GP Audits and Doctor's Visits

By Charles Cutcliffe, CIS Compliance Consultant
charlescutcliffe@cis-partners.com

As I sat in the doctor’s waiting room the other day and being the Government Pricing (GP) Geek that I am, I started thinking about how similar Doctor Visits are to GP Audits. At first glance, these two things don’t seem to have much in common, beyond the facts that neither are very pleasant and that both are necessary. However, as you look a little closer you start to see several more similarities between the two. I’ll try to explain the similarities by answering these three questions – Why?, When? and How?

Why?

Generally, we go to the doctor for a checkup to ensure that we are healthy, or we go when we are not feeling well to see what is wrong. GP Audits are very similar in that we do audits to ensure that our GP processes are functioning correctly and that our GP calculations are “healthy.” We also do them when we suspect that there might be a problem and want to see how “sick” our calculations are.

When?

As children we start seeing the pediatrician at a very young age for well baby checks. These visits then taper off to regularly scheduled checkups as we grow up. These checkups correspond to audits conducted at the very beginning of our GP program to ensure that we are starting our program off as healthy as possible and to regularly scheduled audits during the life of the GP program to ensure that the program and resulting calculations remain healthy.

We have all heard the disclaimer statements telling us to see our doctor before beginning any new exercise or diet programs. This is an excellent concept to carry over to our GP program as well. As we start something new in our GP program, whether it be a new calculation or automation methodology, it a great idea to conduct an audit before going live to make sure that our GP program is healthy and not “rejecting” the new components.

How?

Now that we have an understanding of how the “Why” and “When” of doctor’s visits and GP Audits are similar, let’s compare the “How” by looking at some of the individual steps. The following tables breakdown the steps of an audit and a checkup and compare them to each other.

I realize that I have butchered some medical terminology in my analogies, but hopefully I have demonstrated some of the similarities in checkups and GP Audits. As I stated before, neither is very fun, but both are important in ensuring the health of our bodies and GP programs.

Let the Sun Shine: Eli Lilly Takes a Stand

By: Dana Zelig, CIS Compliance Specialist
danazelig@cis-partners.com

Breaking news, bloggers! For months we’ve given you updates on the Physician Payments Sunshine Act and, more recently, the Transparency in Medical Device Pricing Act, in which we’ve had… well… not much to report. Amidst sweeping layoffs, the deepening economic crisis, and a presidential election of historic proportions, most in the Pharmaceutical Industry (and in Washington) have been content to let pharma’s reigning Don Quixote, Senator Chuck Grassley (R-Iowa), tilt at windmills. Time after time, Grassley has demanded reporting of every payment made to doctors, and every price set for drugs and medical devices, but the Senator has often struggled to make his point in an industry fortified with allies. On September 24, however, he won a small victory. More precisely, it was handed to him… by industry giant Eli Lilly.

In a move guaranteed to have lasting effects the pharmaceutical community, Lilly proactively agreed to comply with the not-yet-passed Sunshine Act, by publishing every payment of $500 or more made to physicians who sign on for speaking engagements or serve in advisory roles. Starting in 2009, Lilly will record all payments that meet this threshold in a national, online registry. (The registry will be open to the public by mid-2009.) John Lechleiter, PhD., Lilly’s President and CEO, offered this explanation of the company’s actions:

"With each of our industry firsts, from launching our clinical trials registry to the public reporting of educational grants, Lilly is striving to be a leader in improving transparency across our industry. As Lilly continues to look for more ways to be open and transparent about our business, we've learned that letting people see for themselves what we're doing is the best way to build trust."

Founded in 1876, Eli Lilly and Company has recognized the importance of growing and adapting in an ever-changing industry. Lechleiter defends the practice of compensating doctors, who take time away from practicing medicine to share their experiences with new drugs and procedures. Yesterday he literally put his money where his mouth is by agreeing to publish his records for everyone to see.

But how does this affect you, dear blogger? For one, it puts pressure on your management to follow suit. If there’s anything we’ve learned from the PhRMA Code, it’s that the more active, open, and honest you are in reaching your compliance goals, the safer you will be when the Fed comes knocking. If you think about it, it makes sense. Since the Sunshine Act’s gift reporting threshold was raised from $25 to $500, it has gained widespread support from legislators and trade groups alike, including AMA doctors and PhRMA members. So it seems safe to say that the Act will be passed sometime in the near future. According to Arthur Caplan, Director of the Center for Bioethics at U. Penn, “the ethical handwriting is on the wall. Disclosure is coming. States are pushing for it, and once a few states do, it’s hard to imagine the federal government won’t line up behind.”

