Guidelines for Government Pricing and Programs Compliance

Regulatory Market Update

As always, if you have questions on any of the content found in this or other newsletters, please reach out to your IntegriChain Consulting Lead or and we would be happy to talk you through it.

In recent weeks, we’ve had customers ask about the “Compliance Program Guidance for Pharmaceutical Manufacturers.” Recommendations were provided by the HHS OIG in 2003 regarding 6 key elements to operate an effective compliance program and we thought we’d revisit this topic with some modern-day examples.

This article highlights those 6 elements and what you, as a pharma manufacturer, can do to support an effective government pricing compliance program.

6 Key Factors of Government Pricing Compliance

  • Policies and Standard Operating Procedures (SOP)
  • Dedicated Compliance Officer
  • Training and Education
  • Effective Lines of Communication
  • Audits/Assessments
  • Corrective Action and Preventive Measure

1. Policies and Standard Operating Procedures (SOP):

Part of an effective compliance program is maintaining policies and standard operating procedures about your business, which includes the areas of government price reporting and state price transparency reporting. It is important to ensure your organization has documented policies and SOPs for your employees to refer to and follow on a routine basis. The documentation should be shared widely throughout the organization as well.

2. Dedicated Compliance Officer:

With the authority to report to the CEO and Board of Directors, a Chief Compliance Officer (CCO) should be well-versed in government pricing and state price reporting transparency given the expansion of the rules and reporting requirements stretching further than the usual finance, legal, accounting, and market access areas. A CCO provides a responsible party for developing, operating, and monitoring the company’s corporate compliance program, including adherence to various government program regulations. 

3. Training and Education:

Training and education have been a large focus of the pharmaceutical drug industry in recent years and in part, the routine training and development provided to employees increase the awareness of and importance of government programs compliance. Manufacturers should consider providing government pricing training, state price transparency training, and educational programs on an annual basis to existing government pricing employees, as well as at the time of hire.

4. Effective Lines of Communication:

It is important to listen to your employees, as much as you listen to your customers. Having an open and effective line of communication is imperative to have an effective compliance program in government pricing where all employees have an effective line of communication with the CCO. However, the mechanisms to maintain an effective line of communication come in various shapes and sizes (e.g. hotlines, anonymous reporting systems, etc.). As an employee in the government pricing space, it is important to understand where the line of communications across market access, legal/compliance, finance, third-party providers (i.e. Cardinal SPS), and/or managed services providers (i.e. IntegriChain) are to maintain effective pricing compliance. 

5. Audits/Assessments:

To proactively identify errors/issues and take corrective action, manufacturers can routinely conduct internal or external audits or self-assessment exercises to evaluate the effectiveness of their continued compliance within the government programs. Oftentimes manufacturer’s corporate compliance teams incorporate a government pricing component into their routine audit/assessment plans – it is in the manufacturer’s best interest to conduct an audit/assessment at a minimum of 3-5 years or following system or regulatory changes.

We recommend working with your current audit and compliance departments to understand if your business area has an audit approaching.

6. Corrective Action and Preventive Measure:

A pharmaceutical manufacturer’s Chief Compliance Officer is encouraged to establish corrective action and preventive measures throughout their internal controls and processes applicable to business operations being performed around government pricing, as well as policies applicable to sales agents engaging in sales and marketing. Manufacturers should proactively maintain necessary improvements to their government pricing policies and standard operating procedures and establish disciplinary actions to hold individuals in the business accountable.  

As a pharmaceutical manufacturer, consider the following financial, operational and legal responsibilities to consider when maintaining and managing an effective compliance program:

  • Has your organization established policies and standard operating procedures (SOP)?
  • Have your GP policies, calculation methodologies and assumptions been reviewed against current industry changes/regulatory updates?
  • When was the last time training and development programs were offered for government pricing?
  • Has the training and development been performed based on recent regulatory updates and industry trends in Government Pricing?
  • Has your organization conducted routine, periodic audits or assessments of government pricing compliance in the past three years?

Learn more about how Intergrichain helps pharmaceutical manufacturers navigate Government Pricing.

Source: Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers 

State Price Transparency (SPTR) Update

Nevada State Price Transperancy

The state of Nevada has dropped Asthma drugs from their “Asthma and Diabetes” reporting requirements. They are now only seeking pricing information for listed diabetes drugs. Manufacturers of Asthma drugs can breathe a sigh of relief due to these reduced reporting requirements.

