Compliance Resolutions for the New Year

By Katie Lapins, CIS Senior Compliance Specialist
katielapins@cis-partners.com

1. I will not only have SOPs, but I will make sure they are relevant, followed and updated as needed.
2. I will try not to speak in complete acronyms when discussing GP with “regular” folks. Oops! I mean Government Pricing.
3. I won’t just ignore comments from the sales group that might lead me to believe there are questionable activities being practiced (i.e., off-label promotion, illegal sample distribution, etc.).
4. I won’t run out the back door if I hear that the OIG just walked in the front door.
5. I will actually validate the data I use for my government calculations.
6. When in doubt, I will request clarification from General Counsel or the appropriate regulatory agency.
7. I won’t just accept the Class of Trade provided by the GPO or assume I can tell how a customer should be classified simply based on the name.
8. I won’t curse, at least not loudly, when I hear “DRA.”
9. I will actually validate, on a regular basis, eligibility for entities receiving PHS pricing.
10. If I’m the only one in my company who understands the government calculations, I won’t try to hide or bury something that doesn’t look right and that I don’t completely understand.
11. Just because a sales rep calls something an, “Admin Fee,” I won’t assume that it actually meets the criteria for government calculations.
12. I won’t joke with my CFO on a regular basis that without me, she would find out how good she looks in an orange jumpsuit.

MEDICAL DEVICE MANUFACTURERS IN THE HOT SEAT AGAIN

By Joe Birdsall, CIS Compliance Specialist
joebirdsall@cis-partners.com

Fast on the heels of the Physician Payment Sunshine Act, the Transparency in Medical Device Pricing Act of 2007 calls for medical device manufacturers to report average and median sales prices for implantable devices, such as artificial hips, pacemakers, artery stents, etc., to the Department of Health and Human Services (CMS) on a quarterly basis. Drug manufacturers have been reporting similar pricing data to CMS for years but it seems medical devices manufacturers will be required to report pricing data as well.

THE UNDERLYING ISSUES
The prices charged by medical device manufacturers may vary widely from hospital to hospital, who obviously implant the devices into patients. And without pricing information publicly available, hospitals are unable to determine fair market value and essentially blind during the price negotiation process.

Medical device manufacturers are not subject to the same regulations as drug manufacturers. In the device industry, physicians may still receive sizable financial payments (over 6 figures) in the form of gifts, consulting fees, grants and various Chotchkies (see Office Space). Although some device manufacturers have a voluntary code of ethics limiting the annual gift amount to physicians, it is still a wide open playing field for sales and marketing representatives and all parties involved can profit in this environment, except for the consumer.

The NY Times published an article in 2005 examining these types of issues in detail. The article noted that “Medicare payments to hospitals for implant surgery have risen about 40 percent, from $10 billion to $14 billion” between 2003 and 2005. Obviously, this fact might have drawn some unwanted attention to medical device manufacturer pricing strategies. http://www.nytimes.com/2005/09/22/business/22devices.html

THE PURPOSE OF THE ACT• Provide public access to manufacturer pricing data to improve consumer ability to fairly negotiate with device manufacturers.
• Alleviate public concern regarding the impact of marketing on prescribing practice.
• To place pressure on physicians and medical device manufacturers to reflect on the ethics of their relationships.

THE REQUIREMENTS OF THE ACT
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:s2221is.txt
• Implantable medical devices manufacturers will report average and median price calculations will include manufacturer’s sales to all purchasers, including volume discounts, cash discounts, free goods and services that are contingent on any purchase requirement, chargebacks, and rebates, and any other discounts or price concessions the Secretary of HHS determines to be appropriate.
• Reports will be made on a quarterly basis.
• Failure to report or errors in reporting will carry civil penalties ranging from $10,000 to $100,000 per violation.
• No later than April 30th, 2009, the pricing data will be posted via the CMS website.

THE IMPACT OF THE ACT
Medical device manufacturers would report average and median sales prices to CMS. The information will be placed on a CMS website for public consumption. The transparency of medical device prices would improve a hospital’s ability to fairly negotiate with device manufacturers. In turn, if lower device prices can be negotiated by hospitals then the total cost to patients and insurers should be reduced as well.

Besides providing value to hospitals, patients and American taxpayers, this type of legislation could be a Post-DRA boon to lawyers, consultants and niche software manufacturers in the government compliance space. Since medical device manufacturers will likely require assistance to fully understand and prepare for the stipulations of the Transparency in Medical Device Pricing Act as well as the Physician Payment Sunshine Act.

The Transparency in Medical Device Pricing Act of 2007 was introduced on October 23rd by Senator Chuck Grassley and Arlen Spector.

More than 700 Medicines Now in Development For Major Diseases Affecting Women

From PhRMA.org:

Baton Rouge, LA (November 27, 2007) – More than 700 medicines for diseases that disproportionately or only affect women are currently in development, according to a new report released today at an event in Baton Rouge, Louisiana by the Pharmaceutical Research and Manufacturers of America (PhRMA). America’s pharmaceutical research companies are developing new medicines to fight arthritis, women-specific cancers, diabetes, obstetric/gynecologic conditions and mental illnesses that, at the very least, impair the quality of life for women.

“There is significant progress being made in the search for new cures and treatments for diseases of special concern to women,” said Billy Tauzin, President and CEO of PhRMA. “We are looking to a future where more women can lead long and healthy lives. These drugs that are now in development are helping get us there.”

According to the report, the drugs in development include:

- 135 medicines for cancers disproportionately affecting women; including 95 for breast cancer, 47 for ovarian cancer and 17 for cervical cancer. This year, more than 700,000 cases of these three cancers alone will be diagnosed, according to the American Cancer Society.

- 125 medicines for arthritis and musculoskeletal disorders. Arthritis affects 41 million American women; accounting for 70 percent of all rheumatoid arthritis suffers, according to the Society of Women’s Health research.

- 106 medicines for autoimmune disorders, which collectively afflict 23.5 million Americans, most of them women, according to National Institute of Allergy and Infectious Diseases.

- Other medicines in development include treatments for diabetes, glaucoma, irritable bowel syndrome, urinary tract infections, asthma, Alzheimer’s disease, migraine, obstetric and gynecologic conditions, depression, anxiety, and sepsis – all of which disproportionately affect American women.

In separate reports, PhRMA has found that researchers are working on 277 medicines for heart disease and stroke – which kill half a million women each year – and 96 medicines for lung cancer, the leading cancer killer of women.

Merry Christmas!

On the 12th Post of Christmas, PCB Bloggers Gave to Me: A GP Holiday Wish & GP Horoscopes --- Your #1 Favorite!

I've stuffed the PCB Stocking with a couple of goodies today! I'll have more towards the end of the year next week, but I wanted to publish a holiday wish from CIS's very own Chris Cobourn and have republished Brian O'Rourke's Horoscopes for the GP/Compliance Professional -- which is still growing in fame!

One more major note: This week, with a boost from our 'news alerts' pertaining to the preliminary injunction, the Pharma Compliance Blog raced past 10,000 visitors since it's launch on April 30th of this year! Sah-weet!

From me to you and your friends and families, I'd like to wish you a wonderful holiday season! The Pharma Compliance Blog and CIS have had a tremendous and fun year --- and we thank you all!

For Your Space,

Steven.
stevenmoore@cis-partners.com

Merry Christmas to All and a Happy GP!

Dear Friends & Colleagues,

We at the CIS GP Practice wish you all a happy holidays, as we close out a very interesting year.

With the Proposed Rule, Final Rule, Changes in the OPA AMP guidance, system changes, procedure changes, and more, it has been a very challenging year. It almost makes us long for those good old days, when our only complaint was a lack of clear guidance. As a GP community, (which includes working for manufacturers, consultants large and small, and system providers) we have gone through it together via conferences, webinars, projects and phone calls. We are the special chosen few who are the closest to maybe understanding it.

(Note: I have stopped trying to explain to my wife what I do!)

