Lunch Presentation: Litigations and False Claims Act Enforcement Risks for Specialty Pharmacies

Transcription

1 Lunch Presentation: Litigations and False Claims Act Enforcement Risks for Specialty Pharmacies September 18, 2017 Washington, DC

2 Navigant Jed Smith Director 5th Annual 5th NASP Annual Annual NASP Meeting Annual and Meeting Educational and Educational Conference Conference September September 18-20, , Washington, 2017 Washington, DC DC 2

3 Agenda I. Specialty Drug Enforcement Risks II. Direct and Indirect Remuneration ( DIR ) Fees / Clawbacks III. Drug Diversion and the Opioid Crisis IV. Price Fixing and Rebate Allocation V. Conclusion 3

4 I. Specialty Drug Enforcement Risks 5th Annual 5th NASP Annual Annual NASP Meeting Annual and Meeting Educational and Educational Conference Conference September September 18-20, , Washington, 2017 Washington, DC DC 4

5 Specialty Drug Industry and Enforcement 50%: Percent specialty drug industry projected to represent of all drug expenditures in the U.S. by %: Projected per year growth for $75.8 billion specialty market 28%: Percent Medicare Part D spending drugs with an annual per-user spend of $10,000+ represented in 2015 $37.9 billion in Medicare Part D program spending 6% increase from ,432: Pharmacies with questionable billing of Medicare Part D per 2015 OIG Report 134%: Percent increase in OIG cases involving Part D between 2010 and

6 Specialty Drug Enforcement Risks Prescription Billing Errors Improper Patient Referrals Prior Authorizations Manufacturer Copay Coupons Usual & Customary Pricing ( U&C ) 6

7 Prescription Billing Errors - Overview Billing Requirements are Unique for Specialty Pharmacies Specialty Drugs are Often More Expensive than Customary Prescriptions Small errors can result in substantial overpayments Government and Commercial payors may review with greater scrutiny Example Billing Errors Double Billing (e.g. automatic refills, coordination of benefits, return to stock) Incorrect information submitted (e.g., member demographics, place of service), billed at improper contracted rates, etc. Potential Overpayment Penalties Medicare / Medicaid: Failure to report and return overpayments within 60 days could result in FCA violations / penalties Commercial: Overpayments may violate a specialty pharmacy s contractual obligations to the payor, which can result in legal action. 7

8 Example: US v. Benzer Pharmacy Holdings, LLC Prescription Billing Errors Overview Lemon Bay Drugs North and Brooksville Drugs, two pharmacies in Florida, allegedly submitted claims to federal health care programs for prescription drugs that were never dispensed. Allegations Pharmacies submitted Medicare and Medicaid claims for reimbursement for brand drugs when generic drugs were actually dispensed Pharmacies submitted Medicare and Medicaid claims for reimbursement for drugs that were not dispensed, as they did not have sufficient inventory of those drugs Outcome Agreed to pay $750,000 in settlements 8

9 Example: US v. Nashville Pharmacy Services, LLC Automatic Refills / Manufacturer Copay Coupons / Prescription Billing Errors Overview Nashville Pharmacy Services is a specialty pharmacy that specializes in dispensing HIV and AIDS-related medications Submitted false claims from February 2011 to May 2012 and overbilled Medicare and TennCare for pharmacy services Allegations Improperly used pharmaceutical manufacturer copay cards to pay beneficiaries copays Routinely and improperly waived co-payments for federal and state beneficiaries Automatically refilled medications in violation of contractual requirements Billed for medications dispensed after dates of death of beneficiaries Billed for medications for prescriptions from a non-licensed provider Outcome NPS settled with DOJ; will pay up to $7.8 million 9

10 Improper Patient Referrals Overview Federal Anti-Kickback Statute prohibits improper referrals and provision of anything of value to healthcare providers in exchange for referrals of items or services that may be reimbursed by federal healthcare programs OIG has warned specialty pharmacies about directly linking payments to patient referrals Specialty pharmacies are continually scrutinized by the government and whistleblowers for improper patient referrals Relationships at risk include: Manufacturer HUB Physician / Retail Pharmacies Patients 10

