FSS Pricing and Compliance Marci Anderson Mark Myers Office of Contract Review Office of Inspector General Department of Veterans Affairs
Why FSS? If you manufacture or sell drugs covered under Public Law 102-585 603 offering those drugs to FSS is mandatory in order to receive any revenue from the Federal Government for your covered drugs, regardless of whether the drugs are purchased through the FSS. If you sell non-covered drugs, VA has a purchasing hierarchy that will benefit sellers with FSS contracts over sellers without FSS contracts. May 8, 2017 2
Delegated Authority The Department of Veterans Affairs (VA) National Acquisition Center (NAC) Federal Supply Schedule (FSS) Program supports the healthcare requirements of the VA and other federal government agencies (OGA). In 1981, the VA launched the VA managed FSS program under delegated authority by GSA (see FAR 8.402(a)) for multiple award contracts for medical equipment, supply, pharmaceutical, and service Schedule programs. May 8, 2017 3
Terms FSS Federal Supply Schedules OGA- Other Government Agencies For a dual pricer the OGA price is synonymous with the FSS price. VA requires that quarterly sales reports distinguish between sales to VA and sales to other government agencies, which is any other entity purchasing products or services from the FSS. The sales reporting terms are different than the terms attached to customers for pricing eligibility. May 8, 2017 4
Terms Ceiling Price This is the term used to describe the calculated statutory price for covered drugs. The term is only used when referring to pricing for covered drugs. Synonymous with Big4 price. For a single pricer the ceiling price will also be called the FSS price. SIN-Special Item Number 42-2A is for Covered Drugs 42-2B is for non-covered Drugs May 8, 2017 5
First things First Determine whether you must offer your products to FSS (i.e. whether your company sells covered drugs) If yes, must have a Master Agreement and Pharmaceutical Pricing Agreement and Federal Ceiling Prices on file with Pharmaceutical Benefits Management You must also determine whether you want to establish dual pricing (one price for the Big4 that does not exceed the FCP and one price for all other users) If not, determine whether your company wants to submit an offer to list their drugs on the FSS May 8, 2017 6
FSS Pricing Pricing for covered drugs is a statutory price based on a calculation. Pricing for non-covered drugs is a negotiated price based on the offeror s commercial sales practices. The negotiation objective is Most Favored Customer (MFC). May 8, 2017 7
Pricing Disclosures Commercial Sales Practices (CSP) Commercial market: awards are usually based on competition and items actually awarded may be limited FSS: non-competitive any vendor can obtain an FSS contract if the vendor is responsible, has commercial sales (and if not provides manufacturer s CSP), offers fair and reasonable prices, and agrees to comply with certain contract terms and conditions The FSS allows vendors to offer full product lines for purchase by eligible FSS customers. May 8, 2017 8
Pricing Disclosures Commercial Sales Practices (CSP) Vendors are required to disclose their commercial sales practices because prices, discounts, and concessions to commercial customers are the basis for determining whether offered prices are fair and reasonable All FSS offerors must complete the CSP data sheets contained in the solicitation. Failure to provide the required information will result in a no award decision. May 8, 2017 9
Pricing Disclosures Commercial Sales Practices (CSP) 52.215-20: The offeror shall submit information in the format provided in this solicitation in accordance with the instructions at Figure 515.4-2 of the GSA Acquisition Regulation (48 CFR 515-2); or submit information in the Offeror s own format. May 8, 2017 10
Disclosure Requirements If offering equal to or better than the most favored customer price, must disclose the customer(s) that receive the most favored customer price. If not offering equal to or better than the MFC price, must disclose all prices to all customers equal to or better than the offered price. For table 515.4-2, you may limit your disclosures to those products that exceed 75 percent of actual historical Government sales by Special Item Number (SIN). May 8, 2017 11
What you will need Current calculated Federal Ceiling Prices from Pharmacy Benefits Management (if applicable) Double Check full product line with your regulatory department to ensure all covered drugs have a properly computed FCP For a newly launched covered drug, without a permanent FCP, the offered price to Big4 customers can t exceed the temporary FCP on file. Commercial Sales and Discounting Data Most Favored Customer Pricing Current Commercial Catalog Pricing Commercial and Government sales volumes Non invoice discount data such as rebates May 8, 2017 12
