Transcript PRIME Inst - S Schondelmeyer - Changes in AMP and best

Changes to
AMP & Best Price:
Impact on 340B Pricing
th
4
Annual 340B Coalition
Winter Conference
February 1, 2008
Long Beach, California
Stephen W. Schondelmeyer, Pharm.D., Ph.D.
Director, PRIME Institute
University of Minnesota
Overview
What will be discussed?
•
Medicaid & AMP
•
Deficit Reduction Act: AMP & the Final Rule
•
Deficit Reduction Act: The Preliminary Injunction
•
Impact of DRA & Preliminary Injunction on 340B
Medicaid & OBRA ’90:
Creation of AMP
[Average Manufacturer Price]
Medicaid & AMP
Medicaid Payment Policy Changes
 OBRA ’90 Required Manufacturers to
Pay Rebates to Medicaid
 Minimum rebate
 Best Price rebate
 Inflation adjustment rebate
 Veterans Health Care Act of 1992
 Set Federal Ceiling Price for Big 4
 Established 340B Pricing
 Based on AMP (Minimum and Best Price)
 Federal Ceiling Price
 Negotiated Price
Medicaid Rx Expenditures & Rebates:
1990 to 2002 (Current Dollars)
Expenditures
$29.3 bil.
$30,000,000,000
$25,000,000,000
$5.9 bil.
Total Rx
Expenditures
$20,000,000,000
$23.4 bil.
$15,000,000,000
Rebates
SOURCE: Compiled by the PRIME Institute, University of Minnesota from data found in Pharmaceutical Benefits Under State Medical
Assistance Programs, National Pharmaceutical Council, 1976 to 2002.
2002
2001
2000
1999
1998
1997
1995
1994
Total Rx
Expenditures
- Rebates
1993
1992
$0
1990
$5,000,000,000
1991
$7.1 bil.
$0.9 bil.
$6.2 bil.
1996
$10,000,000,000
Drug Rebates as a % of
Total Drug Expenditures
% of Medicaid
Drug Expenditures
% of Drug
Product Cost (AMP)
30%
24.9%
25%
22.3%
20%
17.1%
18.8%
15%
12.6%
10%
5%
0%
23.3%
19.4%
23.8%
20.2%
17.9%
% of Total
Drug Expenditures
2.7%
0.0%
2.0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: Compiled by the PRIME Institute, University of Minnesota from data found in Pharmaceutical Benefits Under
Medical Assistance Programs, National Pharmaceutical Council, 1975 to 1998 and in HCFA Form 64.
Estimated Prices of Selected Public Purchasers
(2001)
% of AWP
100%
100.0%
90%
AMP
80.0%
80%
67.9%
70%
60.5%
60%
51.7%
50%
49.0%
47.9%
44.8%
40%
30%
20%
10%
0%
AWP
AMP
Medicaid
(Min.)
Medicaid
(Net)
FSS
340B
FCP
VA
Contract
SOURCE: Estimated by PRIME Institute, University of Minnesota and reported in Pharmaceutical Discounts Under Federal Law: State Program
Opportunities, Public Health Institute, May 2001.
Medicaid & the
Deficit Reduction Act
of 2005
Dual Role for AMP
AMP now has 2 roles in Medicaid:
 Basis for Manufacturer Rebates to Medicaid
 Minimum rebate of 15.1% of AMP
 Best price rebate
 Inflation adjustment payment
 State supplemental rebates
 Basis for Setting FULs for Generics
 New FULs to begin mid-2007
 Lowest AMP of all generic equivalents x 250%
 Updated monthly & posted on web site
 Applies to any drug with 2 or more equivalents
Medicaid Prescription Payment Gap
AMP
Manufacturer
Rebates
Payment Gap
(Wholesaler Operation
& Margin & other costs)
AAC
Wholesaler
State
Medicaid
Program
Provider/
Pharmacy
Patient
Does AMP = Pharmacy AAC ?
No !
% of
Acquisition Cost
AMP as a % Independent
Invoice Acquisition Cost
(CBO, January 2007)
100%
90%
95.0%
80%
AMP Range
70%
2% to 10%
Below
Actual Cost
60%
50%
88.0%
AMP Range
2% to 27%
Below
Actual Cost
40%
62.0%
AMP Range
8% to 61%
Below
Actual Cost
30%
20%
10%
0%
Single Source
Multi-Source Brands
SOURCE: Independent invoice acquisition cost based on IMS invoice data from CBO January 2007.
