In an essay entitled ‘A Positive Look at Compliance’ in January 2007’s PharmaVoice, Eric Siegel, VP, Deputy General Counsel and Chief Compliance Officer, Cephalon, Inc., wrote, “[b]y having a compliance program and advertising it to employees, people understand that their company is doing the right thing.”
What a wonderful and refreshing perspective.
Branding is a visible and communicative stamp or signature on a company’s, individual’s or group’s identity. When thought through properly from start to finish, branding can have a tremendous impact on the way someone or something is perceived.
Unfortunately we live in a world where greed and doing the wrong thing have had quite a negative impact on many brands and businesses in this world. The result: suspicion, doubt and skepticism by the government, media, investors and the public as a whole. Now more than ever, doing the right thing is the best thing a company can do.
This is especially true in the pharmaceutical industry. As we all know, compliance is an ever-present topic that demands our attention. The regulatory environment is evolving and changing as we speak. By branding compliance and creating a visible presence throughout a company, organizations can tell their prospective investors, current employees, the government and the media, that they are taking a proactive approach to ensuring that their company is doing the right thing. By involving all employees in the process of branding compliance, companies can create a logo, tagline, mission, code of conduct and more that speak to the company’s commitment to honesty and compliance. Compliance branding should be consistent with the company’s mission and values. It should be a statement and project void of wrong and layered with right.
Kudos to Eric Siegel for his stance. Most importantly, kudos for doing the right thing.
For Your Space,
Steven.
Thursday, September 27, 2007
Tuesday, September 25, 2007
Removing the Silos: Promoting a Holistic Approach to Compliance
Brian O'Rourke, CIS PCX Product Manager & Compliance Specialist
brianorourke@cis-partners.com
While most pharmaceutical manufacturers have accepted the necessity of a Compliance Department within the organization, Compliance Officers and other personnel assigned compliance-related responsibilities still face an uphill battle. Compliance personnel, who are usually legally well-informed and able to offer sound opinions regarding the legitimacy of certain business or administrative practices, find themselves undercut by rejoinders of the classical “materiality argument.” Further, the corporate culture often breeds a world of loosely-connected silos: departments within an organization operating in a compliance vacuum. To be fully-compliant, the manufacturer must remove the silos and approach compliance holistically. A compliance officer or department, with the appropriate authority, can make sure this happens.
While materiality is an important legal concept in the sales and marketing world, it is inapposite in the Government Programs and Statutory Pricing arena. Directors of Price Reporting would likely be laughed out of the courtroom if they were to testify that errors in Average Manufacturer Price, Best Price, or Average Sales Price calculations were “immaterial.” Under the False Claims Act, no such safe harbor is provided to the pharmaceutical manufacturer. Data is either correct or incorrect.
Given recent case law, which has shown that the Government and qui tam plaintiffs are increasingly relying upon the False Claims Act as the premiere theory of liability, a holistic approach to Compliance is essential to the pharmaceutical manufacturer’s success, profitability, and vitality. Considering that the pharmaceutical manufacturer is unable present the argument of materiality under the False Claims Act, this approach only makes sense—data is either correct or incorrect.
It is important to remember that business practices in one area can, and usually do, have a ripple-like effect throughout an organization. Consider the United States ex rel. David Franklin v. Parke-Davis case. Here, Parke-Davis was alleged to have been engaged in a campaign of off-label promotion. The sales force, probably entirely unaware of the price reporting ramifications, was allegedly instructed to promote off-label use. As a result, the Government argued, pharmacists were submitting claims for reimbursement for prescriptions that were or could have been for unauthorized uses, and thus, possibly not reimbursable under the various State plans. As such, the Government argued that off-label promotion was resulting in false data being submitted to the Government.
As it appears that the False Claims Act is quickly becoming the Federal Government’s drink of choice, the pharmaceutical manufacturer must approach compliance holistically. By removing the departmental silos and increasing communication and understanding among departments regarding compliance issues, the pharmaceutical manufacturer can not only protect itself better from liability, it can also make sound business decisions in a uniform, consistent manner. Such an approach bespeaks the importance of centralizing the compliance duties and commensurate authorities within one particular Department or Office. Compliance cannot be done in a vacuum.
brianorourke@cis-partners.com
While most pharmaceutical manufacturers have accepted the necessity of a Compliance Department within the organization, Compliance Officers and other personnel assigned compliance-related responsibilities still face an uphill battle. Compliance personnel, who are usually legally well-informed and able to offer sound opinions regarding the legitimacy of certain business or administrative practices, find themselves undercut by rejoinders of the classical “materiality argument.” Further, the corporate culture often breeds a world of loosely-connected silos: departments within an organization operating in a compliance vacuum. To be fully-compliant, the manufacturer must remove the silos and approach compliance holistically. A compliance officer or department, with the appropriate authority, can make sure this happens.
While materiality is an important legal concept in the sales and marketing world, it is inapposite in the Government Programs and Statutory Pricing arena. Directors of Price Reporting would likely be laughed out of the courtroom if they were to testify that errors in Average Manufacturer Price, Best Price, or Average Sales Price calculations were “immaterial.” Under the False Claims Act, no such safe harbor is provided to the pharmaceutical manufacturer. Data is either correct or incorrect.
Given recent case law, which has shown that the Government and qui tam plaintiffs are increasingly relying upon the False Claims Act as the premiere theory of liability, a holistic approach to Compliance is essential to the pharmaceutical manufacturer’s success, profitability, and vitality. Considering that the pharmaceutical manufacturer is unable present the argument of materiality under the False Claims Act, this approach only makes sense—data is either correct or incorrect.
It is important to remember that business practices in one area can, and usually do, have a ripple-like effect throughout an organization. Consider the United States ex rel. David Franklin v. Parke-Davis case. Here, Parke-Davis was alleged to have been engaged in a campaign of off-label promotion. The sales force, probably entirely unaware of the price reporting ramifications, was allegedly instructed to promote off-label use. As a result, the Government argued, pharmacists were submitting claims for reimbursement for prescriptions that were or could have been for unauthorized uses, and thus, possibly not reimbursable under the various State plans. As such, the Government argued that off-label promotion was resulting in false data being submitted to the Government.
As it appears that the False Claims Act is quickly becoming the Federal Government’s drink of choice, the pharmaceutical manufacturer must approach compliance holistically. By removing the departmental silos and increasing communication and understanding among departments regarding compliance issues, the pharmaceutical manufacturer can not only protect itself better from liability, it can also make sound business decisions in a uniform, consistent manner. Such an approach bespeaks the importance of centralizing the compliance duties and commensurate authorities within one particular Department or Office. Compliance cannot be done in a vacuum.
Sunday, September 23, 2007
Class of Trade Methodology: Education and Adherence on the "Front Lines"
CLarissa Crain, CIS Compliance Specialist
clarissacrain@cis-partners.com
Class of trade designation and customer management are best maintained when government programs staff work with customer service to ensure proper designations and treatment of customers.
Most often class of trade (COT) designation is made by a company’s customer service staff. Because a customer must be set up in the customer master list prior to processing an order or chargeback request, it is important that customer service and chargeback processors on the “front lines” have the ability to add customers quickly and efficiently. COT is an important part of a customer’s profile and also has a significant impact on government pricing. Often times this impact is not fully understood by customer service staff and therefore errors in designations occur.
Government pricing calculations include or exclude data based on class of trade. In the most simplistic sense, incorrectly assigned or multiple classes of trade can lead to incomplete or inaccurate data—a False Claims Act violation. To avoid this risk, definitions and controls around the designation of class of trade should be implemented through the development of a Class of Trade Methodology. Government Programs staff should be responsible for defining COT and providing proper information and training to customer service staff. While the customer service staff should be encouraged to determine COT by referencing COT definitions, they are also encouraged to contact government programs staff if they do not know how to classify a particular entity.
Customer Service Representatives (CSRs) and Chargeback Processors should be educated, to the extent possible, on the role of COT in government calculations. An understanding not only of COT definitions, but also of the impact of incorrect information is important. CSRs should be trained to avoid duplicate records. Multiple entries for one customer can lead to risk of more than one COT being assigned to a given customer. Multiple COTs put the company at risk of not properly assigning customers for purposes of AMP calculations, again opening the door for a potential False Claims Act violation.
