How to Address the TRICARE Retail Refund Program

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

The clock is ticking… the deadline to make a decision on what your company wants to do regarding TRRx refunds is fast approaching. We are at T-minus-14 days until the Tricare Final Rule's Effective Date of May 26, 2009 - 14 days until retail refunds, and any requests for full or partial compromise, are due. The Tricare Management Authority (TMA) has taken a carrot and stick approach to influence companies to voluntarily participate in this mandatory program. The stick is the threat of assigning Tier 3 status to your products, and requiring prior authorization on products not voluntarily made part of the program. These actions would result in a significant loss of sales in the retail market. The carrot is the implied assurance that retroactive rebates are open to negotiation and compromise, allowing companies to avoid all or a portion of their retroactive liability.

Because of the vague direction provided by the TMA, and the lack of clarity related to compromise approval criteria, protocol, and approval authority, many companies have struggled with how they want to deal with the requirements imposed by the TRICARE Final Rule. It was the intent of TMA (presumed) to incent companies to voluntarily participate (avoiding costly and lengthy litigation) in the program by offering an opportunity to negotiate retroactive refunds for the period of January 28, 2008 to May 26, 2009. However, the criteria for compromise, paradoxically, requires companies to litigate or threaten litigation for a compromise to be considered. TMA has authority to approve compromises up to $100,000; amounts greater than that require approval by the Department of Justice (DOJ). It is unclear what direction has been provided to the DOJ, or what recommendations TMA may have made to influence the criteria to be used by the DOJ in granting compromise requests. It is also unclear whether the DOJ will take a hard line stance and reject all requests for compromise, forcing companies to litigate.

CIS has developed different strategies for manufacturers to use, based on size of their liability, and their willingness to compromise on retroactive refunds. One strategy will be to sign a Pricing Agreement, preserving Tier 2 status and avoiding a Prior Authorization, and request a full or partial compromise of the retroactive liability based on TMA approval authority. We believe this will give companies with liabilities less than $100,000 the greatest chance for a expeditious settlement with minimal costs.

Companies with liabilities significantly exceeding TMA’s authority may want to consider a delay strategy. This would require signing a Pricing Agreement, and requesting a compromise on the full retroactive liability. This would preserve Tier 2 status with no Prior Authorization, and delay a decision on the retroactive refunds due. The compromise request would not be evaluated until the August P&T committee meeting, where it would be referred to the DOJ, most likely delaying a ruling until late Fall. This delay could provide us time to see how the Courts will rule on the Coalition of Government Procurement’s pending litigation on this matter, and how TMA and/or the DOJ may rule on compromise requests submitted by those who are up first.

CIS is partnering with Joe Metro, Esq. at Reed-Smith, LLP to provide assistance to companies that wish to preserve their Tier 2 status, avoid a Prior Authorization, minimize payment of retroactive refunds (with or without litigation), and comply with the requirements of the Tricare Final Rule. The clock is ticking… contact CIS immediately for assistance in formulating your compromise request strategy and compromise request documentation.

For more information, please feel free to contact Steven Moore, CIS Director of Business Development.
stevenmoore@cis-partners.com
484-445-7207
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