SETTING A STANDARD FOR GP COMPLIANCE CURRENT LANDSCAPE AND WHAT DOES GP COMPLIANCE LOOK LIKE? MAY 9, 2017 2017 HURON CONSULTING GROUP INC.
SPEAKER INTRODUCTIONS Clay Willis Director T 404-825-3319 E cwillis@huronconsultinggroup.com John Moose, ABV Director T 312-350-7617 E jmoose@huronconsultinggroup.com 2 2016 HURON CONSULTING GROUP INC.
TODAY S OBJECTIVES +Background including OIG focus areas from 2016 and 2017 +Recent GP Settlements and Evolving View of GP Compliance +Key GP risks and clarification around the determination and treatment of bona fide service fees and fair market value +What is GP compliance are there key benchmarks or elements of a successful compliance program +What would GP Assessment evaluate, what does it look like, and what are the key outcomes? +Key Questions when considering a GP Assessment 3 2017 HURON CONSULTING GROUP INC.
1 BACKGROUND AND CURRENT GP FOCUS AREAS
CURRENT LANDSCAPE + US healthcare and health insurance costs have risen steadily + Merger and Acquisitions Continue + Government market continues to grow over time GP and Medicaid Operations + Drug pricing and transparency of price increases have become a focus in the news and internally Compliance + New cost sharing initiatives have begun and manufacturers are evaluating various new and evolving contracting strategies Market Access & Contract Strategy + Being able to measure the success of the opportunity, understand potential GP and Medicaid impacts, and manage risks from a broader compliance perspective 5 2017 HURON CONSULTING GROUP INC.
GOVERNMENT PROGRAMS GROW & INCREASE; COMPLIANCE BECOMING A MAJOR FOCUS As a result of increasing drug spend, federal and state governments are focusing more on manufacturer compliance Government healthcare programs, such as Medicaid and Medicare continue to grow Over 60% of Americans are expected to receive some benefit from a publicly funded program The Office of Inspector General (OIG) oversees the federal programs with the mandate to protect the integrity of the programs OIG/DOJ can penalize or pursue FCA remedies if data (statutory pricing calculations) reported to the government causes the government to pay more than they should for a manufacturer s products Manufacturers are expected to have processes, systems and controls in place to ensure the accuracy of their calculations The calculations are very complex, and in many cases guidance is insufficient and/or unclear, and manufactures must make reasonable assumptions 6 2017 HURON CONSULTING GROUP INC.
WHERE THE OIG IS FOCUSED DURING 2016 & 2017 The HHS OIG publishes an annual Work Plan, which defines their focus across Federal Programs and stakeholders. Key focus areas related to Manufacturers include: + Comparison of ASP to AMP + Part B payments for drugs purchased under the 340B Program + Increase in prices for brand-name drugs under Part D + States collection of rebates on physicianadministered drugs + States collection of rebates for drugs dispensed to Medicaid MCO enrollees + Medicaid - Treatment of Authorized Generics in AMP + Specialty drug pricing and reimbursement in Medicaid + Medicaid - Reimbursement Rates for Drugs Dispensed Through Specialty Pharmacies + Medicare Part B - Potential Inflation-Based Rebates + Medicare Part D - Rebates for Drugs Dispensed to 340B + Manufacturer rebates Federal share of rebates + Analysis of generic price increases compared to price index + Manufacturer compliance with AMP reporting requirements + HRSA duplicate discounts for 340B-purchased drugs 7 2017 HURON CONSULTING GROUP INC.