Developing, implementing, and monitoring adherence to, a COT Methodology can be challenging. Receiving a full commitment to adherence by the customer service department is the cornerstone to success. However, even the tightest policy cannot completely mitigate the risk of human error, therefore monitoring of the customer master list is important. For many companies this is difficult, as they lack the resources to validate a customer master list that can contain thousands of records. Yet, the risk remains.
As the government increasingly continues to hold companies accountable for False Claims Act violations, COT becomes an area in which they are likely to look. For many companies it is an overlooked element, where gaps in process and validation may exist. Is your company taking a proactive, collaborative approach to COT on the “front lines” and throughout the business?
clarissacrain@cis-partners.com
Class of trade designation and customer management are best maintained when government programs staff work with customer service to ensure proper designations and treatment of customers.
Most often class of trade (COT) designation is made by a company’s customer service staff. Because a customer must be set up in the customer master list prior to processing an order or chargeback request, it is important that customer service and chargeback processors on the “front lines” have the ability to add customers quickly and efficiently. COT is an important part of a customer’s profile and also has a significant impact on government pricing. Often times this impact is not fully understood by customer service staff and therefore errors in designations occur.
Government pricing calculations include or exclude data based on class of trade. In the most simplistic sense, incorrectly assigned or multiple classes of trade can lead to incomplete or inaccurate data—a False Claims Act violation. To avoid this risk, definitions and controls around the designation of class of trade should be implemented through the development of a Class of Trade Methodology. Government Programs staff should be responsible for defining COT and providing proper information and training to customer service staff. While the customer service staff should be encouraged to determine COT by referencing COT definitions, they are also encouraged to contact government programs staff if they do not know how to classify a particular entity.
Customer Service Representatives (CSRs) and Chargeback Processors should be educated, to the extent possible, on the role of COT in government calculations. An understanding not only of COT definitions, but also of the impact of incorrect information is important. CSRs should be trained to avoid duplicate records. Multiple entries for one customer can lead to risk of more than one COT being assigned to a given customer. Multiple COTs put the company at risk of not properly assigning customers for purposes of AMP calculations, again opening the door for a potential False Claims Act violation.
Developing, implementing, and monitoring adherence to, a COT Methodology can be challenging. Receiving a full commitment to adherence by the customer service department is the cornerstone to success. However, even the tightest policy cannot completely mitigate the risk of human error, therefore monitoring of the customer master list is important. For many companies this is difficult, as they lack the resources to validate a customer master list that can contain thousands of records. Yet, the risk remains.
As the government increasingly continues to hold companies accountable for False Claims Act violations, COT becomes an area in which they are likely to look. For many companies it is an overlooked element, where gaps in process and validation may exist. Is your company taking a proactive, collaborative approach to COT on the “front lines” and throughout the business?
Friday, September 21, 2007
The Final Rule, Small Companies and the October Deadline
Earlier this week, I regrettably missed a question embedded in the comments section of a post that I would like to bring to the attention of our fellow bloggers --- as it is a very important topic pertaining to the Final Rule.
For Your Space,
Steven.
Anonymous question:
I understand the OIG has determined auditing of pharmaceutical pricing practices will be a priority. We're a small and relatively new pharmaceutical company. We've barely put together policies and procedures pre-DRA. To say, implementing post-DRA requirements is challenging, would be an understatement. Evaluating the impact the DRA will have on Policies, the updating of systems, revising policies and procedures, re-examining COT, developing lagged price concessions model, training staff, etc. - takes time and resources - both in short-supply for our small company. Any thoughts on how you think the government will react to companies that are not in compliance with DRA-driven changes by the October deadline?
Chris Cobourn, CIS VP of Regulatory said...
Some thoughts, personal opinion, to respond to the post.
Small manufacturers, with limited staff and resources, definitely do face a challenge with meeting the requirements of the Final Rule by October. You may want to think about prioritizing things. You want to make sure that you have the calculations right, which means having spreadsheets and other tools ready by November. Prior to November, you want to probably focus on making sure that the data will be in order, meaning the ability to get the numbers for the averaging, and making sure that your Class of Trade structure is set up (which could mean changes to your existing COT assignments, or scrubbing the existing data). From there, you probably want to focus some good supporting documentation for the CEO/CFO certification, including documentation of G/L reconciliation. Your SOP documentation support is important as well, but I would get the data, calculations and certification in place first, but get working on SOPs as soon as you can afterwards. Steve's point above about an assessment is something to think about as well. In lieu of having the resources to do a full audit plan, an initial assessment shows that you are concerned and want to know your gaps. The assessment report and recommendations become part of your "compliance story," where you can demonstrate that you showed the due diligence to evaluate your GP operations, and put a meaningful plan in place to address things - so that even though you may not be "perfect" in terms of compliance, you can show that you are doing your best and have a meaningful and practical plan. I hope that helps, feel free to contact me directly with questions.
chriscobourn@cis-partners.com
For Your Space,
Steven.
Anonymous question:
I understand the OIG has determined auditing of pharmaceutical pricing practices will be a priority. We're a small and relatively new pharmaceutical company. We've barely put together policies and procedures pre-DRA. To say, implementing post-DRA requirements is challenging, would be an understatement. Evaluating the impact the DRA will have on Policies, the updating of systems, revising policies and procedures, re-examining COT, developing lagged price concessions model, training staff, etc. - takes time and resources - both in short-supply for our small company. Any thoughts on how you think the government will react to companies that are not in compliance with DRA-driven changes by the October deadline?
Chris Cobourn, CIS VP of Regulatory said...
Some thoughts, personal opinion, to respond to the post.
Small manufacturers, with limited staff and resources, definitely do face a challenge with meeting the requirements of the Final Rule by October. You may want to think about prioritizing things. You want to make sure that you have the calculations right, which means having spreadsheets and other tools ready by November. Prior to November, you want to probably focus on making sure that the data will be in order, meaning the ability to get the numbers for the averaging, and making sure that your Class of Trade structure is set up (which could mean changes to your existing COT assignments, or scrubbing the existing data). From there, you probably want to focus some good supporting documentation for the CEO/CFO certification, including documentation of G/L reconciliation. Your SOP documentation support is important as well, but I would get the data, calculations and certification in place first, but get working on SOPs as soon as you can afterwards. Steve's point above about an assessment is something to think about as well. In lieu of having the resources to do a full audit plan, an initial assessment shows that you are concerned and want to know your gaps. The assessment report and recommendations become part of your "compliance story," where you can demonstrate that you showed the due diligence to evaluate your GP operations, and put a meaningful plan in place to address things - so that even though you may not be "perfect" in terms of compliance, you can show that you are doing your best and have a meaningful and practical plan. I hope that helps, feel free to contact me directly with questions.
chriscobourn@cis-partners.com
Thursday, September 20, 2007
THE FINAL RULE: PBM Rebates & Best Price
Chris Cobourn, CIS's VP of Regulatory
chriscobourn@cis-partners.com
One of the difficult legal interpretation issues with respect to the Final Rule is the application of Pharmacy Benefit Manager (PBM) Rebates to Best Price (BP). The Rule seems clear on Average Manufacturer Price (AMP): do not include PBM rebates as a price reduction in AMP, except for the Mail Order purchases or rebates, as these are price concessions and clearly retail. In the Final Rule Comments section pertaining to PBMs, CMS even addresses the difficulty on the part of the manufacturer to have much visibility into proprietary data related to the passing on of discounts, rebates, and other price concessions to end customers.
So, how do we make assumptions and put some rules in place around the unclear BP language about PBM rebates being exempt, except for when they are “…designed to adjust the price at retail or provider level”? It is a critical issue to get our arms around, as it could have a significant BP impact. The feeling I have, and it seems to be a common approach right now, is to apply the AMP logic where possible to the BP area to make some assumptions. Without clear guidance from CMS, this issue is ultimately a legal question and must be reviewed by counsel. Furthermore, CMS may publish clarifying guidance on this topic in the future, which could require companies to change the assumptions they make now.
