Drug Makers Continue to Flout "Best Price" Law, and Predictions are Compliance is About to Get Worse
By Sharon Treat, NLARx Executive Director

Yesterday New York Times reporter Robert Pear reported on drug makers' noncompliance with the federal law that requires reporting of pricing data and giving medicaid programs the "best price." the story, "Drug makers accused of ignoring price law," is here. Pear stated: "Drug manufacturers often flout a federal law that requires them to provide the government with pricing data needed to calculate discounts on medications prescribed for poor people under Medicaid, federal investigators say in a new report. The information is not submitted at all, is filed late or is incomplete, the investigators said, and as a result Medicaid overpays for prescription drugs." Pear noted that the problem, according to federal investigators, "could become more significant under President Obama’s new health care law, which increases the amount of the discounts and promises to add millions of people to the Medicaid rolls."

A new initiative is intended to force compliance. Daniel R. Levinson, the inspector general at the Department of Health and Human Services, who led the investigation, said he would impose civil fines on drug manufacturers that fail to meet their price-reporting obligations. Under federal law, the government can impose penalties of $10,000 a day on a drug manufacturer that fails to provide the information “on a timely basis.” The government has had this authority since 1990 but has not used it, the inspector general said.

We have previously discussed this issue and the problems raised by drug makers failing to provide data. We are aware of 3 states that have laws or rules requiring that these companies directly report this pricing data to their Medicaid programs - Maine, Texas and Vermont. We strongly urge all states to adopt enabling legislation that will give them direct access to this data - and the authority to penalize and bring enforcement actions - so that they can accurately determine whether the drug makers are sending back to them the full value of the rebates they owe the states. A model bill is posted on our website.

At our summer NLARx meeting in Portland, Maine, Jude Walsh, formerly pharmaceutical policy advisor to Maine Governor Baldacci and now with Goold Health Systems, presented in detail the issues facing states and the potential that they will lose significant medicaid funding due to lack of compliance and access to data.

According to the Pear article, Medicaid officials contend that “they do not currently have the resources” to identify all the manufacturers that fail to submit the data. This is all the more reason for states to act. We are talking about really significant cost increases, at a time when states cannot afford even to pay the costs they currently incur. For example, according to Ms. Walsh's presentation, the State of Maine gets back about 50% of the cost of its medicaid drug purchasing through aggressively negotiating supplemental rebates. Luckily, Maine already has a law giving it authority to collect pricing data and bring enforcement actions for failure to comply. What about YOUR state?

Sharon Treat
www.reducedrugprices.org
207.622-5597

· Payment for Biosimilar Biological Products -- Effective today a provision from the Affordable Care Act, Section 3139, allowing a Medicare Part B biosimilar product that has been approved by the Food and Drug Administration (FDA) to be reimbursed at the average sales price (ASP) of the biosimilar plus 6% of the ASP of the reference product (the licensed biological product that is referred to in the application for the biosimilar product).

A biosimilar, often called a “follow-on” biologic, is similar to a brand-name biologic while a generic drug is the same as a brand-name chemical drug. A biologic is a preparation, such as a drug or a vaccine, that is made from living organisms. Most biologics are complex proteins that require special handling (such as refrigeration) and are usually administered to patients via injection or infused directly into the bloodstream. In many cases, current technology will not allow complete characterization of biological products. CBO has estimated savings from this provision to be approximately $100 million for FY2010-FY2014 and $7.1 billion for FY2010-FY2019.

The Affordable Care Act also amends the Public Health Service Act (PHS Act) in Section 7002 to create an abbreviated approval pathway for biological products that are demonstrated to be “highly similar” (biosimilar) to or “interchangeable” with an FDA-approved biological product. The FDA has formed a Biosimilar Implementation Committee (BIC) and two review committees have been chartered to ensure the process of review and evaluation will be implemented in a sound manor. Reference or branded products will retain 12 years of data exclusivity in which time generic companies are prohibited from using to data to gain approval for a biosimilar.