11 Example: US v. Accredo Health Group, Inc Improper Patient Referrals Overview Government sought damages under FCA for reimbursements paid for Exjade drug shipments that resulted from kickback scheme Allegations Novartis issues scorecards to reflect re-orders of Exjade drug to select pharmacies (2007) Novartis execs warn Accredo that lagging scores could result in lost-referrals Novartis and Accredo agree that 60% of all undesignated referrals will go to pharmacy with highest score (2008) Accredo notified that it will receive additional payments as result of high adherence score Novartis notifies Accredo that it will stop allocating additional referrals (2011) Accredo stops assigning nurses to call on Exjade patients to discuss the drug Outcome Accredo agreed to pay $45 million and cooperate with DOJ in prosecution of Novartis 11

12 Prior Authorizations Overview Prior authorization is the process of obtaining pre-approval from healthcare payors to determine prescription drug coverage Specialty pharmacies often take on additional roles of facilitating prior authorizations Additional focus has been placed on enforcing proper prior authorization including enforcement actions 12

13 Example: New York State v. Walgreens Specialty Pharmacy Prior Authorizations Overview Former Walgreens clinical pharmacy manager pled guilty to falsifying prior authorizations, medical lab reports, and drug tests for 51 patients prescribed Hepatitis C drugs, resulting in $4.4M in overpayments made by TennCare Allegations (admitted) Labs and drug tests that disqualified patients for Hepatitis C prescriptions under TennCare eligibility requirements were fabricated in order to eliminate disqualifying information Falsified allergies were included on some prior authorization forms in order for patients to obtain Harvoni ( the most expensive Hepatitis C drug ) Outcome Defendant could face 10 years in prison, a $250,00 fine, and supervised release of up to 3 years 13

14 Example: New York State v. CareMed Pharmaceutical Services Prior Authorizations and Prescription Billing Errors Overview CaredMed allegedly submitted false information to New York State Medicaid in order to obtain prior authorizations and seek reimbursement for false claims Allegations CareMed submitted false information in order to secure expeditious prior authorizations for dispensing specialty drugs CareMed submitted false Medicaid claims for refills that were never obtained by the patients CareMed submitted false Medicaid claims for unused prescription drugs that were restocked and resold to Medicaid Outcome CareMed agreed to pay over $10M in settlements 14

15 Manufacturer Copay Coupons Overview Drug manufacturers offer copay coupons to reduce patients out-of-pocket costs and encourage purchase of specific items (often for brand drugs) Federal anti-kickback statute prohibits specialty pharmacies from accepting copay coupons on claims paid by federal health care programs Often difficult to identify federal program beneficiaries OIG Advisory Opinion No from June 2016 allowed for coupons be offered to Medicare Part D beneficiaries Key point was that claims could not be billed to Medicare Part D if coupon used Additional responsibility on pharmacies 15

16 Example: US v. Kmart Corporation Manufacturer Copay Coupons Overview Kmart was allegedly using coupons to reduce or eliminate Medicare beneficiaries copays on prescription drugs. Allegations Kmart encouraged patients to request brand name drugs instead of less-expensive generic drugs through the use of manufacturer copay coupons Kmart provided discounts on gasoline purchases directly related to the number of prescriptions patients filled at the store to build business and entice patients to return Outcome Agreed to pay $1.4M in settlements 16

17 U&C Pricing Overview Qui Tams Re: U&C Prices: Whistleblowers have recently brought FCA lawsuits against pharmacies alleging that these programs improperly inflate U&C prices, which result in higher reimbursements for pharmacies In other words, pharmacies receive the same reimbursement from the payer but sell the drug at a lower cost Many states define U&C prices differently Some states have Most Favored Nation regulations which may require that the pharmacy submit the lowest price accepted as the U&C or variations on a similar requirement, for example: Georgia Massachusetts Other discounts offered to uninsured may apply as well Transitioning to Member Class Actions 17

18 Example: US ex rel. Garbe v. Kmart Corporation U&C Pricing Overview Whistleblower case with allegations that Kmart misrepresented U&C prices of generic prescriptions Allegations Kmart allegedly violated the FCA by misrepresenting the price of generics as the U&C price In one instance, whistleblower claimed Kmart charged a customer $5 for a 30-day supply of Simvastatin, but billed Medicare for U&C price of $ Outcome 7 th Circuit upheld argument that general public includes customers who are members of discount card programs Kmart will be paying $2.6M in settlements 18

