4 th Annual 340B Coalition Winter Conference

Transcription

1 Changes to AMP & Best Price: Impact on 340B Pricing 4 th Annual 340B Coalition Winter Conference February 1, 2008 Long Beach, California Stephen W. Schondelmeyer, Pharm.D., Ph.D. Director, PRIME Institute University of Minnesota

2 Overview What will be discussed? Medicaid & AMP Deficit Reduction Act: AMP & the Final Rule Deficit Reduction Act: The Preliminary Injunction Impact of DRA & Preliminary Injunction on 340B

3 Medicaid & OBRA 90: Creation of AMP [Average Manufacturer Price]

4 Medicaid & AMP Medicaid Payment Policy Changes OBRA 90 Required Manufacturers to Pay Rebates to Medicaid Minimum rebate Best Price rebate Inflation adjustment rebate Veterans Health Care Act of 1992 Set Federal Ceiling Price for Big 4 Established 340B Pricing Based on AMP (Minimum and Best Price) Federal Ceiling Price Negotiated Price

5 Medicaid Rx Expenditures & Rebates: 1990 to 2002 (Current Dollars) Expenditures $30,000,000,000 $29.3 bil. $25,000,000,000 $20,000,000,000 $15,000,000,000 Total Rx Expenditures $5.9 bil. $23.4 bil. $10,000,000,000 $5,000,000,000 $7.1 bil. $0.9 bil. $6.2 bil. Rebates Total Rx Expenditures - Rebates $ SOURCE: Compiled by the PRIME Institute, University of Minnesota from data found in Pharmaceutical Benefits Under State Medical Assistance Programs, National Pharmaceutical Council, 1976 to 2002.

6 Drug Rebates as a % of Total Drug Expenditures % of Medicaid Drug Expenditures 30% 25% 24.9% % of Drug Product Cost (AMP) 22.3% 23.3% 23.8% 20% 15% 17.1% 18.8% 17.9% 19.4% 20.2% 10% 12.6% % of Total Drug Expenditures 5% 0% 2.7% 0.0% 2.0% Source: Compiled by the PRIME Institute, University of Minnesota from data found in Pharmaceutical Benefits Under Medical Assistance Programs, National Pharmaceutical Council, 1975 to 1998 and in HCFA Form 64.

7 Estimated Prices of Selected Public Purchasers % of AWP 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100.0% 80.0% 67.9% AWP AMP Medicaid (Min.) (2001) 60.5% Medicaid (Net) 51.7% 49.0% 47.9% AMP 44.8% FSS 340B FCP VA Contract SOURCE: Estimated by PRIME Institute, University of Minnesota and reported in Pharmaceutical Discounts Under Federal Law: State Program Opportunities, Public Health Institute, May 2001.

8 Medicaid & the Deficit Reduction Act of 2005

9 Dual Role for AMP AMP now has 2 roles in Medicaid: Basis for Manufacturer Rebates to Medicaid Minimum rebate of 15.1% of AMP Best price rebate Inflation adjustment payment State supplemental rebates Basis for Setting FULs for Generics New FULs to begin mid-2007 Lowest AMP of all generic equivalents x 250% Updated monthly & posted on web site Applies to any drug with 2 or more equivalents

10 Medicaid Prescription Payment Gap AMP Manufacturer Rebates Payment Gap (Wholesaler Operation & Margin & other costs) Wholesaler State Medicaid Program AAC Provider/ Patient Does AMP = AAC? No!

11 % of Acquisition Cost 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% AMP as a % Independent Invoice Acquisition Cost (CBO, January 2007) 95.0% AMP Range 2% to 10% Below Actual Cost 88.0% AMP Range 2% to 27% Below Actual Cost 62.0% AMP Range 8% to 61% Below Actual Cost Single Source Multi-Source Brands Multi-Source Generics SOURCE: Independent invoice acquisition cost based on IMS invoice data from CBO January 2007.

12 GAO Study of AMP (December 22, 2006) FULs set as 250% above the lowest AMP are: Below Average Retail Acquisition Cost 65% Below for Highest Spend Generics 15% Below for Most Prescribed Generics 28% Below for Most Prescribed & High Use Drugs 59 of 77 Generics Studied AMP-based FULs was below average retail pharmacy acquisition cost

13 AMP Final Rule

14 The Final Rule for AMP The CMS Final Rule: Proposed Rule published (Dec. 2006) Final Rule published (July 2007) AMP Regulation Takes Effect (Oct 2007) Lawsuit Filed by NACDS / NCPA (Nov 2007) CMS to Report AMP to States & Website (Jan 2008)

