Comparison of Third-Quarter 2006 Average Sales Prices to Average Manufacturer

Prices: Impact on Medicare Reimbursement for First Quarter
2007 (OEI-03-07-00140)
http://www.oig.hhs.gov/oei/reports/oei-03-07-00140.pdf

Pursuant to section 1847A(d)(3) of the Social Security Act (the Act), OIG must notify the Secretary of the Department of Health and Human Services (the Secretary) if the average sales price (ASP) for a particular drug exceeds the drug's average manufacturer price (AMP) by a threshold of 5 percent. If that threshold is met, section 1847A(d)(3) of the Act grants the Secretary authority to disregard the ASP pricing methodology for that drug and substitute the payment amount for the drug code with the lesser of the widely available market price for the drug (if any) or 103 percent of the AMP.

This review is the third such comparison conducted by OIG, and we identified
39 of 326 Healthcare Common Procedure Coding System (HCPCS) codes with ASPs that differ from AMPs by at least 5 percent in the third quarter of 2006.
Of these 39 codes, 4 have met the threshold for price adjustments in all three of OIG's studies comparing ASPs and AMPs. An additional eight HCPCS codes were also previously eligible for price adjustments as a result of OIG's second report, which used data from the fourth quarter of 2005. If reimbursement amounts for all 39 codes had been based on 103 percent of AMP during the first quarter of 2007, we estimate that Medicare expenditures would have been reduced by $13 million. We recommend that CMS adjust Medicare reimbursement amounts for drugs that meet the 5-percent threshold specified in section 1847A(d)(3) of the Act.

CMS may want to specifically focus on those drugs that, according to the three OIG reports, have ASPs that consistently meet this threshold. In response to our recommendation, CMS expressed a desire to better understand fluctuating differences between ASPs and AMPs, with the intent of developing a process to adjust payment amounts based on the results of OIG's pricing comparisons. However, OIG remains unsure of what, if any, specific steps CMS will take to address OIG's recommendation. OIG continues to believe that the Medicare reimbursement amounts for the 39 codes identified in this report should be adjusted in accordance with section 1847A(d)(3) of the Act.

CIS is Proud to Announce the Launching of its NEW Web Site!!!

www.cis-partners.com


After months of development, Compliance Implementation Services (CIS) is proud to announce the launching of its brand new web site located at its current address: www.cis-partners.com. The site is the culmination of great deal of work and input from the team at CIS, and we hope you find the new look and format very pleasing and accommodating. With our company growing and expanding, it is necessary for us to utilize our web site to clearly communicate who we are and what we do.

We feel that the new look and feel captures the essence and vision of CIS: We specialize in establishing a Culture of Compliance that provides our clients with industry-specific, innovative compliance solutions.

Our emphasis is a Web site that is customer focused, with information that is well organized, up to date, and easy to find. Features on the new site include:
 Enhanced, easier navigation
 More expansive and in-depth subject matter areas
 Easy access to the Pharma Compliance Exchange (PCX)
 Our services on every page

We are committed to ensuring that our new web site functions correctly, answers your questions and addresses your needs. If you encounter any issues or there is something that you would like to see, please do not hesitate to contact me at stevenmoore@cis-partners.com.

Finally, as always, CIS thanks you for your support!

For Your Space.

4 Pharma Companies to Launch TV Station in Europe

FOUR of the world's major pharmaceutical companies are looking at launching a dedicated TV station to promote their medicines directly to patients.

The move, reported by Britain's The Guardian newspaper (May, 2007), comes as industry lobbyists across Europe push for an end to restrictions banning direct-to-consumer advertising of medicinal drugs.

Under the plan, the pharmaceutical industry would fund Pharma TV - a digital channel broadcasting detailed information about drug companies' products, as well as health-related news.

A pilot DVD, which the Guardian said it had viewed, showed a doctor talking about breast cancer and a woman patient, who informs viewers that "there are many new treatments available".

Viewers could use their remote controls to click on treatment options and read what manufacturers have to say about the latest branded breast cancer drugs, the newspaper reported.

Johnson & Johnson, Pfizer, Novartis and Procter & Gamble are behind the pilot, which is being offered to the European commission as a way to give patients more information, it said.

The commission is consulting on potential changes to the regulations that currently protect patients from direct advertising by drug companies.

Industry heavyweights have argued that such a change would increase competition.

And they've suggested that companies may relocate to the US, where they can participate in direct advertising and where profits have soared, the newspaper reported.

But consumer-focused groups have voiced strong objections.

The International Society of Drug Bulletins (ISDB) - consumer publications which analyse the benefits of drugs and draw comparisons between them - told The Guardian the industry was not a reliable source of trustworthy information.

The ISDB said that in both the US and New Zealand, where drug companies are permitted to advertise to the public, it had been shown to be detrimental to health.

"Pharmaceutical companies' messages are focused on relatively few top sellers, exaggerating effects and concealing risks, confusing patients and putting pressure on doctors to prescribe drugs they would not use otherwise," it warned.

"Lack of comparative information in advertising means people cannot choose among several options."

Johnson & Johnson spokesman Scott Ratzan said the channel would offer "on demand" information about drugs "to enable patients and citizens to make better decisions".

It would be self-regulating, with a board of medical, pharmaceutical and patient representatives to hear complaints.

We Work in a Good Industry

I've seen some recent clips and movies from Africa and I'm always so hurt to see the people, especially the children, having to live under those conditions. In fact, a movie I watched yesterday has inspired a post that will come later this week. However, a personal experience for me this weekend made me stop and think about our industry.

Being in the Compliance space and being the moderator of this blog, I'm often forced to read a lot of negative news and opinions when it comes to the Pharmaceutical and Health Care Industries. I've already commented on how I feel about SiCKO and Mr. Moore, but this personal experience gave me somewhat of an epiphany this past weekend.

I never get sick. Really. I haven't been sick since Valentine's Day 2003. That's how infrequent it is --- I remember the actual dates. And I can guarantee you I'll never forget this sickness. I came down with a fever on Tuesday that evolved over two days into a 108 degree sweat factory (okay, that's an exaggeration of course --- but I didn't have a thermometer). Scheduled to go down to Baltimore to see my beloved Yankees take on the Orioles and having the trip and stay fully paid for for me and my wife, I decided I would try to tough it out. BAD MOVE.

Let's just say the fever didn't disappear and the appearance of a 36 hour migrane accompanied it. I actually woke up Saturday morning --- took one step --- and fell! It was time to see someone (despite the industry I'm in --- I'm stubborn when it comes to seeing a doctor. I know, I know). The closest and easiest thing on a Saturday was the ER across the street from the hotel.

So my wife (God bless her for dealing with me!) and I walked over, signed in, and went through our first ER experience.

Let me say this: The people that worked at Mercy Health in Baltimore were Class A people. I saw everything from homeless people, to young children, to seniors and more being treated with class, dignity and the utmost attention to their wellfare. Obviously my condition was nothing compared to many others but you would have never known it from the way they treated me.

This is what made me think: I understand that our system is not perfect --- that there needs some work. I understand that not all human beings are ethical and that Compliance will always be a moving target. But we have a great system with great people in it. People who ask, "How are you feeling?" And then truly listen to your answer because they really, really care.

We are working within a wonderful industry that is helping so many people every day. It's nice to experience it personally from time to time.

July 28, 2007 is my newest sick date to remember. Despite the struggles of actually being sick, it will be nice to look back and smile.

For Your Space,

Steven.