19 Example: Texas State v. HEB Grocery U&C Pricing Overview Texas law requires the submission of reports by pharmacies disclosing prices they charge customers State of Texas brought a civil suit against HEB seeking $12M to settle allegations that HEB overcharged Texas Medicaid for prescription drugs Allegations HEB allegedly discounted prescription drug prices for rewards program members and knowingly submitted inflated pricing information to Texas Medicaid for reimbursement Outcome HEB Grocery agreed to pay $12M in settlements 19

20 II. Direct and Indirect Remuneration ( DIR ) Fees / Clawbacks 5th Annual 5th NASP Annual Annual NASP Meeting Annual and Meeting Educational and Educational Conference Conference September September 18-20, , Washington, 2017 Washington, DC DC 20

21 DIR Fees Overview Broad Definition: Discounts to pharmacy reimbursement not captured at the point of sale CMS s Original Intention: To capture rebates from pharmaceutical manufacturers that are not passed through at the point of sale in order to reimburse PBMs/Plans and lower the true cost of prescription drugs. What DIR Fees Represent Today: Recoupments imposed by PBMs on pharmacies after a drug claim is submitted, adjudicated, or paid out to a pharmacy These fees allow PBMs and other payors to claw back money based on their contracts with pharmacies 21

22 Illustration: Flow of DIR Fees / Clawbacks Source: 22

23 Potential Fees Included in DIR Today Network Participation Fees Pay to play fees for preferred networks, also called network access fees Typical as flat fee per claim or as a percentage assessed at regular intervals Compliance Fees Performance-based fees: can function as a way to penalize pharmacies for noncompliance with quality measures -- could theoretically be tied to a bonus to the pharmacy CMS STAR metrics: Performance-based fees are often tied to metrics similar to CMS STAR metrics CMS STAR rating is used to measure quality in prescription drug plans, assist beneficiaries in finding the best plan, and determine MA Quality Bonus Payments. Price Reconciliations based on Contractual Rates True-up of target reimbursement rate in an agreement with a PBM an aggregated effective rate across all prescriptions (usually conducted quarterly or annually) 23

24 Risks of DIR Fees Potential Impacts to Specialty Pharmacies Fees are often charged long after point of sale Difficult to estimate DIR fees and assess potential costs DIR Fees not often reported to CMS as DIR Fees, but network variable rates or pharmacy performance payments Could result in below cost reimbursement Potential Impacts to Patients Potential for overpayment by patients Higher list prices = higher copayment (DIR rebate to pharmacy not included in copay calculation) Price misconceptions distort drug cost accuracy Potential inflation of specialty drug prices Rising DIR fees could be fueling rising specialty drug prices at the point of sale 24

25 Example: Fellgren v. UnitedHealth Group Inc. DIR Fees / Clawbacks Overview Several individuals have filed complaints against UnitedHealth and its PBM OptumRx Plans state that member contributions would be the lower of either the applicable copayment or the network pharmacy s usual and customary charge Allegations Plaintiffs claim that UnitedHealth charged for copayments that exceeded the usual and customary cost of the drug, clawing back the profits Case also accuses UnitedHealth of clawing back excess payments from pharmacies UnitedHealth allegedly used gag clauses in pharmacy contracts to prohibit pharmacies from exposing true cost of medication to patients Outcome Case still in litigation 25

26 III. Drug Diversion and the Opioid Crisis 5th Annual 5th NASP Annual Annual NASP Meeting Annual and Meeting Educational and Educational Conference Conference September September 18-20, , Washington, 2017 Washington, DC DC 26

27 Drug Diversion and the Opioid Crisis Overview 40%: Portion of overdose deaths in 2015 related to prescription pain relievers. Medicare Part D Opioid Statistics per OIG 27

