huron webinar_government pricing_a top priority for the compliance department_final

Webinar:

Government Pricing - A Top Priority for the Compliance

Department

April 21, 2015

Proprietary and Confidential – Not for Distribution

Today’s Agenda

2© 2015 Huron Consulting Group. Proprietary and Confidential - Not for Distribution

Introductions

Overview and Recent GP Settlements

GP Benchmarks of Compliance

What does an Effective GP Compliance Program Look Like

When to Conduct a GP Diagnostic

Key Questions for the Compliance Department

Questions

Introductions

Speakers:

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Paul Silver

Managing Director

Paul is a Managing Director and Practice Leader for Huron's Life Sciences practice. Paul has 26 years of

experience in the pharmaceutical, medical device, and consumer products industry, specializing in

compliance and regulatory matters. Paul regularly works with in-house legal counsel, corporate

compliance officers, senior operations professionals, and outside legal counsel that support these

professionals. Paul has provided expert testimony on behalf of pharmaceutical companies in litigation

matters involving sales and marketing practices.

Clay Willis

Manager

Clay is a Manager in the Life Sciences practice at Huron Consulting Group, with deep experience in the

pharmaceutical, medical device, and healthcare industry. He has experience in providing government

pricing support to small, mid-size, and large pharmaceutical manufacturers. Specific areas in which he has

assisted companies include GP diagnostics, on-going calculations, restatements, system implementation,

and policy and procedure development. In addition, he has presented various points of view at industry

conferences and through webinars and white papers.

© 2015 Huron Consulting Group. Proprietary and Confidential - Not for Distribution

Overview and Recent GP Settlements

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Overview of Government ProgramsBackground on Government Pricing

Healthcare fraud continues to be one of the top priorities for the OIG, DOJ, and various state agencies.

For today’s discussion, we are going focus on what the compliance department needs to know about government pricing (GP) and the following government programs:

A. Medicaid Drug Rebate Program (MDRP) - Average Manufacturer Price (AMP), Best Price (BP), and Unit Rebate Amount (URA)

B. Medicare Part B Program – Average Sales Price (ASP)

C. Public Health Service Program (PHS) – PHS Price

D. Federal Supply Schedule Program (FSS) – Non-Federal Average Manufacturer’s Price (NFAMP) and Federal Ceiling Price (FCP)


Overview of OIG and False Claims ActCompliance Drivers

The OIG provides oversight and protects the integrity of each of the government programs, including the GP calculations. An area of their focus continues to be around the False Claims Act.

This is significant for compliance departments because the MDRP, PHS, and FSS agreements require pharmaceutical manufacturers, under federal law, to calculate and report accurate GP information to the relevant agency.


Pharmaceutical manufacturers face a difficult

challenge because, if not done accurately and

on time by the responsible function within the

organization, it could result in what could be

considered a potential False Claims Act

violation.

The MDRP agreement requires the CEO, CFO, or a

delegate thereof to personally certify to the

completeness and accuracy of the amounts reported

therefore, pharmaceutical manufacturers need to

demonstrate that they were able to do that.

Another Certification Requirement

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Recent GP SettlementGP Enforcement – Accurate Information and Timeliness

In March 2015, the OIG announced the newest of the settlements related to GP and the Medicare Part B Program. • Allegedly misrepresented the ASP data to

CMS

• Sandoz Inc. to pay $12.64 Million

• Sandoz to certify that the company has established a GP compliance program


What does an effective GP Compliance Program

look like?

GP Benchmarks of Compliance

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GP Benchmarks of ComplianceOIG 7 Elements of an Effective Compliance Program

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We looked at GP compliance within the context of the seven main elements outlined by HHS OIG. These have have been widely considered and recognized as fundamental to an effective compliance program.

Key GP compliance benchmark considerations for each elements have been identified.


1 OIG Compliance Program Guidance for Pharmaceutical Manufacturers. Department of Health and Human Services, Office of Inspector General. Federal Register / Vol. 68, No. 86. May 5, 2003.