Yahoo News reports that Senator Grassley “applauded Eli Lilly's announcement, but said he would continue to push for legislation that requires disclosure of physician payments by drug and medical device manufacturers.” If you’re a pharmaceutical manufacturer, wouldn’t you rather implement such a comprehensive reporting plan on your own terms, instead of waiting for an arbitrary deadline to be set? By acting first, Eli Lilly has forged its own timeline and set the gold standard in transparency. And, like under-achieving younger siblings, everyone else will now be compared to their head-of-the-class big brother…

Nevertheless, we at CIS think you should jump on the bandwagon. If you need any help, give us a call.

For more information, see the following sources:
http://newsroom.lilly.com/releasedetail.cfm?ReleaseID=336444
http://news.yahoo.com/s/ap/20080924/ap_on_bi_ge/drug_company_payment_disclosure
http://www.pharmalot.com/2008/09/lilly-to-disclose-payments-to-doctors/

UPDATE: Late Wednesday Merck also announced that it would take steps to increase transparency. See their statement here.

New CMS Rules Enforce Marketing Requirements

By America Castro, CIS Compliance Specialist
americacastro@cis-partners.com

Last week, the Centers for Medicare and Medicaid Services (“CMS”), issued final rules regarding the enforcement of marketing requirements as the 2009 Medicare Advantage and prescription drug open enrollment period is soon approaching. These rules are intended to protect Medicare beneficiaries of aggressive sales and marketing behavior from insurers. Insurance companies are expected to begin their marketing activities on October 1st, and they must comply with CMS regulations. Depending on the degree of non-compliance with the regulations, companies could face punishments from a warning letter, all the way to suspension of marketing activities.

On May 16, CMS released its “Medicare Advantage and Part D Prescription Drug Program Proposed Rule”. The recently released rules make final some of the regulations in the previously proposed rule. These regulations correlate to the “Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) passed by congress in July of this year. The provisions prohibit[1]:

· Meals to providers as part of marketing activities
· Unsolicited sales contacts (i.e., telemarketing, door-to-door solicitation, etc)
· Cross –selling of non-health care related products during any sales, marketing, or presentation for an MA plan or PDD
· Conducting sales presentation or distributing and accepting plan applications in provider office or other places where health care is delivered
· Conducting sales activities, distributing, or collecting applications at education events

CMS has consistently enforced the marketing requirements by applying all types of surveillance programs to detect abusive behavior from brokers and agents. According to Kerry Weems, CMS Acting Administrator, CMS will intensify its surveillance programs this year to assure compliance of marketing requirements[2]:

“The regulations give insurers bright-line guidance on what types of marketing activities are acceptable and what types are not…Medicare beneficiaries can be assured that we will monitor marketing activities and move aggressively with enforcement measures or other actions if these rules are violated.”

CMS is expected to heavily monitor insurers and brokers. The surveillance programs will include some of the following activities:

· “Secret shopper,” where a Medicare official poses as a prospective enrollee and monitors sales agents
· Review of plans’ local print and broadcast advertisements
· Review of recorded enrollment calls to ensure compliance with the new regulations

The overall goal of the actions taken by CMS is to truly protect Medicare participants, and give them the confidence that the plans they are being offered are truly the best alternative for them.

[1] CMS.hhs.gov “Medicare Issues New Rules to Enforce Marketing Requirements During Upcoming Health and Drug Plan Enrollment Period”
<http://www.cms.hhs.gov/pf/printpage.asp?ref=http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=3266>

[2] CMS.hhs.gov “Medicare Issues New Rules to Enforce Marketing Requirements During Upcoming Health and Drug Plan Enrollment Period”
<http://www.cms.hhs.gov/pf/printpage.asp?ref=http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=3266>

IIR and the Three Waves

By: Steven Moore, CIS Director of Business Development
stevenmoore@cis-partners.com

CIS GP Practice Lead Chris Cobourn has noticed a glaringly clear pattern of behavior at conferences, which he likes to call the “Three Waves”. Fresh off another conference that left me so tired I could barely form a sentence yesterday morning, I thought I’d explain exactly what the Three Waves are, and more importantly, why Mr. Cobourn has coined me a ‘Third Waver’.