Thank you to everyone out there for your support of CIS. You have helped us establish a meaningful and practical dialog and access to information through tools like the PCX, the PCX Newsletter and the Pharma Compliance Blog. At the beginning of the year our vision was to help foster and facilitate a dialogue in the GP community and we have had a great response and feedback. I invite you all to continue to participate in 2008 and, to that end; we will always welcome articles and blog entries from you.

I also want to wish a happy holiday to the CIS GP team members. I believe that we have developed the finest GP team out there, with experienced industry professionals who can relate to what you are going through and will always be willing to roll up their sleeves to help out.

We are looking forward to 2008!

Sincerely,

Chris Cobourn, CIS VP of Regulatory & GP Practice Lead


Horoscopes for the GP/Compliance Professional
By Brian O'Rourke, PCX Product Manager & Compliance Specialist
brianorourke@cis-partners.com

The below is intended to be funny. No more disclaimers than that. Enjoy and laugh. I most certainly did. FYS, Steven.

Horoscopes for the GP/Compliance Professional

January—No matter how many times you check your calculations and data, your AMP and BP for Q1 of 2008 will be wrong. On the bright side, it’s your CFO that will get into trouble for certifying the incorrect data. Before the CFO can point the finger at you, place an anonymous call with the Justice Department and tell them the CFO was intentionally trying to defraud the Government. Make sure to emphasize the word “intentionally.” After the Justice Department arrests the CFO, tell the other executives in the company that the CFO sexually harassed you, and they’ll promote you in exchange for your silence. See—sometimes good can come from evil.

February—2008 will be the year for you, but retire before 2009 if you can. That new drug that R&D has just developed and gotten approved will be a blockbuster in 2008. The longer-term effects of the drug, however, won’t come to light until 2009: temporary insanity, blindness, uncontrollable flatulence, photosensitivity, an outbreak of Bubonic Plague, and Bell’s Palsy. You will also realize, albeit too late, that you sent some free samples to your cousin, Marty. Ah well, you never liked him much anyway.

March—Beware, the Ides of March! Who’s that knocking on the door? It’s the OIG. Can you say “CIA”? Get out while you still can. On a positive note, your love life will flourish in the most unexpected of places.

April— Just when you thought you wouldn’t have to change your AMP Methodology for awhile, CMS issues Release 86 on April 1st, which completely redefines the “retail pharmacy class of trade.” Worse yet, CMS is demanding that manufacturers implement the new methodology for the April monthly calculation! You spend the rest of April putting in 19-hour work days, shirking familial duties and all other personal obligations. You put a cot in your office so you don’t waste time commuting. You miss your son’s first homer in tee ball. On April 30th, CMS issues Release 87, explaining that Release 86 was just an April Fool’s Day gag. Everyone at the company gets a good laugh out of this, while you plot your Monte Cristoean revenge on CMS, which involves the uploading of a virus into the DDR system.

May—The brass will soon decide to bring in a rapidly-growing, well-respected consulting firm to assist you with your GP methodologies, processes, and calculations. You will be grateful for the opportunity to work with CIS and access the PCX during the Project.

June—Your company will bring on a new Corporate Compliance Officer in the very near future. And you’re not going to like her. As part of one of her initiatives, she will decide to review all existing Policies and Procedures and (unfairly) determine that—gasp—none of your GP documentation is up-to-snuff. The job of thoroughly revising nearly a dozen documents will land on your desk. Take some solace in the fact that the Corporate Compliance Officer will be fired for giving away too many pens to prescribing doctors just after she signs off on your newly revised documentation.

July— Your company will be acquired by a British-based pharmaceutical manufacturer in 2008. No major changes will be made. However, you will be constantly reprimanded for not putting u’s in words like “color” and “flavor” and for spelling “authorize” with a “z” instead of an “s.” Finally, the company will force all employees to walk down the left-hand side of hallways and change the Exit signs to “Way Out” signs.

August—Good fortune awaits you. Make sure to tape all Season 4 episodes of the commercially-successful and critically-acclaimed hit “Lost.” Then, watch Seasons 1 through 4 in reverse chronological order, while listening to Pink Floyd and eating Fritos Original Corn Chips, all in one sitting. When you’re finished, play the numbers 4, 8, 15, 16, 23, and 42 in the lottery on the following day. You’ll win millions and never have to calculate AMP again for as long as you shall live. There’s only a 50/50 chance you might wake up on a deserted island someday.

September—At the last minute, your supervisor will approve your request to go to IIR in September. For a good time in Chicago, call the Blog-Nazi, Steven Moore at 610-762-2180. If you’re lucky, Steve will take you to the Billy Goat Tavern. If you don’t call Steve while in Chicago, you will be condemned to an existence of misery and suffering, and your children will blame you for all their failures throughout life, of which there will be many.

October—We hate to break this to you, but you’ve been inadvertently including administrative fees in your AMP calculation. Have no fear! No one will ever notice so long as you retain CIS to help with your Class of Trade scrubbing.

November— Business will continue as usual throughout 2008. In your spare time, you’re able to develop a Unified Field Theory that would have left Einstein speechless. Sadly, the scientific community dismisses your ideas because you’re just a GP specialist, and your co-workers begin to see you for the madman you are. The good thing is—all the people you never wanted to exchange small talk with in the first place won’t be bothering you ever again.

December—Your company will officially recognize December 17th as Festivus, allowing practicing employees to take the day off. Send a Memo to your boss about how your significant other celebrates this oft-overlooked holiday and how you’d like to spend it with him/her. Use the day wisely—get any last-minute shopping done. Opportunities like this don’t come along often.

Special News Alert: Judge Signs Order Granting Preliminary Injunction

Meredith Taylor, Esquire
CIS Compliance and GP Specialist

As promised, we give to you …….the AMP Preliminary Injunction saga part deux!!!

Last night, Judge Lamberth issued an Order addressing the one remaining issue in regard to the AMP injunction: whether AMP data, calculated under the Final Rule can be posted on a public website or be otherwise disclosed publicly.

If you have been following this lawsuit, and this week’s events, you know that the pharmacy trade associations filed a Motion for a Preliminary Injunction against CMS (see yesterday’s blog posting). Yesterday morning we learned that for purposes of this Preliminary Injunction, the Court was not going to hear the parties’ arguments regarding whether the Final Rule ventured outside the four corners of the Social Security Act and improperly changed the AMP calculation methodology. Additionally, the Court held that CMS cannot use AMP data calculated under the Final Rule methodology to set FULs for multiple source drugs covered by the Medicaid Program. CMS must continue (throughout the course of the lawsuit at least) to set FULs using the AWP-based methodology. So, the only issue left to determine was whether AMP data could be publically published.

As CIS’s own Brian O’Rourke so eloquently stated in yesterday’s posting, if CMS were to be allowed to publically publish AMP, then the exception would “swallow the rule.” What this means is that the Court’s ruling—that FULs for generics are to be based on AWP instead of AMP—would be meaningless. If AMP is made public, the practical effect would be that AWP would look a lot like AMP for reimbursement purposes, thereby rendering the Court’s ruling moot.

Yesterday afternoon, the parties came together (much to the satisfaction of the Court I’m sure) and filed a Joint Motion Proposing an Order. The Motion proposed that their attached Order would supersede any other filings pertaining to the Preliminary Injunction. Practically speaking, this didn’t reverse any of the Court’s rulings.

The Order, which was ultimately signed by the Judge, enjoins CMS from undertaking any action to implement the Final Rule is it pertains to Medicaid Reimbursements. This means that AMP will not be used to set FULs for generic reimbursements. Additionally, the Order states that CMS will be allowed to require manufactures to implement the Final Rule as it pertains to rebates. This means that AMP will continue to be calculated in accordance with the Final Rule for rebate purposes. Finally, and most importantly, the Order enjoins CMS from posting AMP data on a public website or otherwise disclosing any AMP data to any individuals or entities.

