By: Lisa C. McNair, CIS Senior Manager, TRICARE Contracting and Abram Balloga, CIS Compliance Associate
lisamcnair@cis-partners.com and abramballoga@cis-partners.com

 The April 22^nd Congressional Research Service Report to Congress, “TRICARE and VA Health Care: Impact of the Patient Protection and Affordable Care Act (P.L. 111-148)”, stated that the Patient Protection and Affordable Care Act (PPACA) did not make any “significant changes to the Department of Defense (DoD) TRICARE program” [1].  Although this may be true for TRICARE beneficiaries and the TRICARE Program Office, there are implications for the pharmaceutical manufacturer.  In regards to TRICARE, many wonder, how does this Act impact pharmaceutical manufacturers?

One major impact to the pharmaceutical manufacturer is the new annual fee required under Section 9008 of the Act [2].  Beginning in 2011, this annual fee applies to “any covered entity engaged in the business of manufacturing or importing branded prescription drugs.”  A “covered entity” includes “any manufacturer or importer with gross receipts from branded prescription drug sales.”  This annual fee is based upon a calculation which reflects the market share of the manufacturer.  These sales include sales of branded prescriptions to specified government programs, including TRICARE under 10 U.S.C. § 1074g.

 TRICARE provides an opportunity for pharmaceutical manufacturers to dispute the accuracy of quarterly utilization data.  Manufacturers have the ability to dispute utilization for numerous reasons including NDC transferred/sold to another labeler, units invoiced exceed units sold, or a duplicate claim.  Utilizing this dispute resolution process can assist pharmaceutical manufacturers to lessen the burden of this fee.   Once a claim has been successfully disputed, the disputed utilization is deducted from the manufacturer’s sales to the government and will decrease the fee amount owed to the government.

 For more information regarding the benefits of utilizing the TRICARE Dispute Resolution Process, please contact CIS at info@cis-partners.com.

Sources:

[1]Panangala, Sidath V. & Jansen, Don J. (2010). TRICARE and VA Health Care: Impact of the Patient Protection and Affordable Care Act (P.L. 111-148).  Congressional Research Service.  Retrieved 10 August 2010, from www.crs.gov.

 [2]The Patient Protection and Affordable Care Act.  Section 9008 – Imposition of Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers, pp 741-744.  Retrieved on 11 August 2010, from http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3590enr.txt.pdf.

By: Chris Cobourn, VP, Regulatory Affairs
chriscobourn@cis-partners.com

The due date for manufacturers to sign the Medicare Part D Discount Program Agreement and the TPA agreement is September 1.

If manufacturers do not sign the agreement their drugs will not be covered by Medicare Part D at all (i.e., before, within and after the coverage gap) in 2011, and they will have to sign the agreement by January 30, 2011 to participate for the 2012 benefit year.

Many of our clients do not participate in the Medicare Part D Plans, as they have more “inpatient” or ASP types of drugs. Additionally, it seems that many of our clients are unsure whether they should or should not sign the agreement with CMS, and what the impact will be based on their decision.

In a recent conversation with Marla Rothouse, acting Director for the Division of Pharmaceutical Manufacturer Management at the Centers for Medicare & Medicaid Services (CMS), Marla and I walked through several scenarios, providing me assistance with the language that CIS could put out on the blog. (Also, I will be adding another blog this week with an update on the specifics of the Model Agreement and the other recent updates by CMS).

Background reading:
In an August 3rd Memo, CMS states that they “encourage” all manufacturers to participate, regardless of whether the manufacturer’s drugs are currently “covered,” covered meaning that they are a Part D Drug on a plan formulary:

CMS encourages all manufacturers, including all labelers, relabelers, repackagers and distributors with their own FDA assigned labeler codes, of prescription drugs products that are covered under Part D to sign the agreement even if your company does not believe any of its products are applicable drugs. If it turns out that your company does not have any applicable drugs, signing the Agreement does not impose any discount requirements. However, if you fail to sign the Agreement and later determine that some of your products are indeed applicable drugs, your company will not have another opportunity to sign an Agreement for 2011 and any such products cannot be covered under Part D until 2012 at the earliest.