You all know why we, the vendors, are there. We are there to meet and greet you and to ‘strut our stuff.’ From “GP Geek” t-shirts, to calculators, pens, notebooks, sell sheets, demos, speaking sessions and more, we aim to dazzle you with our marketing spend, our compliance initiatives, and our knowledge of GP. CIS always tries to accomplish these goals in a fair and genuine way --- we hope you agree. But, the area I’m going to focus on here occurred after the sessions were over, when Chicago became a moonlit jewel of a city. I’m talking about the Three Waves…

The First Wave:

The First Wave is the dinner wave. This is where we all break bread together, share some drinks and laughs, and try to talk a little shop --- but not so much that we lose sight of the importance – fun. Most everyone can jump in and join the First Wave --- and enjoy themselves thoroughly. Thankfully, this year I had the pleasure of sitting next to one of CIS’s founding partners, Jim Collins. He watched me say ‘yes’ to about 27 appetizers for the table as we ordered drinks and pricey wines. Perhaps there is a reason he says I set my career back a little bit more at each conference. Or maybe it is because of the subsequent Waves… We shall see. Anyway, once dinner is over the First Wavers make their exit. They generally yawn and tell you they have work or that they have to speak the next day, thank you and head to bed. This is the Wave I long to be a part of some days --- that is, until the Second Wave starts…

The Second Wave:

The Second Wave is the after dinner drinks crew. This Wave usually congregates at the hotel bar or another one nearby. There are drinks and laughs --- high fives and cheers --- yawns and tears. About an hour and a half into this session, the Second Wavers pronounce they have had enough, or that they are “too old for this,” and make their prompt exit. Chris Cobourn lumps himself into the Second Wave and, generally speaking, he does fit into this area. You will know when the Second Wave is coming to an end when you hear someone say, “Shots!” This is the moment when all remaining Second Wavers run to the nearest exit or elevator. This is also when you find out if anyone is ready to graduate to Third Waver status, or if they realize it’s far past their bedtime and scamper away.

The Third Wave:

To some it’s legend or myth --- to others, it’s a tiresome reality. The Third Wave is when things really get cranking. The time frame is generally between 12:30 and ? You would think that most Third Wavers are the young GP protégés who still have a bit of the college life in their memories --- but you would be wrong. Third Wavers come in all shapes, sizes and ages. Third Wavers do not discriminate when it comes to welcoming a fellow Third Waver into the fray. We are a proud group of people who enjoy a good time so much that we actually try to make sure the night never ends. We laugh and skip around town to the beat of our own drum. We get back home and wake up our roommates and get 3 hours of sleep, only to wake up and go at it again early the next morning. Third Wavers are not lore --- in fact, they are quite real, and their claims the next morning are true. You’ll know when you see one by the looks of them. They will be drinking coffee, doing stretches or calisthenics, telling stories, and sometimes, staring at the ceiling wondering if there are any sharp butter knives nearby.

A big thank you to all First and Second Wavers…

And a special one for my homies!

CIS thanks you all for a great IIR conference, and we look forward to continued work and partnerships with each of you.

Update: The Transparency in Medical Device Reporting Act of 2007

By: Justin Will, CIS Compliance Specialist
justinwill@cis-partners.com

Some of our clients have been asking for an update on the status of the “Transparency in Medical Device Pricing Act,” which was introduced by Senators Grassley and Spector in October 2007. Unfortunately (or fortunately…), not much progress has been made, but here’s a run-down of the proposed plan, to remind everyone of the possible implications of its approval.

As a condition of receiving direct and indirect Medicare payments, the Act would require quarterly reporting by medical device manufacturers to the Secretary of the Department of Health and Human Services. The manufacturers would be required to report the average and median sales prices for all implantable medical devices used in inpatient and outpatient procedures.

The Act would also require that the information be made available to the public on the CMS website. Under the Act, medical device manufacturers would be subject to civil monetary penalties from $10,000 to $100,000 for failing to report or misrepresenting price data.

The Act is intended to ensure that hospitals can provide care efficiently and prevent taxpayers from being overcharged for implantable medical devices paid for through Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). Senator Grassley described the intent of the Act:

“Without any available information on fair prices for medical devices, hospitals are involved in one-sided negotiations with device manufacturers. As a result, hospitals are at the mercy of medical device makers who have the upper hand. Some hospitals are now paying a lot more than others for the same medical device. That means health care dollars aren’t being spent wisely. Taxpayers need confidence that they’re getting the most bang for their buck. More transparency will allow market forces to work for the taxpayers’ and patients’ benefit."[1]

If enacted, the law could take effect as early as first quarter of 2009.[2]

[1] “Grassley, Specter Introduce Transparency in Medical Device Pricing Act,” (Senator Chuck Grassley, Press Release October 23, 2007).
[2] www.opencongress.com.

$$$ from Litigation to Compliance: Read of the possibilities

By: Alaina Confer, CIS Compliance Specialist
alainaconfer@cis-partners.com

Déjà vu. That’s what I experienced today as I read the Sunday edition of the Los Angeles Times. On 25 February 2008, I wrote of a U.S. Supreme Court case that could decide the degree of liability of pharmaceutical manufacturers in drug lawsuits. That case, Warner-Lambert Co. v. Kent, Docket No. 06-1498, ended in affirmed judgement with a divided court; Judge Roberts removed himself from the case as he was a stockholder in the defendant pharmaceutical manufacturer.

