Sweeping Proposed Rule on Rebate Safe Harbor has Potential to Impact all Drug Supply Chain Stakeholders

HHS Secretary Azar has proposed a new rule that will eliminate a Safe Harbor to the federal Antikickback Statute that provides legal protection for rebate arrangements allowing drug makers to pay PBMs to secure their drugs position on PBMs’ Medicare formularies. The goal of eliminating this Safe Harbor, and replacing with a new one, is to ultimately lower prescription drug prices for patients and Medicare and to upend the complicated structure for how drugs are priced. If passed, the proposed rule has the potential to dramatically impact pharmacies’ acquisition price and pharmacy reimbursement rates. It could also potentially alter distributor profit margins, as well as impact the commercial space. The move, while laudable, requires substantial input from stakeholders.

According to Secretary Azar, “This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever, and finally ease the burden of the sticker shock that millions of Americans experience every month for the drugs they need.” The 123-page proposed rule, however, does not address the impact on pharmacy reimbursement, the wholesale distributor model or manufacturer profits. CMS has traditionally left reimbursement rates largely to the “market forces” and has not weighed in on the diminishing pharmacy margins. This rule, if implemented without additional guidance, has the potential to further erode pharmacy margin caused by PBM spread pricing and to erode the margins of other stakeholders.

In addition to eliminating the current Safe Harbor, the proposed rule also creates a new Safe Harbor protecting discounts offered to patients at the pharmacy counter and would also protect fixed fee services arrangements between manufacturers and PBMs. The impact of such fixed fee service arrangements is another aspect stakeholders must carefully consider.

All drug supply chain stakeholders should analyze HHS’s sweeping proposed industry change. The proposed rule currently has little, if anything, to address the impact on such stakeholders, making it imperative for stakeholders to participate in Secretary Azar’s request for comment. The deadline to submit comments to HHS is April 8, 2019.

Frier Levitt Government Affairs, LLC, along with the attorneys at Frier Levitt, LLC, has scoured the rule, and gathered feedback from stakeholders ranging from retail pharmacies, specialty pharmacies, chains, distributors, national associations of providers and manufactures. We have a strong understanding of the impact of the proposed rule and are working with stakeholders to avoid unintended negative consequences.

Submitting your viewpoints will be critical since this proposal reflects a priority of the Administration. Contact Frier Levitt Government Affairs today to have your voice heard.

New FDA Proposed Rule Looking to Define the Term “Biological Product” Seeks Comments

The Food and Drug Administration (FDA) is out with a new proposed rule targeting pharmaceutical manufacturer and specialty pharmacy stakeholder interests. With the new proposed rule, the FDA is looking to amend its regulation that defines “biological product” to incorporate changes made by the Biologics Price Competition and Innovation Act of 2009 (BPCI Act), and provide an interpretation of the statutory terms “protein” and “chemically synthesized polypeptide.” Under this interpretation, the term “protein” would mean any alpha amino acid polymer with a specific, defined sequence that is greater than 40 amino acids in size. A “chemically synthesized polypeptide” would mean any alpha amino acid polymer that is made entirely by chemical synthesis and is greater than 40 amino acids but less than 100 amino acids in size.

The comment period for the new proposed rule on biologics is now open. The deadline to comment is February 25, 2019.

Biologics is a cutting-edge sector within the healthcare industry. Since biologics are not traditional drugs, they will need their own classification as they become more utilized. Reimbursement and regulatory oversight involving safety of biologics will depend on how the term “biological product” is defined in this proposed rule. Pharmaceutical manufacturers and specialty pharmacy stakeholders can participate in this decision by submitting comments. Contact Frier Levitt Government Affairs today to have your voice heard on this very important topic.

Comments Wanted: New ICER Report to Assess if Clinical Evidence Exists for Significant Increase in Prescription Drug Prices

Public comment is being sought on the Institute for Clinical and Economic Review’s (ICER) recently posted draft protocol titled the “Unsupported Price Increase” (UPI) report. This report analyzes significant prescription drug increases and looks to determine whether or not new clinical evidence exists that could be used to support those increases. Once finalized, the protocol will guide the development of the first of these annual reports, currently scheduled for release in October 2019.

The comment period closes on February 13, 2019.

ICER is an independent non-profit research institute that produces reports analyzing the evidence on the effectiveness and value of drugs and other medical services. They are quietly becoming a strong influential force on government policy. The recent announcement of ICER’s collaboration with the Department of Veterans Affairs (VA) Pharmacy Benefits Management (PBM) Services to support VA coverage and price negotiations with drug manufacturers makes it clear that their influence on drug pricing will only continue to increase in the future.