CMS Administrator Nominee Weems at Confirmation Hearing Says He Will Improve Agency Oversight

CMS Administrator nominee Kerry Weems, at a Senate Finance Committee confirmation hearing on Wednesday, said if confirmed, he would improve oversight of the agency and especially of Medicare Advantage plans and Medicare prescription drug plan providers, The Hill reports (Young, The Hill, 7/26). Weems said, "My vision for Medicare and Medicaid is one in which beneficiaries are protected -- whether from unsafe nursing homes, unscrupulous insurance sales people, fraudulent equipment providers or bad medicine," adding, "If confirmed, I will intensify CMS oversight, and I expect you to hold me responsible for acting on abuses or inefficiencies discovered in the course of program oversight" (Carey, CQ HealthBeat, 7/25).

Sen. Ron Wyden (D-Ore.) said Weems should pay special attention to MA marketing practices that might be misleading. Wyden said, "What concerns me is seniors are getting ripped off. It is also giving a bad name to private-sector health care." Weems also said one of the first problems he would address if confirmed is a computer glitch that is causing erroneous Medicare premium deductions from some beneficiaries' Social Security checks (The Hill, 7/26). In addition, Weems said he would be responsive to requests from Congress for information about CMS programs, saying that Congress "will have the same information that I do" (CQ HealthBeat, 7/25).

Committee Chair Max Baucus (D-Mont.) raised concerns about political activities undertaken by the CMS administrator, citing recent testimony by former Surgeon General Richard Carmona that his work was stifled by political appointees. Baucus said that he has "longstanding concerns" about CMS staging political events. Weems said, "I have on many, many occasions resisted political pressure" (The Hill, 7/26). He added, "I would not let my office be used for that purpose" (CQ HealthBeat, 7/25).

Weems also answered questions that were "focused on narrow and technical issues," including reimbursement rates to hospitals and other health care providers (The Hill, 7/26).

Blog Topic of the Week: CMS's Final Rule Definition of "bona fide service fee"

The definition of bona fide service fee was provided in the Final Rule in response to the OIG report, Determining Average Manufacturer Prices for Prescription Drugs under the Deficit Reduction Act of 2005, which noted that, “confusion exists about the treatment of fees, such as service feeds negotiated between a manufacturer and pharmaceutical distributor.” §447.502 of the 42 CFR Part 447, Medicaid Program; Prescription Drugs; Final Rule, defines “bona fide service fees” as “…fee(s) paid by a manufacturer to an entity; that represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement; and that 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.” This is in line with what was defined in the proposed rule, but CMS added a twist in the final rule. While responding to comments submitted, CMS furthers this definition by routinely referring to bona fide service fees as being “…associated with the efficient distribution of drugs…” This terminology was new in the final rule and adds a new layer of complexity to interpretation of the bona fide service fee definition.

This new terminology seems to tighten the definition of bona fide service fee even more than what was initially proposed. Suddenly, manufacturers are thrown into a conundrum. How does this new, more limited, terminology impact their inclusion and exclusion of fees in the calculations?

Specialty Pharmacy Provider relationships provide good example of the potential impacts. The new definition falls short in its application across all existing manufacturer – distributor relationships. It seems CMS has given little thought to the growing and unique SPP distribution channel. Payment or fee agreements with SPPs are unique from those in the traditional distribution channel. SPPs provide services to manufacturers that have never before been provided through the distribution channel in such a way. Yet, can these services be, “associated with the efficient distribution of drugs?” I suppose that it is a question of how you interpret efficient distribution. Are the value-added clinical support and patient education services often provided by SPPs considered within the definition of “efficient distribution of drugs?”

We, as an industry, need to consider this and other implications of the limiting terminology CMS slipped into the final rule. And mind you, they slid it in there without ever allowing manufacturers to comment.

Revised Average Manufacturer Price/Federal Upper Limits Timeline

For Your Space.

Most Children in U.S. Hospitals Receive Medicine Off-Label

In my searches I came upon the below article from March 5th of this year. Thought I'd share!

For Your Space,

Steven.

PHILADELPHIA, March 5 /PRNewswire-USNewswire/ -- Nearly four out of five hospitalized children receive medications that have been tested and approved only for adults, according to a study of hundreds of thousands of patient records. This so-called "off-label" use of drugs was thought to be especially common in children, and the new research, the largest-ever U.S. pediatric study, confirms this.

"We measured the magnitude of off-label use of drugs in children," said study leader Samir S. Shah, M.D., a pediatrician specializing in infectious diseases at The Children's Hospital of Philadelphia. "Given the nature of the available data, we could not evaluate safety and effectiveness of those medications, although those are important concerns. However, only a small number of drugs have been formally tested in children."

Once the U.S. Food and Drug Administration (FDA) approves a drug for any indicated use, physicians may legally prescribe the drug for different conditions and for patients in other age groups. This study measured off-label use only as defined by age, not by indicated conditions.

"With nearly 80 percent of children receiving off-label medications during hospitalizations, we need to focus our attention on the process by which medications are approved for pediatrics," said senior author Anthony D. Slonim, M.D., Dr.P.H., Executive Director of the Center for Clinical Effectiveness at Children's National Medical Center. "It is imperative that we thoroughly review this process to ensure that children are being treated with the safest, most effective therapies."

Researchers in the Pediatric Health Information Systems Research Group, representing various medical centers, analyzed patient records from 31 major U.S. children's hospitals for the entire year of 2004. At least one drug was used off-label in 79 percent of the more than 355,000 children requiring hospitalization. Off-label use accounted for $270 million, some 40 percent, of the total dollars spent on children's medication in the study, which appears in the March issue of the Archives of Pediatrics and Adolescent Medicine.

Off-label prescribing is relatively common among adult patients as well, but it has long been recognized that a large proportion of drugs used in pediatrics have never been tested in children. Over the past decade, federal regulations providing financial incentives to pharmaceutical companies have helped increase the number of drugs tested and approved for children. However, said Dr. Shah, "there was little information on the extent of off-label use among children, the types of drugs used off-label, and the characteristics of hospitalized children receiving those drugs."

All previous studies of off-label drug use in hospitalized children were performed outside the United States, often limited to specific conditions or to patients in single medical centers. This current study focused on 90 drugs that were either administered frequently to children or were recommended for further pediatric study by the FDA.

The drugs most likely to be used off-label in children were those approved for use on the central nervous system or autonomic nervous system, in addition to nutrients and gastrointestinal agents. For instance, 28 percent of the patients in the database received morphine, although the FDA has not approved it for use in children. Anti-cancer drugs were the least likely to be used off-label, possibly because such drugs are more likely to have been tested in pediatric cancer patients, who frequently participate in clinical trials.

Children were more likely to receive drugs off-label if they underwent surgery, were older than 28 days and had more severe illnesses. "Critically ill children may have failed to respond to conventional therapies and may receive drugs off-label because they have no approved options," said Dr. Shah.

The authors point out that, while physicians may sometimes have no alternatives to treating children with off-label medications, the practice is not risk-free. "Using drugs that have been insufficiently studied in children has contributed to adverse outcomes, which have been documented in the medical literature," said Dr. Shah. "We hope that by better defining the magnitude of off-label drug use, our study may help encourage greater cooperation among industry, academia and government in carrying out studies to better protect children."

In addition to his position at The Children's Hospital of Philadelphia, Dr. Shah is a Senior Scholar at the Center for Clinical Epidemiology and Biostatistics at the University of Pennsylvania School of Medicine. Dr. Shah and Dr. Slonim's co-authors, from several other universities and medical centers, were Matthew Hall, Ph.D.; Denise M. Goodman, M.D., M.S.; Pamela Feuer, M.D.; Vidya Sharma, M.B.B.S., M.P.H.; Crayton Fargason, Jr., M.D.; Daniel Hyman, M.D., M.M.M.; Kathy Jenkins, M.D., M.P.H.; Marjorie L. White, M.D.; Fiona H. Levy, M.D.; James E. Levin, M.D., Ph.D.; and David Bertoch, M.H.A.

