Congressional Committee Criticizes 340B Program Oversight Members Urge Greater Transparency of Pricing IN THIS ISSUE HRSA and CMS Reach Interagency Agreement on Price Calculations 2 Congress Moves Towards Passage of 340B/Medicaid Provisions 3 Questions Remain for Low-Income Part D Beneficiaries 4 Stakeholders Respond to OIG Guidance on PAP Programs and Part D 5 OIG Plans to Publish Additional 340B Pricing Report Next Year 6 Subscription Information 12 Volume 2, no. 12 December 2005 On December 15, members of Congress from both parties raised serious concerns about the Health Resources and Services Administration’s (HRSA) oversight of the 340B program, during the first hearing on the program ever convened by Congress. The hearing, held before the House En- ergy and Commerce Subcommittee on Over- sight and Investigations, focused to a sub- stantial degree on the need for transparency of manufacturer ceiling price information and the authority of the Department of Health and Human Services (HHS) to ensure compliance with the program. One of the major ques- tions addressed during the hearing was whether HRSA has the authority to require participating manufacturers to submit their ceiling price information to the agency so that HRSA staff can determine whether covered entities are receiving the correct prices. Under the current system, HRSA inde- pendently calculates the 340B ceiling prices for all covered drugs using data provided by the Centers for Medicare and Medicaid Ser- vices (CMS). Manufacturers, meanwhile, are responsible for calculating their own ceiling prices and using these prices in the marketplace. Democratic members Bart Stupak (D- MI), Diana DeGette (D-CO), and Jay Inslee (D-WA) asked the subcommittee’s witnesses why HRSA does not compare manufacturer pricing information to its own calculations. HRSA Deputy Administrator Dennis Williams testified that his agency is restricted by law from comparing manufacturer prices to the government’s calculations unless that information is submitted by manufacturers on a voluntary basis. Williams was not able to say how many manufactur- ers currently do so. HRSA’s interpretation of its own authority differed from that of William von Oehsen, General Counsel to the Public Hospital Phar- macy Coalition (PHPC), who stated that HRSA does have the authority to require submission of this informa- tion and that doing so would greatly improve the integrity and efficiency of the program. Von Oehsen pointed out that the standard pharmaceutical pricing agreement (PPA) between participating manufacturers and the government expressly obligates manufactur- ers, upon request, to give HHS reasonable access to manufacturer records that are rele- vant to the manufacturers’ compliance with the terms of the Agreement, and that records COPYRIGHT 2005 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. This newsletter is protected by U.S. Copyright Law. Reproduction, photocopying, storage, transmission or any other sharing with any unauthorized third party of any portion of this newsletter by any means (including electronic redistribution) is strictly prohibited, except with the prior written permission of Powers, Pyles, Sutter & Verville, P.C. and payment of any applicable licensing fee. Violation of copyright may result in legal action, including civil and/ or criminal penalties and immediate suspension or revocation of subscription services without refund. Those desiring authorization to copy or use any portion of this newsletter should contact Jared Bloom at [email protected] or (202) 349-4244 for further details. The Inside Source on the Public Health Service 340B Drug Discount Program “It is nonsensical to me that covered entities do not have access to the [340B] ceiling prices.” Rep. Ed Whitfield (R-KY) continued on pg. 10 (click here)
Transcript
Congressional Committee Criticizes 340B Program Oversight Members Urge Greater Transparency of Pricing IN THIS ISSUE
HRSA and CMS Reach Interagency Agreement on Price Calculations
2
Congress Moves Towards Passage of 340B/Medicaid Provisions
3
Questions Remain for Low-Income Part D Beneficiaries
4
Stakeholders Respond to OIG Guidance on PAP Programs and Part D
5
OIG Plans to Publish Additional 340B Pricing Report Next Year
6
Subscription Information 12
Volume 2, no. 12 December 2005
On December 15, members of Congress from both parties raised serious concerns about the Health Resources and Services Administration’s (HRSA) oversight of the 340B program, during the first hearing on the program ever convened by Congress. The hearing, held before the House En-ergy and Commerce Subcommittee on Over-sight and Investigations, focused to a sub-stantial degree on the need for transparency of manufacturer ceiling price information and the authority of the Department of Health and Human Services (HHS) to ensure compliance with the program. One of the major ques-tions addressed during the hearing was whether HRSA has the authority to require participating manufacturers to submit their ceiling price information to the agency so that HRSA staff can determine whether covered entities are receiving the correct prices. Under the current system, HRSA inde-pendently calculates the 340B ceiling prices for all covered drugs using data provided by the Centers for Medicare and Medicaid Ser-vices (CMS). Manufacturers, meanwhile, are responsible for calculating their own ceiling prices and using these prices in the marketplace.
