Roundtable: Deficit Reduction Act - Pharmaceutical Executive


Roundtable: Deficit Reduction Act

Pharmaceutical Executive

HEPBURN: There needs to be a single controlled list so manufacturers know "Can I offer this customer nine percent or 10 percent of AMP and exclude it from my best price?" And we need to ask: "Who is going to manage updates and changes to the list?"


CLINTON: Overall, how great are the compliance challenges of DRA?

SHRIGLEY: I think it pales in comparison to the problems with regard to AWP. That's the biggest change with regard to pharmaceuticals that I've seen in 34 years in government. Best price has been the big compliance issue to date. But I think AWP is going to be bigger. I've seen a lot of big settlements on best price—$300, $400 million settlements. I don't recall one on AMP.

When I'm talking about compliance, I'm really talking about dollars. The smaller issues—the policies, the documentation, the procedural recommendations—are still compliance, but it's not that big a deal.

WINTERTON: There are two things to consider, if one wanted to take the devil's advocate position on Average Manufacturer's Price. As of July 1 2007, AMP is going to be more closely defined. So far with AMP, pharmaceutical companies have had a get-out-of-jail-free card, because CMS has provided so little guidance. You could have a lot of different AMPs out there and they could all be valid. As that narrows, there will be more boundaries in terms of what is acceptable and what's not.

The other side is this: So far, AMP has been used only for rebates. In today's dollars, that's about $10 billion a year.

The traditional ratio between rebates and reimbursements is five to one. So now the pharmaceutical industry is going into a situation where AMP is controlling not $10 billion, but $60 billion worth of Medicaid. If you did have a compliance problem with AMP going forward, it could be significant.

SHRIGLEY: You know, if we had a regulation that told the pharmaceutical manufacturers exactly how to treat PBM rebates or mail-order customers, or large retailers, they would do it. Probably 100 percent of manufacturers would do exactly what the regulation said. The problem is the gray areas.

CLINTON: I know that one big concern is the move toward filing monthly reports. What are the problems with filing at this frequency?

WINTERTON: It appears that companies are required to file both monthly and quarterly reports. The rebate remains quarterly-based and reimbursement becomes monthly-based. But unless you have some kind of smoothing process—which they haven't mentioned—you're going to have big variations in the monthly AMP, which would cause problems with reimbursement.

HEPBURN: One big problem is that we don't have the data. Even on a quarterly basis, we struggle to get proper discounted rebate data from our customers. They don't submit it.

Most large pharmaceutical companies close their books on a quarterly basis. That means we don't necessarily have all of the books closed in a way that lets us tie the payment data in our general ledger. Even from a validation perspective, how exactly would the industry conduct this process each month? We just don't have the answer.

CLINTON: How prompt are the retailers and wholesalers at getting the information back to you? How big is that class of "don't know"?

WINTERTON: There are two sides to your business, a purchase side and a non-purchase side. On the purchase side, you've pretty much got all the data in five, six, seven days, whether you sold it directly or through a wholesaler.


blog comments powered by Disqus

Source: Pharmaceutical Executive,
Click here