HealthCare Reform Questions…Worried about Government Pricing Changes…Can’t Sleep…Who are you going to call – CIS!

By: Lauren Pellicciotti, CIS Project Manager
laurenpellicciotti@cis-partners.com

“Perfect timing!” – If you are currently working in the pharma industry, you can probably interpret the sarcasm in that comment. For all of those GP geeks out there, just when you thought the DRA Final Rule changes were implemented with consistent methodologies in place, with the new law passed there comes another indefinite change to your calculations. Yes – I said it! According to Steven Moore, who you all know as “Scooter Boy”, Healthcare Reform was the hot topic at the most recent IIR GP Summit conference. Most of our clients were consistently asking these two questions: how is healthcare reform going to affect us, and when do we need to implement changes? CIS will be posting a timeline on how it will affect our industry. Stay tuned!

The Patient Protection and Affordable Care Act was signed into law by President Barack Obama on March 23, 2010[1]. Although the law was intended to help provide insurance to approximately 31 million uninsured Americans, and regulate healthcare costs, it is also going to have a huge impact on pharma companies and their internal cost containment strategies. The law has a timeline that could have a costly effect on the government and commercial operations of pharma companies beginning this year.

So how can you react to these changes? I first recommend understanding the new law. If your company does not have a Pricing Committee in place with regular meetings scheduled, I would encourage getting your internal thought leaders together to ensure the impact and changes of the law are addressed immediately. In addition, if you have not already done so, check out our summary of the Act because the 2000 plus page document can definitely put you into a deep coma – sad, but true.

In reading the law, in 2010 alone pharma companies will have to think about how to cut costs to ensure they are still hitting margins, while paying more dollars out to the states with the increase to rebate drug percentage for all drug category types. If you do not know, according to the new law, all brand name drugs will go from 15.1% to 23.1%, and for non-innovator multiple source drugs the rebate percent will increase from 11% to 13% of AMP.

CIS has the knowledge and expertise to help your company comply with these ever-changing requirements. If you have not heard about our services, please feel free to visit our website at www.cis-partners.com.

Sources:
[1] http://en.wikipedia.org/wiki/Patient_Protection_and_Affordable_Care_Act

A Summary of H.R. 3590: Patient Protection and Affordable Care Act

By: Jordan Mummau, CIS Compliance Associate
jordanmummau@cis-partners.com

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.

MEDICARE

2010
• 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.

2011
• 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.

2013
• 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.

2014
• 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)

2010
• 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.

2011
• Prohibit federal payments to states for Medicaid services related to health care acquired conditions.
• State balancing incentive program

2013
• Increase Medicaid payments for primary care services provided by primary care doctors for 2013 and 2014 with 100% federal funding.

2014
• 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
• Honoraria
• Gift
• Entertainment
• Food
• Travel (including the specified destinations)
• Education
• Research
• 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.

More Information:

• 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.

The Healthy, Hunger-Free Kids Act- One Step Towards Ending Childhood Hunger and Obesity

By: Grete Dudek, CIS Compliance Associate
gretedudek@cis-partners.com

As much of the news focus has been on health care reform over the past few weeks, another important bill that will help reduce health care costs is quietly getting closer to becoming law. It is the Healthy, Hunger-Free Kids Act, the draft child nutrition reauthorization bill which was approved by the U.S. Senate Committee on Agriculture, Nutrition and Forestry last week as a step to ending childhood hunger by 2015 and childhood obesity within one generation. The legislation increases the number of children eligible for free or reduced cost meals in several ways, including making every child on Medicaid and every foster child eligible for meals, as well as creating provisions to make entire schools or school districts eligible for free or reduced cost meals. “According to the latest United States Department of Agriculture (USDA) data, nearly 1 in 4 children across the country are at risk of hunger (1).” As food prices have increased, and school district budgets have decreased, it has become more difficult for schools to provide healthy meals for children, so the increase in funding is more important than ever before.

The bill is historic because while fighting childhood hunger, it will also target the nation’s childhood obesity epidemic. The bill contains a provision for an additional six cent reimbursement on top of the national lunch average payment, for each lunch that meets certain nutrition standards (2). The standards will be published by the Secretary of Agriculture, based on recommendations made by the Food and Nutrition Board of the National Research Council for the National Academy of Sciences after the enactment of the bill (2). The bill has the ability to increase access to nutritious food for children not only for breakfast and lunch on school days, but also over the summer, weekends and extended school holidays (1).