About The Children's Hospital of Philadelphia: The Children's Hospital of Philadelphia was founded in 1855 as the nation's first pediatric hospital. Through its long-standing commitment to providing exceptional patient care, training new generations of pediatric healthcare professionals and pioneering major research initiatives, Children's Hospital has fostered many discoveries that have benefited children worldwide. Its pediatric research program is among the largest in the country, ranking third in National Institutes of Health funding. In addition, its unique family-centered care and public service programs have brought the 430-bed hospital recognition as a leading advocate for children and adolescents. For more information, visit http://www.chop.edu/ .

About Children's National Medical Center: Children's National Medical Center, located in Washington, D.C., is a proven leader in the development of innovative new treatments for childhood illness and injury. Consistently ranked among the top pediatric hospitals in America, Children's has been serving the nation's children for more than 130 years. Children's Research Institute, the academic arm of Children's National Medical Center, encompasses the translational, clinical and community research efforts of the institution. For more information about Children's National Medical Center, visit http://www.dcchildrens.com/ .

The Art & Science of SOPs

Beyond the Who (Scope) and the What (Purpose)

Jennifer DiMarco, Procedural Compliance Specialist
jenniferdimarco@cis-partners.com

When thinking about the scope and the purpose of your SOP, these things sound self-explanatory: the scope explains who the SOP applies to and the purpose is what process is being described. However, there are a few nuances.

For the scope, it is evident that those included should know this process. However, small groups may be excluded in this section. Please use this option selectively and be sure when excluding groups the description is very specific. This helps avoid creating gaps or loopholes. This is also an opportunity to add different levels of the organization into the scope. There may come a time when a higher- or lower-level person within your structure may need to know the process to ensure there is proper coverage of this subject area. Ultimately this section defines the training needs for the procedure. As a training note, be sure that those included in the scope are properly trained on the process and training is documented in the individual’s file.

The purpose explains what is being described in the procedure (next month’sarticle). This sounds overly simplistic. The purpose should also demonstrate where this process dovetails with the processes before and after it. It tells an inspector and management that all the bases are covered and there are no gaps. Below are some recommended phrases for inclusion in the purpose to illustrate that “This procedure…

completes the [INSERT TOPIC HERE] process.
continues from [INSERT SOP TITLE].
initiates the [INSERT TOPIC HERE] process.

Again, although these suggestions may seem inconsequential on what you personally may be doing in the process, it provides a clearer picture of the process and who is impacted.

Friday Fun with the Final Rule

The CIS team has been buzzing the past couple of weeks with Final Rule talk --- emails back and forth to each other --- in our efforts to fully interpret the information. With the changes there are certainly issues for the GP space! We wanted to throw a few thought provoking questions out there to everyone and encourage your feedback!

Have a great weekend!

For Your Space.

Do you think that calculating quarterly AMP by taking the weighted average of monthly AMPs during the quarter will make life easier or more difficult?

Retail Pharmacy Class of Trade includes Ambulatory Care?

Authorized Generics data included in AMP and BP BUT ONLY if sold by owner of NDA (to avoid any anti-trust implications)?

Can CMS decide to "not adopt" the fourth example of nominal pricing--practically or legally-speaking? (The Final Rule does not include a provision enabling the Secretary to determine if certain prices offered to certain entities are nominal in nature, and yet, the DRA provides for an exception. Legally, I'm not sure if CMS can do this or
not.)

Off-Label and the First Amendment: A Slippery Slope to Avoid

Again I'll mention the most recent Jazz Pharmaceuticals case because it's really got the experts at CIS thinking hard about off-label promotion --- especially your CIS Moderator.

Many of the discussions we've had revolve around 'how to' do something off-label --- in other words, sure there's the FDA and their statements, but how can we work around that. The fact of the matter is, this is a tightrope that could snap at any time --- often without a net under it.

In 21 CFR, the FDA lays out the rules for off-label and there's very little room to work with. To them, off-label is a potentially dangerous activity to the general public and we must not forget that it can cost the government untold amounts of money in 'False Claims' Medicaid and Medicare rebates.

So companies, like Pfizer, look to the First Amendement --- which is seemingly the American way at times. Arnold Friede, senior counsel at Pfizer, said pharma firms should be able to distribute information on unapproved drug uses if the information is "truthful and not misleading," and published in a medical journal.

Friede said he believed drug companies have the right to disseminate to doctors peer-reviewed journal articles in which off-label uses of drugs are discussed. "In terms of truthful, not misleading speech, [the FDA] has a limited ability to regulate that," Friede said. He added that his position was akin to that of the Washington Legal Foundation, a right-leaning legal think-tank, which has been pushing the FDA to allow off-label promotion via journal articles for years.

These are great points and perhaps nice thoughts for the industry, but let's think about the real facts and real 'now'.

I cannot yell 'fire' in a crowded movie theater and claim the First Amendment. I also can't drop an f-bomb (many thanks to my younger bretheren for the slang) on NBC and not face the wrath of the FCC.

The bottom line is that the law is still the law and attempting to circumvent off-lable rules is a slippery slope that we would always advise avoiding. When and if the law ever changes to be more accommodating to this type of activiity, you'll know it because you read this blog!

Till then, the goal should be to establish the proper off-label policies and procedures that clearly state the company's intention to follow all laws with regard to off-label promotion.

Namely, don't do it.

For Your Space,

Steven.

Corporate Compliance Programs as Foundations for Growth

Jazz Pharmaceuticals' (Orphan Medical) $20M in fines got me thinking yesterday... That it might be a good time to bring up a recent Newsletter Article that I wrote. There's a part of me that wants to be a bit more pointed at this recent case --- but I think it's a continuing lesson in what a really strong compliance program truly is: A foundation that deters and detects misbehavior.

Enjoy and all thoughts are more than welcome! --- Steven.


A recent study by PriceWaterHouse Cooper found that the Pharmaceutical Drug industry can expect to double to $1.3 trillion by the year 2020. This means that there’s approximately $650 billion of incremental business up for grabs. Furthermore, the study found that the model of the ‘blockbuster’ drug is going to be replaced by an influx of smaller scale, more effective drugs. This begs the question: What kinds of companies are going to reap the benefits of these staggering figures?

There are several ways to answer this question, ranging from those with the most money or innovation to those with the strongest and most fiscally sound R&D structures and more. However, for the purposes of this article, I’d like to focus on those companies that will have the strongest and most sound Corporate Compliance Programs in place.

The strength of a corporation’s entire structure hales from the soundness of its foundation. If one column in a foundation topples, so too will the entire building. In our society, one immoral action can devastate even the most revered reputations. For our purposes, it only takes one single unethical action to damage an entire corporation or, at the very least, severely limit its ability to grow.

With a properly built ethical foundation within a corporation, two key things happen. First, the likelihood of an action occurring that goes against an established Corporate Compliance Program is less likely. Second, even when an action does occur, regulatory agencies are going to look at how the situation was handled. That is, how did a corporation’s Compliance Program address the situation? Those organizations that report violations and handle them properly are more likely to limit and avoid further damage.

Furthermore, regulations within this space constantly change as has been a consistent trend. $1.3 trillion is a lot of money, and you can be certain that the government is going to continue to heavily regulate this industry. An ageing American population is going to clamor for less expensive healthcare. This will put pressure on pharmaceutical companies’ profits. Pursuant to this, there will be increased pressure on Compliance Programs of all companies. Those with rigid foundations will stand up to the ethical challenges that will be presented via changes in the healthcare industry coming directly from the American voters. In fact, The Compliance Consortium tells us that the most successful organizations will establish and understand that “the expectation of change needs to be built from the start.”

