The Inside Source on the Public Health Service 340B Drug Discount Program Volume 3, No. 12 Proposed CMS Regulations Portend Setbacks for Safety Net Pharmacists IN THIS ISSUE Lead Government Investigator on 340B Program Takes Consulting Position 2 OPA Says Manufacturers Should Continue to Calculate AMP With Pre‐DRA Formula 3 Providers Concerned Changes to Medicare Part D Will Strain Safety Net 4 Family Planning Clinics 6 Urge HHS to Expand “Safety Net” as Low Prices Disappear PHPC Reorganizes into 8 New Trade Association: Safety Net Hospitals for Pharmaceutical Access Maryland Asks CMS to Clarify Rejection of Pharmacy Discount Waiver 9 12 Subscription Information December 2006 Long‐awaited regulations proposed by the Centers for Medicare and Medi‐
caid Services (CMS) to implement the Deficit Reduction Act of 2005 (DRA) will have a dramatic impact on the health care and pharmaceutical industries, and are likely to have adverse consequences for 340B and other safety net providers, ac‐
cording to 340B advocacy groups. These regulations were announced on Decem‐
ber 18 and will be published in the Fed‐
eral Register on December 22, followed by a 60‐day period during which the pub‐
lic may comment on the government’s proposals. Below is a brief account of some of the aspects of the proposed regu‐
lations of particular concern to safety net entities and other 340B stakeholders. The Monitor will provide a more comprehen‐
sive analysis, with input from various 340B and pharmacy organizations, in its January edition. Collection of NDC Data and Rebates on Physician‐Administered Drugs: The DRA established a new mandate that state Medicaid programs collect drug identification and utilization information on drugs administered by physicians to Medicaid beneficiaries, so that the states can collect manufacturer rebates on those drugs. The proposed regulations would extend this requirement to include drugs administered in hospital outpatient de‐
partments or clinics. The regulations also specify that National Drug Code (NDC) numbers must be used to identify the physician‐administered drugs when they are billed to state Medicaid agencies. In its proposed regulations, CMS acknowl‐
edges that complying with its proposed implementation for this provision will either require manual billing procedures or force hospitals to revamp their elec‐
tronic billing systems, but defends its pro‐
posal by describing the associated finan‐
cial impact on hospitals as “minimal.” CMS does not mention this provision’s possible adverse impact on safety net hos‐
pitals, specifically the potential loss of revenues to hospitals under the 340B pro‐
gram. (See November’s Monitor.) AMPs Calculated Using a Weighted Average: In provisions addressing the way in which average manufacturer price (AMP) data will be calculated and re‐
ported, the proposed regulations specify that 9‐digit AMPs, representing a weighted average of various drug pack‐
age sizes, will continue to be used rather than 11‐digit designations that are more package‐size specific. CMS acknowledges in the notice that 11‐digit AMPs would provide a greater amount of useful infor‐
mation and would enhance pricing trans‐
parency in the 340B program, but never‐
theless concludes that Congress did not intend for CMS to change this aspect of AMP calculations. (See November’s Monitor.) Continued on pg. 10 COPYRIGHT 2006 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. This newsletter is protected by U.S. Copyright Law. Reproduction, photocopying, storage, transmission or any other sharing with any unauthorized third party of any portion of this newsletter by any means (including electronic redistribution) is strictly prohibited, except with the prior written permis‐
sion of Powers, Pyles, Sutter & Verville, P.C. and payment of any applicable licensing fee. Violation of copyright may result in legal ac‐
tion, including civil and/or criminal penalties and immediate suspension or revocation of subscription services without refund. Those desiring authorization to copy or use any portion of this newsletter should contact Sydney Bergman at [email protected] or (202) 349‐4244 for further details. December 2006 Page 2 Government’s Lead 340B Investigator Takes Position with Pharmacy Services Company The program analyst responsible for researching and Her consulting work will allow her to stay in Chi‐
preparing much of the government’s oversight reports cago, IL, where she presently lives, though her travel on the 340B drug discount program has left the Depart‐
schedule will likely take her to Oregon and other parts of the country. ment of Health and Human Services Office of the Inspec‐
tor (OIG). Madeline Francescatti, who served as team While with the government, Francescatti served on leader on the OIG’s July review of 340B prices and con‐
the OIG’s Prescription Drugs Work Planning Committee, tributed significantly to two other reports calling for in‐
which generates proposals geared toward pharmaceuti‐
creased oversight of the program, will continue her work cal policy and program management. She assisted in in the 340B arena at Wellpartner, a contract drafting several reports centered on improving pharmacy and consulting services company the 340B program, addressing, for example, based in Portland, Oregon. Francescatti says cost‐containment strategies for AIDS drug as‐
her decision to leave the OIG was based on her sistance programs and deficiencies in the gov‐
desire to work not only with program oversight ernment’s oversight of 340B program’s opera‐
and enforcement, but also with entity‐level im‐
tions and database. The OIG’s most recent re‐
plementation. At Wellpartner, she will be port on the 340B program, issued in July 2006, charged with leading the 340B arm of the com‐
found that one in seven purchases made by a pany’s professional services group. Hiring covered entity in June 2005 resulted in that en‐
Francescatti, says Jason Hardaway, Wellpart‐