The following are several scenarios that Marla and I discussed to understand how the “non-covered drug” (not on a plan’s formulary) could be impacted:

Scenario 1: Manufacturer signs the agreement with CMS, but is not on a plan formulary.
The beneficiary would have to acquire an exception from the plan, as the product is not on their formulary. If they receive an exception, the discount applies and the manufacturer would receive the invoice for the discount reimbursement.
If the beneficiary does not receive the exception, then the drug does not meet the definition for a covered Part D drug, the beneficiary would pay 100% during the coverage gap, and the manufacturer does not receive an invoice.

Scenario 2: Manufacturer does not sign the agreement with CMS, and is not on a plan formulary.
The drug would not be covered during the coverage gap, regardless of whether the beneficiary receives an exception from the plan. The beneficiary pays 100%.
The only other option would be if CMS makes its own specific exception, and Marla indicated that they do not plan on making any exceptions.

Some of our clients have inpatient or ASP type of drugs that are “covered” under Medicaid as Medicaid as a blanket agreement.

We do see some a small number of Medicaid claims that fall into the “brown bag” scenario, where a patient gets a prescription, fills it in a retail setting, and brings it back to the doctor’s office. I think this “brown bag” scenario is also where we may see some Part D purchases during the coverage gap for the non-Part D drugs. So, according to Marla, if you do have the agreement in place with CMS, these purchases would be “covered” under the program even though your product is not a covered product.

On a closing note, Marla reinforced that CMS encourages participation, to ensure that in the event of Scenario 1 above, the drug is covered and the patient does not have to pay the full cost of the drug. She also adds that “Part D is not just a retail setting program; it is also applicable in other settings, such as Long Term Care.” Marla suggests that all manufacturers should consider participating, just in case there are eligible covered purchases.

Thank you,

Chris

By: Chris Cobourn, VP, Regulatory Affairs
chriscobourn@cis-partners.com

As you may be aware, CMS recently updated its Part Discount Program guidance, posting several documents on its website.

 These documents include:

• The Model Agreement
• The Third Party Administrator Agreement
• A Memo from CMS on the Manufacturer Agreement
  (this is very interesting, as it provides responses to comments from the comment period, see below)
• The Contact Information Submission Instructions.

 Remember, the Agreements are due on September 1! 

Below are a few follow up points that you should be aware of on the updated guidance.

If manufacturers have a drug that is not a covered Part D Drug, and are wondering if manufacturers should sign the agreement, I encourage all to read my blog posting on this, which summarizes my conversation with Marla Rothouse from CMS.

August 3^rd CMS Memo

This reiterates the date of September 1 that CMS is looking to receive the signed agreements.

It also summarizes the responses to manufacturers’ comments on the draft agreement, the TPA agreement, and the data use agreement.

Comments and responses on the Draft Agreement (see my previous blog article concerning the draft agreement):

• The 14 day period for processing the claims;
  • CMS has revised the timeframe to 38 days.
• The requirement that manufacturers pay invoices even when amounts are in dispute;
  • CMS has not changed the original requirement, meaning that manufacturers must pay on the invoice and dispute afterwards.  CMS comments, “CMS will be performing extensive editing on the data prior to invoicing manufacturers,” suggesting that they believe that the quality of the PDE data will be high.
• The level of detail for the information that would be provided to the manufacturers to support the discount payments;
  • CMS revised the level of data that will be provided to manufacturers along with the invoice to be claim-level utilization information and, in addition will upon audit only, provide PDE cost elements for a statistically significant sample size to allow manufacturers to validate discount calculations. CMS will not provide any beneficiary identifiable information, even upon audit

