Transcript www.hoganlovells.com

Deficit Reduction Act:
What You Can and Should
Do Now
IIR’s 11th Annual Medicaid Drug Rebate Conference
Monday, September 25, 2006
Alice Valder Curran, Partner
Ali Tore, Co-founder & Sr. Director of
Product Management
Agenda
 Welcome and Introductions
 DRA Summary and Implementation Timeline
 Topics of Discussion
 Monthly AMP/BP Reporting
 Authorized Generics
 AMP Formula Changes
 Definition of Nominal Price for BP
 State Rebate Claims for Physician-Administered Drugs
 Industry Benchmark Survey :: Are We Ready?
 Emerging Best Practices
 Q&A
DRA Implementation Timeline
Q2 CY06
Q3 CY06
6/1 6/9
Q4 CY06
9/6
Q1 CY07
1/1
3/2
Most
DRA
Changes
in Effect
HHS OIG
Recommendations
Report
Voluntary AMP
Submissions
Due
CMS Open
Door Session
First Monthly
AMP/BP
Submission
Q2 CY07
Q3 CY07
7/1
CMS to Issue
Regulation
Monthly AMP/BP Reporting
 DRA Changes
 AMP/BP to be reported monthly to CMS starting with report for January 2007
 CMS to provide monthly AMP data to states and make AMP data public on a
quarterly basis


CMS began providing AMP data to states in July, but has instructed states to keep AMP
data confidential prior to 2007
AMP data will become publicly available in 2007
 Open Issues
 Calculation methodology for monthly AMP and BP figures

Subject to restatement or smoothed like ASP?
 Relationship of quarterly and monthly AMP and BP figures

Statutory reporting period is now monthly

Statutory “rebate period” is still a calendar quarter


Can quarterly figures be derived as weighted average of monthly figures, even if monthly
figures use smoothing methodology?
What figures will be used to calculate Base date AMP and PHS price going forward?
Authorized Generics (AG)
 DRA Changes
 Effective January 2007, AMP/BP for innovator products must include prices
associated with related products approved under 505(c) of FDCA

Private label products included?

What about biologics?
 Open Issues
 What prices for the AG go into the branded product’s AMP and BP

Transfer Prices vs. Commercial Sale Prices

Royalty, license, and revenue sharing payments
 How is the AG’s pricing data incorporated into the branded product’s AMP/BP
calculations?
 Reporting obligation for the AG – branded or AG manufacturer?
AMP Formula Changes
 DRA Changes
 Effective January 2007, the AMP calculation formula to exclude prompt pay
discounts to wholesalers for drugs distributed to retail class of trade
 Will the definition of the retail pharmacy class of trade change too?
 Open Issues
 Application of new methodology to pre-2007 base date AMP quarters

Is this a permanent penalty on top of the CPI-U penalty?

If CMS permitted recalculation of base date AMPs, would you want to do so?
 Definition of the term “wholesalers”
 Details regarding the separate reporting format of Prompt Pay Discount
 Re-definition of retail class of trade?

Long Term Care

Home Health Care

Mail Order

PBMs
Definition of Nominal Price for BP and ASP
 DRA Changes
 DRA narrows the definition of what types of nominal sales may be excluded
from ASP and BP calculations
 A Nominal Price will only be exempt from ASP and BP when extended to

Covered Entity under 340B Program

Intermediate Care Facility for Mentally Retarded

State-owned or operated Nursing Facility

Any other facility determined by HHS to be a safety net provider
 Sales made on a FSS Master Agreement are exempt
 Open Issues
 Details regarding the reporting of excluded nominal price transaction data

ASP statute already requires this, but not yet implemented
State Rebate Claims
for Physician-Administered Drugs
 DRA Changes
 DRA requires States to collect, translate and submit utilization and NDC data on
physician-administered drugs to CMS

Jan 1, 2006 for single source drugs

Jan 1, 2008 for 20 highest dollar volume multiple-source drugs
 Grassley Letter: DRA Requires pro-rated rebates when Medicaid is secondary payor
 Operational Concerns
 Manufacturers of single source physician-administered drugs likely to see an
increase in the amount of HCPCS coded rebates claimed by States

For future and past quarters

Identifying this utilization in state rebate claims
 Increased emphasis for a robust Claims Processing system

Confirm cross-walking accuracy

Confirm pro-ration by State
Industry Benchmark Survey
Are We Ready?
Is there executive visibility and investment in your organization?
 Have you formally Customers
studied implications of DRA?
 Have you chartered a DRA implementation project?

