A Comprehensive Review of theFederal 340B Drug Discount ProgramIdaho State Bar AssociationWilliam von OehsenPrincipalPowers Pyles Sutter & Verville, PC1501 M Street NW Seventh Floor Washington, DC 20005 202-466-6550

Disclaimer The speaker represents 340B providers, 340B providergroups, Medicaid agencies, Medicaid managed careplans and other Medicaid-related organizationsThis presentation is not to be construed or relied uponas legal advice2

Overview 340B PrimerCovered Entity RestrictionsAffordable Care ActBipartisan Budget Act of 2015Medicaid RulemakingADR Proposed RuleHRSA Audit UpdateMega-GuidanceOther 340B DevelopmentsSMART-D3

340B Primer: Background 340B drug discount program requires pharmaceuticalmanufacturers participating in the Medicaid program toprovide discounts on covered outpatient drugspurchased by federally-funded clinics and other safetynet providers referred to as “covered entities” (CEs)The rights and obligations of CEs and manufacturers areset forth in Section 340B of the Public Health ServiceAct (PHSA)Section 1927 of the Social Security Act (SSA) requiresmanufacturers to enter into a pharmaceutical pricingagreement (PPA) with the Secretary of Health andHuman Services (HHS) as a condition of Medicaid andMedicare Part B covering the companies’ outpatientdrugs4

340B Primer: Background (cont’d) Program is administered by the Health Resourcesand Services Administration (HRSA) through theOffice of Pharmacy Affairs (OPA) Because several aspects of the 340B programdepend on interpretation and application of SSAprovisions (e.g. average manufacturer price, bestprice, etc.), the Centers for Medicare & MedicaidServices (CMS) also plays a significant role in 340Bprogram administration Two HRSA contractors: Apexus and AmericanPharmacists Association (APhA). Apexus runs thePrime Vendor Program (PVP).5

340B Primer: Covered Entities Originally 12 categories of CEs: high-Medicaid disproportionate share (DSH) hospitalsowned by or under contract with state or local governmentcommunity health centersADAPsfamily planning clinicsAIDS, TB and STD clinicsand other PHSA granteesThe non-hospital CEs are only permitted to purchase anduse 340B-discounted drugs within the scope of their340B-qualifying federal grants, e.g. HIV, TB, STD, familyplanning, and other grant programs6

340B Primer: Covered Entities (cont’d) Affordable Care Act (ACA) added five new categories ofhospitals eligible for 340B: Free-standing children’s hospitals with DSH adjustment 11.75% Free-standing cancer hospitals with DSH adjustment 11.75% Critical access hospitals Sole community hospitals and rural referral centers withDSH adjustment 8% All 340B hospitals must either be publicly owned or be aprivate nonprofit contracting with a state or localgovernment to provide indigent care7

340B Primer: Covered Entities (cont’d) DSH, children’s and cancer hospitals are subject to aunique eligibility requirement, namely, they areprohibited from purchasing covered outpatient drugsthrough a group purchasing organization (GPO) or othergroup purchasing arrangement. PHSA340B(a)(4)(L)(iii)For hospitals that use replenishment-based virtualinventory systems, initial purchases of an NDC must beon a non-340B, non-GPO account, typically at wholesaleacquisition cost (WAC), and replenishment under thehospital’s 340B and GPO accounts must be for the sameNDC (including package size) as for the drugs dispensedor administered. See HRSA Release No. 2013-1,Statutory Prohibition on Group Purchasing OrganizationParticipation (2/7/13)8

340B Primer: Calculating Ceiling Price 340B ceiling price average manufacturer price(AMP) minus unit rebate amount (URA)Special procedures for calculating 340B price fornew drugs: Manufacturers must estimate a new drug’s 340Bceiling price for the first 3 quarters that the drug is onthe marketAfter 3 quarters, manufacturers will have AMP andbest price data to calculate the ceiling price Penny prices –If URA exceeds AMP, then themanufacturer must charge a penny for the drug. SeeHRSA Release No. 2011-2, Clarification of PennyPricing Policy (11/21/11)9