AND WHERE OIG WILL SPECIFICALLY FOCUS DURING 2017 REASONABLE ASSUMPTIONS + In a December 6, 2016 letter to Senator Charles Grassley (R-Iowa), the OIG stated that it will conduct three MDRP reviews not included in the 2017 Work Plan. These reviews will focus on CMS's oversight of the Medicaid Program regarding the correct classification of drugs and the accuracy and validity of data reported under the MDRP. + Specifically, the OIG stated that it will: 1. Examine the accuracy of CMS's Medicaid drug rebate classification data In part due to the Mylan EpiPen categorization case, the $465M settlement based upon the classification of EpiPen as a branded drug); 2. Review the Food and Drug Administration (FDA) approval status of drugs paid for by Medicaid; 3. Review the reasonable assumptions upon which manufacturers rely when calculating drug prices (AMP & BP) for the MDRP and also interview CMS staff regarding the agency's oversight of manufacturer reasonable assumption submissions. 8 2017 HURON CONSULTING GROUP INC.
WHY THE FOCUS ON ASP & AMP? + Published pricing metrics, very visible to the Agencies, States, and the OIG + Both dramatically impacted by Bona Fide Service Fee Treatments + Higher ASP can be perceived to be favorable to the manufacturer - Creates a focus on Bona Fide Service Fee Treatment + OIG is focusing on AMP and BP Methodologies and on Reasonable Assumptions + Higher AMP means Higher Medicaid Rebate, Lower AMP means lower Medicaid rebate - Published AMP used for Medicaid Federal Upper Limit (FUL), which is important to the retail industry; FULs can be aggregate of multiple manufacturers for multisource drugs - Directionality of AMP and URA also directly impacts PHS Price, also very visible in the industry 9 2017 HURON CONSULTING GROUP INC.
2 RECENT GP SETTLEMENTS 10 2017 HURON CONSULTING GROUP INC.
GP ENFORCEMENT EXAMPLE: SANDOZ Inaccurate GP Reporting + In March 2016, the OIG announced the newest of the settlements related to GP and the Medicare Part B Program. + Sandoz a subsidiary of Novartis is a $750 million company. + Allegedly misrepresented the ASP data to CMS + Sandoz Inc. to pay $12.64 million fine + Sandoz to certify that the company has established a GP compliance program How does this inform us on the Government s evolving view of a GP Compliance Program? 11 2017 HURON CONSULTING GROUP INC.
THE SANDOZ SETTLEMENT: CONSIDERATIONS FOR GP COMPLIANCE + The Sandoz settlement provides a view of the OIG s evolving perspectives of a robust GP Compliance Program + Compliance program elements required by the Settlement: A Government Pricing Compliance Director A Government Pricing Compliance Committee Dedicated departmental liaisons knowledgeable in Government Pricing Policies for each relevant business function A Code of Conduct Government Pricing Policies and US Supplement (related to Federal health care programs) An annual GP training program A GP audit program A GP Disclosure program 12 2017 HURON CONSULTING GROUP INC.
GP ENFORCEMENT EXAMPLE: SANOFI PASTEUR VA Overcharges + In April 2017, Sanofi Pasteur agrees to pay $19.8 Million to resolve VA FSS Overcharges. + Self-disclosed to the VA that it had incorrectly calculated the FCP for certain drugs from 2007 to 2011 and overcharged the VA. + The OIG for the VA investigated the matter, and it determined that the error resulted in overcharges going back to 2002. + Under the settlement, in addition to paying approximately $19.8 million, Sanofi Pasteur has agreed that it will not pursue claims for reimbursement for sales where it contends its error in calculating the FCP resulted in a lower price to the VA. 13 2017 HURON CONSULTING GROUP INC.
3 KEY GP COMPLIANCE RISKS
IMPORTANCE OF GP AND COMMERCIAL COMPLIANCE + GP compliance in pharmaceutical manufacturing falls under the broader category of U.S. Commercial Compliance and is under the Office of the Inspector General s (OIG) scope and mandate (both HHS OIG and VA OIG). + As you saw in the recent GP settlements, agencies have their own rule making processes; various administrative agencies publish regulations and guidance applicable to specific Federal programs. Non-compliance with a federal program may result in: 1. monetary fines 2. personal liability, and 3. exclusion from future participation in government programs. + Manufacturers may be subject to prosecution under: Federal Anti- Kickback Statute State and Federal False Claims Acts Other state and federal laws related to the MDRP 15 2017 HURON CONSULTING GROUP INC.
