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

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

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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.

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

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

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

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

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PHARMACEUTICAL MANUFACTURER IMPACT

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

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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

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

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

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

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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 Rico Virgin Islands Guam Northern Mariana Islands American Samoa

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

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

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

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

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

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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 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

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

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RETAIL PHARMACY PROVISIONS

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

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

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

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

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

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

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AMP FUL ANALYSIS

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

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Reimbursement Impact

  • How does the new FUL prices compare to the
  • ld 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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American Society for Automation in Pharmacy 2016 Midyear Conference June 16–18 • Louisville, Ky. • www.asapnet.org • #ASAPMidyear

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

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

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

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

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Stakeholder Impact

  • Fee for service
  • Managed Medicaid

State Medicaid Programs

  • Actual Acquisition Cost
  • “Professional” dispensing fee
  • Specialty pharmacies

Pharmacies

  • AMP-eligible sales

Territories

  • Network contracting
  • Beyond Medicaid?

Payers & PBMs

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

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Pharmacy Healthcare Solutions Inc. (PHSI)

(412)-635-4650

Tim Kosty, R.Ph, MBA President tkosty@phsirx.com

Questions?