October 18, 2010—The Department of Health and Human Services Office of Inspector General’s (OIG) says it will investigate next year whether the federal government is getting its fair share of 340B-related savings received by Medicare Part D drug benefit sponsors. It will also issue findings from a review already underway of state Medicaid policies and oversight activities related to 340B, including state actions to identify claims for 340B-purchased drugs.
The studies were among close to two dozen ongoing and new investigations related to 340B, Medicaid drug rebates and other federal drug pricing programs that OIG outlined in its work plan for 2011, which it released on Oct. 1. The Monitor will be looking closely at the issues raised by the OIG studies in coming months.
Focus on 340B Continues
The independent watchdog agency has been paying close attention to 340B for the past decade and its reports have had an impact on both litigation and policy making. Its findings, for example, were the impetus for the 340B price overcharging case now before the U.S. Supreme Court. They also spurred Congress to enhance the program’s integrity as part of health care reform this year.
Earlier this month, OIG announced that it would begin fining manufacturers up to $10,000 a day if they continued to miss quarterly and monthly deadlines for filing their drugs’ average manufacturer prices (AMPs) with federal regulators. The AMP benchmark is used to calculate 340B prices and Medicaid rebates and reimbursement. In its new work plan, OIG said it will begin examining the methods drug companies use to calculate pharmaceuticals’ AMPs and best prices (BPs) as well.
Highlights of the work plan include:
340B drug pricing in Medicare Part D. OIG will begin investigating whether Part D plan sponsors are including in the remuneration information that they provide to the Centers for Medicare and Medicaid Services (CMS) any savings received because their network pharmacies are part of the 340B program. It said it also will look into whether Part D sponsors are sharing any of their applicable 340-related savings with the federal government.
Review of Medicaid policies and oversight activities related to 340B entities. The office said it issue findings from a review it began in 2009 of states’ policies and oversight activities for reimbursements related to 340B. The report will also examine states’ activities to identify claims for 340B‐purchased drugs.
States’ collection of Medicaid rebates for physician‐administered drugs. OIG will review the extent to which state Medicaid agencies’ are collecting drug manufacturers’ rebates for physician‐administered drugs, as required by the Deficit Reduction Act (DRA) of 2005.
Recalculation of base-date AMPs. The office will examine manufacturers’ rationales and supporting data for changes to base-date AMPs and assess the impact of such changes on Medicaid rebates. Drug companies pay additional rebates for single‐source drugs based on the difference between AMPs and base-date AMPs adjusted for inflation.
Medicare Part D and Medicaid prescription drug prices. OIG will compare the prices (including discounts and rebates) paid by Part D plans and state Medicaid agencies for 200 high‐volume prescription drugs and assess the impact of any price discrepancies on the federal government and beneficiaries. The study was required by the new health care reform law.
Part D true out‐of‐pocket (TrOOP) costs. The office will look into whether Part D plan sponsors are tracking beneficiaries’ TrOOP costs accurately. Once a beneficiary’s annual personal costs reach a certain threshold, his or her cost sharing is capped and the plan’s catastrophic coverage kicks in. OIG said it will look specifically at how claims adjustments affect TrOOP.
Comparing Medicare Part B drug average sales prices (ASPs) to AMPs. Five years ago, the federal Medicare program began paying for most Part B drugs using a new methodology based on ASPs. Federal law requires OIG to periodically compare ASPs to AMPs for Part B drugs and to notify the HHS secretary when it finds that the ASP for a selected drug exceeds its AMP by a threshold of 5 percent.
Medicare payments for Part B outpatient drugs. OIG will begin reviewing whether Medicare payments for Part B outpatient drugs associated with a physician service are in accordance with Medicare requirements. The office notes that Medicare Part B covers outpatient drugs furnished “incident to” a physician’s service, provided that the drugs are not usually self‐administered by the patients who take them.
Dual eligibles’ access to drugs under Part D. The office will review the extent to which Part D drug formularies developed by plan sponsors include drugs commonly used by dual‐eligible beneficiaries (those who are enrolled in Medicaid but qualify for Part D prescription drug coverage). The Affordable Care Act requires OIG to conduct this review annually. The office will also compare the availability of drugs commonly used by dual‐eligible beneficiaries enrolled in plans that have premiums above the national average monthly bid amount to the availability under those plans that have premiums below that amount.
DRA’s impact on Medicaid rebates for authorized generic drugs. OIG will review required drug‐pricing and rebate data reported by drug manufacturers to state Medicaid agencies to determine the extent to which manufacturers are reporting pricing data and paying rebates for authorized generic drugs. Rebates to states from manufacturers are based in part on the difference between the AMP and BP of a drug. The DRA clarified the definition of BP to include “the lowest price available to any entity for any such drug that is sold under a new drug application.” CMS stated in its 2007 final rule on Medicaid prescription drugs that BP calculations must include the prices available to secondary manufacturers of authorized generic drugs. The change in definition has the potential to increase the amount of rebates due from single‐source drugs’ primary manufacturers. OIG will also determine to what extent Medicaid rebates have changed since the implementation of the DRA and whether the number of new authorized generics changed after the implementation of the DRA provisions.