CSP The disclosures required in the CSP are used to: to determine negotiation objectives determine whether the offered (and ultimately the awarded) prices are fair and reasonable determine whether the offered price exceeds the FCP identify tracking customers for price reductions during the term of the contract. May 8, 2017 13
CSP For each SIN provide the dollar value of sales to the general public at or based on established catalog or market prices during previous 12 months or offerors last fiscal year. Show the projected annual sales to the Government for each SIN. May 8, 2017 14
CSP-1 Disclose whether the discounts and concessions offered the Government are equal to or better than your best price (with discounts and concessions) offered to any customer acquiring the same items regardless of quantity or terms and conditions. May 8, 2017 15
CSP-1 For each SIN, identify non-federal Government customers and, for each: Best discounts broken out into each type of discount (prompt payment, quantity, rebates etc.) Quantity or volume of sales Indicate the FOB delivery term Identify concessions (trade-ins, extended warranty, return/exchange policy, additional services) May 8, 2017 16
CSP-1 Disclose any deviations to your written policies or standard commercial sales practices that were previously identified and explain the deviations. Dealers/Resellers without significant sales to the general public must provide the manufacturer s CSP data for each manufacturer whose sales under the contract are expected to exceed $500,000 (paragraph 5). Any sales through wholesalers to the Government are not considered commercial. May 8, 2017 17
Most Favored Customer GSAR 538.270: The Government will seek to obtain the offeror s best price (the best price given to the most favored customer). However, the Government recognizes that terms and conditions of commercial sales vary and that there may be legitimate reasons why the best price is not achieved. (Emphasis Added) May 8, 2017 18
Most Favored Customer There is no relationship between the best price as used in the GSAR for FSS contract pricing and Medicare/Medicaid best price provisions. MFC is a negotiation objective. There is no requirement that the price be MFC. May 8, 2017 19
Pre-Award Reviews May 8, 2017 20
What to Expect You have submitted your offer to the National Acquisition Center The solicitation includes the information expected to be supplied in the event that your firm is selected for a preaward review May 8, 2017 21
Pre-Award FAR Clause 52.215-20 (b)(4) By submission of an offer in response to this solicitation, the Offeror grants the contracting officer or an authorized representative the right to examine at any time before initial award. FAR clause 52.215-21(b)(3) Authorizes the right to examine the Offeror s books and records for contract modifications. May 8, 2017 22
Pre-Award Reviews VA contracting officers request preaward reviews for new contracts, requests for modifications, and contract extensions. Reviews are performed by the Office of Contract Review in the VA Office of Inspector General under an agreement with VA s Office of Acquisition and Logistics. May 8, 2017 23
Pre-Award Reviews Purpose of a pre-award is to advise the contracting officer that the CSP is reliable and can be used to determine the reasonableness of the offer and to recommend tracking customers for price reductions. To ensure that pre-awards are conducted in the most effective and efficient way possible, specific instructions are provided on CP-5 and CP-6 of the solicitation. May 8, 2017 24
Pre-Award Reviews Full support for disclosures, including detailed reports used to develop disclosures and sales information by NDC, both direct and indirect along with transactional sales data as specified. Discounting policies, procedures, and marketing practices. If MFC not offered, copies of agreements that result in better prices than those offered the Government may be requested. If requested contracts are not provided, a no award recommendation may result. May 8, 2017 25
Pre-Award Reviews Acceptable media/methods Compact Disk Internet Download unless we need to download software to transfer (such as FileZilla) E-Mail-unencrypted restricted to 4-5 Mb ZixMail-secured We cannot accept thumb drives Acceptable Formats ASCII Text (fixed width or delimited) Excel Access May 8, 2017 26
Pre-Award Reviews Transactional sales data should include all products sold to commercial customers for the 6- month period specified in the request for information letter. Must include all sales (FSS and non-fss customers). Data must reconcile to financial records. May 8, 2017 27
Helpful Hints For SIN 42-2A (covered drugs) your offered price may not exceed the properly computed FCP we have found this to be a common error. If you have covered drugs, you may establish a price for the Big4 that does not exceed the FCP and one for all other purchasers (the dual price, or FSS price). May 8, 2017 28