340B Primer: Covered Entity Restrictions Medicaid billing procedures may need to be adjusted toavoid manufacturers giving duplicate discountsUse of 340B drugs limited to “patients” of CECEs must maintain auditable recordsPenalties applicable to CEs: Repay 340B discounts for diversion or duplicate discountviolations, with interest if violation is knowing andintentional Termination if violation is knowing, intentional, systematicand egregious Termination for GPO exclusion violation Criminal sanctions under Prescription Drug Marketing Act10

340B Primer: Contract Pharmacies HRSA recognized the difficulties facing 340B coveredentities that lack in-house pharmacies (11,000 as of late1996)In 1996, HRSA issued guidelines approving the use ofcontract pharmacies to dispense 340B drugs andrequiring manufacturers to offer 340B pricing on drugsdispensed by contract pharmacies to 340B-eligiblepatientsPatients may choose to obtain drugs from any pharmacy,not just the contract pharmacyThe covered entity must use a “ship to/bill to”arrangement so that drugs are purchased by the CE butsent to the contract pharmacy11

340B Primer: Contract Pharmacies (cont’d) The CE is responsible for the contract pharmacy’scompliance with 340B requirementsThe CE must self-certify to HRSA that the contractpharmacy arrangement meets 340B programrequirementsThe CE must submit information about the contractpharmacy for use in HRSA’s website databaseEffective April 5, 2010, the 340B contract pharmacyprogram was expanded such that CEs are no longerlimited to one contract pharmacy arrangement. See 75Fed. Reg. 10272 (3/5/10).Right of HRSA and manufacturers to audit CEs extendsto their contract pharmacy arrangements12

CE Restrictions: Duplicate Discounts CEs usually must change their Medicaid billing practicesfor 340B drugs but are not required by the governmentto change their billing practices for other payers With respect to Medicaid, 340B drugs are reimbursed atactual acquisition cost (AAC) when dispensed bypharmacies in the retail setting and billed on a fee-forservice (FFS) basis The sole reason that CEs must adjust their Medicaidbilling practices is to protect manufacturers from theduplicate discount problem13

CE Restrictions: Duplicate Discounts(cont’d)Step 1:Manufacturersells drug at340BdiscountCoveredEntityStep 5: Manufacturerpays rebate on 340BdrugManufacturerStep 4: Statesubmits rebaterequestStep 3: CE bills Medicaidfor 340B drugStateMedicaidAgencyMedicaid patientStep 2: 340B drugis dispensed toMedicaid patientSTEPS 1 AND 5 DUPLICATEDISCOUNT14

CE Restrictions: Duplicate Discounts (cont’d)OptionsCovered EntityProceduresState Medicaid ProceduresMedicaid Carve-In forRetail FFS DrugsBills state at AAC or reduced rateand submits pharmacy’s Medicaidbilling number to HRSA forposting on websiteUsing HRSA’s exclusion file, stateexcludes from rebate requests anyclaims paid under billing numberposted on HRSA websiteMedicaid Carve-Out forRetail FFS DrugsPurchases its Medicaid outpatientdrugs outside 340B program,withholds billing number fromHRSA website and bills Medicaidat regular non-340B ratesState includes CE’s claims in rebaterequest filesShared SavingsSame as carve-in option exceptentity and state enter intoalternative billing and paymentarrangementsPays based on shared savingsarrangement15

CE Restrictions: Anti-Diversion “A covered entity shall not resell or otherwise transfer the[340B-discounted] drug to a person who is not a patient ofthe entity.” PHSA 340B(a)(5)(B) HRSA has established a three-pronged test for evaluatingwhether an individual falls within the definition of a“patient.” 61 Fed. Reg. 55,156 (10/24/96) An individual is not a “patient” if the only service receivedfrom the CE is the dispensing of a drug or drugs forsubsequent self-administration or administration in thehome setting. 61 Fed. Reg. 55,156 (10/24/96)16

