The Government Accountability Office (GAO) has released data comparing retail prescription drug prices paid by the Department of Defense (DOD), Medicaid, and Medicare Part D for a sample of 78 high-utilization/high-expenditure drugs. In general, the GAO determined that Medicaid paid the lowest average net prices for both brand-name and generic drugs in the sample based on data for the third quarter of 2010. For the entire sample, Medicare Part D paid an estimated 32% higher average net price than Medicaid, while DOD paid 60% more than Medicaid (although Medicare Part D paid more for brand-name drugs than did DOD). Key factors affecting net prices paid by each program included the amount of any post-purchase price adjustments (e.g., refunds, rebates, or price concessions received by each program from drug manufacturers), which equaled approximately 15% of the gross price for Medicare Part D, 31% for DOD, and almost 53% for Medicaid across the entire sample.
The OIG issued a report today entitled “Inconsistencies in States’ Reporting of the Federal Share of Medicaid Drug Rebates.” States are eligible for higher federal financial participation (FFP) rates for certain Medical Assistance services, such as those related to family planning, Indian Health Services, and breast and cervical cancer care. Based on prior work, the OIG was concerned that states may not always use the higher FFP rates when refunding to the federal government its share of drug rebates that drug manufacturers paid to the states, which could result in a loss of federal share. The new OIG report assesses whether states reported drug rebates at the applicable FFP rates for the period July 1, 2011 through June 30, 2012. According to the OIG, while states claimed drug expenditures at higher FFP rates, they did not consistently report the federal share of drug rebates at those higher FFP rates for one or more quarters during the review period. The OIG also found that states used different methodologies to determine the federal share of drug rebates, which could be attributed to a lack of specific national CMS guidance instructing states to report drug rebates at the FFP rates at which drugs were originally reimbursed or that identifies acceptable methods to determine the federal share of drug rebates. The OIG recommended that CMS issue guidance that clearly instructs states to report drug rebates at the applicable FFP rates and identify acceptable methods to determine the federal share of drug rebates; CMS concurred.
CMS has released the average sales price (ASP) files that will be used to pay for Medicare Part B drugs for the third quarter of 2014. According to CMS, “average drug prices in the market remain relatively stable,” with prices for the top Part B drugs increasing by 1.8% on average.
In an email today to stakeholders, CMS announced that it will not be finalizing the ACA Medicaid federal upper payment limits (FUL) for multiple source drugs in July 2014, as previously intended. CMS attributes the change to a delay in providing detailed guidance to the states in preparation for implementation. CMS expects to announce a new finalization date when it releases this subsequent guidance to states.
On the heels of its proposed rule to expand its health program exclusion authority, the Office of Inspector General (OIG) of the Department of Health and Human Services has published a proposed rule that would amend the health care program civil monetary penalty (CMP) regulations. The rule would codify the OIG’s expanded statutory authority under the Affordable Care Act to impose CMPs on providers and suppliers and would allow for significant penalties in a variety of scenarios, some of which could extend beyond what is currently permitted.
Reed Smith attorneys have prepared a Client Alert summarizing and analyzing the OIG’s proposed rule, including the various scenarios under which CMPs could be issued under the proposed regulations, such as: failure to report and return an overpayment; failure to grant OIG timely access to records upon request; ordering or prescribing items or services while excluded from a federal health care program, as well as arranging or contracting with an individual or entity who meets this criteria; making false statements or omitting or misrepresenting material facts in an application, bid, or contract; and failing to submit or certify drug-pricing and product information in a timely manner. In addition, the alert covers the changes in technical language proposed by OIG to clarify and more clearly define the scope of CMP regulations.
The Client Alert is available here.
