Modeling Price Increases and the Effects on Customer Segments

Transcription

1 Modeling Price Increases and the Effects on Customer Segments CBI Medicaid Congress May 9, 2017 Jennifer English Director, Pricing, Contracting and Govt Programs, Insmed, Inc.

2 Disclaimer The opinions and interpretations expressed during today s presentation are those of the individual presenter and do not reflect the policies or practices of any employer; present or past. The opinions do not constitute legal, financial, regulatory or fiduciary advice. Please consult your retained advisors or internal counsel with any questions. Additionally, the information and opinions shared by presenters today are their own and not to be attributed to current or prior employers.

3 Topics: Overview of GTN categories most impacted by Price Increases Understanding the impact of Price Increases on Government Pricing Programs Understanding the Evolution of Managed Care Controls and Contract Price Protection terms Understanding Price Protection Systems to Support the Process 3

4 Overview of GTN categories most impacted by Price Increases 4

5 Components of Gross-to-Net Gross-to-Net Categories Definitions Prompt Pay Discount Prompt Pay Discount is offered and taken by all direct customers and is typically 1-2%. Wholesaler/Distributor Fees Chargebacks Medicaid Rebates Other Government Rebates (IFF, Tricare) Commercial Payer Rebates Medicare Part D Payer Rebates Medicare Part D CGDP Co-pay Mitigation Allowance for Returns Bona Fide Service Fees for Inventory Management and Administration of pricing contracts. Federally mandated price concessions to the VA/DOD under the FSS, Covered Entities under the 340B/PHS and institutional customers under GPO contracts. Discount will increase over time to the extent that price increases exceed the rate of inflation (CPI-U). Federally mandated rebates to state Medicaid programs. Discount will increase over time to the extent that price increases exceed the rate of inflation (CPI-U), in addition to States expanding Medicaid Lives due to ACA. Includes rebates paid for Tricare utilization, as well as the quarterly VA IFF fee payments. Rebate payments to Commercial plans, includes Base Rebates, Admin Fees and Price Protection Penalty Rebates. Rebate payments to Medicare Part D plans, includes Base Rebates and Price Protection Penalty Rebates. Federally mandated payments to cover 50% of patient costs in the Medicare Part D Coverage Gap (note, 50% of patient co-pay does not equal 50% of WAC). Co-pay mitigation for patients with co-pay >$X. Manufacturer co-pays amount down to $X. Assume Rx mix will shift to higher co-insurance benefit design by X% each year. Based on product Returns Goods Policy and contract terms negotiations. 5

6 Components of Gross-to-Net Gross-to-Net Categories Definitions Prompt Pay Discount Prompt Pay Discount is offered and taken by all direct customers and is typically 1-2%. Wholesaler/Distributor Fees Bona Fide Service Fees for Inventory Management and Administration of pricing contracts. Chargebacks Medicaid Rebates Other Government Rebates (IFF, Tricare) Commercial Payer Rebates Medicare Part D Payer Rebates Medicare Part D CGDP Co-pay Mitigation Federally mandated price concessions to the VA/DOD under the FSS, Covered Entities under the 340B/PHS and institutional customers under GPO contracts. Discount will increase over time to the extent that price increases exceed the rate of inflation (CPI-U). FSS & PHS Federally mandated rebates to state Medicaid programs. Discount will increase over time to the extent that price increases exceed the rate of inflation (CPI-U), in addition to States expanding Medicaid Lives due to ACA. CPI-U & BP Price increases are the predominant driver of GTN growth in Government Mandated Programs Includes rebates paid for Tricare utilization, as well as the quarterly VA IFF fee payments. Rebate payments to Commercial plans, includes Base Rebates, Admin Fees and Price Protection Penalty Rebates. PP rebates Rebate payments to Medicare Part D plans, includes Base Rebates and Price Protection Penalty Rebates. Federally mandated payments to cover 50% of patient costs in the Medicare Part D Coverage Gap (note, 50% of patient co-pay does not equal 50% of WAC. Donut hole (Price Inflation Penalties) Co-pay mitigation for patients with co-pay >$X. Manufacturer co-pays amount down to $X. Assume Rx mix will shift to higher co-insurance benefit design by X% each year. Allowance for Returns Based on product Returns Goods Policy and contract terms negotiations. 6