CE Restrictions: Anti-Diversion (cont’d)1. The CE has established a relationship with the individual, suchthat the covered entity maintains records of the individual’shealth care; and2. The individual receives health care services from a health careprofessional who is either employed by the covered entity orprovides health care under contractual or other arrangements(e.g. referral for consultation) such that responsibility for thecare provided remains with the covered entity; and3. The individual receives a health care service or range of servicesfrom the covered entity which is consistent with the service orrange of services for which grant funding or federally-qualifiedhealth center look-alike status has been provided to the entity.17

CE Restrictions: Anti-Diversion (cont’d) ADAP patients – an individual registered in a stateoperated or funded AIDS drug purchasing assistanceprogram receiving financial assistance under titleXXVI of the PHSA will be considered a “patient” ofthe covered entity for purposes of this definition if soregistered as eligible by the state programHospital patients Third prong of patient definition does not apply Purchase of 340B drugs for inpatient use or in violationof the orphan drug exclusion is considered diversion18

ACA: Medicaid Changes ACA extended Medicaid rebate program to drugs coveredby managed care organizations (MCOs) unless purchasedthrough 340B MCO drugs are not rebatable when purchased through340B program. SSA 1927(j) HRSA has clarified that the Medicaid exclusion file does notapply to MCO claims How 340B drugs are billed and reimbursed is generally amatter of private negotiation between the CE (or itspharmacy) and the MCO (or its pharmacy benefit manager) According to the HHS Office of Inspector General (OIG),states’ success at establishing systems to exclude 340BMCO claims from rebate requests has been mixed19

ACA: Integrity Provisions HHS must issue regulations to establish a formalalternative dispute resolution (ADR) process Current process is voluntary and outcomes are not legallybinding Must exhaust this process before proceeding to court Both manufacturers and CEs must use this process HRSA issued a proposed ADR regulation this summerand the comment period closed on October 11. 81 Fed.Reg. 53381 (8/12/16) HRSA received thirty-one comments20

ACA: Integrity Provisions (cont’d) HHS is also required to make 340B ceiling prices available toCEs and to develop a system for verifying the accuracy of 340Bprice calculations OPA posted on its website an update on a new pricing system“designed to calculate, verify and display 340B ceiling prices.” Verification – Manufacturers will upload their quarterlypricing data to validate their prices with the HRSA-verified 340Bceiling prices CE access to pricing – CEs will be assigned log-in credentialsto view 340B ceiling prices on a password-protected website In December 2015, OPA provided on its website a link to asample notification form for informing the government when340B prices are unavailable21

ACA: Integrity Provisions (cont’d) Manufacturers are subject to civil monetary penalties (CMPs)for “knowing and intentional” overcharges, and HRSA issuedthis year a final rule implementing this provision Delegates authority to the OIG to enforce Imposes up to 5,000 for each “instance of overcharging” which isdefined on a per-order basis Obligation to issue refunds for over-estimating 340B price for newdrugs no longer be conditioned on a request by CE82 Fed. Reg. 1210 (1/5/17) HRSA’s final rule also addressed what it means for anovercharge to be “knowing and intentional” when theovercharge is inadvertent or manufacturer acted on reasonableinterpretation of agency guidance. See 82 Fed. Reg. 1220-2222

ACA: Integrity Provisions (cont’d) HRSA also addressed two pricing issues in the final rule Penny pricing – ceiling price set at 0.01 if calculation of ceilingprice results in less than 0.01 New drugs – estimate ceiling using 340B discount off of WAC untilAMP is available Following the Trump Administration’s regulatory freeze, HRSAdelayed the effective date to May 22, 2017 and has solicited commentson whether the rule should be delayed further to October 1, 2017 HHS is also required to issue guidance on the refund process forovercharges Under the ACA, refunds are owed to CEs in the event of anovercharge, including when AMP and best price are restated23

ACA: Integrity Provisions (cont’d) Drug manufacturers must allocate drugs in shortsupply in a non-discriminatory manner HRSA advises manufacturers to develop a plan for nondiscriminatory, restricted distribution to all purchasers,including 340B providers Where feasible, manufacturers should notify OPA inwriting 4 weeks before implementation date Allocation plans are published on OPA website See HRSA Release No. 2011-1.1, Clarification of NonDiscrimination Policy (3/23/12)24