The OIG recently offered recommendations to CMS on how to update Medicare payments to end stage renal disease (ESRD) facilities for drugs used by dialysis patients. Based on a review of ESRD drug prices in the first quarter of 2012, the OIG concluded that independent dialysis facilities can purchase ESRD drugs for less than the levels provided in the ESRD base rate (9% below, in the aggregate), but average acquisition costs for hospital based dialysis facilities exceeded the reimbursement amounts (5% above, in the aggregate). Thus the OIG cautioned that any reductions to the ESRD base rate could potentially harm hospital-based dialysis facilities. While dialysis facilities’ average acquisition costs for the majority of drugs under review have decreased over the last 3 years, the average costs for epoetin alfa (which represented more than three-quarters of drug costs in responding facilities) have increased by at least 17%. The OIG also determined that the concluded that the Producer Price Index (PPI) for Prescription Drugs was not an accurate predictor of cost changes for most drugs under review. In addition to rebasing the ESRD base rate to reflect current trends in drug acquisition costs (as is required by law), the OIG recommends that CMS (1) distinguish payments in the ESRD base rate between independent and hospital-based dialysis facilities, and (2) consider updating the ESRD payment bundle using a factor that takes into account drug acquisition costs.
The OIG has issued a report, “Comparing Average Sales Prices and Average Manufacturer Prices for Medicare Part B Drugs: An Overview of 2012,” which assesses CMS’s use of its authority to lower reimbursement for Medicare Part B drugs when a drug’s average sales prices (ASP) exceeds its average manufacturer prices (AMP) or widely available market price (WAMP) by a threshold, currently set at 5%. In April 2013, CMS began exercising its payment substitution authority, which currently applies only to certain codes with complete AMP data, and when the ASP for the code exceeds the 5% threshold in two consecutive quarters. The OIG estimates that CMS has generated more than $800,000 in savings under this policy, but the agency could achieve greater savings by expanding the circumstances under which it exercises its substitution authority to include drug codes with complete AMP data in a single quarter and drug codes with partial AMP data. CMS did not concur with these recommendations.
A recent OIG report examined potential problems associated with the growing use of contract pharmacies under the 340B discount drug program. The OIG describes these arrangements as when a 340B covered entity, such as a community health center or disproportionate share hospital, contracts with a pharmacy to dispense drugs purchased through the 340B program on the entity’s behalf. In short, based on interviews with covered entities and 340B administrators, the OIG found that some contract pharmacy arrangements create inconsistencies with regard to which prescriptions are treated as 340B eligible. Contract pharmacies also may not make necessary arrangements to prevent duplicate discounts (when a drug manufacturer pays a Medicaid drug rebate program on a drug sold at the already-discounted 340B price). The OIG also found that most covered entities it reviewed did not conduct all of the oversight activities recommended by the Health Resources and Services Administration (HRSA). In discussing its findings, the OIG stated that it was not making recommendations since HRSA has announced plans to propose new regulations for the 340B program this year the OIG’s results are intended to inform HRSA’s efforts. The OIG also intends to continue monitoring the issue.
After more than two years of releasing draft average manufacturer price (AMP)-based federal upper payment limit (FUL) files and methodology documents, CMS now expects to finalize the ACA Medicaid FULs for multiple source drugs in July 2014. While CMS intends to provide additional guidance in the months to come, the agency is encouraging states to consider what changes may be needed to contracts with pharmacy claims processors and pricing compendia, as well as state plan amendments that need to be submitted to use the FUL data. CMS also has posted final National Average Drug Acquisition Cost (NADAC) pricing files, which CMS points out could be used by states to meet the FULs aggregate upper limit if a state plan amendment is submitted. CMS suggests that as states revise their reimbursement for the ingredient cost of a drug to stay within the FUL aggregate, they should consider whether current dispensing fees continue to provide adequate reimbursement for the cost of dispensing prescriptions to a Medicaid beneficiary.
CMS has suspended Part I of its National Average Retail Price (NARP) survey, through which the agency collected prices paid for drugs to retail community pharmacies for individuals with Medicaid, cash paying customers, and those with certain third party insurance. CMS notes that the survey is being suspended, effective July 1, 2013, “pending funding decisions.” While the resulting draft NARPs file will not be published, archive files will remain on the CMS website. CMS also has suspended posting of the monthly draft New Drug Report file that listed newly marketed single-source drugs.