One thing that we all must keep in mind is that the effects of this Order are only temporary. The Court ruled on a preliminary injunction. A preliminary injunction is defined as a temporary court order commanding or preventing an action which is issued before or during the trial to prevent an irreparable injury from occurring before the court has made a ruling in a case. The reason that one party files a preliminary injunction is because it believes that at that moment in time, during the lawsuit, if some or all of the issues aren’t dealt with immediately, then they will suffer a harm that cannot be remedied by the Court’s final ruling.

This was exactly what was going to happen in this case, at least for the purposes of publishing AMP. As of mid December 2007, or January 2008 at the latest, pursuant to the Final Rule, AMP was to be made public. Had the pharmacy associations not sought this injunction at this point in time, then AMP would have been made public, it would be used to set FULs, and it would have affected their reimbursements. This particular event was time sensitive, and the Court and ultimately the parties agreed, it needed to be ruled on immediately.

On the other hand, the issue of whether the Final Rule went outside the four corners of the Social Security Act was not an immediate threat, and the Court and the parties recognized this.

So, what does this mean? It means that this lawsuit is in its beginning stages, and the parties still need to litigate the merits of this case. The issues in the Complaint are going to be litigated (for an analysis of the Complaint, please see my November newsletter article, or I can send it to you meredithtaylor@cis-partners.com). In fact, CMS has not even answered the Complaint yet which means that there are months, if not years, of litigation to come. This Order will last only throughout the course of the lawsuit. So, for all of you manufacturers out there who think that this ruling doesn’t affect you, you’re right. For now it doesn’t, but it might. And for all of you pharmacies out there who are pleased as punch about the fact that your reimbursements will be based on AWP, not AMP, watch out, because that might change too.

On the 11th Post of Christmas, PCB Bloggers Gave to Me: The Pharmaceutical Industry: Making the Train Ride of Life More Enjoyable

An Ode to John Mayer...

Once in a while, it’s probably a good idea to share some really good news on the Pharma Compliance Blog. I stumbled upon this gem of information yesterday during my daily morning research session:

“Good news on the cancer front: Death rates are dropping faster than ever, thanks to new progress against colorectal cancer.

Among the report's other findings:
• Cancer mortality is improving faster among men, with drops in death rates of 2.6 percent a year compared with 1.8 percent a year for women.
• Lung cancer explains much of the gender difference. Male death rates are dropping about 2 percent a year while female death rates finally are holding steady after years of increases. Smoking rates fell for men before they did for women, so men reaped the benefits sooner.
• Overall, the rate of new cancer diagnoses is inching down about one-half a percent a year.
• New breast cancer diagnoses are dropping about 3.5 percent a year, a previously reported decline due either to women shunning postmenopausal hormone therapy or to fewer getting mammograms.

The annual report is a collaboration of the American Cancer Society, National Cancer Institute, Centers for Disease Control and Prevention, and North American Association of Central Cancer Registries.”

Amidst all of the talk of overhauling the current state of the industry, especially during the most recent presidential campaign, it’s important to note that there are a lot of things that are extremely right with the industry as it is. Statistics like these are awesome and whether or not you have a personal story that goes along with this or any other report, we can all agree that it adds to our peace of mind.

There is a song by the precocious and prolific songwriter John Mayer on his most recent release, Continuum, entitled Stop This Train, that is unbelievably touching and speaks so much to our very own thoughts. At the onset of the song, the lyrics follow:

“No, I'm not colorblind
I know the world is black and white
Try to keep an open mind
But I just can't sleep on this tonight

Stop this train
I wanna get off
And go home again
I can't take the speed it's moving in
I know I can't
But honestly, won't someone stop this train?

Don't know how else to say it
Don't want to see my parents go
One generation's length away
From fighting life out on my own”

Whether it is your own parents or the others in your life that you are close to and love, we can all relate to these lyrics. I’m certainly not in the business of depressing people, but I think you should all be proud to be in an industry that helps heal and comfort our loved ones. No matter the ailment, from Cancer to Lyme Disease to Hemophilia to snake bites to Malaria, our industry is helping countless numbers of people worldwide every single day.

Although we may not be able to stop the train of life, it’s comforting to know that the pharmaceutical industry is doing all that it can to make the ride that much more enjoyable...

...and perhaps a stop or two longer.

For Your Space,

Steven.

Special News Alert--AMP Final Rule: Preliminary Injunction Update

The Intersection of Principled Legal Reasoning and Pragmatism

I’m psyched to be writing this for you. Why? Because as of the time we posted this, I do not know of any other news outlet that is reporting this ground-breaking story. Score one for the good guys.

Many of you have heard about the Preliminary Injunction filed by two pharmacy trade organizations (NACDS and NCPA, whom I’ll just refer to as the pharmacies) on November 15, 2007 against CMS, among others. The pharmacies sought injunctive relief, meaning they were trying to get the Court to stop something that was already happening and about to happen. Specifically, the pharmacies wanted to keep CMS from applying the new AMP-based methodology for setting the Federal Upper Limits (FULs) for multiple source drugs covered by the Medicaid Program.

However, in the initial filing the pharmacies decried many other things about the Final Rule, including the fact that CMS went beyond the four corners of the Social Security Act (SSA) when defining AMP in the first place, as reported to you by CIS’s own Meredith Taylor in the PCX November Newsletter. (For a copy, send me an email at brianorourke@cis-partners.com). More specifically, the pharmacies were quick to point out that the SSA defines AMP as the average price paid to a drug manufacturer by wholesalers for drugs distributed to retail pharmacies. However, as we are all painfully aware, the AMP Final Rule includes prices paid to the manufacturer by entities other than wholesalers—just think of all the sales to non-wholesaler direct purchasers that you are including in your AMP calculations!

CMS and its cohorts promptly filed their opposition to the pharmacies’ motion for a preliminary injunction.

The Court scheduled a hearing on December 14, 2007, at which time both sides argued the merits of their case. Adam Fein of Pembroke Consulting broke the first story on December 17th—the Court granted the pharmacies’ preliminary injunction. If you don’t already, we recommend that you check out Mr. Fein’s Blog on a regular basis: http://www.drugchannels.net/. Always well-researched and well-written, I can’t say enough good things about Drug Channels.

However, since December 17th, we have been waiting with bated breath to see to what extent the Court granted the pharmacies’ preliminary injunction. Would the Court grant it in its entirety? Would the Court limit its ruling? Or, would the Court allow the parties time to attempt to reach an amicable compromise? For those of you who are a bit cynical of America’s judicial system, I offer into evidence Exhibit A: the Court’s actions in this case. The Honorable Royce C. Lamberth, United States District Court Judge used principle-based legal reasoning, showed an understanding of the practical implications of the granting of this Preliminary Injunction, made a decision that didn’t dodge or punt the issues raised in the case, and had enough pragmatism to allow the parties to try to reach an amicable solution to the Preliminary Injunction, all the while showing the restraint most judicial activists lack. Good for you, Your Honor. Now I’ll get off my soap box.

What Did the Court Hold?

The Court held that CMS cannot use AMP data calculated under the Final Rule methodology to set FULs for multiple source drugs covered by the Medicaid Program. CMS must continue to set FULs using the AWP-based methodology.

What Issues Did the Court Not Reach?

The Court did not reach the issues of whether manufacturers should change their methodology for calculating AMP for a variety of reasons. It is unlikely that this injunction, when finalized, will reach that far.

First, manufacturers are not party to this action—the Court appears unwilling (and rightly so) to “change” the definition of AMP so that manufacturers would have to revert to a prior methodology to calculate AMP for rebate purposes. The costs, strain on internal resources, and delays on rebates associated with such a reversion would be astronomical. And I don’t even like to use the word astronomical.

Second, the Court has not yet decided whether CMS will be permitted to disclose AMP data calculated under the Final Rule to the States.

What Are the Parties Arguing About Now?

To the pharmacies’ and CMS’s credit, they were able to agree on most of the non-major (from their perspectives!) issues raised in the Preliminary Injunction. Both sides are willing to ignore that the Final Rule definition of AMP might go beyond the SSA’s definition of AMP. Further, it appears that the pharmacies are willing to drop any contentions related to AMP rebates for the time being; naturally, they’re more concerned with FUL reimbursement.

