CIS' TRICARE Final Rule Teleconference

By Dave Rice, Director Federal Contracting
daverice@cis-partners.com

I am new to CIS and to the Pharma Compliance Blog, so let me introduce myself. I’m Dave Rice, CIS’ new Director of Federal Contracting. I have over 25 years diverse pharmaceutical industry experience including FSS Contracting, Business Development, FSS Compliance, Pricing and Contracting, Finance and Auditing. Prior to joining CIS, I worked at WSI, Pharmacia, Pharmacia & Upjohn and The Upjohn Company where I held key positions in Auditing, Pricing and Contacting, Federal Government Compliance, and Federal Government Business Development. I am also a past Chairman of the AMSUS-Sustaining Members (Association of Military Surgeons of the United States), an industry organization that brings together private healthcare industry representatives with key Department of Defense (DoD), Department of Veterans Affairs (VA), and U.S. Public Health Service decision makers to facilitate discussion of issues common to all.

Thank you to the to the 95 -100 pharmaceutical company participants who were part of the Tricare Final Rule teleconference sponsored by CIS and Reed Smith on March 26, 2009. There was a lot of information covered in a very short period of time, so I thought it would be good to summarize my thoughts on this “Hot Topic.”

As the Tricare Retail Pharmacy (TRRx) Program moves forward in seeking FCP pricing, and thereby witnessing estimated savings of hundreds of millions of dollars, manufacturers are left with many challenging questions around the legalities and operational aspects of the Final Rule. It is the DoD’s opinion that NDAA-08 and the other additional legal underpinnings sited within the Final Rule are clear… this is a mandatory program, and rebates will be retroactive to 28 January 2008. Pharmaceutical companies must decide if they should challenge the legitimacy of the Final Rule through litigation or participate in the TRRx Program. Litigate or participate… the clock is ticking.

I would break the process of deciding how to act into three parts, 1) Risk Assessment, 2) Waiver Negotiation, and 3) Operational Components.

Risk Assessment
First and foremost, manufacturers must assess the risk of not participating in the TRRx Program. As a manufacturer, you might ask yourself:

• What is the potential liability of calculating refunds back to January, 2008? Is it material?
• If you elect not to participate, and are therefore moved from Tier 2 to Tier 3 on the DoD’s Uniform Formulary, what is the impact on your sales in the retail market segment of going from a $9 copay (Tier 2) to a $22 copay (Tier 3)?
• What is the impact of having a Prior Authorization placed on your product in the various market channels?
• What is the probability that you would be referred to the Department of Justice for collection and/or other legal actions?
• If you were to litigate, what is the probability that you would be successful; and if unsuccessful, how much would it cost you in legal fees and refunds?

Waiver Negotiation
If manufacturers decide to participate in the TRRx program, some of their key considerations should be:

• What is our prospective refund liability?
• What is our retroactive refund liability?
• How much of the retroactive refund can we negotiate away if we voluntarily enter into a Manufacturer’s Agreement with the DoD?
• What is the negotiation process? Is it face to face?
• What rationale would we present for a request of waiver?
• Is the waiver request a written communication?
• How confident are we that the Director of Tricare Management Activity (TMA) would accept our waiver request?
• If the request for waiver is denied, can we resubmit another waiver request?

Understanding the negotiation process is a key component of determining your success in negotiating a waiver of refunds, and in determining if you want to voluntarily and proactively participate in the TRRx program.

Operational Component
If you determine you are going to participate in the TRRx program, there are a number of operation issues to consider:

• How will I validate the legitimacy of the data received from TMA?
• How do I calculate the refund amount?
• What is the procedure for paying the refund?
• How will paying the refund impact my FCP calculation? AMP? ASP?
• What SOP’s will need updating?

There are still more questions than answers related to the Tricare Retail Refund Program, but with only 2 months until the Final Rule’s effective date of May 26, 2009, the clock is ticking. CIS plans to continue dialog with the DoD to get clarification on many of these issues, and will be happy to present your messages and questions. Please tell us your concerns, and feel free to share any ideas you have to make the process work better for all of us.

The bottom line is that “litigate or participate” is not as cut and dry as we would like it to be. Many factors, including a manufacturer’s size, the number and type of drugs in its portfolio, and all the questions raised above, all go into determining your next steps as a manufacturer. What we can tell you is that CIS has the tools to help you weigh this information and come up with the best plan of action. Please feel free to contact me any time, to make sure your company is moving in the right direction. And remember… the clock is ticking.

Sincerely,
Dave Rice
daverice@cis-partners.com

CIS would also like to extend a special thanks to Joe Metro, Esq. from Reed Smith LLP for providing the Legal Perspective on the Tricare Final Rule during yesterday's teleconference. For more information, please see Reed Smith's Life Sciences Health Industry Alert: TRICARE Retail Pharmacy Program Subject to Federal Ceiling Prices Under New DoD Rule.

NOTE: For those of you who missed the May 26th teleconference, it is currently being edited and will be posted on the Pharma Compliance Exchange for reference. Details to follow...