A recent GAO report compares direct purchase prices paid by the Department of Defense (DOD) and the Department of Veterans Affairs (VA) for a sample of 43 brand-name and 40 generic drugs for the first quarter of 2012. In short, the GAO found that each agency obtained better prices on the type of drugs its beneficiaries use more, with generic drugs accounting for 83% of VA's utilization of the sample drugs, and brand-name drugs accounting for 54% of DOD's utilization. For instance, DOD's average unit price for the 40 generic drugs was 66.6% higher than the VA's average price, while the VA's average unit price for the 43 brand-name drugs was 136.9% higher than DOD's average price. The GAO points out that different pricing can result from factors such as variations in agency formulary design and prescription practices, differences in price and rebate negotiations with manufacturers, and differences in beneficiary populations.
CMS has posted the draft February 2013 FULs and Draft February 2013 Three-Month Rolling Average FULs. CMS will continue to accept comments on the draft average manufacturer price-based FULs and the draft three-month rolling average FULs, along with the methodologies used to calculate them.
CMS has posted the September 2012 draft average manufacturer price (AMP)-based Medicaid federal upper limit (FUL) files, along with updated three-month rolling average FUL file consisting of the weighted average of the current and two previous monthly draft AMP-based FULs. CMS continues to accept comments on the monthly and three-month rolling average draft AMP-based FULs and the methodologies used to calculate them.
The D.C. Circuit recently upheld a Department of Defense (DOD) rule that will require drug manufacturers to provide partial refunds on certain prescription drugs, dating back to 2008. The rule that was the subject of the case imposes a cap on the retail price of drugs and requires manufacturers to refund the difference between the retail price and the discounted rate of the drug benefits the DOD provides through TRICARE.
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CMS Medicaid Drug Pricing Webinar: Draft Federal Upper Limits and Draft Survey of Retail Prices (Dec. 5)
On December 5, 2012, CMS is hosting a webinar on various Medicaid drug pricing issues. The webinar will cover the CMS draft three-month rolling average FUL file; draft National Average Drug Acquisition Cost (NADAC) file; draft National Average Retail Price (NARP) file; and draft Monthly New Drug Report. A taping of the event and slides will be available for one week after the webinar. (This webinar originally was scheduled for Nov. 15).
The GAO has issued a report that responds to concerns raised by certain Democratic lawmakers that manufacturers participating in the Medicare Part D drug “Coverage Gap Discount Program” would raise prices for brand-name drugs used by beneficiaries in the coverage gap to offset the 50% discount that manufacturers must provide under the Affordable Care Act. Contrary to these concerns, the GAO found that prices for brand-name drugs used by beneficiaries in the coverage gap increased similarly to those used by beneficiaries who did not reach the gap, both before and after the Discount Program was implemented in January 2011. The GAO also reports that while pharmacy benefit managers (PBMs) interviewed believe that some manufacturers decreased brand name rebate amounts as a result of the Discount Program, most plan sponsors did not observe this, and manufacturers reported no effects on their rebate negotiations as a result of the Discount Program. Most sponsors and PBMs also reported that the Discount Program did not affect Part D plan formularies, plan benefit designs, or utilization management practices. The GAO cautioned that its findings are limited to those sponsors, PBMs, and manufacturers interviewed and may not be representative of the effects observed across all of these types of entities, and multiple factors besides the Discount Program can affect drug prices over time.