KEY GP COMPLIANCE REQUIREMENTS + C-suite (CEO/CFO) level certification. Medicaid and Medicare require certification of the accuracy of AMP/BP and ASP submissions. + The Ten Year Rule. Manufacturers must save all data and documents related to Medicaid for at least ten years. + $10,000 daily penalties per NDC-11 for failure to report AMP & BP - Five days late = $50,000 penalty per NDC-11 - Thirty days late = $300,000 penalty per NDC-11 + $100,000 CMP for false information knowingly provided to CMS + Lack of Reasonable Assumptions. Manufacturers must document interpretive decisions made on how they will calculate GP values + Civil and criminal charges. May be filed against a company and senior management, especially if an intent to defraud the government or gross negligence is proven. 16 2017 HURON CONSULTING GROUP INC.
REVIEWING & DOCUMENTING BONA FIDE NATURE OF SERVICE FEES + Streck Case, 2012 - Relater alleged that various drug manufacturers violated the False Claims Act based upon their treatment of service fees paid to wholesalers, and that manufacturers made a determination based upon what was in their benefit in the calculation of AMP - The court concluded that historically, there was insufficient guidance related to the treatment of fees in AMP prior to the establishment of the BFSF regulatory language in 2007 with the AMP Rule + 2016 AMP Final Rule Requiring Documentation of the FMV Determination - In the preamble to the 2016 Final Rule, CMS made several references to documenting FMV determinations: any documentation can be used, provided that it makes clear the methodologies or factors the manufacturer used in making its fair market value determination We believe that any documentation can be used, provided that it clarifies the methodologies or factors the manufacturer used in making its fair market value determination, and the manufacturer maintains adequate documentation supporting its determination. 17 2017 HURON CONSULTING GROUP INC.
INCLUSION OR EXCLUSION OF PAYMENTS/FEES + Payments to third parties/middlemen are one of the most scrutinized areas in pricing today, with both FCA and Anti-Kickback risks + The OIG recognizes that the treatment of payments, including or excluding in the pricing calculations, can dramatically impact the calculations + Reiterates as well the focus on the middleman + Each manufacturer has to perform their own due diligence on whether fees will be considered included or excluded + Treatment of an agreement as an excludable Bona Fide Service Fees would generally drive all price points higher, which could be conservative for AMP with a potential higher URA, but also a higher ASP in the market, and higher FSS and PHS price, which could be perceived as aggressive ASP AMP FSS PHS URA 18 2017 HURON CONSULTING GROUP INC.
SERVICE FEE COMPLIANCE REQUIREMENTS + Bona Fide Service Fees To be excluded from GP calculations, a payment must be determined to be a Bona Fide Service Fee CMS requires documentation of a manufacturer s rationale and treatment of fees + Four Part Test: 1 2 The fee for services represents fair market value Services are itemized 3 Services are actually performed on behalf of the manufacturer and are tasks that the manufacturer would otherwise perform 4 Fee is not passed on (all or in part) to a client or customer 19 2017 HURON CONSULTING GROUP INC.
In Addition to the Four Part Test + The recent Addendum to the Corporate Integrity Agreement for Novartis Pharmaceuticals Corporation (dated November 19, 2015) suggests that, to help ensure compliance with the Anti-Kickback Statute, pharmaceutical companies should establish and implement the following: A written review and approval process for all arrangements that includes at least the following a process for specifying the business need or business rationale for each service provided under the FFS arrangement and determining and documenting the fair market value of the remuneration specified in the FFS arrangement 20 2017 HURON CONSULTING GROUP INC.