The bill also includes guidelines that require any schools participating in a school lunch program to implement school wellness policies that include nutrition education, physical activity, and other activities that promote student wellness (2). Schools will also have to meet nutritional guidelines for all food sold at the school, including food outside the meal programs and sold any time during the school day (2). Childhood obesity and excess weight threaten the health of one third of American children, and children today are the first generation to face a shorter expected lifespan than their parents. Each year, $150 billion is spent treating obesity-related conditions, including diabetes, high blood pressure and heart disease, so if obesity rates are reduced, a tremendous amount of money could be spent on healthcare each year. First Lady Michelle Obama has been drawing attention the problems and solutions, by planting a garden at the Whitehouse and starting a campaign, called Let’s Move, to support healthier food in schools, help kids get more physically active, and make healthy, affordable food available everywhere (3).

President Obama took on the healthcare companies and insurance industries with the current Healthcare Reform bill. The time is right for also taking on the school lunch program to fight childhood obesity. It makes more sense to teach children healthy life habits from a young age, instead of treating diabetes, high blood pressure and heart disease down the road. The bill will be up for vote in the full Senate later this year.

Sources:
1. http://www.prnewswire.com/news-releases/feeding-america-applauds-passage-of-child-nutrition-reauthorization-legislation-by-senate-agriculture-committee-and-urges-full-senate-action-89058612.html
2. http://ag.senate.gov/Legislation/WEI10137.pdf
3. http://www.letsmove.gov/

Articles of the Week!

Courtesy of: Scott Hoffman, CIS Senior Compliance Associate
scotthoffman@cis-partners.com

1) G.O.P. Forces New House Vote on Fixes to Health Bill
http://www.nytimes.com/2010/03/26/health/policy/26health.html?hp

2) Nurses' Drug Dispensing Examined
http://online.wsj.com/article/SB10001424052748704896104575140210198491910.html

3) Medicare panel eyes ESA use in kidney patients
http://www.reuters.com/article/idUSN1715734820100319

4) Gene Holds Key to Embryonic Stem Cell Rejuvenation
http://www.businessweek.com/lifestyle/content/healthday/637314.html

5) Zebrafish study may shed light on cell regeneration in human heart
http://sify.com/news/zebrafish-study-may-shed-light-on-cell-regeneration-in-human-heart-news-international-kdzp4ddieba.html

6) Teva Pharmaceuticals Wins Fight in the Generic Drug Market Battle
http://moneymorning.com/2010/03/19/teva-pharmaceutical/

A Summary of Final Contract Pharmacy Guidelines

By: Jordan Mummau, CIS Compliance Associate
jordanmummau@cis-partners.com

The proposed guidelines for contract pharmacy services that had once been limited to the Alternative Methods Demonstration Project (AMDP) program have now been revamped to utilize multiple contract pharmacies and suggested contract pharmacy provisions. This final notice, put in place by the Health Resources and Services Administration (HHS), comes after many of the covered entities participating in the 340B program suggested that their delivery of patient care would be more effective with a multiple contract pharmacy option. The guidelines state, “It would be a significant benefit to patients to allow the use of more easily accessible, multiple contract pharmacy arrangements by covered entities.”[i] Ultimately, this would allow the program to reach patients who otherwise would not have had access to a covered entity or if a covered entity did not have the resources ‘in-house’ to administer proper care to a patient.

Covered entities are permitted to use multiple pharmacies as long as they remain in compliance with previously established guidance. Auditable records must be maintained to demonstrate this compliance, and records must be held for as long as required by federal, state and local law. Covered entities are responsible for maintaining compliance with these requirements in order to prevent covered drugs from being dispersed to ineligible individuals, and to guard against situations where a drug is subject to both the 340B discount and a Medicaid Rebate claim. It is important to note that the use of a contract pharmacy is voluntary; thus, each covered entity should determine whether or not utilizing multiple contract pharmacies improves upon their current delivery system.

