Some state-level changes give an indication of what to prepare for
The proposed Average Manufacturer Price (AMP) rule for implementing the Medicaid Prescription Drug Provisions of the Patient Protection and Affordable Care Act (PPACA) was published by the Centers for Medicare and Medicaid Services (CMS) on January 27, 2012. Almost three years later, pharmaceutical manufacturers are still eagerly awaiting the release of the AMP Finale Rule.
The guidelines, which will have a wide-reaching financial impact on the life sciences industry, are expected to create serious administrative and operational challenges. They will need to be addressed quickly, and require significant changes across all aspects of the regulated pricing environment including policies, procedures, methodology, systems and data. In addition, the final rule may include new provisions or nuances to proposed provisions that will not be known until the final release.
While waiting for the final rules to be published, many states adopted new regulations, and revised and expanded reporting obligations issued by Texas. The new rules required manufacturers to submit pricing data for eligible pharmacies within the state, if readily available, as opposed to those located in the entire United States. In the event a manufacturer does not have a single price point for a product, they must report the range of prices (high and low) and then calculate the weighted average for each product and each period. This was accompanied by other price reporting expansions. Manufacturers should not include prices excluded from Medicaid Best Price, including prices to 340B-covered entities when determining price points.
But now with the final AMP rule’s impending release, it’s time to focus on the potential impacts. The goal of the rule is to lower costs for states and taxpayers. This process would include aligning reimbursement rates to better reflect the actual price the pharmacy pays for the drug, increasing the rebate amounts paid by drug manufacturers that participate in Medicaid, and providing rebates for drugs dispensed to individuals enrolled in a Medicaid managed care organization.
Keeping these goals in mind, manufacturers should focus on major items that would ultimately change the way they do business. Within the final rule, US territories would be included in the AMP calculations. Rebate agreements would include prescriptions paid by Medicaid Managed Care, as well as fee-for-service. This would require Medicaid Managed Care plans to capture utilization data and provide it to the states, and would only exempt prescriptions dispensed by a health maintenance organization. Over-the-counter drugs would need to be considered covered drugs if they have a National Drug Code (NDC).
The inclusion of sales to wholesalers would be prohibited, unless a manufacturer has documented evidence that the drugs sold to the wholesalers were distributed to retail community pharmacies. Specialty pharmacies and home healthcare distributors would be included within the definition of “retail community pharmacies.”
Manufacturers would be required to exclude AMP rebates paid to insurers, but not the underlying sales to the pharmacies. Best price would be redefined to include discount and rebates “associated” with the sale of a drug to a customer, rather than the price available to that customer. There would now be inclusion of direct sales of an authorized generic-labeled drug to a manufacturer or distributor selling under its own NDC in the AMP of the brand.
Going forward, performing gap and readiness assessments will help to identify the aspects of proposed or final regulations that apply to your business and the areas of your organization and infrastructure that will be impacted by the legislation. Preparing a plan outlining changes by business unit to each component of your government pricing infrastructure will aid in discovering the necessary resources needed to implement required changes and associated costs. It will also assist in creating an overall project timeline identifying key work streams, contingencies and project milestones. Along with this, it would be wise to assess implementation costs and potential changes to regulated reimbursement resulting from changes in regulation.
ABOUT THE AUTHOR
Ryan McKinney is director of Government Pricing at Alliance Life Sciences Consulting Group, Inc. (Somerset, NJ; www.alscg.com).