They also introduced a requirement for the state to compile a list of prescription drugs with a wholesale acquisition cost (WAC) exceeding $40 for a course of therapy that have been subject to an increase in the wholesale acquisition cost of a percentage equal to or greater than:

  • Ten percent during the immediately preceding calendar year; or
  • Twenty percent during the immediately preceding 2 calendar years.

Manufacturers will be required to submit these price increases along with the diabetes filing by April 1 each year.

Source: Nevada Senate Bill No. 380–Committee on Health and Human Services

North Dakota State Price Transparency

The state of North Dakota has thrown its hat in the ring as the latest state to require new pricing transparency reporting. Similar to most states, they will require reporting in the three following areas. Their adherence to existing requirements from other states will make this a relatively easy lift for existing reporting manufacturers:

  • Quarterly Wholesale Acquisition Cost (WAC) reporting 15 days after quarter-end)
  • Disclosure of certain information upon a drug WAC price increase within 30 days of increase of >40% over past 5 years
  • Notification when introducing a new drug with a WAC that exceeds Medi D specialty pricing thresholds

No date has been given for when the website portal will be available, or when the first required period will happen. IntegriChain is already working to develop the templates needed for swift reporting once the portal and dates are known.

Source: Legislative Assembly of North Dakota House Bill No. 1032

Medicare Part D Updates and Reminders

Specialty Threshold Change

CMS has passed legislation that allows the Medicare Part D threshold, currently $670 for a 30-day supply, to increase annually to allow it to continue to reflect the top 1% of drug prices. The new methodology resulted in a 2021 threshold of $780, though CMS decided not to increase it in 2021. The amendment also changed how the price of a given drug will be calculated.

  • It is now based on ingredient cost for a 30-day supply of the drug (as reported to CMS in prescription drug event records), as opposed to the negotiated price of the drug
  • This could have a big impact on manufacturers with high-priced, low-cost drugs.

Reminder for 2023 Bid Year

PBMs, on behalf of MAPD and PDP plan sponsors, will be sending out requests for pricing as early as 4Q2021. Now is the time to start discussing strategies and contract terms in anticipation of these requests. Many of these requests have extremely short timelines. Also, in advance of the bid cycle, this presents a great time to monitor contract performance and re-visit contract guidelines.

Specific VA FSS Rules Related to Vaccine Drugs  

In 2004, the VA OIG published a Dear Manufacturers letter outlining the requirements for companies to report annual non-FAMP calculations for covered drugs. We are re-sharing this information in order to provide companies with guidance on complying with the 2020 annual non-FAMP reporting requirements (for 2021 FCPs) under Public Law 102-585, Section 603. 

Has your company been taking advantage of all the nuances afforded to manufacturers of influenza vaccines when it comes to your FSS contract and administration?

Elimination of Temporary FCP

Flu vaccine manufacturers shall, after the deadline for taking pre-booked orders and before any government orders are invoiced, review all pre-booked orders. Manufacturers shall then reduce the provisional FCP to the “Big Four” flu vaccine orders to the lowest pre-booked commercial price (if that price was lower than the provisional FCP (>24% discount))

  • Having a calculation starting point of WAC, rather than provisional NFAMP, for the “temporary” NFAMP; allows vaccine manufacturers to have a slightly higher price for this period of NFAMP/FCP.

Orders on a single year commercial contract with terms materially different from the government’s may be excluded if, after negotiations, the VA Contracting Officer (CO) agrees

  • This allows vaccine manufacturers to not artificially lower their FCP by not needing to acknowledge and report deep discounts that the VA can not match or support

Elimination of Tracking Customer: Because the flu vaccine is a seasonal product, manufacturers do not have to establish an FSS tracking customer for the product.

  • Reduces the administrative burden of monitoring tracking customers

Source: VA OIG March 31, 2004 Dear Manufacturers Letter

About the Author

Ben Fanelli

Ben Fanelli

Director, Operational Consulting

Ben Fanelli is a Director with IntegriChain’s Advisory Services service line. Ben's unique experience combines assisting Life Science companies with regulatory and compliance matters, along with years of experience within the pharmaceutical industry itself, at a New Jersey manufacturer. He brings extensive experience in leading both pre-commercial and steady-state projects with a specific focus on Government Pricing, State Pricing Transparency Reporting, and Calculation Architecture.