From my perspective, the manufacturer does not currently have the ability to know to what extent, if any, a portion of the PBM rebate is passed along to adjust prices at the retail or provider level. I don’t think there is any data to support it, and the most you could do is to have something in an agreement outlining an allowable ‘pass on’ percentage if it is your understanding that this is occurring. Additionally, the wording on the BP side talks about rebates “designed to adjust prices at the retail or provider level…” I would ask, from the manufacturer’s perspective, if the PBM rebates being paid are “designed” for that purpose.
Here is a summary of relevant wording directly from the Final Rule, and some personal thoughts around it at this point.
Final Rule, page 39241:
AMP includes: "Sales including discounts, rebates, or other price concessions provided to pharmacy benefit managers (PBMs) for their mail order pharmacy purchases;"
I take the above provision to mean that AMP must include data pertaining to sales made to PBMs ONLY for their mail order pharmacy purchases.
Final Rule, page 39242:
BP excludes: "PBM rebates, discounts, or other price concessions except their mail order pharmacy’s purchases or where such rebates, discounts, or other price concessions are designed to adjust prices at the retail or provider level."
I take this provision to mean that PBM rebates, discounts, or other price concessions are excluded from BP, except sales to mail order pharmacies OR where such rebates, discounts, or other price concessions are designed to adjust prices at the retail or provider level.
For purposes of the BP section (page 39242), "provider" means "a hospital, HMO, including an MCO or entity that treats or provides coverage or services to individuals for illnesses or injuries or provides services or items in the provision of health care."
In other words, BP excludes PBM rebates, discounts, price concessions except when they are:
• Related to sales to mail order pharmacies;
• Designed to adjust prices at retail level (pharmacies, etc); or
• Designed to adjust prices at provider (hospital, HMO, etc).
This is only my opinion, and it is based upon the current guidance (or lack thereof). I do feel that the PBM Manager Care Rebates, as they are structured at most manufacturers today, are exempt from BP consideration, and by their nature, are not designed to adjust the price at retail, regardless of the fact that there could be a purchasing Mail Order operation within the same larger organization. I would further suggest that Manufacturers have seperate agreements in place in cases where there is an organization with a Managed Care Rebate Agreement, and also a Mail Order Operation, and that there is language in place to state your assumption that there is no “pass through.” But that is just my opinion. What do you think?
Wednesday, September 19, 2007
Price Regulation: An Economic Analysis of How Drug Prices Directly Affect R&D
CIS's Clarissa Crain, Compliance Specialist
clarissacrain@cis-partners.com
In the past few decades, hundreds of innovative new drugs have entered the marketplace. They help: improve quality of life; save millions of lives; increase labor productivity leading to more robust economies; and, provide cheaper, less invasive solutions to chronic diseases, such as heart disease. The improvements to quality of life and life expectancy have been significant. Studying US life expectancy between 1970 and 1991, Lichtenberg (1998) conservatively estimates a $15 billion increase in pharmaceutical R&D expenditures saves 1.6 million life-years per year, valued at $27 billion. Lichtenberg also finds pharmaceutical innovation decreases costs in other areas within the healthcare industry. For example, Lichtenberg (1996) estimates for every $1 increase in spending on pharmaceuticals there is a subsequent decrease of $3.65 in hospitalization costs, yielding a savings of $2.65. Additionally, by reducing the age of utilized drugs from 15 to 5.5 years, pharmaceutical expenditures increase $18, but yield a $129 savings in non-drug expenditures for a net savings of $111 (Lichtenberg 2002).
Despite the evidence of the tremendous benefits of innovative drugs, great attention is drawn to their costs by consumers and governments. The pharmaceutical industry has come under increasing pressure to curb prices of ethical drugs. In 2004, USA Today reported findings from an AARP study indicating a 27.4% average price increase in the leading 155 selling drugs from 1999-2003 relative to 10.4% general inflation (Welch 2004). Outraged, citizens and political leaders across the country have demanded that the US implement pharmaceutical price controls. Unfortunately, most do not understand that economic impact of price regulation. Drug costs should be reflective of two components: the marginal cost to produce them and the ‘sunk’ costs of the R&D conducted to develop the drug. While marginal cost of production per tab can be as little as a few cents, the price of a drug also must reflect the estimated, average $1.7 billion in R&D costs invested per drug that comes to market (Launders 2003). Without this consideration the revenues necessary for future drug R&D do not exist.
All industrialized countries, other than the US, have implemented pharmaceutical price and/or profit regulations in an attempt to control pharmaceutical expenditures. As a result of these regulations, these countries have seen a decrease in R&D investments within their borders. By restricting prices, profits diminish and companies see much less incentive to conduct R&D. In Germany, price regulations were implemented in the early 1990’s and are a good example of this phenomenon. From 1992-1999, 23,000 jobs were eliminated in the German pharmaceutical industry, and by 2001 Germany had slipped from the number one to the number three position in European countries conducting innovative R&D (Kermani and Bonacossa 2003). As a result of price regulations like those in Germany, R&D has moved out of these regulated markets (i.e. Western Europe and Japan) and into less regulated markets (i.e. US and South America).
Some might think that because the industry continues to develop new drugs despite these regulations there would not be a significant, negative impact if the US were to regulate its market. However, the truth of the matter is that the United States is the largest pharmaceutical market in the world, representing approximately 50% of global pharmaceutical sales volume (Matraves 1999). The impact on the industry if the US were to implement price controls that artificially lowered prices to a point that manufacturers were unable to regain sunk R&D costs would be not only significant, but devastating to R&D. Is it really worth regulating prices at the cost of losing drug innovation?
clarissacrain@cis-partners.com
In the past few decades, hundreds of innovative new drugs have entered the marketplace. They help: improve quality of life; save millions of lives; increase labor productivity leading to more robust economies; and, provide cheaper, less invasive solutions to chronic diseases, such as heart disease. The improvements to quality of life and life expectancy have been significant. Studying US life expectancy between 1970 and 1991, Lichtenberg (1998) conservatively estimates a $15 billion increase in pharmaceutical R&D expenditures saves 1.6 million life-years per year, valued at $27 billion. Lichtenberg also finds pharmaceutical innovation decreases costs in other areas within the healthcare industry. For example, Lichtenberg (1996) estimates for every $1 increase in spending on pharmaceuticals there is a subsequent decrease of $3.65 in hospitalization costs, yielding a savings of $2.65. Additionally, by reducing the age of utilized drugs from 15 to 5.5 years, pharmaceutical expenditures increase $18, but yield a $129 savings in non-drug expenditures for a net savings of $111 (Lichtenberg 2002).
Despite the evidence of the tremendous benefits of innovative drugs, great attention is drawn to their costs by consumers and governments. The pharmaceutical industry has come under increasing pressure to curb prices of ethical drugs. In 2004, USA Today reported findings from an AARP study indicating a 27.4% average price increase in the leading 155 selling drugs from 1999-2003 relative to 10.4% general inflation (Welch 2004). Outraged, citizens and political leaders across the country have demanded that the US implement pharmaceutical price controls. Unfortunately, most do not understand that economic impact of price regulation. Drug costs should be reflective of two components: the marginal cost to produce them and the ‘sunk’ costs of the R&D conducted to develop the drug. While marginal cost of production per tab can be as little as a few cents, the price of a drug also must reflect the estimated, average $1.7 billion in R&D costs invested per drug that comes to market (Launders 2003). Without this consideration the revenues necessary for future drug R&D do not exist.
All industrialized countries, other than the US, have implemented pharmaceutical price and/or profit regulations in an attempt to control pharmaceutical expenditures. As a result of these regulations, these countries have seen a decrease in R&D investments within their borders. By restricting prices, profits diminish and companies see much less incentive to conduct R&D. In Germany, price regulations were implemented in the early 1990’s and are a good example of this phenomenon. From 1992-1999, 23,000 jobs were eliminated in the German pharmaceutical industry, and by 2001 Germany had slipped from the number one to the number three position in European countries conducting innovative R&D (Kermani and Bonacossa 2003). As a result of price regulations like those in Germany, R&D has moved out of these regulated markets (i.e. Western Europe and Japan) and into less regulated markets (i.e. US and South America).
Some might think that because the industry continues to develop new drugs despite these regulations there would not be a significant, negative impact if the US were to regulate its market. However, the truth of the matter is that the United States is the largest pharmaceutical market in the world, representing approximately 50% of global pharmaceutical sales volume (Matraves 1999). The impact on the industry if the US were to implement price controls that artificially lowered prices to a point that manufacturers were unable to regain sunk R&D costs would be not only significant, but devastating to R&D. Is it really worth regulating prices at the cost of losing drug innovation?