tity being charged above the 340B ceiling price. ner’s Director of Medicaid and 340B Programs, (See July’s Monitor.) The report, however, was almost by “popular demand.” The com‐
found that the total amount of overcharges was Madeline pany had been searching for someone with an significantly less than a previous OIG study Francescatti in‐depth expertise on both the pharmaceutical that was subsequently withdrawn. supply chain issues and 340B policy, he says, which Francescatti says that even after her successor at the Francescatti possesses. OIG is named, it is unlikely that he or she will be con‐
Although much of Francescatti’s work with Well‐
ducting work on the 340B program for at least another partner will focus on implementation, some of it will in‐
year. Following three reports citing deficiencies in pro‐
volve the types of auditing and analysis she performed gram oversight, the OIG will likely give the Health Re‐
while with the OIG, albeit on behalf of covered entities, sources and Services Administration (HRSA), which rather than the government. oversees the 340B program, a year to implement the “At the OIG I would spot problems,” she says, “but I OIG’s recommendations. Despite the multiple OIG re‐
ports that raised concerns about program management, wasn’t able to say ‘this is how you fix it.’” Francescatti, who graduated from Saint Mary’s College in Notre relations between Francescatti and the Office of Phar‐
macy Affairs (OPA), the office within HRSA that directly Dame, IN, in 1999 with degrees in political science and English, believes that her position at Wellpartner will oversees 340B, remain congenial. “We have the greatest give her a chance to implement solutions. admiration for her,” says OPA Director Jim Mitchell. THE MONITOR The Federal Drug Discount and Compliance Monitor is a national monthly newsletter that covers the legal and political issues surrounding the Public Health Service 340B drug discount program and other developments in federal drug pricing law and policy. The Monitor also updates subscribers on breaking news stories through e‐mail alerts. MANAGING EDITOR Sydney Bergman The Monitor is published by the Public Hospital Pharmacy Coalition, a non‐profit organization that represents nearly 400 340B hospitals, and the law firm of Powers, Pyles, Sutter and Verville. SUPERVISING EDITORS Ted Slafsky William von Oehsen Federal Drug Discount and Compliance Monitor 1875 Eye St., NW, 12th Floor Washington, DC 20006 Phone: (202) 349‐4244 Fax: (202) 785‐1756 www.drugdiscountmonitor.com For information on The Monitor, including advertising opportunities, contact Sydney Bergman at [email protected] or (202) 349‐4244. COPYRIGHT 2006 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one. December 2006 Page 3 OPA Says Manufacturers Need to Continue to Calculate AMP Using Pre‐DRA Formula; Industry Raises Concerns Pharmaceutical manufacturers may be required to submit two sepa‐
rate calculations of average manufac‐
turer price (AMP), the pricing figure that serves as the basis for Medicaid drug rebate and 340B ceiling prices – a requirement that representatives of the pharmaceutical industry are call‐
ing a “nightmare.” But 340B advo‐
cacy groups are supporting the move to prevent price hikes in 2007. Starting in 2007, AMP will be re‐
placing average wholesale price as the basis for federal upper limits, the price ceiling set by the federal govern‐
ment for Medicaid reimbursement of certain drugs to pharmacies. Pharmacy groups, particularly organizations representing chain and retail drug stores, urged Congress to raise AMP to offset the losses that they expect under the new reimburse‐
ment system. However, since the discounts un‐
der the 340B program are based on a percentage off the AMP, any increase in that base figure would result in an increase in 340B prices. It has been almost a year since Congress passed the Deficit Reduc‐
tion Act of 2005 (DRA), which was signed into law in early February 2006. Proposed regulations imple‐
menting the drug pricing provision of the DRA were issued on December 18th. These regulations address a range of DRA provisions including such topics as the definition of AMP, nomi‐
nal pricing, and rebates on physician‐
administered drugs. The regulations clarify how and when AMPs are to be calculated by manufacturers and submitted to the Centers for Medicare and Medicaid Services (CMS). CMS, in turn, is expected to con‐
tinue to provide AMP data to the Health Resources and Services Ad‐
ministration (HRSA), which oversees the 340B program. But Jim Mitchell, Director of the Office of Pharmacy Affairs (OPA), says that the manufacturers will need to continue to calculate 340B pricing based on the pre‐DRA AMP defini‐
tion. Exactly how that data will be cal‐
culated and submitted remains to be seen. “We are exploring with CMS how to gain access to the appropriate data for 340B,” Mitchell says, adding that this request may be communi‐
cated to manufacturers in several forms, including a website notice or a “Dear Manufacturer” letter. According to OPA’s reading of the law, amendments to AMP’s defi‐
nition made after November 1992 should not affect the calculation of AMP for purposes of the 340B pro‐
gram. Prior to the DRA’s enactment, the Medicaid rebate statute specified that AMP be calculated based on pur‐
chases by wholesalers for the retail class of trade, which typically in‐
cludes prompt pay discounts. The DRA changed the law to eliminate any adjustment of AMP calculations to reflect prompt pay discounts, thus raising AMP figures. Although the size of prompt pay dis‐
counts varies by manufacturer, they are customarily in the range of 2 per‐
cent of AMP. An analysis done by the Huron Consulting Group, which consults for healthcare providers and the pharma‐
ceutical industry, predicts that ex‐
cluding these discounts from AMP both will increase the size of rebates payable under the Medicaid drug rebate program and raise 340B ceiling prices for 340B covered entities. But Mitchell points out that the 340B statute contains a provision mandating that references in the 340B statute to the Social Security Act in‐
