Title: Compliance Issues Relating to Intersection of Medicaid Rebate and 340B Programs
1Compliance Issues Relating to Intersection of
Medicaid Rebate and 340B Programs
- by
- Bill von Oehsen
- President and General Counsel
- Safety Net Hospitals for Pharmaceutical Access
- NAMFCU Directors Symposium
- March 24, 2010
- Washington, DC
2Overview
- 340B background
- Calculating ceiling price
- 340B litigation update
- Medicaid intersection duplicate discounts
- 340B-specific billing and payment options
- Medicaid billing compliance issues
- SNHPA Medicaid billing survey
- Whats next?
- Additional 340B resources and upcoming events
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
3340B Background
- 340B drug discount program requires
pharmaceutical manufacturers participating in the
Medicaid program to provide discounts on covered
outpatient drugs purchased by federally-funded
clinics and other safety net providers referred
to as covered entities - The rights and obligations of covered entities
and manufacturers are set forth in Section 340B
of the Public Health Service Act (PHSA) - Section 1927 of the Social Security Act (SSA)
requires manufacturers to enter into a
pharmaceutical pricing agreement (PPA) with the
Secretary of HHS as a condition of Medicaid
covering and paying for the companies outpatient
drugs - Under the PPA, a manufacturer agrees to provide
discounts and otherwise comply with 340B
requirements
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
4340B Background (contd)
- Program is administered by the Health Resources
and Services Administration (HRSA) through the
Office of Pharmacy Affairs (OPA) - Because several aspects of the 340B program
depend on interpretation and application of SSA
provisions (e.g. average manufacturer price, best
price, etc.), the Centers for Medicare Medicaid
Services (CMS) also plays a significant role in
340B program administration - Covered entities include high-Medicaid
disproportionate share hospitals owned by or
under contract with state or local government
community health centers ADAPs family planning
clinics AIDS, TB and STD clinics and other
grantees under the Public Health Service Act - Covered entities, manufacturers and other 340B
participants are listed in the OPA database
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
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9340B Background (contd)
- Discounts are calculated using the Medicaid
rebate formula but 340B pricing is better
because (1) sales do not involve retail
pharmacies thereby avoiding retail mark-ups and
(2) 340B providers regularly negotiate
sub-ceiling prices - Use of drugs limited to patients of 340B
covered entity - Medicaid billing procedures may need to be
adjusted to avoid manufacturers giving duplicate
discounts
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
10340B Background (contd)
Private Sector Pricing
Best Price 63
42
Source Data derived from Prices for Brand-Name
Drugs Under Selected Federal Programs,
Congressional Budget Office (June 2005)
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
11340B Background (contd)
82
Private Sector Pricing
71
67
Best Price 66
60
55
53
51
44
42
Source Data derived from Prices for Brand-Name
Drugs Under Selected Federal Programs,
Congressional Budget Office (June 2005)
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
12Calculating Ceiling Price
- Manufacturers Medicaid drug rebate agreements
require drug companies to calculate average
manufacturer price (AMP) and best price as part
of their obligation to pay rebates to Medicaid
for covered outpatient drugs - Medicaid rebate formula also requires
manufacturers to calculate the average total
rebate for a drug unit for each dosage and
strength, often referred to as the unit rebate
amount (URA) - 340B ceiling price AMP URA
- Accordingly, if a manufacturer miscalculates AMP,
best price or URA in a manner that results in the
underpayment of Medicaid rebates, the
miscalculation will lead to 340B providers being
overcharged for the same drug
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
13Calculating Ceiling Price (contd)
April 1st 30th
May 1st 15th
June 15th
July 1st
Days 1-30 Manufacturer submits AMP and BP data
from Jan-March to CMS
Days 31-45 CMS validates data and calculates the
unit rebate amount and the 340B-ceiling price.
Because in middle of 2nd quarter, price not in
effect until beginning of 3rd quarter, the next
full quarter.