7 Components of Gross-to-Net Gross-to-Net Categories Definitions Prompt Pay Discount Prompt Pay Discount is offered and taken by all direct customers and is typically 1-2%. Wholesaler/Distributor Fees Chargebacks Medicaid Rebates Other Government Rebates (IFF, Tricare) Commercial Payer Rebates Medicare Part D Payer Rebates Medicare Part D CGDP Co-pay Mitigation Allowance for Returns Bona Fide Service Fees for Inventory Management and Administration of pricing contracts. Federally mandated price concessions to the VA/DOD under the FSS, Covered Entities under the 340B/PHS and institutional customers under GPO contracts. Discount will increase over time to the extent that price increases exceed the rate of inflation (CPI-U). GPO/Institutional Expansion of % of Contracted Customers with Rebate/Price Discounts as well as pressure for higher discount levels drive GTN growth in Payer Channel Federally mandated rebates to state Medicaid programs. Discount will increase over time to the extent that price increases exceed the rate of inflation (CPI-U), in addition to States expanding Medicaid Lives due to ACA. Includes rebates paid for Tricare utilization, as well as the quarterly VA IFF fee payments. Rebate payments to Commercial plans, includes Base Rebates, Admin Fees and Price Protection Penalty Rebates. Value based & PP rebates Rebate payments to Medicare Part D plans, includes Base Rebates and Price Protection Penalty Rebates. Federally mandated payments to cover 50% of patient costs in the Medicare Part D Coverage Gap (note, 50% of patient co-pay does not equal 50% of WAC. Co-insurance Co-pay mitigation for patients with co-pay >$X. Manufacturer co-pays amount down to $X. Assume Rx mix will shift to higher co-insurance benefit design by X% each year. (Commercial and Medicare Part D) Based on product Returns Goods Policy and contract terms negotiations. 7

8 Understanding the impact of Price Increases on Government Pricing Programs

9 Government Programs Medicaid Federal Supply Schedule 340B/PHS Model impact to AMP Project range of rate quarterly growth for CPI-U Project Commercial BP impact due to increasing discounts and price protection rates Project URA Project Rx growth Model impact to NFAMP and FCP Project range of rate annual growth for CPI-U Understand the incentives to shift Rx from TriCare rebate to FSS price Discount differences: WAC minus FCP > NFAMP minus FCP Use AMP and URA projections to model PHS discount ranges Project growth in Rx due to increase in covered entity eligibility Understand growth of entity relationships with Contracted Pharmacies and potential for double dipping 9

10 Understanding the Evolution of Managed Care Price Protection 10

11 What Price Increases? 11

12 Price Protection From a Payer s Perspective Source: The Express Scripts 2014 Drug Trend Report 12

13 Price Protection From a Payer s Perspective Given the already high cost of specialty drugs, rapidly increasing prices are a critical concern. One of Prime s top initiatives is to contract with drug manufacturers who provide protection from high inflation trends. These contracts protect both customers and plan sponsors from higher-thanexpected increases in specialty drug prices and allow for more accurate forecasting of future drug costs. As pharmacy benefit managers and health plans strive to improve the quality of care for individuals with MS through improved adherence, the expected increases in cost of care can be mitigated through rebate contractual relationships that provide some measure of price inflation protection. Source: Prime Therapeutics 2012 Drug Trend Insights

14 Price Protection From a Payer s Perspective We use our Prescription Drug List (PDL) to provide access to safe, effective medications. While the PDL covers almost all prescription drugs, it uses cost-sharing based on placing drugs in differently priced tiers to encourage use of preferred treatments. The PDL works in tandem with such proven effective utilization management tools such as supply limits, prior authorization, step therapy and our negotiated price protection arrangements. Source: article Treatment and the high cost of MS