Helpful Hints Consider the Pre-Award Review as an opportunity to review and assess the currency of your policies and procedures and if necessary update your SOPs. Verify transactional data. May 8, 2017 29
SIN 42-2A Prior to submitting your offer, you must have a properly computed FCP for your firm s covered drugs. But all compliance stems from properly identifying your firms covered drugs. Marketed under a New Drug Application (and is the Reference Listed Drug) or a Biological License Agreement The RLD test is not the end all. If your company believes that a drug is not covered you can bring that to VA for a determination. May 8, 2017 30
Pre-award Report The OIG issues their pre-award report to the contracting officer The report will not be provided to the vendor, and is not released to the public The purpose of the report is to assist the contracting officer in negotiating a fair and reasonable price May 8, 2017 31
Adhering to Mandatory Reporting Requirements Commercial Sales Practice (CSP): Use sales transaction data to ensure the data provided VA is accurate, complete and current. Rule of Thumb Disclose and Negotiate. May 8, 2017 32
Adhering to Mandatory Reporting Requirements Questions you should ask yourself: Does your system accurately identify transactions that are required for reporting? Are we using data from the correct time frame? Do we offer concessions or rebates that result in lower prices not reflected in the transactional data? What is currently being negotiated with commercial customers? Are there recent contracts with no recorded sales at lower prices? May 8, 2017 33
Adhering to Mandatory Reporting Requirements Reevaluate the disclosures before negotiations are completed to ensure the information provided is still accurate, complete and current. May 8, 2017 34
Contract Award Awarded prices based on negotiations (unless the awarded price is the FCP) At the conclusion of negotiations, VA and the vendor agree on a tracking customer(s) (TC) or category of customers. TC is used to determine if FSS purchasers are entitled to price reduction under the Price Reductions Clause, and to determine whether a vendor s request for a price increase under the Economic Price Adjustments Clause should be approved. When the TC has been identified, the CO and vendor agree on the ratio between the FSS price and the price received by the tracking customer. The ratio is always rounded and is computed on the FSS price without IFF. May 8, 2017 35
FCP Defined The Federal Ceiling Price is the maximum amount that a Manufacturer may charge for a covered drug sold to the Federal Agencies listed in 38 U.S.C. 8126(b). The FCP is effective for a calendar year (or that portion of a calendar year in which the covered drug is marketed) and is derived from the calculations prescribed in 38 U.S.C. 8126(a)(2), (c) and (d). May 8, 2017 36
FCP Defined Basic formula: Annual non-famp times.76 minus any additional discount. Calculated separately for each NDC-11 Maximum price to Big Four entities: VA, DoD, PHS and Coast Guard May 8, 2017 37
The additional discount for price increases in excess of the CPI-U FCP Calculation Annual Non-FAMP $ 72.63 x FCP % (76%) 55.20 less: Additional Discount 0.54 FCP Maximum $ 54.66 New Non-FAMP (3rd Quarter) $ 76.50 Less: Old Non-FAMP (3rd Quarter) 74.00 Difference $ 2.50 Old Non-FAMP x CPI-U 1.96 Additional Discount $ 0.54 Additional Discount If the increase between the benchmark 3 rd quarter Non-FAMPs ( New Non-FAMP vs. Old Non-FAMP ) is greater than the inflation adjusted Old Non- FAMP, an additional discount must be provided to the VA. In this example the CPI-U is 2.65 percent. May 8, 2017 38
The FCP Calculation: 1 st FSS Contract Year - 2014 First FSS Contract Year - 2014: (Annual Non-FAMP * 0.76) minus "Additional Discount" Additional Discount = (New Q3 Old Q3) (Old Q3 * CPI-U) Q3 Non-FAMP for current year minus Q3 Non- FAMP for last year minus Q3 Non-FAMP for last year times % increase in CPI- U (Consumer Price Index Urban) This is called the FCP calculated ceiling Dual calculation is not performed First Year is static every 5 years and has nothing to do with the award year of you FSS contract May 8, 2017 39
The FCP Calculation: Second & Subsequent FSS Contract Years Second & Subsequent FSS Contract Years: Lesser of: The FCP calculated ceiling, and Last year s FSS contract price (price in effect on September 30, w/o the IFF) increased by the % allowable increase in CPI-U known as the FSS Max Cap If the product did not have a permanent FCP as of 9/30 there can be no dual calculation (new product launches between April 2 and September 30) May 8, 2017 40