Democratic members Bart Stupak (D-MI), Diana DeGette (D-CO), and Jay Inslee (D-WA) asked the subcommittee’s witnesses why HRSA does not compare manufacturer pricing information to its own calculations. HRSA Deputy Administrator Dennis Williams testified that his agency is restricted by law from comparing manufacturer prices to the government’s calculations unless that information is submitted by manufacturers on a voluntary basis. Williams was not able to
say how many manufactur-ers currently do so. HRSA’s interpretation of its own authority differed from that of William von Oehsen, General Counsel to the Public Hospital Phar-macy Coalition (PHPC), who stated that HRSA does have the authority to require submission of this informa-
tion and that doing so would greatly improve the integrity and efficiency of the program. Von Oehsen pointed out that the standard pharmaceutical pricing agreement (PPA) between participating manufacturers and the government expressly obligates manufactur-ers, upon request, to give HHS reasonable access to manufacturer records that are rele-vant to the manufacturers’ compliance with the terms of the Agreement, and that records
COPYRIGHT 2005 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. This newsletter is protected by U.S. Copyright Law. Reproduction, photocopying, storage, transmission or any other sharing with any unauthorized third party of any portion of this newsletter by any means (including electronic redistribution) is strictly prohibited, except with the prior written permission of Powers, Pyles, Sutter & Verville, P.C. and payment of any applicable licensing fee. Violation of copyright may result in legal action, including civil and/or criminal penalties and immediate suspension or revocation of subscription services without refund. Those desiring authorization to copy or use any portion of this newsletter should contact Jared Bloom at [email protected] or (202) 349-4244 for further details.
The Inside Source on the Public Health Service 340B Drug Discount Program
“It is nonsensical to me that covered entities do not have access to the [340B] ceiling prices.”
Rep. Ed Whitfield (R-KY)
continued on pg. 10 (click here)
The Monitor Managing Editor Jared Bloom Supervising Editors Ted Slafsky William von Oehsen
HRSA and CMS Reach Interagency Agreement on Price Calculations
Page 2
COPYRIGHT 2005 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one.
The Federal Drug Discount and Compliance Monitor is a national monthly newsletter that covers the legal and political issues surrounding the Public Health Service 340B drug discount program and other developments in federal drug pricing law and policy. The Monitor also updates subscribers on breaking news stories through e-mail alerts. The Monitor is published by the Public Hospital Pharmacy Coalition, a non-profit organization that represents more than 300 340B hospitals, and the law firm of Powers, Pyles, Sutter and Verville.
For information on The Monitor, including advertising opportunities, contact Jared Bloom at [email protected] or (202) 349-4244.
The Health Resources and Services Administration (HRSA) and the Centers for Medicare and Medicaid Services (CMS) reached an agreement on De-cember 9 that will allow HRSA to inde-pendently calculate the government’s 340B pricing information for 2006. Under the agreement, CMS will pro-vide HRSA with most of the data neces-sary to calculate the 340B ceiling prices for covered drugs, including the Aver-age Manufacturer Price (AMP), best price, and unit rebate amount (URA). HRSA will purchase package size data from First DataBank, a third party ven-dor recommended by CMS. “We will be analyzing that data over the next year and using it to improve the integrity of the program,” says Office of Pharmacy Affairs (OPA) Director Jim Mitchell, whose agency will take the lead in computing the prices. The agreement for 2006 reinforces what has been the practice since Sep-tember, when HRSA and CMS reached an agreement to allow HRSA to calcu-late 340B prices through the end of this calendar year. Before September, there had not been a working agreement be-tween the two agencies for 2005. Until the two agencies reached their agreement in September, CMS was re-sponsible for calculating 340B prices for the government and then providing
those prices to HRSA, which would in turn use those prices to verify the accu-racy of the prices received by covered entities, upon request. The relationship between HRSA and CMS with respect to calculating 340B prices was addressed in an October re-port issued by the US Department of Health and Human Services (HHS) Of-fice of Inspector General (OIG) and at a Congressional hearing on December 15 (see pg. 1). The October OIG audit found that CMS had submitted incomplete data to HRSA in many cases, which made it difficult for HRSA to verify pricing. (The Monitor, October 2005).
Mitchell Receives ASHP Award OPA Director Jim Mitchell was hon-ored on December 5 by the American Society of Health-System Pharmacists (ASHP) with the organization’s Award for Excellence. According to ASHP, Mitchell re-ceived the award in recognition of his leadership of OPA and his role in “expanding patients’ access to pharma-cists’ services.” “Mr. Mitchell is an outstanding ad-vocate for the profession,” said ASHP President Jill E. Martin. “We are pleased to recognize his efforts to provide pa-
tients with access to the skills and exper-tise of pharmacists.” “I am extremely honored by the award,” says Mitchell. “It’s not only an honor for me, but for the staff of this office and our partners.” Mitchell has served as OPA Director since December 1997. Since that time, he has directed a number of initiatives in the 340B program including the devel-opment of the 340B prime vendor pro-gram, the establishment of the Pharmacy Services Support Center (PSSC), and the creation of clinical pharmacy dem-onstration grants and Alternative Meth-ods Demonstration Projects (AMDP). “The agency has changed from a focus on drug pricing to a focus on phar-macy affairs,” Mitchell says. “The agency recognizes that if you want to increase access to pharmaceuticals, then you have to focus on how to bring qual-ity pharmacy services to the people who need them.” The ASHP award is the third in a string of honors received by Mitchell and OPA over the last two years. In July 2004, OPA received the HHS Secre-tary’s Award for Distinguished Service, the agency’s highest honor. In April 2005, Mitchell was awarded the Distin-guished Achievement Award in Admin-istrative Practice from the American Pharmacists Association (APhA).