If you are a manufacturer, GPO, wholesaler or similarly situated life science or healthcare stakeholder, it is imperative that you participate to ensure having your voice heard. Contact Frier Levitt Government Affairs today for assistance in submitting your comments for this very important policy development before the upcoming deadline.

Take Action: New CMS Proposed Rule Targeting Manufacturers, Patient Assistance Programs, ACOs, Payers and ACA Exchange Stakeholders

The Centers for Medicare and Medicaid Services (CMS) has issued a new proposed rule targeting Accountable Care Organizations (ACOs), payers and Affordable Care Act (ACA) exchange stakeholders. The proposed rule, titled “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2020“, reflects a priority of the Administration around the Patient Protection and Affordable Care Act (PPACA) of reducing fiscal and regulatory burdens across various areas within the law. This proposed rule has several components that affect different stakeholders.

Manufacturers and Patient Assistance Program Stakeholders:

Copay accumulators are being implemented by insurance companies and Pharmacy Benefit Managers (PBMs), harming patient access. With this payor program, the value of copay assistance cards/coupons issued by manufacturers do not count towards out-of-pocket costs that are applied toward deductibles. The result has caused a cost shift onto consumers and away from employers and payers.

In this proposed rule, the Administration defends the use of copay accumulators stating:

“The availability of a coupon may cause physicians and beneficiaries to choose an expensive brand-name drug when a less expensive and equally effective generic or other alternative is available. When consumers are relieved of copayment obligations, manufacturers are relieved of a market constraint on drug prices which can distort the market and the true costs of drugs. Such coupons can add significant long-term costs to the health care system that may outweigh the short-term benefits of allowing the coupons, and counter-balance issuers’ efforts to point enrollees to more cost-effective drugs.”

“We propose, for plan years beginning on or after January 1, 2020, notwithstanding any other provision of the annual limitation on cost sharing regulation, that amounts paid toward cost sharing using any form Start Printed Page 291of direct support offered by drug manufacturers to insured patients to reduce or eliminate immediate out-of-pocket costs for specific prescription brand drugs that have a generic equivalent are not required to be counted toward the annual limitation on cost sharing. Not counting such amounts toward the annual limitation on cost sharing would promote: (1) Prudent prescribing and purchasing choices by physicians and patients based on the true costs of drugs and (2) price competition in the pharmaceutical market.”

Participating in this proposed rule is crucial for manufacturer and patient assistance programs to maintain patient access and stop unnecessary risk shifting from occurring in consumer spending.  We can help advocate your concerns.

ACOs, Payers and ACA Exchange Stakeholders:

Specifically, the proposed rule would set forth parameters and provisions related to the risk adjustment and risk adjustment data validation programs, cost sharing parameters, and user fees for Federally-facilitated Exchanges and State-based exchanges on the Federal Platform.

The proposal outlines changes that would allow greater flexibility related to the duties and training requirements for the Navigator program and proposes changes that would provide greater flexibility for direct enrollment entities, while strengthening program integrity oversight. Lastly, the proposal discusses policies that are intended to reduce the costs of prescription drugs. This includes proposed changes to Exchange standards related to eligibility and enrollment, exemptions, and other related topics.

The Administration has been making several changes to the ACA via regulation, as earlier Executive Orders described how regulatory changes would be used to make drastic reductions to the ACA. If you have an interest in the ACA or a direct one based off of an interest in the Exchanges, it is advised that you participate in this rule to ensure that your interests are represented. Not doing so will subject your organization to whatever policies may or may not arise from this rulemaking, potentially placing your organization and your priorities at a disadvantage.

Frier Levitt Government Affairs (FLGA) helps stakeholders comment on proposed regulations. FLGA understands the nuances around industry and has strategies that can help successfully communicate stakeholders’ positions to CMS.

The deadline to comment is February 19, 2019, so it is important that you contact Frier Levitt Government Affairs today to make sure your voice is heard.

CMS Permits Use of Step Therapy for Part B Drugs with Medicare Advantage Plans Affecting Physician Dispensing and Specialty Pharmacy Patients

The Centers for Medicare and Medicaid Services (CMS) recently announced a new policy affecting Medicare Advantage plans, specifically those Medicare Advantage beneficiaries who rely on prescription drugs from Medicare Parts B and D. This new CMS guidance effective, January 1, 2019, permits MA plans to use “step therapy” for Part B drugs as part of a patient-centered care coordination program. Simply put, step therapy would require physicians to write prescriptions for a less expensive alternative drug and see if it succeeds or fails before writing for some additional expensive medications. In what will likely end up resulting in unnecessary costs and delays many providers including national oncology organizations have publicly criticized the guidance as removing patient and physician choice and harming individualized treatment.