4 WHAT DOES GP COMPLIANCE LOOK LIKE? 21 2017 HURON CONSULTING GROUP INC.
WHAT IS GP COMPLIANCE? AUDIT READINESS + Regulation and Guidance is limited, and manufacturers are required to make reasonable assumptions to apply available guidance to their business. - Can you demonstrate good faith effort & due diligence to evaluate available guidance, make appropriate reasonable assumptions, develop accurate methodologies, and demonstrate the accuracy of your calculations? + GP Compliance can best be viewed as a state of audit-readiness. - Understand the regulations and guidance that define requirements under the various Federal health care programs - Evaluate the guidance and develop reasonable assumptions for your business - Establish and maintain polices, procedures and controls to help ensure ongoing compliance, specifically including the accuracy and integrity of required statutory pricing - Demonstrate that you can ensure the accuracy of your statutory pricing calculations, including performing Bone Fide Service Fee Assessment - Maintain audit readiness to demonstrate the company s GP compliance program and preparedness for an external audit over time 22 2017 HURON CONSULTING GROUP INC.
GP COMPLIANCE EVALUATION Description and Alignment of Compliance to the End-to-End Process + The framework, which assesses the end-to-end GP environment, divides each piece of the process and documentation into the appropriate GP compliance criteria. The criteria are further described as: Procedure and Methodology Documentation Data Validation and Reconciliation Calculation Review and Integrity Leadership Certification and Review Ensuring that policies, methodologies, reasonable assumptions, and procedural (SOP) documents, to comply with government program calculations and reporting requirements, are developed, documented, stored, and maintained Ensuring that steps and procedures for maintaining data integrity are documented and executed when extracting, reconciling, and exchanging transactional and domain data for consumption in calculations Ensuring the application of the methodology and reasonable assumptions is performed in a compliant environment with appropriate oversight and reproducibility of calculations to produce accurate GP calculations Ensuring the accuracy of calculations through review, impact assessment, and certification of calculated price reports and price types is performed with appropriate stakeholders 23 2017 HURON CONSULTING GROUP INC.
GP COMPLIANCE EVALUATION Examples of Findings and Observations + The following example findings and observations for each of the compliance evaluation criteria, as seen across the industry, serve as supplementary points of reference to further understand the framework: Procedure and Methodology Documentation Data Validation and Reconciliation Calculation Review and Integrity Leadership Certification and Review 1. Documentation is not up to date with latest legislation. 2. Methodology contains a potential incorrect treatment for a customer class of trade or other key GP filters. 3. There is limited documentation of BFSF/FMV review (and results). 1. Evidence of reconciliation performed against the General Ledger is missing. 2. Transactions were manually updated, post extraction. 3. Transactional data has missing information or gaps. 4. Transactions undergoes mapping with no documentation 1. Manufacturer may not have appropriate training related to Government Programs to provide necessary oversight. 2. Manufacturer may not have performed necessary testing or auditing of calculations to ensure accuracy and correct utilization of the methodology. 1. Manufacturer may not be complying with CMS requirement to have a CEO, CFO, or direct designee of one of these individuals who has been granted certification authority to certify data in DDR. 2. Cross functional ownership review was not done during the GP review process. 24 2016 HURON CONSULTING GROUP INC.
WHAT IF WE FIND ISSUES? + Types of issues - Methodology incorrect - Documentation does not align to System where GP Calculation are performed - Lack of or insufficient Reasonable Assumptions - Data Errors + What to do? - CMS Three Year Window Potential PHS overcharges: generally trend to the CMS Three Year Window Potential VA overcharges: can follow own timeline - Agency protocols and communication vary across programs + Predicting directionality and impact - Treatment of certain components, such as service fees, could create calculation errors in both directions simultaneously - An impact on one program, i.e., overpayment of Medicaid, could have an opposite impact on other program, i.e. overcharge PHS 25 2017 HURON CONSULTING GROUP INC.