Thanks to the National Conference of State Legislatures for this information!

States Need to Get Ready for Rebate Changes Now

By Sharon Treat

Health care reform brings with it both opportunities and challenges for the states. One of the challenges is how to address major changes in the way Medicaid prescription drug rebates are calculated, as well as changes to the formula controlling how much of supplemental rebates stay with states to offset Medicaid costs and how much goes to the federal government.

These changes, some of which are retroactive to January 1 of this year, will cost many states millions of dollars, and unless states act swiftly to directly collect drug pricing information and to modify their Preferred Drug Lists (PDLs), the financial hit will continue into the future. While over time, state Medicaid programs stand to benefit financially with greater federal cost sharing under the Affordable Care Act, and on balance will come out ahead financially, the retroactivity of the drug rebate changes means that states will have to quickly come up to speed and make immediate changes to avoid negative impacts on this year's budget.

Drug rebates are how states "negotiate" drug prices with the manufacturers. A state that has been really aggressive about securing both federal "best price" rebates and state "supplemental" rebates could be receiving 40-50% of its Medicaid prescription drug spend back in the form of rebates from drug manufacturers. New rules in the Affordable Care Act, though, increase the federal share of some supplemental rebates retroactively - money some states have collected in the past and are relying on to balance this year's budgets.

Specifically, states that already receive supplemental rebates greater than 15.1% of "Average Manufacturer Price" (AMP) will have to pay over to the federal government the value of rebates between 15.1% and 23.1% of AMP. Potentially offsetting this impact for some states, another provision will allow states for the first time to collect rebates for prescription drugs purchased through Medicaid managed care.

Changes to allowable state rebates for "line extensions" - newer versions and different dosages of existing drugs - also complicate this picture. Under the law CMS will keep all new rebates due to line extension changes, a policy change that will require states to change their PDLs promptly to incorporate equivalent drugs that provide greater rebates - or pay more than they have budgeted in their Medicaid budgets. These PDL choices must also be examined in light of state laws that grandfather particular drugs, for example in mental health services.

Congress has also changed the base price from which rebates are calculated. The problem for states is that drug manufacturers report data on this base price to CMS - NOT to the states. Unfortunately, CMS is currently barred by court order from sharing data with the states on the "Average Manufacturer Price" (AMP) and federal "Best Price," even though states must have this data in order to negotiate rebates with the industry and calculate the federal share. This information is also necessary for states to take advantage of new rebate opportunities under the managed care provisions in the Affordable Care Act.

The only states that have accurate data from which to negotiate rebates with the drug companies, and to accurately calculate what they owe the federal government, are states that have already passed their own laws requiring the drug companies to report AMP and "Best Price" directly to them.

Very few states have such laws; we know only of laws in Vermont and Maine. This is an emergency issue for State Medicaid directors and State Legislatures. States need to immediately review their PDLs and make changes as appropriate from a clinical perspective to reflect retroactive changes in rebate policies that will affect their budgets this year, and to pass a state drug price reporting law. NLARx has drafted a model AMP/best price bill to address the data reporting issue.

What can you do?

· Introduce the Model AMP/Best Price Act. Contact Sharon Treat if you are interested.

· Attend the NLARx summer meeting August 18th in Portland, Maine. The entire meeting is devoted to prescription drug policy changes that affect the states which result from the Affordable Care Act. We will have policy experts Robin Lunge, Esq. of the Vermont Legislative Council and Jude Neveux of Goold Health Systems present in detail on the rebate issue, and will also hear about Medicare Part D, and new federal advertising and marketing disclosure rules from several other speakers. Check out our website for more information and to register. Space is limited, so don't delay!

· Read up on these issues on the website of the National Association of State Medicaid Directors, which has written to CMS with many questions about the rebate changes, and has posted white papers and other materials of interest.

For more information, contact:

Maine Rep. Sharon Treat, NLARx Executive Director

207-622-5597

info@reducedrugprices.org