Comments and responses on the TPA and Data Use Agreements

• The data use requirement that manufacturers meet federal data security standards that are required for federal government agencies — manufacturers raised concerns that this requirement was overly burdensome and would require them to overhaul their existing security programs solely for participation in the CGDP (Note – I discussed this concern, as mentioned in a recent blog article).
  • CMS revised this specific requirement because CMS will not be releasing PHI to manufacturers. The agreement maintains requirements for manufacturers to establish appropriate administrative, technical, and physical safeguards to protect the confidentiality of the data and to prevent unauthorized use of or access to it.
• The data use requirement that manufacturers are not to sell, rent, lease, loan, or otherwise grant access to the data covered by the agreement— manufacturers asked CMS to clarify that manufacturers may grant access to data to contracted third parties for purposes of assisting the manufacturer in evaluating the accuracy of claims discounts, resolving disputes and otherwise exercising their rights and responsibilities under the agreement.
  • CMS clarified in the revised agreement that such access is allowed (this is near and dear to CIS, as we process Medicaid and TRICARE claims for our clients, and have been asked to process the Part D Coverage Gap Discount Program Claims as well).
• The language in the TPA Agreement suggesting that manufacturers would be bound by the contractual arrangement between CMS and the TPA — manufacturers raised concerns that CMS is obligating them to comply with unknown provisions in CMS’s agreement with the TPA.
  • CMS clarified in the revised version that only the TPA is governed by the contractual arrangement between CMS and the TPA.

I do not see the update separate data use agreement.  CMS did indicate in the memo that they responded to the manufacturer comments and revised the data use agreement.  I do see that in Exhibit C of the Model Agreement there is a Data Use Provisions section.  This section does include the phrasing:

the Manufacturer agrees 1) to ensure the integrity, security, and confidentiality of the data by complying with the terms of this Agreement and applicable law, including the Privacy Act and the Health Insurance Portability Accountability Act; and 2) to use the prescription or claim-level data only for purposes of evaluating the accuracy of claimed discounts and resolving disputes concerning the Manufacturer’s payment obligations under the Discount Program as described in the applicable statutes, regulations, and this Agreement.

This is followed by specific requirements, including areas where manufacturers had concerns about the draft Data Use Agreement:

• In the event that a Manufacturer inadvertently receives individually identifiable information, the Manufacturer will report the incident to the CMS Action Desk by telephone at (410) 786-2580 or by e-mail notification at cms_it_service_desk@cms.hhs.gov within one hour of the Manufacturer’s discovery of the incident.
• The Manufacturer hereby acknowledges that criminal penalties under §1106(a) of the Social Security Act (42 U.S.C. § 1306(a)), including a fine not exceeding $10,000 or imprisonment not exceeding 5 years, or both, may apply to disclosures of information that are covered by § 1106.

 It is very important that as manufacturers look at implementing the Part D Discount Program that they coordinate with Legal and IT to ensure that there are very tight security controls on the receipt, use and access of the data so that manufacturers can meet these security requirements.

Also on page 4 of the CMS Memo, CMS “encourages” manufacturers to participate (it was another open question on whether manufacturers were required to participate):

CMS encourages all manufacturers, including all labelers, relabelers, repackagers and distributors with their own FDA assigned labeler codes, of prescription drugs products that are covered under Part D to sign the agreement even if your company does not believe any of its products are applicable drugs. If it turns out that your company does not have any applicable drugs, signing the Agreement does not impose any discount requirements. However, if you fail to sign the Agreement and later determine that some of your products are indeed applicable drugs, your company will not have another opportunity to sign an Agreement for 2011 and any such products cannot be covered under Part D until 2012 at the earliest.

 As stated earlier, please see my blog, summarizing my conversation with Marla Rothouse of CMS, on how purchases within the coverage gap could be impacted if manufacturers do not have Part D drugs but do sign the agreement with CMS.

Thank you,

Chris

By: Chris Cobourn, VP, Regulatory Affairs
chriscobourn@cis-partners.com

I encourage you to read Adam Fein’s recent blog post on Drug Channels, “Secret AMP Letter Emerges, FUL Delay Likely”.

Our views on the CIS blog are geared primarily to Pharmaceutical Manufacturers, as we work very closely with them across many areas of Government Program compliance, including Methodology reviews and Compliance Audits, as well as performing calculations for many of our clients.  In our capacity as GP consultants, one of the most pressing questions right now is where is the guidance on the new AMP definition that is to be effective October 1 of this year.