15 What is Price Protection? Price Inflation Agreement Price Protection Price Guarantee What Does it Mean? 15

16 What is Price Protection? Price Protection is a stipulation in a Commercial Payer or PBM contract that defines & limits the liability to a Payer or PBM by setting maximum Price Increase caps on a Manufacturer s product. The Payer or PBM is made whole for any increase above the defined Price cap in the form of additional penalty rebate from the Manufacturer to the Payer or PBM. 16

17 What is Price Protection? Price Protection is a stipulation in a Commercial Payer or PBM contract that defines & limits the liability to a Payer or PBM by setting maximum Price Increase caps on a Manufacturer s product. Manufacturer Ceiling Price to Cap The Payer or PBM is made whole for any Payer/PBM Product Cost Liability increase above the defined Price cap in the form of additional penalty rebate from the Manufacturer to the Payer or PBM. 17

18 Why Price Protection? Payers & PBMs want to protect themselves from the potential cost liability of aggressive price increases taken by Manufacturers This protection (ceiling cap) allows them the opportunity to budget appropriately and provide clarity on forecasted product cost liability over the next several years So competitive product formulary decisions they make today are still profitable several years from now 18

19 Why Price Protection? Payers & PBMs want to protect themselves from the potential cost liability of aggressive price increases taken by Manufacturers This protection (ceiling cap) allows them the opportunity More to Predictable budget appropriately Rx Costand provide clarity on forecasted product cost liability over the next several years So competitive product formulary decisions they make today are still profitable several years from now 19

20 Understanding Price Protection Calculations 20

21 Types of Price Protection Annual Reset Cumulative Cumulative & Perpetual * When compared head-to-head in Year 1 21

22 Types of Price Protection Annual Reset Cumulative Cumulative & Perpetual Allowed WAC increase is reset annually Results in slightly larger price protection rebate versus Allowed Net WAC * Does not provide long term protection from cumulative effect of increases that exceed allowed inflation. * When compared head-to-head in Year 1 22

23 Types of Price Protection Annual Reset Cumulative Cumulative & Perpetual Allowed WAC increase is reset annually Results in slightly larger price protection rebate versus Allowed Net WAC * Does not provide long term protection from cumulative effect of increases that exceed allowed inflation. Allowed Net WAC focuses on Net Cost after Rebate Results in slightly lower price protection rebate versus Allowed WAC * Provides long term cost predictability and protection from cumulative effect of higher than expected increases. * When compared head-to-head in Year 1 23

24 Types of Price Protection Annual Reset Cumulative & Cumulative Perpetual Allowed WAC increase is reset annually Results in slightly larger price protection rebate versus Allowed Net WAC * Does not provide long term protection from cumulative effect of increases that exceed allowed inflation. Allowed Net WAC focuses on Net Cost after Rebate Results in slightly lower price protection rebate versus Allowed WAC * Provides long term cost predictability and protection from cumulative effect of higher than expected increases. Allowed Net WAC focuses on Net Cost after Rebate Once a penalty rebate is triggered, it is carried forward perpetually, even if NO WAC increase is taken in the future Provides long term cost predictability and protection * When compared head-to-head in Year 1 24

25 Types of Price Protection Annual Reset Allowed WAC increase is reset annually Results in slightly larger price protection rebate versus Allowed Net WAC * Does not provide long term protection from cumulative effect of increases that exceed allowed inflation. 25

26 Types of Price Protection Annual Reset Allowed WAC increase is reset annually Results in slightly larger price protection rebate versus Allowed Net WAC * Does not provide long term protection from cumulative effect of increases that exceed allowed inflation. 26

27 Types of Price Protection Annual Reset Allowed WAC increase is reset annually Results in slightly larger price protection rebate versus Allowed Net WAC * Does not provide long term protection from cumulative effect of increases that exceed allowed inflation. Year 2 Baseline WAC resets with Year 1 Actual WAC 27

28 Types of Price Protection Annual Reset Allowed WAC increase is reset annually Results in slightly larger price protection rebate versus Allowed Net WAC * Does not provide long term protection from cumulative effect of increases that exceed allowed inflation. Year 2 Baseline WAC resets with Year 1 Actual WAC 28

