Mini Summit XIII: Government Price Reporting Update

Transcription

1 Mini Summit XIII: Government Price Reporting Update 13 th Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum November 6, :15 5:45 PM

2 Disclaimer This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this presentation. As used in this document, Deloitte means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. 1

3 Co-Chairs John D. Shakow, Esq. Partner, FDA & Life Sciences Practice, King & Spalding LLP Marcy Imada Principal, Life Sciences, Deloitte & Touche LLP Panelists Cynthia B. Bass, Esq. Associate General Counsel, U.S. Legal Department, Sanofi George Kenny, Esq. Senior Account Manager, Managed Care and Customer Operations, 340B, Genentech USA, Inc. 2

4 Discussion topics The Streck opinion and bona fide service fees 340B integrity and price reporting The proposed expansion of bundled sale definition Planning for the Average Manufacturer Price (AMP) Final Rule, due in early

5 The Streck opinion and bona fide service fees Background: Relator Streck, the former President and CEO of HDMA, filed a qui tam action against 13 drug manufacturers in the Eastern District of Pennsylvania in Allegations of FCA fraud based on failure to accurately deal with IMA fees paid to wholesalers Discount defendants alleged to have improperly included IMA fees in AMP as price concessions, resulting in a lower AMP Service fee defendants alleged to have required wholesalers to credit service fee payments against price appreciation credits, effectively suppressing AMP 1 U.S. ex rel. Streck v. Allergan, et al., C.A. No

6 The Streck opinion and bona fide service fees (cont.) The bona fide service fee test: Fees paid to service providers in the chain of purchase or payment are price concessions unless they meet the following four criteria: 1.The fee paid must be for a bona fide, itemized service that is actually performed on behalf of the manufacturer, 2.The manufacturer would otherwise perform or contract for the service in the absence of the service arrangement, 3.The fee represents fair market value (FMV) for services rendered, AND 4.The fee is not passed on in whole or in part to a client or customer of the service-providing entity 5

7 The Streck opinion and bona fide service fees (cont.) Allegations as to Discount Defendants: The Discount Defendants illegally characterized as discounts and deducted from AMP fees for the following types of services: distribution services, data reporting services, inventory management services, chargeback and returns processing services, customer service support, new product launch services, consolidated deliveries to providers, consolidated accounts receivable management, and sophisticated ordering technology By characterizing the service fees as discounts instead of bona fide service fees, Discount Defendants incorrectly reported lower AMPs because they deducted the amount of the fee from the price wholesalers paid Department of Justice and all states declined to intervene, but Streck pressed on 6

8 The Streck opinion and bona fide service fees (cont.) July 3, 2012 opinion from Judge Robino: 2 Granted motion to dismiss all claims as to the Service Fee Defendants Dismissed all claims against the Discount Defendants prior to January 1, 2007, but allowed the case to proceed against them for claims arising after that date o Prior to the DRA, it was not reckless for drug manufacturers to assume that these fees should be considered discounts and included in AMP o Since January 1, 2007, however, plaintiff s allegations of recklessness survive the motion to dismiss standard o Discount Defendants will have to build a record to defend as not reckless their determination that all four elements of the bona fide service fee test were not met as to these fees 2 U.S. ex rel. Streck v. Allergan, et al., C.A. No

9 340B integrity and price reporting Background: In March 2010, the Patient Protection and Affordable Care Act (ACA) 3 amended the Section 340B Statute to add 340B Program Integrity improvement provisions Provisions address both manufacturer and 340B covered entity compliance with 340B Program requirements Program integrity has been a key focus area in 2012 for the Health Resources and Services Administration (HRSA) and the Office of Pharmacy Affairs (OPA) HRSA is required to issue regulations to implement the ACA provisions 3 Pub. L. No

10 340B integrity and price reporting (cont.) Provisions expected to impact manufacturers most significantly address the following compliance activities: HRSA verifications of accuracy of 340B ceiling prices reported by manufacturers HRSA spot checks of 340B price accuracy in covered entity sales transactions Manufacturer refunds to covered entities of overcharges, whether due to errors or routine retroactive adjustments to pricing data (e.g., Medicaid Best Price true-ups) HRSA selective auditing of manufacturers Manufacturer auditing of covered entities to resolve duplicate discount or diversion claims 9