Now we hear of a similar case, Wyeth vs. Levine, where again the question is whether to limit lawsuits against pharmaceutical manufacturers.

Now absolutely Levine deserves some settlement for losing her livelihood, you see she is a musician whose arm was amputated following an improper administration of a drug. However, the problem is not with the drug, it was with the administration. She did settle with the administering clinic and the healthcare professional responsible. So why would Wyeth be liable?

Levine’s argument was, and is, that the drug did not have adequate precautions on the label. So the question facing the court is, if Wyeth followed the FDA’s requirements for labelling which did advise caution when administering by injection should Wyeth be shielded from such lawsuit?

If the US Supreme Court decision is to leave the policing of pharmaceuticals in the FDA’s hands and not allow such cases, then injured parties will need to prove fraud in the pharmaceutical approval process to be awarded punitive damages. This fraud could be in one of two forms, (i) illegal payment to a corrupt FDA official or (ii) providing a fraudulent submission to the FDA. A decision along these lines, would free up more dollars set aside for litigation which could then be wisely directed towards compliance efforts to assure a continued absence of fraud.

This hearing is scheduled for 03 November 2008. As long as all of the Supreme Court judges participate in the decision this will bring breaking news.


Los Angeles Times, http://www.latimes.com/news/nationworld/nation/la-na-scotus7-2008sep07,0,3843835.story

Washington Legal Foundation, http://www.wlf.org/Litigating/casedetail.asp?detail=538 and http://www.wlf.org/Litigating/casedetail.asp?detail=502

U.S. Supreme Court, http://www.supremecourtus.gov/opinions/07pdf/06-1498.pdf and http://www.supremecourtus.gov/qp/06-01498qp.pdf

US Counties Fighting Back over Medicaid Prices

By: John Jordan, CIS Compliance Specialist
johnjordan@cis-partners.com

On August 27, a federal appeals court reinstated a lawsuit brought on by Santa Clara County against the pharmaceutical industry for allegedly overcharging public hospitals and clinics for prescription drugs to the Medicaid patients. Medicaid, according to our PCX website, is a government program that covers medical expenses for the poor and certain other classes of uninsured people, established by Title XIX of the Social Security Act. Each state administers its own program. Medicaid is funded by both the state and federal governments.

The Santa Clara officials filed the lawsuit in 2005. The lawsuit was stating that the pharmaceutical companies were violating the 1992 Public Health Services Act, which has a Medicaid drug discount program. The lawsuit states that the drug companies have failed to provide the proper discounts gouging tax payers for the cost. The Office of Inspectors General has concluded that over the last six years that the companies have overcharged local agencies under the drug discount program, likely overbilling for drugs by tens of millions of dollars across the country. Also that in June 2005 alone that drug providers had violated the price ceilings by $3.9 million. The lawsuit that Santa Clara county has filed seeks repayment from the overcharging from 2001 – 2005.

At first a federal judge dismissed the lawsuit. He stated that only the government had the right to enforce the compliance and not the county. However, once the lawsuit went into the 9th U.S. Circuit Court of Appeals court the ruling changed. They felt that pricing contracts with manufacturers are intended to benefit the counties and that they should be able to sue when the contracts are breached.
According to the Mercury News, Robert Litt, a Washington, D.C., attorney who argued the case for the drug industry and represents a pharmaceutical company, said the companies "disagree with the court's decision'' and will consider the next step, including the possibility of further appeals. He added that his client is "confident'' it will prevail if the case goes forward because it did not overcharge and "complied with its obligations under the law.''

Also in the Mercury News, County Counsel Ann Ravel said the 9th Circuit ruling "opens the door'' to moving the case forward so the county can force the industry to reveal its charging practices, which are governed by a contract with the federal government.

This could prevent pharmaceutical companies from being allowed to charge counties and states without them knowing the charging practices. Santa Clara is the first county that has sued for being overcharge. This suit will help ensure that drug companies are complying with the appropriate contracts that they have signed for the programs within each state and if not then the counties and states will be able to file a breach of contract suit against these companies.

A Reference Guide, Week Ten

In this last installment of the abbreviated version of The Ten Commandments of Sample Accountability, A Reference Guide for a PDMA-Compliant Sample Accountability Program, we want to remind you to stop by CIS at Booth #105 at the 2008 PDMA Alliance Sharing Conference. (See below for a free gift offer, just for stopping by!)