Plan
Each provision presents unique challenges
 Are you evaluating AG Deals and Nominal Contracts?
 Identify where key changes will occur
 Which functions will feel impact of DRA?

Evaluate
Are you hiring more resources to help execute your DRA plan?
 What types of system investments are needed?
 Confidence in meeting deadlines?
 Predict the post-DRA world

Take Action
Survey Results
Planning for DRA
 High level of Executive
Visibility in Organizations
Is there Executive Visibility in Your
Organization Regarding DRA?
 Majority of manufacturers
have started DRA projects
No
8%
 75% have studied impact
on contract and pricing
strategy
Yes
92%
 50% have studied
financial impact
Have You Chartered a Specific DRA
Project?
No
9%
Not Aware
8%
Yes
83%
Survey Results
Planning for DRA
 Leveraging resources
within and across
organizations
 58% of
organizations
utilizing internal
and external
resources
 33% internal only
 9% external only
Which Departments are Involved in Your DRA
Project?
Contracts & Pricing
Finance
IT
Marketing & Brand
Legal
0%
10%
20%
30%
40%
50%
60%
70%
80%
Survey Results
Evaluating DRA’s Impact
Level of Concern on Issues
AMP Formula Changes
Monthly Reporting
AMP Transparency
Nominal Price Definition
Authorized Generics
False Claims Act
State Rebate Claims
Retail Price Survey
FUL Definition
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Survey Results
Evaluating DRA’s Impact
Level of Implementation Challenge
AMP Formula Changes
Monthly Reporting
Authorized Generics
State Rebate Claims
Federal Upper Limit
Nominal Price Definition
Children's Hospitals
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Survey Results
Evaluating DRA’s Impact
Are You Analyzing Whether to Modify or Terminate
Existing Authorized Generics Deals?
Yes, and plan to
Not Applicable make changes
0%
25%
No
12%
Yes, and do not
plan to make
changes
38%
Yes, and have
not decided
25%
Are You Analyzing Whether to Modify or Terminate
Existing Nominal Price Contracts?
Not Applicable
25%
No
38%
Yes, and plan to
make changes
13%
Yes, and do not
plan to make
changes
12%
Yes, and have not
decided
12%
 More organizations
are analyzing AG
agreements than
Nominal Price
Contracts
 Majority is not
planning to modify
AG agreements or
delaying their
decisions pending
further guidance
Survey Results
Preparing for 2007
 Organizations are
investing in systems,
processes and
resources
 Planning to hire
additional resources to
execute DRA
response:
What Type of IT & System Investments is Your
Organization Making in 2006?
Government Pricing
Medicaid Claims Processing
Analytics & Reporting
Commercial Contracting
Enterprise Resource Planning
 42% Yes
Customer Relationship Management
Not Sure
 17% No
 41% Do Not Know
0%
10%
20%
30%
40%
50%
60%
70%
80%
Survey Results
Preparing for 2007
 Do You Think You Will be Able to Meet the Current DRA
Deadlines?
 Yes
 No
 Do Not Know
Survey Results
Preparing for 2007
Do You Think You Will be Able to Meet the Current
DRA Deadlines?
Do Not Know
34%
No
8%
Yes
58%
 Two thirds of respondents expect Government
Pricing and Medicaid Rebate processes to be
more complex in 2007
 Remaining one third thinks it will remain as
complex
Emerging Best Practices
 Start Now!
 Think Agility and Adaptability
 Strategy
 Methodology & SOPs
 Data & Technology Infrastructure
 Continue Dialog and Collaboration
 Engage with CMS
 Continue Executive Awareness and Education
 Collaborate with Other Functions in the Organization
 Take Advantage of the Opportunity
 Influence Policy and Regulations
 Align Commercial and Government Strategies
 Rethink approach to technology infrastructure for the future
Thank You!
Alice Valder Curran
Ali Tore
[email protected]
[email protected]
www.hhlaw.com
dra.modeln.com
(202) 637-5997
(650) 610-4628