Page 3
COPYRIGHT 2005 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one.
December 2005
With Congress adjourning for the holidays, the House of Representatives and the U.S. Senate have moved closer to passing a budget package that will introduce a new covered entity group to the 340B program and lead to signifi-cant reductions in Medicaid pharmacy reimbursement. Meanwhile, a Senate proposal to increase the size of the rebates that manufacturers pay to state Medicaid agencies—which also would have led to lower 340B prices—has been dropped from the bill after intense lobbying by the pharmaceutical industry. Both chambers have approved a compromise between the House and Senate budget reconciliation bills, which were passed last month. The compro-mise bill was passed by the House on December 18 by a vote of 212-206, and the Senate passed the bill on December 21 when Vice President Cheney was called on to break a 50-50 tie. However, due to a procedural matter raised in the Senate, the bill must once again be passed by the House before it is sent to the President’s desk. As a result, the House must decide whether to call its members back to Washington for a vote this year or wait until January. The compromise bill includes a number of measures that could have a significant impact on 340B stakeholders. Most notably, the bill would make ap-proximately 80 freestanding children’s hospitals eligible for 340B. This pro-posal was included in the House’s rec-onciliation bill last month and was intro-duced by Reps. Paul Gillmor (R-OH) and Diana DeGette (D-CO). These hospitals, which are currently excluded from the 340B program be-cause they are exempt from the Medi-caid prospective payment system (PPS), would be required to provide a signifi-cant amount of care to patients eligible for state medical assistance to qualify. According to the Congressional Budget Office (CBO), this provision would save the federal government $50 million over five years by lowering drug
costs for these institutions. In a victory for the generic drug industry, the bill also includes a provi-sion that would require brand name manufacturers to include the prices of “authorized generic” drugs in their Av-erage Manufacturer Price (AMP) and best price calculations. Under current law, brand name manufacturers are permitted to sell an “authorized” generic version of a brand name drug once the drug’s patent has been successfully challenged by a ge-neric manufacturer. However, the au-thorized generic is considered to be a generic drug for Medicaid drug rebate purposes, which means that it does not factor into best price calculations. Under the compromise bill, the low-est price charged by a brand name manufacturer for its authorized generic
drugs would be taken into account in determining the best price of its corre-sponding brand name drugs. The compromise bill also allows state Medicaid agencies to collect data on physician-administered drugs for the purpose of collecting rebates on those drugs. This measure could be problem-atic for 340B hospitals if it is interpreted by state Medicaid agencies to include drugs dispensed in hospital clinics (The Monitor, November 2005). As reported earlier, the pharmaceuti-cal industry successfully defeated the Senate’s proposal to increase the Medi-caid drug rebate percentage for both brand name and generic drugs. Earlier this month, the Wall Street Journal re-ported that some House Republicans were considering an increase in the re-bate percentage in order to secure Sen-ate support for oil drilling in the Arctic National Wildlife Reserve (ANWR).
Since that time, the ANWR provi-sion has been moved to a defense spend-ing package, while the increase to the Medicaid drug rebate percentage was dropped completely. If this measure were included in the final bill, pharmaceutical manufacturers would have been required to pay a larger rebate to state Medicaid agencies for Medicaid-covered drugs. Manufacturers now pay 15.1% of Average Manufac-turer Price (AMP) for brand name drugs and 11% of AMP for generic drugs. Under the Senate’s proposal, the rebate percentage would have been in-creased to 18% of AMP for brand name drugs and 17% for generics. In addition to increasing the payments made to Medicaid, this provision would have also presumably led to lower 340B drug prices because the 340B ceiling price formula relies on the same data as the Medicaid drug rebate formula. The bulk of the bill’s projected sav-ings comes from major reforms to the Medicaid pharmacy reimbursement sys-tem. In particular, the bill replaces the current Average Wholesale Price (AWP) system with a methodology based on a new benchmark called Retail Average Manufacturer Price (RAMP). The bill also allows states to set their own dispensing fees, though it requires that states pay at least $8 for generic drugs dispensed to Medicaid patients. Overall, the majority of the reforms in the bill come from the reconciliation bill passed by the House last month, which sought to allow states to charge premiums to Medicaid beneficiaries and increase co-payments for some services. The purpose of these reforms, ac-cording to House leaders, is to encour-age individuals to make cost-effective decisions about their health care rather than relying on government programs. Provider groups and advocates for low-income individuals have argued that raising co-payments could lead patients to forego medical treatment, which could result in more patients ending up in emergency rooms.
