National Hemophilia Foundation - PowerPoint Presentation

National Hemophilia Foundation13th Annual Insurance and Reimbursement Conference Medicaid Drug Reimbursement Methodology Renaissance Baltimore Harborplace Hotel September 29 th , 2016 Michael Sharp, R.Ph.

Disclaimer The views and opinions expressed in this presentation are those of Michael Sharp, R.Ph. and do not necessarily represent the views and opinions of the Centers for Medicare and Medicaid Services or any State Medicaid program.

Discussion TopicsMedicaid BasicsFinancing/Rules/State Plan AmendmentsDelivery SystemsCMS “Covered Outpatient Drug” Final Rule 2345-FC Clotting Factor Payment Requirements/Approaches 340B Non 340B Perspectives Moving Forward 3

Medicaid BasicsFinancingFederal/State PartnershipFederal Matching Funds (FMAP/FFP)Rule Promulgation and State Plan Amendments (SPAs)Delivery Systems Fee for Service (FFS) Direct payments to providers from State Managed Care (MCO) Capitated payments from State. MCO pays providers.

Centers for Medicare and Medicaid Services “Covered Outpatient Drugs” Rule 2345-FCProposed rule released in February 2012 Over 425 commenters submitted input Final rule with comment published February 1 st , 2016 Addressed many pharmacy related program provisions including drug rebate changes and covered outpatient drug reimbursement States must comply with an effective date no later than April 1 st , 2017. State Plan Amendment must be submitted to CMS no later than June 30 th , 2017. Rule left many reimbursement areas open for interpretation, CMS has provided subsequent guidance to states, which has been beneficial 5

Centers for Medicare and Medicaid Services “Covered Outpatient Drugs” Rule 2345-FCRe-defines Medicaid Estimated Acquisition Cost (EAC) to Actual Acquisition Cost (AAC) for Retail Community Pharmacy paymentModifies Dispensing Fee to Professional Dispensing FeeRequires states to outline 340B payment methodology. Must pay no more than 340B ceiling price for covered outpatient drugs dispensed by Retail Community Pharmacies Requires states to document payment methodologies for physician administered drugs, specialty pharmaceuticals primarily distributed through the mail and clotting factor

Medicaid Estimated Acquisition Cost (EAC) to Actual Acquisition Cost (AAC)CMS desires transparency in drug ingredient price reimbursement and professional dispensing feesStates (Fee-for-Service) delivery systems will be required to move away from Average Wholesale Price (AWP) and Wholesale Acquisition Cost (WAC) as a primary basis of Retail Community Pharmacy claims payment for brand and generic drugs. Markup programs over cost such as state MAC (SMAC) programs will not be allowed as a primary method of paying for generic drugs. 7

Medicaid Estimated Acquisition Cost (EAC) to Actual Acquisition Cost (AAC)Primary drivers of the change:Pharmaceutical manufacturer AWP litigationFirst DataBank and McKesson AWP litigationNational Association of State Medicaid Directors (NASMD) AWP white paper calling for transparent pricing benchmark http://www.sharprx.net/uploads/2/7/5/6/2756589/awp_whitepaper_final.pdf https://oig.hhs.gov/oei/reports/oei-03-11-00060.pdf 8

National Average Drug Acquisition Cost (NADAC)CMS has contracted with Myers and Stauffer, LC to produce a weekly pricing file which has been implemented for nearly 4 years Represents the national average invoice price derived from Retail Community Pharmacies for brand and generic drug products based on invoices from wholesalers and manufacturers. Based on actual market transactions. Based on invoice prices voluntarily reported by 500- 600 pharmacies across the U.S. each month It does not reflect off-invoice discounts or rebates Updated weekly representing pricing for over 24,000 National Drug Codes (NDCs) Covers 93% of all Medicaid brand claim submissions Covers 98% of all Medicaid generic claim submissions https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Benefits/Prescription-Drugs/Pharmacy-Pricing.html9

Medicaid Estimated Acquisition Cost (EAC) to Actual Acquisition Cost (AAC)State pathways for migrating from EAC to AACCMS National Average Drug Acquisition Cost (NADAC), currently utilized by AK, DE, TX, NC, NV. Several others in planning stages. Majority of states are going to utilize the NADAC.State-level Average Acquisition Cost (AAC), currently utilized by AL, OR, CO, ID, IA, MT Fallback benchmark for drugs without an AAC based rate States required to establish Professional Dispensing Fee Recent in-state cost of dispensing (COD) study New in-state COD study Neighboring state’s COD study Conduct ongoing dispensing fee surveys every 2-3 years Represents actual pharmacy cost of transferring the covered outpatient drug to the Medicaid beneficiary 10

