Medicaid: Basic Drug Rebate Percentage Change

Single source ("S") and innovator multiple source ("I") drugs – basic rebate increases from 15.1% of Average Manufacturer Price ("AMP") to 23.1% of AMP.

Same as H.R. 3590.

Notwithstanding above, for clotting factor with separate furnishing fee – basic rebate increases to 17.1% of AMP.

No corresponding provision. Therefore, clotting factor would be subject to 23.1% basic rebate.

Notwithstanding above, for clotting factor and for "S" or "I" drugs approved exclusively for pediatric indications – basic rebate increases to 17.1 % of AMP.

No corresponding provision. Therefore, S or I products with exclusively pediatric indications would be subject to 23.1% basic rebate.

Noninnovator multiple source ("N") drugs – rebate increases from 11% of AMP to 13% of AMP.

No corresponding provision. Therefore, N products would continue to be subject to 11% rebates.

No corresponding provision.

Federal government would "recapture" difference between 15.1% and 23.1% basic rebate.

All changes effective for covered outpatient drugs dispensed after December 31, 2009.

Same as H.R. 3590.

Medicaid: Medicaid Managed Care Organization Rebates

Manufacturers' obligation to pay rebates to States extended to utilization reported by Medicaid Managed Care Organizations to States (unless dispensed by 340B Covered Entity). Effective with respect to covered outpatient drugs dispensed on or after January 1, 2010.

Generally the same as H.R. 3590.

Medicaid: Additional Rebate for New Formulations of Existing Drugs

Similar to H.R. 3962, but not limited to oral solid dosage forms. Also, H.R. 3590 provides that the changes are not applicable to orphan drugs.

For a line extension of an S or I drug that is an oral solid dosage form, additional rebate equals the greater of the additional rebate calculated under historic formula, or the product of: (AMP of the line extension X highest additional rebate calculated as a percentage of AMP for any strength of the original S or I drug X total invoiced units for line extension). "Line extension" is a new formulation, such as an extended release product. Effective for covered outpatient drugs dispensed after December 31, 2009.

Medicaid: Maximum Rebate

Capped at 100% of AMP for the quarter. Effective for covered outpatient drugs dispensed after December 31, 2009.

No corresponding provision.

Medicaid: Excludable Drugs

Removes smoking cessation drugs, barbiturates, and benzodiazepines form the Medicaid "excludable" drug list, effective with respect to services provided on or after January 1, 2014.

No corresponding provision.

Medicaid: Changes to Definition of AMP

Redefines AMP as the average price paid to the manufacturer for the covered outpatient drug in the United States by:

(i) wholesalers for drugs distributed to retail community pharmacies; and

(ii) retail community pharmacies that purchase drugs directly from the manufacturer.

Would require that AMP include "any other discounts, rebates, payments, or other financial transactions that are received by, paid by, or passed through to, retail community pharmacies."

Defines "retail community pharmacy" as "an independent pharmacy, a chain pharmacy, a supermarket pharmacy, or a mass merchandiser pharmacy that is licensed as a pharmacy by the State and that dispenses medications to the general public at retail prices. Such term does not include a pharmacy that dispenses prescription medications to patients primarily through the mail, nursing home pharmacies, long-term care facility pharmacies, hospital pharmacies, clinics, charitable or not-for-profit pharmacies, government pharmacies, or pharmacy benefit managers"

Defines "wholesaler" as "a drug wholesaler that is engaged in wholesale distribution of prescription drugs to retail community pharmacies, including (but not limited to) manufacturers, repackers, distributors, own-label distributors, private-label distributors, jobbers, brokers, warehouses (including manufacturer's and distributor's warehouses) independent wholesale drug traders, and retail community pharmacies that conduct wholesale distributions."

No corresponding provision.

Requires that AMP "exclude":

(i) customary prompt pay discounts extended to wholesalers;

(ii) bona fide service fees paid by manufacturers to wholesalers or retail community pharmacies, including (but not limited to) distribution service fees, inventory management fees, product stocking allowances, and fees associated with administrative services agreements and patient care programs (such as medication compliance programs and patient education programs);

(iii) reimbursement by manufacturers for recalled, damaged, expired, or otherwise unsalable returned goods, including (but not limited to) reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction; and

(iv) payments received from, and rebates or discounts provided to, pharmacy benefit managers, managed care organizations, health maintenance organizations, insurers, hospitals, clinics, mail order pharmacies, long term care providers, manufacturers, or any other entity that does not conduct business as a wholesaler or a retail community pharmacy.