Congress Moves Towards Passage of 340B/Medicaid Provisions
The compromise bill in-cludes a number of re-
forms that would impact the 340B and Medicaid drug rebate programs.
COPYRIGHT 2005 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one.
Page 4
With the Medicare Part D prescrip-tion drug benefit set to launch on Janu-ary 1, federal and state officials continue to struggle with the process of enrolling the program’s “dual eligible” and low-income beneficiaries. Under the Medicare law, the federal government is responsible for pre-enrolling all individuals eligible for the Part D benefit who currently receive drug coverage through Medicaid. Since early October, the Centers for Medicare and Medicaid Services (CMS) have been mailing letters to these bene-ficiaries informing them of the specific prescription drug plan in which they will be enrolled if they do not choose a dif-ferent plan by December 31. The purpose of the auto-enrollment process, according to CMS, is to ensure that these beneficiaries do not lose their drug coverage for any period of time as they are transferred from Medicaid to Medicare coverage. As of early Novem-ber, CMS had auto-assigned about 5.5 million of the 6.1 million dual eligibles identified by the agency. Yet despite the government’s best efforts to enroll all of these individuals, a number of advocacy groups are con-cerned that some individuals will inevi-tably be overlooked by the government.
These groups also argue that the pro-grams into which these individuals are auto-enrolled may not necessarily meet their needs. In fact, a coalition of eight advocacy groups filed a lawsuit against CMS last month calling on the government to al-low dual eligibles to maintain their Medicaid coverage until they are able to find a Medicare plan that suits their medical needs.
“The poorest, sickest, and oldest Ameri-cans face grave risk of losing their life-saving medications once the clock strikes twelve on New Year’s,” said Robert M. Hayes, President of the Medi-care Rights Center, one of the organiza-tions that filed the suit. “This lawsuit seeks to force creation of an essential safety net to protect the health and lives of the frailest Americans.” CMS, for its part, stated as early as May that “in the event that these safe-
guards fail, CMS is also working on a way to ensure that any full benefit dual eligibles omitted from our process are able to receive Medicare prescription drug coverage when it begins.” To that end, CMS announced on December 1 that it has entered into con-tracts with two companies—Wellpoint and Z-Tech Corp—that will be responsi-ble for guaranteeing that the dual eligi-bles who have not been enrolled into a plan are able to receive coverage when the benefit launches. “CMS and its contractor will provide a uniform and straightforward set of instructions that all pharmacists can follow no matter which plan network they are in or where they are in the country,” the agency said in a December 1 press release. Under these contracts, the prescrip-tion drug plan (PDP) WellPoint will pay the claims for all eligible individuals who have not been assigned to a plan. It will fall to the pharmacy to determine whether these individuals are indeed eligible for both Medicare and Medicaid coverage. Once WellPoint has paid the phar-macy, it will send the individual’s en-rollment information to Z-Tech Corp.,
www.rxforaccess.org
Medicine for People in Need (Medpin), a nonprofit leader in the field of pharmaceutical access, invites you to subscribe to Rx for Access. Rx for Access brings together the information safety net providers need to manage pharmaceutical services in to-day’s health care environment. The monthly newsletter explores effective strategies for balancing cost and access issues, ways to incorporate drug companies' patient assistance programs into pharmacy operations, dispensing options for clinics, steps to qualify for and better use 340B discounts, and trends in federal and state policies affecting pharmaceutical access.
IN FOCUS 340B ENTITIES PREPARE FOR MEDICARE PART D
Questions Remain for Low-Income Part D Beneficiaries
CMS plans to ensure that all dual eligibles receive drug coverage
when the Part D benefit is launched in January.
continued on pg. 8 (click here)
Page 5
A Special Advisory Bulletin re-leased by the US Department of Health and Human Services Office of Inspector General (OIG) on the role that pharma-ceutical manufacturer patient assistance programs (PAP) can play in the new Part D drug benefit has already sparked a great deal of interest among legislators and program stakeholders. The November 7 bulletin addresses the potential fraud and abuse concerns that could arise if these programs are extended to Part D enrollees and out-lines the steps that manufacturers would have to take in order to bring their PAPs into compliance. The guidance states that under some current programs manufacturers will not be permitted to assist Part D enrollees with payments towards the purchase of drugs. However, OIG outlines a number of models that manufacturers may adopt in order to continue providing assistance to Part D beneficiaries. “The OIG is mindful of the impor-tance of ensuring that financially needy beneficiaries who enroll in Part D re-ceive medically necessary drugs,” In-spector General Daniel Levinson said. “Accordingly, the Bulletin makes clear that lawful avenues exist.” For instance, manufacturers may either donate cash to an independent charity that will distribute the assistance or offer to cover drugs outside of the Part D benefit. The guidance also states that manu-facturers may continue to operate their current PAPs for those who do not re-ceive drug coverage through Medicare. (For more a detailed look at the implica-tions of the OIG bulletin, see The Moni-tor, November 2005.) Since the release of the bulletin, a number of parties have registered their concerns over the OIG policy. On No-vember 22, a group of six Democratic
U.S. Senators issued a letter to OIG ar-guing that the guidance could harm low-income Part D beneficiaries who will not receive additional assistance from the government. “We are concerned that the Special Advisory Bulletin on PAPs could un-fairly punish low-income Medicare beneficiaries of limited means who do not qualify for the low-income subsidy and who currently derive a significant benefit from pharmaceutical manufac-turer PAPs,” the letter states. Specifically, the senators are con-cerned that manufacturers will not be permitted to assist beneficiaries with their payments once they reach the
“donut hole,” the range of drug spending during which Part D participants will be required to cover 100% of their drug costs before reaching the catastrophic coverage limit. According to the letter, this policy could mean that “low-income Medicare beneficiaries, who are not eligible for the low-income subsidy, but still very poor, will lose access to free or reduced-price prescription drugs if they enroll in [a Part D plan].” The letter also raises concerns over the OIG’s recommendation that manu-facturers replace their current PAPs by donating money to independent charities that will in turn distribute that assistance to needy beneficiaries.