cluding the Medicaid rebate law should be read as referring to that Act when the 340B law was first passed by Congress in 1992. The 340B statute directs that 340B ceiling prices be calculated based on AMP as defined in the Medicaid re‐
bate law. As a result, even though the DRA changed the AMP’s definition in the Medicaid rebate law, Mitchell says, the 340B statute still requires 340B ceiling prices to be calculated based on the pre‐DRA definition of AMP being used in 1992. This, according to Mitchell, will require manufacturers to calculate and submit different AMP figures for the 340B and Medicaid programs – one using the pre‐DRA methodology and one using a new methodology prescribed under the DRA. Because the DRA requires manu‐
facturers to report both the new AMPs excluding prompt pay dis‐
counts as well as the prompt pay dis‐
counts themselves, Mitchell says, it will not be difficult for companies to calculate and report pre‐DRA AMPs as well. “If they have the two num‐
bers, they can be put back together.” The Public Hospital Pharmacy Coalition, which represents most of the disproportionate share hospitals participating in the 340B program, predicts that 340B prices could in‐
crease by a significant amount unless the program continues to use pre‐
DRA AMP calculations. This prospect has prompted an outcry from pharmaceutical industry representatives, who say that calcu‐
lating two figures would be undue, expensive and burdensome for phar‐
maceutical companies. Should the government propose having separate AMPs calculated every quarter, “manufacturers will scream,” says Larri Short, a partner with the Washington, DC‐based law Continued on pg. 11 COPYRIGHT 2006 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one. Page 4 December 2006 IN FOCUS MEDICARE PART D RE‐ENROLLMENT Providers Concerned Changes to the Medicare Drug Benefit Will Strain Safety Net With the last open enrollment period recently behind them, providers are once again assisting beneficiaries during the open enrollment in the Medicare Part D prescription drug benefit. And similar to the last enrollment period, which occupied the first half of 2006, many safety net phar‐
macists and other providers are concerned about not just the patients they are currently seeing, but the ones who may arrive early next year and who do not have coverage or may have been automatically switched to a new plan. Not only will 600,000 beneficiaries face situations where they will have lost automatic federally subsidized coverage – and 1.2 million will have been auto‐enrolled in a different plan – other patients may be unaware that their plans’ bene‐
fits may have changed. Until these concerns are resolved, providers say, many of these beneficiaries will rely on safety net pharmacies to provide them with deeply discounted or free drugs outside the Part D benefit. Further, providers report that they anticipate spending many hours trying to resolve the complex issues beneficiaries present and assist‐
ing them in communicating with the various government agencies and private plans that comprise the Part D benefit. “Come January, we’ll see them when nothing works,” says Jacqueline Encalade, Lead Pharmacist for Outpatient Pharmacy at the Regional Medical Center at Memphis in Tennessee. Auto‐Enrollment The current open enrollment period began November 15th and lasts until the end of December. Beneficiaries who wish to change their current coverage are required to enroll in a prescription drug plan (PDP) during this period, al‐
though lower income beneficiaries may have the option to change their plans during the plan year on a monthly basis. The Centers for Medicare and Medicaid Services (CMS) will again auto‐assign beneficiaries eligible for the govern‐
ment’s low income subsidy (LIS) who have not elected to participate in a Part D plan for the next year. This includes beneficiaries who were auto‐assigned to a plan this year and have not switched away from that plan. LIS support is available for beneficiaries with incomes up to 135 percent of the Federal Poverty Level (FPL), such as “dual eligibles,” beneficiaries eligible for both Medicare and Medicaid, as well as supplemental security income recipients and partici‐
pants in the Medicare savings program. Partial assistance is available to beneficiaries with incomes between 135 and 150 percent of the FPL. This auto‐assignment process – which could enroll a beneficiary into a different plan offered by the patient’s same PDP sponsor or into a plan operated by an entirely different sponsor – will only take place for beneficiaries’ whose plan premiums will rise above the benchmark premium established for their region in 2007 plus $2, which CMS instituted as a buffer to avoid beneficiaries being switched to new plans based on minimal differ‐
ences in premium amounts. Numbers released in late November by CMS show that an estimated 1.2 million LIS‐eligible beneficiaries may be subject to auto‐reassignment. Of these, an esti‐
mated 920,000 will likely be reassigned to another plan offered by their current plan sponsor and 250,000 will be assigned to a plan managed by another sponsor. Providers are concerned that many of these benefici‐
aries may be unaware that they have been reassigned and that their new drug plans may have significantly different formularies. Fewer Dual Eligibles In addition, changes to government programs in‐
cluding Medicaid means that about 600,000 beneficiaries who were dual eligibles in 2006 will not be eligible for automatic LIS assistance in 2007, according to Medicare officials. These beneficiaries will have to apply for these subsidies, which they may do at any point during the plan year. Failure to apply could deprive beneficiaries coverage of most of the Part D benefit’s expenses, in‐
cluding premiums, deductibles, and other out‐of‐pocket costs. “Those who do not re‐apply for 2007 could ex‐