Essential Covered Entity Compliance Elements[ii]:

1. The covered entity will purchase and maintain the title to the drug while assuming responsibility for establishing its price
2. An agreement between a covered entity and a contracted pharmacy will specify the responsibility of both parties to provide comprehensive pharmacy services
3. It is the responsibility of the covered entity to inform the patient of his or her freedom to choose a pharmacy provider
4. The contracted pharmacy may provide other services to the covered entity or its patients (e.g., home care, reimbursement services)
5. The contracted pharmacy and covered entity will adhere to all federal, state, and local laws and requirements
6. The contracted pharmacy will provide the covered entity with reports consistent with customary business practices (e.g., quarterly billing statements, status reports, etc.)
7. The contracted pharmacy, with the assistance of the covered entity, will establish and maintain a tracking system suitable to prevent diversion of section 340B drugs to ineligible individuals
8. The contracted pharmacy and covered entity will develop a system to verify patient eligibility, as defined by HRSA guidelines
9. Neither party will use drugs purchased under section 340B to dispense Medicaid prescriptions unless the covered entity, the contracted pharmacy and the State Medicaid agency have established an arrangement to prevent duplicate discounts
10. The covered entity and contracted pharmacy will identify the necessary information to meet its ongoing responsibility of ensuring compliance
11. Both entities understand that they are subject to audits by outside parties
12. Upon written request to the covered entity, a copy of the contracted pharmacies service agreement will be provided to the Office of Pharmacy Affairs

[i] http://edocket.access.gpo.gov/2010/pdf/2010-4755.pdf

[ii] http://edocket.access.gpo.gov/2010/pdf/2010-4755.pdf

What to Make of the Bipartisan Meeting over Healthcare Reform

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

President Obama recently met with congressional leaders to discuss the future of the stalled Healthcare reform. Democrats state that both parties are close to a solution. However, Republicans have a different story. They say that the reform should be scrapped and started over again (2). From the meeting that took place, it seems that starting over is not the likely outcome. The president’s goal is to reach a compromising solution within one month to six weeks (1).

The Republican Party wants to decentralize the health care problem and make it a piece by piece fix (1). This is a large scale down from the Democrats’ plans. Sen. Lamar Alexander, a Republican from Tennessee said, "Our country is too big, too complicated, too decentralized for Washington, a few of us here, just to write a few rules about remaking 17 percent of the economy all at once. (4)” Democrats stated that this way of going about the change has been tried, and has failed in the past.

The Democrats also have their own thoughts about the bill that was already proposed. According to the New York Times, Democrats:

“…are making the case that, in fact, comprehensive health legislation has
already passed both chambers, garnering a majority in the House and a
supermajority in the Senate. Under their tentative plan, the House would first
approve the bill that was adopted by the Senate on Christmas Eve. The Senate
majority leader, Harry Reid, and House Speaker Nancy Pelosi would also
draft a package of changes to be approved by both chambers in a separate
reconciliation bill. The reconciliation package would effectively smooth out
some of the differences between the House and Senate versions. The whole bundle
would be sent to Mr. Obama to sign into law. (3)”

This means that they would have to take into account what the Republicans have said, and would have to work to make certain compromises.

There are some key points that both parties agree on. Some of these areas are: reforming insurance markets, increasing purchasing powers for small businesses and individuals, eliminating waste, fraud and abuse, and lowering health care costs (2). An ensuing debate is scheduled to discuss the problems that both sides are stating; one of these points of disagreement is publicly funded abortions (4).

Another item that Democrats and Republicans agree on is that the status-quo is not working, and they must come together in some sort of compromise to get a health care reform in place to help the American public. However, another year-long debate is not in the best interest for the people and hopefully something will get resolved sooner, rather than later.

This all should come to a conclusion this upcoming weekend with the vote for the Health Care bill taking place.

Sources:
1. http://blogs.suntimes.com/sweet/2010/02/obama_at_bipartisan_health_mee.html
2. http://www.dotmed.com/news/story/11854
3. http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/health_care_reform/index.html?scp=1-spot&sq=health%20care&st=cse
4. http://www.npr.org/templates/story/story.php?storyId=124105211

Key Elements of ICH-Q10 Pharmaceutical Quality System

Erica Brooks, CIS Senior Compliance Manager
ericabrooks@cis-partners.com

The US Food and Drug Administration (FDA) launch of the Quality-by-Design (QbD) initiative is the foundation for the International Conference on Harmonization (ICH) Q10 Pharmaceutical Quality System guideline. [1] The QbD is a risk-based approach towards manufacturing. ICH Q10 guideline specifies the effective quality systems for the pharmaceutical industry, and is designed to be used throughout the lifecycle of a product. The guideline is a compilation of known regulations used in the industry today; it is not intended to replace Good Manufacturing Practices (GMP), but to serve as an enhancement of the concepts and laws. It applies to drug substances and drug products and includes biotechnology and biological products.

