Covered-Outpatient-Drugs-Final-Rule-Webinar-for-GP-Professionals-Slides

Proprietary and Confidential – Not for Distribution
CBI Webinar
The CMS Final Rule
Covered Outpatient Drugs
January 29th, 2016

© 2015 Huron Consulting Group. Proprietary and Confidential – Not for Distribution 2
Presenters
• Joe Metro, Reed Smith
– jmetro@reedsmith.com
• Chris Cobourn, Managing Director, Huron Life Sciences
– ccobourn@huronconsultinggroup.com
• Clay Willis, Director, Huron Life Sciences
– cwillis@huronconsultinggroup.com

Agenda
Abstract & Key Question
Overview of Final Rule
Key Elements of the Final Rule and Considerations
Role of Government Programs (GP) Professional
Timeline and Supporting Information
Questions

Abstract
• On January 21, CMS published the Final Rule for Covered Outpatient Drugs (Final Rule)
under the Medicaid Drug Rebate Program:
(https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-01274.pdf)
• The Final Rule will be published in the Federal Register on February 1, with an effective
date of April 1, 2016.
• This means a very tight timeline of just over two months for pharmaceutical manufacturers
to implement data, methodology, system, business process changes.
• In parallel to these implementation constraints, manufacturers need to carefully consider
the business, compliance, and fiscal impact of the Final Rule, and evaluate potential
changes to pricing and contracting strategies.
• The GP Professional as well as others in the organizations will have a key role in the
process

Key Questions
• What will it mean to your organization?
• How will the Final Rule impact the
different types of manufacturers?
 Branded
 Generic
 Specialty
 AG
• How will it financially impact your
business?
• What are your risks?
• What will it take to implement it?
• How much will it cost and who needs
to be involved?

© 2015 Huron Consulting Group. Proprietary and Confidential – Not for Distribution 66© 2015 Huron Consulting Group. Proprietary and Confidential – Not for Distribution
Overview of Final Rule

7© 2015 Huron Consulting Group. Proprietary and Confidential – Not for Distribution
MDRP: Covered Outpatient
Drugs Final Rule
• On January 21, 2016, the Centers for
Medicare & Medicaid Services (CMS)
issued the Covered Outpatient Drugs
Final Rule (“Final Rule”).
• Manufacturers must be able to
comply with/implement the provisions
of the Final Rule by April 1, 2016.
• Given this, manufacturers have a little
over two months to comply with most
provisions of the rule.
While the individuals engaged in the
Government Programs (GP) function within
Pharmaceutical manufacturers are certainly
focused on the definition of AMP and the impact
it will have on methodologies, data, and
systems, there are also broader considerations
to the organization, and places where the CEO,
CFO, Legal, Finance, and the Compliance
Office will want to be engaged
“
”

Final Rule Overview
The following is a table of contents
which outlines each section of the rule
(headings, captions, preamble and rule)
along with corresponding page numbers.
At a high level, the rule is organized as
depicted in the chart.
Section Pages
Administrative and Background Pages 1 – 14
Summary of Proposed Provisions, Analysis of
and Response to Public Comments, and
Provisions of the Final Rule
(Preamble/Guidance)
Pages 14 - 530
Administrative Rulemaking Related Sections Pages 534 - 616
CFR Provisions (Actual Rule Language) Pages 617 - 658

Final Rule – 3 Key Areas
• The Final Rule addresses three key areas:
1. Provides a regulatory definition of Average Manufacturer Price, or “AMP” (used primarily
for the determination of Medicaid rebate amounts), and other rebate program standards
2. Modifies the standard for non-multiple source drug Medicaid aggregate upper payment
limits by replacing the “Estimated Acquisition Cost” concept with “Actual Acquisition Cost,”
or “AAC,” whereby pharmacy payment rates must be evaluated in relation to AMP, national
survey data such as NADAC, or state-specific pharmacy cost survey data.
3. Establishes AMP-based Federal Upper Limits, or “FULs,” which set the maximum
aggregate reimbursement payable by the state to retail pharmacies for Medicaid utilization
for multisource drugs
• Primary focus of this presentation is the most significant elements affecting the AMP calculation
and Medicaid rebate payment issues
Note: CMS previously announced that its delay in implementing AMP based FULs was based on the delay in the CMS Final Rule