In his blog, Adam discusses a July 20 Letter to CMS from the National Association of Chain Drug Stores (NACDS) and National Community Pharmacists Association (NCPA).  There are a lot of interesting things in this letter, including the organizations asking for a delay in the new AMP and AMP-based FUL, to allow for sufficient rule-making. The letter states:

Due to its complexity, we urge you to utilize formal rulemaking with a reasonable public comment period, as opposed to a sub regulatory guidance, to implement this important provision. We believe this rulemaking should be completed before CMS implements Section 2503, even if a delay in the October 1, 2010 effective date is required. The agency used this approach when implementing the pharmacy reimbursement provisions of the Deficit Reduction Act (DRA), and we believe this method of implementation is appropriate in this case as well.

First of all, I agree with the wish to see actual regulations with a sufficient comment period.  The manufacturing community is familiar with “sub regulatory guidance” throughout the history of the Medicaid Program, as well as the PHS and VA programs.  For years prior to the Final Rule in 2007, we relied upon Manufacturer Releases, which do not have to go through the same administrative process as something that is in the Code of Federal Regulations (CFRs).  I would suggest that we are experiencing a sub regulatory process now with the Part D Coverage Gap Discount Program as the government hastily puts together guidance in order to meet the implementation deadline, as well as guidance from CMS on changes to the Medicaid Program that are coming out via emails and letters.  The Final Rule was the first time in the Medicaid Program that we had actual regulations.  And, although the changes were dramatic and had a huge operational and systems impact on manufacturers, at least we had it down on paper what was required.

But the letter to CMS has another layer of complexity.  Do you remember the Injunction?  Yes, there is still a court injunction on the Final Rule, as right now we are all calculating AMP according to the definitions of AMP in the Final Rule.  We were waiting to see what would happen with the injunction, which was based upon the retail industry’s view that AMP, as defined in the Final Rule, did not really reflect net prices at Retail (or Retail Community Pharmacies (RCPs), the term that came in to being with the Patient Protection and Affordable Care Act [PPACA]).  So along comes the PPACA, which redefines AMP to be based upon RCPs, aligning it very closely in principle to the argument behind the injunction.  So when the PPACA passed, we asked the question, will it nullify the injunction?  In reviewing the letter, I agree with Adam Fein’s assessment in his blog article, that the retail industry is signaling that CMS could face a strong legal challenge if it does not carefully consider the more formal rule making process AND take in to consideration the perspectives of the retail industry.  Following the opening salvo of the letter is a very detailed listing of “NECESSARY REVISIONS TO CURRENT AMP RULE” (upper case, as reflected in the letter).

This is further complicated, of course, by the recent legislation which now essentially creates two AMPs, a RCP-based one and a non-RCP based one.  The necessary revisions that are detailed in the retail industry’s letter very much focus on the RCP AMP.  If CMS does postpone the implementation of the new AMP, I would assume that it would have to be for both.

There are many important open questions on the new AMP, such as will CMS allow for a one-time resetting of Base AMP (or two, the RCP and non-RCP) as they did with the Final Rule. But the most fundamental question now is whether CMS will implement the AMP on October 1 with “sub regulatory guidance” (I do love that term!), which could certainly re-engage the legal efforts of the retail industry, or will postpone it.

Take care,

Chris

By: Chris Cobourn, VP, Regulatory Affairs
chriscobourn@cis-partners.com

For the most part, I felt that Release 81 pretty much reiterates the email guidance issued by CMS in May (for a summary, please click here), dealing with the new URAs.

One interesting point I would like to raise is the bullet in the release that states:

“The total rebate obligation for all innovator drugs (S/I Drug Category) is capped at 100% of AMP.”

When the email guidance was released in May, the wording in the email was unclear as to whether the cap was on the total rebate (basis URA plus the CPI-U penalty), which would seem to follow the intent of the legislation.

In Release 81, I am assuming right now that the wording “the total rebate obligation” would clear up that point, and that the cap would be on the basic URA plus the additional rebate.

We have submitted the question to CMS for confirmation, and will follow up when we hear anything new.

