1. Christopher C. Biddle, Vice President of Life Sciences Strategy
Improve Compliance, Minimize Revenue Loss and Improve Overall Operational Efficiency
Christopher C. Biddle, Vice President of Life Sciences Strategy
11/24/2018
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2. Agenda Speaker and Corporate Background Medicaid History and Overview
Steps you can take to ensure compliance
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3. I-many, Inc. The Leader in Contract Management for the Enterprise
Software Mag. Software 500: Largest “pure play”
Supply & Demand Chain Executive 100 “Leading Innovator”
Forrester Research: “Leader & Pioneer”
Large Worldwide Customer Base
80 of Top 100 Life Sciences Companies; 25% of the Fortune 50
More than 200 Employees Worldwide 3
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4. Contract Lifecycle: Business Process
Pre-contract
Contract
Compliance
Analysis
Prospective Analysis
Strategize
Initiate
Create
Negotiate
Store
Manage
Transaction Compliance
Administration
Adjudication
Reconciliation
Regulatory Impact
Analysis
Reporting
Performance Assessment
Strategize
This is the new standard. This should flow into the corporate messaging document, the data sheets, website, analyst presentations, NG launch presentations
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5. Contract Management for the Enterprise
Gain insight into the business and enhance strategy
Contract Analytics Software
Revenue management and optimization
Compliance Software
This is the new standard. This should flow into the corporate messaging document, the data sheets, website, analyst presentations, NG launch presentations
Authoring and management of contracts
Contract Infrastructure Software
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6. MDRP Ecosystem
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7. Medicaid Drug Rebate Program (MDRP): Background
Program was sponsored by David Pryor (D-AR)
Program was enacted on November 5, under Section of the Omnibus Reconciliation Act (OBRA) of 1990
Program was effective January 1, 1991
Program is administered at the federal level by the Centers for Medicare and Medicaid Services (CMS)
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8. Medicaid Drug Rebate Program: Requirements
Manufacturers must provide rebates to states on a quarterly basis for products dispensed by prescription to Medicaid patients
Manufacturers must give the federal government unrestricted audit access
Manufacturers must pay significant monetary penalties for any late, incomplete or “knowingly” false pricing submissions
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9. Medicaid Drug Rebate Program: Amendments
Veterans Health Care Act of 1992
Requires pricing agreement with PHS & VA (in order to participate in MDRP)
Prevents double discounts
Changes rebate percentage
Excludes prices charged to certain entities from Best Price (BP)
OBRA 1993
Changes parameters for calculating rebates for products approved by FDA after 10/1/90
Deficit Reduction Act (DRA) 2005
Several key changes for pharmaceutical manufacturers
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10. Deficit Reduction Act
AMP must exclude prompt pay discounts to wholesalers.
Fewer nominal price arrangement excluded from BP calculation.
Authorized generics are included in calculation of AMP and BP.
Drug sales to children's hospitals are now exempt from BP calculation.
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11. Deficit Reduction Act Manufacturers must report AMP on a Monthly Basis
Average manufacturer prices on all drugs to be publicly posted on CMS' website (formerly, quarterly pricing was kept confidential)
Changes to federal upper payment limit (FUL) for multiple source drugs
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12. Additional Complexity – Guidance Interpretation
CMS Guidance:
Medicaid Rebate Release 14 (1994): “We consider administrative fees to be included in the calculation of AMP, if those sales are to an entity included in the calculation of AMP, and best price.”
ASP FAQ Website (2004): “Administrative fees should be included in the calculation of ASP, if those sales are to an entity whose sales are included in the calculation of ASP and if they ultimately affect the price realized by the manufacturer.”
Part D Proposed Rule (2004): “[W]e are proposing to require that any administrative fees paid to Part D plans be based on the fair market value of services rendered, and that any fees determined to be above or below fair market value would be considered additional price concessions.” 69 Fed. Reg. 46,632, 46,687.
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13. Additional Complexity – Bundled Discounts
OIG Guidance: “Any discount, price concession, or similar benefit offered on purchases of multiple products should be fairly apportioned among the products ”
Medicaid Rebate Agreement and ASP Interim Final Rule include similar direction.
Manufacturer contracts to sell drug A at $10, or $6 if customer also purchases drug B at $10. If a customer buys A and B, what are their true prices?
Are your company’s systems and procedures able to capture and process such discounts correctly?
Impact of differential definition of “unit” for purposes of Medicaid rebates and ASP.
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14. Additional Complexity – Price Concessions
Some price concessions accrue outside of the quarter in which the sale was made and after the prices for that quarter have been calculated and reported to CMS. (Under discount safe harbor, terms must be fixed at the time of the sale.)
AMP/Best Price: Medicaid Rebate Agreement & Medicaid Rebate Release 2 require that AMP and Best Price be adjusted “if cumulative discounts adjust the prices actually realized.”
