Transcript Patient Definition - Safety Net Hospitals for Pharmaceutical Access

PHARMACEUTICAL DISCOUNTS UNDER FEDERAL
LAW: ANALYSIS OF STATE OPTIONS
by
Bill von Oehsen
Counsel
Public Hospital Pharmacy Coalition
NCSL 2004 Annual Meeting: Health Care Cost Solutions?
Examples from the Worlds of Insurance
and Prescription Drugs
July 20, 2004
Salt Lake City, Utah
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Bill von Oehsen
[email protected]
Overview
• Existing federal framework in which federal and state
agencies regulate and/or negotiate drug prices
• State experimentation in pharmacy assistance programs –
multiple models have emerged
• Future of state pharmacy programs – which models save
the most money
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Existing Federal Framework:
Five Federal Drug Discount Programs
•Medicaid rebate program - jointly administered by federal
and state government (AWP minus 40%)
•340B program - federal grantees (AWP minus 51%)
•Federal supply schedule - federal agencies, U.S. territories,
Indian Tribes (AWP minus 48%)
•Big 4 Federal ceiling price - VA, DOD, PHS and Coast
Guard (AWP minus 52%)
•VA contract - VA only (as low as AWP minus 65%)
A sixth program — establishing a Medicare drug benefit — goes
into effect in 2006.
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Bill von Oehsen
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Existing Federal Framework:
Comparison of Federal Prices
100.0%
80.0%
Private Sector Pricing
60.5%
“Best Price”
58.0%
51.7%
49.0%
47.9%
34.6%
Fr
ee
ac
t
VA
B
ig
co
nt
r
P
Fo
ur
:
FC
34
0B
FS
S
an
ad
ia
n
C
eb
at
e
M
ed
ic
ai
d
R
A
A
M
P
0.0%
W
P
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: Data derived from Prescription Drugs: Expanding Access to Federal Prices Could Cause Other Price Changes, U.S. General Accounting Office,
GAO/HEHS-00-118, August 2000 and How the Medicaid Rebate on Prescription Drugs Affects Pricing in the Pharmaceutical Market, Congressional Budget Office
Papers, January 1996.
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Background On U.S. Drug Market:
Comparison Of Prices*
100%
100.0%
80.0%
Average Wholesale Price
80%
60.5%
60%
Cash
Customers
51.7%
49.0%
PBM and Other
Private Insurance
44.8%
40%
Medicaid
FSS
20%
340B
Market Share
VA
Free/Nominal
0%
25%
60%
Market Share
11%
1%
1%
1%
1%
* Chart is based on rough estimates
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Impact of Medicare Drug Benefit:
Scenario One*
100.0%
100%
Average Wholesale Price
Price Reduction for Medicare Patients
80.0%
80%
60.5%
51.7%
60%
New Medicare
Business
49.0%
44.8%
40%
Cash
Customers
Price Increase for Medicare
PBM and Other
Private Insurance
Medicaid
FSS
340B
20%
Market Share
VA
0%
Free/Nominal
25%
60%
11%
Market Share
1% 1%
1%
1%
* Chart is based on rough estimates
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Impact of Medicare Drug Benefit:
Scenario One*
100%
AMP After
AMP Before
Average Wholesale Price
80%
“Best Price” After
“Best Price” Before
60%
51.7%
Cash
Customers
100.0%
49.0%
PBM and Other
Private Insurance
44.8%
Medicare
80.0%
40%
60.5%
Medicaid
FSS
20%
Market Share
340B
VA
Free/Nominal
0%
10%
40%
5%
Market Share
42%
1%
1% 1%
* Chart is based on rough estimates
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Impact of Medicare Drug Benefit:
Scenario Two*
100.0%
100%
Price Increase for Medicare
Average Wholesale Price
Price Reduction for Medicare Patients
New Medicare
Business
80.0%
80%
60.5%
51.7%
60%
49.0%
40%
Cash
Customers
44.8%
PBM and Other
Private Insurance
Medicaid
FSS
340B
20%
Market Share
VA
0%
Free/Nominal
25%
60%
11%
Market Share
1% 1%
1%
1%
* Chart is based on rough estimates
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Impact of Medicare Drug Benefit:
Scenario Two*
100%
AMP Unchanged
Average Wholesale Price
80%
“Best Price” Unchanged
60%
Cash
Customers
100.0%
PBM and Other
Private Insurance
51.7%
49.0%
44.8%
Medicare
80.0%
40%
60.5%
Medicaid
FSS
20%
Market Share
340B
VA
Free/Nominal
0%
9%
38%
45%
Market Share
5%
1% 1% 1%
* Chart is based on rough estimates
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Existing Federal Framework:
Medicaid Rebate Program
• Patient uses retail pharmacies participating in Medicaid
• Manufacturers and retail pharmacies are required to give
discounts prescribed by law
• Manufacturer discounts are given to state Medicaid
agencies in the form of rebates, since Medicaid is a payor,
not a purchaser, of drugs
• Medicaid rebate for brand name drugs is “best price” or
AMP minus 15.1 percent, whichever is lower, plus an
additional rebate if prices rise faster than rate of inflation
• California, Florida, Michigan and other states have
established supplemental rebate programs using preferred
drug lists (PDLs) and prior authorization for non-PDL
drugs
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Existing Federal Framework: 340B Program
• Eligible entities include high-Medicaid acute care hospitals
owned by or under contract with state or local government;
community health centers; ADAPs; AIDS, TB and STD
clinics; and other HRSA grantees
• Manufacturer discounts are applied “up front” (340B
entities are purchasers not payors) and are calculated using
the Medicaid rebate formula; but 340B pricing is better
because (1) sales do not involve retail pharmacies thereby
avoiding retail mark-ups and (2) 340B providers regularly
negotiate sub-ceiling prices
• Use of drugs limited to “patients” of 340B covered entity
• To avoid duplicate discounts by manufacturers, (1) states
must forego rebates on drugs purchased through 340B and
dispensed to Medicaid recipients and (2) 340B entities
must pass their discounts through to states by billing at