The United States is far from the only market for Pharmaceutical manufacturers. This market will continue to become increasingly global, and corporations are going to need to adapt to different importation rules and local laws and regulations. The Compliance Program that prepares for and understands this will best be able to capitalize on these added dollars from new markets. With the proper foundation of ethics and values in place locally, the walls of culture will not be so formidable. That is, companies with a Compliance Program that is malleable and adaptable so as to function within a global market will find ways to increase their market share.

At the Seventh Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum, an OIG representative commented that any company that does not have a Compliance Program is acting ‘recklessly.’ This is not only true from a legal or regulatory standpoint, but also when looking at an organization’s ability to capitalize on the large incremental dollars that are up for grabs as our industry marches toward 2020. The proper Corporate Compliance Program will serve as your foundation for conducting a business that remains ethical, can readily adapt to regulatory and industry changes and enables you to function in an increasingly global industry.

For Your Space,

Steven.

Jazz Pharmaceuticals, Inc. Agrees to Pay $20 Million to Resolve Criminal and Civil Allegations in 'Off-Label' Marketing Investigation

Good Monday Morning everyone! Sorry in advance for the length of this post, but I feel this one is EXTREMELY important to the industry and compliance in general. Expect more from me on this topic --- but let's get the facts out there first!

For Your Space,

Steven.

BROOKLYN, N.Y., July 13, 2007 /PRNewswire-USNewswire/ -- Jazz Pharmaceuticals, Inc. (Jazz) has agreed to pay $20 million in penalties and victim compensation to resolve parallel criminal and civil investigations conducted by the United States Attorney's Office for the Eastern District of New York relating to the illegal marketing practices of its wholly-owned subsidiary Orphan Medical, Inc. (Orphan). As part of this resolution, Orphan plead guilty this morning to felony misbranding, in violation of the Food, Drug, and Cosmetic Act in connection with its illegal promotion of the prescription medication Xyrem, also known as gamma-hydroxybutyrate or "GHB," for unapproved uses. GHB is a powerful and fast-acting central nervous system depressant that has been subject to abuse as a recreational drug and is classified by the Department of Health and Human Services (HHS) as a "date rape" drug. The guilty plea proceeding was held before United States District Judge Eric N. Vitaliano.

The criminal misbranding scheme induced physicians throughout the country to write prescriptions for Xyrem that were not reimbursable by private health insurers or public insurance programs like Medicare and Medicaid, and caused millions of dollars of losses to these insurers. Pursuant to a non- prosecution agreement with the United States, Jazz has agreed to guarantee Orphan's obligation to pay criminal restitution to public and private insurers of approximately $12.2 million and a criminal fine of $5 million, and to provide ongoing cooperation to the government in connection with its investigation and prosecution of the underlying illegal marketing scheme. Pursuant to the civil settlement agreement, Jazz and Orphan have agreed to resolve the government's civil False Claims Act claims by paying $3.75 million, plus interest. A portion of the restitution ordered in the criminal case is also accounted for as a part of the civil settlement, resulting in a total payment by Jazz and Orphan of $20 million.

Jazz has also agreed to implement the terms of a corporate integrity agreement required by the Office of Inspector General for HHS, and has taken other proactive and remedial measures, including implementing a Code of Conduct prohibiting promotion for unapproved or "off-label" use, requiring compliance training for promotional speakers and sales representatives, and replacing the former Orphan regional sales managers who were responsible for overseeing the conduct of sales representatives in their respective territories.

The government's investigation was commenced after a former sales representative for Orphan filed a suit in the Eastern District of New York on behalf of the United States. Under the federal False Claims Act, a private individual is allowed to file a whistleblower suit to bring the United States information about wrongdoing. If the United States is successful in resolving or litigating the whistleblower's claims, the whistleblower may share in part of the recovery.

Federal law makes it a felony for a drug manufacturer to introduce a drug into interstate commerce for an unapproved or "off-label" medical use not sanctioned by the U.S. Food and Drug Administration (FDA). Xyrem was approved for only two medical uses -- the first use, approved in July 2002, was for the treatment of cataplexy, a condition characterized by weak or paralyzed muscles associated with the sleep disorder known as narcolepsy. The second use, approved in November 2005, was for the treatment of excessive daytime sleepiness (EDS) in narcolepsy patients. As set forth in the drug's "black box" warning label, the most serious warning placed in the labeling of a prescription medication, Xyrem is capable of inducing sleep very quickly and causing serious side effects, including difficulty breathing while asleep, confusion, abnormal thinking, depression, nausea, vomiting, and sleepwalking. Abuse of the drug can cause dependence and craving, as well as seizures, coma, and even death. The warning label also indicated that the drug's safety and efficacy were not established in children and that there was only limited experience with the drug in elderly patients.

In pleading guilty, Orphan admitted that, through sales representatives and at least one medical professional, it engaged in a scheme to expand the market for Xyrem by promoting the drug to physicians for "off-label" medical uses, including fatigue, insomnia, chronic pain, EDS (before EDS became an approved indication), weight loss, depression, bipolar disorders, and movement disorders such as Parkinson's Disease. Specifically, Orphan sales representatives in the Eastern District of New York and across the United States, with the knowledge and approval of Orphan sales managers throughout the country, frequently made sales calls on physicians who did not specialize in narcolepsy in order to promote Xyrem for the treatment of conditions not related to an approved use, and also distributed written materials concerning "off-label" uses that did not adhere to FDA guidance designed to prevent their improper use by drug manufacturers in promoting their products.

Orphan also admitted that it relied on a psychiatrist to give talks around the country, including Great Neck, New York, promoting Xyrem to physicians for "off-label" uses and paid him tens of thousands of dollars for such promotional speaking engagements. With the approval of Orphan sales personnel, the psychiatrist allegedly made misleading statements about Xyrem in the course of promoting the drug for "off-label" use, including minimizing the dangers of a Xyrem overdose, suggesting that the drug was customary and safe to use on children and the elderly, and suggesting that the drug's active ingredient, "GHB," was not really a "date rape" drug. The psychiatrist, again with the approval of Orphan sales personnel, also advised physicians how to conceal "off-label" Xyrem prescriptions in order to ensure reimbursement from insurers for unapproved uses that, the government alleges, were not medically accepted and generally not reimbursed. The prescriptions were filled by a central pharmacy, and the medication was then shipped to patients in the Eastern District of New York and throughout the United States.

"The illegal marketing of prescription medications for unauthorized medical uses is a serious crime that poses significant public health risks," stated United States Attorney Roslynn R. Mauskopf. "Drug manufacturers have a legal obligation to market their products only for medical uses that have been approved by the Food and Drug Administration as safe and effective. This case is especially troubling not only because it involves a drug containing GHB, a dangerous substance recognized by HHS as having a long history of abuse, but also because Orphan teamed up with a medical professional and employed deceptive marketing tactics in order to advance its illicit marketing scheme." U.S. Attorney Mauskopf added that the investigation is continuing.

"It is vital to public health and safety that pharmaceutical companies are deterred from improperly marketing their drugs to doctors and patients to treat illnesses that these drugs are not approved to treat," said Assistant Attorney General Peter D. Keisler for the Tax Division. "Today's settlement sends a clear message to the pharmaceutical industry that the Justice Department will not tolerate these deceptive and illegal marketing practices."

"The illegal conduct charged today put profits ahead of public health," stated U.S. Food and Drug Administration, Office of Criminal Investigations, Special Agent-in-Charge Kim A. Rice. "The FDA will continue to seek the type of criminal resolutions and stiff sanctions involved in this agreement when pharmaceutical companies seriously undermine the drug approval process by dangerously promoting drugs for unapproved uses."