perience sticker shock at the pharmacy counter in Janu‐
ary when they have to pay higher co‐payments, premi‐
ums and deductibles,” CMS said in a December 12 re‐
lease. “In order to avoid any interruptions to drug ther‐
apy in January, we strongly recommend that pharma‐
cists continue to remind people who currently receive the LIS that if they have received notification from CMS about a status change, they must apply.” Providers in California are especially concerned about LIS beneficiaries who need to re‐apply for 2007. Medi‐Cal, the state’s Medicaid program, requires its beneficiaries to be certified twice a year. Many of these beneficiaries may have missed their certifications and are no longer enrolled in Medi‐Cal, says Wendy Peter‐
son, Project Coordinator for the LifeLong Medical Care, a health center in California. By losing Medi‐Cal cover‐
Continued on pg. 5 COPYRIGHT 2006 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one. December 2006 Page 5 IN FOCUS MEDICARE PART D RE‐ENROLLMENT the waiver of beneficiary cost‐sharing obligations by safety net providers age, the beneficiary will no longer counts toward beneficiaries’ true out‐
qualify for automatic LIS coverage of‐pocket spending (TrOOP). and will have to apply for it. Under current CMS policy, “Patients who fall off Medicaid don’t waiver or reduction of co‐pays by do so because something significant community health centers, ADAPs, changes about their financial situa‐ and other government‐funded pro‐
tion,” Peterson says. Medi‐Cal did grams, including disproportionate not return requests for comment. share hospitals under certain circum‐
Brand Name Coverage stances, does not count toward Safety net providers are also con‐ TrOOP. Therefore, beneficiaries who cerned that, because fewer PDPs in receive cost‐sharing waivers from 2007 will offer coverage for brand safety net entities will not progress to name drugs during the “doughnut catastrophic coverage, where benefi‐
hole” – the portion of the benefit ciaries are responsible for 5 percent of where beneficiaries are responsible their costs. This places a further fi‐
for 100 percent of their cost‐sharing nancial burden on safety net provid‐
expenses – patients will turn to safety ers, because they may have to assume net providers and their pharmacies all of a beneficiary’s costs for the year for free or deeply reduced cost drugs. after he or she enters the coverage According to the Kaiser Family Foun‐ gap. dation, residents of most states only Contracting Concerns have access to one plan that covers In addition to continuing con‐
both generic and brand name prod‐ cerns about Part D coverage of lower ucts during the doughnut hole, and income patients, safety net providers residents of 11 states only have access continue to face many of the same to generic coverage during the gap. contracting challenges that they en‐
L’Oreal Chaney‐Jones, a Medica‐ countered during the first months of tion Access Specialist at Parkland the Part D benefit. Hospital & Health System in Dallas, Providers may still have trouble TX, says that having fewer plans with getting PDPs to contract with them, brand name coverage during the says Jim Mitchell, Director of the Of‐
doughnut hole will likely create a fice of Pharmacy Affairs, which over‐
burden for Parkland, “because there sees the 340B drug discount program. is no way to track and recoup costs” “Covered entities are looking for Part for such drugs. D plans who will contract with them It has also been an issue for AIDS … at a [reimbursement] rate they can Drug Assistance Programs (ADAPs), live with,” Mitchell says. says Ann Leffert, the Director of Gov‐
Providers report varying experi‐
ernmental Affairs for the National ences in contracting with plans, with Alliance of State and Territorial AIDS some saying that they have received Directors (NASTAD), because there more contracts than they can commit are few generic antiretrovirals. to and others reporting that they have ADAPs will then provide brand only been able to contract with a few name drugs for those beneficiaries PDPs. Michael Murphy, Director of who could not otherwise afford them Pharmacy Network Development for during the coverage gap. PDP‐sponsor Caremark, says that Complicating matters is whether Caremark’s commitment to under‐
continued from pg. 4 standing the 340B program aided his company in addressing the contract‐
ing issues relating to safety net phar‐
macies. Nevertheless, the pharmacies, which have a choice as to whether they renew their contracts each plan year, have not responded to Care‐
mark’s contract offers as enthusiasti‐
cally as he had hoped. “We’d like to see a better response,” he says. “We’d love to have everyone.” Formulary Conflicts PDP’s generic substitution rules that require a pharmacist to substi‐
tute a generic medication for a brand name may pose an additional prob‐
lem for providers who purchase drugs through the 340B program. Because brand name drugs may be cheaper through 340B than their ge‐
neric alternatives, pharmacists have reported that the PDPs’ substitution rules force them to use higher priced drugs. Mitchell says that pharmacists have spoken with plans and negoti‐
ated use of the brand name products where it is more cost effective. Formulary differences between safety net providers and Part D plans create an additional wrinkle for bene‐
ficiaries. Although Part D plans are required to cover drugs that treat spe‐
cific disease categories, there may be differences between their formularies and those offered by safety net pro‐
viders. This has become an issue for ADAPs, whose clients are sensitive to regimen changes, according to Lef‐
fert. Most states have all antiretrovi‐
rals on their ADAPs’ formularies. However, Part D plans may not cover one or more of these medications, which may mean changing a clients’ regimen or having the ADAP cover the cost of the medication not on the PDP’s formulary. COPYRIGHT 2006 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one. Page 6 December 2006