Not surprisingly, the PBM lobbying group, Pharmaceutical Care Management Association (PCMA), has publicly favored the guidance. The big three PBMs have common ownership with MA Plans. The new rule will allow Part D plans the ability to cross-manage drug decisions across Part B and Part D. Instead of a physician choosing what drug to prescribe, the PBM would decide through Step Therapy. Under the previous CMS rule, PBMs had little control over Part B drugs—that was the domain of physicians.  The new rule will embolden the PBMs’ ability to control dispensing with step therapy; will enable PBMs to control formulary design, thus allowing them to secure even greater “rebates” from manufacturers and better spread pricing. PCMA called for this rule change in its July 16, 2018 Statement to Secretary Azar regarding the American Patients First: Blueprint to Lower Drug. Unfortunately, the consequence of this rule will be to increase the list price of drugs and patient copayment, particularly for those suffering from serious disease states.

The issue for the industry now is how to deal with the possibility of higher out of pocket costs, uncertain patient outcomes and unnecessary interference with the doctor patient relationship. The first piece of advice for Part B and Part D providers is to be vigilant in your response to the increasingly utilized Request for Information (RFI). The Request for Information is a method that agencies extend to interested stakeholders to identify issues of concern to the industry that could be technical in nature. It is strongly encouraged that you reach out to agencies offering RFIs such as this would could help avoid policy changes that hurt patient care and provider autonomy.

Over the last 12 months, CMS has increasing relied on the issuing of Requests for Information (RFIs). An RFI is part of the rulemaking process wherein an agency, such as CMS, proposes a rule or policy that it is looking to either add or change. Proposed rule announcements are usually followed by a “comment period”, public workshops/hearings, a final comment period and then a final rule with effective date. The RFI process provides opportunities for industry stakeholders, including national associations, to comment on the technical aspects of a proposal. However, the Administration is using agencies like CMS to distribute RFIs as a way for the industry to guide the conversation on what should be included. This could provide your organization with another way to influence policy.

It is clear that the pace of federal and state government policy making in the healthcare and life sciences spaces has quickened and continues to raise the stakes for market participants. Frier Levitt Government Affairs, LLC, along with legal insight from Frier Levitt, LLC, helps physician dispensers and specialty pharmacies navigate market and policy changes and helps provide the necessary tools to stay ahead. Contact us today.

Modifying HIPAA Rules: OCR Looks for Input from Physicians, Hospitals and Healthcare Stakeholders

The Office for Civil Rights (OCR) has issued a Request for Information (RFI) seeking input from the public on ways to modify the Health Insurance Portability and Accountability Act (HIPAA). OCR intends to use the public’s comments to remove regulatory obstacles and decrease regulatory burdens in order to facilitate efficient care coordination and case management to promote value-based health care while preserving the privacy and security of protected health information.

Covered entities and business associates often defer thorough HIPAA compliance due to the onerous requirements and/or limited administrative resources required to develop and enforce a comprehensive policy and procedure manual. However, this places these companies at significant risk. OCR’s HIPAA enforcement has, and will likely continue, to rise.

This proposal offers providers an opportunity for physicians, hospitals and healthcare stakeholders to submit feedback to OCR highlighting certain obstacles they may face due to HIPAA regulations that do not meaningfully contribute to the privacy and security of protected health information.

The deadline for the comment period ends February 12, 2019. If you are a healthcare stakeholder and would like to participate, contact Frier Levitt Government Affairs today. We have several strategies to help you or your organization engage in this process and have your voice heard.

Growing Trend Toward PBM Transparency Provides Opportunities for State Medicaid Directors

2018 was a key year for further shedding light on Pharmacy Benefit Manager (PBM) business practices. As state budgets continue to be squeezed and patient populations require more specialty care, state Medicaid Directors have an opportunity to pull back the curtain on PBMs and realize additional ways that your state can benefit from transparency.