ACA: PPA Changes In August 2016, OMB approved an addendum to the PPA.See OMB Information Collection Request, Control No:0915-0327 (8/23/16)The addendum incorporates into the PPA twomanufacturer program integrity provisions passed underthe ACA: Manufacturers must make quarterly reports to HHS of 340Bceiling prices for covered outpatient drugs; and Manufacturers must offer covered entities the opportunityto purchase a drug at or below the ceiling price if the drug isavailable to another purchaser at any price. The addendum is available on the OPA website25

ACA: Recertification Focus of recertification is that CE information on OPAdatabase is accurate and up to dateTwo-step process in which CEs have to: Correct information for existing sites and/or decertify sitesthat no longer exist or use 340B drugs Certify that CE meets eight 340B compliance standards,including duty to disclose to OPA any material breach of a340B requirement New recertification forms have dropped the materialitylanguage but OPA website still directs CEs to reportmaterial violations26

ACA: Orphan Drug Exclusion “Orphan drugs” are excluded from scope of coveredoutpatient drugs subject to 340B discounts for newlyeligible rural and cancer hospitals “Orphan drugs” (1) are designed to treat rare diseases and conditionsthat affect fewer than 200,000 patients in the U.S. or, (2) if the disease or condition affects more than200,000 patients in the U.S., will produce sales that failto cover R&D costs Congress removed children’s hospital from the banpursuant to post-ACA legislation27

ACA: Orphan Drug Exclusion (cont’d) HRSA issued a regulation that would limit theprohibition "to uses for the rare disease or conditionfor which the orphan drug was designated.” 78 Fed.Reg. 44016 (7/23/13) The rule was enjoined as a result of a lawsuit byPhRMA. PhRMA v. HHS, 43 F.Supp.3d 28 (D.D.C.2014). HRSA issued the same policy as aninterpretive rule which was also overturned. PhRMAv. HHS, No. 14-1685, Mem. Op. (D.D.C. 10/14/15) OPA recently clarified on its website thatmanufacturers may voluntarily offer 340B prices onorphan drugs28

Bipartisan Budget Act of 2015: Sec 602 Applies the Medicaid additional rebate requirementto generic drugs Increases 340B discounts for generic drugs because the additional rebate will increase generic drugs’ URA,and 340B ceiling price AMP minus URA Additional 340B savings was included in budget scoreby Congressional Budget Office Generic drugs will be subject to penny pricing likebrand names29

Bipartisan Budget Act of 2015: Sec 603 Establishes “site-neutral” Medicare reimbursement tonew off-campus outpatient departments of a provider Effective January 1, 2017, off-campus facilities acquiredby a hospital after the budget bill’s date of enactment(11/2/15) will not be reimbursed by Medicare under thehospital outpatient payment system; they will continueto be paid based on their pre-acquisition status Recent hospital outpatient prospective payment finalrule contains language strongly suggesting that Section603 will not impact 340B hospitals and registration oftheir offsite clinics30

Medicaid Rulemaking: CoveredOutpatient Drugs Several parts of AMP rule address 340B program. 81 Fed.Reg. 5170 (2/1/16)States must file state plan amendments (SPAs) by June 30,2017 providing 340B-specific reimbursement policies basedon AAC Only applies to retail FFS drugs Does not apply to physician administered drugs nor to MedicaidMCO drugs All sales to CEs are exempt from best priceAcknowledges manufacturer obligation to refund CEs whenrestating AMP and/or best price, but clarified that this issuemust be addressed by HRSA31

Medicaid Rulemaking: Managed Care Medicaid managed care rule also addresses 340Bprogram. 81 Fed. Reg. 27498 (5/6/16)States have flexibility in identifying 340B MCO claims andexcluding such claims from their rebate requests CMS declined to establish a standardized process foridentifying 340B MCO claims CMS declined to affirm the obligation of states to avoidduplicate discounts involving 340B MCO claims. CMSopined that states, MCOs and CEs all have a role to play inavoiding duplicate discounts. CMS clarified that CEs may identify 340B MCO claimsdirectly with states rather than through MCOs. See, e.g.,billing arrangements in Oregon and Hawaii.32