The OIG has issued a report on Medicaid pharmacy reimbursement that compares FUL amounts based on published prices to FUL amounts based on AMP and pharmacy acquisition costs. According to the OIG, FUL amounts based on published prices (from the fourth-quarter 2011 Redbook file) were more than four times greater than sampled pharmacy acquisition costs. Moreover, FUL amounts based on AMPs were 61 percent lower than FUL amounts based on published prices, at the median, but still exceeded sampled pharmacy acquisition costs by 43 percent in the aggregate. Notably, however, the study was subject to a number of limitations, including use of AMP-based FULs that have not been published by CMS (data for November 2010 was used, whereas CMS began releasing draft FULs in September 2011). While CMS has been issuing draft AMP-based FUL amounts for review and comment, the OIG recommends that CMS complete implementation of AMP-based FUL amounts, in conformance with the ACA. CMS concurred, and stated that it plans to implement FUL amounts based on AMPs “in the near future.”
CMS has posted the August 2012 draft average manufacturer price (AMP)-based Medicaid federal upper limit (FUL) files, along with updated three-month rolling average FUL file consisting of the weighted average of the current and two previous monthly draft AMP-based FULs. CMS continues to accept comments on the monthly and three-month rolling average draft AMP-based FULs and the methodologies used to calculate them.
The HHS Office of Inspector General (OIG) has released its FY 2013 Work Plan, which outlines audit, inspection, and investigative initiatives that the OIG intends to conduct in the coming year. The OIG plans activities in a wide range of areas, including reviews of Medicare fee-for-service reimbursement and program integrity policies involving virtually all types of providers and suppliers (with a heavy concentration of reviews involving hospitals and medical equipment suppliers). The OIG also will focus attention on Medicare Advantage and Medicare Part D prescription drug plan policies, including payment policy and plan oversight reviews. Numerous Medicaid reports also are on the books, including investigations involving Medicaid prescription drug pricing and rebate policies, various provider and supplier payment issues, and state management of their Medicaid programs. The Work Plan also includes numerous reviews involving other HHS agencies, such as reviews targeting Food and Drug Administration (FDA) and National Institutes of Health programs. The Work Plan also includes a description of the OIG’s legal and investigative activities related to Medicare and Medicaid.
On October 5, 2012, CMS released a number of draft Medicaid drug pricing files and related documents for review and comment. Among other things, CMS has posted the June 2012 and July 2012 draft average manufacturer price (AMP)-based Medicaid federal upper limit (FUL) files. Based on comments that month-to-month fluctuations in the AMP-based FULs “may create problems for pharmacies because they will be unable to predict resulting state reimbursement rates,” CMS has developed a draft three-month rolling average FUL file consisting of the weighted average of the current and two previous monthly draft AMP-based FULs. CMS is posting these draft files, and the draft methodology used to calculate the draft three-month rolling average FUL, for review and comment only. While CMS expects three-month rolling average FULs to fluctuate less than monthly FULs, CMS observes that “the draft three-month rolling average FULs incorporates pricing data older than the current monthly pricing that may be less reflective of pharmacies’ current purchase prices.” CMS is accepting comments on the monthly and three-month rolling average draft AMP-based FULs and the methodologies used to calculate them.
CMS also released for comment draft National Average Retail Price (NARP) data, which reflects prices paid for drugs to retail community pharmacies for individuals with Medicaid, cash paying customers, and those with certain third party insurance. CMS expects the reference pricing to assist states in comparing their current pricing policies to that reflected in the draft NARP. In addition, CMS has posted for comment draft National Average Drug Acquisition Cost (NADAC) data, which is based on a voluntary survey of pharmacy invoices, and a draft Monthly New Drug Report that shows newly marketed single source drugs that are currently generally available through wholesalers. CMS states that after it considers comments on all of these files (a comment deadline is not specified), the agency plans to release these data files in final form, with updated files posted on at least a monthly basis. States can use the monthly AMP-based FUL, or the three-month rolling average FUL, once finalized, to develop a pharmacy reimbursement methodology that will allow their pharmacy payments to remain within the FUL in the aggregate. CMS points out that any state that wants to change its pharmacy reimbursement methodology must submit a state plan amendment to CMS for review and approval.