OIG 7 Elements of an Effective Compliance Program1

Implementing written policies and procedures

Designating a compliance officer and a compliance committee

Conducting effective training and education

Developing effective lines of communication

Conducting internal monitoring and auditing

Enforcing standards through well-publicized disciplinary guidelines

Responding promptly to detected problems and undertaking corrective action


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Written policies and procedures which outline the regulatory guidance, the company’s interpretation, and process instruction. This includes: Demonstrate GP compliance with relevant laws, regulations, and contract terms and conditions for

all of the government programs; MDRP, Medicare Part B, PHS, and FSSDescribe current business practices on how each of the GP calculations are performed as well as

other key underlying processes that support themMaintain other documentation, including assumption memos outlining the company’s positions on

issues not clearly described in regulations for each of the government programs


1. Implementing written policies and procedures

2. Designating a compliance officer and compliance committee

A compliance officer and compliance committee provide oversight needed to help ensure compliance across the company. Having a compliance officer, function, and committee that ensures that the GP function has

established relevant policies and procedures



3. Conducting effective training and education

Proper education and training of employees and officers to ensure expectations are understood and proper GP procedures are being executed. This includes:Having a GP training curriculum in placeEnsuring resources have skill sets that include a strong knowledge base of GPAdequate staff training on relevant GP documentation including policies and proceduresRegular assessment of staffing size to ensure it is sufficient to meet the current demands of GP

4. Developing effective lines of communication

Establishing and maintaining a culture that encourages ethical conduct and commitment to compliance with the law. This includes:Pricing committee to discuss new contracts, pricing, price reporting impacts to URA, etc.Open and transparent communication across functions around items that may affect or impact GP

function



Sets forth clear, disciplinary consequences of violating the law and what actions need to be taken. This includes:A compliance program training and/or employee handbook that mentions importance of GP

6. Enforcing standards through well-publicized disciplinary guidelines

7. Responding promptly to detected problems and undertaking corrective action

Failure to comply with applicable federal or state law can threaten the company’s participation in these government programs. This includes:• A process to assess any suspected non-compliance within the GP function

5. Conducting internal monitoring and auditing

Monitoring and auditing around the implementation as well as an on-going evaluation of current processes. This includes:A parallel independent price calculation of historical reported values to assess if the documented policy

matches what was submitted to the various government agencies

What an Effective GP Compliance Program Looks Like

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Effective GP Compliance Program

An effective GP compliance program should take into consideration each of the HHS OIG’s seven elements of a

compliance program.

Additional factors the compliance department should consider include:

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What does that look like?


External Factors Internal FactorsPer the Sandoz settlement, government-mandated price reporting has been a key areas of risk and litigation.

Company merger/acquisition implications

Continuous emphasis by the OIG in its annual work plan on the timeliness of when manufacturers report their GP values

Increasing participation in commercial contracting activity and new managed market strategies

New complexities and changes have been introduced by HRSA, the VA, and CMS which will continue going forward.

Sales and marketing practice changes

Stringent regulatory timeframes may force many companies to implement less-than-ideal GP solutions or workarounds when the new regulations (e.g. MDRP Final Rule) is released.

Implementation of new, or enhancements to existing contracting, chargeback/rebate, and GP systems

The continual erosion of enterprise GP knowledge due to workforce attrition, etc. leaving operational resources uncertain of the specifics in the GP calculations

Staff turnover – new resources being trained to take over the GP responsibility (what happens frequently)

The likelihood of future changes remains a distinct possibility with the increase in healthcare reform.

Newly launched NDCs, extended product lines, and class of trade changes

Effective GP Compliance ProgramCore Components to Evaluate Your GP Function

Understand Current Processes and

Procedures

Assess Current Methodology

and Operations

Perform an Independent Price

CalculationPrepare Findings Report

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• Identify key stakeholders within GP

function and/or an outside vendor

• Request, collect, and review relevant GP

policies and procedures for all price types

• Collect and review all other documents

(e.g. CoT Schema, Transaction Type, etc.)

