Friday, June 24, 2016

Five Crucial AMP Final Rule Challenges Facing Manufacturers

Today’s guest post comes from Katie Lapins, Principal/CEO of Government Pricing Specialists. Katie discusses five key challenges facing drug manufacturers as they attempt to comply with the Average Manufacturer Price (AMP) Final Rule.

To learn more about these topics, join Katie at IIR’s 21st Annual Summit on the Medicaid Drug Rebate Program (MDRP). Register before July 1 and save $400 off the regular registration fee.

Read on for Katie's thoughts.

By Katie Lapins, Principal/CEO, Government Pricing Specialists, LLC

The AMP Final Rule, related to the Patient Protection and Affordable Care Act (ACA), was released by the Centers for Medicare and Medicaid Services (CMS) on Jan. 21, 2016 with an effective date for the majority of the components of April 1, 2016. That means manufacturers’ first monthly calculations should have been submitted with the required methodology changes, with the exception of things such as Line Extensions.

CMS held a webinar on the subject. And while a lot of information in the Preamble can assist manufacturers in understanding the various requirements, but as is usual in the Government Pricing (GP) space, there is still a lot of room for “reasonable assumptions.”

Here are five key areas that manufacturers are struggling to handle:

1) Treatment of sales to other manufacturers: For manufacturers involved with another manufacturer, especially with regards to an authorized generic, how to treat these sales in your GP calculations may not be black-and-white. At times, the definitions of “manufacturer” and “wholesaler” can be circular.

2) Specialty Pharmacies: CMS did not include specialty pharmacies (or home health care providers and home infusion pharmacies) in their definition of Retail Community Pharmacies (RCPs). Instead, they have left the determination of how to treat sales to these types of entities to the manufacturer. For these entities, like any other class of trade (CoT) not specifically excluded by CMS, the manufacturer must make the determination if the entity qualifies as an RCP. This will most likely be based on an individual manufacturer’s products, distribution model, and contracts.

3) 5i Products: Manufacturers must determine if a 5i product should use the “alternative” 5i methodology on a monthly basis. If 70% or more of the sales (based on units, not dollars) are not to RCPs or to wholesalers for drugs distributed to RCPs, then a manufacturer must use the 5i methodology for the monthly AMP calculation.

When making the 70/30 determination, CMS has said that sales to RCPs as well as those to specialty pharmacies, home infusion pharmacies, and home healthcare providers “that otherwise qualify as RCPs” should be included. It is up to the manufacturer to determine if specialty, home infusion, and home healthcare qualify as RCPs for their business model. The option to smooth the data is up to the manufacturer but how to get at the units to use can be interpreted different ways, for example, do you include all sales or just the non-government sales?

4) Not generally dispensed drugs: For drugs that are not inhaled, infused, instilled, implanted, or injected, such as oral solids, and do not go through RCPs, CMS has not provided much guidance except to say that the 5i methodology is not appropriate. In these cases, manufacturers will need to evaluate their CoTs and determine if specialty pharmacies or other outlets for their products meet the definition of an RCP. If they do not, then the manufacturer must make a reasonable assumption as to how to calculate AMP.

5) Quarterly AMP: The change to the quarterly AMP calculation from CMS yields the same result as the previous methodology except when there is a negative monthly number or a false positive. When GPS requested additional guidance from CMS for these situations, their reply was, “Manufacturers should make a reasonable assumption.”

If you’re struggling with these or other areas, or just want to network with your peers and to hear more on these and other hot topics, I strongly recommend that you join me at IIR’s 21st Annual Summit on the Medicaid Drug Rebate Program (MDRP).

This event is one of the best and most well-attended conferences each year, and it attracts top speakers. If you register by July 1, you can save up to $400 off of the regular registration fee. GPS will be onsite and blogging for the second year.

I look forward to seeing you at the MDRP!

The content of Sponsored Posts does not necessarily reflect the views of Pembroke Consulting, Inc., Drug Channels, or any of its employees.

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