Final Rule, which established what we call now the “Four Part Test.” A BFSF is defined as: “a fee paid by a manufacturer to an entity, which represents Fair Market Value (FMV) for a bona fide, itemized service actually performed on behalf of the manufacturer, that a manufacturer would otherwise perform (or contract for) in the absence of a service agreement, and that is not passed in whole or in part to a client or customer of an entity, whether or not the entity takes title of the drug.” (42 Drug shortages continue to challenge health systems More compounding pharmacy recalls worsen the situation; FDA looks for new legislation With some fanfare, FDA and industry groups announced expanded efforts to deal with drug shortages in late 2011, mostly (but not exclusively) involving generic products for injection. Manufacturers are C.F.R.§ 414.802 (2011)) The first and most difficult element of this test to determine is the FMV. FMV is difficult because 1) it is not defined, 2) the payments are often related to a variety of products and services and are percentage based, raising the question of how to determine FMV when the payment is variable, and 3) there are variations across manufacturers and service providers in the fees paid for services. Having performed a significant number of BFSF and FMV evaluations now, often done through a partnership between a consulting and a law firm, it seems good faith effort and due diligence are almost more important than having the exact right answer because there may not be a “right” answer. FMV is inherently subjective and can be a range. It is the documentation of the assumptions, methodology, and rationale used in establishing that range that must give an outside review organization, such as the OIG, comfort in the appropriateness of the established range. 28 Visit our website at www.PharmaceuticalCommerce.com May | June 2013 higher costs,” according to a statement from Memphis-based St. Jude. “Unlike medications for other diseases, there are few, if any, therapeutically equivalent alternatives available for many oncology drugs in short supply,” says Hoffman. That study spanned the October 2010–October 2011 timeframe, but a look at the current ASHP list shows many of the same products are still there. The shortages have consequences for innovator pharma companies as well: clinical trials involving comparator products have been disrupted or delayed—and there are continued on page 30 http://www.PharmaceuticalCommerce.com

Table of Contents for the Digital Edition of Pharmaceutical Commerce - May/June 2013

Pharmaceutical Commerce - May/June 2013
Table of Contents
Editorial
Op-Ed
Top News
Business/Finance
Brand Marketing & Communications
Supply Chain/ Logistics
Information Technology
Manufacturing & Packaging
Legal & Regulatory
Meetings and Editorial Index

Pharmaceutical Commerce - May/June 2013

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