Downstream Effects of Class of Trade Implications

Transcription

1 Downstream Effects of Class of Trade Implications Presented by Stephanie Trunk Partner Arent Fox LLP Washington, DC New York, NY Los Angeles, CA June 21, 2017

2 Presentation Overview Approach to Classifying Customers Tricky Class of Trade (COT) Classifications Legal Implications of Misclassifications New Best Price Wrong Best Price Most Favored Nations (MFN) Obligations VA/Federal Supply Schedule (VA/FSS) Pricing False Claims Act Exposure 2

3 Approach to Classifying Customers to COTs Should Employ a COT Name and Definition/Description for each COT Indep. Retail Pharm. Veterinarian VA/Veterans Admin. Retail pharmacies with only one location that are licensed as pharmacies by proper state authorities and that dispense medications to the general public at retail prices. Such term does not include a pharmacy that dispenses prescription medications to patients primarily through the mail, nursing home pharmacies, long-term care facility pharmacies, hospital pharmacies, clinics, charitable or not-for-profit pharmacies, government pharmacies, pharmacy benefit managers, chain pharmacies, supermarket pharmacies, or mass merchandiser pharmacies. Sales to veterinarian practices; facilities with qualified animal based medical support staff that is in charge of the caring and overseeing of animal health to fight, reduce, or prevent a disease, disorder, or injury. Sales only to the Department of Veterans Affairs. Use for entities other than the Department of Veterans Affairs, Coast Guard, Department of Defense and Public Health Services (including the Indian Health Service) that purchase off the Federal Supply Schedule. Also use for any sales to federal agencies under depot and single-award contracts. Other Gov. Agencies Federal Government Include only sales to the Department of Defense, Coast Guard and Public Health Service/Indian Health Services in this customer designation. TRICARE Retail Pharmacy Program Sales should be included here as well. Sales to the Department of Veterans Affairs are a separate customer type but same class of trade. Cty/Cnty/St Contract Sales to state, city and county government pharmacies, including state and local prison pharmacies. Entities eligible to purchase off the FSS should NOT be included in this customer designation or in this Class of Trade. 3

4 Approach to Classifying Customers to COTs Use a holistic approach No one document, description or source is definitive as to how to classify a customer Need to look at the complete picture of who the customer is and classify the entity using COT name and definitions Classification runs with the sale, not the contract 4

5 Sources to Consider in Classifying a Customer Customer s name and website description Group Purchasing Organization (GPO) customer type/cot designation License information- pharmacy, distributor, durable medical equipment supplier Health Industry Number (HIN) Classification DEA Classification Other- Customer, Contract with Manufacturer 5

6 HINs HIN Database available at Maintained by the Health Industry Business Communications Council Organizations apply for a HIN and are encouraged to periodically review and update their HIN assignments, as well as to request additional assignments for locations that have not yet been enumerated with a HIN 6

7 HIN Purpose & Background Main purpose is to facilitate electronic data exchange between customers and suppliers Compiled from self-reported information as well as data on various websites including switchboard, Google, Yahoo, WebMD, American Medical Association, American Hospital Directory and SearchBug Main purpose is NOT customer classification 7

8 HIN Market Segments Academic Institution Doctor of Osteopathy Hospital Administration Animal Hospital or Clinic Feed Manufacturer Hospital System Animal Retail Outlet Free-Standing Laboratory Hospital Warehouse Buying Group Government Agency Insurance Clinic Group Practice Manufacturer Dentist Health Maintenance Organization Medical Doctor Dialysis Centers Health Miscellaneous Military Facility Distributor or Wholesaler Home Health Corporation Mobile Veterinarian Doctor of Optometry Hospital Non-Health Miscellaneous Nurse Practitioner Nursing Home Nursing Home Chain Outpatient Surgery Center Pharmacy Podiatrist PPO Facility Producer Psychiatric Health Facility Veterinarian Warehouse 8