Multi-Source Generics
GAO Study of AMP
(December 22, 2006)
FULs set as 250% above the lowest AMP are:
 Below Average Retail Acquisition Cost
 65% Below for Highest Spend Generics
 15% Below for Most Prescribed Generics
 28% Below for Most Prescribed & High Use Drugs
 59 of 77 Generics Studied
 AMP-based FULs was below average retail
pharmacy acquisition cost
AMP Final Rule
The Final Rule for AMP
The CMS Final Rule:
 Proposed Rule published (Dec. 2006)
 Final Rule published (July 2007)
 AMP Regulation Takes Effect (Oct 2007)
 Lawsuit Filed by NACDS / NCPA (Nov 2007)
 CMS to Report AMP to States & Website
(Jan 2008)
Winners & Losers with AMP
AMP as defined in the CMS Final Rule
 The Final Rule AMP benefits:
 Manufacturers with less rebate liability
 340B with lower AMP from broad definition of retail
 The Final Rule hurts:
 Medicaid program with less rebates
 Traditional retail pharmacy with AMP-based FULs
(payment below acquisition cost in many cases)
 340B rebates lower due to exclusion of
wholesaler prompt pay discounts
CMS Proposed Rule on AMP
(December 22, 2006)
Proposed Rule Expected Impact Includes:
 Savings from Use of AMP to Set FULs
 $800 million in savings in 2007
 $8.04 billion in savings over 5 years
 90% of savings would come from pharmacy
 Pharmacies Will Feel the Impact
 18,000 pharmacies will be significantly impacted
 350 pharmacies in Minnesota will have
significant impact
 High Medicaid pharmacies will be affected most
 Rural & Low-income area pharmacies will be hit
The Lawsuit &
Preliminary Injunction
The Lawsuit Alleges:
Preliminary Injunction Alleges CMS Final Rule:
 Violates Admin. Procedure Act
 Definition of Retail Class of Trade Violates Statute
 Definition of Wholesaler Violates Statute
 Prices in Each State, Not “United States”
to be Considered
 FUL Used for Non-equivalent Multiple Source Drugs
The CMS Final Rule:
Overly broad & self-styled CMS definitions:
 Firms not licensed as wholesalers are wholesalers
 Firms not licensed as pharmacies are pharmacies
 Physicians, clinics, hospital outpatient, & home
infusion are called “retail pharmacies”
 Manufacturers are wholesalers & retail pharmacies
 Consumers are wholesalers & retail pharmacies
Exhibit 3C. Pharmaceutical Market Structure:
Distinct Market Segments & Classes of Trade
Manufacturers,
Marketers, &
Distributors
Drug Manufacturers & Marketers
Wholesalers
Chain
Warehouse
Chain
Pharmacy
Mass
Merchant
Pharmacy
Regional
Wholesalers
National Wholesalers
Food & Drug Independent Mail Order
Pharmacy
Pharmacy
Pharmacy
Retail Pharmacy
Health Plan
Pharmacy
Clinic &
Drs’ Office
Mail
Pharmacy Outpatient Providers
Long Term
Care
Pharmacy
Hospital
Government
Facilities &
Other
Institutional Providers
Exhibit 3D. Pharmaceutical Market Structure:
Wholesalers
Drug Manufacturers & Marketers
Wholesalers
Chain
Warehouse
Chain
Pharmacy
Mass
Merchant
Pharmacy
Regional
Wholesalers
National Wholesalers
Food & Drug Independent Mail Order
Pharmacy
Pharmacy
Pharmacy
Manufacturer
Direct Sales,
Pt. Assistance,
Coupons, &
Vouchers
Health Plan
Pharmacy
Clinic &
Drs’ Office
Long Term
Care
Pharmacy
Hospital
Government
Facilities &
Other
Hospital
Outpatient
Non-Profit
Entities
Exhibit 3E. CMS Final Rule:
Wholesalers
Drug Manufacturers & Marketers
Wholesalers
Wholesalers
Chain
Warehouse
Chain
Pharmacy
Mass
Merchant
Pharmacy
Regional
Wholesalers
National Wholesalers
Food & Drug Independent Mail Order
Pharmacy
Pharmacy
Pharmacy
Wholesalers
Manufacturer
Direct Sales,
Pt. Assistance,
Coupons, &
Vouchers
Health Plan
Pharmacy
Clinic &
Drs’ Office
Long Term
Care
Pharmacy
Wholesalers
Hospital
Government
Facilities &
Other
Hospital
Outpatient
Non-Profit
Entities
Exhibit 3F. Pharmaceutical Market Structure:
Retail Pharmacy Class of Trade
Drug Manufacturers & Marketers
Chain
Warehouse
Chain
Pharmacy
Mass
Merchant
Pharmacy
Regional
Wholesalers
National Wholesalers
Food & Drug Independent Mail Order
Pharmacy
Pharmacy
Pharmacy
Retail Pharmacy Class of Trade
Manufacturer
Direct Sales,
Pt. Assistance,
Coupons, &
Vouchers
Health Plan
Pharmacy
Clinic &
Drs’ Office
Long Term
Care
Pharmacy
Hospital
Government
Facilities &
Other
Hospital
Outpatient
Non-Profit
Entities
Exhibit 3G. CMS Final Rule:
Retail Pharmacy Class of Trade
Drug Manufacturers & Marketers
Chain
Warehouse
Chain
Pharmacy
Mass
Merchant
Pharmacy
Regional
Wholesalers
National Wholesalers
Food & Drug Independent Mail Order
Pharmacy
Pharmacy
Pharmacy
Retail Pharmacy Class of Trade
Manufacturer
Direct Sales,
Pt. Assistance,
Coupons, &
Vouchers
Health Plan
Pharmacy
Clinic &
Drs’ Office
Long Term
Care
Pharmacy
Retail Pharmacy by
Final Rule Definition
Hospital
Government
Facilities &
Other
Hospital
Outpatient
Non-Profit
Entities
Preliminary Injunction Order
by Judge R. C. Lamberth
“Plaintiffs are likely to succeed on the merits”
“Unless enjoined plaintiffs are likely to suffer
irreparable harm for which no adequate remedy
exists in law”
Preliminary Injunction Order
by Judge R. C. Lamberth
“statute is clear enough”
“does not provide the ambiguity for the
wholesale re-writing of the words by the Agency”
CMS is enjoined from:
“any and all action to implement the AMP rule
to the extent such action affects Medicaid
reimbursement rates for retail pharmacies”
“Posting AMP on a public website or . . . to states”
What Can We Expect?
What Can We Expect?
In the Next Year:
 May have settlement of legislative intervention
 Without above the lawsuit will proceed to trial
 CMS may implement other aspects of DRA & AMP
 Manufacturers will continue to report AMP
 AMP may be implemented for 340B pricing purposes
PRIME Institute
P harmaceutical
Research
In
Management &
E conomics
University of Minnesota