Requires that AMP be determined "without regard to":

(i) customary prompt pay discounts extended to wholesalers;

(ii) bona fide service fees paid by manufacturers;

(iii) reimbursement by manufacturers for recalled, damaged, expired, or otherwise unsalable returned goods, including reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction;

(iv) sales directly to, or rebates, discounts, or other price concessions provided to, pharmacy benefit managers, managed care organizations, health maintenance organizations, insurers, mail order pharmacies that are not open to all members of the public, or long term care providers, provided that these rebates, discounts, or price concessions are not passed through to retail pharmacies;

(v) sales directly to, or rebates, discounts, or other price concessions provided to, hospitals, clinics, and physicians, unless the drug is an inhalation, infusion, or injectable drug, or unless the Secretary determines, as allowed for in Agency administrative procedures, that it is necessary to include such sales, rebates, discounts, and price concessions in order to obtain an accurate AMP for the drug. Such a determination shall not be subject to judicial review; or

(vi) rebates, discounts, and other price concessions required to be provided under agreements under [Medicare Part D – See Below].

Effective the first day of the first full calendar quarter beginning 180 days after enactment of H.R. 3590 into law, with or without regulations.

No specific effective date. The corresponding federal upper payment limit ("FUL") changes become effective January 1, 2011, but it is not clear whether this date also applies to AMP definitional changes. The U.S. Department of Health and Human Services ("HHS") Secretary is authorized to promulgate rules to "clarify" AMP, that may become effective on an interim basis.

Medicaid: Changes to Definition of Best Price

Would exclude discounts offered under the Medicare coverage gap discount program (see below) from Best Price.

No corresponding provision.

Medicaid: AMP Units Reporting

No corresponding provision.

Requires monthly reporting of units associated with AMP calculation.

Public Disclosure of AMP and Retail Survey Price Information

Modifies public AMP disclosure provision to require disclosure of "weighted average" of most recent monthly AMPs. Also requires public disclosure of "average retail survey price" for multiple source drugs. Modifies definition of "retail survey price" (added by the Deficit Reduction Act of 2005) to be based on community retail pharmacies.

Modifies public AMP disclosure provision to require disclosure of "weighted average" AMPs.

Medicaid: Federal Upper Limit ("FUL") Changes

Eliminates requirement that there be "two or more" therapeutically and pharmaceutically equivalent multiple source products to trigger FUL application (thus reverting to pre-Deficit Reduction Act requirement that there be "three or more" such products).

No corresponding provision.

FUL shall be "no less than" 175% of weighted average (based on utilization) of most recently reported monthly AMPs for pharmaceutically and therapeutically equivalent multiple source drug products that are available for purchase by retail community pharmacies on a nationwide basis. Secretary shall implement AMP "smoothing" process.

FUL shall be 130% of weighted average (based on utilization) of monthly AMPs. Secretary not prohibited from implementing AMP "smoothing" process.

340B:

Elimination of "Freeze in Time" Provision

Deletes the so-called "freeze in time" provision from Section 340B (which currently provides that "any reference in [Section 340B] to a provision of the Social Security Act [42 U.S.C. 301 et seq.] shall be deemed to be a reference to the provision as in effect on November 4, 1992). However, does not include conforming amendment to revise similar provision in the Medicaid Drug Rebate Statute.

Same, but also includes conforming amendment to similar provision in Medicaid Drug Rebate Statute.

No corresponding provision.

Deletes the 340B subsection that currently provides that a manufacturer may be "deemed" to meet the 340B requirements if compliant with the 340B provisions in effect immediately after November 4, 1992. However, does not include conforming amendment to revise similar provision in the Medicaid Drug Rebate Statute.

340B: Expansion of Drug Discount Program Eligibility

Expands 340B eligibility to inpatient drugs.

Defines "covered drug" to mean a "covered outpatient drug" as defined in the Medicaid Drug Rebate Statute, including a drug used in connection with an outpatient or inpatient service provided by a hospital.