CMS State Plan Requirements 2345-FCClotting Factor11

State Medicaid Director/Pharmacy Director ConsiderationsAccess to quality services and clotting factor at a reasonable priceBest reimbursement practices utilized by other programsBudgetary pressureClotting factor budget impact ~6% of total pharmacy expenditures Average claim ~22,000 units at $28,000 payment Managed care capitation rates and rebate considerations Reliability and transparency of available pricing benchmarks Stakeholder input and recommendations Compliance with CMS State Plan requirements Specialty Pharmacy/State Patient Access Coalition Dobson DaVanzo cost of dispensing for clotting factor ~ $998.1912

13 Clotting Factor Pricing Comparison Clotting Factor Product Group Name ↓ Average Pharmacy Cost per Unit (non-340B) WAC WAC Equivalence to AAC AWP AWP Equivalence to AAC AWP - 16% AWP-16% Equivalence to AAC Medicare Allowable (ASP+6%+ 0.202 per unit) Medicare Allowable Equivalence to AAC   $ 1.00630 $ 1.52000 -33.80% $ 1.82000 -44.71% $ 1.52880 -34.18% $ 1.18100 -14.79%   $ 1.42237 $ 1.98000 -28.16% $ 2.38000 -40.24% $ 1.99920 -28.85% N/A N/A   $ 0.73538 $ 1.15000 -36.05% $ 1.38000 -46.71% $ 1.15920 -36.56% $ 0.96500 -23.79%   $ 0.67732 $ 1.32000 -48.69% $ 1.58000 -57.13% $ 1.32720 -48.97% $ 1.12300 -39.69%   $ 2.42868 $ 2.85000 -14.78% $ 3.42000 -28.99% $ 2.87280 -15.46% $ 2.81500 -13.72%   $ 0.88052 $ 1.03000 -14.51% $ 1.24000 -28.99% $ 1.04160 -15.46% $ 1.21700 -27.65%   $ 1.32561 $ 1.37000 -3.24% $ 1.64000 -19.17% $ 1.37760 -3.77% $ 1.44800 -8.45%   $ 7.40214 $ 9.90000 -25.23% $ 11.88000 -37.69% $ 9.97920 -25.82% $ 7.77400 -4.78%   $ 1.56751 $ 1.98000 -20.83% $ 2.38000 -34.14% $ 1.99920 -21.59% $ 1.89900 -17.46%   $ 1.60622 $ 2.16000 -25.64% $ 2.59000 -37.98% $ 2.17560 -26.17% $ 1.90100 -15.51%   $ 0.89019 $ 1.47000 -39.44% $ 1.76000 -49.42% $ 1.47840 -39.79% $ 1.18100 -24.62%   $ 0.80311 $ 1.33000 -39.62% $ 1.60000 -49.81% $ 1.34400 -40.24% $ 0.96400 -16.69%   $ 0.77408 $ 1.17000 -33.84% $ 1.40000 -44.71% $ 1.17600 -34.18% $ 0.99600 -22.28%   $ 1.14177 $ 1.48000 -22.85% $ 1.78000 -35.86% $ 1.49520 -23.64% $ 1.44800 -21.15%   $ 1.48420 $ 2.11000 -29.66% $ 2.53000 -41.34% $ 2.12520 -30.16% N/A N/A   $ 0.59507 $ 1.23000 -51.62% $ 1.48000 -59.79% $ 1.24320 -52.13% $ 0.96400 -38.27%   $ 0.85149 $ 1.46000 -41.68% $ 1.75000 -51.34% $ 1.47000 -42.08% $ 1.18100 -27.90%   $ 0.69667 $ 1.08000 -35.49% $ 1.30000 -46.41% $ 1.09200 -36.20% $ 0.96400 -27.73%   $ 0.94825 $ 1.27000 -25.33% $ 1.52000 -37.62% $ 1.27680 -25.73% $ 1.12300 -15.56%   $ 1.00630 $ 1.65000 -39.01% $ 1.98000 -49.18% $ 1.66320 -39.50% $ 1.39300 -27.76%   $ 1.54816 $ 2.00000 -22.59% $ 2.40000 -35.49% $ 2.01600 -23.21% $ 1.90000 -18.52%   $ 4.43161 $ 5.16000 -14.12% $ 6.19000 -28.41% $ 5.19960 -14.77% N/A N/A   $ 0.83801 $ 1.20000 -30.17% $ 1.44000 -41.80% $ 1.20960 -30.72% $ 1.21700 -31.14%   $ 0.83801 N/A N/A $ 1.44000 -41.80% $ 1.20960 -30.72% $ 1.21700 -31.14%   $ 1.00630 $ 1.52000 -33.80% $ 1.82000 -44.71% $ 1.52880 -34.18% $ 1.18100 -14.79%   $ 0.87084 $ 1.17000 -25.57% $ 1.40000 -37.80% $ 1.17600 -25.95% N/A N/A   $ 0.99663 $ 1.46000 -31.74% $ 1.75000 -43.05% $ 1.47000 -32.20% $ 1.23300 -19.17%   $ 0.65429 $ 1.30000 -49.67% $ 1.56000 -58.06% $ 1.31040 -50.07% $ 0.97600 -32.96%   $ 0.95919 $ 1.52000 -36.90% $ 1.82000 -47.30% $ 1.52880 -37.26% $ 1.19800 -19.93%   $ 0.95919 $ 1.52000 -36.90% $ 1.82000 -47.30% $ 1.52880 -37.26% $ 1.19800 -19.93% DRAFT Pricing as of 4/1/2016