The senators believe that such a shift could create more confusion among new Part D beneficiaries as they will then be required to select a charitable organiza-tion in order to receive additional assis-tance with their drug costs. The letter also requests further clari-fication of the concerns articulated in the bulletin. In particular, the senators are wary of OIG’s assertion that tradi-tional PAPs will increase costs to Medi-care by subsidizing a beneficiary's move through the donut hole, which would then require Medicare to cover more of the beneficiary’s costs. The senators also question OIG’s statement that traditional PAPs could potentially steer patients towards the use of a particular manufacturer’s drug. The letter argues that Part D formularies will be rather strict and that this will “mitigate the potential for beneficiary steering.” Manufacturers May Scale Back PAPs In addition to policy concerns, the OIG guidance has also drawn attention to the practical matter of whether manu-facturers will alter or eliminate their programs when Part D launches. Even before the release of the OIG bulletin, a number of manufacturers had already chosen to discontinue their PAP programs for Part D beneficiaries be-cause of the coverage that these indi-viduals could receive under their new drug plans. However, according to an analysis performed by Volunteers in Healthcare (VIH)—a non-profit organization that works with healthcare providers treating the uninsured—there still appears to be a great deal of variance among manufac-turers on the future of their PAPs.
December 2005
COPYRIGHT 2005 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one.
IN FOCUS 340B ENTITIES PREPARE FOR MEDICARE PART D
Stakeholders Respond to OIG Guidance on PAP Programs and Part D
“The new government guidance may make it
more difficult for PAPs to help low-income Medi-
care beneficiaries.” Ken Johnson
PhRMA
continued on pg. 9 (click here)
Page 6
COPYRIGHT 2005 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one.
The US Department of Health and Human Services Office of Inspector General (OIG) plans to release a report next year that will examine the prices received by 340B entities and consider reasons why overcharges may occur under the program, according to the agency’s 2006 work plan. The new report will be a comprehen-sive look at whether covered entities are being charged above the 340B ceiling price for drugs and why these over-charges may be taking place. Expected in the Spring of 2006, the new OIG study will replace the agency’s June 2004 effort, which estimated that 340B entities were overcharged by more than $41 million during a single month in 2002. The June 2004 report was later with-drawn by HHS Inspector General Daniel Levinson due to potential errors in the data that OIG received from the Centers for Medicare and Medicaid Services (CMS) prior to performing its analysis. Within months of the withdrawal, however, Levinson told the Senate Fi-nance Committee that OIG would repli-cate the June 2004 study once the data could be verified. “The OIG is currently conducting a more systematic evaluation of the data used to calculate 340B ceiling prices,” Levinson said at the time, adding that his agency continues to believe that there are “systemic weaknesses” in the pricing system for the 340B program despite concerns over the integrity of the data used in the June 2004 report. The OIG has delivered the same message in a number of forums since that time, including during testimony before a hearing convened by the House Energy and Commerce Committee Sub-committee on Oversight and Investiga-tions on December 15 (see pg. 1). In addition to conducting its pricing analysis, the 2006 report will also evalu-ate potential causes of 340B overcharges if they are identified in the analysis, an endeavor that was not included in the June 2004 report.
“If 340B participating entities do not receive the discount to which they are entitled, we will evaluate potential rea-sons through in-depth case studies,” according to the work plan. OIG Program Analyst Madeline Francescatti addressed the 2006 report during a meeting of the Public Hospital Pharmacy Coalition (PHPC) on Decem-ber 4 in Las Vegas, NV. Francescatti said the report should be released in the Spring of 2006 and that the Office of Pharmacy Affairs (OPA) has cooperated fully with OIG to this point. Francescatti also discussed OIG’s October 2005 report on the oversight of the 340B program, which reviewed the process by which the federal govern-ment calculates the 340B price and the
role of the Health Resources and Ser-vices Administration (HRSA) as admin-istrator of the program. The October report identified weak-nesses in the oversight of the program including the inefficiency of 340B ceil-ing price calculations and a lack of clear guidelines on how to calculate the 340B prices of drugs. (For more on the Octo-ber 2005 OIG report, see The Monitor, October 2005.) The report also called on HRSA to seek legislation that would allow the agency to levy penalties on manufactur-ers that violate the program. Currently, the only recourse available to HRSA is to disqualify program violators from the Medicaid and 340B programs, a penalty that OIG has criticized as too severe to be effective.
