Roundtable: Deficit Reduction Act - Pharmaceutical Executive


Roundtable: Deficit Reduction Act

Pharmaceutical Executive

Stephen Zocchi Model N
SHRIGLEY: OIG always looked at the use of multiple prices as a disconnect. In other words, you base your reimbursement on average wholesale price. But you pay the rebate based on average manufacturer price. There's really no relationship there.

CLINTON: One of the goals of the DRA legislation is to standardize the reporting of pricing. But there's nothing in the law, or in the guidelines, that actually gives you the tools to standardize pricing, even if you wanted to.

ZANT: The existing guidances don't set steadfast guidelines for what the calculations mean. And they're not simple. At even the simplest level, you're taking sales in and out of the calculation, you're considering customers or not considering them. There are so many dynamics that haven't been well defined.

STEPHEN ZOCCHI (VICE PRESIDENT OF MARKETING, MODEL N): Coming back to the question of what [DRA] means to the manufacturers, it's not only the issue of the management of the program and aligning the rebates and the reimbursement pieces, but then what is the impact on business practices that have developed over the years?

For example, many companies have made use of authorized generics. Now, DRA has provisions that may cause companies to ask, "Well, is this the right approach for doing business going forward?" I think DRA will have a spillover effect on the commercial business of a pharmaceutical manufacturer, as well.


CLINTON: What type of financial impact will DRA have on the industry?

JOEL WINTERTON (OWNER, SET ENTERPRISES): Over the next 10 years, Medicaid will spend about $3 trillion, of which about 15 percent goes for drugs. The Congressional Budget Office estimates they're going to save $12.6 billion over the next 10 years through DRA—and basically all the savings will come from the pharmaceutical side.

CLINTON: So a billion plus per year?

WINTERTON: Roughly. It's going to start slower and then ramp up.

Joel Winterton SET Enterprises
ZANT: It's not an enormous financial impact, but it continues a trend that requires companies to change processes, systems, and the way they behave with regulators and their customers—and that means significant expenditures to stay compliant with the continuously changing legislation.

HEPBURN: It's a critical step for CMS. DRA requires them to clarify the definition of AMP by July 1 of next year. That's something they haven't accomplished in the 16 years since the Medicaid legislation went into effect. We'll see how good a job they do.

WINTERTON: Not only that—it's a moving target. Whatever CMS defines in July will potentially be different in 2009. And the industry keeps changing.

HEPBURN: Another issue I see with the DRA is that a number of the provisions are effective January 1, such as the changes to the way prompt-pay discounts are treated and the provisions for authorized generics. But the broader clarification of AMP is not due until July 1. We see that as an issue: having to adjust systems to hit January, then having to adjust systems again.

SHRIGLEY: The legislation required the Inspector General to do an audit and make recommendations on what AMP should look like. I don't know if you've seen the report.

CLINTON: It was discouraging, I thought. It basically said, "OK, everyone does this a different way."


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