Maintaining Compliance Controls Initiate a compliance program with checks and balances to ensure accurate reporting of FCPs Look for variances in calculated prices from period to period and investigate changes that exceed a percentage identified for each product. Test the system performing the calculations to ensure the system is providing accurate information. Take steps to ensure that the process used by the program to calculate the prices is consistent with the terms of your internal compliance policies. May 8, 2017 41
Compliance with Contract Provisions During the life of the FSS contract there are several administrative responsibilities Ensure compliance with the Price Reductions Clause and complying with the requirements in the award letter to notify the CO of any tracking customer changes. Ensuring modification requests for increases comply with the Economic Price Adjustments Clause 552.216-70. Ensuring compliance with TAA Commencing in May, 2016 TAA non-compliant products will be added under SIN 42-2A only and are to be made available for purchase by any Big4 entities who have made a nonavailability determination. May 8, 2017 42
Compliance with Contract Provisions During the life of the FSS contract there are several administrative responsibilities File non-famps on a timely basis. Submitting new covered drug filings on a timely basis. Report FSS sales and submit IFF timely. Compliance with Trade Agreements Act requirements. May 8, 2017 43
Price Reductions Clause 552.238-75 Prior to award, VA and contractor will agree on: The customer or category of customers which will be the basis of award, and The Government s price or discount relationship to the identified customer(s) Relationship shall be maintained throughout the contract period Any change to the Contractor s commercial pricing or discount arrangement applicable to the identified customer(s) which disturbs the relationship constitutes a price reduction. May 8, 2017 44
Price Reductions Clause 552.238-75 Contractor must: Report to the CO all price reductions to the tracking customer(s) and explain the conditions under which the reductions were made. Can make the notification anytime but no later than 15 calendar says after the effective date. May 8, 2017 45
Price Reductions Clause 552.238-75 Triggers: Revisions to the commercial catalog, pricelist, schedule or other document upon which contract award was predicated that result in reduced prices. Grant more favorable discounts or terms and conditions to the tracking customer(s) than those contained in the commercial catalog, pricelist, schedule, or other documents considered at the time of award. Grant special discounts to the tracking customer(s) which disturb the price/discount relationship of the Government. May 8, 2017 46
Price Reductions Clause 552.238-75 Notification is also required if the tracking customer changes over the life of the contract through mergers or contract termination. This provision is found in your award letter. May 8, 2017 47
Price Reductions Clause 552.238-75 Exceptions Firm, fixed-price definite quantity contracts with specified delivery in excess of the maximum order threshold. Sales to Federal agencies. Sales to state and local government agencies who purchase off the FSS contract. Caused by an error in quotation or billing and adequate documentation is provided. May 8, 2017 48
Price Reductions Clause 552.238-75 Price reductions will be offered to the Government for the same time period as extended to the tracking customer(s) May 8, 2017 49
Price Reductions Clause 552.238-75 Common issues: Terms and conditions of the price reductions are irrelevant to the duty to disclose unless it fits one of the four exceptions. IDIQ and requirements contracts are not exceptions. Contracts excluded are not over the MOL and delivery not specified. May 8, 2017 50
Economic Price Adjustments 552.216-70 Contractors may request price increases when all of the following conditions are met: (1) Increases result from a reissue or other modification of the Contractor s commercial catalog/price list that was used as the basis for the contract award. (2) Increases are requested before the last 60 days of the contract period. (3) At least 30 days elapse between requested increases. May 8, 2017 51
Interaction Between FCPs and the Price Reduction/Economic Price Adjustment Clause May 8, 2017 52
FSS Price Reduction Clause Application to VHCA Covered Drugs The function of the Price Reduction Clause changes for those items on the schedule at the statutory price. The impact of the Price Reduction clause is different for a single pricer (i.e. FSS is the same as FCP) because the price is set by law or regulation. The PRC ratio for Big4 pricing at the statutory price is always 1:1 and only applies once the TC price falls below the FCP May 8, 2017 53
Price Reduction - Dual Pricer For OGA (negotiated) pricing, Price Reductions Clause works in the usual way. For Big4 pricing set at FCPs, Price Reductions Clause is applied such that if a price reduction to the tracking customer causes the OGA pricing to dip below the FCP, then the Big4 pricing must be reduced to match the OGA pricing This is only true if the negotiated TC ratio for the OGAs is less than 1:1 May 8, 2017 54