An important lesson can be learned from Ohio’s 2018 successes. In a report to the Ohio Joint Medicaid Oversight Committee, the Ohio Auditor gave an overview of the audit of the state’s Medicaid program and its dealings with PBMs.
The report found:
∙ The “spread”- difference in dollar amount between what Plans pay to PBMs and what PBM pay to pharmacies- has been growing and hit its peak in the fourth quarter of 2017
∙ An overwhelming portion of PBM spread is occurring on generic drugs
∙ Spread pricing totals varied wildly from region to region
∙ There is a disconnect between the Medicaid drug spend and what PBMs reimburse to pharmacies
∙ Data confirms a high number of pharmacy closures amid reimbursement cuts
∙ Spread totals were highest on specialty drugs, which are typically dispensed at PBM-owned pharmacies

The Ohio audit report concludes that PBMs enjoyed an 8.8% spread on Medicaid beneficiary claims, yielding PBM profits in excess of $250MM—that’s just in Ohio state Medicaid. Ohio decided that it would no longer permit PBM spread pricing and now requires PBMs to have pass through model contracts.

Frier Levitt Government Affairs, LLC (FLGA) and Frier Levitt, LLC, have extensive experience working with Medicaid Directors and other stakeholders to provide money saving solutions against PBMs. For Medicaid Directors witnessing population growth, we can help unravel savings from complex PBM contracts and relationships. We can assist your state in reviewing your Medicaid contracts to determine if you are paying too high for negotiated items. We can also provide you with substantial education on the PBM business model with the goal of saving your program much needed resources. Contact us today to put an end to questions and confusion and start requiring accountability from your PBM.

Take Action: Pharmacy Industry Asked to Comment on the New CMS Proposed Rule Aimed at DIR Fees

The Centers for Medicare & Medicaid Services (CMS) has released “Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses,” a proposed rule to amend the Prescription Drug Benefit Program (Part D) regulations to support health and drug plans’ negotiation for lower drug prices and reduce out-of-pocket costs for enrollees. One important component is a proposal to change the definition of “negotiated price.” Currently, the term must include all pharmacy price concessions except those contingent amounts that cannot be “reasonably determined” at the point of sale. This small exception is what has led PBMs to manipulate Medicare bidding and to the explosion of DIR Fees in the pharmacy space.

CMS is proposing a change to the definition of “negotiated price” to eliminate this exception and instead adopt a new definition were the term would mean the lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D plan sponsor or the sponsor’s PBM.

Independent pharmacies, especially those dispensing high-cost medication such as specialty pharmacies, have paid substantial money back to PBMs and plan sponsors in the form of percentage-based DIR Fees. The government has only now begun to analyze the impact that DIR fees have had on the Medicare Part D marketplace, including pharmacies, Medicare beneficiaries and the Government. CMS is ready to change regulations that have created PBM and plan sponsors’ incentives that have “distorted” CMS’s intentions and original definition of “negotiated price.” CMS is asking for stakeholders to comment by January 25, 2019 on the proposed rule changes. The proposed changes could remove these distorted incentives and undue some of the negative consequences that have been caused by DIR Fees. This potential impact is highlighted by some of CMS’ own commentary in its proposed rule, including:

  • DIR fees “[p]erformance-based pharmacy price concessions, net of all pharmacy incentive payments, increase, on average, nearly 225 percent per year between 2012 and 2017 and now comprise the second largest category of DIR received by sponsors and PBMs, behind only manufacturer rebates.”
  • Less than 1 percent of plans have passed through any price concessions to beneficiaries at the point of sale.
  • “When pharmacy price concessions are not reflected in the price of a drug at the point of sale, beneficiaries might see lower premiums, but they do not benefit through a reduction in the amount they must pay in cost-sharing, and thus, end up paying a larger share of the actual cost of a drug.”
  • “[P]harmacy price concession applied as DIR can lower plan premiums and increase plan revenues, result in cost-shifting to beneficiaries and the government, and reduce consumer and government knowledge about the true costs of prescription drugs.”
  • If a Part D plan sponsor’s actual drug costs are within +/- 5 percent of the drug costs estimated in its bid, the plan assumes all of the risk or reward. CMS’s own analysis show “that in recent years the DIR amounts that Part D sponsors and their PBMs actually receive have consistently exceeded bid-projected amounts, by as much as three percent as a share of gross drug costs.” The three percent increase in estimated DIR revenue is kept 100% by Part D plan sponsors without the requirement to pass any of that “savings” to the government, beneficiaries or health care providers such as the pharmacies that acquire and dispense the medication in accordance with prescriber instructions.

Why You Should Comment:

Opportunities to comment directly on DIR are rare. Last year, CMS issued a Medicare Part D Final Rule and declined to discuss DIR. Providers are in danger of closing or are being forced to drastically alter their business models. CMS has stated in this proposal that the current application of DIR by PBMs was an unintended consequence.

