What Keeps You Up at Night?

Specialty Pharmacy TimesAugust 2012
Volume 3
Issue 4

Our new department focuses on the issues that the industry faces as it is held to very high standards of compliance with minimal guidance. So what are the rules to be in compliance?

Our new department focuses on the issues that the industry faces as it is held to very high standards of compliance with minimal guidance. So what are the rules to be in compliance?

The federal government attaches very high importance to Government Program Compliance and “Program Integrity.” What keeps manufacturers up at night is the fact that there is a very high level of scrutiny and focus on Program Integrity, the required calculations are very technical and complex, and yet there are few rules that tell companies what to do to be in compliance. A perfect example is the calculation of Medicaid Average Manufacturer Price (AMP).

As discussed in the Specialty Pharmacy Times article, “Average Manufacturer Price: Pharmacy Reimbursement Under the Microscope” (June 2012), AMP is a hot topic right now. It is out there looming as the key metric for Federal Upper Limit, possibly as soon as 2013. But AMP has been around since 1990, used by drug manufacturers for the calculation of their Medicaid rebates to the states. Using it for this completely different purpose certainly raised its visibility, but it also peaked interest in many people outside of the manufacturing community on how it actually works and may work under the CMS Proposed Rule. And, simply stated, there are no rules for how to calculate it.

So while the industry is held to a very high standard of compliance, there is minimal guidance to specifically tell us what to do. Sounds strange, doesn’t it? It is no fault of the agencies that run the programs. In the case of the Medicaid program, we experienced significant legislative changes with the Patient Protection and Affordable Care Act which redefined AMP. The Centers for Medicare & Medicaid Services (CMS) had no choice but to remove the existing rules—and is in the process of replacing them—while at the same time having a tremendous amount of scrutiny on the process across the industry.

In the meantime, manufacturers are still expected to calculate and report AMP, and to get it right. Various agencies have an administrative function in running compliance programs and promulgating guidance, such as CMS for Medicaid and the Office of Pharmacy Affairs for the Public Health Program program. However, the Office of Inspector General (OIG) has the broad mandate of oversight with its stated mission to “protect the integrity of the programs.” Therefore, at CIS we largely use the OIG as our standard of GP compliance.

The OIG has a significant history of GP compliance, starting with its landmark document in 2003, “Compliance Program Guidance for Pharmaceutical Manufacturers,” (http://oig.hhs.gov/authorities/docs/03/050503FRCPGPharmac.pdf) in which it defined 3 key risk areas and also developed an outline of a compliance program. One of the key risk areas related directly to Medicaid and other Program Integrity, focusing on the accuracy of data that manufacturers submit to the government and the integrity of the government’s price for drugs under the various programs. The OIG has subsequently established the False Claims Act (FCA) as a key legal principle in this area, so that if a manufacturer submits data to the government that cause the government to pay more than it should for drugs, it can result in a possible FCA action, regardless of any intent of wrongdoing. Manufacturers are clearly expected to make sure they are getting it right.

The OIG has fulfilled its mission through audit and investigation activity, and publishes an annual work plan (http://oig.hhs.gov/reports-and-publications/workplan/index.asp) that outlines its focus. It also works very collaboratively with the Department of Justice and the states (through state attorney generals as well as National Association of Medical Fraud Control Units) in their audit and investigative activity. The OIG’s focus on Program Integrity has been reinforced through certification requirements, requiring C-Level certification by the manufacturers on the accuracy of their Medicaid and Medicaid Average Sales Price calculations.

Government programs, such as Medicaid, Medicare, and the PHS programs are growing. This trend will continue with an aging population and with the expansion of Medicaid. As more Americans receive some drug benefit through a government program, scrutiny on these programs will increase.

The drug manufacturers have an acute awareness of Program Integrity and establish policies, procedures, and systems to ensure that they are getting it right. A key challenge these days is trying to understand “the rules”—and then having sufficient expertise and systems in place to get the data and do the math right. In the government’s eyes, wrong is wrong, regardless of intent. This creates a significant compliance and operational burden on the manufacturer.

Now, wouldn’t that keep you up at night?

Government Program Compliance CIS works with over 100 pharmaceutical manufacturers, as well as the agencies that run the Government Programs (GPs). CIS helps clients develop GP compliance largely by understanding the rules and ensuring that the data submitted to determine “government price” are accurate. This article is the first in a series entitled “Compliance Corner—What Keeps You Up At Night,” focused on the subject of GP compliance from the manufacturer perspective. The objective of the series is to raise awareness about compliance challenges across the industry and the unique operational challenges of manufacturers.

Chris Cobourn is senior vice president of commercial business strategy at Compliance Implementation Services. He blogs at www.pharmacomplianceblog.com.

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