Price Reduction and FCPs An example with numbers (all are rounded, without IFF): OGA Big4 TC Ratio $100.00 $75.00 $105.00 0.95 $76.00 $75.00 $80.00 $74.00 $74.00 $78.00 May 8, 2017 55
Price Reduction - Dual Pricer What happens when the OGA ratio is greater than 1:1? There is the potential for the Big4 price to be affected prior to the OGA price. May 8, 2017 56
Price Reduction and FCPs An example with numbers (all are rounded, without IFF): OGA Big4 TC Ratio $102.00 $75.00 $85.00 1.2 $96.00 $75.00 $80.00 $84.00 $70.00 $70.00 May 8, 2017 57
Price Reduction and FCPs What if the Big4 price was a negotiated price, rather than a statutory price? The tracking customer ratio is established based on the relationship at the time of award. Any price reductions will apply immediately. If price reductions result in an FSS price that is less than the FCP max the FSS Max cap will govern. May 8, 2017 58
Price Reduction Clause: Dual Pricers where ratio is less than 1:1 $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 All FSS purchasers pay the FSS price once the price falls below FCP FCP FSS TC May 8, 2017 59
Price Increases - Dual Pricers Price increases can be requested only for the prices extended to non big-4 agencies not eligible to receive the FCP. During the first year of a multi-year contract, price increases can be requested without ceiling limitation, and at least 30 days must pass between requests. In this instance, the first year is the actual first year of the FSS contract. Not the first year for the purposes of the Public Law calculation. May 8, 2017 60
Price Increases: Dual Pricers In the second and subsequent year of a multi-year contract price increases are limited to the increase to the tracking customer or the FSS Max-Cap, whichever is less. This is unique to the Pharmaceutical schedule. May 8, 2017 61
Price Increases: Dual Pricers (First Year) $50.00 $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 FCP FSS TC May 8, 2017 62
Price Increases: Dual Pricers (Second and Subsequent Years) $50.00 $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 FCP FSS TC May 8, 2017 63
Price Reduction Clause: Single Pricers If the price established is the submitted FCP, the price reduction clause does not apply because the price is set by law or regulation. As stated previously, when the tracking customer price falls below the statutorily set price, price reductions apply at a ratio of 1:1. May 8, 2017 64
Price Reduction Clause: Single Pricers 45 40 35 30 25 20 15 10 5 0 Once the TC falls below the FCP the FSS price becomes the price paid for all purchasers FCP TC May 8, 2017 65
Industrial Funding Fee GSAR Clause 552.238-74 The current IFF is 0.5 percent Contract Price is determined by dividing the awarded price by.995 The FSS Max Cap is determined based on the FSS price without IFF. Reporting and payment is due quarterly. May 8, 2017 66
Modifications 552.243-72 Contractor may request a contract modification by submitting a request along with the required Request for Modification Form to the Contracting Officer for approval. At a minimum, every request shall describe the proposed change(s) and provide the rationale for the requested change(s). May 8, 2017 67
Modifications 552.243-72 During the performance of the contract, the contractor may: 1. Delete obsolete products and services; 2. Add new products and services; 3. Execute Item number changes; 4. Novation/Name change; and, 5. Request administrative changes. Clauses may also be updated by the NAC. May 8, 2017 68
Processing of Modification Actions Effective submission and timely processing take into account: The number of modification requests submitted The length of time between submission The inclusion of the modification request form The inclusion of supporting documentation with the modification requests May 8, 2017 69
Product Deletions Contractors must provide an explanation for the deletion. Government reserves right to reject any subsequent offer of the same item or a substantially equal item at a higher price during the same contract period, if it is determined the higher price is unreasonable in comparison. Covered Drugs may not be deleted until stock is depleted and no longer available through wholesalers. May 8, 2017 70
Product Additions SAME AS NEGOTIATING A NEW OFFER CSP Disclosures must be submitted Commercial Pricelist Letter of Commitment from manufacturer(s), (if a distributor) REQUEST FOR MODIFICATION FORM Delivery time(s) (clause 552.211-78) Production point(s) (clause 52.215-6) Hazardous Material information (clause 52.223-3) Trade Agreement compliance (clause 52.212-3(f)) May 8, 2017 71