The scope of ICH Q10 defines the major components of product lifecycle as pharmaceutical development, technology transfer, manufacturing, and product discontinuation. The objectives for the guideline are to achieve product realization, establish and maintain a state of control, and to facilitate continual improvement. The Pharmaceutical Quality System consists of four key elements: Process Performance and Product Quality Monitoring system; Corrective Action and Preventive Action (CAPA) system, Change Management system, and Management Review of Process Performance and Product Quality.

A comprehensive monitoring system should demonstrate the state of control that the company has on product quality. Pharmaceutical companies should use a risk-based approach to establish the appropriate tools for measuring and analyzing the parameters. The CAPA system should include actions from complaints, investigations, product rejects, audits, etc., producing a combination of process improvements, knowledge and understanding of the product. An effective Change Management system is necessary to evaluate the impact of a change through an expert team to assure there is no impact to product quality. Lastly, the Management Review Process provides assurance that the process performance and product quality are managed and evaluated over the lifecycle of a product.

ICH Q10 encompasses GMP requirements and other ICH guidelines. The guidance presents information for pharmaceutical companies to establish a system-based management of products throughout the lifecycle. It supports four major systems for continuous improvement of process performance and product quality. Implementation of ICH Q10 is the vehicle to establishing a relationship between pharmaceutical development and manufacturing.

Sources:
1. http://www.fda.gov/RegulatoryInformation/Guidances/ucm128030.htm

Letter from a GP SME: Cardinal Health Distributes a Letter to Manufacturers on 340B Sales Reclassification

By: Chris Cobourn, CIS VP of Regulatory Compliance
chriscobourn@cis-partners.com

On February 18, 2010, Cardinal Health distributed a “Dear Valued Supplier” letter to manufacturers explaining its new 340B Purchase Reclassification Policy. Cardinal states that the policy was designed to better serve “our mutual customers.” Cardinal has made the policy optional and suppliers are asked to respond via email or fax to agree or decline to participate. Note: Cardinal states that any supplier who does not respond by April 1, 2010 will be considered to be in agreement with the reclassification policy. Suppliers who do not want to adhere to the policy must check the “No” box and return the letter.

It is important to understand what is meant by “reclassifications.” According to the letter, if a customer who makes a purchase from a wholesaler, either under a contract or at WAC, subsequently dispenses the product under 340B eligible criteria, the customer can request that Cardinal Health “reclassify” the purchase as a 340B purchase. Essentially, Cardinal will consider the non-340B purchase to be a 340B purchase, as long as requests for Purchase Reclassification are received within 30 days of the close of the quarter in which the transaction took place.

So what impact could the Purchase Reclassification program have on pharmaceutical manufacturers and on Government Programs specifically? CIS has received numerous inquiries from manufacturers asking this question, and wondering what they should consider when determining whether or not to participate. One consideration is the value of Cardinal managing this process for manufacturers in an automated fashion, another is the potential complications for manufacturers who have Cardinal automatically reclassify the sales. Some of these complications could include:

• Reconciling changes to historical chargebacks
• The treatment of the sales in Statutory Pricing calculations, where a commercial sale in a previous period has to be reclassified as Government (potentially requiring a recalculation)
• The impact on the GPO administrative fee, where the original sale would have been included in the administrative fee calculation

Another question for consideration is whether manufacturers are required to honor reclassification requests, or will have the option to do so. Given a situation in which an entity could have purchased under the 340B program but didn’t, and then subsequently asks for the price retroactively, would the manufacturer be obligated to reclassify the purchase (thus granting the price retroactively)? I am not aware of any guidance that suggests that the manufacturer is required to grant a price retroactively in that situation. Additionally, if an entity is eligible to purchase under the 340B program there are restrictions on their purchasing under a GPO contract. These are questions and issues that you may want to discuss with your legal counsel before determining how to proceed with the reclassification policy.

In evaluating this specific reclassification scenario, manufacturers should not confuse it with other common historical PHS pricing issues, such as the following basic scenarios. (Note: These thoughts represent my opinions on 340B pricing issues; I am not providing guidance or legal advice!)