Commandment #1 – Thou Shalt Have a Corporate Commitment
Commandment #2 – Thou Shalt Have Written Policies and Procedures
Commandment #3 – Thou Shalt Have Documentation
Commandment #4 – Thou Shalt Require Employee Compliance
Commandment #5 – Thou Shalt Provide Training
Commandment #6 – Thou Shalt Require Accountability
Commandment #7 – Thou Shalt Have Vendor Contacts
Commandment #8 – Thou Shalt Monitor Compliance
Commandment #9 – Thou Shalt Take Corrective and Disciplinary Actions
Commandment #10 – Thou Shalt Conduct Inventory and Reconciliations

The PDMA states, “…a manufacturer or authorized distributor of record that distributes drug samples shall establish, maintain, and adhere to written policies and procedures describing its administrative systems for…conducting the annual physical inventory and preparation of the reconciliation report…”

While inventory and reconciliation requirements are established in written policies and procedures, the two entities deserve their own commandment.

The PDMA requires that, at a minimum, an annual inventory and reconciliation must be conducted. In order to determine if more frequent inventories and reconciliations are warranted, a pharmaceutical company should determine how they will use the information that is collected, what other methods are utilized to determine compliance, and if the volume of sampling activity would warrant more frequent monitoring and reconciliations.

Some pharmaceutical companies conduct only the required annual physical inventory and reconciliation, others find it helpful to conduct them throughout the year and use the results to monitor their sampling program. The annual physical inventory and reconciliation must be conducted by someone other than the sales representative, however if a company chooses to require more frequent inventories, those additional inventories can be completed by the individual representatives. In addition to sales representatives, managers who have possession of samples are required to report physical inventories and receive reconciliation reports, even if the possession of samples is short term due to an employee termination or resignation. This area of sample accountability is often overlooked and compliance is lacking.

A reconciliation report takes into consideration all activities surrounding samples, such as shipments, transfers, theft and loss, and of course, disbursements. Reconciliation reports, regardless of the frequency, should all be disbursed at the same time, with everyone receiving a report regardless of the reconciliation status. Those that are below the acceptable threshold (or considered “reconciled”) should receive a report for their records and those that are above the acceptable threshold should receive the initial report and updated reports as they work through the reconciliation process. Everyone should be instructed to keep all reports with their other documents for a minimum of three (3) years

Significant loss thresholds should be determined through several factors including, but not limited to, the potential for diversion of the drug, the volume of sampling, and the cost of the drug. Many companies find it helpful to establish a corporate threshold to bridge the gap between an acceptable reconciled variance and a reportable variance level.

A corporate threshold will serve to identify employees with a potential for reportability or those who may repeatedly “fly under the radar”, but warrant further corporate surveillance.

Thresholds can be determined by using variance percentages, quantities, or a combination of both, as long as the company uses a methodology for determining the threshold. Thresholds should always remain privileged information and should not be shared with the corporate sampling community.

In addition to fulfilling the PDMA requirements, pharmaceutical companies often have a wealth of information in the data collected for sampling activities and reconciliation reports and don’t do anything with it.

The data collected through sampling activities can serve as a business tool and is often used to determine and evaluate sampling trends for the sales and marketing team, “red flag” areas that may require additional surveillance and monitoring and/or identify areas of non-compliance such as failure to turn in documentation.

Over the last few weeks, I have sent you each step of our reference guide to successfully implement a Sample Accountability Program. This guide consists of each of the commandments as well as a copy of the 21CFR part203 and 21CFR part11 for reference.

The Ten Commandments of Sample Accountability, A Reference Guide for a PDMA-Compliant Sample Accountability Program will be available in a complimentary bound copy. To receive your copy, print out any of the “Ten Commandments” email messages and bring the print out to Booth #105 at the 2008 PDMA Alliance Sharing Conference (www.pdmaalliance.org) September 14-17 in New Orleans.

Sincerely,

Judy Fox
PDMA Practice Lead
484-445-7185
judyfox@cis-partners.com

The McCain /Palin ticket: A free market driven Health Care approach

By America Castro, CIS Compliance Specialist
americacastro@cis-partners.com

Last week we looked at the Obama/Biden ticket, their views on Health Care and how will it affect the overall pharmaceutical industry. Both Obama and Biden are strong believers of increasing government funded programs to achieve their “Health Care access for all” plan. If the Obama/Biden ticket was to win the presidential race next November, Health Care related issues would remain as a top priority in their “to-do” list. To continue with our “political analysis” here at CIS, this week we will examine the McCain/Palin ticket to determine the same.