Key Elements of the Final Rule

Final Rule - Key Elements to Be Covered
Inclusion of Puerto Rico and the US
Territories in the MDRP
Standard AMP: Presumed Inclusion
Maintained
COT - Definition of Retail Community
Pharmacy (RCP)
Smoothing of AMP Pricing
Components
Authorized Generic (AG) Drugs in
AMP
Alternate 5i AMP: Clarification of Not
Generally Dispensed
Baseline AMP Restatement
Line extension product identification and
rebate calculation – Additional Comment
Bona Fide Service Fees (BFSFs)
Drug Classification Issues
Reimbursement Considerations
Note: Final Rule provisions are fairly close to those of
the Proposed Rule with a few exceptions

Inclusion of Puerto Rico and US Territories in
MDRP
• CMS revised the definition of states to include U.S. Territories (Puerto Rico, Guam, Virgin Islands,
American Samoa, and the Northern Marina Islands) in AMP and BP. This is effective April 1, 2017
(a one-year delayed implementation period).
• Unless a territory requests a waiver from CMS to opt-out of the rebate program, manufacturers
must both (i) include territory sales in price calculations and (ii) pay rebates on territory utilization.
Manufacturer Considerations & Potential Implications
Documentation/Methodology Data
• Update AMP and BP methodology sections to
include state codes, transaction type and/or COT
associated with territory sales
• Customer COT Classification and Identification
• Review historical and current data to determine data fields
being used, Bill To or Ship To, and Net Sale Field
• Evaluate ability to begin appropriate date collection by May
2016 in order to maybe need data for smoothing
System Business Process
• Identify all system updates required, including bill-to
and ship-to customer fields and direct sales values
• Update the system and design documents,
including design extracts and table(s), if applicable
• Evaluate existing distribution, pricing, and contract strategies
• Assess impact on BP and rebate liability, forecasting
processes, contractual or other constraints on modifying
relationships, and BFSF/FMV of distribution agreements
• Assess need for new resources to process new invoices

AMP - Presumed Inclusion
Retained
• CMS reversed its position in the proposed
rule with regard to the “build-up” approach
– This is probably a sigh of relief for all
manufacturers due to how expensive and
inaccurate this methodology would have
been.
• Manufacturers may continue to calculate
AMP using presumed inclusion approach
based on reasonable assumptions
• Manufacturers may “presume in the
absence of guidance and adequate
documentation to the contrary, that prices
paid to manufacturers by wholesalers are
for drugs distributed to retail community
pharmacies.”

Class of Trade (COT) and Definition of Retail
Community Pharmacy (RCP)
• AMP calculation based on direct and indirect net sales to “retail community pharmacies”
• Final Rule did not expressly include specialty pharmacies, home infusion pharmacies, and home health
providers in the definition of retail community pharmacies.
• However, CMS said in the preamble, that specialty pharmacies, home infusion, and home health could be
considered RCPs if they actually meet the definition of RCP.
• Evaluate COT schemas and other documents to ensure
alignment with definition
• Consider adding a new COT for RCP Specialty
Pharmacy, Home Infusion, Home Health
• Review existing COT assignments for current customers
to ensure they align with new definitions and/or COTs
and make changes, as necessary
• Ensure system design documents or policies align with
changes made to COT schema and/or customer master
changes, if any
• Evaluate Specialty Pharmacies, Home Infusion
Pharmacies, and Home Health Providers on a case by
case basis to see if they qualify as Retail Community
Pharmacies

Smoothing of AMP Pricing Components
• CMS finalized 12 month rolling percentage (similar to ASP) methodology for estimating the value of lagged
price concessions in the calculation of AMP.
• Manufacturer may use either chargeback earned date or paid date
• CMS also agrees it is reasonable for manufacturers to do a 12-month rolling average to estimate indirect
ineligible sales.
• If a company decides to smooth ineligible sales based
on new CMS guidance, update policies, procedures and
methodology documents with ineligible sales smoothing
• If already smoothing ineligible sales, update policies
and/or assumptions to reference the new guidance
contained in the Final Rule
• Evaluate fields within transactional data to ensure
relevant information is available to smooth ineligible
sales
• Update system design documents with new ineligible
sales smoothing methodology if necessary
• Perform an analysis to determine if smoothing of
ineligible sales should be adopted, including potential
impact

Authorized Generic (AG) Drugs
• Sales of an AG should be included in the primary manufacturer’s AMP and BP calculation of the NDA
drug when the drug is sold directly to a wholesaler or sold or licensed to a secondary manufacturer
“acting as a wholesaler,” i.e., selling the product to RCPs
• Adds definition of “secondary manufacturer” - manufacturer that is authorized by the primary
manufacturer to sell the drug but does not hold the NDA
• Suggested in comments that secondary manufacturer can provide sales data to the primary
manufacturer
• For primary manufacturer, determine approach for
collection & treatment of secondary sales in AMP
• Ensure transactional data contains the necessary
elements (i.e., units) for calculation purposes
N/A
• Evaluate AG licensing contracts to ensure they contain
provisions around data for secondary manufacturers