Another item of note, especially for manufacturers of clotting factors or drugs with pediatric indications, is that a list of these drugs will be published in DDR “soon.”  The lists have already been published on the CMS website, though the list of pediatric drugs currently includes only 2 NDCs.  Given the brevity of the list, it is likely that a number of relevant products have been omitted.  Manufacturers who believe their drug(s) should be included in one of the lists are encouraged to contract CMS (the Release says to contact Policy; the website says to contact Operations) to have the product added.

Courtesy of Jenna Steinberg, CIS Business Development Associate
jennasteinberg@cis-partners.com

1) New Report Obama’s Healthcare Reform Bill and Its Impact on the U.s. Healthcare Market (Pharmaceuticals, Medical Devices and Health Insurance) Published by Marketsandmarkets
http://www.sbwire.com/press-releases/sbwire-53914.htm

2) Pharma Industry Veteran to Address Recent Changes to FDA/GCP Requirements at Quality System Event
http://pr-usa.net/index.php?option=com_content&task=view&id=465191&Itemid=29

3) Filling The Medicare Doughnut Hole
http://www.theledger.com/article/20100819/EDIT01/8195026/1036?Title=Filling-The-Medicare-Doughnut-Hole

4) U.S. says Medicare drug plan costs steady in 2011
http://news.yahoo.com/s/nm/20100818/hl_nm/us_drugs_medicare

5) From the Editor: Can Healthcare Reform Cure a Risk-Averse Pharma?
http://www.pharmamanufacturing.com/articles/2010/066.html?page=print

By: Chris Cobourn, VP, Regulatory Affairs
chriscobourn@cis-partners.com

In a recent CIS blog by Craig Kubicek, CIS summarized the recent updates to AMP guidance in the Patient Protection and Affordable Care Act (“PPACA”), part of Health Care Reform, H.R. 1586.

This guidance means that there will be 2 AMPs, one for your Retail Community Pharmacies (“RCPs”) or “retail” product, and one for your non-retail injected/infused/instilled/inhaled/implanted products.

This will have a dramatic methodology, policy, and system impact, as a company that has some products not sold in the traditional retail market will have to have multiple methodologies, each with their different inclusions and exclusions by Class of Trade.

When the PPACA was signed in to law, and the new RCP basis for AMP was defined, industry immediately asked the question, “What if we don’t have sales to these customers, how do we calculate AMP?”

On the face of it, without further guidance, one could have suggested that AMP could end up being pretty close to WAC, as there would be few or no discounts to back out from gross sales.

Now with this recent guidance, we are going another direction.  If you have products that meet both qualifiers, meaning the “5 I’s” (injected/infused/instilled/inhaled/implanted) and NOT sold into traditional retail, your other commercial discounts will be taken off of gross sales.

The irony is that AMP is fundamentally based upon the retail Class of Trade, and always has been.  But now we will have a non-retail AMP. Why?

My thought is that maybe it was driven more by some of the 340B initiatives.  A higher AMP that was close to WAC for the non-retail type products should not have been a problem for Medicaid, it would have meant higher rebates for the little Medicaid utilization that was there.  But, it would have probably also driven the PHS price up with the higher AMP.

As for the operational aspect of the new non-retail AMP, we still have some big questions, the first being how will a company determine if their products meet the qualifications for the non-retail AMP, as that determination could be rather subjective.  Another pressing question is what do you do if you have a non-retail product that is not injected, infused, instilled, inhaled or implanted?

I hope and assume that further guidance will be issued with more definitive direction. 

Thank you,

Chris

By: Nicole Arend, FSS Manager
nicolearend@cis-partners.com

The North American Industry Classification System (“NAICS”) (pronounced NAYKS) is used by federal statistical agencies to organize business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.

Who assigns the NAICS Code? The industry codes for the NAICS are assigned through the supportive efforts of three North American governments. In the U.S., the White House Office of Management and Budget has the key responsibility for coordinating NAICS codes. NAICS is a two- through six-digit hierarchical classification system, consisting of five levels of detail. The more digits in the code indicates greater classification detail. The first two digits designate the economic sector, the third digit designates the subsector, the fourth digit designates the industry group, the fifth digit designates the NAICS industry, and the sixth digit designates the national industry.

