ASAP Midyear: Final AMP Rule Industry...

American Society for Automation in Pharmacy2016 Midyear ConferenceJune 16–18 • Louisville, Ky. • www.asapnet.org • #ASAPMidyear

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ASAP Midyear:Final AMP Rule

Industry Implications

Presented June 19, 2016 Pharmacy Healthcare Solutions, Inc.

Tim Kosty, R.Ph, President


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Agenda

•Review AMP History Leading to Final Rule

•Pharmaceutical Manufacturer Impacts

•Retail Pharmacy Perspective

–History and Outcome

•AMP FUL Analysis and Discussion

•Reimbursement Model & Next Steps


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Final AMP Rule Timeline

•February 2006 – Deficit Reduction Act of 2005 changed the FUL Methodology

•December 2006 – CMS Published Proposed Rule changing the FUL Calculation. Final Rule published July 2007

•November 2007 Lawsuit NACDS and NCPA against CMS –Estimated 10-12,000 pharmacies would close

•March 2010 – ACA enacted and changed FUL to not less than 175% of Weighted Average AMP

•Proposed Regulations were published January 2012

•Final AMP Rule Published January 2016


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History

•The Final Rule implemented changes to the Medicaid Drug Rebate Program (MDRP) under the Affordable Care Act (ACA)– Changes to Average Manufacturer Price (AMP)

calculation submitted by pharmaceutical manufacturers participating in the MDRP

– Implementation of the AMP-based Federal Upper Limit (FUL) for state Medicaid program (FFS) reimbursement for multi-source drugs

– Requirement that state Medicaid programs implement Actual Acquisition Cost (AAC)-based pharmacy reimbursement methodologies


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PHARMACEUTICAL MANUFACTURER IMPACT


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AMP Definition

• AMP means the average price paid by wholesalers or retail pharmacies to manufacturers for drugs distributed to retail pharmacy class of trade.

• AMP does not include:

–Customary prompt pay discounts extended to wholesalers

–Bona fide service fees paid by manufacturers to wholesalers or retail community pharmacies

–Reimbursement by manufacturers for recalled, damaged, expired, or otherwise unsalable returned goods, including reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction

–Rebates or discounts provided to, pharmacy benefit managers, managed care organizations, health maintenance organizations, insurers, hospitals, clinics, mail order pharmacies, long term care providers, manufacturers, or any other entity that does not conduct business as a wholesaler or a retail community pharmacy


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AMP Market Use

•Originally defined in OBRA’90 legislation for use in the Medicaid Drug Rebate program

•New definition uses AMP as both a reimbursement metric for the CMS FUL price in addition to the original drug rebate calculation

•AMP pricing had been confidential. However, CMS has been publishing draft AMP based FUL’s since September 2011


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AMP Attributes

•AMP has the following characteristics:

•Based on transaction prices

•Available for all products covered under the

Medicaid program

•Manufacturers must sign an OBRA’90 rebate

agreement to have their products covered

•Updated and published monthly

•Fines of $10,000/day when AMP submission

is late


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Pharmaceutical Manufacturer Impact

•Manufacturers revised their AMP methodologies to comply with the Final Rule for the April 2016 calculation

•April 1, 2017: Eligible sales in US Territories must also be included in AMP calculations and Best Price determinations

Puerto RicoVirgin

IslandsGuam

Northern Mariana Islands

American Samoa


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Outpatient Drug Categorization & Reimbursement – Same as Always

•Rebates on single source and innovator, multi-source drugs are higher than rebates on non-innovator multi-source drugs

•Single Source & Innovator, Multiple Source: Greater of

–23.1% of AMP plus CPI-U adjustment or

–Difference between AMP and Best Price

•Non-Innovator, Multiple Source:

–13% of AMP


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Bipartisan Budget Act (BBA) of 2015

•Included the CPI-U adjustment for generic drugs

•Effective date of CPI-U adjustment is 2017 Q1 with rebate submissions due April 2017

•Additional rebate due for generics = AMP for current quarter minus baseline AMP adjusted for inflation

•Penalizes generic pharmaceutical manufacturers that take rapid price increases


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Best Price Determinations

•Best Price: lowest price paid for a covered outpatient drug by any entity in the US in any pricing structure, except those statutorily excluded

•No changes to current methodology for determining best price

•Best price excludes the following so long as all benefits go directly to patients, and not retail community pharmacies or others:

–Manufacturer copayment assistance programs (i.e. copay cards)

–Manufacturer-sponsored patient refund/rebate programs (i.e. patient assistance programs)

–Manufacturer vouchers (i.e. free trial offers)


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Bona Fide Service Fees

•Fees paid by manufacturers to wholesalers or retail community pharmacies that are excluded from the AMP calculation include:

Distribution Service Fees

Inventory Management Fees

Product Stocking Allowances

Fees associated with administrative

services agreements

Patient Care Programs

(adherence programs, patient

education initiatives)


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Bona Fide Service Fees Four-Part Test

