Final AMP Rule Industry Implications Presented June 19, 2016 - PowerPoint PPT Presentation

ASAP Midyear: Final AMP Rule Industry Implications Presented June 19, 2016 Pharmacy Healthcare Solutions, Inc. Tim Kosty, R.Ph, President American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 1

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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 2

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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 3

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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 4

PHARMACEUTICAL MANUFACTURER IMPACT American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 5

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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 6

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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 7

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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 8

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 Northern Virgin American Puerto Rico Guam Mariana Islands Samoa Islands American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 9

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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 10

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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 11

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) American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 12

Bona Fide Service Fees • Fees paid by manufacturers to wholesalers or retail community pharmacies that are excluded from the AMP calculation include: Distribution Service Inventory Product Stocking Fees Management Fees Allowances Patient Care Fees associated Programs with administrative (adherence services programs, patient agreements education initiatives) American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 13

Bona Fide Service Fees Four-Part Test Any fee paid by a manufacturer to any entity that: 1. Represents fair market value 2. Itemized services are actually performed on behalf of the manufacturer 3. Manufacturer would otherwise perform or contract for in the absence of the service agreement 4. 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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 14

RETAIL PHARMACY PROVISIONS American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 15

Retail Community Pharmacy (RCP) AMP Final Rule Definition of Retail Community Pharmacy • Retail Community • Exclusions: Pharmacies that Pharmacy: Pharmacy dispense prescriptions to that dispenses patients primarily through: medications to the – Mail generic public at retail – Specialty prices – Nursing home pharmacies • Includes: – Long-term care facilities – Independent – Hospital pharmacies – Chain – Clinics – Supermarket – Charitable or not-for-profit pharmacies – Mass merchandiser – Government pharmacies pharmacy American Society for Automation in Pharmacy – Pharmacy benefit managers 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 16

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 American Society for Automation in Pharmacy 2016 Midyear Conference June 16 –18 • Louisville, Ky. • www.asapnet.org • # ASAPMidyear 17