28 Causes and Risks of Drug Diversion Corresponding Responsibility: The responsibility for the proper prescribing and dispensing of controlled substances is upon the prescribing practitioner, but a corresponding responsibility rests with the pharmacist who fills the prescription. Recent settlements Mallinckrodt - $35 million for failure to report suspicious orders (2017) Settlement requires manufacturer to develop suspicious order monitoring program McKesson - $150 million for failure to report suspicious orders (2017) Settlement included first DEA Monitorship CVS Settled with Massachusetts (2016) Required review of state PDMP Costco $11.75M for poor controls over the dispensing of controlled substances. 28

29 Example: Cherokee Nation v. McKesson Corp., Cardinal Health, Inc., CVS Health, Walgreens, Walmart, etc. Drug Diversion and Opioid Crisis Overview In 2017, Cherokee Nation filed against multiple drug distributers and pharmacies, alleging that Wal-Mart, Walgreens, and others flooded the market in Oklahoma with prescription painkillers Allegations Pharmacies were regularly filling suspicious prescriptions and deliberately ignoring patients who presented multiple prescriptions for the same medication Implications Many state Attorney Generals have begun similar investigations focusing on damage theories similar to the tobacco litigation 29

30 IV. Price Fixing & Rebate Allocation 5th Annual 5th NASP Annual Annual NASP Meeting Annual and Meeting Educational and Educational Conference Conference September September 18-20, , Washington, 2017 Washington, DC DC 30

31 Pricing in the News Overview Recent Focus on Pharmaceutical Pricing Generic drug price collusion (December 2016) 20 states accused generic drug manufacturers of price collusion of an antibiotic and a diabetes medication For example between 2013 and 2014, the price of 500 count bottle doxycycline rose from $20 to $1,849 Mylan Epipen Price increased by more than 500% in 5 years ($ in 2009 to more than $ in 2016) $465 million settlement for overcharging government for Epipen Kaleo Evzio Price increased by more than 600% in 3 years ($690 in 2014 to $4,500 in 2017) 31

32 Price Fixing with Rebates Overview Recent Lawsuits against PBMs and Manufacturers accuse them of price fixing through rebates, the allegations include: PBMs/manufacturers colluded to set prices at a fixed rate that has little/nothing to do with production costs PBM receive a rebate from a drug manufacturer for placing their product in a preferred formulary position Member cost shares are based on the higher cost PBMs split rebates with plan sponsors so that PBMs benefit from higher list price 32

33 Illustration: Manufacturer Rebate Allocated to PBM Source: 33

34 Example: Prescott v. CVS Health Corp. Price Fixing & Rebate Allocation Overview Class Action: Three largest PBMs in the US and four leading pharmaceutical companies accused of colluding to fix prices on glucose test strips Allegations Test strip producers provided PBMs increasingly large rebates and kickbacks by inflating the prices of test strips Pharmaceutical companies helped PBMs and their insurers to prevent disclosure of net prices to consumers These actions have caused consumers to grossly overpay for monitoring tests Outcome To be determined 34

35 Example: Mylan EpiPen Price Fixing & Rebate Allocation Overview Class Action: Filed against Mylan by patients accusing it of price gouging through large rebates offered to PBMs Allegations Mylan paid large rebates to PBMs in return for favorable EpiPen treatment Mylan undertook a scheme and enterprise whose purpose was unlawfully inflating the list price of EpiPen then marketing the spread to PBMs These actions caused consumers to overpay for the medication Outcome To be determined 35

36 V. Conclusion 5th Annual 5th NASP Annual Annual NASP Meeting Annual and Meeting Educational and Educational Conference Conference September September 18-20, , Washington, 2017 Washington, DC DC 36

37 Top Regulatory and External Risks for Specialty Pharmacies With prescription drug spending and specialty s share of that spending continuing to grow, it is important for pharmacies to understand current trends in enforcement and litigation. It appears that regulators and enforcement agencies are continuing to scrutinize prescription drug claims as the Medicare Part D program grow. Specialty pharmacies should use this information on trends in investigations and litigations to evaluate their own practices, evaluate potential acquisitions, as well a prepare for potential changes in the market. 37

38 Follow-up Questions? Contact Info: JED SMITH, CPA Director Navigant Direct 38

39 Sources 5th Annual 5th NASP Annual Annual NASP Meeting Annual and Meeting Educational and Educational Conference Conference September September 18-20, , Washington, 2017 Washington, DC DC 39

40 Sources

41 Sources

42 Sources