"Tainted, counterfeit, or illicit drugs are not the only ones that pose substantial health risks for consumers," stated FBI Assistant Director-in- Charge, New York Field Office, Mark J. Mershon. "Pharmaceuticals manufactured under strict standards can still injure or kill if used for unapproved purposes. Here, the risk was not from willful abuse by users; it was from a concerted campaign by the manufacturer to push a drug for off-label uses. This posed a serious health risk and constitutes a serious crime."

"The HHS Office of Inspector General, Office of Investigations, assesses all aspects of fraud against the Medicaid and Medicare programs when committing its investigative resources," said Gary Heuer, Special Agent-in- Charge of the New York Regional Office. "This off-label promotion of Xyrem resulted in hundreds of thousands of dollars of illicit Medicaid payments and also adversely impacted Medicare Part D. Orphan Medical's very aggressive and creatively designed marketing scheme was the culprit. Given the unique nature of this case, the multi-agency cooperative effort significantly contributed to the successful investigative and prosecutorial outcome."

As a result of Jazz's acceptance of responsibility, its cooperation in the government's investigation, and its willingness to make restitution and take significant remedial action, Jazz will not be prosecuted for the unlawful practices of Orphan employees, provided Jazz fully complies with the terms of its agreement with the government. However, if Jazz violates any of the terms of the non-prosecution agreement, or commits any other crimes, it is subject to prosecution, including prosecution for the conduct described in the criminal charges filed by the government.

The criminal and civil cases are being prosecuted by Assistant United States Attorneys Geoffrey Kaiser and Paul Kaufman, with audit assistance by Emily Rosenthal. The Corporate Integrity Agreement was negotiated by Senior Counsel Mary Riordan in the Office of Counsel to the Inspector General for the Department of Health and Human Services.

Bill on drug safety, FDA funding clears House

By Lisa Richwine

WASHINGTON (Reuters) - The U.S. House of Representatives voted on Wednesday to give the Food and Drug Administration more power over drugmakers as part of an effort to better protect the public from dangerous medicines.

The measure must be merged with a competing version that passed the Senate in May before it can go to President George W. Bush to sign into law.

The FDA could require post-approval studies of new prescription drugs or order additional warnings under the legislation, which passed the House in a 403-16 vote.

Companies that fail to follow FDA directives could face fines as high as $50 million. Running a false or misleading advertisement to consumers could draw fines of $250,000.

"This legislation strikes the proper balance between new drug safety regulations and measures, and ensuring consumers have the access to innovative prescription pharmaceuticals without undue delay," said Rep. John Dingell, a Michigan Democrat and chairman of the House Energy and Commerce Committee.

The new authority for the FDA was among provisions meant to improve the government's drug safety oversight, increase transparency of company clinical trials and raise the fees that manufacturers pay to help speed reviews of medicines and medical devices.

Lawmakers crafted the legislation in response to complaints about the FDA's handling of serious side effects seen after drugs hit the market. The agency was criticized as slow to act on signs of problems with Merck & Co. Inc.'s arthritis pill Vioxx, which the company withdrew in 2004, and other medicines.

Pharmaceutical companies and the FDA had proposed $393 million in fees for each of the next five years to speed agency reviews and help fund safety monitoring after approval.

Under the House bill, companies would pay an extra $225 million over five years specifically for post-approval checks.

The Senate bill differs from the House plan in part by capping fines at $2 million and setting lower drugmaker fees.

Lawmakers are expected to work out differences between the House and Senate versions before the current fees expire in September.

The drug industry has generally supported the bill. Pharmaceutical companies strongly favor extending the fees they pay the FDA because they help cut product review times.

HRSA Publishes Proposed Notice on Children's Hospitals

July 10, 2007

BREAKING NEWS ALERT

HRSA Publishes Proposed Notice on Children's Hospitals

Children's hospitals are a step closer to participation in the 340B program after HRSA published proposed guidelines on July 9th that provide guidance on which facilities will be eligible for the program and the enrollment process for these facilities. The Deficit Reduction Act of 2005 added free-standing children's hospitals to the 340B program but the hospitals have not been able to enroll due to the government's decision to require the publication of further guidance. Advocates for children's hospitals were hopeful that HRSA would issue an “Interim Final Rule” that would allow for immediate participation in the program, however, HRSA instead has chosen to publish a proposed notice requesting comments from the public. The comment period will last until September 7, 2007 and the hospitals will not be able to enroll in the program until a final notice is published. More details about the proposed notice will be included in the upcoming issue of the Monitor.

To see the Federal Register notice, go to:
http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pd
f/E7-13239.pdf

Final Deficit Reduction Act Guidelines Published

Final regulations implementing the Deficit Reduction Act of 2005 (the DRA) are
scheduled to be published in the Federal Register on July 17, but advance copies are
already available and have been obtained by The Monitor. Despite the many comments
on and criticisms of the proposed version of these rules that were submitted to CMS by 340B entities and their advocates, there have been few changes in connection with
provisions directly pertinent to the 340B program. The only 340B-relevant changes
appear to be in some of the provisions defining what prices and price adjustments are
included or excluded from Average Manufacturer Price (AMP). 340B ceiling prices are
calculated in part based on AMP, so changes to AMP will raise or lower 340B prices.
Apart from these changes, the final DRA rule is very similar to the proposed rule in areas relevant to the 340B program.

For example, whereas some 340B provider advocacy organizations recommended that
CMS extend nominal price protection to new categories of safety net providers besides
340B covered entities and a few other groups identified in the proposed regulation, CMS declined to expand the list that it originally proposed. CMS also rejected a
recommendation to make children’s hospitals eligible for nominal pricing. Another
recommendation – that AMP data be reported by manufacturers and published by the
government using 11-digit NDC numbers rather than 9-digit numbers – was also
unheeded by CMS. Because 340B prices are generally based on 11-digit NDCs, many in
the 340B community believe that AMP data needs to be published in the same format in
order for the data to be useful in verifying the accuracy of 340B prices.
Finally, CMS does not appear to have changed its policy regarding a provision requiring state Medicaid agencies to collect NDC information on “physician-administered drugs” and to request manufacturer rebates on such drugs. CMS also did not make any changes to the NDC reporting requirements applicable to hospitals and clinics to alleviate the administrative burdens associated with complying with those requirements. More details about the DRA regulations will appear in the upcoming issue of the Monitor.

To see the regulations, go to:

http://www.cms.hhs.gov/MedicaidGenInfo/Downloads/CMS2238FC.pdf.
The HRSA proposed guidelines and CMS's final DRA regulations will be addressed at
the upcoming 340B Coalition Annual Conference in Washington, DC from July 23-25.
If you have not registered yet, pre-registration ends on Thursday, July 12th. After that date, you will only be able to register on-site and prices go up $100. Special discounts are available for Monitor subscribers. More details about the conference can be found at www.340Bcoalition.org.

Compliance by Sword

So I'm left with a bit of a conundrum on this muggy, muggy morning in the Northeastern USA. Yesterday, the Chinese executed --- I repeat, EXECUTED --- their former drug chief for corruption and taking bribes in the neighborhood of $6.5 million yaun --- which my Chinese friends tell me is about $850,000 US. Upon reading this, I thought about some of the money involved in some of the recent cases in the United States in multiple industries and businesses and wondered how many American executives would now be pushing up daisies instead of serving jail time or sipping a martini in an exotic location. In other words, $850,000 is much like throwing a deck chair of the Titanic in the United States business world.