5i Drugs: Identification and Alternate AMP
• No requirement to use FDA Path of Administration: “reasonable assumptions” apply
• CMS defined “generally not dispensed through retail community pharmacies” as 70% or more of sales
(using units at NDC-9) of 5i drugs are to entities other than retail community pharmacies. (“70/30 Rule”).
• Establishes a monthly evaluation of the 70/30 test but allows for 12-month smoothing in the evaluation
• Alternate AMP calculated based on retail and other non-retail COT sales, but not taking into account direct
to patient sales and programs, returns, and BFSF
• Update methodology within policy to include 70/30
quantitative test requirement
• Ensure all 5i products have the necessary flags within
the data
• Review system to ensure 5i products correctly identified
• Identify all data elements and system updates required
• Develop the system design documents
• Update system to perform 70/30 quantitative test.
• Assess updates that will need to be made to monthly
and quarterly processes to perform quantitative test
Note: Still limited guidance on non-5i Drugs that do not go
through Retail

Baseline AMP Restatements
• CMS allows manufacturers to recalculate the Baseline AMP on a product by product basis (i.e. cherry
pick key products) where there is sufficient data.
• 5i products may only have one Baseline AMP
• Manufacturers must recalculate and report new values to CMS within the first 4 quarters following the
implementation period of April 1, 2016.
• Update product master and DDR if decide to restate
Baseline AMP for specific products
• Perform feasibility analysis of data sources and systems
(current and legacy) to determine whether transactional
data can be obtained and is actual and verifiable
• Evaluate domain tables, specifically product master in
system, if decision is made to restate baseline AMP for
specific products.
• Immediately begin having planning sessions to review
current products, launch dates, time periods and assess
feasibility of restatement
• Perform recalculation and restatement if necessary

Line Extensions - Additional
Comment Period
• CMS is still considering comments on the
definition of line extensions and has decided
not to finalize this portion of the regulations.
– Gives manufacturers additional time to
evaluate current documentation and
determine if they should follow-up with
additional questions to CMS
• CMS is accepting additional comments up until
April 1, 2016.

Bona Fide Service Fees (BFSFs)
• Maintains Four-Part BFSF Test:
Cannot categorically exclude “Administrative Fees”
CMS declines to define or prescribe Fair Market Value (FMV) methods, but continues to require manufacturers
to maintain documentation of FMV determination
Clarifies that manufacturers may assume there is “no pass through” in the absence of notice or information to
the contrary, but still lacks clarity regarding what constitutes “pass through”
• States that CMS generally understands price appreciation credits to be price adjustments
• Develop a BFSF / FMV policy and procedure
• Ensure that there is documentation of all BFSF / FMV
assessments on all service fee contracts. Do it Now!!
• Ensure that fee transactions can be and are properly
coded so that treatment (as determined by a BFSF /
FMV assessment) in AMP and BP calculations is correct
• Assess and update filters to account for BFSF
determination
• Consider contracting approaches in light of ability to
presume no pass through

Covered Outpatient Drug Definition and
Classification
• Compounded radiopharmaceuticals are considered covered outpatient drugs, but no additional guidance
concerning price calculations
• Innovator multiple source drug definition based on NDA approval
Exception process:
• Manufacturer may seek exception for reclassification to non-innovator status within one year of
effective date
• Must seek exception even if in receipt of prior non-innovator determination
Possible examples:
• Pre-Hatch Waxman paper NDA
• Post-Hatch Waxman 505(b)(2) based solely on literature search
• Biosimilars classification
Rule is silent but provides that BLAs trigger innovator status.
• Exclusively pediatric drugs based on indication for ages 16 and under, based on prescribing information
as a whole
• Key operational and strategic considerations
Identify potential exception requests
Contingency planning for pricing and contract strategy adjustments in light of potential BP exposure

Reimbursement Landscape
• “Brand” aggregate upper limits based on Actual
Acquisition Cost (AAC)
Validated based on AMP, national survey data, or
state survey data
Designed to push away from AWP-based payment
No requirement to include profit factor
Must consider adjustments in tandem with
dispensing fee (which is new)
• Multiple source FULs
175% of weighted average of AMPs where three
equivalent products (including authorized generics)
Subject to upward adjustment if less than NADAC
value
• Key considerations
 Review discount disclosure processes
 Monitor market and evaluate pricing strategies
Seven Pharmacy and Channel
Implications of the New AMP Final Rule
By: Pembroke Consulting, Adam Fein
http://www.drugchannels.net/2016/01/sev
en-pharmacy-and-channel-
implications.html
GREAT READ!

