responding to enforcement initiatives: designing the successor(s) to the medicaid rebate program
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Responding to Enforcement Initiatives: Designing the Successor(s) to the Medicaid Rebate Program. The Fourth Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum Concurrent session 3.05 November 13, 2003 2:15 – 3:15 Edwin Rauzi Davis Wright Tremaine - PowerPoint PPT PresentationTRANSCRIPT
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Responding to Enforcement Initiatives: Designing the Successor(s) to the Medicaid Rebate Program
The Fourth Annual Pharmaceutical Regulatory
and Compliance Congress and Best Practices Forum
Concurrent session 3.05November 13, 2003
2:15 – 3:15
Edwin Rauzi
Davis Wright [email protected]
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Current Medicaid Rebate design elements
• Universal contracting
• Rebates calculated by reference to– Best Price– AMP
• Reliance on NDC numbers
• Medicaid payment precedes rebates
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Problems with current design elements
• Universal contracting means a lack of competition for Medicaid business
• Rebates calculated by reference to Best Price leaves open the possibility of– manipulation– errors by pharmaceutical manufacturers
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Problems with current design elements
• Relying on NDC numbers results in "garbage in/garbage out"
• Paying well in advance of rebates implicates cash flow and the time value of money
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Options in dealing with problematic design elements
• Retrospective– pursue rebate disputes– litigation
• AWP• Best Price
• Prospective—various initiatives under way
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Possible refinements of design flaws• Selective contracting
– just like the private sector and portions of the federal government
– create financial incentives for pharmacies to use preferred vendors
• Negotiated prices– supplemental rebates– AMP could continue to play a role
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Possible refinements of design flaws• Assign rebate claims to pharmacies
– reduces GIGO– reduces cash flow and gives states the time
value of money
• Creates opportunities to– "mix and match"– create multi-state purchasing coalitions and/or– phased implementation
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Some of the "Why" Questions
Why will a pharmaceutical manufacturer consider contracting directly?
– push the competitive button– they recognize that the current system cannot
last forever– avoid becoming tobacco companies– it is the lesser of the various evils
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Some of the "Why" Questions
Why will the retail pharmacy lobby consider accepting an assignment of a rebate claim?
– to make more money (i.e., you could split the savings with them)
– the Wal-Mart factor – to avoid making less money (i.e., lesser of two
evils)
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Some of the Why Questions
Why will CMS consider allowing States to contract directly and on a selective basis?
– Because the Secretary has the explicit authority under section 1927 of the Social Security Act to “authorize a State to enter directly into agreements with a manufacturer . . . .”
– Because it’s good public policy
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Illustrative examples
• Consider epogen/procrit– two manufacturers– clinically identical drugs
• Consider generic amoxicillin– multiple manufacturers– currently “substitutable” drugs