No corresponding provision.

Expands 340B eligibility to the following new[1] classes of covered entities:

(i) Certain children's hospitals and free standing cancer hospitals;

(ii) Critical access hospitals; and

(iii) Rural referral centers, or sole community hospitals with DSH adjustment ≥ 8%.

Effective as of January 1, 2010, and applicable to drugs "purchased" on or after such date.

Expands 340B eligibility to the following new classes of covered entities:

(i) Certain children's hospitals and free standing cancer hospitals;

(ii) Critical access hospitals;

(iii) Entities receiving Maternal and Child Services funds for the provision of health care;

(iv) Entities receiving Comprehensive Mental Health Services funds for the provision of community mental health services;

(v) Certain entities receiving federal funds for the prevention and treatment of substance abuse;

(vi) Certain Medicare-dependent, small rural hospitals; and

(vii) Certain Medicare-dependent, small rural referral centers.

Effective as of the date of enactment, and applicable to drugs "dispensed" on or after such date.

340B Drug Discount Program: GPO Provisions

Prohibits hospital covered entities from obtaining 340B-discounted products for outpatient use through a group purchasing organization ("GPO"). However, the HHS Secretary is directed to establish significant exceptions to this prohibition, including: shortage, facilitation of generic substitution (where generic is cheaper), to "reduce in other ways the administrative burdens of managing both inventories of drugs subject to this section and inventories of drugs that are not subject to this section," so long as no Medicaid duplicate discount or diversion problem is created.

Notably, the GPO prohibition does not apply to inpatient purchases. Rather, the HHS Secretary is required to "ensure" that a hospital covered entity "shall have multiple options for purchasing covered drugs for inpatients."

Effective as of January 1, 2010, and applicable to drugs "purchased" on or after such date.

Prohibits hospital covered entities from obtaining 340B-discounted products through a GPO.[2]

Effective as of the date of enactment, and applicable to drugs "dispensed" on or after such date.

340B Drug Discount Program: Medicaid Credit

Requires hospital covered entities to issue credits to the "State Medicaid program for inpatient drugs provided to Medicaid recipients" no later than 90 days after filing Medicare cost reports.

Effective as of January 1, 2010, and applicable to drugs "purchased" on or after such date.

No corresponding provision.

340B Drug Discount Program: Manufacturer Integrity

Provisions

Directs the HHS Secretary to establish a number of "integrity" provisions, including, but not limited to the following:

HHS Secretary to establish a "system" to improve manufacturer compliance, that will:

(i) verify accuracy of ceiling prices calculated and charged by manufacturers;

(ii) require manufacturers to refund overcharges to covered entities, "both in routine instances of retroactive adjustment to relevant pricing data and exceptional circumstances such as erroneous or intentional overcharging for covered drugs";

(iii) permit secure Internet access by covered entities and State Medicaid programs to the ceiling prices.

Directs the HHS Secretary to establish a number of "integrity" provisions, including, but not limited to the following:

HHS Secretary to establish a "process" to improve manufacturer compliance, that will:

(i) verify accuracy of ceiling prices calculated and charged by manufacturers;

(ii) require manufacturers to refund overcharges identified by the Secretary to covered entities;

(iii) permit secure Internet access by covered entities and State Medicaid programs to the ceiling prices.

Additionally, HHS Secretary is required to develop a mechanism by which "(I) rebates and other discounts provided by manufacturers to other purchasers subsequent to the sale of covered drugs to covered entities are reported to the Secretary; and (II) appropriate credits and refunds are issued to covered entities if such discounts or rebates have the effect of lowering the applicable ceiling price for the relevant quarter for the drugs involved."

Generally the same, but also includes "other price concessions."

Selective auditing of manufacturers and wholesalers.

Generally the same. Audits may include "audits on the market price of covered drugs."

No corresponding provision.

Requires manufacturers and wholesalers to use the identification system developed by the HHS Secretary for purposes of facilitating the ordering, purchasing, and delivery of covered drugs under Section 340B.

Authorizes civil monetary penalties ("CMPs") against manufacturers up to $5000 per instance of "knowingly and intentionally" overcharging a covered entity "that may have occurred." HHS Secretary is required to promulgate regulations within 180 days of enactment.