Tuesday, September 18, 2007
NCPA: Quick Analysis of Presidential Candidate Hillary Clinton's Health Care Plan
Presidential candidate Hillary Clinton unveiled her long awaited health care plan in Iowa. The following is a response to the plan by National Center for Policy Analysis (NCPA) President John C. Goodman:
"Universal coverage at a minimum requires a credible plan. So far, no presidential candidate -- Hillary included -- has come up with one. We can't mandate our way to universal coverage. Even if health insurance is absolutely free, mandates don't work. If anything, they may make matters worse."
Here are five principles politicians tend to overlook:
-- Employer mandates don't work. Hawaii has had an employer mandate for more than 30 years; and the uninsurance rate in Hawaii is higher than in several states that have no mandate. A mandate is a tax on labor. Employers respond by economizing on labor as well as by turning to part time and contract workers. Pay or play mandates (insure your employees or pay a fine) have the same effect.
-- Individual mandates don't work. All but three states mandate auto liability insurance. Yet the national uninsurance rate for drivers is only a point or two below the national uninsurance rate for health.
-- A mandated benefit package only makes things worse. Health insurance mandates almost always specify a package of benefits that people must buy. The problem here is: the cost of the package is going to grow at twice the rate of people's incomes. So the mandate will absorb an increasing share of family income or will require increasing tax subsides. Things are made even worse as special interests lobby to include particular services and procedures in the package.
-- Insurance in name only is not universal care. The most important barrier to care for low-income patients is not lack of insurance or price rationing. It is rationing by waiting. Further, the uninsured and Medicaid and S-CHIP enrollees often get care from the same doctors and same facilities. Indeed one reason why so many eligible people fail to enroll in government insurance plans is that enrollment often doesn't expand access to care.
-- Pay or play for individuals is not enough. Making individuals pay more in taxes if they are uninsured is not unreasonable. In fact, we do that already under federal income and payroll tax laws. But as Massachusetts is currently finding out, many people will pay the fine and remain uninsured anyway.
National Center for Policy Analysis
http://www.ncpa.org
What do you think?
Monday, September 17, 2007
CMS's Weems to Focus on Compliance
Acting CMS Administrator Kerry Weems at his first media conference on Wednesday outlined his agenda and priorities for the agency, CQ HealthBeat reports. At the briefing, Weems said, "We're going to do business in the daylight," and he criticized a recent release late on a Friday night of a CMS letter to states issuing strict new guidelines on SCHIP enrollment. Weems called such announcements "cocktail hour press releases," adding, "[W]e're going to try to end those." Weems, a 25-year employee at HHS who has served under both Democratic and Republican administrations, said "compliance" with regulations also will be a leading priority, CQ HealthBeat notes (Reichard, CQ HealthBeat, 9/12).
In addition, he stressed that strong oversight is required to increase public confidence that the agency keeps an "arm's-length" relationship with the health care industry (Washington Post, 9/13). Weems said that CMS will make public the "corrective action plans" reached between the agency and Medicare Advantage plans that have been found to violate Medicare regulations, adding, "I simply am not going to tolerate marketing abuses in this area." CQ HealthBeat notes that to date, CMS "has called little press attention to violations it uncovers by Medicare Advantage plans" (CQ HealthBeat, 9/12).
In addition, he stressed that strong oversight is required to increase public confidence that the agency keeps an "arm's-length" relationship with the health care industry (Washington Post, 9/13). Weems said that CMS will make public the "corrective action plans" reached between the agency and Medicare Advantage plans that have been found to violate Medicare regulations, adding, "I simply am not going to tolerate marketing abuses in this area." CQ HealthBeat notes that to date, CMS "has called little press attention to violations it uncovers by Medicare Advantage plans" (CQ HealthBeat, 9/12).
Friday, September 14, 2007
CIS's Katie Lapins: "Simply do the right thing."
Katie Lapins, CIS Senior Compliance Specialist
katielapins@cis-partners.com
OK, so my friends, family and neighbors know I work in the pharmaceutical industry. Within the last six months, I’ve had the following questions/issues raised to me:
My neighbor asked me the following question: “My sister and her husband can buy his cholesterol medication in Mexico for only $10 for each prescription and yet in the U.S., it’s $50. Why shouldn’t they?”
My best friend’s dad, who is covered by Medicare and pays for a private HMO with prescription coverage, only takes one-half of his heart medication each day because it is too expensive otherwise. She asks me how she can convince him otherwise because she knows this is dangerous.
A friend told me she had seen a website where she could buy a prescription weight loss product without having to see a doctor. She has been desperately trying to lose weight, her doctor has encouraged it, but she wants an “easy” solution and is thinking about trying it.
I didn’t even know where to begin with these people… These are well-educated, middle class Americans with health insurance. I understand all about wanting to save a few dollars or finding the silver bullet for a magical solution, but at what price? We can all speak to these issues, especially the potential dangers involved and why prices are higher and regulations are stricter in the U.S. However, if these people, who all have insurance, are incorporating these strategies into their lives, what about people without insurance, with chronic health conditions and who see enticing advertisements on the internet for products like Viagra ®, weight loss products and narcotic pain killers?
I think these questions raise the underlying bigger issues facing our healthcare system and will only be resolved by changes by pharmaceutical manufacturers, health insurance companies, and/or the federal and state governments.
I don’t know the answers.
I know there must be better education about the dangers of importing, buying pharmaceutical products online and adjusting dosages without consulting a doctor. Maybe even better controls, although I don’t know how you achieve that with foreign countries and online purchases.
I know the pharmaceutical and health insurance industries are very powerful and a national healthcare plan will most likely not ever see the light of day in my lifetime. I also don’t know if that is the right answer. I live in Colorado and there is currently a state-appointed “Blue Ribbon Commison” that is evaluating a variety of options for a state-mandated plan. However, they keep throwing out numbers like $1.6 BILLION and then people, especially small business owners, ask, “Where are we going to find that kind of money?”
I know there are perverse incentives within the marketplace that could be eliminated and I know the systems are much too complicated for the average consumer and even many manufacturers. (Let’s face it, government pricing programs are much more complicated than they probably need to be and in small companies, often only one or two people can even come close to explaining the various programs, requirements and little nuances of each product.)
I know for behavior to change, the risk must exceed the potential reward/saving. So, how do you decrease the incentives described above and educate the population to try to improve the awareness of the risk while decreasing the reward/saving?
I believe in the universal right to health care for all Americans. I just don’t know how we accomplish it. I believe it will take changes by all parties – consumers, providers, insurance companies, manufacturers and governments. What I’m afraid of, is that we’re all playing a game of ‘chicken' and waiting for all of the others to make the first move. Maybe it’s time for all of these parties to simply do the right thing.
Comments, thoughts, ideas, suggestions and even disagreements are definitely welcomed!
katielapins@cis-partners.com
OK, so my friends, family and neighbors know I work in the pharmaceutical industry. Within the last six months, I’ve had the following questions/issues raised to me:
My neighbor asked me the following question: “My sister and her husband can buy his cholesterol medication in Mexico for only $10 for each prescription and yet in the U.S., it’s $50. Why shouldn’t they?”
My best friend’s dad, who is covered by Medicare and pays for a private HMO with prescription coverage, only takes one-half of his heart medication each day because it is too expensive otherwise. She asks me how she can convince him otherwise because she knows this is dangerous.
A friend told me she had seen a website where she could buy a prescription weight loss product without having to see a doctor. She has been desperately trying to lose weight, her doctor has encouraged it, but she wants an “easy” solution and is thinking about trying it.
I didn’t even know where to begin with these people… These are well-educated, middle class Americans with health insurance. I understand all about wanting to save a few dollars or finding the silver bullet for a magical solution, but at what price? We can all speak to these issues, especially the potential dangers involved and why prices are higher and regulations are stricter in the U.S. However, if these people, who all have insurance, are incorporating these strategies into their lives, what about people without insurance, with chronic health conditions and who see enticing advertisements on the internet for products like Viagra ®, weight loss products and narcotic pain killers?