Who can buy at what price? VA (including State Veterans Homes with a sharing agreement option 2), DoD, PHS (including Indian Health Service) and Coast Guard all receive FCP (or less). Other Eligible purchasers pay no more than the listed FSS price for an FSS purchase gsa.gov/graphics/fas/gsaorderadm480 0 2F.pdf May 8, 2017 72
Post-Award Reviews FSS May 8, 2017 73
Price Adjustment Failure to Provide Accurate Information 552.215-72 CO may reduce the price if CO determines after award of contract or modification that price was increased by a significant amount because the contractor failed to: provide required or requested information; submit information that was accurate, complete, or current; or disclose changes in commercial pricelists, discounts, or discounting policies that occurred after submission and before award. May 8, 2017 74
Price Adjustment Clause 552.215-72 Contractor is liable to the United States for any overpayments and simple interest. Any disagreement will be resolved as a dispute. CO may also terminate the contract for default. May 8, 2017 75
Price Adjustment Clause 552.215-72 How does VA find out? Post-Award Audit, Voluntary Disclosures, Civil actions filed under the qui tam provisions of the False Claims Act, and Complaints from employees, former employees, and competitors. May 8, 2017 76
Price Adjustment Clause 552.215-72 Defective Pricing For non-covered drugs, the issue is whether the contractor provided accurate, complete, and current CSP data during contract negotiations. For covered drugs, the issue is whether the FCPs were properly calculated. May 8, 2017 77
Price Adjustment Clause 552.215-72 Non-covered drugs Transactional sales information, rebates, and other data relating to sales that occurred 6 months prior to submission of proposal up to end of negotiations. Commercial contracts, company marketing and sales policies and procedures, etc. Covered drugs Same disclosure requirements apply even if the manufacturer intends on offering no less than their calculated FCP in effect at the time of the offer. May 8, 2017 78
Price Adjustment Clause 552.215-72 Covered drugs Reviews of a manufacturers calculated FCPs include the following: Internal policies relating to the FCP calculations. Marketing policies and procedures. All transactions that are made through the wholesaler sales, rebates, chargebacks, etc. May 8, 2017 79
Examination of Records 52.212-5 (d) Allows for the Comptroller General to have access to and right to examine any of the contractor s directly pertinent records involving transactions related to the contract. Records must be made available for 3 years after final payment. Records includes books, documents, accounting procedures and practices, and other data. Not required to create or maintain records outside the normal course of business or by law. May 8, 2017 80
Examination of Records - FSS AS13 Examination of Records by VA (a) Gives VA right to examine books, records, documents, computer tapes, and any other directly pertinent records of the Contractor to verify that the preaward pricing, sales, marketing and other data, related to the supplies and services offered under the contract which formed the basis for award were accurate, complete, and current. May 8, 2017 81
Examination of Records -FSS AS13 Examination of Records by VA Right under subparagraph (a) exists for 2 years after each of the following events Contract award Date of modification requiring new CSP information May 8, 2017 82
Helpful Hints Awareness of the contract provisions relating to retention and inspection authority should be incorporated into your document retention policy so that the relevant records remain reasonably accessible if needed in response to an inspection request. May 8, 2017 83
FSS Post-Award Reviews AS13 (a) Examination of Records by VA Only applies to proactive reviews. Clause does not apply to reviews of FCP pricing. Two year limitation does not apply to reactive reviews conducted in response to information received from third parties relating to contract violations or fraud, including qui tam actions filed under the False Claims Act, and voluntary disclosures. May 8, 2017 84
FSS Post-Award Reviews AS13 Examination of Records by VA Paragraph (b) provides that the VA has the right to examine the vendors records relating to the contract for overbillings, billing errors, compliance with the Price Reductions Clause, and compliance with payment of the Industrial Funding Fee clause. These reviews can be initiated up to 3 years after final payment May 8, 2017 85
FSS Post-Award Review Documentation needed for FSS post-award Sales transaction data for the 6- month time period prior to the award of the contract. All commercial sales transactional data from the date of award to the date identified in the request. Commercial contracts. May 8, 2017 86
Post-Award Reviews FCP May 8, 2017 87