Medicaid Rulemaking: Managed Care(cont’d) OIG published study in June analyzing state efforts to exclude340B drugs from Medicaid MCO rebate requests OIG found that, to identify 340B drug claims and correctlycollect rebates for MCO drugs, most states use methods thatidentify providers using 340B-purchased drugs. However, provider-level methods may not accurately identifyall individual 340B drug claims, creating a risk of duplicatediscounts and forgone rebates. By contrast, methods that operate at the claim level canimprove accuracy in identifying 340B drug claims, and thereby,help states correctly collect rebates OIG recommended that CMS require states to use claim-levelmethods to identify 340B claims, but CMS did not concur33

Medicaid Rulemaking: Evolving State340B Policies In response to AMP and MCO rules, states are focusing ontheir 340B billing and reimbursement policies Some states have pursued policies that are problematic forCEs Mandatory carve-out (e.g., DE) Mandatory carve-in and AAC reimbursement (e.g., CA, IL) Other states have adopted 340B-friendly solutions Claims-level carve-in model for retail FFS and MCO drugs(e.g., OR) Claims-level carve-in model for FFS physician administereddrugs (e.g., OK)34

ADR Proposed Rule: Comparison of CommentsADR ProposalPhRMABIOCovered EntitiesPreconditions forfinalizing ruleNo ADR process untilaudit guidelines,manufacturer refundprocess, ceiling price,civil monetarypenalties, and megaguidance are in placeNo ADR process untilceiling price,manufacturer refundprocess andstandardized CEidentification system isin placeNo preconditionsADR panelOne or threeadministrative lawjudges (ALJs); noHRSA representationor voting rightsOne ALJ or a panel ofALJs or, as a fallback,a panel of three nonALJs; no OPArepresentation orvoting rightsPanel of three non-ALJgovernment employeesdrawn from a roster ofseven; no OPA or PVPrepresentation or votingrightsConfidentialityStandards are neededto protect confidentialbusiness information;protective orders mustbe issuedSafeguards are neededto protect confidentialbusiness information;panelists should signnon-disclosureagreementsSafeguards are needed toprotect confidentialbusiness information;safeguards are needed tocomply with patientprivacy laws

ADR Proposed Rule: Comparison of Comments (cont’d)ADR ProposalPhRMABIOCovered EntitiesManufacturer claimspermittedCE eligibility claims (e.g.,GPO prohibition claims)should be allowed;manufacturer auditprerequisite can besatisfied by auditsperformed by othermanufacturersShould accommodatethe other kinds ofdisputes described inHRSA’s 1996 voluntaryADR guidelines;manufacturer auditprerequisite can besatisfied by auditsperformed by othermanufacturersShould only addressdiversion and duplicatediscount claims and shouldexclude Medicaid managedcare duplicate discountclaims; manufacturer auditprerequisite may not besatisfied by othermanufacturer auditsCE claims permittedNo second guessingaccuracy of prices inHRSA’s passwordprotected ceiling pricesystemNo access to underlyingprice reporting metrics,i.e., AMP or Best PriceShould accommodateclaims that ceiling pricesare based on incorrect datasuch as AMP or Best PriceThree year statute oflimitationsTolled while audit isbeing performedThree years begins whenaudit completed or otherkinds of extensions areneeded to accommodatelength of auditThree years begins on thedate of sale or payment atissue except manufacturerrestatements of AMP, BestPrice, etc.

ADR Proposed Rule: Comparison of Comments (cont’d)ADR ProposalPhRMABIOCovered EntitiesConsolidation ofclaimsCE claims must involvesubstantially the sameNDCs and quarters;manufacturer claims canbe based on the samepolicy or practice by CEand can be brought by atrade association orother agentCE and manufacturerclaims should beevaluated against thesame standard – whetherthe claims presentcommon questions of lawor fact and whetherconsolidation would bemore efficient andaddress fairness concernsCE claims should notrequire completecommonalty of NDCs;manufacturer claims mustbe based on the same factsand cannot be brought bytrade association or otheragentTime to respond toclaimSixty (60) days withextensionsAt least sixty (60) dayswith extensionsAt least forty five (45) dayswith extensionsInformationrequestsManufacturers shouldnot be responsible forobtaining informationfrom third parties andshould be allowed tosubmit their owninformation requestsManufacturers shouldnot be responsible forobtaining informationfrom third parties andADR panel should holdpreliminary hearing toestablish the scope ofdiscoveryManufacturers should beresponsible for obtaininginformation from thirdparties; CEs should beentitled to receive AMP andBest Price data ifconfidentiality is protected;ADR panel should holdbriefing on overcharge data