11 The proposed expansion of bundled sale definition Background: Price concessions offered in bundled arrangements must be aggregated and allocated in order to make the reported government price points reflect the true price The definition of a bundled sale or bundled arrangement, however, has evolved and grown since the concept was introduced in the Medicaid Rebate Agreement twenty years ago The notion of temporal bundles for instance, those where the price concession and the performance requirement occur in separate quarters, was set out for the first time in the preamble to the DRA Final Rule in

12 The proposed expansion of bundled sale definition (cont.) Proposed PPACA Rule Changes to Bundled Sale : The February 2012 proposed rule interpreting PPACA s pricing provisions reconfigures the definition of bundled sale 4 The language regarding identification of a bundled sale remains basically the same, but the aggregation and allocation language proposes a significant change The discounts in a bundled sale, including but not limited to those discounts resulting from a contingent arrangement, are allocated proportionally to the total dollar value of the units of all drugs sold under the bundled arrangement , 77 Fed. Reg (February 2, 2012) 11

13 The proposed expansion of bundled sale definition (cont.) Potential Effect of Proposed Change Some believe the bundling rules always required us to pull in every discount on any drug in a bundled sale whether or not it was subject to a contingency But for many, this language proposes an expansion of the definition of bundled sale that does violence to the concept of accuracy in government price reporting 12

14 The proposed expansion of bundled sale definition (cont.) Example A 10% rebate is offered on Drug A with no formulary or purchase requirement. If both Drug A and Drug B are on placed formulary, the plan receives an additional 5% rebate on Drug A and a 7% rebate on Drug B. The 5% and 7% price concessions are contingent on both Drugs being on formulary. The total dollar value of these concessions has to be allocated across the utilization of both products under the traditional bundling math. The new language would call for the 10% noncontingent rebate on Drug A also to be shared with Drug B. 13

15 Planning for the AMP Final Rule, due in early 2013 Background: On February 2, 2012, the Centers for Medicare & Medicaid Services (CMS) published a Proposed Rule in the Federal Register to implement the Medicaid Drug Rebate Program (MDRP) provisions of the ACA 5 CMS requested manufacturer comments/feedback by early April 2012 The Final Rule is expected to be released in 2013 The ACA provisions impact the MDRP in areas including the following: o AMP calculations o Best Price (BP) calculations o Unit Rebate Amount (URA) calculations, which are the basis for Medicaid rebates payable by manufacturers 5 77 Fed. Reg (February 2, 2012) 14

16 Planning for the AMP Final Rule, due in early 2013 (cont.) AMP calculation-affecting provisions expected to have the greatest impact on manufacturers include: Narrowed definition of wholesaler and statutory definition of Retail Community Pharmacies (RCPs) calculation of AMP based on actual sales to RCPs or wholesalers for products distributed to RCPs Rejection of the presumed inclusion approach Traditional AMP or 5i AMP calculation methodologies 15 o 5i products = inhaled, infused, instilled, implanted, or injectable products o Determination of which calculation to use to be performed monthly and quarterly based on whether 90% of sales are not generally dispensed through a RCP o Products could potentially switch month-to-month between traditional AMP and 5i AMP calculation approaches, which has implications for smoothing and base date AMP

17 Planning for the AMP Final Rule, due in early 2013 (cont.) Other provisions expected to impact manufacturers include: Inclusion of U.S. territories in AMP and BP price calculations and expansion of Medicaid rebates to U.S. territories Alternative Medicaid URA for line extension drugs in oral solid dosage form 16

18 Contacts John D. Shakow, Esq. (Co-Chair) King & Spalding LLP Marcy Imada (Co-Chair) Deloitte & Touche LLP Cynthia Bass, Esq. (Panelist) sanofi-aventis U.S. Inc George Kenny, Esq. (Panelist) Genentech USA, Inc

19 Member of Deloitte Touche Tohmatsu Limited