Authorizes CMPs against manufacturers up to $100,000 per instance of "knowingly" overcharging a covered entity, as well as a knowing violation of other 340B provisions and withholding or providing false information to the HHS Secretary or covered entities under 340B. HHS Secretary is required to promulgate regulations within one year of enactment.

340B Drug Discount Program: Covered Entity Integrity

Provisions

Directs the HHS Secretary to establish a number of "integrity" provisions, including, but not limited to the following:

(i) developing procedures to enable and require covered entities to regularly update (at least annually) the information on the HHS website;

(ii) developing a system for the HHS Secretary to verify the accuracy of information regarding covered entities that is listed on the HHS website;

(iii) developing more detailed guidance describing methodologies and options available to covered entities for billing covered drugs to State Medicaid agencies in a manner that avoids duplicate discounts; and

(iv) establishing a single, universal, and standardized identification system by which each covered entity site can be identified by manufacturers, distributors, covered entities, and HHS for purposes of facilitating the ordering, purchasing and delivery of covered drugs (including chargeback processing).

Generally the same.

Authorizes sanctions, in appropriate cases as determined by the Secretary, in addition to repayment of the discount amount, including:

(i) an interest penalty to manufacturers in the event a covered entity knowingly and intentionally violates the anti-diversion provision;

(ii) removal of the covered entity from the 340B program (and disqualification from re-entry into the program for a period of time), where the violation is systematic and egregious, as well as knowing and intentional; and

(iii) referral of matters to authorities such as the FDA, OIG or other agencies.

Authorizes sanctions, in addition to repayment of the discount amount, including:

(i) CMPs up to $5000 per "knowing" violation of the anti-diversion or other 340B provision;

(ii) exclusion of a covered entity from the 340B program where the HHS Secretary determines the violation was "repeated and knowing" and that "imposition of a monetary penalty would be insufficient to reasonably ensure compliance"; and

(iii) referral of matters to authorities such as the FDA, OIG or other agencies.

Requires the HHS Secretary to establish a binding administrative dispute resolution process.

Among other things, the HHS Secretary, through rulemaking, shall "establish procedures by which a covered entity may discover and obtain such information and documents form manufacturers and third parties as may be relevant to demonstrate the merits of a claim that charges have exceeded the applicable ceiling price under [Section 340B] and may submit such documents and information to the administrative official or body responsible for adjudicating such claim."

Permits the HHS Secretary to establish an administrative dispute resolution process.

No corresponding provision.

340B Drug Discount Program: Appropriations

Funds are appropriated beginning in fiscal year 2010, and for each succeeding year, to carry out the 340B integrity provisions.

Funds are appropriated beginning in fiscal year 2011, and for each succeeding year, to carry out the 340B integrity provisions.

340B Drug Discount Program: Ceiling Price Reports

Requires quarterly reporting by manufacturers of ceiling prices to HHS.

Same.

340B Drug Discount Program: "Must Sell" Provision

Participating manufacturers will be required to "offer each covered entity covered drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price."

Similar provision. However, "if the supply of a covered drug is insufficient to meet demand, then the manufacturer may utilize an allocation method that is reported in writing to the Secretary and does not discriminate on the basis of the price paid by covered entities or on any other basis related to an entity's participation in the program under this section."

340B Drug Discount Program: GAO Report

Within 18 months of enactment, the Comptroller General shall submit to Congress a report examining whether individuals served by the covered entities are receiving optimal health care services.

No corresponding provision.

Medicare Part D: Coverage Gap Discounts

Establishes the Medicare Coverage Gap Discount Program, effective with respect to costs incurred on or after July 1, 2010. The program would eventually operate as a point-of-sale discount to non-Low Income Subsidy beneficiaries on "applicable drugs" during the "donut hole." By April 1, 2010, the HHS Secretary shall establish a model agreement, in consultation with manufacturers, and subject to comments. "Applicable drugs" are generally those approved under an original new drug application ("NDA") or a biologic license application ("BLA") for which benefits are available under the plan.

H.R. 3590 provides that for 2010 and 2011, it may be necessary to make the discounts available "as soon as practicable after the point-of-sale." The program would apply to only "applicable drugs." The discount would not be applied until beneficiary's supplemental benefits, if any, have been applied.