FCP Post-Award Reviews 38 USC Section 8126 (e)(3) In order to determine the accuracy of a drug price that is reported to the Secretary under paragraph (1), the Secretary may audit the relevant records of the manufacturer or of any wholesaler that distributes the drug, and may delegate the authority to audit such records to the appropriate Federal agency. May 8, 2017 88
FCP Post-Award Reviews The VA OIG s Office of Contract Review currently conducts audits relating to FCP pricing. Authority not delegated to any other agency. No statutory or contractual time limitation for conducting the audit. Master Agreement requires manufacturer to retain all records relevant to generation of the required reports and calculations of annual FCPs for not less than 5 years from date of creation. May 8, 2017 89
Post-Award Documentation FCP Written policies and procedures used to calculate non-famps Documentation of any changes to the methodology used to compute non-famps Master Agreement, Pharmaceutical Pricing Agreement and all Addendum A s Organizational chart showing personnel responsible for computing non-famps and a description of their duties regarding quarterly and annual submissions To calculate overcharges, full transactional data for the Big Four. May 8, 2017 90
Penalties May 8, 2017 91
Penalties FSS pricing Administrative = overcharges plus interest False Claims Act = up to treble damages and $5,500 - $11,000 penalty per false claim Potential suspension/debarment or exclusion from participation in Federal healthcare programs. May 8, 2017 92
False Claims Act Elements of a False Claims Act Violation: the submission of a claim for payment (or payment of an obligation owed to the government) the claim was false the false claim was knowingly submitted the government suffered a loss (although some cases have been pursued for penalties alone where no loss could be established by the government) May 8, 2017 93
False Claims Act Lower Standard of Proof Re Intent Favors The Government in FCA Matters: No SPECIFIC INTENT TO DEFRAUD Is required to be proven by the government. The KNOWINGLY standard can be met by showing nothing more than a RECKLESS DISREGARD FOR THE TRUTH OR FALSITY OF THE CLAIM. May 8, 2017 94
Penalties FCP Section IV of Master Agreement VA may impose a civil monetary penalty not to exceed $100,000. Penalty of $10,000 per day for failure to provide information required under Section 8126(e)(1) on a timely basis. If not reported within 90 days of the imposed deadline, suspension of Master Agreement until date information is reported but no less than 30 days. (Section 1927(b)(3)(C) of the Social Security Act.) May 8, 2017 95
Penalties FCP (cont.) Section IV of Master Agreement (cont.) Up to $100,000 civil monetary penalty if the manufacturer knowingly provides false information. The penalty is assessed for each item of false information and is in addition to any other penalties that may be prescribed by law. (Section 1927(b)(3)(C) of the Social Security Act.) May 8, 2017 96
Voluntary Disclosures Informal program in VA. For contracting issues, disclosures made to VA OIG, Office of Contract Review. Disclosures can be made before internal review is completed. Consider discussing with VA OIG the criteria to be used in the internal review. Be prepared to provide results and supporting documentation to the VA OIG. May 8, 2017 97
Informal v. Formal Program Reviews of voluntary disclosures are done independently by the VA Office of Inspector General (OIG) No involvement by DOJ unless the matter is referred by the VA OIG No agreements signed by the parties May 8, 2017 98
Pitfalls of Self Audits Use of consultants and outside counsel who do not have the requisite expertise. Creative interpretations of contract terms and conditions as damage control. Reliance on inaccurate, incomplete, or irrelevant data. May 8, 2017 99
Voluntary Disclosures VA OIG may conduct an independent review to verify accuracy of results. Voluntary disclosure does not preclude a FCA referral to DOJ but impact penalties imposed. May 8, 2017 100
What the VA OIG Does Review the disclosure. Review Government files and discuss findings with VA contracting officer. Verify the data provided. Report results to the contractor. Refer matters to DOJ, if appropriate. Conduct settlement negotiations. May 8, 2017 101
How to Expedite the Process Provide information in a timely manner. Do not place limitations on reviewing the contract for pricing violations, e.g., limit the review to price reductions while ignoring defective pricing. Be sure that company officials are involved in discussions. May 8, 2017 102
Referrals to DOJ VOLUNTARY DISCLOSURES DO NOT RELIEVE THE CONTRACTOR OF LIABILITY UNDER THE FALSE CLAIMS ACT False Claims Act contains a provision that limits penalties to no less than double damages when an individual makes a voluntary disclosure. May 8, 2017 103
Points of Contact Mark Myers, 202-461-4633, mark.myers@va.gov Marci Anderson, 910-346-5020, marci.anderson@va.gov May 8, 2017 104
Questions? May 8, 2017 105