Healthcare Reform is on the tip of everyone’s tongue, and the best way to successfully implement the required changes into your company’s government and commercials programs is to have a thorough understanding of the Patient Protection and Affordable Care Act. Understandably, that task may seem daunting, considering the Act is over 2,000 pages long. To give our readers the pertinent knowledge they need, we’ve created the following summary of the Act to highlight the most important and relevant points to the pharmaceutical industry. As always, CIS is here to answer any questions you have about Healthcare Reform and how it affects you.
• Provide a $250 rebate to Medicare beneficiaries who reach the Part D coverage gap in 2010 and gradually eliminate the Medicare Part D coverage gap by 2020.
• Expand Medicare to individuals exposed to environmental health hazards.
• Manufacturers to provide a 50% discount on brand-name prescriptions filled in the Medicare Part D coverage gap.
• Begin phasing-in federal subsidies for generic prescriptions filled in the Medicare Part D coverage gap.
• Provide a 10% Medicare bonus payment to primary care physicians and to general surgeons practicing in health professional shortage areas.
• Begin phasing-in federal subsidies for brand-name prescriptions filled in the Medicare Part D coverage gap (to 25% in 2020, in addition to the 50% manufacturer brand-name discount).
• Pilot program is established; evaluates paying a bundled payment for acute, inpatient hospital services, physician services, outpatient hospital services, and post acute care services.
• Reduce Medicare Disproportionate Share Hospital (DSH) payments by 75%.
• Increase payments over time based upon the % of uninsured population and the amount of uncompensated care provided.
MEDICAID (Section 2501)
• Increase the Medicaid drug rebate % for brand name drugs to 23.1%.
• Exception: rebates for clotting factor drugs and drugs approved exclusively for pediatric use increases to 17.1%.
• Increase the Medicaid rebate for non-innovator, multiple source drugs to 13% of Average Manufacturer Price (AMP).
• Extend drug rebate to Medicaid managed care plans.
• Prohibit federal payments to states for Medicaid services related to health care acquired conditions.
• State balancing incentive program
• Increase Medicaid payments for primary care services provided by primary care doctors for 2013 and 2014 with 100% federal funding.
• Expand Medicaid to all individuals under age 65 with incomes up to 133% Federal Poverty Level (FPL) based on modified adjusted gross income.
• Reduce states’ Medicaid DSH allotments.
Physician Ownership/Reporting/and Other Transparency - (Section 1128G)
If providing a payment or other transfer of value to a covered entity, a Manufacturer must submit:
• The name of the covered recipient.
• The business address of the covered recipient and, in the case of a covered recipient who is a physician, the specialty and National Provider Identifier of the covered recipient.
• The amount of the payment or other transfer of value.
• The dates on which the payment or other transfer of value was provided to the covered recipient.
• A description of the form of the payment or other transfer of value, indicated (as appropriate for all that apply) as: cash or a cash equivalent.
• In-kind items or services.
• Stock, a stock option, or any other ownership interest, dividend, profit, or other return on investment; or any other form of payment or other transfer of value (as defined by the Secretary).
• A description of the nature of the payment or other transfer of value, indicated (as appropriate for all that apply) as: Consulting fees.
• Compensation for services other than consulting
• Travel (including the specified destinations)
• Charitable contribution
• Royalty or license
• Current or prospective ownership or investment interest
• Direct compensation for serving as faculty or as a speaker for a medical education program
• Grant; or any other nature of the payment or other transfer of value (as defined by the Secretary).
• If the payment or other transfer of value is related to marketing, education, or research specific to a covered drug, device, biological, or medical supply, or to the name of that covered drug, device, biological, or medical supply.
• Any other categories of information regarding the payment or other transfer of value the Secretary determines appropriate.
Monetary penalties for non-compliance can range from $10,000 – $1,000,000. See section 1128G if you have specific questions regarding penalties.