HRSA has since reached an agree-ment with CMS that it says will simplify the price calculation process by granting the agency access to the necessary data. HRSA also plans to publish detailed guidelines on its website outlining how the 340B price is to be calculated, ac-cording to Francescatti. However, HRSA has stated that they do not agree with the recommendations that the agency seek broader legislative powers or make 340B prices available to covered entities on the OPA website. “We have made a commitment to respond to each of the recommendations except for those we do not agree with, including the recommendation to put 340B prices on the OPA website,” says OPA Director Jim Mitchell. The report on 340B pricing is one of a number of studies that OIG plans to perform this year that could have impli-cations for 340B entities and participat-ing manufacturers. According to the work plan, OIG is planning to release two reports on the computation of Average Manufacturer Price (AMP) and best price, two figures that factor heavily in the determination of 340B prices. The purpose of the two studies, ac-cording to the work plan, will be to “evaluate the adequacy of drug manu-facturers’ methodologies for computing AMP and best price” and assess CMS’s oversight of the two formulas. OIG’s work plan says that the agency will also release a report this year that will look more closely at the Medicaid drug rebate program in order “to determine whether manufacturers are circumventing the requirements of the Medicaid drug rebate legislation.” OIG announced that it is also inves-tigating the impact of “authorized gener-ics” on the Medicaid drug rebate pro-gram. Since Congress has included a provision in its budget reconciliation bill that would require manufacturers to in-clude authorized generics in their best price calculations, it is unclear whether OIG will continue to pursue this matter.
OIG Plans to Publish Additional 340B Pricing Report Next Year
“If 340B participating entities do not receive the discount to which they are entitled, we will evaluate
potential reasons through in-depth case studies.”
OIG Work Plan
2006
PHS Pricing Now Available for 340B Eligible Hospitals
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For additional information, please visit www.innohepusa.com. Spinal or epidural hematomas can occur with the associated use of low molecular weight heparins and spinal/epidural anesthesia or spinal puncture, which can result in long-term or permanent paralysis. The risk of hematomas is increased by the use of postoperative indwelling epidural catheters or by the concomitant use of drugs affecting hemostasis such as NSAIDs, platelet inhibitors, or other anticoagulants. Patients should be frequently monitored for signs and symptoms of neurological impairment. If neurological impairment is noted, urgent treatment is necessary (see Full Prescribing Information). Patients with active major bleeding, patients with (or a history of) heparin-induced thrombocytopenia, or patients with known sensitivity to heparin, tinzaparin sodium injection (or any of its constituents), or pork products should not be treated with Innohep®. Innohep® should be used with ex-treme caution in conditions with increased risk of hemorrhage. Bleeding is the most common adverse event associated with Innohep®, and can occur in any tissue or organ. The most common adverse events in controlled clinical trials with Innohep® were injection site hematomas (16%), abnormal elevations of AST (8.8%) and ALT (13%), urinary tract infections (3.7%), pulmonary embolism (2.3%), and chest pain (2.3%). Other bleeding events associated with Innohep® at a frequency of ≥1% were epistaxis (1.9%), hemorrhage (1.5%), hematuria (1%), and thrombocytopenia (1%). Innohep® cannot be used interchangeably (unit for unit) with heparin or other LMWHs as they differ in manufacturing process, molecular weight distribution, anti-Xa and anti-IIa activities, units, and dosage. Each of these medications has its own instructions for use.
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If your entity is considering 340B, the first step is to evaluate the impact of this program on the patient care objectives and financial resources of your organization. CBSRx has developed a comprehensive feasibility/financial impact study that has become a “must” first step in answering questions and creating a 340B implementation road map. This will lay out the 340B implementation model that will best maximize program benefits based on the unique factors that apply to your hospital or community health center: 1. The Feasibility/financial impact study This should be the first step before 340B implementation and also the decision matrix used if considering program expansion into retail outpatient prescription capture programs. • Evaluation of program qualification • Calculation of cost/benefit relationship of all implementation models and mixed use savings • Determination of retail pharmacy expansion benefits, contracted and entity operated • Sixteen financial proformas showing results at various capture rates, with contracted and entity operated outpatient pharmacies • Implementation costs and working capital requirements of recommended programs 2. Program Implementation Consulting CBSRx will provide a scope of work and implement your program on a turn-key basis, whether it is a mixed use setting program in a hospital, construction of an out-patient pharmacy in your hospital or health center, or creation of a contracted dispensing relation-ship with a local retail pharmacy. We have done it all. 3. Program Maintenance We have contracts with many of our clients where CBSRx conducts monthly visits to include compliance audits, financial variance analysis, program marketing capture rate audits, and work flow efficiency analysis. Recommendations, mentoring, coaching, and reporting that insures 340B program success is assured through this consulting.