The main remaining point of contention appears to be the disclosure of AMP data calculated under the Final Rule definition of AMP. The pharmacies are arguing that, by allowing CMS the right to disclose this information, the States might use it anyway to establish Medicaid reimbursement rates for pharmacies. At least 9 States, according to the pharmacies, have indicated that they are “likely” or “very likely” to use this AMP data for establishing reimbursement rates (Plaintiffs’ Reply to Defendants’ Opposition to Plaintiffs’ Proposed Preliminary Injunction Order, p.3). Such a ruling by the Court would enable the States to circumvent the Court’s ruling in the first place—that reimbursement should not be based upon the Final Rule definition of AMP. In other words, the exception would swallow the rule.

What Does This Mean for Manufacturers?

The Court’s granting of such an important, far-reaching request for injunctive relief means that the judiciary is more than willing to entertain such motions, when they are well-researched and based upon solid legal reasoning. In this case alone, the Court stated that the Defendants “failed to abide by the ‘crystal clear’ provisions of the Social Security Act.” (Plaintiffs’ Reply to Defendants’ Opposition to Plaintiffs’ Proposed Preliminary Injunction Order, p.1). Yikes—a Federal Judge went on the record and said to CMS, “You went outside Congress’s mandates in defining AMP.” If one Judge is willing to say that, manufacturers and their respective lobbying organizations should think long and hard about whether to file their own Complaint after making an economic assessment of the current definition of AMP under the Final Rule.

What’s Next?

We have heard, albeit very unofficially, that Judge Lamberth will issue his Ruling sometime later this evening. So we might know, by tonight, to what extent the preliminary injunction has been granted. Once that story comes through, we will post more!

On the 10th Post of Christmas, PCB Bloggers Gave to Me: PBM Rebates and 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?

Anonymous said...
This is a great topic, and certainly one that has no straight forward answer. I wonder why CMS so obviously overlooked BP when addressing the inclusion/exclusion of PBM rebates? While it could be a simple oversight (it certainly wouldn’t be the first time), I wonder if there might not be more to it?

When you look at why CMS says the proposed to treat PBM rebates passed on to the retail class of trade, it is clear that they are specifically addressing only AMP:

“One of the most difficult issues with PBM discounts, rebates, or other price concessions is that manufacturers contend that they do not know what part of these discounts, rebates, or other price concessions is kept by the PBM for the cost of its activities and profit, what part is passed on to the health insurer or other insurer or other entity with which the PBM contracts, and what part, if any, that entity passes on to pharmacies. Despite the difficulties of including certain PBM rebates, discounts or other price concessions in AMP, excluding all of these price
concessions could result in an artificial inflation of AMP.” (39147)

Even with this one sided statement of why PBM rebates passed on to the retail COT should not only be determined but included in the calculation as a price concession, I do agree with Chris’s evaluation. It would seem logical that CMS would like to see this same “price concession” incorporated in the calculation of Best Price.

Anonymous said...
This is a very difficult issue as it impacts ASP as well. I believe the real issue is that BP is intended to apply to all commercial business as opposed to the more narrowly defined retail class of trade used for AMP. Since provider is so broadly defined in the Final Rule (447.505(b)) to include "...an 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", it appears in the broadest sense for BP, PBM rebates are ultimately paid for the provision of health services thus includable. To quote from a legal opinion, “the exception swallows the rule!"

On the 9th Post of Christmas, PCB Bloggers Gave to Me: Let us not Forget the Children

I had posted a recent study (Tuesday, July 24th “Most Children in U.S. Hospitals Receive Medicine Off-Label") that pointed out the staggering statistic that just under 80% of hospitalized children receive medications that have been only tested and approved for adults. This extensive study, the largest of its kind conducted by the Children’s Hospital of Philadelphia (CHOP), certainly shed light on the amount of off-label drug use that is occurring in our nation’s children. This is a scary thought when we think about the recent issues we have seen in adults with drugs such as Plavix and Avandia.

I was reminded of this story and inspired to write after watching the movie The Constant Gardener, which I will not ruin or give away for those who have not seen it. The basic premise is that the wife of the main character has discovered a major pharmaceutical company is testing a drug called Dypraxa, a drug with very promising potential for fighting resistant strains of Tuberculosis. The testing, however, is occurring on the people of Africa and, in many cases, the children of Africa. The story goes on to show that many of the Africans treated are dying because the drug is not quite ‘perfect’, but to pull the testing now would mean millions of dollars in expenses to the partnering companies. It’s far easier to ‘tweak’ the drug while in trials in order to expedite the drugs delivery. Meanwhile, more and more people and children pass.

So, while perhaps not a direct link, you can clearly see the where I’m headed. The vast majority of drugs (perhaps not cancer drugs and other potentially terminal illness drugs) have NEVER been tested in children --- yet they are administered to children time and time again. The drugs most prescribed to children are approved for use in the central nervous system or autonomic nervous system. Think of your own children…

I fully understand that the options are certainly limited for many physicians and I’m not playing the blame game. However, in recent years, we’ve seen so many things go wrong in adults that we are seemingly blindly moving forward in an industry where a huge percentage of pediatric patients are being administered drugs for while there is little or no clinical precedent. Clearly I see the issues with clinical trials with children, but are there alternatives we’re not thinking about?

I was just a tot, but do you remember Aspirin and its connection to Reye Syndrome? This was Aspirin, not a drug related to treating the central nervous system.

I’m not a parent as of yet, but my wife and I do hope we can enjoy this miracle some day in the future. I chuckle (in an ‘ironic’ way) when I see a warning label on a box of Legos warning parents that children can swallow them --- resulting in obvious danger. Yet we continue to inject or allow children to swallow drugs that have never been tested on them. As a potential parent, this concerns me.

In the CHOP study, off-label use accounted for $270 million, or 40%, of the total dollars spent on children’s medication. That is certainly just a microcosm of the large chunk of change that the pediatric market represents.

But what’s the price tag on one adverse event in a child? 28% of children treated in the study received Morphine.

Let us not forget the children.

For Your Space,

Steven.

On the 8th Post of Christmas, PCB Bloggers Gave to Me: CMS's Final Rule: CIS's Chris Cobourn's Analysis

Originally Posted: July 8, 2007

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)

On the 7th Post of Christmas, PCB Bloggers Gave to Me: Methodology Changes or Data Related Restatements After October

What if you have methodology changes after November?

By Chris Cobourn, CIS VP of Regulatory with support from Chrissy Spicer and Joe Birdsall, CIS GP Compliance Specialists

As we talk about "restatements" post Final Rule, keep in mind that we are
speaking 2 two different topics, a restatement based upon "errors," such
missing or incorrect data, and restatements or recalculations based upon
identified issues or errors in Methodology. In this blog entry, I try to
offer some thoughts on both, and to clarify the potential differences moving
forward.

CMS has made it clear that they expect manufacturers to have their Final
Rule methodology correct for the October calculations, and to report on
time, yet as recent as IIR in September is was clear that there were
numerous open Methodology questions that seemed too broad still to make
general assumptions. When asked what a manufacturer should do if there were
not answers to all of these methodology issues, CMS restated that
manufacturers are expected to get it right and on time.

Practically speaking, we will be left with the fact that we will have to do
the best we can, including making some methodology assumptions that may need
to be updated as we move forward, or to put procedures and systems in place
to get data at the right level of detail. So where does it leave us if,
lets say, we make some corrections to methodology, systems, data in January?

It would appear that the manufacturer should, under section 447.510 of the
Final Rule, section b, report revised quarterly AMPs, except when the
revision would be as a result of data pertaining to lagged concession data
(as in my opening paragraph, corrections based on data errors).