Implications for manufactures: Correction of reports and adjustments to Medicaid rebates and 340B ceiling prices.
ASP: 42 C.F.R. § (a)(3) (final rule issued on Sept. 16, 2004) introduced a “rolling average” methodology for estimating such price concessions.
No requirement to “true up” the estimates.
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15. Additional Complexity – Reasonable Assumptions
Medicaid Rebate Agreement: “In the absence of specific guidance in section 1927 of the [Social Security] Act, Federal regulations and the terms of this agreement, the manufacturer may make reasonable assumptions in its calculations of AMP and Best Price, consistent with the intent of [the above]. A record (written or electronic) outlining these assumptions must be maintained.”
ASP FAQ Website: “In the absence of specific guidance in the Social Security Act or Federal regulations, the manufacturer may make reasonable assumptions in its calculations of ASP, consistent with the intent of [the above] and customary business practices. These assumptions should be submitted along with the ASP data.”
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16. Medicaid Drug Rebate Program: Fines and Penalties
$10,000 per day per item for failure to provide timely AMP and BP reporting to CMS
$100,000 for each item of false information reported to CMS
$100,000 for each item if manufacturer refuses a CMS “request for information”
CMS may terminate the manufacturer’s rebate agreement for failure to submit quarterly pricing data, nonpayment of rebates or for other “good cause”
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17. Significant Fines for Non Compliance
Government settlements for non-compliance totaled more than $1.3 billion in 2007 alone
Source: TAF Educational Fund & S.E.T. Enterprises 17
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The information contained in this presentation is confidential and the sole property of I-many, Inc., Copyright © All rights reserved.

18. What steps can we take ? Data Audit Internal Legal Department Review
Proactively “partner” with State and Federal Agencies
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19. Medicaid Rebate Systems
Utilize a packaged Medicaid rebate processing application.
This allows you to perform your business, while the software automates key compliance requirements
All of your data is retained and is fully auditable
These systems significantly improve the quarterly calculation and provide features for automated created of ROSI/PQAS
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20. Other Medicaid System Benefits
Ensures compliance with best practices
Additional programs and changes can be accommodated within the system, such as State Supplemental Programs
Adjustments for prior quarters can be generated automatically
The data within the system is fully accessible to the manufacturer for use in analytics, budget, and forecasting
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21. What to look for ? Proven Approach to Historic Data Conversion
When choosing a vendor, make sure they have a proven approach to the conversion process. This can be a very large task and should not be underestimated
Get Performance Metrics
When choosing a vendor, make sure they are able to supply good performance metrics. These metrics should be based off large pharmaceutical manufacturers as their data volumes can be substantial.
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22. What to look for ? Automated RPU and Claims Change Process
Application should have an automated function to manage the claim changes associated with RPU changes. When a component of the RPU changes (i.e. AMP, BP), specific claims are impacted by this change – the system should be able to appropriately identify and re- process those claims automatically.
Ability to Store Calculation Methods Separate from the Contracts
The application should have a way to store calc methods separate from the contracts. Many contracts can utilize the same calc method allowing for huge efficiencies for the end user. In addition, without the separation of calc methods and contracts, paying different rebates for different products under one contract can be very difficult to manage.
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23. What to look for ? Easy Data Extraction for Reporting
The application should allow for easy data extraction for reporting independent of the type of third-party tool you are currently or intend to use.
Integrate to your Existing Government Pricing System
The system should easily integrate with the application that is responsible for calculating government prices. Automated integration for the AMP/BP/RPU is paramount for easier, more efficient processing.
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24. What to look for ? Easily Create New Calculation Formulas
System should support state and supplemental contracts with a flexible tool for creating new calculation formulas, as the trend is toward increasingly complex calculations.
Ability to Track Previous Payment Submissions
System should have a method for tracking what has been paid (units and dollars) on previous submissions for the same program/quarter, so these amounts are automatically accounted for in calculating payments on revised submissions from the states.
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25. What to look for ? Ability to Perform Reasonability Tests
System should have the ability to perform ‘reasonability’ tests on submissions based on past utilization trends and the ability to automatically dispute claims based on reasonability test results.
Ability to Import Invoices, Product and Pricing Information
System should have the ability to import invoices as well as product and pricing information to reduce the introduction of typographical errors.
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26. Other steps you can take
Ensure full review and blessing of All pricing/discount strategies by your Legal Department
Target high exposure areas such as Nominal Pricing
Examine and enhance standard Legal clauses within all contracts going forward
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27. Other steps you can take
Appoint full time representative(s) to Government Entities
In addition to Government Mandated reports, provide the availability of additional detailed reports
Strive for a positive, open dialogue at all times.
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28. Conclusion
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29. The information contained in this presentation is confidential and the sole property of I-many, Inc., Copyright © All rights reserved.