29 Types of Price Protection Cumulative Allowed Net WAC focuses on Net Cost after Rebate Results in slightly lower price protection rebate versus Allowed WAC * Provides long term cost predictability and protection from cumulative effect of higher than expected increases. 29

30 Types of Price Protection Cumulative Allowed Net WAC focuses on Net Cost after Rebate Results in slightly lower price protection rebate versus Allowed WAC * Provides long term cost predictability and protection from cumulative effect of higher than expected increases. 30

31 Types of Price Protection Cumulative Allowed Net WAC focuses on Net Cost after Rebate Results in slightly lower price protection rebate versus Allowed WAC * Provides long term cost predictability and protection from cumulative effect of higher than expected increases. Year 2 Baseline WAC resets with Year 1 Allowed WAC 31

32 Types of Price Protection Cumulative Allowed Net WAC focuses on Net Cost after Rebate Results in slightly lower price protection rebate versus Allowed WAC * Provides long term cost predictability and protection from cumulative effect of higher than expected increases. Year 2 Baseline WAC resets with Year 1 Allowed WAC Penalty is the difference between Allowed Net WAC and Actual Net WAC 32

33 Types of Price Protection Cumulative Allowed Net WAC focuses on Net Cost after Rebate Results in slightly lower price protection rebate versus Allowed WAC * Provides long term cost predictability and protection from cumulative effect of higher than expected increases. Year 2 Baseline WAC resets with Year 1 Allowed WAC Penalty is the difference between Allowed Net WAC and Actual Net WAC 33

34 Types of Price Protection Cumulative & Perpetual Allowed Net WAC focuses on Net Cost after Rebate Once a penalty rebate is triggered, it is carried forward perpetually, even if NO WAC increase is taken in the future Provides long term cost predictability and protection 34

35 Types of Price Protection Cumulative & Perpetual Allowed Net WAC focuses on Net Cost after Rebate Once a penalty rebate is triggered, it is carried forward perpetually, even if NO WAC increase is taken in the future Provides long term cost predictability and protection 35

36 Types of Price Protection Cumulative & Perpetual Allowed Net WAC focuses on Net Cost after Rebate Once a penalty rebate is triggered, it is carried forward perpetually, even if NO WAC increase is taken in the future Provides long term cost predictability and protection Year 2 Baseline WAC resets with Year 1 Actual WAC 36

37 Types of Price Protection Cumulative & Perpetual Allowed Net WAC focuses on Net Cost after Rebate Once a penalty rebate is triggered, it is carried forward perpetually, even if NO WAC increase is taken in the future Provides long term cost predictability and protection Year 2 Baseline WAC resets with Year 1 Actual WAC Year 3 No WAC increase, 37

38 Types of Price Protection Cumulative & Perpetual Allowed Net WAC focuses on Net Cost after Rebate Once a penalty rebate is triggered, it is carried forward perpetually, even if NO WAC increase is taken in the future Provides long term cost predictability and protection Year 2 Baseline WAC resets with Year 1 Actual WAC Year 3 No WAC increase, yet pay Year 1 & 2 Penalties 38

39 Types of Price Protection Cumulative & Perpetual Allowed Net WAC focuses on Net Cost after Rebate Once a penalty rebate is triggered, it is carried forward perpetually, even if NO WAC increase is taken in the future Provides long term cost predictability and protection Year 2 Baseline WAC resets with Year 1 Actual WAC Year 3 No WAC increase, yet pay Year 1 & 2 Penalties 39