Frier Levitt Government Affairs (FLGA) helps pharmacy industry stakeholders, including independent pharmacies, specialty pharmacies, state and national pharmacy associations, and in-office dispensers, comment on proposed regulations. FLGA understands the nuances around DIR fees and has strategies that can help successfully communicate pharmacy stakeholders’ positions on DIR Fees and other issues to CMS.

The deadline to submit Comments is January 25, 2019, so it is important that you contact Frier Levitt Government Affairs today to make sure your voice is heard.

State and Pharmacy Associations Can Demand Greater Conditions of Approval from Agencies that Oversee PBM and Insurer Mergers

Various state and federal agencies approve the mergers of Pharmacy Benefit Managers (PBMs) and Insurers and often “condition” approval on various “consents” by the merging entities. The last few years have witnessed rapid consolidation throughout the healthcare industry, especially within the insurer-PBM realm. Lately, the industry is monitoring events around the latest mergers such as CVS-Aetna and Express Scripts-Cigna. A recent example of successful efforts to condition approval of a merger on increased market fairness recently occurred in Georgia.

Such conditions are necessary to preserve competition and patient choice. If such mergers continue, states will witness decreased market competition for prescription drugs, PBMs charging greater “spread pricing” and exacting larger rebates from manufacturers for Medicare Part D. Additionally, more PBM mergers will substantially magnify the PBM-business-model’s negative impact on an already broken healthcare system, causing the government’s already untenable drug spend to exponentially increase, and patients to pay artificially inflated copayments.

When it comes to approval of PBM mergers, Georgia recently demonstrated that states can take a stand for their patients and providers. Georgia approved the CVS/Aetna merger on the condition that:

     ●  CVS/Aetna must invite non-CVS health care providers (pharmacies, physicians, clinics, etc.) to join its
          networks, and must set the same criteria for all those providers.
     ●  CVS/Aetna must allow Georgia patients to use any health care provider – in or out of network – if that provider
          accepts the same conditions as those within the network.
     ●  CVS/Aetna cannot require patients to use CVS-owned pharmacies, period – not for regular prescriptions,
          refills, or specialty drugs. These concessions reduce the chance that a combined CVS/Aetna can limit patients’
          choice of health care providers. CVS Health already requires patients on some plans to get their specialty
          medications from CVS pharmacies. This practice will no longer be allowed in Georgia.
     ●  CVS/Aetna must disclose the amount of rebates it receives from drug makers and how much of those it passed
          on to insurers.

So how can you achieve similar results in your state? Frier Levitt Government Affairs, LLC (FLGA) can use its network of contacts nationwide to help state agencies, pharmacy associations and individual pharmacies realize that you too can make demands like Georgia, New York and California. Success requires a deep knowledge of the Life Sciences business and legal dynamics. FLGA can help your state pharmacy association exact greater concession from PBMs looking to do business in your state. Contact FLGA today to get started.

What You Need to Know: The HHS “Reforming America’s Healthcare System Through Choice and Competition” Report

Recently, the Department of Health and Human Services (HHS) – in collaboration with the Departments of the Treasury and Labor, the Federal Trade Commission and several offices within the White House – released a report titled “Reforming America’s Healthcare System Through Choice and Competition.”

The report is a product of a directive from Executive Order 13813 titled, “Promoting Healthcare Choice and Competition Across the United States.” The Executive Order directs the administration to facilitate “the development and operation of a healthcare system that provides high-quality care at affordable prices for the American people” by increasing consumer choice and promoting competition in healthcare markets and by removing and revising government regulation.

The report identifies problems with the U.S. healthcare system, as well as four areas of opportunity. It blames issues such as influence of state and federal laws, excessive mandates, and limited insurance coverage options as factors that have increased costs. As a result, four key policy areas – Health Care Workforce and Labor Markets, Health Care Provider Markets, Health Care Insurance Markets, and Consumer-Driven Health Care – have been identified as opportunities to improve healthcare policy.

As seen with the Administration’s “American Patients First” Blueprint, the Administration releases broad policy statements that are refined with either Requests for Information (RFIs) or with specific bills/proposed rules. 2019 looks to be no different, as this report is bound to show up in some regulatory or legislative vehicle.

Healthcare organizations, Health Systems, physician practices, and physicians in general need to stay ahead of trends like this report as they could end up having an impact on their bottom lines. Through the use of federal or state lobbying, assistance with federal or state regulatory comments, bill language verification, the creation of SuperPACs or general business strategy consulting, Frier Levitt Government Affairs, LLC. (FLGA) can help healthcare industry stakeholders realize their long-awaited priorities. Contact FLGA today to discuss options that will best get your voice heard.