Family Planning Clinics Urge HHS to Expand “Safety Net” As Low Prices Disappear Family planning clinics that do not participate in the 340B drug discount program will see prices for a popular contraceptive product rise ten‐fold in late December – a move the drug’s manufacturer says results from a provision in the Deficit Reduction Act of 2005 (DRA). In a November letter to providers, including non‐340B family planning clinics and student health centers nation‐
wide, manufacturer Ortho‐McNeil informed clinics that it would no longer offer Ortho Tri‐Cyclen Lo at reduced pric‐
ing. Family planning stakeholders estimate that prices for Tri‐Cyclen Lo will rise from $3.25 per cycle to approximately $37 per cycle. A spokeswoman for the company says that student health centers will comprise the “vast majority” of clinics affected by the price increase. The company recently came under fire for raising its prices to 340B‐enrolled family planning clinics; the company lowered these prices after outcry from advocacy groups and certain members of Con‐
gress. (See September’s Monitor.) The letter cites eligibility requirements in the DRA that eliminates the longstanding exclusion of “nominal pricing” – pricing at or below 10 percent of the average manufacturer price – from Medicaid best price calculations except for sales made to 340B qualified entities and other entities designated as “safety net providers” by the Secretary of Health and Hu‐
man Services (HHS). Family planning advocates, including the National Fam‐
ily Planning and Reproductive Health Association (NFPRHA), are now asking the Secretary to expand the defi‐
nition of “safety net provider,” so that entities that received nominal pricing prior to the DRA can continue to receive that pricing without forcing manufacturers to lower their overall pricing. Jennifer Lockwood‐Shabat, NFPRHA’s Di‐
rector of Public Policy, says that her organization also sought a legislative fix for this provision in Congress before it adjourned, though no such language made it into the final bills. CMS addressed the nominal pricing provision and what can be designated a “safety net entity” in its proposed regu‐
lations on the DRA, which were issued December 18. The proposed regulations limit the definition of “safety net” pro‐
viders to 340B covered entities and a few other healthcare facilities. Although the agency considered broadening the definition of “safety net,” it concluded that “the entities specified in the [DRA] are sufficiently inclusive to capture the appropriate safety net providers.” Some within the family planning community do not expect the Secretary to expand the definition of “safety net entity,” when urged to do so by stakeholders. “It’s going to be a tough sell,” says Steve Robinson of the Wisconsin Fam‐
ily Planning and Reproductive Health Association. “The question is how much is the Bush Administration will‐
ing to bend on this.” The public has 60 days to com‐
ment on the proposed regulations following their publi‐
cation in the Federal Register on December 22. Jim Mitchell, Director of the Office of Pharmacy Af‐
fairs (OPA), which oversees the 340B program, says that family planning clinics’ participation in 340B is often limited by their Title X grant, which is managed by the state. He adds that manufacturers other than Ortho McNeil may similarly stop offering nominal prices to non‐340B entities. Before the DRA, all nominal pricing was excluded from Medicaid best price calculations, regardless of the purchaser’s status. Manufacturers could offer these prices to for‐profit, as well as nonprofit, 340B, and “safety net” institutions, without having them count in their Medicaid best price calculations. Best price repre‐
sents the lowest price paid on a brand‐name product in a given time period and is used in calculating 340B ceil‐
ing prices and rebates for the Medicaid drug rebate pro‐
gram. As of January, best prices given to non‐safety net entities will be used to set 340B prices and Medicaid re‐
bates. Even some safety net entities – namely those that do not qualify for the 340B program or are limited in what drugs they may buy through 340B – have already experienced price hikes resulting from manufacturers anticipating a narrower definition of “safety net en‐
tity.” (See August’s Monitor.) Efforts to protect against the loss of nominal price protection for family planning clinics are also emerging at the state level. Minnesota family planning advocates, for example, have begun their own campaign calling for HHS Secretary Michael Leavitt to include their clinics as “safety net” entities and, in a December 5th letter, urged the state’s governor to contact Secretary Leavitt. In the letter, the Minnesota Statewide Association for Family Planning (SAFPLan) says that unless clinics can demon‐
strate proof of eligibility for “an obscure federal pro‐
gram” – meaning the 340B program – they will not con‐
tinue to receive low prices. Only family planning clinics funded through Title X grants may participate in 340B. Peg LaBore, Chair of SAFPlan, says that the non‐
Title X clinics in the state will not be able to enroll in 340B. “We’ve tried everything we could think of,” she says, adding that SAFPlan had pushed for including these clinics in Minnesota’s multi‐state purchasing pool, an effort that died in the state legislature. LaBore says SAFPlan is also working with Sen. Norm Coleman (R‐
MN) to urge the Administration to expand its proposed definition. COPYRIGHT 2006 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one. PHS Pricing
Now Available for 340B Eligible Hospitals
To order, please contact your Wholesaler
Innohep® is a low-molecular weight heparin indicated for
the treatment of acute symptomatic deep vein thrombosis
(DVT) with or without pulmonary embolism when administered in conjunction with the oral anticoagulant warfarin
sodium. The safety and effectiveness of Innohep® were established in hospitalized patients.