discounted rates
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Existing Federal Framework:
Federal Ceiling Price
• Available only to the Big 4 (VA, DOD, PHS and Coast
Guard)
• Manufacturer up-front discount for brand name drugs is
non-federal AMP (non-FAMP) minus 24 percent
• FCP discounts are comparable to 340B pricing except they
extend to inpatient drug prices but not generic drugs
• Big 4 are permitted to negotiate sub-ceiling prices
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Existing Federal Framework:
Federal Supply Schedule
• Prior to enactment of FCP program, virtually all federal
agencies, including the Big 4, purchased their drugs
through FSS
• FSS pricing is only available to federal agencies, U.S.
territories, tribal governments, and others
• In contrast to the FCP and 340B programs, FSS prices are
negotiated rather than prescribed by law
• “Most favored customer” price is starting point in
negotiations to obtain below-market prices
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Existing Federal Framework:
VA Contract Program
• FCP program allows the Big 4 to negotiate sub-ceiling
prices
• VA has been particularly successful using a national
formulary and a competitive bidding process to select one
or a limited number of contractors to supply drugs within
specified therapeutic classes
• Because the VA is vertically integrated, compliance with
the national formulary is easier to achieve
• According to a 1999 GAO report, these national contract
prices were about 33 percent below FSS which is about 65
percent below AWP
• VA and DOD are collaborating on purchasing to increase
volume
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State Experimentation in
Pharmacy Assistance Programs
•
•
•
•
•
•
•
•
•
State subsidy/rebate programs
Pharmacy plus/1115 waivers
Supplemental rebates
Mandatory pharmacy discounts
Partnering with 340B providers
Medicaid sole source contracts
Bulk purchasing
Reimportation
Other initiatives
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State Models: State Subsidy/Rebate Programs
• Most common state model – in 31 states according to
NCSL; 23 are operational
• Virtually all are for seniors only, so most will be folded
into the Medicare benefit when it goes into effect in 2006.
Several states now allow or require use of transitional
assistance subsidy available through Medicare drug
discount card program in combination with state programs.
• Similar to Medicaid drug rebate program except no federal
funding; these programs are generally funded by state
revenue, patient co-pays and deductibles, pharmacy
discounts, and manufacturer rebates
• Best price exemption allows below-market pricing from
manufacturers through the payment of rebates
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State Models: Pharmacy Plus/1115 Waivers
• States can apply for 1115 waivers to expand Medicaid
eligibility for pharmacy benefit only
• CMS has developed a model 1115 waiver application
called “Pharmacy Plus” to simplify the application process
• Creates two additional funding sources for states:
manufacturer Medicaid rebates and federal matching
funds. State efforts to rely solely on these two funding
sources (with no state funding) have been successfully
challenged in court by industry.
• Another benefit is the best price exemption which allows
states to negotiate supplemental rebates without affecting a
manufacturer’s Medicaid rebate obligation
• According to NCSL, six states (IL, IN, WI, SC, FL, MD)
have received waiver approvals and another nine states are
seeking waivers (as of November 2003)
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State Models: Supplemental Rebates
• Manufacturers pay a second rebate to have their drugs
included on the state’s preferred drug list (PDL) and to
avoid prior authorization requirements for non-PDL drugs
• States can use this approach to obtain supplemental rebates
for drugs purchased for Medicaid recipients (CA, FL),
non-Medicaid patients (ME), or both (MI)
• According to NCSL, 12 states have established
supplemental rebate programs and another 16 states have
passed supplemental rebate laws
• Because coverage for dual eligibles will be transferred to
Medicare drug benefit in 2006, states will lose half or more
of their Medicaid volume which, in turn, reduces their
leverage in negotiating supplemental rebates; multi-state
purchasing is potential remedy
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State Models: Mandatory Pharmacy Discounts
• Pharmacies are prohibited from charging above specified
prices
• For example, California prohibits pharmacies from
charging Medicare beneficiaries more than Medi-Cal
prices
• According to NCSL, 20 states have created or authorized
pharmacy discount programs; a majority of these states
also have a subsidy/rebate program
• Savings are relatively small and come from pharmacies
rather than manufacturers
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State Models: Partnering with 340B Providers
• Every state has 340B providers, especially community
health centers, disproportionate share hospitals and state
and local health departments
• Because 340B entity pharmacies bill state Medicaid
programs at rates below Medicaid net reimbursement rates
(including rebates), states are encouraging provider
participation in 340B as a way to reduce Medicaid drug
costs
• Texas recently partnered with UTMB to give the state
correctional population access to 340B pricing, saving over
$10 million per year
• Similar approaches are being explored to extend 340B
pricing to other state-funded populations: mental health,
long term care, state employees, etc.