9 Intersection of Manufacturer Customer Types with HIN Market Segments HIN Classification alone does not provide sufficient detail to map to Manufacturer Customer Types HIN Classification Government Agency Warehouse Manufacturer Pharmacy Health Maintenance Organization Potential Manufacturer Customer Type Federal Government; Other Government Agencies; Cty/Cnty/St Contract Warehousing Chain; Wholesaler Repackager- Manufacturer NDC; Repackager- Own NDC Indep. Retail. Pharm.; Warehousing Chain; Non- Warehousing Chain; Long Term Care; Mail Order; Home Infusion/Specialty Clinic 9

10 HIN Sample Name City Region Zip Market Segment WALGREENS STUART FL PHARMACY WALGREENS PHOENIX AZ PHARMACY WALGREENS CHANDLER AZ PHARMACY WALGREENS EL MIRAGE AZ CONTRACTED PHARMACY SERVICES WALGREENS DSH PHOENIX AZ CONTRACTED PHARMACY SERVICES 10

11 DEA Registration Database DEA Registration Database available at ionid/%7b2cff8c5e-03d1-4b4a-a171-92fe e%7d/pagevars/library/infom anage/guide.htm Subscription service 11

12 DEA Registration Database Purpose The Controlled Substance Act (CSA) requires registration by physicians, related practitioners, other established health organizations, pharmaceutical companies, and others in order to prescribe and handle controlled substances The data is used to credential practitioners as well as to certify a practitioner s CSA status Prescriber focused 12

13 Business Activity Codes Retail Pharmacy Practitioner- DW/30 Researcher (I) Central Fill Pharmacy Practitioner- Military Canine Handler Chain Pharmacy MLP- Military Researcher Automated Dispensing System Online Retail Pharmacy Online Central Fill Pharmacy Online Chain Pharmacy Hospital/Clinic Practitioner- DW/100 Military Practitioner- DW30 Teaching Institution Manufacturer Manufacturer (CI, II, Bulk) Analytical Lab Importer Importer (C, I, II) Exporter Reverse Distributor Practitioner Distributor MLP- Ambulance Service 13

14 Business Activity Codes MLP- Animal Shelter MLP- Dept of State MLP- Homeopathic Physician MLP- Dr of Oriental Medicine MLP- Naturopathic Physician MLP-Optometrist MLP- Euthanasia Technician MLP- Nursing Home MLP-Physician Assistant MLP- Medical Psychologist MLP-Nurse Practitioner MLP-Registered Pharmacist Maintenance Maintenance & Detox Compounder/Detoxifi cation Detoxification Compounder/Mainten ance Compounder/Maint & Detox 14

15 Intersection of Manufacturer Customer Types with Business Activity Codes BACs alone does not provide sufficient detail to map to Manufacturer Customer Types BAC Military Practitioner Potential Manufacturer Customer Type Federal Government; Other Government Agencies; Clinic; Doctor Retail Pharmacy Indep. Retail. Pharm.; Warehousing Chain; Non-Warehousing Chain; Long Term Care; Mail Order; Home Infusion/Specialty Automated Dispensing System Hospital/Clinic Manufacturer Long Term Care; Clinic; Hospital; Doctor Clinic; Hospital; Alternate Care Repackager- Manufacturer NDC; Repackager- Own NDC 15

16 DEA Registration Sample ABC DIET NEEDS Address: APARTADO 9207 SANTRUCE, PR State and Zip: PR DEA Number: AL Business Activity Code: C Business Activity Sub Code: 0 Drug Schedule: 22N 33N 4 5 Drug Codes: 6695 Expiration Date: 12/31/2013 Payment Indicator: P Activity: Active 16

17 Documentation, Audit & Review Customer and COT Designations are critical to ensure that government pricing metrics are accurate, including and excluding sales to customers based on statutes, regulations and guidance FCA exposure related to COT classifications which flow into GP metrics due to certification Consistency is imperative 17

18 Documentation, Audit & Review Written policy and standard operating procedure for classifying customers Process for classifying customers Process for new COTs Where to ask questions COT Schema with Customer classifications and COT definitions Forms supporting COT assignments for new Customers Keep it in the customer contract file Annual Review of COT policy, definitions and process Auditing a sample of classifications COT training 18

19 Some Tricky Customer Classifications Combination or Integrated Entities Veterinary Distributors City/County/State Sales to Patients Pharmacy Buying Groups GPOs Repackagers 19