Day 75 Manufacturer sends 340B price to
wholesaler /or entries
Day 90 340B price in effect for 3rd Quarter,
July-September
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
14Calculating Ceiling Price (contd)
- Special procedures for calculating 340B price for
new drugs - Manufacturers must estimate a new drugs 340B
ceiling price for the first three quarters that
the drug is on the market - After three quarters, manufacturers will have AMP
and best price data to calculate the ceiling
price - If the manufacturer overestimates the new drugs
price during the initial three quarter period, it
must issue a refund to the covered entity upon
request - Penny prices Under HRSA policy, if the 340B
formula results in a negative price (because the
inflation-based penalty exceeds AMP minus 15.1
or best price), then the manufacturers must
charge a penny for the drug
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
15340B Litigation Update
Manufacturer Name Drug Involved Period/Quarter Covered by Settlement Settlement Date Settlement Amount
Bayer Kogenate and other Factor/IVIG Products January 1993 August 31, 1999 Sept. 2000 14 Million200K for 340B
TAP Lupron January 1991 October 2001 Oct. 2001 875 Million
Pfizer Lipitor 1st Quarter - 4th Quarter 1999 Oct. 2002 49 Million 567K for 340B
Bayer and GSK Cipro, Adalat CC, Flonase and Paxil Cipro 1st Qtr 96 1st Qtr 01 Adalat CC 4th Qtr 97 1st Qtr 00 Flonase 3rd Qtr 97 3rd Qtr 00 Paxil 1st Qtr 01 April 2003 Bayer Total 257 Million At least 2.5 Million to 340B entities GSK Total 87.6 Million At least 9.4 Million to 340B entities
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
16340B Litigation Update (contd)
Manufacturer Name Drug Involved Period/Quarter Covered by Settlement Settlement Date Settlement Amount
AstraZeneca Zoladex January 1991 December 31, 2002 June 2003 355 Million
Schering-Plough Claritin January 1998 December 31, 2002 July 2004 Total 345 Million At least 10.6 Million to 340B entities
KING Pharmaceuticals Entire Drug Line January 1994 December 31, 2002 October 31, 2005 124 Million At least 7 Million to 340B entities
Schering-Plough Claritin Redi-Tabs and K-DUR Redi-Tabs 4th Qtr 98 2nd Qtr 02 K-DUR 2nd Qtr 96 2nd Qtr 01 August 29, 2006 255 Million civil settlement (180 Million criminal fines) At least 3.9 million to 340B entities
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
17340B Litigation Update (contd)
Manufacturer Name Drug Involved Period/Quarter Covered by Settlement Settlement Date Settlement Amount
Bristol-Myers Squibb Serzone 1st Qtr 97 4th Qtr 97 September 28, 2007 515 million 124,000 to 340B entities
Merck Zocor, Vioxx April 1998 March 2006 February 7, 2008 671 million 9 million to 340B entities
Cephalon Inc. Gabitril, Actiq, and Provigil January 2001 through at least 2006 October 2008 Total 425 Million At least 1.8 Million for 340B entities
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
18340B Litigation Update (contd)
Manufacturer Name Drug Involved Period/Quarter Covered by Settlement Settlement Date Settlement Amount
Eli Lilly Zyprexa September of 1999 - March of 2001 January 2009 Total 1.43 Billion More than 75,000 to 340B entities
Aventis Pharmaceuticals Azmacort, Nasacort, and Nasacort AQ October. 1, 1995 to September 30, 2000 May 28, 2009 95.5 million total 6.5 Million to 340B Entities
Mylan Pharmaceuticals Inc. and UDL Laboratories Inc Various 2000-2004 October 19, 2009 118 Million, 7.3 Million for 340B entities
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
19Medicaid Intersection Duplicate Discounts
- Covered entities are generally free to bill and
be reimbursed for 340B drugs without making any
adjustments to their billing procedures, unless
Medicaid is the payer - Covered entities sometimes must bill Medicaid at
reduced prices for 340B drugs - The sole reason that covered entities must adjust
their Medicaid billing practices is to protect
manufacturers from the duplicate discount problem
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
20Medicaid Intersection Duplicate Discounts
(contd)
Step 5 Manufacturer pays rebate on 340B drug
Step 1 Manufacturer sells drug at 340B discount
Manufacturer
Step 4 State submits rebate request
Step 3 Covered entity bills Medicaid for 340B
drug
State Medicaid Agency
Covered Entity
Medicaid patient
Step 2 340B drug is dispensed to Medicaid patient
STEPS 1 AND 5 DUPLICATE DISCOUNT
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
21Medicaid Intersection Duplicate Discounts
(contd)
- Manufacturers are protected from paying a
Medicaid rebate and giving a 340B discount on the
same drug. PHSA 340B(a)(5)(A) SSA 1927(a)(5)(C) - To avoid the duplicate discount problem, the
Secretary is directed to develop a mechanism that
340B providers and states can use to ensure
compliance alternatively covered entities should
not seek Medicaid reimbursement for 340B drugs
that are subject to Medicaid rebates. PHSA
340B(a)(5)(A) SSA 1927(a)(5)(C)
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
22340B-Specific Billing and Payment Options
- HRSA guidelines allow covered entities to comply
with the statute in different ways - 1. Bill Medicaid at acquisition cost plus the
state-allowable dispensing fee and the state
does not request a rebate. 58 Fed. Reg. 34,058
(6/23/93) - 2. Carve out Medicaid drugs from the 340B
program and allow the state to collect rebates.