Any fee paid by a manufacturer to any entity that:1. Represents fair market value2. Itemized services are actually performed on behalf of

the manufacturer3. Manufacturer would otherwise perform or contract for

in the absence of the service agreement4. Are not passed on in whole or in part to a client or

customer of an entity, whether or not the entity takes title to the drug

Any fee that meets the criteria in the four part test is

deemed bona fide and excluded from AMP and Best Price


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RETAIL PHARMACY PROVISIONS


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•Retail Community Pharmacy: Pharmacy that dispenses medications to the generic public at retail prices

•Includes:–Independent

–Chain

–Supermarket

–Mass merchandiser pharmacy

•Exclusions: Pharmacies that dispense prescriptions to patients primarily through:

–Mail

–Specialty

–Nursing home pharmacies

–Long-term care facilities

–Hospital pharmacies

–Clinics

–Charitable or not-for-profit pharmacies

–Government pharmacies

–Pharmacy benefit managers

Retail Community Pharmacy (RCP)AMP Final Rule Definition of Retail Community Pharmacy


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Retail Community Pharmacy: Specialty, Home Infusion, & Home Health

•Sales to Specialty, Home Infusion and Home Health pharmacies should be included in the AMP calculation if pharmacies actually meet statutory definition of “retail community pharmacy”

•If these pharmacies do not dispense medications to the general public or if they provide medications to patients primarily through the mail, sales to these pharmacies would be excluded from the AMP calculation


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CMS FUL Definition

•Final rule establishes FUL at 175% the weighted average AMP or NADAC. NADAC is used if higher than the AMP FUL

•Must be three therapeutically equivalent products including brand, authorized generic and ANDA generic

•CMS will NOT apply a smoothing process to minimize the month to month fluctuations

•State Medicaid programs must pay no more than the CMS FUL on an aggregate basis in order to receive federal matching funds. SMAC Prices are still allowed


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Professional Dispensing Fee

•Pays costs in excess of ingredient cost of a covered outpatient drug each time a covered outpatient drug is dispensed

• Includes the following pharmacy costs:

–Reasonable costs for RPh time checking computer information about an individual’s coverage

–Performing DUR

–Preferred drug list review activities

–Measurement or mixing the covered drug

–Filling the container

–Beneficiary counseling

–Physically providing the completed prescription to Medicaid beneficiary

–Overhead with maintaining the facility and equipment


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State Plan Amendments

•April-June 2017: State Medicaid programs must submit State Plan Amendments to CMS and implement AAC-based pharmacy reimbursement methodologies. Must include studies that support setting the Professional Dispensing Fee

•CMS has stated they will review the pharmacy reimbursement in totality, i.e. FUL/Acquisition Cost plus the Professional Dispensing Fee

•CMS will withhold approval until they are satisfied that retail pharmacy is not disadvantaged by the proposed AAC/FUL reimbursement


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AMP FUL ANALYSIS


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Reimbursement Impact

•How does the new FUL prices compare to the old prices? State MAC prices?

•Use the right comparator for evaluating FUL prices for analysis

•How quickly will the potential impact be felt?

•What concerns does retail pharmacy still have with the process?


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ACA FUL ANALYSIS

•The ACA FUL does not include all generics, similar to the old FUL

•The ACA FUL appears to be fairly representative of current SMAC prices

•PHSI analyzed several states and found the current SMAC prices to be slightly more aggressive than the ACA FUL (assuming the reimbursement remains the same for non-FUL products)

•States may continue with their SMAC prices. In these cases, there will be an interesting dynamic with CMS on their state plan amendments


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ACA FUL Analysis

•If states moved to the ACA FUL and changed the dispensing fee to around $10.00 per transaction, pharmacy reimbursement would increase between $4 to $20 per prescription

•If ingredient cost reimbursement remains the same (SMAC) and the dispensing fee changes to $10.00 per prescription, the pharmacy would realize a benefit of $7 to $10 (the difference between the current and new dispensing fee)

•States may identify additional opportunities to lower the ingredient cost portion of the reimbursement to counter the effect of the expected higher dispensing fee


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Unintended Consequences

•Does the cost plus model lessen the incentive for retail pharmacy to continually negotiate lower generic prices?

•Will AMP based pricing establish a price floor for generics?

•Will AMP based FUL’s end up costing the state Medicaid programs more money?

•How will CMS react if FUL’s cost more money, especially on low cost generics?


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Potential Pharmacy Models

•Fee for Service

–Cost Plus Dispensing Fee

–Discounted AWP Plus Dispensing Fee

•Risk Based

–Capitation

–Reference Drug Pricing

•PBM Arbitrage Model

•Evolution in Reimbursement


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Stakeholder Impact

• Fee for service

• Managed MedicaidState Medicaid

Programs

• Actual Acquisition Cost

• “Professional” dispensing fee

• Specialty pharmaciesPharmacies

• AMP-eligible salesTerritories

• Network contracting

• Beyond Medicaid?Payers & PBMs


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Pharmacy Healthcare Solutions Inc.

(PHSI)(412)-635-4650

Tim Kosty, R.Ph, MBA

President

[email protected]

Questions?

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ASAP Midyear: Final AMP Rule Industry...

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