1. A 340B entity purchases at the offered 340B price, and subsequently it is determined that the price was too high (perhaps due to restatement of Medicaid Pricing by the manufacturer). In this scenario, I think the current and expected practice is for the manufacturer to correct the overcharge and make the entity whole (if the entity was undercharged, the manufacturer has no recourse).
2. A Non-340B eligible entity purchases at the 340B price; however, it is subsequently identified that the entity should not have purchased at that price. It is standard practice for the manufacturer to show sufficient due diligence to recover the under charge, as to not create a potential Medicaid Best Price violation.
3. A 340B entity makes a purchase, but at a “commercial price,” such as off of a GPO contract, and later identifies that it could have purchased at the 340B price; this is the scenario that could allow a purchase to be reclassified under the Cardinal Health Purchase Reclassification policy. Manufacturers should consider the guidance on this, check with legal counsel if necessary, determine wither they are obligated to grant the price historically, and make a business decision on whether to grant the price.

If you are a manufacturer, make sure to fully evaluate the potential impact of the reclassification, especially on your GP calculations, as you determine how to follow Cardinal’s new policy.

Additional Note: Upon inquiry – the OPA currently has no position on this letter.

Thank you, I appreciate any questions or comments,

Chris Cobourn

Articles of the Week!

Courtesy of: Jess Ebert, CIS Compliance Associate
jessicaebert@cis-partners.com

1) Parents give kids fewer bad genes than thought: study
http://news.yahoo.com/s/afp/20100310/ts_alt_afp/scienceresearchusgenome

2) NY seeks 'fat tax' on sodas to fight rising US obesity
http://www.google.com/hostednews/afp/article/ALeqM5izMGnugDj3S1KEI5m825MmSwuLPA

3) Scientists tease DNA from eggshell of extinct birds
http://news.yahoo.com/s/afp/20100310/sc_afp/sciencepalaeontologyfossils

4) As Lice Grow Treatment-Resistant, Drug Could Help
http://www.npr.org/templates/story/story.php?storyId=124526307&ft=1&f=1027,1030,1066

5) Health Care War: Can Democrats Pass Bill by White House Deadline
http://abcnews.go.com/GMA/HealthCare/white-house-deadline-health-care-bill-irks-democrats/story?id=10068131

“TRICARE Final Rule – Tips for Manufacturers to Ensure That They Are Prepared”

By: Dave Rice, FSS Director, daverice@cis-partners.com
John Avicolli, FSS Project Manager, johnavicolli@cis-partners.com
Jeff Blake, FSS Associate, jeffblake@cis-partners.com

On November 30, 2009, the U.S. District Court for the District of Columbia held that remand of the Final Rule was necessary so that TRICARE Management Activity (TMA) could exercise its discretion in implementing the statute. However, the court was clear that the Department of Defense (DoD) could, in exercising its discretion, reissue a rule with the same substantive requirements. In view of this conclusion, the court decided not to void the TRICARE Final Rule, thereby leaving the voluntary agreement program in place.

The U.S. District Court has directed TMA to reissue the Final Rule. Specifically, TMA is to remove references in the pre-amble indicating that the law requires manufacturers to pay refunds for products purchased by the government at a price that was in excess of the calculated Federal Ceiling Price. Currently, the statute requires that FCPs apply to all retail pharmacy program prescriptions filled on or after January 28, 2008. However, the statute does not address who is responsible for the cost differential between the FCP and the actual price paid. In other words, the statute does not specifically state that the manufacturer is on the hook to retroactively reimburse the government for purchase prices greater than the FCP price dating back to January 28, 2008. This was the basis of the case brought on by the Coalition for Common Sense in Government Procurement back in May 2009.

Per the U.S. District Court’s ruling, TMA was also required to show that they have considered options other than manufacturer refunds for getting to the required FCP price. However, it will be at the discretion of the agency to determine which of the different options is best for implementing the Final Rule. It is most likely that TMA will continue along the manufacturer refund course and document that they have, in fact, evaluated other options.
The court rejected the Coalition's argument that the Final Rule was impermissibly retroactive, on the grounds that it is the statute, not the rule itself, which made transactions on or after January 28, 2008 subject to FCPs. This ruling will most likely be appealed as many legal arguments remain related to this ruling. Currently, the DoD is in the process of collecting comments from the general public before the revised Final Ruling is issued. The comment period ends on March 11, 2010, and any individual who wishes to make an official comment can do so on the Federal eRulemaking Portal at http://www.regulations.gov/. [1]