Release 78 adds another element, stating that:
a manufacturer with a new recalculation request regarding AMP and/or best
price (submitted to CMS after the date of this release) may proceed with
implementing the revised pricing methodology on a prospective basis without
further review by CMS. We continue to request that manufacturers notify CMS
and receive authorization in advance of any retroactive change in the method
used to calculate their AMP and/or best price, along with revised AMP
and/or best price data for the drugs affected, the relevant 11-digit NDC
numbers, the fiscal magnitude of the change, and a statement as to the
reason for the change in methodology.

Those elements together would suggest that a manufacturer should:

1) Proceed with the October calculations with the best methodology
assumptions and data you can, and document everything well so that you have
good support for your certifications

2) If you identify later that there are methodology corrections that you
have to make, you can (according to release 78) begin using the new
methodology on a prospective basis, but that you would have to notify CMS
and receive authorization before making any retroactive changes and
conducting any recalculations.

3) If moving forward you identify errors in your AMP calculation, where the
errors are not related solely to lagged price concessions, you are required
to resubmit monthly and quarterly AMPs (see 447.510(b), and comments on page
39210)

On the 6th Post of Christmas, PCB Bloggers Gave to Me: A Little 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.

On the 5th Post of Christmas, PCB Bloggers Gave to Me: The Fine Art of Canoodling

Fresh off of another tiring and fun IIR MDRP conference, I thought I’d pick an interesting topic. We all know that these conferences are great places for us all to learn a bit more from our colleagues and various other organizations. However, the focus of my article will be the ‘other’ reason that we’re all there and, of course, a big reason we at CIS are there.

Like someone with their fly down, the fine art of canoodling is visible to all but hard to openly bring up in conversation. The definition of ‘canoodle’ that I will focus on is not the one that involves two teenagers meeting at that famous ‘spot’ at the top of the hill in the neighborhood. Rather I am talking about the one that reads, more or less, “…To win over or convince by cajoling or flattering.” If you’re like me, you’ll also need the definition of ‘cajoling’ because the definition couldn’t be “to win over or convince by canoodling,” which would be breaking the golden rule of definitions as my colleague Brian O’Rourke would remind me: Thou shalt not define a word with the word in the definition.

I’ll be right back, I have a headache.

Okay --- so where was I --- oh yes, the definition of ‘cajole’. Cajole is to persuade by flattery or promises; wheedle; coax. Oh and the definition of wheedle is to endeavor to influence (a person) by smooth, flattering, or beguiling words or acts. The definition of beguiling is to influence by trickery, flattery, etc.; mislead; delude. Whoa --- now it’s gone completely negative! I will help you clarify when someone is beguiling in a bit.

Now that we’re all smarter and have some new 50 cent (great rapper) words to say at our next Conference Cocktail Hour (thanks I-Many!), let’s talk about canoodling.

I believe there are three categories, rather classes, of canoodlers. They are, in order of most annoying to least annoying:

The “Get Out of my Face” Canoodler: You all know him or her. This is the person that stalks you like a lioness on the hunt --- never ceasing until they get the opportunity to tell you why their awesomeness exceeds the awesomeness of all the other awesome companies doing the same awesome things. They get business via annoying people to the point where a signature acts as the final act of shutting them up. He or she does not drink because their intoxication comes purely from deceiving you and getting your dollars. They are in all industries, but if you’re in need of a Chevy Nova that is 20 years old and only has 3,654 miles on it --- you’ll be sure to meet him or her.

The “Sheepish Grin” Canoodler: Oh, they know what they’re doing. They really, really do. But their grin is one that seems to say, “I hate to do this --- but I have to tell you how awesome we are.” He or she drinks wine at a pace that rivals the evaporation of water on a 33 degree day, but knows that having a drink in their hand (a fine glass of boxed cocktail hour wine) makes them look cool and painfully approachable. These folks will never celebrate in front of you --- but rather close their office door and dance like Dwight Schrute would on ‘The Office’ upon execution of any agreement.

The “Genuine” Canoodler: This is the man or woman doing their job --- and I like them! Let’s face it, we’re all in a business and we all have numbers to make and people to impress. The genuine canoodler is honest with you and tells you why they think they’re product or services are the ones you should go with. They live and breathe on fun relationships with their co-workers, clients and potential clients. Of course they’re thrilled to win your business, but they understand if you choose a different direction. Should they lose your business, they will follow up and ask you what they could have done better. By definition, there is a bit of canoodling going on, but it’s because they genuinely like people and want to work with you. Sure they flatter you --- but mean it if they say they like your suit. Their awesomeness comes from backing up what they tell you.

So there you have it. We’ve successfully defined canoodling and 567 other words that made me feel dumber.

Where does CIS fit in? I try my best not to sell our services on this blog, so I will drop back and punt that one to you.

However, if you’ll allow me just a little bit of latitude, I do think we’re pretty cool. (See: Definition for “Genuine Canoodler”)

For Your Space,

Steven.

On the 4th Post of Christmas, PCB Bloggers Gave to Me: Medicare & Medicaid's Grand Socio-Economic Issues Pull at the Heart-Strings

by Clarissa Crain, CIS Compliance Specialist
clarissacrain@cis-partners.com

Steven’s ‘Blog Topic of the Week’ last week (October 18, 2007) yielded a great deal of blog traffic and comment. Many bloggers jumped in with comments supporting Steven and giving additional credence to his argument in the way of evidence supporting the social and economic benefits of the pharmaceutical industry. Frank Lichtenberg, a professor at Columbia University, was referenced for his work related to “Pharmaceutical Innovation, Mortality Reduction, and Economic Growth” (1998). Without regurgitating the information provided in the Friday, October 19th blog topic, Lichtenberg’s research shows clear benefits to society and the economy when patients are provided access to innovative pharmaceuticals.

While those of us on the Pharma Compliance Blog were reading about Lichtenberg’s findings, a study from UCLA professor Dr. David S. Zingmond was published that evaluated the quality of care provided to elderly Medicare, Medicaid patients in California. Zingmond’s (2007) study found that patients in his study received only approximately 65% of the tests and other diagnostic evaluations and treatments available for the management of their conditions. Zingmond specifically sites the failure to provide Medicare, Medicaid patients diagnosed with heart failure the pharmaceuticals proven to be effective in the treatment/control of the condition. (See Elderly Medicare, Medicaid Patients Not Receiving Quality Care, http://www.sciencedaily.com/releases/2007/10/071017102220.htm).

Zingmond’s finings are disheartening at best. As a society we do not want to deny the elderly the care that they need and deserve. Unfortunately, Zingmond’s findings do more than just pull at the heart-strings, they highlight a larger socio-economic issue. If we go back and consider what we learned from Lichtenberg’s research specific to pharmaceuticals, we know that the provision of pharmaceutical drugs significantly lowers the cost of other medical treatments. 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. If we take from Lichtenberg’s studies the idea of socio-economic savings based on the utilization of pharmaceuticals, and couple that with Zingmond’s finding that 35% of Medicare, Medicaid patients are not receiving appropriate care, we can conclude that as a society we are paying for medical bills that would have been otherwise unnecessary if proper treatment had been provided in the first place. Savings that could help offset some of the deficit dollars linked to the Medicare and Medicaid programs?

The Deficit Reduction Act of 2005 set out to tighten controls on the prices paid by the Federal Government for pharmaceuticals provided to patients through the governments Medicaid program. The government defended the need for this tightening of definition and application in order to save the Federal Government billions of dollars. In the end, pharmaceutical manufacturers are now subject to a new set of regulatory requirements with regards to statutory pricing provided for Medicaid reimbursement purposes. However, if Zingmond’s study can be assumed to apply across the country, wouldn’t the government be better served to concentrate on providing patients with the drugs they need and thereby decrease the cost of other medical treatments that result from not utilizing effective treatments available for prevention and/or maintenance?

Note: Zingmond’s research evaluated the care provided to 100,258 dual eligible patients in California between 1999 and 2000. Since that time the Medicare Part D plan has all but eliminated dual eligibility, however for purposes of this opinion article his research is assumed to apply in today’s Federal Health Care environment across the country.