Manufacturers would be required to enter an agreement with the HHS Secretary by May 1, 2010, in order for Medicare Part D coverage to be available for the period from July 1, 2010 through December 31, 2011. For coverage to be available in subsequent years, the manufacturers would need to enter an agreement with the Secretary by January 30 of the preceding year. The agreement will have an initial term of 18 months, renewable in 12-month increments, with limited manufacturer termination rights.

The "discounted price" means 50% of the "negotiated price of the applicable drug of a manufacturer," not including dispensing fees. As a practical matter, the "negotiated price" is determined on a plan-by-plan and provider-by-provider basis, as it generally represents the rate that the Part D plan has agreed to reimburse the pharmacy.

The Secretary shall contract with a third party to administer the program.

Similar to H.R. 3590. However, H.R. 3962 specifies that manufacturers would periodically pay the discount to PDP sponsors and MA organizations (with respect to MA-PDs). Also, H.R. 3962 does not make it clear that manufacturers will have the opportunity to comment on the agreement. Program begins January 1, 2010, as opposed to July 1, 2010. Program applies to "qualifying drugs" which are defined, generally, as drugs that are (or were) marketed under an original NDA, including cross-licensed products under the original NDA (e.g., authorized generics) or a BLA, for which benefits are available under the plan. H.R. 3962 only permits the non-point-of-sale administration transition for 2010.

Medicare Part D: Dual Eligible Rebates

No corresponding provision.

Would ultimately eliminate coverage gap. Effective for plan years beginning in 2010, initial coverage limit would increase by $500. Beginning in 2011, and culminating with plan year 2019, the coverage gap would be phased out. The phase out will be funded, in part, by manufacturer rebate dollars to be paid quarterly into a Medicare Prescription Drug Account.

Beginning with plan year 2011, manufacturers would be required to sign a rebate agreement with the HHS Secretary as a condition to having their products eligible for Part D coverage. Under the rebate agreement, manufacturers would rebate the plans directly, on a quarterly basis, based on plan-submitted utilization invoices.

Additionally, if a manufacturer does not sign a rebate agreement by December 31, 2010 for rebates applicable to January 1, 2010 through December 31, 2010, their products will not be eligible for 2011 Part D coverage.

The rebate, with respect to each dosage form and strength of covered Part D Drugs, will equal:

§ Total units dispensed to full benefit dual eligibles and low income subsidy ("LIS") eligibles, and reimbursed by Prescription Drug Plan sponsors under Part D or Medicare Advantage plans under Part C, multiplied by

§ The amount, if any, by which the Medicaid Drug Rebate exceeds the "average Medicare drug program rebate eligible rebate amount" across all sponsors.

The "average Medicare drug program rebate eligible rebate amount" is based on a complex calculation, that essentially is a dual eligible/LIS-volume weighted average of the manufacturer's Part D rebates.

Medicare Part D: Changes to Noninterference Provisions

No corresponding provision.

Current law provides that the HHS Secretary "may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors." Effective January 1, 2011, H.R. 3962 would delete this provision and replace it with a provision requiring the HHS Secretary to "negotiate with pharmaceutical manufacturers the prices (including discounts, rebates, and other price concessions) that may be charged to PDP sponsors and MA organizations for covered part D drugs for part D eligible individuals who are enrolled under a prescription drug plan or under an MA-PD plan."

H.R. 3962 would not authorize the Secretary to establish or require a particular formulary, nor prohibit plans from negotiating greater discounts. HHS would report to Congress by June 1, 2011 regarding the results of such negotiations.

"Public Option"

No directly corresponding provision, but we are continuing to evaluate the Senate version of the public option for implications on drug pricing and rebate issues.

Among other things, the HHS Secretary is required to "negotiate payment for the public health insurance option for health care providers and items and services, including prescription drugs." The Secretary may enter into "innovative" payment arrangements, including "value-based purchasing, bundling of services, differential payment rates, [and] performance or utilization based payments."

Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers

Establishes an annual fee to be paid by branded drug and biologic manufacturers and importers, beginning with 2010, based roughly on sales volume to (or covered by) specified government programs, to provide a cumulative $2.3 billion, to be paid into the Medicare Part B Trust Fund. Provides a limited exception for drugs approved for orphan indications.

No corresponding provision.