Given all of this information, we are currently recommending to our clients to take a wait-and-see approach and recommend the following to ensure potential financial obligations are accounted for and to ensure that companies have unencumbered access to the TRICARE retail market:

1. Calculate and accrue for any retroactive liabilities.
2. Sign a Pricing Agreement with TMA agreeing to pay refunds going forward on a voluntary basis. (This agreement helps to ensure that products are assigned a Tier 1 or Tier 2 Uniform Formulary Status. Tier 1 and 2 products have a $3 and $9 co-pay, respectively, while Tier 3 products require a $22 co-pay [2]. Further, a pricing agreement can help ensure that there are no pre-authorizations associated with the product.)
3. Wait for a formal request for payment prior to making any refund payments.
4. Monitor progress of any appeals by individual companies or the Coalition for Common Sense in Government Procurement.

Sources:
[1] http://www.tricare.mil/pharm_mfg/downloads/PharmFCP-FR2-9-10.pdf
[2] http://www.tricare.mil/News/news.aspx?fid=306

IIR's GP Summit Update

Before the snow storm hit Baltimore, CIS was scheduled to run a full-day Advanced GP Workshop during IIR’s GP Summit in February (GP 201). The Workshop was scheduled to include a Roundtable discussion involving different agencies; OIG, CMS, VA and OPA.

IIR’s GP Summit has been rescheduled for Monday, March 22nd and Tuesday, March 23rd at the Hilton, Baltimore. The Conference will consist of a full two day agenda that will cover both GP 101 and 201 topics.

A finalized agenda from IIR is expected shortly, and some of the topics CIS will present include:

• GP Audit Approach
• Recalculations and Restatements: Understanding the Guidance
• Mergers, Acquisitions and Divestiture and the Impact on GP
• Hot Topics: Agency Round Table Discussion

We hope you will be able to make it to Baltimore. If you have any questions or suggestions regarding our sessions, please feel free to contact me.
chriscobourn@cis-partners.com

Articles of the Week!

Courtesy of: Dana Zelig, CIS Compliance Consultant
danazelig@cis-partners.com

FDA Criminal Division to Increase Prosecutions
http://online.wsj.com/article/SB10001424052748703862704575099942109582112.html?mod=WSJ_Pharmaceuticals_leftHeadlines

Obama Calls for ‘Up or Down’ Vote on Health Care Bill
http://www.nytimes.com/2010/03/04/health/policy/04health.html?ref=health

Sanofi’s Cancer Drug May Set New Standard
http://www.thestreet.com/_yahoo/story/10694965/1/sanofis-cancer-drug-may-set-new-standard.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Teva Regains Exclusivity on Blood Pressure Drugs
http://finance.yahoo.com/news/Teva-regains-exclusivity-on-apf-2254947923.html?x=0&.v=1

AZ Pitches Social-Media Rules to FDA
http://www.fiercepharma.com/story/az-pitches-social-media-rules-fda/2010-03-02

*

New York Attempts to Restrict Sales & Marketing Practices – Again

By: Chris Didizian, CIS Compliance Manager
chrisdidizian@cis-partners.com

New York is attempting to follow suit with states such as California, Nevada, and Massachusetts by proposing a bill, which, if passed, would limit marketing activities to healthcare professionals (“HCPs”). Not surprisingly, the proposed provisions governing promotional materials, meals, and entertainment mimic those of other states, but New York takes the provisions a step further by extending liability, not just to the manufacturers, but to the HCPs. The focus of this newsletter article is on the proposed rules per state, specifically as they apply to promotional expenses spent on HCPs.

As with all states with similar, effective legislation, Section 279 of Senate Bill 6608 attempts to “ensure that the relationship between medical manufacturing companies and HCPs does not interfere with the independent judgment of such professionals in making prescribing decisions.”[1] To do so, the New York legislation states that medical manufacturing companies are prohibited from providing HCPs “any financial support, including but not limited to any grant, scholarship, subsidy, support, consulting contract, speaker contract or educational or practice-related items to reward the professional for having prescribed particular drugs, biologics or medical devices in the past, or to induce the professional to prescribe or continue prescribing… in the future.”[2] As with the other states, this prohibition excludes compensation for bona fide consulting or speaking services.