For additional information, please visit www.innohepusa.com.
Spinal or epidural hematomas can occur with the associated use of low molecular weight heparins and spinal/epidural anesthesia or spinal
puncture, which can result in long-term or permanent paralysis. The risk of hematomas is increased by the use of postoperative indwelling
epidural catheters or by the concomitant use of drugs affecting hemostasis such as NSAIDs, platelet inhibitors, or other anticoagulants.
Patients should be frequently monitored for signs and symptoms of neurological impairment. If neurological impairment is noted, urgent
treatment is necessary (see Full Prescribing Information).
Patients with active major bleeding, patients with (or a history of) heparin-induced thrombocytopenia, or patients with known sensitivity to heparin,
tinzaparin sodium injection (or any of its constituents), or pork products should not be treated with Innohep®. Innohep® should be used with extreme caution in conditions with increased risk of hemorrhage.
Bleeding is the most common adverse event associated with Innohep®, and can occur in any tissue or organ. The most common adverse events in
controlled clinical trials with Innohep® were injection site hematomas (16%), abnormal elevations of AST (8.8%) and ALT (13%), urinary tract
infections (3.7%), pulmonary embolism
(2.3%), and chest pain (2.3%). Other bleeding events associated with Innohep® at a frequency of ≥1% were epistaxis (1.9%), hemorrhage (1.5%),
hematuria (1%), and thrombocytopenia (1%).
Innohep® cannot be used interchangeably (unit for unit) with heparin or other LMWHs as they differ in manufacturing process, molecular weight
distribution, anti-Xa and anti-IIa activities, units, and dosage. Each of these medications has its own instructions for use.
Innohep® is a registered trademark of LEO Pharma.
2005 Pharmion Corporation. All rights reserved. March 2005 2005050
Page 8 December 2006 PHPC Reorganizes into New Trade Association—Safety Net Hospitals for Pharmaceutical Access Starting with the New Year, the Public Hospital Phar‐
macy Coalition (PHPC), which represents 400 hospitals and health systems participating in the 340B drug discount pro‐
gram, will become an independent trade association. As part of its reorganization, PHPC will have a new name: Safety Net Hospitals for Pharmaceutical Access (SNHPA), effective January 1, 2007. Bill von Oehsen, who helped found PHPC in 1993 and will serve as SNHPA’s president, says that “because PHPC fills an important niche in representing the interests of safety net hospitals on federal matters involving access to affordable pharmaceutical care, it only makes sense for the organization to become a permanent freestanding trade group.” PHPC was formed as a coalition of the National Asso‐
ciation of Public Hospitals and Health Systems (NAPH) shortly after NAPH and von Oehsen took a lead role in urging Congress to allow disproportionate share hospitals to participate in the 340B program. After more than a decade with NAPH, PHPC is de‐
linking from its parent organization to form its own 501(c)
(6) trade association. Nevertheless, the organizations will maintain a strate‐
gic alliance and continue to work closely on legislative and regulatory matters. During PHPC’s early years, the Coali‐
tion represented, much like NAPH, a high percentage of urban hospitals that are owned, operated and/or funded by state and local government. Over time, however, PHPC’s membership has grown in size and diversity. It now comprises several hundred hospital systems that include small, rural hospitals, and many religious and private nonprofit hospitals, which now collectively outnumber its original public hospital membership. The organization’s mission and activities will remain the same following its transition to SNHPA. SNHPA will also continue to be represented by the law firm of Powers Pyles Sutter & Verville, PC. FIND YOUR NEXT GREAT EMPLOYEE
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December 2006 Page 9 Maryland Asks CMS to Clarify Rejection of Pharmacy Discount Waiver Request Weeks after being told that its plan to expand phar‐
maceutical access to many low‐income Maryland resi‐
dents would not pass muster, the State of Maryland has asked the federal government to reconsider its proposal to grant Medicaid prescription drug coverage to 37,000 uninsured patients. The plan is similar to other state ini‐
tiatives in Florida, Illinois, South Carolina, and Wisconsin – and a current initiative in Maryland – as well as to broader programs in Vermont and Tennessee. All of these rely on federal demonstration authority to expand Medicaid eligibility to low‐income seniors for drug cov‐
erage but no other Medicaid benefit. In September 2005, the State submitted a proposal to the Centers for Medicare and Medicaid Services (CMS), outlining an expanded pharmacy program that would offer Medicaid drug rebate program prices to patients who were not eligible for Medicare and had incomes be‐
low 200 percent of the federal poverty line (FPL), which is $40,000 for a family of four. According to a Congres‐
sional Budget Office report released in 2005, Medicaid pays approximately 51 percent of average wholesale price for outpatient prescription drugs, reflecting what states pay on average to pharmacies minus rebates they receive from manufacturers. Currently, Maryland offers a similar program for low‐income seniors. The State’s proposal would have implemented an expanded version of the Maryland Pharmacy Discount Program (MPDP) enacted in the spring of 2005. Under the new MPDP, eligible beneficiaries would have re‐