But I digress --- back to my conundrum. I wondered if this sort of policy would be a good thing for Compliance Implementation Services and our team. In other words: Would the threat of death shape everyone up in light speed without the need for help? Would everyone suddenly and unequivocally get compliance? OR --- would our services be so in need that I'd say goodbye to my wife forever as I become billable for the next 10 years of my life with no sleep?

I think the answer is a mixture of both --- that our needs would be in extreme demand in the short term --- but that a few minor things called "EXECUTIONS" would curtail our long term business plans.

Either way, and this is not a statement on the death penalty by any means, I do hope that China gets their act together on food and drug safety before any more people (in China and abroad) get hurt or worse by the greedy acts of those who are looking out for only themselves.

For Your Space,

Steven.

Sticking with the Final Rule

Good Morning Everyone,

Due to the traffic we had yesterday, I am going to leave up yesterday's post from our VP of Regulatory, Chris Cobourn ---- complete with comments from Adam J. Fein --- whom this blog has great respect for. You can also check out Adam's blog at www.drugchannels.net.

Whether you've visited the Pharma Compliance Blog before or you're brand new to the site, be sure to scroll down the left hand side to check out Pharma Compliance Infohub and Pharma in the News (updated daily). You'll be sure to find some great articles on the Final Rule. The team here at Compliance Implementation Services is reading, re-reading and researching --- so expect more in the coming days.

During the interim, never hesitate to send in your questions to the experts at CIS via 'POST YOUR THOUGHTS HERE' at the bottom of each post, or by emailing me at stevenmoore@cis-partners.com.

Thanks again to all those who have visited and continue to keep the Pharma Compliance Blog:

Your Space. For Your Space.

Kind Regards,

Steven

CMS's Final Rule: CIS's Chris Cobourn's Analysis

The Final Rule was published Friday as CMS-2238-FC, a 587 page document, and will soon be published in the Federal Register. The full file is available on the CMS website at http://www.cms.hhs.gov/MedicaidGenInfo/Downloads/CMS2238FC.pdf, or on the Pharma Compliance Exchange (PCX) website (www.cis-pcx.com).

Also of interest, CMS published several related documents (also available on their website): a Fact Sheet summary (http://www.cms.hhs.gov/apps/media/fact_sheets.asp), a press release, (http://www.cms.hhs.gov/apps/media/press_releases.asp. NEW MEDICAID DRUG PAYMENT RULE), and a letter to State Medicaid Directors, (http://www.cms.hhs.gov/smdl/downloads/SMD070607.pdf).

One other relevant document is the recent June 26 Medicaid Drug Rebate Bulletin, Release 78, as it speaks to Manufacturer assumptions for Monthly AMP methodology and guidance on AMP and BP recalculations.

Now, let’s talk about the Final Rule. We will all be doing a good deal of reading over the next few weeks, and I am sure that the details of the Final Rule will be the hot topic of upcoming conferences. First and foremost, let's take a look at how to start reviewing the long document and some of the key highlights.

The document has a lot of good background and information, but what you care most about, and where I suggest you start, is Pages 563 through 580. These cover:
• 447.504 (p 563) – Determination of AMP; this section breaks down the AMP rules
• 447.505 (p 570) – Determination of best price (yes, CMS changed some of the rules on inclusion and exclusion from BP)
• 447.506 (p 575) – Authorized Generic Drugs (and inclusion/exclusion from AMP and BP)
• 447.508 (p 576) – Nominal Pricing
• 447.510 (p 576) - Requirements for Manufactures (including section (d), Monthly AMP)

Other interesting sections to pay close attention to include:

Section IV, Provisions of the Final Regulations, page 480 – Clarification and definitions relevant to AMP and BP.

Section III, Analysis of and Response to Public Comment, pages 335 through 403, which contains very important information on AMP and BP calculation and reporting, and can almost be read as an FAQ. I especially like the topic on whether Manufacturers need to obtain CMS approval of methodology changes (which also relates to release 78). Of Note:
• You do not need to obtain approval for changes related to the Final Rule.
• In retrospective restatements, submit written requests to CMS and wait for response before submitting revised AMPs.
• For prospective restatements, submit written requests to CMS, but you are not required to wait for CMS approval.

Some Key Points of The Final Rule
I would also like to highlight a few key points in the Final Rule that I think manufacturers will be very interested in.
AMP
• AMP defined and Retail Pharmacy Class of Trade (COT) defined (p 563). As expected, and the Retail Pharmacy COT is defined to be entities that sell to the General Public
• Section (g) (p 564), Summary of AMP inclusions. The inclusions are numbered; please see number (15), the Sales of Drugs reimbursed by third party payors. Note that these are the “sales,” and that later in the Exclusion Section (h) numbers (22) and (23), (p 569) that associated rebates are excluded) This is very important, as the Proposed Rule has discussed the possible inclusion of PBM rebates, and possibly other rebates such as SPAPs. So we finally have some clarification of one of the key AMP issues that has troubled us for years.
• Notice number (3) on page 570, manufacturers must adjust AMP for a rebate period if cumulative discounts and subsequently adjust the price actually realized.
BP
• BP Inclusions, section (c) (p 571) – An important listing of included prices (notice the language “price concessions that adjust prices either directly or indirectly…”)
• BP Exclusions, section (b) (p 572) – This section lists the exclusions, please note what I consider one of the most important changes, number (13), PBM Rebates (PBM rebates are exempt, except for PBM Mail Order rebates)
Base AMP
• The options and requirements for a restatement of Base AMP based upon the new methodology is defined in section (2) on page 578. You may choose to recalculate base date AMP, and you may do it on a product by product basis, but (and this is critical) you MUST USE ACTUAL AND VERIFIABLE PRICING RECORDS. This will be difficult for many manufacturers who may not have original source data readily available.
Monthly AMP
• Monthly AMP reporting is discussed in section (d) of 447.510, starting on page 578. Two points of note: The Monthly AMP must use the same “methodology” as Quarterly AMP, and you must use a 12-Month rolling average to estimate your lagged price concessions.” I expected this to happen, and am not surprised. If you have reported ASP then you understand the mechanics of the 12-month averaging. Your lagged price concessions should probably include Chargebacks and Rebates, and the 12 months should include the current month.
Certification
• As expected, there is now a Certification requirement for Medicaid Price Reports. This is defined in section (e), on page 579. This increases the importance of reconciling your data to your financial records, and maintaining thorough support binders for your Monthly and Quarterly reports.

The effective date of the Final Rule is October of 2007. This means that October will be the first month to use your new AMP, and Q4 the first quarter. As you maintain your required documentation of methodology assumptions, also keep in mind that you have to keep track of at least 3 methodologies (remember, the 10 year rule!)
1) Historical Methodology – Up to January 1, 2007
2) DRA Methodology – January 1, 2007 through September 2007
3) Final Rule Methodology – As of October 2007

With this blog entry, I did not want to give a full breakdown of every change, so please read the Final Rule thoroughly, and feel free to contact us directly for any assistance (610-565-8007). After an initial review, I wanted to provide a viewpoint in how to approach the document, and to highlight a few critical things. Remember, these are my opinions, and are not intended to be legal advice (we always have to say that!)

Good luck!

Chris (chriscobourn@cis-partners.com)

The Final Rule from CMS. More to come Monday AM.

http://www.cms.hhs.gov/MedicaidGenInfo/Downloads/CMS2238FC.pdf.

A new method of setting limits on what the federal government will reimburse state Medicaid agencies for prescription drug payments — aimed at reigning in inflated drug product payments — was announced today in a final rule put on display at the Federal Register.

“This new payment formula allows Medicaid to pay more appropriately for prescription drugs dispensed to Medicaid beneficiaries,” said Leslie V. Norwalk, Esq., acting administrator of the Centers for Medicare & Medicaid Services (CMS).