I think these questions raise the underlying bigger issues facing our healthcare system and will only be resolved by changes by pharmaceutical manufacturers, health insurance companies, and/or the federal and state governments.
I don’t know the answers.
I know there must be better education about the dangers of importing, buying pharmaceutical products online and adjusting dosages without consulting a doctor. Maybe even better controls, although I don’t know how you achieve that with foreign countries and online purchases.
I know the pharmaceutical and health insurance industries are very powerful and a national healthcare plan will most likely not ever see the light of day in my lifetime. I also don’t know if that is the right answer. I live in Colorado and there is currently a state-appointed “Blue Ribbon Commison” that is evaluating a variety of options for a state-mandated plan. However, they keep throwing out numbers like $1.6 BILLION and then people, especially small business owners, ask, “Where are we going to find that kind of money?”
I know there are perverse incentives within the marketplace that could be eliminated and I know the systems are much too complicated for the average consumer and even many manufacturers. (Let’s face it, government pricing programs are much more complicated than they probably need to be and in small companies, often only one or two people can even come close to explaining the various programs, requirements and little nuances of each product.)
I know for behavior to change, the risk must exceed the potential reward/saving. So, how do you decrease the incentives described above and educate the population to try to improve the awareness of the risk while decreasing the reward/saving?
I believe in the universal right to health care for all Americans. I just don’t know how we accomplish it. I believe it will take changes by all parties – consumers, providers, insurance companies, manufacturers and governments. What I’m afraid of, is that we’re all playing a game of ‘chicken' and waiting for all of the others to make the first move. Maybe it’s time for all of these parties to simply do the right thing.
Comments, thoughts, ideas, suggestions and even disagreements are definitely welcomed!
Wednesday, September 12, 2007
Where, Oh Where, Have Your Audit Plans Gone?
Chris Cobourn, CIS VP of Regulatory
chriscobourn@cis-partners.com
Monitoring and Auditing: they are simple enough concepts but can create challenges to many organizations.
In this article I will provide general definitions and highlight a few critical areas related to Monitoring and Auditing.
I also invite you all to attend our session on Monitoring and Auditing at IIR this year in Chicago, where we will elaborate on each.
Definitions
Monitoring: At the operational level, the departments responsible for Government Programs are routinely looking at procedures and calculations. This can include running reports, looking at analytics, and evaluating trends. Monitoring should have some general definition in your standard operating procedures, providing a framework of the routine activities performed at the operational level to monitor the calculations.
Audit: On an ongoing basis, the company tests the procedures and systems related to Government Program to ensure that the policies and procedures that have been put in place are being followed completely and accurately.
The Purpose and Value of an Audit Plan
An effective Audit Plan serves several purposes. First of all, it is critical to the integrity of the CEO/CFO certification process. In order for senior management to have assurance that documented procedures are being followed accurately they must make sure that procedures and systems are being audited. Second, an effective monitoring and audit program allows a manufacturer to demonstrate that it is “audit ready.” By having a monitoring and audit program in place the manufacturer can show the government that it is doing its due diligence to be in compliance with the Medicaid Program, and that there is integrity in the calculations and the data reported to the government.
Risk Alignment and Strategy
Each company’s “compliance profile” is unique to its business, reflecting its size, its products, contracting strategy and customer base.
Through the process of assessments and audits, a manufacturer should become aware of potential compliance gaps or risks that are particular to its organization and business. Risks and gaps should become prioritized and senior management “aligned” on the best strategy and approach to mitigate risks by developing documentation and procedures. Getting over the hurdle of an initial audit and developing the organization’s alignment and strategy can be the hardest part, as the company must potentially address organizational and resource issues. Over time, an organization can develop annual Audit Plans that appropriately address specific operational areas, systems and vendors and put a periodic audit and resource plan in place, using a mix of internal and external audit resources.
Challenges
The challenges are varied. Many companies are currently focused on the priority of developing policies and procedures, including evaluating the impact of the Final Rule. Organizations may also be thinking about when or how to implement automated GP systems. Additionally, many organizations may not currently have the internal audit resources necessary to conduct audits. Audit may certainly be on the minds of many people working in GP or in Compliance, but it may also be seen as something to address down the road, once other areas have been addressed. The key challenge is how to put some level of audit in place sooner as part of the up-front initiatives. For many organizations this can include using external resources to provide an objective assessment of procedures and calculations.
Methodology
There are two key concepts when it comes to methodology. First, a company should approach an audit in the same way that the government might. Second, it is important to establish an objective and well-documented process that demonstrates solid audit discipline, including document collection, interviews, procedural testing and calculation testing. A manufacturer should focus on the following areas:
- General Ledger Reconciliation is performed and accurate
- A Class of Trade policy and procedure is in place, and there is integrity in the company’s Class of Trade assignment
- Written Policy and Procedure documentation is in place, methodology assumptions are documented and meet current guidance
- Procedural testing is performed to demonstrate that individuals are trained and procedures are being followed completely and accurately
- Calculation testing is performed to demonstrate that the calculations are accurate
- There is sufficient review and approval, and sufficient support binders are in place
As you can see, a Monitoring and Audit Plan can be challenging to implement, especially in light of other competing priorities. I recommend that your organization start with the principal of “alignment” to develop strategic goals related to an audit strategy, and determine how and when to develop and implement a practical approach to Audit. Please feel free to contact me if you would like to discuss the topic further.
The Art & Science of SOPs: The Procedure
Taken from an article written by CIS Procedural Compliance Specialist, Jen DiMarco:
"The procedure is the equivalent of a recipe in cooking. If something is left out, the whole process will be very mushy (a highly technical term, I know). So how do you ensure you have a firm, robust process? Include all the pieces.
Always start with a high-level process flow diagram regardless of the number of people assigned tasks in the SOP. A good process flow:
- Describes what needs to be done.
- Identifies who needs to perform the task.
- Describes Titles vs. Roles.
- Is general whenever possible, as a change in a role means a change to the SOP.
- Use specific roles only when regulations stipulate that the individual must be “Qualified.”
Does not include unnecessary details of how the task is completed (e.g. what form is completed, what system is used, how information is sent-email, fax, etc.).
Include touch points to other processes, when applicable.
After the process flow is completed, ensure that it is sufficiently reviewed by the personnel involved in the process. The approach to this review varies depending on the process itself. For example, a process involving one individual will probably need to be reviewed differently than a process involving two or more people, who work independently and/or collaborate on tasks.
If you are performing the tasks and are the author of the SOP, it is best to have a colleague with a different position run through the process. This does not need to be in depth; you can suggest a review over morning coffee. This allows for a fresh set of eyes to review the process. If your colleague understands it, chances are your manager and/or an inspector will also.
If the Procedure is a collaboration of tasks, the process flow diagram is pivotal. Get a team together representing all the different areas and hash out the process. The intent is to only have one meeting of this kind. You may be surprised at the number of assumptions that occur between groups. This gives everyone the opportunity to be heard and resolve any process or responsibility conflicts. This is also an ideal time to involve management if key decisions are to be made.
After consensus is reached on the process flow, place the tasks into the Procedure. Ensure that each step identified in the process flow has a corresponding step in the Procedure. For processes where an individual is performing a variety of tasks, it is recommended to use a checklist or bullet points to describe the tasks. This gives a clear understanding of the order of events and the details (if any) associated with them. For processes where two or more people exchange or collaborate on tasks, it is recommended to place the tasks in a tabular format. This allows for a clear delineation of responsibilities. In addition, the following are important guidelines for writing an effective Procedure:
- Avoid paragraphs. They are cumbersome, create confusion, and unless written exceptionally well, generally do not provide the necessary information needed to complete the task.
- Use present tense, active verbs for all tasks.
- Use approved definitions and acronyms.
- Include references to other processes and cross-references to points within the Procedure, where appropriate."
"The procedure is the equivalent of a recipe in cooking. If something is left out, the whole process will be very mushy (a highly technical term, I know). So how do you ensure you have a firm, robust process? Include all the pieces.
Always start with a high-level process flow diagram regardless of the number of people assigned tasks in the SOP. A good process flow:
- Describes what needs to be done.
- Identifies who needs to perform the task.
- Describes Titles vs. Roles.
- Is general whenever possible, as a change in a role means a change to the SOP.