65 Fed. Reg. 13,983 (3/15/00) - 3. Follow state guidelines for applicable
billing limits. 65 Fed. Reg. 13,983 (3/15/00)
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
23 340B-Specific Billing and Payment Options
Options Covered Entity Procedures State Medicaid Procedures
340B Pass-Through Bills state at actual acquisition cost (AAC) and submits pharmacys Medicaid billing number to HRSA for posting on website Excludes from rebate request files any claims paid under billing number posted on HRSA website
Medicaid Carve-Out Purchases its Medicaid outpatient drugs outside 340B program, bills Medicaid at regular non-340B rates and submits N/A for posting on HRSA website Includes covered entitys claims in rebate request files
Shared Savings Same as 340B pass-through option except covered entity and state enter into alternative billing and payment arrangement Pays enhanced dispensing fee or above AAC rates
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
24Medicaid Billing Compliance Issues
- Question Has a covered entity overbilled
Medicaid if it does not bill its state at actual
acquisition cost (AAC) for 340B drugs? - Answer Not necessarily
- Explanation There are numerous exceptions to
the AAC billing restriction, for example - when billing a managed care organization
- if the drug is not rebatable under Medicaid
- if the state has different billing and
reimbursement limits
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
25Medicaid Billing Compliance Issues (contd)
- There are some within the Medicaid program who
believe that the AAC billing restriction was
established to save money for Medicaid - Not true for several reasons
- It is clear in both 340B law and legislative
history that the sole purpose of AAC billing is
to compensate states for the loss of their
rebates that they would otherwise receive but for
the protection of manufacturers from duplicate
discounts - HRSAs 1993 guidance establishing the AAC billing
standard is an informal, non-binding policy - HRSA essentially withdrew the policy in March
2000 when it issued another guidance directing
covered entities to refer to their respective
Medicaid state agency drug reimbursement
guidelines for applicable billing limits
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
26Medicaid Billing Compliance Issues (contd)
- States allow deviation from AAC billing for
different reasons - State utilizes billing system that does not
accommodate AAC billing - AAC billing does not affect reimbursement
(prospective payment for Medicaid services) - Hospital systems do not accommodate AAC billing ,
so billing must be by hand and state recognizes
onerous administrative burden - Regardless of states perceived billing and
payment policy for 340B drugs, there may be no
clear guidance in statute, rules, or providers
manual or transmittal
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
27Medicaid Billing Compliance Issues (contd)
- While HRSA clarified in 2000 that AAC is not
required under federal law, CMS has never issued
parallel guidance - Considerable lack of clarity among Medicaid
programs - Many (e.g. Medi-Cal) believe that federal law
requires billing at AAC - Medicaid auditors in at least three states FL,
AK, NY have investigated 340B covered entities
for alleged overbilling - Federal whistle blower suit against family
planning clinics in Los Angeles sued for billing
at other than AAC
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
28SNHPA Medicaid Billing Survey
- 45 percent of the hospital respondents reported
that their state Medicaid agency allowed them to
deviate from AAC billing - 55 percent indicated that they were not allowed
to deviate - 10 states that reportedly allow non-AAC billing
include Arizona, Georgia, Maine, Maryland,
Minnesota, New Jersey, Ohio, Oregon, Texas and
West Virginia. - 5 states that require AAC billing include
Idaho, Iowa, Kansas, Rhode Island and South
Dakota. - Hospitals in 12 states gave conflicting answers
Arkansas, California, Florida, Kentucky,
Louisiana, Massachusetts, Michigan, Missouri, New
York, North Carolina, Pennsylvania and Washington
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
29Whats Next?
- 340B Coalition urging CMS and HRSA to work on a
uniform and coherent policy - 340B Coalition offering input on law, state
variations, history - 340B Coalition keeping pressure on CMS, HRSA to
produce - HHS Office of Inspector General reviewing
Medicaid billing by 340B covered entities - Time is of the essence
- June 2009 California legislature mandated AAC
billing, prohibited carve-out - Medi-Cal results in lose-lose. HRSA and CMS
have opportunity to educate states on shared
savings win-win
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
30Additional 340B Resources
- Safety Net Hospitals for Pharmaceutical Access
- www.snhpa.org
- Bill von Oehsen
- william.vonoehsen_at_snhpa.org or 202-466-6550
- Stuart Gordon
- stuart.gordon_at_snhpa.org or 202-552-5851
- Federal Drug Discount and Compliance Monitor
- www.drugdiscountmonitor.com
- SNHPA/340B Job Site
- www.rxjobsolutions.com
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
31Additional 340B Resources (contd)
- Office of Pharmacy Affairs
- www.hrsa.gov/opa
- 340B Prime Vendor Program
- www.340Bpvp.com
- Pharmacy Services Support Center
- 1-800-628-6297 or www.pssc.aphanet.org
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org
32Upcoming Events
- 14th Annual 340B Coalition Conference
- July 19-21, 2010
- Washington, DC
- www.340bconferences.org
Safety Net Hospitals for Pharmaceutical
Access Bill von Oehsen (202) 552-5850
william.vonoehsen_at_snhpa.org