• Physician-owned hospitals that do not have a provider agreement prior to August 2010 will not be able to participate in Medicare.
• Drug, device, biological and medical supply manufacturers must report gifts and other transfers of value made to a physician, physician medical practice, a physician group practice, and/or a teaching hospital.
• Referring physicians for imaging services must inform patients in writing that the individual may obtain such service from a person other than the referring physician, a physician who is a member of the same group practice, or an individual who is supervised by the physician or by another physician in the group.
• Prescription drug makers and distributors must report to the Health and Human Services (HHS) Secretary information pertaining to drug samples currently being collected internally.
• Pharmacy benefit managers (PBM) or health benefits plans that provide pharmacy benefit management services that contract with healthy plans under Medicare or the Exchange must report information regarding the generic dispensing rate, rebates, discounts, or price concessions negotiated by the PBM.
Drug Sampling; Reporting – (Section 1128H)
Beginning in 2012, no later than April 1st of each year each manufacturer and authorized distributor of an applicable drug shall submit to the Secretary the following information from the preceding year:
• In the case of a manufacturer or authorized distributor which makes distributions by mail or common carrier reports: the identity and quantity of drug samples requested and the identity and quantity of drug samples distributed, aggregated by: the name, address, professional designation, and signature of practitioner making the request.
• In the case of a manufacturer or authorized distributor of record which makes distributions by means other than mail or common carrier reports: the identity and quantity of drug samples requested and the identity and quantity of drug samples distributed under such subsection during that year, aggregated by: the name, address, professional designation, and signature of the practitioner making the request.
Expanded Participation in the 340B Program – (Section 7101)
Expansion of Covered Entities Receiving Discounted Prices – Section 340B of PHS is amended by adding:
• A children's hospital excluded from the Medicare prospective payment system pursuant to section 1886(d)(1)(B)(iii) of the Social Security Act.
• A free-standing cancer hospital excluded from the Medicare prospective payment system
• Critical Access Hospitals
• Rural referral centers (must have disproportionate share adjustment percent equal or greater than 8%)
• Extension of Discount to Inpatient Drugs
• Prohibition on Group Purchasing Arrangements
• Medicaid Credits on Inpatient Drugs: not later than 90 days after the date of filing of the hospital's most recently filed Medicare cost report, the hospital shall issue a credit as determined by the Secretary to the State Medicaid program for inpatient covered drugs provided to Medicaid recipients.
Quick Facts/ At a Glance
Dual Eligible Coverage and Payment Coordination –
HHS will establish a Federal Coordinated Health Care office.
• Improve coordination among the federal and state governments for individuals enrolled in both programs.
Medicare Advantage (Part C) –
‘MA’ payments will be based on the average number of bids submitted by insurance plans in each market.
• MA plans will be prohibited from charging beneficiaries cost sharing for covered services greater than what is charged under fee-for-service.
Medicare Prescription Drug Plan Improvements (Part D) –
In order to have their drugs covered under the Medicare Part D program, drug manufacturers will provide a 50% discount to Part D beneficiaries for brand-name drugs and biologics purchased during the coverage gap beginning July 1, 2010.
• Initial coverage limit in the standard Part D benefit will be expanded by $500 for 2010.
Pharmacy Reimbursement – (Section 2503)
Use of AMP in Upper Limits – Secretary shall calculate the Federal upper reimbursement limit as no less than 175% of the weighted average of the most recently reported monthly AMP for pharmaceutically and therapeutically equivalent multiple source drug products.