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State Models: Medicaid Sole Source Contracts
• Requires CMS approval of a 1915(b) waiver because
patient choice is being restricted
• Utah has successfully implemented this model by
contracting with University of Utah’s home care division
to serve hemophiliacs on Medicaid requiring factor product
• This model can be applied to other expensive drugs that
lend themselves to mail order distribution
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State Models: Bulk Purchasing
• States purchase or pay for drugs through different
agencies: Medicaid, corrections, health departments, state
employees, mental health facilities, substance abuse
facilities, schools, etc.
• Bulk purchasing concept is to consolidate purchasing using
a common PDL to reduce prices
• States are pursuing bulk purchasing across states lines in
order to increase volume; e.g. National Medicaid Pooling
Initiative (MI, VT, SC, NV, AK, NH) and Rx Issuing States
for employees (MD, MO, NM, WV)
• Multi-state purchasing may be the best solution for states
seeking increased volume to compensate for loss of dualeligible business
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State Models: Reimportation
• Drug reimportation is explicitly prohibited under the
Prescription Drug Marketing Act except when the drug is
imported by the drug’s manufacturer
• FDA has chosen not to enforce this prohibition with
respect to individuals and their physicians who bring into
the U.S. small quantities of drugs for “personal use”
• Legislation to legalize reimportation was passed by
Congress in 2000 and more recently in the Medicare
Modernization Act but has never been implemented by the
FDA. Interest is growing in Congress to override FDA
opposition.
• According to NCSL, eight states introduced bills
addressing reimportation in 2003
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State Models: Other Initiatives
• Formation of buyer’s clubs, similar to the Medicare drug
discount card that was recently launched by CMS
• Establishing “clearinghouses” to facilitate patient and
provider access to manufacturer patient assistance
programs
• Regulation of PBMs and drug company “detailers”
• Regulation of drug company marketing and advertising,
and labels and packaging on retail pharmaceuticals
• Reuse or recycling of pharmaceuticals
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Bill von Oehsen
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Existing Federal Framework:
Comparison of Federal Prices
100.0%
80.0%
Private Sector Pricing
60.5%
“Best Price”
58.0%
51.7%
49.0%
47.9%
34.6%
Fr
ee
ac
t
VA
B
ig
co
nt
r
P
Fo
ur
:
FC
34
0B
FS
S
an
ad
ia
n
C
eb
at
e
M
ed
ic
ai
d
R
A
A
M
P
0.0%
W
P
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: Data derived from Prescription Drugs: Expanding Access to Federal Prices Could Cause Other Price Changes, U.S. General Accounting Office,
GAO/HEHS-00-118, August 2000 and How the Medicaid Rebate on Prescription Drugs Affects Pricing in the Pharmaceutical Market, Congressional Budget Office
Papers, January 1996.
Powers Pyles Sutter & Verville, PC
(202) 466-6550
Bill von Oehsen
[email protected]
Future State Efforts: Getting the Best Price
How the VA does it:
• Element one: best price exemption
• Element two: mandatory discounts
• Element three: subceiling negotiation
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Bill von Oehsen
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Future State Efforts: Getting the Best Prices
Medicaid
Federal
340B
Big 4
(with
Agencies
(Public
(VA, DOD,
Supplemental (minus Big 4) Hospitals, PHS & Coast
Rebates)
FQHCs, etc.)
Guard)
VA
National
Contracts
Best Price
Shaded area = supplemental rebates or subceiling discounts
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Future State Efforts:
How Do the Models Compare?
P R I C E
Pharmacy Discounts
Medicaid Sole Source
Bulk Purchasing
Buyers Clubs
Step One: Best Price Exemption
“Best Price”
State Subsidy/Rebate Model
Reimportation
Step Two: Mandatory Discount
Step Three: Subceiling Negotiation
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Medicaid Rebate
Pharmacy Plus/1115 Waivers
340B Partnering
Medicaid Supplemental
Rebates
340B Subceiling
Negotiation
Bill von Oehsen
[email protected]
Future State Efforts: Where Are States Going?
P R I C E S
State
Employees
Prisons
Schools
Mental
Health
Rebates or Upfront
Discounts
In-State
Medicaid
Out-of-State
Medicaid
AMP
Best Price
State Pharmacy
Assistance Programs
and 340B Partnerships
Supplemental Rebates/Subceiling Pricing
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Bill von Oehsen
[email protected]
The Inside Source on the Public Health Service 340B Drug Discount Program
www.drugdiscountmonitor.com
For more information, contact Jared Bloom
at [email protected] or
(202) 349-4244.