15 Winners & Losers with AMP AMP as defined in the CMS Final Rule The Final Rule AMP benefits: Manufacturers with less rebate liability 340B with lower AMP from broad definition of retail The Final Rule hurts: Medicaid program with less rebates Traditional retail pharmacy with AMP-based FULs (payment below acquisition cost in many cases) 340B rebates lower due to exclusion of wholesaler prompt pay discounts

16 CMS Proposed Rule on AMP (December 22, 2006) Proposed Rule Expected Impact Includes: Savings from Use of AMP to Set FULs $800 million in savings in 2007 $8.04 billion in savings over 5 years 90% of savings would come from pharmacy Pharmacies Will Feel the Impact 18,000 pharmacies will be significantly impacted 350 pharmacies in Minnesota will have significant impact High Medicaid pharmacies will be affected most Rural & Low-income area pharmacies will be hit

17 The Lawsuit & Preliminary Injunction

18 The Lawsuit Alleges: Preliminary Injunction Alleges CMS Final Rule: Violates Admin. Procedure Act Definition of Retail Class of Trade Violates Statute Definition of Wholesaler Violates Statute Prices in Each State, Not United States to be Considered FUL Used for Non-equivalent Multiple Source Drugs

19 The CMS Final Rule: Overly broad & self-styled CMS definitions: Firms not licensed as wholesalers are wholesalers Firms not licensed as pharmacies are pharmacies Physicians, clinics, hospital outpatient, & home infusion are called retail pharmacies Manufacturers are wholesalers & retail pharmacies Consumers are wholesalers & retail pharmacies

20 Exhibit 3C. Pharmaceutical Market Structure: Distinct Market Segments & Classes of Trade Manufacturers, Marketers, & Distributors Drug Manufacturers & Marketers Chain Warehouse Regional Wholesalers Wholesalers National Wholesalers Chain Mass Merchant Food & Drug Independent Mail Order Health Plan Clinic & Drs Office Long Term Care Hospital Government Facilities & Other Retail Mail Outpatient Providers Institutional Providers

21 Exhibit 3D. Pharmaceutical Market Structure: Wholesalers Drug Manufacturers & Marketers Wholesalers Chain Warehouse Regional Wholesalers National Wholesalers Chain Mass Merchant Food & Drug Independent Mail Order Health Plan Clinic & Drs Office Long Term Care Hospital Government Facilities & Other Manufacturer Direct Sales, Pt. Assistance, Coupons, & Vouchers Hospital Outpatient Non-Profit Entities

22 Exhibit 3E. CMS Final Rule: Wholesalers Drug Manufacturers & Marketers Wholesalers Wholesalers Chain Warehouse Regional Wholesalers National Wholesalers Chain Mass Merchant Food & Drug Independent Mail Order Health Plan Clinic & Drs Office Long Term Care Hospital Government Facilities & Other Wholesalers Manufacturer Direct Sales, Pt. Assistance, Coupons, & Vouchers Wholesalers Hospital Outpatient Non-Profit Entities

23 Exhibit 3F. Pharmaceutical Market Structure: Retail Class of Trade Drug Manufacturers & Marketers Chain Warehouse Regional Wholesalers National Wholesalers Chain Mass Merchant Food & Drug Independent Mail Order Health Plan Clinic & Drs Office Long Term Care Hospital Government Facilities & Other Retail Class of Trade Manufacturer Direct Sales, Pt. Assistance, Coupons, & Vouchers Hospital Outpatient Non-Profit Entities

24 Exhibit 3G. CMS Final Rule: Retail Class of Trade Drug Manufacturers & Marketers Chain Warehouse Regional Wholesalers National Wholesalers Chain Mass Merchant Food & Drug Independent Mail Order Health Plan Clinic & Drs Office Long Term Care Hospital Government Facilities & Other Retail Class of Trade Manufacturer Direct Sales, Pt. Assistance, Coupons, & Vouchers Retail by Final Rule Definition Hospital Outpatient Non-Profit Entities

25 Preliminary Injunction Order by Judge R. C. Lamberth Plaintiffs are likely to succeed on the merits Unless enjoined plaintiffs are likely to suffer irreparable harm for which no adequate remedy exists in law

26 Preliminary Injunction Order by Judge R. C. Lamberth statute is clear enough does not provide the ambiguity for the wholesale re-writing of the words by the Agency CMS is enjoined from: any and all action to implement the AMP rule to the extent such action affects Medicaid reimbursement rates for retail pharmacies Posting AMP on a public website or... to states

27 What Can We Expect?

28 What Can We Expect? In the Next Year: May have settlement of legislative intervention Without above the lawsuit will proceed to trial CMS may implement other aspects of DRA & AMP Manufacturers will continue to report AMP AMP may be implemented for 340B pricing purposes

29 PRIME Institute P R I M E harmaceutical esearch n anagement & conomics University of Minnesota