- Use specific roles only when regulations stipulate that the individual must be “Qualified.”
Does not include unnecessary details of how the task is completed (e.g. what form is completed, what system is used, how information is sent-email, fax, etc.).
Include touch points to other processes, when applicable.
After the process flow is completed, ensure that it is sufficiently reviewed by the personnel involved in the process. The approach to this review varies depending on the process itself. For example, a process involving one individual will probably need to be reviewed differently than a process involving two or more people, who work independently and/or collaborate on tasks.
If you are performing the tasks and are the author of the SOP, it is best to have a colleague with a different position run through the process. This does not need to be in depth; you can suggest a review over morning coffee. This allows for a fresh set of eyes to review the process. If your colleague understands it, chances are your manager and/or an inspector will also.
If the Procedure is a collaboration of tasks, the process flow diagram is pivotal. Get a team together representing all the different areas and hash out the process. The intent is to only have one meeting of this kind. You may be surprised at the number of assumptions that occur between groups. This gives everyone the opportunity to be heard and resolve any process or responsibility conflicts. This is also an ideal time to involve management if key decisions are to be made.
After consensus is reached on the process flow, place the tasks into the Procedure. Ensure that each step identified in the process flow has a corresponding step in the Procedure. For processes where an individual is performing a variety of tasks, it is recommended to use a checklist or bullet points to describe the tasks. This gives a clear understanding of the order of events and the details (if any) associated with them. For processes where two or more people exchange or collaborate on tasks, it is recommended to place the tasks in a tabular format. This allows for a clear delineation of responsibilities. In addition, the following are important guidelines for writing an effective Procedure:
- Avoid paragraphs. They are cumbersome, create confusion, and unless written exceptionally well, generally do not provide the necessary information needed to complete the task.
- Use present tense, active verbs for all tasks.
- Use approved definitions and acronyms.
- Include references to other processes and cross-references to points within the Procedure, where appropriate."
Tuesday, September 11, 2007
Medicaid and Medicare State Reimbursements Study
Medicaid payments to primary care physicians vary widely among states, while Medicare physician payments are more similar across the country, according to a report released Wednesday by Public Citizen, the Philadelphia Inquirer reports (Burling, Philadelphia Inquirer, 9/6). For the report, Public Citizen analyzed 2003 Medicaid reimbursements in 10 states that had the lowest and highest rates. States with the highest rates were Alaska, Arizona, Arkansas, Delaware, North Carolina and Wyoming (Solomont, New York Sun, 9/6).
States with the lowest rates were New Jersey, New York, Pennsylvania and Rhode Island, as well as Washington, D.C. (Philadelphia Inquirer, 9/6). The report found significant differences in state Medicaid reimbursement rates. For example, in New York, Medicaid reimburses physicians $20 for an hour-long visit with an established patient, while higher-paying states, on average, pay $49.20 for a 15-minute visit or $157.92 for an hour-long appointment (New York Sun, 9/6).
Annette Ramirez de Arellano, a Public Citizen researcher and co-author of the report, said the lowest-paying states tended to have broader eligibility requirements and more generous benefits than states with the highest reimbursements (Philadelphia Inquirer, 9/6). According to Sidney Wolfe, director of Public Citizen's Health Research Group, the differences between states' Medicaid reimbursements suggest that Medicaid beneficiaries could receive lower-tier care in states with low payments.
The report also found substantial differences between average Medicaid reimbursement rates, which are set by states, and Medicare reimbursement rates set by the federal government. For example, in New Jersey, Medicare reimburses physicians $65.65 for a 15-minute office visit, while Medicaid pays $20.30, according to the report (Layton, Bergen Record, 9/6). In a comparison of 11 procedures, New Jersey Medicaid reimbursements were less than one-third of Medicare's and Pennsylvania's were 42% less.
States with the lowest rates were New Jersey, New York, Pennsylvania and Rhode Island, as well as Washington, D.C. (Philadelphia Inquirer, 9/6). The report found significant differences in state Medicaid reimbursement rates. For example, in New York, Medicaid reimburses physicians $20 for an hour-long visit with an established patient, while higher-paying states, on average, pay $49.20 for a 15-minute visit or $157.92 for an hour-long appointment (New York Sun, 9/6).
Annette Ramirez de Arellano, a Public Citizen researcher and co-author of the report, said the lowest-paying states tended to have broader eligibility requirements and more generous benefits than states with the highest reimbursements (Philadelphia Inquirer, 9/6). According to Sidney Wolfe, director of Public Citizen's Health Research Group, the differences between states' Medicaid reimbursements suggest that Medicaid beneficiaries could receive lower-tier care in states with low payments.
The report also found substantial differences between average Medicaid reimbursement rates, which are set by states, and Medicare reimbursement rates set by the federal government. For example, in New Jersey, Medicare reimburses physicians $65.65 for a 15-minute office visit, while Medicaid pays $20.30, according to the report (Layton, Bergen Record, 9/6). In a comparison of 11 procedures, New Jersey Medicaid reimbursements were less than one-third of Medicare's and Pennsylvania's were 42% less.
Monday, September 10, 2007
Monday Morning Humor from a CIS Intern
James Sproule, a.k.a. CIS "Intern 2"
Internship. The mere sound of the word conjures up negative thoughts in most college students’ minds. Thoughts usually revolve around mundane tasks like making copies or fetching coffee and bagels from the local store.
“One cream or two?” I planned on saying, as the dread of being below the bottom can make the first day miserable.
I remember my first day. I was dressed to impress, sporting freshly-pressed khakis, new brown shoes, and a button-up. I looked into the mirror as I brushed my teeth and thought for sure I was ready for anything they had for me.
Twenty minutes later as I sat still on a four-lane highway, I watched the time tick by. It soon became a reality I had no shot at making it on time. I panicked as I thought of being late on the first day and the impression it would make. I called up my boss thinking my life was over.
“Get here when you can,” she replied softly, which brightened my mood.
The traffic was a part of the internship I had not considered, as I arrived a half hour late. I was thrown into a conference call having missed the initial orientation as well as a chance to find my bearings.
“Do your best to figure out what’s going on with the project,” was the only advice I got as I entered a world beyond my comprehension.
Being an honor student at a good college, how hard could this be? I was never more wrong in my life. After the salutations and small talk, the staff and client started discussing the issues.
They threw around so many words, phrases and acronyms I had never heard. I thought for sure there had been another Great Awakening, which explained the tongues or foreign language they were speaking.
I had a full page of acronyms and legal references by the time the 15-minute call was over. From writing faster than I ever have in my life, my whole arm was tingling and my forearm was cramping. I hoped to get these questions answered after the call. I tried to remain positive.
My face must have revealed my feelings because the other intern (a.k.a. Intern 1), who already had two weeks of experience, slid a couple sheets across the table to me. I looked at the paper and soon realized those papers would be like the Bible of the industry. It was like a cheat sheet from college, a list of acronyms spelled out in their entirety. The resource I needed.
Even with the cheat sheet and four weeks’ experience, I found myself reading over proposals or sitting in on another conference call and just hoping to catch the true content of the conversation.
So as you sit in the big comfy chairs, reading this article I hope you can recall your first day and how overwhelming this industry can be. If you can't relate, you can AMP my HIBCC and hope I don’t COT on your PHS.
Note: James is a senior this year at Ursinus College in PA.
Internship. The mere sound of the word conjures up negative thoughts in most college students’ minds. Thoughts usually revolve around mundane tasks like making copies or fetching coffee and bagels from the local store.
“One cream or two?” I planned on saying, as the dread of being below the bottom can make the first day miserable.
I remember my first day. I was dressed to impress, sporting freshly-pressed khakis, new brown shoes, and a button-up. I looked into the mirror as I brushed my teeth and thought for sure I was ready for anything they had for me.
Twenty minutes later as I sat still on a four-lane highway, I watched the time tick by. It soon became a reality I had no shot at making it on time. I panicked as I thought of being late on the first day and the impression it would make. I called up my boss thinking my life was over.
“Get here when you can,” she replied softly, which brightened my mood.
The traffic was a part of the internship I had not considered, as I arrived a half hour late. I was thrown into a conference call having missed the initial orientation as well as a chance to find my bearings.