20 Combination or Integrated Entities Mail, Retail and Pharmacy Benefit Manager (PBM) combined CVS Health Did the discount/rebate go to the retail or mail order pharmacy or was it really to the PBM? Relevant to the AMP calculation Integrated Delivery System Kaiser Are all sales to the pharmacy? Is it a closed door or retail pharmacy? Can the public walk in? Need to follow the sale; may need a manual % split of sales/discounts 20

21 Veterinary Distributors Veterinary sales are included in 5i Average Manufacturer Price (AMP) and Best Price (BP) Veterinary sales are excluded from Non- Federal Average Manufacturer Price (Non- FAMP) but VA has said that sales to Veterinary Distributors are sales to a merchant middlemen included in Non-FAMP 21

22 City/County/State Sales to governmental pharmacies are excluded from AMP Are all sales to city/county/state deemed to be to a governmental pharmacy? Reasonable assumptions 22

23 Sales to Patients Direct sales to patients excluded from AMP and BP What s a direct sale? From manufacturer to patient Consigned goods sold through a specialty pharmacy? Sale through a manufacturer-owned distributor or pharmacy? 23

24 Pharmacy Buying Groups Walgreens Alliance with AmeriSourceBergen Red Oak (CVS Health and Cardinal) McKesson OneStop and ClarusOne (Walmart) Generally, like GPOs and do not take title or possession Classify sale to underlying member- generally Retail Community Pharmacies (RCPs) What about non-bona fide fees? 24

25 GPOs Generally do not take title or possession Classify sale to underlying member- generally RCPs What about non-bona fide fees? Separate COTs for bona fide vs. non-bona fide fees 25

26 Repackagers Is sale to a manufacturer acting as a wholesaler? Relevant for inclusion/exclusion in AMP and Non-FAMP Do not re-label under own NDC Sell to RCPs and other distributors/wholesalers 2 COTs- relabeler (customer s NDC) and repackager (selling manufacturer s NDC) Alternatively, repackagers classified as distributors/wholesalers 26

27 New Best Price? Misclassifying a customer to wrong the COT could result in a new Best Price Hospital categorized as a 340B Covered Entity, however it was not listed in HRSA OPA database and should have been hospital Sales to hospital are not excluded from Best Price Could result in higher MDRP rebates and a lower 340B Ceiling Price 27

28 Wrong Best Price Misclassifying rebates to a customer in wrong COT could result in an incorrect Best Price Rebates to consolidated/integrated entities- PBM vs. mail or retail 28

29 Other Legal Implications of Wrong COTs VA/FSS Price Implications Veterinary Distributors vs. Veterinarians Pharmacy Buying Group vs. Distributor/Wholesaler Most Favored Nations Pricing Obligations Pharmacy Buying Group vs. Distributor/Wholesaler GPOs and classification of members under GPOs Different pricing for hospitals/clinics vs. pharmacies/ltc entities Robinson Patman Challenges Like customers must be treated alike 29

30 King Pharmaceuticals Settlement In 2006 King Pharmaceuticals paid $124 Million to Settle a FCA case Among the allegations, lack of training for reporting AMP and BP and no system to support those calculations Includes in the retail pharmacy class of trade inappropriate customers resulting in AMP mistatements 30

31 GSK Settlement Paid $3 billion in 2012 related in part to alleged misstatement of AMPs and BPs Most of the allegations related to BP Some nominal pricing went to customers that were not designated to receive nominal pricing and should have remained in AMP and BP and some alleged nominal pricing was contingent and to remain in AMP and BP 31

32 GSK Settlement- Take 2 Paid $150 billion in 2005 related to fraudulent ASP and AMP Free Good contingent on purchase that should have been included (overfill) However, Addendum to Corporate Integrity Agreement is illustrative as to expectations for government pricing and COT 32

33 GSK Settlement- Take 2 Formal systems, processes, policies and practices used to determine which customers are considered for AMP and ASP including the system logic or decisions rationale used to determine which customers are considered in each calculation which is regularly reviewed 30-transaction probe sample for various AMP-eligible transactions include sales/cot assignments related to such sales Properly supported by source data Properly excluded/included by system 33

34 Questions Stephanie Trunk Partner Arent Fox LLP (202)