As We Wait for the Final AMP Rule…

The AMP rule for implementing the Medicaid prescription drug provisions of the Patient Protection and Affordable Care Act (PPACA) was published by CMS on January 27, 2012. Guidelines with a wide-reaching financial impact on the life science industry were expected to create serious administrative and operational challenges needing to be addressed quickly. The goal of this rule was to lower costs for states and taxpayers by the following:

  • Aligning reimbursement rates to better reflect the actual price the pharmacy pays for the drug
  • By increasing rebates paid by drug manufacturers that participate in Medicaid
  • By providing rebates for drugs dispensed to individuals enrolled in a Medicaid managed care organization

Keeping these goals in mind, manufacturers were suggested to focus on major items in this rule that would ultimately change the way they do business.

  • U.S territories would be included in the AMP calculations.
  • Rebate agreements would include prescriptions paid by Medicaid managed care, as well as Fee-for-Service. This would require Medicaid managed care plans to capture utilization data and provide it to the states, and would only exempt prescriptions dispensed by a health maintenance organization (HMO.
  • OTC drugs would need to be considered covered drugs if they have a National Drug Code (NDC)
  • The Inclusion of sales to wholesales would be prohibited, unless a manufacturer has documented evidence that the drugs sold to the wholesalers were distributed to retail community pharmacies.
  • Specialty pharmacies and home healthcare distributors would be included within the definition of “retail community pharmacies”.
  • Manufacturers would be required to exclude from AMP rebates paid to insurers, but not the underlying sales to the pharmacies.
  • Best Price would be redefined to include discount and rebates “associated” with the sale of a drug to a customer, rather than the price available to that customer.
  • Inclusion of direct sales of an AG labeled drug to a manufacturer or distributor selling under its own NDC in AMP of the brand.

Two years later, Pharmaceutical manufacturers are still eagerly awaiting the release of the AMP Finale Rule. Some changes will require significant change across all aspects of the regulated pricing environment including policies, procedures, methodology, systems, and data. The final rule may include new provisions or nuances to proposed provisions that will not be known until the final release.

Going forward, performing gap and readiness assessments will help to identify the aspects of proposed or final regulations that apply to your business and the areas of your organization and infrastructure that will be impacted by the legislation. Preparing a plan outlining changes by business unit to each component of your GP infrastructure with aid in discovering the necessary resources needed to implement required changes and associated costs, and an overall project timeline identifying key work streams, contingencies, and project milestones. Along with this, it would be wise to assess implementation costs and potential changes to regulated reimbursement resulting from changes in regulation.

For more information:

How will the New Marketplace Affect Pharmaceutical Companies? Part 2

The Marketplace Effect on Pharmaceutical Companies

A Need for Vigilance and Readiness

New rules and compliance requirements will continue to evolve and change likely at a greater pace than commercial or other managed markets. This will require expanded vigilance and new tools to help track and work with these changes. There will be greater cost control and pricing negotiation expectations on pharma each year in this segment, with spill over potential to the broader commercial market. The Marketplace will become a significant component of the managed markets segment, with strong ties to Medicaid. This becomes an opportunity, with an estimated $26 billion in additional retail drug spend anticipated because of expanded coverage through 2021.

Tweak to Optimize the Opportunities

The out-of-pocket cap on medical costs across new insurance plans as stipulated by ACA is a significant opportunity for Pharma. This creates the following opportunities for Pharma:

  • Validation of currently subsidized patients who were uninsured, to make sure they are not in the Marketplace and thus qualified for benefit coverage (no longer in financial need of the subsidy).
  • Build Marketplace enrollment questions, guidance, and referral into the application process
  • Consider approving subsidies for a limited time, contingent on Marketplace enrollment

For specialty drugs, we anticipate that most insurers will require use of their specialty pharmacy network. Identifying patients through Pharma-specialty pharmacy relationships may become an efficient first step. Pharma will need to structure its research, clinical studies, contracting, marketing, and operations to meet these new stakeholder requirements and expectations.

Marketplace Bottom Line

In 2015 many insurers are looking to expand into new Marketplaces, and national insurers are planning to expand their footprints as well, due to very limited 2014 participation. Medicaid enrollment will continue to grow, particularly in those states that expanded the qualification limits. Those benefits, formularies, and pharmaceutical management approaches that are successful within the Marketplace plans in 2014-2015 will expand to become the norm across most of the commercial business.



Current State of Government Reporting: Will We all Follow Texas?

As medical costs increase and states decide how they will handle Obama’s Affordable Care Act, they will look to the manufacturer to offset these increased costs. Expect more states to follow Texas in enacting new regulations, and revising and expanding reporting obligations.

This will mean that reporting and calculation requirements will vary for many of the states, in addition to the new Federal Government mandates.

The new Texas regulation includes:

1) That the manufacturers submit pricing data for eligible pharmacies located in Texas, if readily available, as opposed to those located in the entire US. In the event a manufacturer does not have a single price point for a product they must report the range of prices (high and low) and then calculate the weighted average for each product each period. Texas is expanding  price reporting to include:

  • Direct Price to Chain Pharmacy
  • Direct Price to Long Term Care Pharmacy
  • Direct Price to Pharmacy
  • Direct Price to Wholesaler/Distributer

2) Manufacturers should not include prices excluded from Medicaid Best Price including prices to 340b covered entities when determining price points.

3) Monthly Reporting:

  • The manufacturer is responsible for the correctness of the AWP, even though they do not play a role in the third-party price reporting compendia’s decision regarding their publication of the AWPs.
  • All price updates must be provided, except, Average Manufacturer Price (AMP) updates, to the Commission by the 10th day of each month.
  • Forecasted price concessions must be included in calculations for a product launch if the manufacturer has this information in its internal business records.
  • Manufacturers must update the Commission with change to formulation, product status, or availability.