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.


Reminder: DUNS Number Transition Update

As we mentioned in our February update, as of April 4, 2022, the federal government is no longer requiring the DUNS number for System for Award Management (SAM) registration.

Pathways to Success Training is required for all manufacturers looking to contract with the VA and is no longer available as an online training module, rather it is now a self-based training. This means there will no longer be a certification requirement at the end of the course completion. If you are interested in the pathways to success training, it is available here from gsa.gov.


Eli Lilly Streck Case

Eli Lilly is facing whistleblower allegations that it violated the False Claims Act (FCA) by defrauding the Medicaid Drug Rebate Program (MDRP). Ronald Streck has filed the FCA suit on behalf of the U.S. and the 26 states that have been impacted. Eli Lilly requested that the courts throw out the case, but Judge Harry Leinenweber ruled that it will proceed to trial.

The case alleges that Lilly knowingly used improper methods to lower their Average Manufacturer Price (AMP), which lowered the rebate amount paid to the government. They reported the initial AMP but did not include the price increases that they charged distributors on unsold units.

Lilly deducted price appreciation credits (PACs) from the service fees that they paid to wholesalers. These PACs were created to prevent wholesalers from speculatively buying manufacturers’ products. Lilly implemented provisions in their agreements with wholesalers that made them return the profits that they accumulated from excess inventory. They did not have the wholesalers make cash payments back to them. Instead, they used PACs to deduct the price of the service fees that they paid to wholesalers. This method is not allowed because the service fees are considered “bona fide”, and therefore ineligible to be deducted from the AMP calculation.

For a fee to be considered bona fide, it must pass the four-part test:

  1. The fee paid must be for a bona fide, itemized service that is actually performed on behalf of the manufacturer
  2. The manufacturer would otherwise perform or contract for the service in the absence of the service arrangement
  3. The fee represents fair market value (FMV) for the services rendered
  4. The fee is not passed on in whole or in part to a client or customer of any entity

The claim states that they underpaid rebates to the government and states beginning in 2005 and ending in 2016. Lilly had argued that the pricing rules were not clear until CMS issued their guidance in 2016, but the judge ruled that the wording from the Affordable Care Act makes their argument invalid. 

Source:

Reuters: Whistleblower’s claim that Eli Lilly shortchanged Medicaid will go to jury


The Current State of Healthcare Spending is Unsustainable


This month we are featuring a guest blog post from Blue Fin Group, an IntegriChain company on the rising costs of healthcare spending. You can read this article in full and more articles on the healthcare industry at consultbfg.com.

The time is ripe for an evolution in how U.S. payers approach the management of drug spending. With recent trends in new product development, we’ve seen an explosion of therapeutic innovation as drugs are approved to address previously untreatable rare diseases, and treatments for prevalent diseases continue to improve. While it is never a good time to be a patient, more rare disease patients are now offered hope through the development and approval of complex therapeutics.

This innovation comes at a cost. In the U.S., the cost of new drugs has skyrocketed in recent years. Payers have become increasingly restrictive, as we continue to see longer formulary exclusion lists each year, and as patients are increasingly shunted towards high deductible and closed health plans, which can be more restrictive than previous options. In addition, more products are subject to traditional and innovative utilization management controls as payers seek to exert some level of control over drug spending to satisfy the expectations of their members, as well as employer groups and shareholders in some cases.

It is apparent that current payer management tactics are unable to sufficiently control drug spend without the addition of novel approaches to management, thus creating pressure for changes in their approach to drug management. In the meantime, we are likely to continue to see increasing cost burden placed on patients as payers and other stakeholders in the healthcare ecosystem strive to avoid carrying the weight of rising healthcare costs that has no end in sight.

Read the rest of the article at consultbfg.com

About the Author

Matt Cunningham

Matt Cunningham

Matt Cunningham is an up and coming consultant on the Advisory team at IntegriChain. His background and experience brings a new perspective to the Government Pricing and State Price Transparency services for Life Sciences manufacturers of all sizes. He has earned his Bachelor's degree from The College of New Jersey.