“Do your best to figure out what’s going on with the project,” was the only advice I got as I entered a world beyond my comprehension.
Being an honor student at a good college, how hard could this be? I was never more wrong in my life. After the salutations and small talk, the staff and client started discussing the issues.
They threw around so many words, phrases and acronyms I had never heard. I thought for sure there had been another Great Awakening, which explained the tongues or foreign language they were speaking.
I had a full page of acronyms and legal references by the time the 15-minute call was over. From writing faster than I ever have in my life, my whole arm was tingling and my forearm was cramping. I hoped to get these questions answered after the call. I tried to remain positive.
My face must have revealed my feelings because the other intern (a.k.a. Intern 1), who already had two weeks of experience, slid a couple sheets across the table to me. I looked at the paper and soon realized those papers would be like the Bible of the industry. It was like a cheat sheet from college, a list of acronyms spelled out in their entirety. The resource I needed.
Even with the cheat sheet and four weeks’ experience, I found myself reading over proposals or sitting in on another conference call and just hoping to catch the true content of the conversation.
So as you sit in the big comfy chairs, reading this article I hope you can recall your first day and how overwhelming this industry can be. If you can't relate, you can AMP my HIBCC and hope I don’t COT on your PHS.
Note: James is a senior this year at Ursinus College in PA.
Friday, September 7, 2007
5,000 Visitors!!!
The Pharma Compliance Blog reached a milestone at 3:24PM yesterday. We recorded our 5,000th visitor! In fact, yesterday's topic registered the highest visitor total in the short 4 month history of the blog. Keep in mind that I do track those topics that are read most in order to continue to customize this site to best meet the needs of our visitors.
I'd like to take the opportunity to thank each and every one of you for your comments, concerns and questions since our launch in May. We continue to set "Blog records" in the number of people visiting every day. Your support and feedback is overwhelming.
As a reminder and for our daily newcomers, know that the Pharma Compliance Blog is a 100% anonymous environment. You can make comments to any post by simply clicking on "POST YOUR THOUGHTS HERE" at the bottom of each topic posted. Click on the 'radio button' that says 'anonymous' and type away! Also don't forget to check out the entire left side of the Pharma Compliance Blog where you will find some helpful sites, key terms to search for in the news that are pertinent to YOUR SPACE, and the Pharmaceutical companies making news --- which is updated every single morning.
Moving forward, I continue to urge you to send your comments, topic ideas and questions to me directly at stevenmoore@cis-partners.com or you can call me at 610-565-8007.
Our goal at CIS remains to keep this site for you --- free of annoying popups and advertisments (although I may plug something very occasionally --- c'mon, I work hard!) --- and full of content that is important to YOU!
For Your Space,
Steven.
Thursday, September 6, 2007
Common GP Challenges Facing Small and Mid-Sized Pharma
Brian O'Rourke, PCX Product Manager
Katie Lapins, CIS Senior Compliance Specialist
GP personnel at small or mid-sized pharmaceutical companies face many unique challenges. Based upon what we have seen in the numerous GP assessments we’ve provided to organizations fitting these sizes, all the challenges stem from a single source: lack of internal understanding of GP regulatory requirements and GP’s importance to the organization.
In most small or mid-sized companies, GP is often overlooked and not fully understood. Senior management is usually unaware of the potential profit and liability associated with GP. The Compliance Department has been traditionally more concerned with sales and marketing practices. The Legal Department is more focused upon contract review, human resource issues, patents, corporate compliance, corporate communications, and other regulatory issues.
As a result, we’ve seen these issues arise time and time again:
One GP Resource: You’re responsible for AMP, BP, Customary Prompt Pay Discounts, Nominal Price, Non-FAMP, PHS, and/or ASP. As a result, you don’t have the time to track pending legislation or changing regulatory requirements, nor do you have the time to document your processes in the form of written policies and procedures. You’re an army of one, and you’re usually kept out of the loop about commercial pricing strategies or offerings until AFTER decisions have been made that affect your calculations. And, you usually have many other responsibilities unrelated to GP.
Commercially-Driven Class of Trade Schema: A COT schema exists and is used, but it was created without any input from GP personnel. The schema reflects operational or administrative decisions, without regard to GP statutory and regulatory requirements. As a result, customers are being assigned to a class of trade, and GP personnel must re-assign customers for their own purposes or rely upon potentially inaccurate classifications.
No GP Policies and Procedures: While you may not need written policies and procedures to follow to perform your job, lack of formal documentation poses huge risks to the organization. As the company expands, additional resources might be brought in, your role might change, and other personnel may become involved in GP. Further, your company must have documentation in place in the event of an external audit. Formal, written policies and procedures are the first things the OIG will ask to see if it initiates an audit. Finally, assuming that corporate management has approved the proposed methodologies and supporting policy decisions, formal documentation affords a measure of protection to GP personnel. After all, if you are following corporate-approved methodologies, then you are doing your job correctly.
Commercial Pricing Decisions Made Without GP Input: Pricing decisions do not always affect your GP calculations. However, any effect must be captured and prepared for. At the very least, GP personnel should serve in an advisory capacity for upper management and be kept informed with respect to commercial pricing decisions. That way, there won’t be as many fluctuations in pricing that could have long-term effects. With the DRA provision pertaining to AMP-based pharmacy reimbursement, GP calculations could have a major impact on company revenues. Consistent, fully-informed pricing strategies have never been more important than they are now.
Decentralized GP Approach: Calculation and submission responsibilities rest with several different employees that have little to no contact with one another. Often, these employees’ main roles are something else entirely, and GP is relegated to the backburner. For obvious reasons, a decentralized approach to GP breeds many problems given the inter-relatedness of the Programs.
So what can you do? The obvious answer is that you can raise awareness of GP’s importance. Executives tend to listen when they hear words like “profit” and “exposure.” The phrase “revenue leakage” tends to grab the attention of senior management. Given that October 1st is fast approaching, now is as good a time as any, especially with the CEO/CFO Certification requirement contained within CMS’s Final Rule.
Katie Lapins, CIS Senior Compliance Specialist
GP personnel at small or mid-sized pharmaceutical companies face many unique challenges. Based upon what we have seen in the numerous GP assessments we’ve provided to organizations fitting these sizes, all the challenges stem from a single source: lack of internal understanding of GP regulatory requirements and GP’s importance to the organization.
In most small or mid-sized companies, GP is often overlooked and not fully understood. Senior management is usually unaware of the potential profit and liability associated with GP. The Compliance Department has been traditionally more concerned with sales and marketing practices. The Legal Department is more focused upon contract review, human resource issues, patents, corporate compliance, corporate communications, and other regulatory issues.
As a result, we’ve seen these issues arise time and time again:
One GP Resource: You’re responsible for AMP, BP, Customary Prompt Pay Discounts, Nominal Price, Non-FAMP, PHS, and/or ASP. As a result, you don’t have the time to track pending legislation or changing regulatory requirements, nor do you have the time to document your processes in the form of written policies and procedures. You’re an army of one, and you’re usually kept out of the loop about commercial pricing strategies or offerings until AFTER decisions have been made that affect your calculations. And, you usually have many other responsibilities unrelated to GP.
Commercially-Driven Class of Trade Schema: A COT schema exists and is used, but it was created without any input from GP personnel. The schema reflects operational or administrative decisions, without regard to GP statutory and regulatory requirements. As a result, customers are being assigned to a class of trade, and GP personnel must re-assign customers for their own purposes or rely upon potentially inaccurate classifications.
No GP Policies and Procedures: While you may not need written policies and procedures to follow to perform your job, lack of formal documentation poses huge risks to the organization. As the company expands, additional resources might be brought in, your role might change, and other personnel may become involved in GP. Further, your company must have documentation in place in the event of an external audit. Formal, written policies and procedures are the first things the OIG will ask to see if it initiates an audit. Finally, assuming that corporate management has approved the proposed methodologies and supporting policy decisions, formal documentation affords a measure of protection to GP personnel. After all, if you are following corporate-approved methodologies, then you are doing your job correctly.
Commercial Pricing Decisions Made Without GP Input: Pricing decisions do not always affect your GP calculations. However, any effect must be captured and prepared for. At the very least, GP personnel should serve in an advisory capacity for upper management and be kept informed with respect to commercial pricing decisions. That way, there won’t be as many fluctuations in pricing that could have long-term effects. With the DRA provision pertaining to AMP-based pharmacy reimbursement, GP calculations could have a major impact on company revenues. Consistent, fully-informed pricing strategies have never been more important than they are now.