• Conduct workshops/ interviews with key

personnel to ensure accurate

interpretation of documents

• Assess overall GP processes including

the data collection and validation,

calculations, review, and submission

• Review GP calculations methodology used

by GP function and/or the outsource

vendor

• Validate and confirm methodologies to

perform independent GP calculations

• Collect and review sales data for direct

sales, chargebacks, rebates, and other

transactions

• Perform sample testing of customer

master data

• Perform an independent calculation for a

sample of NDCs and one quarter

• Review results against historical

calculations

• Identify key drivers of any variances

• Develop a summary level report documenting

observations, findings, and gaps of the

current state of GP function

• Document specific findings related to the

independent price calculations

• Develop recommendations or roadmaps to

address any gaps, if applicable


Effective GP Compliance ProgramKey Outcomes for Compliance

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Performing a GP diagnostic is the critical step for the compliance department to be able to demonstrate their due diligence in this area.

In addition to establishing what an effective compliance program looks like, a GP diagnostic will reduce risk while providing the compliance department with the following:

Insight into the company’s current GP

environment

Potential areas of risks and exposure

specific to the Government Programs

A baseline of GP compliance against

available guidance

A readiness assessment of how prepared

your company is for an upcoming audit or

legislative changes

A roadmap with recommendations and next

steps to become compliant


Recent Huron Results, Findings, and Trends

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Below are recent results and trends that we have seen when performing GP diagnostics on behalf of the compliance department:

• GP functions do not have enough dedicated resources to perform all of the monthly and quarterly processes in an accurate and timely manner

• GP policies, procedures, and other supporting documentation require updating to varying degrees

• GP calculation methodologies are not consistent and do not follow latest guidance or regulatory requirements

• System configuration documentation is lacking and/or non existent• Managed Markets and GP functions are not reviewing or even performing BP True Ups• Bona-fide service fee evaluations and corresponding documentation are lacking for all

agreements• There is no process to perform G/L reconciliation for rebates• There is no GP training for resources dedicated within the GP function


Effective GP Compliance Program


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Compliance departments should consider establishing an effective GP compliance program, which includes conducting a

GP diagnostic every one to two years. This is dependent upon the company’s size, history, and sales volumes within the

various government programs.

Other GP diagnostic considerations for the compliance department include:

• When the GP function is performing their monthly, quarterly, and annual GP calculations?

• Are there any other large GP projects and/or system implementations being conducted by the GP function?

• What is the level of effort that would be required by both the compliance department and the GP function to meet the needs?

• Are there any upcoming regulations that may impact or change the GP environment? If so, is there a way to leverage resources and/or

costs from a GP diagnostic with those?

Timing and Other Considerations


Key Questions for the Compliance Department

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Key Question for the Compliance DepartmentKey Questions to Ask


As we leave today, ask yourself or someone in your compliance department if they can answer any of the following questions:

1. When was the last time your company performed a diagnostic of your GP function? If so, what were the key observations and steps taken to mitigate risks?

2. Have there been any recent external regulatory changes that have impacted the GP function?

3. Have there been any recent internal changes (e.g. staff turnover, newly launched NDCs, implementation of a GP system) that have impacted the GP function?

4. Do you know if your GP polices and procedures are complete, up to date, and fully aligned with current regulations and industry best practices?

5. Do you know if the GP function is currently following and executing the relevant processes outlined in the company’s GP policies and procedures?

6. Has a recent independent GP calculation or testing been performed to ensure the current policies and procedures match the actual price results?

7. Does the C-level person signing off on the GP values each month and quarter know about the compliance risks associated with their submissions?

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Questions

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Thank You!

Thank you for attending Huron’s Government Pricing Webinar for the Compliance Department. If you have any additional

questions or would like to reach out to us regarding this presentation, please contact:

Paul Silver

Huron Life Sciences

Managing Director, Practice Leader

678-672-6061

[email protected]

Clay Willis

Huron Life Sciences

Manager

678-672-6162

[email protected]

© 2015 Huron Consulting Group. Proprietary and Confidential - Not for Distribution 23

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