ADR Proposed Rule: Comparison of Comments (cont’d)ADR ProposalPhRMABIOCovered EntitiesDecision makingPanel should sharedraft report prior toissuing final decisionand a summary ofthe decision shouldbe publishedPanel should sharedraft report prior toissuing final decision;summary of decisionshould be publishedunless parties agreethat it should not bePanel should sharedraft report prior toissuing final decision;decision should beissued within sixmonths after briefingconcluded; HRSAshould seek publiccomment on whether topublish summaries ofdecisionsEnforcementHRSA should enforcedecision after givingnotice to affectedpartyHRSA should enforcedecisionHRSA should enforcedecision

HRSA Audit Update As of last month, HRSA audit reports posted: 51 audits for FY 201294 audits for FY 201399 audits for FY 2014200 audits for FY 2015182 audits for FY 20166 audits for FY 2017 To date, HRSA has conducted four manufactureraudits39

HRSA Audit Update (cont’d) In January 2016, OPA provided an update on its websiteannouncing changes to the audit process Discontinuance of public letter requirement Electronic submission of audit documents using emailaddress [email protected] Corrective action plans (CAPs) remain open untilsettlements have been finalized and CE submits letterattesting that corrective action is complete CEs must receive written confirmation from state Medicaidagencies that manufacturers were not subject to duplicatediscountsHRSA now provides CAP template to assist CEs withpreparing CAPs40

Mega-Guidance HRSA’s long-awaited 340B omnibus guidance wasissued in August 2015. 80 Fed. Reg. 52300 (8/28/15) Comments are posted at:!docketBrowser;rpp 50;po 0;dct PS;D HRSA-2015-0002 The Mega-Guidance addresses almost every aspect ofthe 340B program More than 1,200 comments were submitted HRSA transmitted the final Mega-Guidance to OMB onSeptember 1, 2016 for final approval, but withdrew theMega-Guidance on January 30, 201741

Mega-Guidance (cont’d) Program eligibility and registration Drugs eligible for purchase under 340B Termination and re-enrollmentRecertificationProhibition against group purchasing “Covered outpatient drug” definition would exclude bundledMedicaid drugsIndividuals eligible to receive 340B drugs New six-part patient definition proposal Duplicate discounts and the “presumed” carve-out ofOther CE requirements Medicaid managed care drugs by contract pharmaciesAuditable records42

Mega-Guidance (cont’d) Contract pharmaciesManufacturer responsibilities PPA Obligation to offer 340B prices and application to limiteddistribution networks Issuing refunds and credits to CEs Recertification Rebate option for ADAPsProgram integrity HRSA audits of CEs Manufacturer audits of CEs HRSA audits of manufacturers and wholesalers43

Mega-Guidance: CE Concerns Would significantly decrease volume of drugs that could bepurchased through 340B Prescriptions written in unregistered sites would be excluded For hospitals, guidance would disqualify (a) dischargeprescriptions, (b) infusions ordered outside hospital and (c)pre-admission drugs Drugs paid for by Medicaid in a bundled manner would bedisqualified Medicaid MCO drugs dispensed by contract pharmacieswould be “presumed” to be carved out Would significantly increase administrative burden Patient definition would require satisfying six tests ratherthan three Contract pharmacy registration and oversight44

Mega-Guidance: Manufacturer Concerns Does not go far enough in overseeing and controllinggrowth of contract pharmacies Notification of HRSA of limited distribution networksprior to implementation would be burdensome andunauthorized Would require calculation of refunds by NDC and wouldprohibit calculations based on other methods, e.g.,aggregate or net purchases or using de minimusthresholds Increased reporting standards would be burdensome45