5 OVERVIEW OF GP ASSESSMENT
ENSURING GP-RELATED METHODOLOGY, PROCESSES AND SYSTEMS ARE COMPLIANT AND THAT THE COMPANY HAS CONFIDENCE IN THE CALCULATIONS Create and Document Procedures & Methodology Data Integrity Validation & Reconciliation Calculation Integrity Leadership Certification of Calculations Benefits Standardizes and documents Company s interpretation of reporting requirements in policies/procedures Consistent, automated application of methodology to relevant data (e.g. COT assignment) Helps ensure that the system s application of Company s methodology delivers the expected results Leadership s statement to the government on behalf of Company that all of the preceding steps have occurred Compliance Assessment Steps Policy & SOP Review; Methodology Review; COT Review; BFSF Review Reasonable Assumptions Validation and Financial Reconciliation, Process Documented Transactional Testing Parallel Calculation Testing Review Process Documentation (e.g. Certification Process, Data & Document Retention Process) Responsible Party (General) GP Legal Compliance GP Finance IT Compliance GP Finance Legal Compliance CEO/CFO GP Legal Compliance 27 2017 HURON CONSULTING GROUP INC.
GP ASSESSMENT PROPOSED APPROACH Three-Phase Approach GP Environment Assessment Parallel Calculation of Prior Quarter Management Report Phase I: + Data and Document Review + Discussions with Key Stakeholders + GP Compliance Assessment of Documentation, Methodology, Communication, Leadership Oversight, Training, Certification + Review of Service Fees and BFSF Assessment Phase II: + Transactional Data Gathering and Validating + Sample Parallel Calculation + Key Drivers of Differences Analysis, if necessary + Review of Parallel Calculation Results with Key Stakeholders Phase II: + Development of Management Report + Roadmap with key priorities + Report Review with Key Stakeholders 28 2017 HURON CONSULTING GROUP INC.
OUTCOMES FROM A GP ASSESSMENT + After completion of the GP Assessment, the manufacturer will be able to gain visibility into the following areas and be in possession of the appropriate remediation steps to correct problem areas and continue of a path of a compliant GP program: Insight into the company s current GP environment Potential areas of risks and exposure specific to the Government Programs A baseline of GP compliance against available guidance A readiness assessment of how prepared your company is for an upcoming audit or legislative changes A roadmap with recommendations and next steps to become compliant 29 2017 HURON CONSULTING GROUP INC.
THE BENEFITS OF A COMPLIANT GP PROGRAM + Performing a GP assessment is the critical step to be able to demonstrate a company s due diligence and good faith effort in this area + A GP assessment will demonstrate your ability to detect and respond to issues and gaps, reduce risk, and also baseline against the OIG s seven elements for an effective compliance program for pharmaceutical manufacturers + Fulfills company s legal duty to avoid submitting false or inaccurate pricing or rebate information to any federal health care program + Provides a concrete demonstration to employees and the community at large of the company s commitment to honest and responsible corporate conduct + Through early detection and reporting, minimizes any financial loss to the government and any corresponding financial loss to the company 30 2017 HURON CONSULTING GROUP INC.
KEY QUESTIONS FOR YOUR CONSIDERATION As we leave today, ask yourself or someone in your GP function if they can answer any of the following questions: 1. When was the last time your company performed a GP Assessment? If so, what were the key observations and were they all remediated? 2. Have there been any recent external changes (e.g. merger or acquisition) or internal changes (e.g. staff turnover, newly launched NDCs, implementation of a GP system) that may have impacted your GP function? 3. Do you know if your GP polices and procedures are complete, up to date, and fully aligned with current regulations and industry best practices? 4. Do you have reasonable assumptions and were they reviewed by legal? 5. Do you feel you have proper oversight by senior leadership of your GP function? 6. Do you feel you have an appropriate amount of resources within your GP function? 7. Has a recent independent GP calculation or testing been performed to ensure the current policies and procedures match the actual price results? 8. Does the C-level person signing off on the GP values each month and quarter know about the GP compliance risks associated with their submissions? 31 2017 HURON CONSULTING GROUP INC.
QUESTIONS? 32 2016 HURON CONSULTING GROUP INC.
THANK YOU Clay Willis 404-825-3319 Mobile cwillis@huronconsultinggroup.com John Moose 312-350-7617 Mobile jmoose@huronconsultinggroup.com