As I mentioned in Part I, the response I received from the National Acquisition Center (“NAC”) in Chicago for identification of a business being large or small was that within a Solicitation the participating vendor identifies themselves and the industry they participate in with a NAICS. It is the NAICS and the number of employees within the company that indicates if a business is large or small. Also, a Small Business Sub-Contracting Plan (“SBSCP”) must be included in the FSS Solicitation and/or the indication that the company may participate in business opportunities set aside for small or large businesses (see table below). If the number of employees within the company is at or below the number identified on the chart to the primary NAICS, a company falls into the classification of a small business. If the number of employees is above this the number indicated on the chart, a company is considered a large business.

The NAICS is important to a company for various government business opportunities. A NAICS must be included in the registration on the Central Contract Registration (“CCR”) database. This database is a resource for the procurement and acquisition officers within the VA and DOD.

Any company participating in contract solicitations or currently holding VA or DOD government contract should ensure that the primary NAICS is used within their CCR to identify the industry in which the company participates is the code that most accurately identifies the company. A company may have more than one NAICS that identifies the type of business the company may use. However, only one is considered to be the primary. Ideally, the primary business activity of an establishment is determined by relative share of production costs and/or capital investment. The government utilizes the NAICS code(s) to not only identify a company as the industry in which they participate or whether they are large or small, but also seeks specific NAICS during the bidding and posting process of Request for Quotes (“RFQ”), Request For Information (“RFI”), and Request For Proposals (“RFP”).

NAICS are categorized by industry; manufacturing, wholesale trade, retail trade, information, finance, insurance, construction etc. The manufacturing category includes; food, wood product, primary metal, machinery and miscellaneous. Within the subcategory of manufacturing a company can then identify which category is best suited to identify them. For instance, within the miscellaneous manufacturing subcategory one will find medical equipment and supplies. The next step to properly identify a company is to target the type of medical equipment and supplies that the company manufactures, such as dental, surgical, etc. Once the specific NAICS is identified, a company should include that NAICS within their CCR and all solicitations (federal, state, and local) that they may participate in.

Pharmaceutical manufacturing identification of a NAICS would be found under chemical manufacturing. The subcategory would be pharmaceutical and medicine manufacturing. The last step for the most accurate identification would be the type of manufacturing process that is performed by the company. An example would be (but not limited to) manufacturing uncompounded medicinal chemicals and their derivatives. For instance, manufacturing in-vitro diagnostic substances and manufacturing vaccines, toxoids, blood fractions, and culture media of plant or animal origin.

Below is a table of the SBA Size standards based on NAICS. The table includes a more voluminous list. The table below lists the most common NAICS used by CIS Clients. The complete list can be found here: www.sba.gov/size .

CIS can assist your company in identifying/reviewing your current primary and sub NAICS code(s) to ensure you are receiving full exposure to the government for bid and contract opportunities. Please contact Nicole Arend at nicolearend@cis-partners.com.

For more information please visit the following sites:

http://www.census.gov/eos/www/naics/

http://www.census.gov/eos/www/naics/history/history.html

http://www.census.gov/eos/www/naics/faqs/faqs.html

By: Chris Cobourn, VP, Regulatory Affairs
chriscobourn@cis-partners.com

Recently, at the 340B Coalition conference in Washington D.C., there were several discussions around the 340B credit and rebill process, and the challenges in finding a process that works for entities, wholesalers and manufacturers.  The Safety Net Hospitals for Pharmaceutical Access (SNHPA), the organizers of the conference, put together a panel to discuss the challenges and issues concerning credits and rebills from various perspectives.  We had active participation from many viewpoints and the audience, including wholesalers, entities, the 340B Prime Vendor Program (Chris Hatwig facilitated the panel), SNHPA, manufacturers (whom I represented on the panel) and the Office of Pharmacy Affairs (OPA.)

The bottom line is that there are various legitimate perspectives, and very difficult challenges facilitate an integrated process that works smoothly from the entity to the wholesaler to the manufacturer.  Additionally, there is very limited guidance to really help define the requirements within the process.

I have attached my slides to this blog post, and would like to summarize my view of the manufacturer perspective.

