Regulatory Market Update

Updates for Pharma Manufacturers

As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or advisory@integrichain.com and we would be happy to talk you through it.

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Copay Court Case Update: Ruling in Favor of Manufacturers

On May 17, 2022, PhRMA’s motion for Summary Judgment in the case challenging the CMS final rule on copay and impact on Best Price (BP) was granted. This ruling vacates the accumulator adjustment rule that was finalized by CMS in the December 2020 Final Rule. This is a big victory for all pharmaceutical manufacturers that offer copay programs.

The first item in question for the proposed rule was whether a manufacturer’s financial assistance to a patient, whose insurance may have an accumulator adjustment program, should be included within the manufacturer’s  BP calculation. The court ruled that since patients are not BP eligible purchasers, the co-pay should not be included in the manufacturer’s BP calculation.

The court also determined that the accumulator adjustment rule would not make it feasible for manufacturers to report BP. In order for manufacturers to report BP, they would be required to conduct transactional investigations into accumulator adjustment programs provided by the PBMs. However, this is not feasible as Manufacturers do not have readily available access to the information provided by the PBMs (and in some cases, PBMs may not provide this information to Manufacturers). This would make it almost impossible for them to report BP within 30 days of the end of the quarter. 

As a result of the court ruling, Manufacturers are no longer required and subject to “ensuring” co-pay programs are passed onto the patient in entirety; however, manufacturers should still continue to document assumptions relative to this requirement as required by 42 CFR § 447.504(c)25 -(c) 29 & 42 CFR § 447.505(c)8-(c)10. 

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Medi-Cal Older Adult Expansion

On January 1, 2020, the initiative “Young Adult Expansion” was put into place in California that provided full-scope Medi-Cal to all eligible children under 26 years old regardless of their immigration status. Medi-Cal is California’s version of Medicaid, a federal-state partnership that provides health insurance for low-income residents. As of May 1, 2022, the “Older Adult Expansion” will make all unauthorized immigrants eligible for full coverage  Medi-Cal if the person is at least 50 years old and fall below the income threshold. The Young Adult Expansion provides health care for over 220,000 people and the Older Adult Expansion is expected to bring in an estimated 235,000 additional Medi-Cal members. It is plausible to believe that all remaining low-income unauthorized immigrants will be able to join Medi-Cal by 2024, which is an estimated 700,000 people.

The Older Adult Expansion will allow people who previously did not qualify for Full Medi-Cal to be able to receive more comprehensive coverage. Current law allows all unauthorized immigrants who meet the financial criteria to receive limited Medi-Cal coverage which primarily includes emergency and pregnancy services. Under the Full Medi-Cal, the patients receive primary care, prescription drugs, mental health care, dental, and eye care. If a person previously had the restricted scope Medi-Cal in May 2022 then they will automatically be transitioned to the full scope Medi-Cal. This initiative will increase healthcare costs due to hundreds of thousands of people now receiving healthcare. With more patients visiting doctors and hospitals there is an expectation that pharmaceutical drug companies will experience an increase in revenue. In addition, it is safe to say that with more of California’s population receiving healthcare there will be more people able to get the assistance they need to work efficiently and help struggling people/families experience financial security.

Medicaid is a big item in Gross-to-Net for a lot of companies and this change in Medi-Cal may increase future Medicaid liabilities. This issue is something that will be monitored, and you are more than welcome to reach out to us with any questions.

Sources:

California Opens Medicaid to Older Unauthorized Immigrants

Older Adult Expansion

ACA Medicaid Expansion Increases Young Adult Coverage, Health Equity

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Industry Update: New 3PL in Market

We have seen the Big 3 wholesalers enter the market with their own 3PL companies: ABC with ICS; Cardinal Health with Cardinal SPS and McKesson with RxCrossRoads. Now J. Knipper, a mid-level distributor, has entered the same market by expanding the services that are being provided by their current 3PL services to allow for pick, pack, and ship services. This provides opportunities for emerging pharmaceutical companies to consider a greater variety of options to choose from when determining who their 3PL will be. With J Knipper entering the 3PL market, this could be the start of a new wave for more of the mid-market distributors to start providing similar services and disrupting the existing 3PL market share. 

Source:

J. Knipper and Company Announces Expansion of Knipper 3PL Division 

Learn more about choosing a Third Party Logistics provider

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New Pharmacy Models Entering the Market: True Pill & Blink

The standard brick & mortar pharmacy model has been evolving over the past few decades. We have seen some of the large pharmacies, such as CVS, add clinic services, distribution services, specialty pharmacy services, and LTC services. We’ve written before about retail pharmacy’s recent digital transformation, as the concept of digital or online pharmacies has picked up steam within the last few years. These new models include more automated script/billing processes, patient support services, and direct-to-customer distribution models. Additionally, these online pharmacies are transforming and redefining the term widely known in the industry as a “mail-order” pharmacy. These new models may appear to be mail order but provide the same drug products to the general public as a retail pharmacy, which results in many questions arising in the world of Government Pricing (“GP”). Manufacturers who contract with these new pharmacy models should really understand how the business operates and work with their trusted GP advisor and Legal Counsel to determine how to best classify the customer for their GP reporting purposes. We focus below on a couple of newer players in this space – TruePill and Blink Health.

Truepill: Founded in 2016 is a pharmacy distribution and fulfillment center within the direct-to-consumer (DTC) market, taking advantage of technology and automation processing orders for other third parties. Truepill receives scripts from a few tele-doc service providers (such as Hims). The doctors contracted with these service companies send scripts through Truepill, which then processes and fulfills the patient’s orders and delivers them directly. Truepill offers both OTC and RX drugs through their fulfillment centers and partnerships with other companies.  

Blink Health: Founded in 2014 is an e-commerce pharmacy that provides an online ordering OTC/RX drug ordering platform with price matching in order to provide patients with access to the lowest price for their prescription drugs; however, within their model, the patient would either have the drug picked up at their local pharmacy or delivered to their home by their local pharmacy versus having it shipped directly from Blink. Blink’s model allows patients to access low-cost prescription drugs without having to go through their insurance carrier. Blink has partnered with Medimpact (a PBM) to obtain access to a larger pharmacy network and negotiates directly with the various pharmacies in order to gain access to lower prices.

Learn more about how digital pharmacies are shifting towards a delivery-focused future.