Given her short term serving as governor of Alaska, Palin does not have a “strong” documented view when it comes to Health Care issues; overall, she is in line with McCain’s proposed Health Care reform. Palin believes that Health Care should be run in a free market and business driven environment rather than a heavily government administered program environment (Obama and Biden’s proposal). Thus, we should not expect that the nomination of Palin will result in any major changes in McCain’s strategy when it comes to Health Care related issues.

According to Palin, “Doctors should manage Health Care, not bureaucracies.” As governor of Alaska, Palin introduced the Health Care Transparency Act, which aimed to provide consumers with better pricing information that would consequently lead to stronger market competition. Ms. Palin also proposed to eliminate the Certificate of Need Program (CON) to increase choice and manage rising costs in a more efficient manner.

McCain’s proposed Health Care reform includes:

•Opposition to mandates for coverage
•Provide access to Health Care for all by paying only for quality Health Care; encourages personal responsibility
•Remove the favorable tax treatment of employer sponsored insurance and provide a tax credit to all individuals and families to increase incentives for insurance coverage
•Allowance of Drug re-importation

Both McCain and Palin are strong believers that personal responsibility by each individual plays a major role in the Health Care System, and in the flexibility in government regulations to allow for better competitions and a drop in costs that would eventually lead to a drop on government subsidies.

Regardless of who wins the presidential election next November, Health Care will remain as a hot topic. One of the key factors that will have a great impact on our industry is drug re-importation from countries such as Canada. This is a proposal that both McCain and Obama support. If this is to become a reality, we will see a huge impact on pricing and market competition. Indeed, we should expect changes that could have a major impact in our industry and in how government programs are run.

1 On the Issues “Sarah Palin on Health Care”
http://www.ontheissues.org/2008/Sarah_Palin_Health_Care.htm

OIG Recommends Changes to Medicare Pricing

By Justin Wutti, CIS Compliance Specialist
justinwutti@cis-partners.com

Everyone knows that when a drug goes generic, the price of that drug plummets. Is this sudden price decline being considered when calculating the price that Medicare pays for such drugs covered by Medicare Part B? A recent study called “Medicare Payment of Irinotecan,” done by the OIG in August 2008, suggests that it is not.

In the study, the OIG examines the prices a drug called Irinotecan hydrochloride, which went generic in February 2008. The study compares the sales prices reported by the manufacturers and the Medicare payment amount in March 2008. It was found that the Medicare payment amount, which is based on ASP, was more than twice the average manufacturer’s sales price calculated by the OIG for March. The OIG also estimated that, if the Medicare payment amount was based on the average manufacturer’s sales price in March, the amount would have been decreased by $6.5 million.

So where is the problem? The OIG feels that the problem lies in the standard methodology recommended by CMS to calculate ASP. The calculation of ASP is based on sales from 2 quarters prior to the effective period. In other words, the payment amount is based on prices calculated during a period when only the branded version of the drug was available. The OIG believes that the pricing issues extend to all drugs that go generic and will continue until a change is made to the process.

So how can this be fixed? The OIG recommends that CMS examines options to change the ASP calculation process to ensure that Medicare payment amounts for newly available generic drugs reflect current market prices. This may also require a legislative change. CMS concurred with the recommendation and plans to review any specific suggestions that the OIG may have.

If you are involved in the calculation of Medicare payments, keep your eyes peeled.

Certification Checklist

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

A few years ago, when I had just started at a new company as the “GP Person,” the CFO said to me, “So Katie, tell me what it is that you actually do…” I responded, “My job is to keep you out of jail.” Needless to say, if I ever needed anything in the future, he was my biggest advocate. This happened around the time that certification of the calculations was just being implemented and he was the one who had to certify something he had no clue about. As an officer of the company, he recognized what a perilous situation he was in.

So how do you provide your CFO with confidence that your calculations are correct without having to walk her through each and every step every month? (Let’s face it, neither the Certifier nor the GP Person has time for that.) Obviously, the first biggest step is to have a documented methodology that has been approved by a Pricing Committee or some internal group that understands, at least at a high level, the government programs and Class of Trade. Additionally, another important step is to have formal policies and procedures that are accurate and reflective of the processes being followed.

But how about setting up a “Certification Checklist” that would provide your Certifier with information that would enable her to know that all of the identified steps have been followed? This makes you look good because you’re anticipating the Certifier’s needs but it also makes that person look good because she doesn’t have to ask for the supporting documentation when she may not know what to even request. (A wise person told me years ago that making your boss look good is always a good strategy!)