I know that some manufacturers have issued letters to wholesalers stating policy that they would not honor credit and rebills, and I know that many also responded to the Cardinal Policy letter (see my blog posting…) on the automatic reclassification, stating that they did not want to adhere to that voluntary policy. 

I don’t think that manufacturers are against the legitimate need to “fix” a routine or administrative error that may occur soon after a purchase as a result of system or administrative errors.  The real problem comes when you open the floodgate to historical reclassifications that can go back for years when entities seek retroactive 340B pricing.

Manufacturers have very limited visibility on what may be driving the request to do a reclassification, and they have very high level of compliance requirements and operational impact.  If a commercial sale has to be reclassified as a government sale under the PHS program, that sale goes from an included retail purchase to an excluded government purchase, and the manufacturer has to recalculate and restate their Medicaid AMP calculations, and in turn restate the PHS price, which is driven off of AMP minus the Unit Rebate Amount (URA).  If the manufacturer does not reclassify the sale in their calculations then they have a potential Best Price (BP) violation, because they have excluded a low commercial price from BP analysis (as well as an impact on NonFAMP, cascading to Tricare, etc.)

If manufacturers do not perform these restatements, they are potentially liable for a False Claims Act action for misreporting.  The OIG, CMS and the OPA have, I believe, been very clear in their expectations that manufacturers get the calculations right, and if they find out that there was an error, manufacturers must perform a voluntary restatement.

So, the impact and implications from a compliance perspective are much more burdensome on the manufacturer, in my opinion, than on the entities.

I would not attempt to speak from any other perspective, but my understanding from the entity perspective is that if they had a historical purchase under a GPO contract that should have been a 340B purchase; this puts them out of compliance with the GPO exclusion.  I don’t know whether an entity has ever been investigated or audited for this, or what the impact would be.  But from the manufacturer perspective, the compliance impact can be significant.  Also, I don’t believe that there is any guidance that would suggest that if an entity was eligible to purchase under the 340B program and didn’t, but seeks to reclassify it later, that a manufacturer would be obligated to offer the price retroactively (should the burden be on the entity that once they are participating in the program, they purchase as they should under it?  I know that the manufacturers are expected to be in compliance as soon as they sign the agreement.)

There are other impacts on the manufacturer as well, such as reversing chargebacks, and adjusting the Administrative Fee calculations to the GPO’s.

I go back again to an earlier comment that the manufacturer does not always know what is driving the request to reclassify for a historical period.  It does seem evident that there are service providers and consultants that work with entities to seek retroactive pricing for multiple years back.  This is what is most problematic, and where I believe that manufacturers have a legitimate question on whether they should, or have to, reclassify the purchases.

I know that the entities are often severely understaffed, and legitimate mistakes do happen.  In the discussion at the conference, I think that there was some general consensus around a few areas:

• We would all like to have some guidance from OPA around the process, and guidance that may surface about via the Dispute Resolution definition that is part of the 340B enhancement legislation (within the PPACA.)
• A good framework could be developed around defining an acceptable period to allow for reclassifications, within certain guidelines (such as a system or administrative error.)

There is a general need for data transparency from both ends.  The manufacturer has chargeback data and eligibility history, and has limited visibility into the transaction of that data.  When, and if, they are working on a dispute or a request to reclassify with an entity, it would be helpful to have more data from the entity, such as evidence that shows the purchase was legitimate outpatient use, as sometimes the lines between outpatient and inpatient can be fuzzy.

CIS’ GP Forum Advisory Board is pleased to announce that Ted Slafsky will be a guest speaker on Wednesday, August 18^th.  Ted will be speaking on behalf of SNHPA and the 340B Coalition. 

The following topics will be discussed: 

• Intro to SNHPA, 340B Coalition and the Monitor;
• Brief overview of 340B elements in health reform and implementation status;
• Update on enrollment of rural hospitals;
• New OPA director;
• Pending legislation on the Hill; and
• Upcoming events

Dial In: 1-888-206-2266   Passcode: 9449409
10AM – 11AM

Thank you and I welcome your questions,

Chris