On the 3rd Post of Christmas, PCB Bloggers Gave to Me: Jack Johnson's If I Could Evokes a Thought: You Can...

I wrote last week about John Mayer and his song, Stop this Train, and it got me thinking more and more about music and its ties to our industry.

One of my favorite pastimes is sitting out outside --- wherever it may be --- and enjoying a cold beverage (diet soda, of course) and listening to music. During the summer, there is a staple in my household when it comes to the music side of things: Jack Johnson. If you haven’t listened to his music --- I highly recommend it.

This week, I focus on Jack Johnson’s song If I Could:

“A brand new baby was born yesterday
Just in time
Papa cried, baby cried
Said "Your tears are like mine"
I heard some words
From a friend on the phone
That didn't sound so good
The doctor gave him two weeks to live
I'd give him more if I could

You know that I would now
If only I could
You know that I would now
If only I could

Down the middle drops one more
Grain of sand
They say that
New life makes losing life easier to understand
Words are kind
They helped ease the mind
I'll miss my old friend
And though you gotta go
We'll keep a piece of your soul
One goes out
One comes in

You know that I would now
If only I could
You know that I would now
If only I could”

You know what’s cool? You can! Now obviously, this song speaks to a situation that had passed the point of no return, but how many of these situations have been avoided thanks to a medication or device that came from one of your companies? The study that was brought to our attention last week by a reader tells us that 1.6 million life years per year are being saved each year. That’s a lot of years --- and extra years we get to spend with the people we love.

If you listen closely to the music you love, I can nearly promise you that you will find references to various ailments and the hope that it builds in those surrounding the situation. The difference between the gifted musicians that I listen to and me is their artistic ability. That is, the ability to express through music the things that are in my own head. The questions we all have. The answers that seem so elusive…

I just watched Al Gore’s superb documentary on Global Warming, An Inconvenient Truth, and towards the end, he began discussing the concept of ‘what can we do about it’. He showed clips such as the abolishment of slavery, our ability to defeat fascism by fighting a war on two continents, desegregation and how the world teamed up together to reduce CFCs to help repair the ozone layer.

Then, albeit briefly, he talked about the pharmaceutical industry and its monumental accomplishments through research and development that have saved countless lives.

So I think the point of all of this is: I know you all would if you could. And, quite frankly, you can. Of course, the ‘you’ I am discussing is a collective ‘you’.

To me, that’s the only attitude that makes any sense in this world filled with questions.

For Your Space --- and For Your Weekend,

Steven.

On the 2nd Post of Christmas, PCB Bloggers gave to me: Simply Do the Right Thing

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!

Introducing The Twelve Posts of Christmas! On the 1st Post of Christmas, PCB Bloggers gave to me: Compliance By Sword

It's tough to follow a post like Brian's yesterday, especially considering no single post has ever been read by more people! It was the perfect way to lead into the Pharma Compliance Blog's latest series: The Twelve Posts of Christmas. Of course if you do not celebrate Christmas --- that's cool --- just insert your holiday and enjoy! CIS, the PCX and the Pharma Compliance Blog thank you for your amazing support during the course of 2007. We've greatly enjoyed meeting and working with many of you and look forward to meeting even more of you out there. Whether you've commented on the blog or been a 'lurker', I personally thank you for being a part of this project. Without you, the Pharma Compliance Blog simply could not work!

So, without any further ado, during the course of this year I've been keeping track of who has been naughty and nice. In addition, I've also been keeping track of the posts that you have enjoyed most! You have voted with your 'veiwership' and for the 12 days leading up to Christmas, I am going to re-post the top 12 read posts on the Pharma Compliance Blog since it was launched in April.

These will run in order on each business day leading up to 12/21 and the top post of the year! (NOTE: If anything major comes up, it will be posted on the blog, so check back from time to time each day).

For Your Space,

Steven.

So let's get it started!

On the 1st Post of Christmas, PCB Bloggers gave to me:

Compliance by Sword (Original post: July 11, 2007)

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.

Horoscopes for the GP/Compliance Professional

By Brian O'Rourke, PCX Product Manager & Compliance Specialist
brianorourke@cis-partners.com

The below is intended to be funny. No more disclaimers than that. Enjoy and laugh. I most certainly did. FYS, Steven.

Horoscopes for the GP/Compliance Professional

January—No matter how many times you check your calculations and data, your AMP and BP for Q1 of 2008 will be wrong. On the bright side, it’s your CFO that will get into trouble for certifying the incorrect data. Before the CFO can point the finger at you, place an anonymous call with the Justice Department and tell them the CFO was intentionally trying to defraud the Government. Make sure to emphasize the word “intentionally.” After the Justice Department arrests the CFO, tell the other executives in the company that the CFO sexually harassed you, and they’ll promote you in exchange for your silence. See—sometimes good can come from evil.

February—2008 will be the year for you, but retire before 2009 if you can. That new drug that R&D has just developed and gotten approved will be a blockbuster in 2008. The longer-term effects of the drug, however, won’t come to light until 2009: temporary insanity, blindness, uncontrollable flatulence, photosensitivity, an outbreak of Bubonic Plague, and Bell’s Palsy. You will also realize, albeit too late, that you sent some free samples to your cousin, Marty. Ah well, you never liked him much anyway.

March—Beware, the Ides of March! Who’s that knocking on the door? It’s the OIG. Can you say “CIA”? Get out while you still can. On a positive note, your love life will flourish in the most unexpected of places.

April— Just when you thought you wouldn’t have to change your AMP Methodology for awhile, CMS issues Release 86 on April 1st, which completely redefines the “retail pharmacy class of trade.” Worse yet, CMS is demanding that manufacturers implement the new methodology for the April monthly calculation! You spend the rest of April putting in 19-hour work days, shirking familial duties and all other personal obligations. You put a cot in your office so you don’t waste time commuting. You miss your son’s first homer in tee ball. On April 30th, CMS issues Release 87, explaining that Release 86 was just an April Fool’s Day gag. Everyone at the company gets a good laugh out of this, while you plot your Monte Cristoean revenge on CMS, which involves the uploading of a virus into the DDR system.

May—The brass will soon decide to bring in a rapidly-growing, well-respected consulting firm to assist you with your GP methodologies, processes, and calculations. You will be grateful for the opportunity to work with CIS and access the PCX during the Project.

June—Your company will bring on a new Corporate Compliance Officer in the very near future. And you’re not going to like her. As part of one of her initiatives, she will decide to review all existing Policies and Procedures and (unfairly) determine that—gasp—none of your GP documentation is up-to-snuff. The job of thoroughly revising nearly a dozen documents will land on your desk. Take some solace in the fact that the Corporate Compliance Officer will be fired for giving away too many pens to prescribing doctors just after she signs off on your newly revised documentation.

July— Your company will be acquired by a British-based pharmaceutical manufacturer in 2008. No major changes will be made. However, you will be constantly reprimanded for not putting u’s in words like “color” and “flavor” and for spelling “authorize” with a “z” instead of an “s.” Finally, the company will force all employees to walk down the left-hand side of hallways and change the Exit signs to “Way Out” signs.

August—Good fortune awaits you. Make sure to tape all Season 4 episodes of the commercially-successful and critically-acclaimed hit “Lost.” Then, watch Seasons 1 through 4 in reverse chronological order, while listening to Pink Floyd and eating Fritos Original Corn Chips, all in one sitting. When you’re finished, play the numbers 4, 8, 15, 16, 23, and 42 in the lottery on the following day. You’ll win millions and never have to calculate AMP again for as long as you shall live. There’s only a 50/50 chance you might wake up on a deserted island someday.

September—At the last minute, your supervisor will approve your request to go to IIR in September. For a good time in Chicago, call the Blog-Nazi, Steven Moore at 610-762-2180. If you’re lucky, Steve will take you to the Billy Goat Tavern. If you don’t call Steve while in Chicago, you will be condemned to an existence of misery and suffering, and your children will blame you for all their failures throughout life, of which there will be many.