A Certification Checklist will differ for each manufacturer based on their procedures, systems, products and the level of detail required by the Certifier but in general, it could include the following:

• reconciliations to the general ledger,

• documentation of any methodology changes and the rationale,

• documentation regarding “Bona Fide Fees for Service” that are excluded from the calculations,

• relevant communications regarding updates to transaction or reason codes,

• documentation of any updates to the Product Master,

• assumptions related to bundling,

• invoice and chargeback reports,

• invoice adjustments with any supporting documentation,

• rebate payments and reconciliations,

• a screen shot of DDR with the AMP and/or Best Price as entered,

• a comparison or analysis of the historical calculations to the current calculations,

• exception reports for data anomalies,

• checklists to be signed by all individuals involved in the calculations, and

• an internal document for the Certifier to sign, showing that the information presented was complete.

As a note, many manufactures maintain the monthly and quarterly checklists in a binder, with tabs for each month, so that there is one reference for all periods within a quarter.

In the event of a government audit or even for use during an internal audit, the use of a checklist and a central binder will facilitate the process and show your commitment to maintaining adequate documentation.

Historical Corrections of AMP and BP, clarification of requirements

By Raul Reyes, CIS Compliance Specialist
raulreyes@cis-partners.com

Manufacturers have long been required to “restate” AMP or BP when it has been determined that incorrect values were reported for a period. With that said, the requirements have evolved over time, and are very different whether you are making a correction based upon methodology, or on incorrect data. Compounding the issue is a lack of common terminology and process used by manufacturers. There are two main events that occur when correcting historical pricing calculations, methodology or data. For the purpose of this conversation, lets refer to a methodology related correction as a ‘restatement,’ and a ‘recalculation’ as the result of the discovery of data related error.

Things changed with release #78 and the Final Rule (and it is important to read them together for a net impact). Prior to this, CMS Release #14 provided our main guidance. Release #14 required manufacturers to submit any methodology changes into CMS prior to the issuing of any restatements, and to get CMS approval before making a change. This was not only for retrospective changes in the AMP calculations but also for any changes to be made to the methodology for prospective calculations. This meant that manufacturers who discovered errors in the methods that they were using to achieve their pricing calculations were required to continue making them until CMS approved the change. With CMS Release #78, CMS changed this policy. With Release #78, a change in methodology could be implemented prospectively without CMS approval. However, retrospective changes still need to be submitted and reviewed for authorization prior to the issuing of any rebate adjustments to the states.

The Final Rule provided a change in methodology, and manufacturers were obviously not required to seek permission to implement it. Manufacturers were expected to transition to the Final Rule methodology. Release #78, however, still applies. So, for example, you were to determine that you got the Final Rule methodology wrong, release #78 would apply. So now we have some working regulation and guidance on historical and prospective methodology changes.

So what about data related errors?

For these, the reading of the Final Rule indicates that manufacturers should recalculate AMP if it is determined there was an error, except where the error was solely a component of the lagged rebate price concession. In my opinion, this keeps with the intent of “smoothing,” as error will smooth out over time. It is important to note that AMP uses actual transaction dates and smoothing, where as BP still uses earned date. For this reason, many manufacturers are still submitting an estimated BP (lowest achievable) but then recalculating BP later to perform a “True up” to the actual. So AMP should have few recalculations, where they can still be standard for BP.

In closing, written explanations for non-final ruling changes need to be submitted to CMS for both retrospective and prospective restatements. Retrospective changes, unrelated to the DRA or that encompass more than just a change in smoothing, still need approvals from CMS before implemented but prospective restatements may be issued with prior approvals.

Through the issuance of the Final Rule, manufacturers are encouraged to voluntarily disclose their DRA methodology changes to CMS. Additionally, an expectation of the Final Rule is that manufacturers will increase their self-audits and voluntarily disclose and correct any historical issues they find.

CMS Release and the Final Rule can be found at our PCX website: http://www.cis-pcx.com

A Reference Guide, Week Nine

If you haven’t registered for the 2008 PDMA Alliance Sharing Conference, do not miss out on another exciting year of valuable information.

In preparation for the event, we are continuing our series of abbreviated versions of The Ten Commandments of Sample Accountability, A Reference Guide for a PDMA-Compliant Sample Accountability Program.