With regards to promotional materials, the bill states that, “medical manufacturing companies are prohibited from providing any promotional materials to a HCP unless such materials: (1) are accurate and not misleading; (2) make claims about a product only when properly substantiated; (3) accurately reflect the balance between risks and benefits; and (4) are consistent with all other requirements of the FDA.”[3] Nothing within the above provisions reads differently than what is currently enacted by federal legislation, 21 USC §352 et seq. Misbranded Drugs and Devices and relevant guidance in accordance with the PhRMA Code on Interactions with Healthcare Professionals (“PhRMA Code”).

With regards to providing entertainment, recreational items, and meals, the proposed rule would prohibit a manufacturer from offering, and a HCP from accepting, any entertainment or recreational items. Meals are also prohibited to HCPs and staff unless they: “(1) are modest as judged by local standards; (2) are provided in connection with structured, oral informational presentations that provide specific or educational value; (3) are served only for consumption during an informational or educational presentation and are not offered or served at another time or place or outside the presence of the pharmaceutical company; (4) are not part of an entertainment or recreational event nor do they occur more often than on an occasional basis.”[4] Meals are also permitted outside of the professional’s office or hospital setting or manufacturer’s office if the meal is incidental, not part of a recreational event, and is conducive to informational communications. As always, meals provided in this case should be modest and occur occasionally.

In an atypical manner, as stated earlier, liability has been extended not only to manufacturers but also to HCPs, as indicated by the proposed penalties. The penalties for a medical manufacturing company for violating any section of the proposed bill are a minimum of $15,000 and a maximum of $250,000 per violation. Individual HCPs who violate any section of the proposed legislation are penalized a minimum of $5,000 and a maximum of $20,000 per violation.[5] For the most part, much of the provisions already exist within the PhRMA Code, but the increased liability to HCPs further indicates that state governments are willing to resort to further restrictions to ensure that interactions between manufacturers and HCPs are, ultimately, in the best interests of their patients.

[1] S.B. 6608. §279 et seq,
[2] Ibid.,
[3] Ibid., section 4
[4] S.B. 6608. §279 Section 5.
[5] Ibid., Section 17.

FDA Impersonators

By: Venessa Piper-Givler, CIS Compliance Manager
Vanessapiper-givler@cis-partners.com

The FDA is now worried about the extortion scam for which they received reports in November 2009. The FDA has been warning the public that there are criminals posing as FDA special agents as well as other law enforcement agents such as DEA, FBI, U.S. Secret Service and U.S. Customs Service. The criminals have targeted victims that purchase their prescription drugs over the internet or “telepharmacies.” They believe that the scam started out as a theft of consumers’ personal information.

“The criminals inform the victims that purchasing drugs over the internet or the telephone is illegal, and that law enforcement action will be pursued unless a fine or fee ranging from $100 to $250,000 is paid.” In addition to these fines, victims might find that there are fraudulent transactions placed against their credit cards, the FDA said. (1)
The FDA also has explained that consumers should be aware that although phone calls appear to be from numbers located in the U.S., they are actually voice-over-the-internet-protocol numbers or even cell phones. (2)

“Impersonating an FDA official is a violation of federal law,” said Michael
Chappell, the FDA’s acting Associate Commissioner for Regulatory Affairs.
“The public should note that no FDA official will ever contact a consumer
by phone demanding money or any other form of payment.” (3)

It was also explained to the public that FDA special agents are not authorized to impose criminal fines. This type of action can only be taken through the court system and the fines are paid to the U.S. Treasury. The FDA also explained that they are working with various agencies to find the impersonators and will actively pursue criminal charges.

In summary, what you should watch out for:

• A phone call from someone identifying themself as an FDA official or other law enforcement personnel
• The phone call appears to be a U.S. number
• The caller is requesting credit card information, or a wire transfer (to the Dominican Republic) to pay for fines related to purchasing drugs over the internet
• The caller may have a Hispanic accent

What you should do if you receive a call like this:

• Refuse all demands; be aware that the impersonators may threaten with property searches, arrest, etc.
• Call the FDA's Office of Criminal Investigations Metro Washington Field Office at 800-521-5783 to report the crime.

With all of these reports about FDA impersonators, we might want to reconsider purchasing our prescription drugs over the internet and try going to the pharmacy counter again.

Sources:

1) http://www.miamiherald.com/news/action-line/v-print/story/1447413.html
2) http:///www.fiercebiotech.com/press-releases/fda-warns-public-extortion-scam-fda-impersonators
3) http://pharmtech.findpharma.com/pharmtech/article/articleDetail.jsp?id=650318