Decentralized GP Approach: Calculation and submission responsibilities rest with several different employees that have little to no contact with one another. Often, these employees’ main roles are something else entirely, and GP is relegated to the backburner. For obvious reasons, a decentralized approach to GP breeds many problems given the inter-relatedness of the Programs.
So what can you do? The obvious answer is that you can raise awareness of GP’s importance. Executives tend to listen when they hear words like “profit” and “exposure.” The phrase “revenue leakage” tends to grab the attention of senior management. Given that October 1st is fast approaching, now is as good a time as any, especially with the CEO/CFO Certification requirement contained within CMS’s Final Rule.
Wednesday, September 5, 2007
U.S. Patent Reform Could Threaten Pharma
Snippets from a recent Reuters article: "Lawmakers returning from their summer break are expected to consider patent law changes that have pitted two of America's most invention-dependent industries against each other.
The theory behind patents -- which date back at least to pre-Renaissance Italy and possibly to ancient Greece -- is that inventors should profit from their work.
But in an economy powered by rapid innovation, battles over who owns a patent can cost corporations tens of millions of dollars annually...
...But large pharmaceutical firms worry about the changes. Their big moneymakers tend to be drugs protected by one or two patents and they depend on the period of patent protection to make their profits.
...Both bills would change how damages are calculated and make it harder for inventors to prove willful infringement to win triple damages.
They would also scrap the practice of considering the entire value of a product in calculating damages, even if the patent infringed contributed only a small amount to the item.
...But Hans Sauer, associate general counsel for the Biotechnology Industry Organization, said that reduced damages would weaken patents. "Some people might ask themselves, 'well, is it going to be cheaper to infringe?'"
...But the tech companies are confident they will prevail.
Another change in the bills is to grant a patent to whoever files first, rather than to which inventor can prove -- using a laboratory notebook, for example -- that he or she was the first to invent the product."
Talk about two powerful industries battling on an issue!
For our space's purposes, the one thing that seems to stand out is the quote: "Some people might ask themselves, 'well, is it going to be cheaper to infringe?'"
You have to wonder if this sort of thing is thought about in other issues within Compliance. Consider off-label promotion. Are the benefits of an unapproved alternative use greater than the potential issues that might be faced down the road? To me, this is where ethical behavior meets business! I'm not saying it's easy, but off-label use --- much like patent infringement --- is illegal any way you look at it. However, if these changes make it 'cheaper' to do so, I have to believe that Hans Sauer's quote is quite legitimate!
The same holds true for compliance and, in my opinion, it simply shouldn't be that way! Starting from scratch in setting up a meaningful compliance program is not cheap --- both financially and with respect to time and resources. These costs MIGHT lead management to say, "Perhaps it's cheaper to 'roll the dice' and continue to grow under the radar." The problem is --- like any real radar --- the larger you get, the quicker you're visible. That's exactly why setting up a compliance program early is the key. Gaining alignment from all departments involved is absolutely necessary. Most importantly, management needs to be on board. This establishes the 'tone at the top' and protects the company from wayward and unethical decision making. Willfully infringing on a patent as a business decision is the type of great area that a meaningful compliance program can help a company navigate through.
It will be interesting to see how changes to patent law will effect our industry. As you know, companies rely on the profits of Single Source drugs to fuel R&D expenditures and keep the company growing. If competitors are able to circumvent certain patent laws and 'more cheaply infringe,' there could be a newfound threat to this important cycle of profits to R&D.
Thoughts?
For Your Space,
Steven.
The theory behind patents -- which date back at least to pre-Renaissance Italy and possibly to ancient Greece -- is that inventors should profit from their work.
But in an economy powered by rapid innovation, battles over who owns a patent can cost corporations tens of millions of dollars annually...
...But large pharmaceutical firms worry about the changes. Their big moneymakers tend to be drugs protected by one or two patents and they depend on the period of patent protection to make their profits.
...Both bills would change how damages are calculated and make it harder for inventors to prove willful infringement to win triple damages.
They would also scrap the practice of considering the entire value of a product in calculating damages, even if the patent infringed contributed only a small amount to the item.
...But Hans Sauer, associate general counsel for the Biotechnology Industry Organization, said that reduced damages would weaken patents. "Some people might ask themselves, 'well, is it going to be cheaper to infringe?'"
...But the tech companies are confident they will prevail.
Another change in the bills is to grant a patent to whoever files first, rather than to which inventor can prove -- using a laboratory notebook, for example -- that he or she was the first to invent the product."
Talk about two powerful industries battling on an issue!
For our space's purposes, the one thing that seems to stand out is the quote: "Some people might ask themselves, 'well, is it going to be cheaper to infringe?'"
You have to wonder if this sort of thing is thought about in other issues within Compliance. Consider off-label promotion. Are the benefits of an unapproved alternative use greater than the potential issues that might be faced down the road? To me, this is where ethical behavior meets business! I'm not saying it's easy, but off-label use --- much like patent infringement --- is illegal any way you look at it. However, if these changes make it 'cheaper' to do so, I have to believe that Hans Sauer's quote is quite legitimate!
The same holds true for compliance and, in my opinion, it simply shouldn't be that way! Starting from scratch in setting up a meaningful compliance program is not cheap --- both financially and with respect to time and resources. These costs MIGHT lead management to say, "Perhaps it's cheaper to 'roll the dice' and continue to grow under the radar." The problem is --- like any real radar --- the larger you get, the quicker you're visible. That's exactly why setting up a compliance program early is the key. Gaining alignment from all departments involved is absolutely necessary. Most importantly, management needs to be on board. This establishes the 'tone at the top' and protects the company from wayward and unethical decision making. Willfully infringing on a patent as a business decision is the type of great area that a meaningful compliance program can help a company navigate through.
It will be interesting to see how changes to patent law will effect our industry. As you know, companies rely on the profits of Single Source drugs to fuel R&D expenditures and keep the company growing. If competitors are able to circumvent certain patent laws and 'more cheaply infringe,' there could be a newfound threat to this important cycle of profits to R&D.
Thoughts?
For Your Space,
Steven.
Tuesday, September 4, 2007
Final Rule Assessment
From the desk of CIS Compliance Specialist, Chrissy Spicer:
"Now that the long awaited Final Rule is finally here, manufacturers may be puzzled on the next steps or do not have the resources to tackle the 600-page rule quickly and analyze the impact on current operations from a system and documentation perspective. With the October 1st effective date right around the corner, CIS is here to help. CIS has been helping their clients assess the impact of the new requirements of the final rule by providing recommendations related to:
· The AMP Monthly and Quarterly Methodology
· Customer Inclusion and Exclusion treatment
· Transaction Inclusion and Exclusion treatment
· Definition Application
· Reporting
CIS is also strategizing with their clients to provide optimal process solutions for applying the new definitions outlined in the Final Rule (i.e. Bundled Sales). Subsequent to analyzing the impact, CIS is facilitating the deployment and integration of the changes to our client’s government pricing systems and documentation."
For more information, contact me at stevenmoore@cis-partners.com or Chrissy directly at chrissyspicer@cis-partners.com.
Have a great week!
"Now that the long awaited Final Rule is finally here, manufacturers may be puzzled on the next steps or do not have the resources to tackle the 600-page rule quickly and analyze the impact on current operations from a system and documentation perspective. With the October 1st effective date right around the corner, CIS is here to help. CIS has been helping their clients assess the impact of the new requirements of the final rule by providing recommendations related to:
· The AMP Monthly and Quarterly Methodology
· Customer Inclusion and Exclusion treatment
· Transaction Inclusion and Exclusion treatment
· Definition Application
· Reporting
CIS is also strategizing with their clients to provide optimal process solutions for applying the new definitions outlined in the Final Rule (i.e. Bundled Sales). Subsequent to analyzing the impact, CIS is facilitating the deployment and integration of the changes to our client’s government pricing systems and documentation."
For more information, contact me at stevenmoore@cis-partners.com or Chrissy directly at chrissyspicer@cis-partners.com.
Have a great week!
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