The new regulation is expected to save states and the federal government $8.4 billion over the next five years. Even with this change, the Medicaid program is still expected to spend $140 billion for drugs over the same time period, fiscal years 2007 through 2011.

The change, part of the Deficit Reduction Act (DRA) of 2005, is in part a reaction to a series of reports issued in 2004 by both the Government Accountability Office (GAO) and the HHS Office of the Inspector General (OIG) showing that Medicaid payments to pharmacies for generic drugs were much higher than what pharmacies were actually paying for those drugs.

Both the GAO and the OIG found that states were overpaying for drugs because they were using commercial drug pricing guides as the basis for setting state reimbursement levels. The investigation of these drug “compendia” documented that these prices were artificially inflated, especially for generic drugs. Pharmacies, the reports showed, made the most profit on those generic drugs with the highest mark-up, creating an incentive to dispense those drugs.

Earlier efforts to stem growth in Medicaid drug costs were unsuccessful. Prior to the DRA, Federal Upper Limits (FULs), which capped federal matching payments to states for generic drugs, were based on artificially inflated prices reported in the commercial pricing compendia. For example, the OIG found that for 23 of the 25 drugs under review, FULs set under the previous calculation method were more than double the average pharmacy acquisition costs.

“These prices (FULs) were so high that most states set their own upper limits on allowable drug costs that were generally far less than the federal FUL,” Norwalk said.

Prior to the DRA, many drug companies reported prices to the compendia that bore little relationship to the drug’s cost. Actual drug costs were considered proprietary information that was kept secret. CMS was prohibited by law from disclosing Average Manufacturers Price (AMP).

The DRA also makes an important change to health care purchasing by introducing transparency in Medicaid prescription drug pricing and requiring that for the first time, AMPs be publicly reported on the Internet. States will now be able to use actual AMP information as the basis for setting drug reimbursement. Drug makers will also have to report AMPs monthly, as well as quarterly, as was the practice prior to DRA. More frequent reporting will allow states to make timely adjustments to reimbursement rates.

The rule will also require states to collect information from physicians on drugs they administer in their offices. According to federal law, manufacturers are required to give the state a rebate for all covered outpatient drugs given to Medicaid patients. States have had some trouble collecting the information but now must require it from doctors who must use the proper billing or National Drug Code (NDC) information. Without the proper NDC, a state cannot bill the drug maker for that rebate.

In response to comments on the final rule CMS also:

· Revised the definition of retail pharmacy class of trade and wholesaler to better track the provisions of the DRA. For example, it clarified that sales to entities such as pharmacy benefit managers and pharmacies serving nursing homes and assisted living facilities are excluded from the determination of AMP.

· Added manufacturer coupons redeemed by an agent, pharmacy or entity acting on behalf of the manufacturer to the list of prices excluded from the determination of AMP.

Added that manufacturer vouchers and manufacturer-sponsored drug discount card programs are excluded from the determination of AMP.

Added that sales to home infusion and specialty pharmacies are included in AMP.

Adopted the final average sales price reporting rule’s (71 FR 69668, December 1, 2006) interpretation of the definition of bona fide service fees and how manufacturers may apply the definition for the purposes of AMP and best price.

“This new calculation method will allow Medicaid to pay more accurately for the medicines enrollees need,” Norwalk said. “Furthermore, it will yield a payment level that will be sufficient to assure widespread availability of drugs for Medicaid patients.” The total pharmacy revenue for prescription drugs will decline by less than one percent, according to industry data, she added.

Recognizing that the new payment calculations could result in some reduction in drug-related payments to pharmacies, CMS is actively encouraging states to evaluate whether other fees they pay pharmacies are adequate to compensate them for their costs in dispensing the prescription.

The final rule provides for a new definition of “dispensing fees” which cover a pharmacy’s costs of dispensing the drug including overhead. In order to adjust dispensing fees, state Medicaid programs must submit a state plan amendment for federal approval. Dispensing fees receive a full federal match and are not limited by the new FULs.

Although being published as a final rule, CMS does solicit additional comments on two key areas: (1) the so-called “outlier policy” that eliminates from AMP calculations any drug in an FUL that is priced significantly lower than other drugs in that category and (2) definition of AMP. This will allow CMS the benefit of further public comment as actual AMP numbers become available and the FULs are developed.

Interested parties will have 180 days to submit comments. CMS will respond to those comments and publish a final rule on those provisions at a later date.

Other sections of the rule will take effect on October 1, 2007. The rule can be viewed at http://www.cms.hhs.gov/MedicaidGenInfo/Downloads/CMS2238FC.pdf.

No Final Rule Yet. What are your thoughts on Michael Moore's "Sicko?"

CIS continues to monitor the Federal Register for publication of the Final Rule from CMS. You can be sure to find expert insight as soon as possible from the team here.

In the mean time, here's a fun topic. What are your thoughts on Michael Moore's Sicko?

The following was an excerpt/quote taken from a Forbes.com article which alluded to a blog entry entitled "Does negative press make you Sicko?"

"Moore attacks health insurers, health providers and pharmaceutical companies by connecting them to isolated and emotional stories of the system at its worst," read Turner's entry in Google's (nasdaq: GOOG - news - people ) Health Advertising blog, a new project launched last month and aimed at health care companies. "Moore’s film portrays the industry as money and marketing driven, and fails to show health care’s interest in patient well-being and care."

We'd love to hear your opinions --- as anonymously as you'd like.

So we're clear, this is not the opinion of CIS, but me --- Steve --- the CIS Moderator.

Michael Moore certainly knows how to make a film and make an impression on his audience. Whether that impression is positive or negative is an altogether different story. In this day and age of media's grasp on our society, Moore has mastered the art of using the few to demonstrate a seemingly mass opinion that exists in society. In reality, he's everything that makes the media successful...and everything that's wrong with the media in one lump sum.

Moore uses the movie Sicko to demonstrate, in his infinite wisdom, that the healthcare industry is a mess and that we are at the mercy of a system that favors the most fortunate and cares little about those in dire straits. My problem with his movie is that he only takes a few select cases to make a sweeping generalization. It's propaganda and, quite honestly, rather obvious in its one-sidedness. He takes a few extreme cases to illustrate an entire industry. Are there things that might need fixing or changing? Sure. But to compare the US Healthcare system to Cuba's via ONE ISOLATED patient is really, really pushing the limits.

What do you all thinkn in the Pharma Compliance Blogosphere?

Authorized Generics: A New Challenge - By Clarissa Crain, CIS Compliance Specialist

I hope everyone had a great 4th of July holiday!

This post is a re-print of an article written by CIS Compliance Specialist Clarissa Crain for the Pharma Compliance Exchange (www.cis-pcx.com) Newsletter. I happened to like it enough to expose it to a much larger audience. - Steve.

"Politics, war, and now Government Programs make for strange bedfellows. It seems that with time the GP area is becoming more and more illustrious in its relations with Commercial Operations. While data reliance has always existed, in recent years the reliance and the stakes have increased significantly.

In the first article of this series we addressed some of the more traditional and ‘mundane’ relationships that exist with Commercial Operations. Sales, returns, and credits/debits have always been a necessary provision, yet many manufacturers still lack sufficient controls to ensure that data is accurate and complete. Anomalies in distribution pose the biggest struggle, and thus pose the biggest risk.

The second article of the series followed suit with the first and addressed the traditional Class of Trade (COT) designation dependency. While COT designation by Customer Service Representatives and Chargeback Processors has long been in place, this is an area that many companies struggle with. The individuals responsible for assigning COT are often not properly trained to understand the importance of COT designation or the impact that the designations have on government pricing.