• Smoothing process will be implemented for AMP (similar to Average Sales Price (ASP) smoothing)
• Definition of AMP:
o Wholesalers for drugs distributed to retail community pharmacies
o Retail community pharmacies that purchase drugs direct from the manufacturer
• AMP should exclude:
o Customary Prompt Pay Discount extended to wholesalers
o Bona fide service fees paid by manufacturers to wholesalers or retail community pharmacies, including (but not limited to) distribution service fees, inventory management fees, product stocking allowances, and fees associated with administrative services agreements and patient care programs (such as medication compliance programs and patient education programs.)
o Reimbursement by manufacturers for recalled, damaged, expired, or otherwise unsalable returned goods, including (but not limited to) reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction.
o Payments received from, and rebates or discounts provided to, PBMs managed care organizations, health maintenance organizations, insurers, hospitals, clinics, mail order pharmacies, long term care providers, manufacturers, or any other entity that does not conduct business as a wholesaler or a retail community pharmacy.
• AMP should include:
o Any other discounts, rebates, payments, or other financial transactions that are received by, paid by, or passed through to, retail community pharmacies shall be included in the AMP for a covered outpatient drug.
Medicare, Medicaid, and CHIP Program Integrity Provisions
The Secretary will establish procedures to screen providers and suppliers participating in Medicare, Medicaid, and CHIP.
• Providers and suppliers enrolling or re-enrolling will be subject to new requirements including a fee, disclosure of current or previous affiliations with any provider or supplier that has uncollected debt, has had their payments suspended, has been excluded from participating in a Federal health care program, or has had their billing privileges revoked.
• Secretary of HHS is authorized to deny enrollment in these programs.
Enhanced Medicare and Medicaid Program Integrity Provisions – (Section 1128J)
CMS will include in the integrated data repository (IDR) claims and payment data from Medicare (Parts A, B, C, and D), Medicaid, CHIP, health-related programs administered by the Departments of Veterans Affairs (VA) and Defense (DoD), the Social Security Administration, and the Indian Health Service (IHS).
• New penalties will exclude individuals who order or prescribe an item or service, make false statements on applications or contracts to participate in a Federal health care program, or who know of an overpayment and do not return the overpayment.
• Each violation would be subject to a fine of up to $50,000.
• The Secretary will take into account the volume of billing for a Durable Medical Equipment (DME) supplier or home health agency when determining the size of a surety bond.
• The Secretary may suspend payments to a provider or supplier pending a fraud investigation.
• Health Care Fraud and Abuse Control (HCFAC) funding will be increased by $10 million each year for fiscal years 2011 through 2020.
• The Secretary will establish a national health care fraud and abuse data collection program for reporting adverse actions taken against health care providers, suppliers, and practitioners, and submit information on the actions to the National Practitioner Data Bank (NPDB).
• The Secretary will have the authority to dis-enroll a Medicare-enrolled physician or supplier who fails to maintain and provide access to written orders or requests for payment for DME, certification for home health services, or referrals for other items and services.
• The HHS Secretary will expand the number of areas to be included in round two of the DME competitive bidding program from 79 of the largest metropolitan statistical areas (MSAs) to 100 of the largest MSAs, and to use competitively bid prices in all areas by 2016.
Additional Medicaid Program Integrity Provisions
States must terminate individuals or entities from their Medicaid programs if the individuals or entities were terminated from Medicare or another state’s Medicaid program.
• Medicaid agencies must exclude individuals or entities from participating in Medicaid for a specified period of time if the entity or individual owns, controls, or manages an entity that:
o (1) Has failed to repay overpayments;
o (2) Is suspended, excluded, or terminated from participation in any Medicaid program;
o (3) Is affiliated with an individual or entity that has been suspended, excluded, or terminated from Medicaid participation.
• Agents, clearinghouses, or other payees that submit claims on behalf of health care providers must register with the state and the Secretary.
• States and Medicaid managed care entities must submit data elements for program integrity, oversight, and administration.
• States must not make any payments for items or services to any financial institution or entity located outside of the United States.
Pharmaceutical Manufacturers Fee
This provision imposes an annual flat fee of $2.3 billion on the pharmaceutical manufacturing sector beginning in 2010 allocated across the industry according to market share.
• The fee does not apply to companies with sales of branded pharmaceuticals of $5 million or less.