ceived membership cards, which they would present to participating pharmacies. The pharmacy would then bill the State, which would reimburse them at a yet‐to‐be‐
determined percentage of the current Medicaid reim‐
bursement rate. Then, the State would submit those claims to manufacturers and capture rebates on those drugs, thereby lowering the net cost of the drugs to the program. CMS rejected the Maryland Department of Health and Mental Hygiene’s (DHMH) proposal in an October 2, 2006 letter, saying the State did not make an adequate contribution to the funding for the plan. The proposal, wrote the CMS Administrator, “would permit the State to seek drug rebates when the State has made no net pay‐
ment in order to trigger manufacturers’ rebates.” Susan Steinberg, the Chief Operating Officer for Health Care Financing for DHMH, says that, contrary to CMS’ response, the State did provide adequate funding for the program. DHMH wrote to CMS in mid‐October requesting that the agency clarify its position. “We’re hoping to get this,” she says. “It’s a question of whether or not [CMS] understood our proposal.” Although Steinberg could not give a timeline for CMS’ response, she says that, should CMS approve the program after further review, the State hopes to implement the pro‐
gram shortly. A spokesperson for CMS says they have received the State’s follow‐up letter and are reviewing it. While the State did not specifically mention its funding level in its original October 2005 letter, it included an at‐
tachment outlining its projected budget for the proposed Medicaid demonstration project, of which MPDP is a com‐
ponent. That budget includes spending levels of $777,000 for Fiscal Year 2007 on MPDP, which Steinberg says repre‐
sents 2 percent of the amount needed to fund the program. Manufacturer rebates pay for the rest of the program. The question of adequate state funding for pharmacy programs that expand Medicaid eligibility dates back to a 2000 lawsuit in which the pharmaceutical industry chal‐
lenged the State of Vermont’s attempt to implement a simi‐
lar program. Vermont passed legislation establishing a pharmacy discount program in which otherwise non‐
Medicaid patients would be eligible for Medicaid drug re‐
bate program discounts. In an effort to implement the leg‐
islation, Vermont applied to the federal government for a specific waiver to expand their Medicaid program’s eligi‐
bility to this new population, but only for the Medicaid drug benefit. CMS (then the Health Care Financing Ad‐
ministration) approved the 1115 waiver, named after the section of the Social Security Act to which it pertains. However, the Pharmaceutical Research and Manufac‐
Continued on pg. 11 December 2006 Page 10 CMS Proposals Include Rules on AMP, Nominal Price and safety net pharmacy groups have questioned whether their pharmacies will be to absorb these cuts. Exclusion of Prompt Pay Discounts from AMP Calcu‐
lation: The proposed regulations implement a provision of HHS Will Not Expand Nominal Price Protection for the DRA that changes AMP calculation. AMP figures will Other “Safety Net” Providers: Historically, nominal no longer take into account prompt pay discounts offered prices – any price less than 10 percent of a drug’s AMP – by manufacturers to drug wholesalers. This change in the have not affected calculation of the Medicaid rebates and AMP formula will, CMS says, raise AMP and, in turn, 340B prices that manufacturers are required to give on Medicaid rebate levels. CMS does not include any consid‐ covered outpatient drugs because nominal prices have eration of this change’s impact on 340B providers, which been excluded from a drug’s AMP and best price. would be subject to significant price hikes should 340B ceil‐ Under the DRA, exclusion of nominal prices from Medi‐
ing prices be calculated by using the new, higher AMP fig‐ caid rebate and 340B calculations has been limited to ures. CMS’ proposed regulations also do not adopt the when a manufacturer affords the nominal price to a Office of Pharmacy Affairs’ (OPA) construction of the 340B “safety net” entity. In addition to listing purchasers such statute. OPA believes the law requires manufacturers to as 340B covered entities and various government pro‐
continue calculating 340B ceiling prices using the pre‐DRA grams that are qualified to receive nominal price protec‐
formulation of AMP. (See related story on page 3.) tion, the DRA permits the Secretary of Health and Hu‐
man Services to define other “safety net” providers that Medicaid Reimbursement Levels Likely to Drop: can qualify. CMS, however, proposes not to exercise this CMS estimates that implementation of the DRA under the discretion, opting instead to limit nominal price protec‐
proposed regulations will save federal and state govern‐ tion to only those entities specifically identified in the ments $8.4 billion over the next five years. Much of this DRA. While this decision is not unexpected, many stake‐
savings will come from lower Medicaid reimbursements to holders disagree with this approach, which may generate pharmacists and increased rebates from manufacturers a great deal of public comment on the regulations. (See through the Medicaid drug rebate program. Community related article on page 6.) continued from pg. 1 3rd Annual 340B Coalition Winter Conference
Major Changes on the Horizon for the 340B Drug Discount Program
February 26 - 28, 2007
Hilton Salt Lake City Center
Salt Lake City, UT
The government is preparing to make more changes to the
340B drug discount program than the program has ever
experienced over its 15 year history.