While both areas pose unique relationship requirements more recent developments like Inventory Management Agreements (IMAs) and Authorized Generics take the relationship to new levels. With IMAs Government Programs staff should be involved in ensuring that agreements are drawn up in such a way that they support the new definition of “bona fide fee for service.” While most manufacturers have successfully made the necessary adjustments to agreements to reflect true fee for service (FFS) relations, it is important the Government Programs Staff remain involved in future revisions or addendums to agreements. More recently “upstream” data provided to manufacturers as part of FFS agreements have become an area of interest for GP teams. Auditors now look for GP groups to be using this data, when available, to validate transactions affecting GP calculations. This is seen most clearly in the new level of due diligence being seen around the assessment of chargeback information.

Finally, and most timely, are the new complexities of authorized generics. With the Deficit Reduction Act of 2005 (DRA), the definitions of AMP and BP were revised to include authorized generics. With this revision a whole new world of relations has opened. Branded manufacturers are now stepping into uncharted waters as they attempt to piece together the necessary information to complete mandatory calculations. Lack of knowledge and ability to personally certify data integrity, branded manufacturers are working to determine the best way to ensure the accuracy of data they receive from authorized generic partners. As branded manufacturers feel their way through options, and authorized generic manufacturers get taken along for the ride, many across the industry are struggling with this issue today.

While authorized generics remain on the front of the mind when thoughts take you to the relationship between GP and Commercial Operations, do not forget the other areas in which the two departments cross. Much as in personal life, whether working across departments, or across companies, a relationship built on understanding and openness will be most successful. Fostering a strong relationship between GP and Commercial Operations will yield a greater ability to achieve ‘total’ compliance."

Blog Topic of the Week: A GP Community Member with a Great AMP & Class of Trade Question

As the Pharma Compliance Blog Stays on Final Rule Watch, we wanted to publish a great question from a GP community member:

"The CMS proposed AMP Rule in §447.504 Determination of AMP (g) Sales, rebates, discounts, or other price concessions included in AMP states: Except with respect to those sales identified in paragraph (h) of this section, AMP for covered outpatient drugs shall include-- (2) Sales to other manufacturers who act as wholesalers and do not repackage / relabel under the purchaser’s NDC, including private labeling agreements….

This language specifically includes in AMP sales to repackers that do not repackage / relabel under their own NDC. Our question is, the big 3 wholesalers have repackaging operations that buy products in 500 and 1000 count bottles and repackage them into smaller sizes that equate to package sizes manufacturers already provide (i.e. 100 count bottles). We have found that these operations use the original manufacturers NDC number on the package sizes that equate package sizes the original manufacturer also produces. Since we do not know exactly what the repacker is doing, but do know that at minimum some of the product bears the original manufacturers NDC number, and have found that they are processing chargebacks and returns for their repacks under the original manufacturers NDC numbers, should the repackers purchases be included in the AMP calculation? We feel the answer is yes as the repacker does not meet the criteria of using their own NDC number. Without evidence that they use their own NDC numbers, and the only evidence is they use the manufacturers NDC numbers, the sales appear to be to the retail pharmacy class of trade unless a chargeback indicates it was sold to a non-retail customer. This logic would seem apply to the other GP calculations as well."

Many thanks in advance for your thoughts. Again, click on "POST YOUR THOUGHTS HERE" below.

Awaiting CMS's Proposed Rule --- Chris Cobourn's Thoughts

As we await the Final Rule, we wanted to be sure and get some information out there to continue thinking about the impact... If CMS does not hit the July 2nd timeline, it remains at the forefront of our thoughts!

The below was written by Chris Cobourn, CIS's VP of Regulatory:

CMS’s Proposed Rule

“Once more into the breach... ”
— Henry in Shakespeare's Henry V

Not to sound too dramatic, or perhaps it is too late having quoted from Henry V, but once again the GP specialist at the Pharmaceutical manufacturer is at the center of change, dealing with challenges and issues that will certainly have a dramatic impact upon the organization as a whole. CMS issued a Proposed Rule in the Federal Register, Volume 71, No. 246, P. 77174, on December 22, 2006. Could this become the long-awaited rule containing the clear, authoritative definition of Average Manufacturer Price (AMP) and Best Price (BP), or does it present even more questions and require additional clarification? For those special few who are in the Pharma-GP community, there is an understanding that the Proposed Rule and the currently effective DRA provisions present some complex questions and that the impact upon the organization could be enormous. These changes, if effectuated, could have a ripple-like effect throughout the organization, affecting both sales and marketing and contracting strategies, affecting employees who have never dealt with AMP and BP.

The Proposed Rule, despite not having any legal consequence, provides insight into CMS’s position with respect to AMP and BP and provides a forecast of what the Final Rule might look like. It is likely that the Final Rule will not differ dramatically from the Proposed Rule, and hopefully CMS will provide more clarification and specifics. What this means is that manufacturers have to evaluate their policies, assumptions, methodologies, classes of trade, systems, and processes in order to be ready to implement the requirements of the Final Rule quickly and effectively. Planning should be based upon the general direction taken in the Proposed Rule, but manufacturers must be prepared to fine tune policies and procedures and configure systems as soon as the Final Rule is published. Additionally, manufacturers should revisit market strategies and prepare mathematical models detailing the potential ramifications of the Final Rule.

A few key concepts appear throughout the Proposed Rule:

- The Retail Class of Trade could be redefined to include “any entity that purchases prescription drugs from a manufacturer or a wholesaler for dispensing to the general public.”

- AMP could be defined to include indirect price reductions, such as those offered to PBMs, and not just those offered to purchasing entities. In the Proposed Rule, CMS summarized its position: “[w]e believe that AMP should be calculated to reflect the net drug price recognized by the manufacturer, inclusive of any price adjustments or discounts provided directly or indirectly by the manufacturer."”

- CMS states in the Proposed Rule that the effect on drug manufacturers will be “higher AMPs and, consequently, higher rebate payments,” and an upgrade investment of “$50,000 for each of the 550 manufacturers that participate in the Medicaid Drug Rebate Program.” However, this analysis only factors in the exclusion of prompt pay discounts and does not include consideration of the effect of other proposed concepts, such as the inclusion of prices for covered Part D drugs, the inclusion of SPAP (state pharmaceutical assistance programs) sales, the exclusion of returns made in good faith, and the inclusion of PBM rebates, to name a few. In considering these elements also, it appears that AMP could decrease if the Proposed Rule were finalized as is.

- The Proposed Rule takes steps to encourage the use of generic drugs over branded drugs and to decrease any advantages realized by authorized generics. The DRA mandates changes to the Federal Upper Payment Limits (FULs), and thus the proposed changes are outlined in the Proposed Rule. The proposed calculation now sets the FUL based on 250% of AMP and thereby would increase price pressure on branded drugs. The Proposed Rule would also decrease the incentives previously realized by authorized generics by broadening the definition of authorized generics and requiring that primary, NDA holding, manufacturers include authorized generics in their calculations of AMP and BP.

- The Proposed Rule, in upholding the intent of the DRA, is taking steps to decrease costs to the Medicaid Program. As a suggested cost savings technique, CMS proposes but does not mandate that states consider AMP when determining dispensing fees. This could lead to a decrease in the reimbursements realized by pharmacies. This decrease could change the participation or adherence of pharmacies to certain formularies. While it is too early to project what the end result would be, this and changes in FULs could affect the market in such a way that manufacturers will need to evaluate the impact on their contracting strategies.

Comments encouraged!

Pharma Compliance Blog Hits 2,000 Visitors!

My thanks to all for your support!

Pharma Compliance Blog on Final Rule Watch

How about a discussion on the Final Rule to kick off this Holiday Week?

Will CMS hit their self-imposed deadline today July 2nd?