October—We hate to break this to you, but you’ve been inadvertently including administrative fees in your AMP calculation. Have no fear! No one will ever notice so long as you retain CIS to help with your Class of Trade scrubbing.

November— Business will continue as usual throughout 2008. In your spare time, you’re able to develop a Unified Field Theory that would have left Einstein speechless. Sadly, the scientific community dismisses your ideas because you’re just a GP specialist, and your co-workers begin to see you for the madman you are. The good thing is—all the people you never wanted to exchange small talk with in the first place won’t be bothering you ever again.

December—Your company will officially recognize December 17th as Festivus, allowing practicing employees to take the day off. Send a Memo to your boss about how your significant other celebrates this oft-overlooked holiday and how you’d like to spend it with him/her. Use the day wisely—get any last-minute shopping done. Opportunities like this don’t come along often.

CIS's Joe Birdsall Examines the Physician Payments Sunshine Act

By Joe Birdsall, CIS Compliance Specialist
joebirdsall@cis-partners.com

Physician Payments Sunshine Act? Wow, that sounds really uplifting unless you happen to be a physician or an employee of a drug, medical device or supply manufacturer. If you are, pay attention to the status of this proposed amendment to title XI of the Social Security Act since it will impact you.

Introduced to the U.S. Senate on September 6, 2007, the purpose of the bill is “to provide for transparency in the relationship between physicians and manufacturers of drugs, devices, or medical supplies for which payment is made under Medicare, Medicaid, or SCHIP.”

This transparency would be achieved by having manufacturers of drugs, medical devices or supplies with annual gross revenues that exceed $100 million to report any compensation, gift, honorarium, speaking fee, consulting fee, travel, discount, cash rebate, or services of value that exceeds $25 to a physician, or to an entity that a physician is employed by, has tenure with, or has an ownership interest.

An electronic report to the United States Department of Health and Human Services would be required on a quarterly basis, beginning in 2008.

The reported information would be published on an Internet website allowing the public to search and download the information. Companies that fail to properly report gifts or payments to doctors would be fined from $10,000 to $100,000 for each violation. Therefore, a quarterly report must be submitted and must be 100% accurate.

SHOULD ALL MANUFACTURERS BE CONCERNED? ABSOLUTELY!
Most people immediately reference the part about exceeding annual gross revenues of $100 million and start flipping through the company's last annual shareholder report to determine if it hit that reporting threshold or not.

Frankly, for drug manufacturers, it doesn't matter since all drug manufacturers, regardless of size or revenue, should already be disclosing this type of information to various U.S. States.

This Act may not even come to pass or your employer might not generate over $100 million in annual revenue. But, for drug manufacturers, it would only alleviate the Federal reporting obligations but there are plenty of state regulations that must still be met and carry similar penalties, including fines of varying financial amounts, imprisonment and/or a violation of the Unfair Business Practices Act. Try throwing that idea around at the next Executive Management Team meeting.

EXISTING STATE LEGISLATION – 5 STATES ALREADY REQUIRE MANUFACTURERS TO REPORT
Several states (CA, DC, ME, MN, VT) already require a similar type of disclosure of marketing expenditures from drug manufacturers and over 25 other states currently have active legislation introduced in 2007 seeking similar types of disclosures from drug manufacturers. The Physician Payments Sunshine Act is simply the Federal version of existing U.S. state legislation.

FEDERAL VS. STATE
The key differences between the “Physician Payments Sunshine Act” and existing state legislation are:
1) Includes not only drug manufacturers but medical device and medical supply manufacturers
2) Quarterly reporting instead of annually
3) Compliance failure results in fines up to $100,000 per violation
4) Only required for manufacturers with annual gross revenues that exceed $100 million

Will this Act override any of the state requirements? Does this also apply to distributors? What about medical supply company sales representatives selling test kits, does it apply to them?

THE PURPOSE – WHAT ARE THE LAWMAKERS’ GOALS?
• To provide public disclosure of the economic relationship that exists between manufacturers and physicians.
• Place pressure on physicians and medical device, medical supply and drug makers to reflect on the ethics of their relationships.
• Validate lawmakers concerns about the impact of marketing on prescribing practice.

Sponsors of this Act are concerned that manufacturer gifts to physicians encourage brand-name prescribing when generic equivalents exist. If true, this would lead to a waste of tax-payer dollars in Medicare and Medicaid as well as contribute to the rising cost of private health insurance. It may also be leading physicians to prescribe new drugs without long safety records thereby creating a potential patient health issue.

Drug manufacturers are accustomed to operating under intense scrutiny for their pricing and discount strategies, probably more than physicians. By publishing the names, amounts and addresses of doctors, pharmacists, hospitals and other prescribers who receive manufacturer gifts, the perceived conflict of interest alone might be embarrassing enough to a health care provider to cause him/her to deter or cease certain manufacturer/physician relationships.

It might even force manufacturers and physicians to consider doing away with their relationships completely. Although this might be hard to fathom today, it could happen if physicians believe their professional reputation is being threatened or damaged. Pharmaceutical sales representatives already have a difficult time gaining access to physicians and this Act will effectively remove the last few sales tools a sales representative has available. Imagine every pharmaceutical sales force in the United States reduced to good looks, product pamphlets and samples. (Yes, I know it’s hard but seriously, start throwing that idea around at the next sales team meeting.) How long before every physician’s office in the country simply banned all sales representatives? Without access to prescribers, how would manufacturers market their products? I digress; these are issues to be discussed in another blog post.

MANUFACTURER PREPAREDNESS
Are all manufacturers prepared? Perhaps, if a company’s expense reporting system captures the information needed at the level of detail required and reconciles to the company’s General Ledger.

However, for example, if a company’s CRM tool is being used to gather and report this type of information, what are the odds that all the speaker program expenses are included? Or expenses for the quick lunch the CEO had last week with Key Opinion Leaders who are also physicians? Certain types of manufacturer personnel are probably not entering this information into a CRM tool or into an expense report at the level of detail required. Even if it is defined within a company policy, how would it be ensured that every employee was following through on their compliance obligations?

MANUFACTURER ISSUES
In my opinion and experience, these are the typical compliance issues that a manufacturer encounters when attempting to report accurate marketing expenditures.
• Unaware of legislation
• Aware of legislation but not reporting or prepared to report if necessary
• Reporting estimated figures due to lack of automated controls/reporting and/or resources
• Reporting figures gathered manually from expense reports which is error prone and time-consuming
• Reporting figures gathered solely from CRM tool thereby including Sales Rep expenditures but excluding other employee expenditures
• Reporting figures gathered from CRM and expense reporting system with manual reconciliation
• Reporting figures gathered from CRM and/or expense reporting system with automated reconciliation but without audit and/or documentation

MANUFACTURER SOLUTIONS
• Ensure that relevant (ideally, all) employees fully understand both State and Federal regulations.
• Audit all current sales, marketing and financial expense reporting and tracking tools to determine existing data gathering and reporting capabilities.
• Perform a gap analysis between current reporting capabilities and current and/or future State and Federal marketing expenditure legislation.
• Develop an action plan and address issues accordingly.
• Develop marketing expenditure reporting processes.
• Generate and submit reports to State, and possibly Federal agencies.
• Perform periodic audits to ensure accuracy of reports.