SMART-D: Background The Center for Evidence-Based Policy (CEbP) atOregon Health & Science University recentlylaunched a three-year, three phase pilot programfunded by the Laura and John Arnold Foundation.The program’s purpose is: to strengthen the ability of Medicaid programs tomanage prescription drugs through alternativepayment methodologies, and to provide Medicaid leaders with opportunities toshape the national conversation on prescription druginnovation, access, and affordability46

SMART-D: Project Objectives1. Map the landscape of Medicaid drug purchasing2. Identify alternative payment options for states3. Work to increase patient access and improvehealth outcomes4. Identify specific opportunities to collaboratewith drug manufacturers5. Provide technical assistance and support tostates for implementation47

SMART-D: Website and Reports See Research and reports tab:1.Summary Report2.Legal Brief3.Economic Analysis4.APM Brief5.MED Policy Report48

SMART-D: Elements Needed to EstablishAlternative Payment Models and ValueBased Purchasing ArrangementsManufacturer APM Elements-adjustable pricingindication-specific pricingclosed formularyprior authorizationMedicaid best priceexemptionProvider VBP Elements- adjustable reimbursementrates- sole source contracting- prescription limits- adjustable patient costsharing49

SMART-D: Federal Impediments Medicaid Drug Rebate Program (MDRP) rebate calculation is statutorily fixed rebates are NDC-specific, not indication-specific states may not use closed formularies, althoughpreferred drug lists (PDLs) are allowed prescription limits are regulated Medicaid Non-MDRP AAC reimbursement for FFS retail drugs under AMPrule patient cost-sharing, anti-kickback, etc.50

SMART-D: State and ManufacturerOpportunities Pathway One – Supplemental Rebate Arrangements:Use of PDLs and prior authorization to negotiate supplementalrebates with manufacturers on FFS drugsPathway Two – MCO Contracting: State outsources toMCOs the task of negotiating supplemental rebatesPathway Three – MCO/340B Covered EntityPartnerships: Enter into APM rebate arrangements withmanufacturers and VBP arrangements with 340Bproviders/pharmacies for 340B drugs reimbursed by state’sMCOsPathway Four – Hospital-Dispensed CoveredOutpatient: Enter into manufacturer APM rebate andprovider VBP arrangements for covered outpatient drugsdispensed by hospitals and billed at no more than theirpurchasing costs51

SMART-D: State and ManufacturerOpportunities (cont’d) Pathway Five – Physician Administered Drugs That FallOutside “Covered Outpatient Drug” Definition: Enter intomanufacturer APM rebate and provider VBP arrangements for PADsthat fall outside “covered outpatient drug” definition Pathway Six – Section 1927 Alternative Benefit Plans:Establish closed formulary for drugs provided to Medicaid expansionpopulations that receive essential health benefits under AffordableCare Act Pathway Seven – Section 1115 Waiver: Seek to relax formularyrestrictions and other MDRP requirements in order to test new VBPmodels for prescription drugs and related services Pathway Eight – 340B with Innovative Care DeliveryModels: Work with CEs to implement innovative patient caredelivery models and shared savings arrangements leveraging 340Bdiscounted pricing52

Contact InformationBill von OehsenPrincipalPowers Pyles Sutter & Verville PC1501 M Street, NW 7th FloorWashington, DC 20005Direct Dial: (202) 872-6765Fax: (202) 785-1756E-mail: [email protected] M Street NW Seventh Floor Washington, DC 20005 202-466-655053

IDAHO REPUBLICANS PRESENT NEWHEALTH PLANAPMarch 14, 2017 at 2:03 pm By BILL DENTZERDraft legislation emerging in the Idaho House seeks to meet primary care shortages and cut costsacross the state health care system.Central to the proposal is the

Apr 06, 2017 · HRSA Audit Update Mega-Guidance Other 340B Developments SMART-D 3 . 340B Primer: Background 340B drug discount program requires pharmaceutical manufacturers participating in the Medicaid