40 Types of Price Protection Comparisons 40

41 Manufacturer View: Price Protection Analysis Annual Resetting Price Protection at 5%, baseline WAC = 12/31/16, take 9% Price Increase in CY2017 & 2018 Dec Q Q Q Q Q Q Q Q4 WAC $ $ $ $ $ $ $ $ $ Rebate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% Net Price $ $ $ $ $ $ $ $ $ Price Protection Factor 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Allowed WAC per Unit $ $ $ $ $ $ $ $ Allowed Net Price $ $ $ $ $ $ $ $ Price Protection Rebate $ $ $ $ $ $ $ $ $ Price Protection Rebate % 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 3.30% 3.30% Total Net effective discount 13.3% 13.3% 13.3% 13.3% 13.3% 13.3% 13.3% 13.3% Annual Resetting Price Protection at 8%, baseline WAC = 12/31/16, take 9% Price Increase in CY2017 & 2018 Dec Q Q Q Q Q Q Q Q4 WAC $ $ $ $ $ $ $ $ $ Rebate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% Net Price $ $ $ $ $ $ $ $ $ Price Protection Factor 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% Allowed WAC per Unit $ $ $ $ $ $ $ $ Allowed Net Price $ $ $ $ $ $ $ $ Price Protection Rebate $ $ $ $ $ $ $ $ $ Price Protection Rebate % 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.83% 0.83% Total Net effective discount 10.8% 10.8% 10.8% 10.8% 10.8% 10.8% 10.8% 10.8% No PP, Increase base rebate to 12%, take 9% Price Increase in CY2017 & 2018 Dec Q Q Q Q Q Q Q Q4 WAC $ $ $ $ $ $ $ $ $ Rebate % 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% Net Price $ $ $ $ $ $ $ $ $ Price Protection Factor 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Allowed WAC per Unit $ - $ - $ - $ - $ - $ - $ - $ - Allowed Net Price $ - $ - $ - $ - $ - $ - $ - $ - Price Protection Rebate $ $ - $ - $ - $ - $ - $ - $ - $ - Price Protection Rebate % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.00% 0.00% Total Net effective discount 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 41

42 Systems to Support 42

43 Systems Excel Based Systems Based Typically Small Pharma 1-12 NDC s One Business Unit 43

44 Systems Excel Based Systems Based Typically Small Pharma 1-12 NDC s One Business Unit Pros: Low Cost, One Owner, Universal Cons: Non Transferable, Time Consuming 44

45 Systems Excel Based Systems Based Typically Small Pharma 1-12 NDC s One Business Unit Typically Large Pharma 24+ NDC s Multiple Business Units 45

46 Systems Excel Based Systems Based Typically Small Pharma 1-12 NDC s One Business Unit Typically Large Pharma 24+ NDC s Multiple Business Units Pros: Replicable, Auditable, Scenario Build, Multiple Owners/Inputs Cons: High Cost, Compatibility with other Systems 46

47 Systems Excel Based Systems Based Hybrid Based Typically Small Pharma 1-12 NDC s One Business Unit Typically Large Pharma 24+ NDC s Multiple Business Units Some in Excel Others in System Examples: GP & Chargebacks in System Rebates & Price Protection in Excel 5/4/

48 Systems Excel Based Systems Based Hybrid Based Typically Small Pharma 1-12 NDC s One Business Unit Typically Large Pharma 24+ NDC s Multiple Business Units Some in Excel Others in System Examples: GP & Chargebacks in System Rebates & Price Protection in Excel Pros: Moderate to High Cost, Multiple Departments with One Owner, Pick and Choose Systems for Economic Efficiencies Cons: Potentially More Costly than System Approach from Man Power perspective, Time Consuming, Too Many Variables 48

49 D e c r e a s e d R i s k Excel Based Models One Size Fits All? Not Always Contract Variability Not Easy to Change Systems System Based Models Robust Flexible Scalable Easy to Incorporate Pre/Post Deal GTN Models Replicable, Accurate, Auditable Audit Proof Increased Accuracy Accurate 49

50 System impacts on Price Increase Decisions Data Management Modeling Accruals Brings together data from disparate systems onto the same page Limits individual workstream bottlenecks Data integrity maintained, not exposed to keying errors or Excel glitches Effortless audit process Easier to perform Price Increase What If comparisons Pre-Deal & Price Increase impact analytics Versioning control Find limits of and monitor Price Increase profitability More accurate reserves Efficient update of actuals vs accruals Easily compare veracity of accrual forecasting to improve future projections Reduced close and forecast cycle time 50

51 QUESTIONS?

52 Thank you for your attention!