Page 8
Pharmacies Expect Challenges in Treating Low-Income Part D Beneficiaries
the second CMS contractor, which will enroll these individuals into Part D plans. However, if it is determined that an applicant is not a qualified dual eligi-ble, WellPoint will reverse the claim to the pharmacy that dispensed drugs and recover their payment. As a result, it will be important for pharmacists to verify the eligibility of the patient before dispensing drugs to ensure proper reimbursement. In addition to their efforts to fill in “gaps” for un-enrolled dual eligibles, CMS has also announced that Part D plans will be required to honor current prescriptions—including those which are not on a plan’s formulary—for at least 30 days so that these beneficiaries are able to decide whether a different plan would suit them better. Regardless of whether these indi-viduals are enrolled in plans by January
1, caring for them is likely to be a diffi-cult task for pharmacies. For instance, some beneficiaries may not be aware that they are enrolled in a Part D plan and will no longer receive coverage for certain drugs. Similarly, these beneficiaries may be enrolled in plans that have not contracted with their preferred provider, which means that these pharmacies will not receive reim-bursement for drugs dispensed to these patients. As a result, pharmacists will play a key role in educating beneficiaries about the drug benefit and explaining how to change plans to ensure that all of their drugs are covered. Pharmacies will also likely be charged with educating patients about the low-income subsidies available to beneficiaries that meet the program’s income and assets requirements. Under the Part D benefit, certain individuals are eligible to receive “extra help” from
the government that will help pay their premiums, deductibles, and co-pays under the Part D benefit. For instance, an individual with an income below 135% of the federal pov-erty level may be eligible to have their premium and deductible covered by the government. If approved, these indi-viduals will only be required to pay a $2 co-pay on generic drugs and a $5 co-pay on brand name drugs. Since May, the Social Security Ad-ministration—which is responsible for processing the applications for low-income subsidies—has been reaching out to potential beneficiaries and facili-tating the enrollment process. However, according to the agency, only 660,000 of the estimated 5.7 mil-lion eligible beneficiaries have been approved for this “extra help” to date. In this respect, pharmacists will most likely play an increasingly important role when the benefit launches.
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December 2005 Page 9
Manufacturers Evaluating Options for PAP Assistance of Part D Beneficiaries
Of the 63 manufacturers polled by VIH, 28 reported that they have not yet decided whether Medicare beneficiaries will be eligible for their PAPs in 2006. Fourteen manufacturers reported that Medicare patients will no longer receive assistance, regardless of whether they enroll in a Part D plan, while seven manufacturers reported that all Medicare beneficiaries will continue to be eligible. Still others have decided to offer the programs only to those who do not par-ticipate in Part D or those who do not receive low-income subsidies through the program, according to VIH. It is unclear how manufacturers will respond to the OIG bulletin, though some believe it may discourage the in-dustry from making traditional PAPs available to Part D beneficiaries in light of potential fraud and abuse concerns. “The world is going to become more complicated,” says Bill Shearer, Execu-tive Vice President and Chief Operating Officer of Ventis Pharma Services, a company that helps manufacturers ad-minister their PAPs. According to Shearer, the challenge for manufacturers will be to develop assistance programs for Part D enrollees that are compliant with the OIG bulletin
but are as efficient as the programs they currently operate for other populations. The Pharmaceutical Research and Manufacturers of America (PhRMA)—a trade association that represents the brand name drug industry—has ac-knowledged that the OIG guidance could lead to a decline in the number of PAPs administered by manufacturers. “Generally, the new government guidance may make it more difficult for PAPs to help low-income Medicare beneficiaries,” said PhRMA Senior Vice President Ken Johnson. “[The OIG bul-letin] may impose significant limits on PAPs’ ability to continue providing di-rect assistance to Medicare beneficiaries within their current PAP structures.” The promotion of PAPs has been a hallmark of PhRMA’s recent efforts to highlight the role of the pharmaceutical industry in assisting the uninsured. It remains to be seen whether manu-facturers will embrace the alternative models proposed by OIG, including the donation of assistance through inde-pendent charities. Some observers are concerned that manufacturers may not embrace this model because it could potentially lead to these companies sub-sidizing the purchase of a competitor’s product. Speaking about this particular
model, a spokesperson for Bristol-Meyers Squibb (BMS) told The Monitor that the company is “evaluating third party foundations to see what their role will be in addressing the needs of Part D enrollees in the future.”