Commandment #1 – Thou Shalt Have a Corporate Commitment
Commandment #2 – Thou Shalt Have Written Policies and Procedures
Commandment #3 – Thou Shalt Have Documentation
Commandment #4 – Thou Shalt Require Employee Compliance
Commandment #5 – Thou Shalt Provide Training
Commandment #6 – Thou Shalt Require Accountability
Commandment #7 – Thou Shalt Have Vendor Contacts
Commandment #8 – Thou Shalt Monitor Compliance
Commandment #9 – Thou Shalt Take Corrective and Disciplinary Actions

The PDMA states, “…a manufacturer or authorized distributor of record that distributes drug samples shall establish, maintain, and adhere to written policies and procedures describing its administrative system for identifying any significant loss of drug samples and notifying FDA of the loss…”

In order to fully commit to a sample accountability program, a pharmaceutical company must have processes in place that address how non-compliance activities will be addressed. The best method includes tracking non-compliance by listing specific activities that will be monitored and attaching corrective or disciplinary actions to each non-compliance offense.

By establishing specific corrective and disciplinary actions, the pharmaceutical company sends a message to its employees that compliance is a top priority and is taken very seriously. A clear message of consequence can often help ensure adherence to the program.

Corrective or discipline actions should be incremental and appropriate to the offenses. For example, a first offense of neglecting to turn in a monthly inventory may require a corporate warning. A more serious offense may result in a suspension of sample shipments. An even more serious offense, such as reportable significant losses, should include not only reporting to the FDA, but an audit of the representative and an inspection of their sample storage. Once a representative is reported to the FDA, the disciplinary actions may also require a suspension of sampling privileges until additional training can take place. Since repeated offenses are common with difficult employees, it is important that additional monitoring be attached to all non-compliant offenses.

By applying incremental corrective actions against offenses, a pharmaceutical company is also able to effectively discipline repeat offenders. The compliance monitoring program should not only track the date that an offense was noted, but the date that the disciplinary action was enforced. If the issue requires a corrective action, the documentation should include the date the issue was considered closed. Applying incremental disciplinary measure also allows the pharmaceutical company to apply more severe disciplinary action if an individual continues with the same or similar offenses. This can be important documentation if the offenses of an individual results in termination.

Corrective and disciplinary actions often include, but are not limited to, corporate warnings, for-cause audits and inspections, suspension of sample shipments, suspension of sampling privileges, reporting to the FDA, remedial training, and termination when appropriate.

If you would like more information, or if you missed any of the previous emails, please feel free to contact me directly.

Visit us at Booth #105 at the 2008 PDMA Alliance Sharing Conference (www.pdmaalliance.org) September 14-17 in New Orleans.

Sincerely,

Judy Fox
PDMA Practice Lead
484-445-7185
judyfox@cis-partners.com

“..Building a Legacy of GP Compliance..”

By Chris Cobourn, CIS GP Practice Lead
chriscobourn@cis-partners.com

This is a quote I heard recently from a friend in the industry, and I think it is an inspiring way to look at what we in the GP Community do. It also is especially relevant as we get closer to IIR; a conference where we get together to talk about GP Compliance. As we discuss GP issues on a daily basis, whether it is between Manufacturers, Consultants, Law Firms, or with the Federal Agencies, our conversations are usually focused on understanding regulations or guidance and making sure that we are compliant with the relevant laws, regulations, and guidance.

In an industry that is not held in high opinion by the public (see Katie Lapins recent PCX newsletter article “Pharma v. Tobacco” ), I must say that the people that I meet and work with on a daily basis share a common goal of compliance. So each of us, in our respective roles in our companies, are building our own legacy of GP Compliance. Years ago there was far less scrutiny in the GP area. I remember when GP Compliance was barely a focus at conferences, and now it is THE focus.

It is important that we realize the purpose of these programs: access to pharmaceutical products in the United States for specific populations, be it the elderly, children, or those in financial need. For the agencies that manage and administer these programs, that is their number one goal. For manufacturers, they help achieve the goal of the programs through their participation and by making sure that the government gets “the right price.” Compliance with the statutory provisions of these programs, such as calculating AMP correctly, is a fundamental component to this. So, as the regulations and guidance have evolved dramatically over the last year, we each have an objective of understanding and implementing the changes.

By implementing the changes, we will leave a legacy. We will either leave a bad legacy, by getting things wrong and leaving a mess for others to clean up later, or we will leave a positive GP legacy, by promoting the knowledge of GP through the organization, keeping management aware of compliance requirements and the impact of the government customers, putting systems in place, developing and documenting policies and procedures, and by establishing audit and monitoring protocols.
Within each pharmaceutical manufacturer, there is a small number, sometimes one, of people who understand GP and what GP Compliance means to the organization. This job is not easy, and people with GP responsibilities often wear many hats. If you are that person, you probably know how important you are to the organization, and you may feel under appreciated. Keep in mind, however, that your number one job is to build a legacy of GP Compliance.