The 340B Coalition invites you to attend its Winter
Conference to learn about and prepare for important 340B
changes that covered entities, manufacturers and other 340B
stakeholders can expect to see in 2007.
Special discounts for Monitor subscribers:
Learn more at www.340Bconferences.org
Please contact Mike Hess at [email protected] or (202) 349-4264 with any conference related questions.
December 2006 CMS, Maryland Disagree About State Contribution in Waiver continued from pg. 9 turers of America (PhRMA) sued the U.S. Department of Health and Human Services (HHS), alleging that the 1115 waiver was improperly approved because the program was going to be funded exclusively by manufacturer rebates and that, without any state contributions, it failed to meet federal and state cost‐sharing requirements. The U.S. District Court for the District of Colum‐
bia found in PhRMA’s favor in September 2001. Vermont later sought, and obtained, approval for a revised pharmacy expansion program. Bernie Horn, Senior Director of Policy and Communications for the Center for Pol‐
icy Alternatives, a policy research organiza‐
tion, worked with DHMH to draft the legis‐
lation expanding MPDP and says that Maryland was aware of the state spending requirements when it sent its application to CMS. “It does appear that the state offered funds – and CMS’ response says the state didn’t offer funds.” Page 11 Manufacturers Will Object to Separate AMP Calculations for 340B, Industry Attorney Says continued from pg. 3 firm of Arent Fox. In fact, Short says, manufactur‐
ers are so concerned about this request that one of her clients at‐
tending the recent conference where Mitchell spoke about the matter e‐mailed her before Mitchell completed his presenta‐
tion. S h o r t a l s o q u e s t i o n e d Mitchell’s reading of the 340B stat‐
ute, citing possible conflicts with provisions in the Medicaid statute and with manufacturers’ pharma‐
ceutical pricing agreements, which they are required to enter into with HHS. “It’s ambiguous,” she says. “You have conflicting instructions” on how to calculate AMPs and what constitutes the methodology required by the 340B statute. As of January 2007, manufac‐
turers will be required to calculate monthly AMPs, in addition to quarterly figures, which, Short says, will increase the administra‐
tive burden on drug companies because of the additional person‐
nel needed to make those calcula‐
tions. Asking manufacturers to calculate 20 AMPs per drug per year, she says, would be unneces‐
sarily burdensome for most manu‐
facturers. Short adds that, should the government require dual calcula‐
tion of AMPs, manufacturers may consider litigation in addition to responding through the comments to the Federal Register. Subscribe online at www.drugdiscountmonitor.com or Mail or fax subscription form to: The Federal Drug Discount and Compliance Monitor 1875 Eye Street NW, Twelfth Floor Washington, DC 20006 Fax: (202) 785‐1756 For questions concerning The Monitor, contact Sydney Bergman at [email protected] or 202‐349‐4244. Method of Payment Contact Name: ____________________________________________ Title: _____________________________________________________ Organization: _____________________________________________ Mailing Address: __________________________________________ __________________________________________________________ __________________________________________________________ Billing Address: ___________________________________________ __________________________________________________________ __________________________________________________________ Email: __________________ Phone: ___________________ Subscriptions # of users Price Online access: Nonprofit 1 $200 and up to 5 $500 government up to 10 $800 Unlimited $1200 Online access: For profit 1 $400 up to 5 $800 up to 10 $1200 Unlimited $2000 Print Copies max. one per online user $100 each Check (payable to “The Monitor”) Bill Me Credit Card Type: ______________________________ Name on Card:______________________ Card #: ____________________________ Expiration: _________________________ CVV Code: _________________________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ TOTAL COST
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