Providers Push for Restructured PAPs The OIG guidance has also garnered a great deal of interest in the safety net community, as provider groups scramble to find ways to ensure that patients are able to continue receiving prescription drug assistance from manufacturers. A group of organizations including the Public Hospital Pharmacy Coalition (PHPC) and Medicine for People in Need (Medpin) recently issued a letter encouraging manufacturers to continue offering their PAPs to non-Part D Medi-care beneficiaries through the plan’s open enrollment period, which ends on May 15. The letter also asks the compa-nies to explore ways to continue assist-ing the Part D population through PAPs. “We are pleased that the OIG has developed ways for manufacturers to continue assisting needy beneficiaries without forcing these individuals to forego Part D coverage completely,” says PHPC’s Perry Knight. “We hope that manufacturers will take advantage of these different options.”
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Committee Calls for Greater Access to 340B Pricing Information
of ceiling prices plainly fall into this category. “PHPC believes that HRSA should not merely request, but should require manufacturers to submit all of the 340B ceiling prices they have calculated to HRSA each quarter for verification of pricing accuracy,” von Oehsen said. Subcommittee members also ex-pressed concern that covered entities do not have access to manufacturer ceiling prices and are therefore unable to deter-mine whether they are paying the cor-rect prices for their pharmaceuticals. “It is nonsensical to me that covered entities do not have access to the ceiling prices,” said Subcommittee Chairman Ed Whitfield (R-KY). In his testimony, Wright expressed OIG’s view that the HHS Secretary has the authority to permit disclosure of ceiling price data if it is determined to be “necessary to carry out the program.” However, he said that HRSA has chosen to abide by guidance from the Centers for Medicare and Medicaid Services (CMS) protecting the confidentiality of manufacturer pricing information. During the hearing, Whitfield and others praised manufacturer GlaxoS-mithKline (GSK) for agreeing to volun-tarily submit its entire ceiling price file to all covered entities that participate in the 340B Prime Vendor Program (PVP). In October, GSK entered into an agreement with HRSA and PVP under which the company will allow PVP members to access its entire 340B pric-ing file through a password-protected section of the PVP website. “It is the right thing to do because it increases transparency,” Whitfield said, adding that he is hopeful that other manufacturers will follow suit and coop-erate with HRSA. David Brown, Director of Govern-ment Contracts and Pricing Programs at GSK, said that the company decided to share this information because “the
benefits to the 340B entities outweighed the risks [to GSK].” According to testimony submitted by PVP Senior Director Chris Hatwig, GlaxoSmithKline’s price file has been accessed 792 times by participating enti-ties during the two months following the announcement of the agreement. “I believe the additional service will encourage more manufacturers to work with the Prime Vendor Program and will eventually lead to manufacturers offer-ing additional subceiling pricing on their products to further benefit the program’s participants,” Hatwig said. Another topic discussed during the hearing was HRSA’s lack of civil and
monetary penalties for program viola-tions. In his testimony, Wright observed that the only recourse currently available to HHS is to remove manufacturers from both the 340B and Medicaid drug rebate programs. “This remedy is so extreme that it limits the likelihood that it will be used,” Wright said in prepared testi-mony. “Terminating a manufacturer’s participation is an exceptionally severe sanction, given the effect that terminat-ing a manufacturer would have on ac-cess to medications for the millions of Medicaid and 340B beneficiaries.” Despite being pressed on the need for new legislative authority to improve program oversight, Williams contended that HRSA’s “primary job is to work within the current legislative context,” adding that the agency would prefer to implement other program improvements
before asking Congress for new author-ity to impose intermediate penalties. Stupak was particularly critical of HRSA’s failure to obtain refunds from four manufacturers that were identified by OIG in 2003 as having overcharged 340B entities by $6.1 million during fiscal year 1999 (The Monitor, Decem-ber 2004). After questioning Williams about this issue, Stupak proposed that the sub-committee issue a letter to the affected manufacturers to support HRSA’s re-covery efforts. While much of the hearing focused on the transparency of manufacturer pricing data, Rep. Marsha Blackburn (R-TN) shared her concerns about the accu-racy of the information in the 340B cov-ered entity database. Specifically, Blackburn asked Wright if OIG is confi-dent that only eligible entities are taking advantage of 340B discounts. Wright said that, according to an OIG analysis, many of the entities that were improperly included in the covered entity database were not participating in the program, and therefore were not receiving 340B discounts. Office of Pharmacy Affairs (OPA) Director Jim Mitchell told The Monitor prior to the hearing that his agency has verified the eligibility of 5,000 covered entities this year, including all of the Centers for Disease Control grantees and the entities that receive Title X funding through the Office of Popula-tion Affairs. At the conclusion of the hearing, Chairman Whitfield said that the sub-committee plans to hold a second hear-ing on the 340B program next year upon the release of an OIG report that is ex-pected to include specific findings on whether 340B entities are being over-charged for their drugs. In related news, Rep. Bobby Rush (D-IL) re-introduced a bill this month that includes many of the reforms dis-cussed in the hearing. The bill, H.R. 4544, was not voted on last year.
continued from pg. 1
Rep. Ed Whitfield (R-KY)
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