WHAT ARE THE SPECIFIC REPORTING REQUIREMENTS?
If this Act is passed, manufacturers would be required to report the following information:

INCLUSIONS
(1) Physician's name or entity employed by
(2) Address information of the physician's office or entity employed by
(3) If applicable, the name of the facility with which the physician is affiliated
(4) The dollar value of the payment or other transfer of value
(5) The date payment or other transfer of value was provided
(6) Description of the payment type as indicated:
• Compensation
• Food, entertainment, or gifts
• Trips or travel
• Product or other item provided for less than market value
• Participation in a medical conference, continuing medical education, or other educational or informational program or seminar, provision of materials related to such a conference or educational or informational program or seminar, or remuneration for promoting or participating in such a conference or educational or informational program or seminar
• Product rebates or discounts
• Consulting fees or honoraria
• Any other economic benefit to be defined
(7) The medical issue or condition addressed, if any, that was the basis for the payment or transfer

EXCLUSIONS
(1) Product samples intended for patients.
(2) A payment or other transfer of value made for the general funding of a clinical trial.
(3) A transfer of anything of value to a physician when the physician is a patient and not acting in his or her professional capacity.
PENALTIES INCURRED BY VIOLATION OF CURRENT STATE REGULATIONS

CALIFORNIA
See www.leginfo.ca.gov/pub/03-04/bill/sen/sb_1751-1800/sb_1765_cfa_20040412_144131_sen_comm.html
• Statue does not detail specific penalties however the California Senate Health and Human Service Committee Analysis allows for civil enforcement and penalties under the Unfair Business Practices Act when it states the following:
“According to the Attorney General staff, an individual or entity who violates the provisions of the bill could be subject to a civil enforcement action under Business and Professions Code Section 17200 (unfair business practices). Individuals and prosecutors could also file complaints seeking injunctive relief and restitution; public prosecutors could also seek civil penalties.”

DISTRICT OF COLUMBIA• Failure to report may result in a $1,000 fine plus costs and attorneys fees.

MAINE
• Failure to report may result in a $1,000 fine plus costs and attorneys fees.
• State has the right to investigate suspected violations, including issuing summons and/or conducting hearings.


MINNESOTA
• State considers violations as a misdemeanor offense.
• Fines include imprisonment for up to 90 days and/or payment up to $1,000.


VERMONT
• Failure to report may result in fines up to $10,000 plus costs and attorneys fees.

PENALTIES INCURRED BY VIOLATION OF POSSIBLE FUTURE STATE AND FEDERAL LEGISLATION
ADDITIONAL STATES• Penalties would be similar to those listed above or greater.

PHYSICIAN PAYMENTS SUNSHINE ACT (FEDERAL)• Up to $100,000 per violation

CURRENT STATUS OF THE “PHYSICIAN PAYMENTS SUNSHINE ACT”The bill is currently in review by the U.S. Senate Committee on Finance.

WHO SPONSORED IT?The bill is co-sponsored by senior United States Senator Chuck Grassley from Iowa. He is also the chairman of the U.S. Senate Committee on Finance and currently serves as the committee's Ranking Member.

It would be an understatement to say that Senator Grassley opposes more federal funding for health coverage. In 2004, Senator Grassley had introduced a bill (REMEDIES Act - Reliable Entry for Medicines at Everyday Discounts through Importation with Effective Safeguards) to allow for the legalization of prescription drug purchases by U.S. consumers from Canada. So, while improving the current health coverage system is a noble cause, Senator Grassley has demonstrated his desire to further health coverage through non-government means or rather, by assigning that burden to the free market.

Senator Grassley made that objective clear during his Senate Floor Statement delivered Wednesday, May 2, 2007 in support of Senate Amendment 990, the Pharmaceutical Market Access and Drug Safety Act.

"Mr. President, consumers in the United States pay far more for prescription drugs than those in other counties. If Americans could legally and safely access prescription drugs outside the United States, then drug companies will be forced to re-evaluate their pricing strategies. They’d no longer be able to gouge American consumers by making them pay more than their fair share of the high cost of research and development."

Senator Grassley's website contains further insight to future agendas - http://grassley.senate.gov/public

"From my leadership position on the Senate Finance Committee, I work to find policy solutions that will make health care coverage more affordable and health care services accessible and accountable."

"As momentum builds for the next presidential election in 2008, I will continue working to identify achievable solutions that will expand coverage to the 47 million uninsured. Health care services provided to the uninsured results in costs shifted to paying customers and private insurers."

FUTURE CONSIDERATIONS
This is absolutely not meant to be viewed as an attack on Senator Grassley. The point is that, even if the Physician Payments Sunshine Act does not survive, manufacturers still have to meet existing U.S. State regulations and can be certain that additional Federal and State legislation is not too far behind as political parties are racing towards the 2008 election and beyond with the values of the aging bulk of the U.S. population in mind.

By being aware of as many current and future legislative scenarios as possible, manufacturers of pharmaceutical products, medical devices and supplies can proactively prepare and address many compliance issues that would likely lead to a disruption of their current business model and/or Federal and State penalties.

GP Policy and Procedure Recommendations: Part Two

Brian O'Rourke, CIS PCX Product Manager & Compliance Specialist
brianorourke@cis-partners.com

Here is a list of the GP Policies and Procedures we generally recommend and look for when performing an assessment. And I promise, once again, not to beat you over the proverbial head about the Final Rule.

1. Government Programs Compliance Policy

The Government Programs Compliance Policy is the overarching document containing your company’s governing policy statements. This Policy is corporate-level, as opposed to operational or functional-level. In other words, senior management, the Chief Compliance Officer, and the Manager in charge of your GP operations are the “authors.” I place authors in quotation marks because we all know they won’t actually write this document—what I mean to say is that the policy decisions contained herein are their policy decisions to make and proclaim.

This Policy addresses the issues that apply to all the Programs: delegation of responsibilities, calculation, review, approval, certification, submission, and retention.

In addition, you might consider having separate policies pertaining to the integrity of data and data extraction and validation. These concepts are all necessary components to a compliant process for submitting accurate data.

2. Class of Trade Policy and Supporting Procedure(s)

The Class of Trade (COT) Policy is typically not a GP-authored Policy, as it is usually commercially-defined and driven. However, it should be fairly obvious to anyone working in the GP space that your company’s COT Policy and supporting procedure(s) bear an enormous impact on your calculations.

Therefore, the appropriate GP personnel must be involved at some point in the authoring or review of these documents. For each COT, GP personnel need to know whether it constitutes sales to entities that are retail, non-retail, or Government, among other things. A sound COT schema, reflected in a Policy and Supporting Procedure(s), goes a long way in ensuring that calculations are accurate.

3. The Federal Programs Policies

Each Federal Program your company participates in merits its own Policy document, because each Program carries its own unique requirements. For example, your Medicaid Drug Rebate Program Policy references the CEO/CFO Certification and the company’s commitment to submitting AMP, BP, Nominal Price, and Customary Prompt Pay Discounts in a timely, error-free fashion. In contrast, your PHS/340B Program Policy lists your company’s position relative to 340B participation and contracting with the Prime Vendor for any sub-340B price.

Separate policies for each Program also make life a lot easier when your GP calculation responsibilities are spread out among several employees. Separate policies also make the review and revision cycle more manageable, because you will only need to update the policies as changes are made to those Programs.

4. The Federal Programs Supporting Procedures

Just as each Program requires its own Policy document due to the Program’s unique requirements, so too does each Program require its own supporting procedural documents. With respect to Medicaid, your company needs procedures around:

-AMP methodology and calculation
-BP methodology and calculation
-Nominal Price methodology and calculation
-Customary Prompt Pay Discount methodology and calculation
-Medicaid Claims processing

Given the fairly detailed methodologies these calculations require, especially AMP, we typically recommend placing your company’s methodology assumptions in an attachment to the calculation procedure. As CMS has shown over the years, the definition of AMP and all that it encompasses is constantly evolving. By placing your AMP methodology in an attachment, as opposed to the procedure itself, you can circumvent the lengthy and formal process of SOP revision because you are only revising an attachment when your methodology changes. Under this scenario, the calculation SOP remains the same.

Following the model described above, all other Programs should receive their own calculation procedures and methodology attachments.

With respect to the VA Program, you must consider whether you want to reference processes related to Most Favored Customer or Tracking Customer in the calculation procedure or whether you want to keep those tasks separate. How your company is structured will likely determine the outcome of this decision—some companies segregate non-FAMP and FCP calculation duties from Tracking Customer duties, while others do not.

The 340B Price calculation is fairly simple in nature. For the sake of brevity and creating fewer documents that need to be periodically reviewed, we typically recommend that companies combine the calculation methodology and procedure into one document, which also could include the process of 340B eligibility verification.