Role of the GP Professional

What Does This All Mean for the GP Professional?
Manage the Final Rule implementation impact with involvement from
other departments within the organization
Develop and
Execute on
Implementation
Plan
Gain visibility
within the
organization
where appropriate
Manage &
Coordinate Roles
of Internal and
External
Stakeholders
Educate the organization

Roles Across the Stakeholders
The Business
The GP
Function
Huron Outside Counsel
Finance
• Knowledge of
business drivers,
assumptions, and
pricing strategy
and tactics
• Financial Impact
• Gross 2 Net
• Methodology updates
• Policies and Procedures
• Develop and manage
implementation
• Regulatory expertise
• Evaluate methodologies
• Review of reasonable
assumptions
• Mitigation recommendations
• Support with Final Rule Analysis
• Develop Implementation Plan
• Systems and Data impact
• Methodology impact, coordinate
with Council
• Financial Analysis
• Policy and SOP Updates
• Periodic
internal
audit
Audit ComplianceLegal
• Integration of GP in to Corporate
Compliance structure
• Evaluation of Corporate Risks
• Evaluate independence objectivity of
appropriate functions and activities
• GP meets the framework of OIG
• Legal review,
coordination
with outside
counsel
IT
• Systems & Data
Impact
Software
Vendors/ SI’s
• Systems Updates

Timeline and Supporting Information

Timeline and Key Dates
1/26/2016 4/1/2016
January
26, 2016
April 1,
2016
April 1,
2017
Publication Effective Date Extended Effective Date
• Territories
• Non-innovator reclassification requests
• Restate Base AMP
• Contact external vendors (counsel,
systems, consultants)
• Develop an implementation plan
• Update all affected documentation
• Assess data to determine what
changes (e.g., new COT for entities
in territories), if any, are necessary
• Perform feasibility analysis for base
AMP restatement
• Perform base AMP restatement, if
applicable
• Seek exceptions for non-innovator
drugs, if necessary
• Evaluate Territories contracting
strategies and update systems to
incorporate into AMP and BP
Key tasks to consider / complete: Key tasks to consider / complete:

How Huron and Reed Smith Can Help?
• Evaluating and updating manufacturer considerations, coordinated with legal counsel of course,
as appropriate, to include
– Methodology impacts
– Business considerations
– Data considerations
– Systems considerations
• Developing an implementation work plan necessary to incorporate Final Rule requirements
• Updating and/or Creating all MDRP Policies, SOPs, and Other Supporting Documentation such
as COT and Transaction Type Schema and Product Masters
• Performing parallel MDRP calculations to validate the Final Rule changes are implemented
appropriately in system
• Assisting with Project Management of Final Rule implementation, as necessary
• Conduct initial planning and feasibility analysis as well as a baseline AMP restatement
• Conducting Financial Impact Analysis
• Assessing potential disclosures or impact on existing compliance investigations

Questions

References – Supporting Documents
Huron Supporting Documents:
1. Final Rule Reading Guide
http://www.huronconsultinggroup.com/Insights/Analysis/Life_Sciences/MDRP-Final-Rule-Reading-Guide
2. Huron Analysis and Initial Client Alert
http://www.huronconsultinggroup.com/~/media/Insights-Media-Content/PDF/LifeSciences/Final%20Rule%20Full%20Analysis.pdf
Reed Smith Supporting Documents:

Thank you.
Please contact us if you have any additional questions or would like to reach out to us regarding
this presentation.
Chris Coburn Joe Metro
Managing Director
312-212-6710
ccobourn@huronconsultinggroup.com
Reed Smith
202-414-9284
jmetro@reedsmith.com
Clay Willis
Director
404-825-3319
cwillis@huronconsultinggroup.com

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from Huron Consulting Group. This PowerPoint
document was used to structure a visual presentation. Without the accompanying comments of the participants and corresponding appendix materials, it is incomplete as a record of the event.
Innovative Life Science
Strategies and Risk Mitigation.
It’s in our DNA.
Thank You.
Please contact us if you have any additional questions or would like to reach out to us regarding this presentation.

Covered-Outpatient-Drugs-Final-Rule-Webinar-for-GP-Professionals-Slides

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (11)

Ähnlich wie Covered-Outpatient-Drugs-Final-Rule-Webinar-for-GP-Professionals-Slides

Ähnlich wie Covered-Outpatient-Drugs-Final-Rule-Webinar-for-GP-Professionals-Slides (20)

Covered-Outpatient-Drugs-Final-Rule-Webinar-for-GP-Professionals-Slides