Clotting Factor Medicaid Payment Scenarios340B Pre CMS 2345-FC Post CMS 2345-FC 340B Acquisition Cost or 340B Ceiling Price plus Dispensing Fee per unit or per prescription 340B Acquisition Cost or 340B Ceiling Price plus Professional Dispensing Fee per unit or per prescription. Related supplies billed separately. ASP+6% plus Dispensing Fee ASP+6% plus Professional Dispensing Fee, Medicare Part B Furnishing Fee not recognized by Medicaid State maximum allowable cost (variable mark-ups on cost) plus Dispensing Fee State maximum allowable cost rate plus Professional Dispensing Fee WAC (+/-) or AWP(-) plus Dispensing Fee WAC +/- or AWP +/- plus Professional Dispensing Fee 340B eligible covered entities can carve out or carve in Medicaid from 340B dispensations Some states may not allow 340B dispensations in any delivery system (MCO or FFS). Medication Therapy Management (MTM) Programs/Payment

Clotting Factor Medicaid Payment Scenariosnon 340B Pre CMS 2345-FC Post CMS 2345-FC Average acquisition cost plus Professional Dispensing Fee per unit or per prescription. Related supplies billed separately. ASP+6% plus Dispensing Fee. Furnishing fee has been applied in one state. ASP+6% plus Professional Dispensing Fee, Medicare Part B Furnishing Fee not recognized by Medicaid State maximum allowable cost (variable mark-ups on cost) plus Dispensing Fee State maximum allowable cost (variable mark-ups on cost) plus Professional Dispensing Fee WAC (+/-) or AWP(-) plus Dispensing Fee WAC +/- or AWP +/- plus Professional Dispensing Fee Submitted cost Submitted cost? Non 340B n ot allowed. All clotting factor claims pass through a single 340B provider Non 340B n ot allowed. All clotting factor claims pass through a single 340B provider ASP+20% ASP+20%? plus Professional Dispensing Fee Specialty Pharmacy Procurement-Pennsylvania Model through Freedom of Choice Waiver Specialty Pharmacy Procurement-Pennsylvania Model through Freedom of Choice Waiver Medication Therapy Management (MTM) Programs/Payment

PerspectivesCMS will continue to pursue transparent ingredient pricing and professional dispensing fee initiatives for Fee-for-service (FFS) Medicaid Programs. NADAC and AAC will be rapidly implemented up to the required deadline.CMS and states will continue to become more knowledgeable regarding non 340B acquisition costs and 340B acquisition costs for specialty drugs including clotting factor. AAC (340B and non 340B) programs will likely be the primary basis for payment in the future. Impact on specialty pharmacy only drugs (including clotting factor) to be determined as CMS evaluates best practices for specialty pharmacy reimbursement. Anticipate CMS best practice guidance or rule addressing specialty pharmacy /clotting factor in 2017/2018. Specialty pharmacy will be a continued area of intense focus for all payers. Commercial PBMs, including those owned by MCOs, will continue to direct specialty dispensations to their own specialty pharmacies. 16

PerspectivesCMS will require FFS Medicaid Programs to pay no more than the 340B ceiling price plus a professional dispensing fee for 340B drugs dispensed by Retail Community Pharmacies. Many states will require 340B acquisition cost or ceiling price billing for clotting factor even though not required by the rule.Risk based Medicaid managed care will continue to expand and include the most vulnerable patient populations. Some states will not allow any 340B billing in FFS and MCO Medicaid or tightly control how much is paid to protect from rebate losses. The 340B program will undergo significant changes to regulate and ensure the original program intent. Contract pharmacies and covered entity profit will be an area of focus. Medicaid Preferred Drug Lists and Supplemental Rebate Programs will continue to evolve and likely include clotting factor classes in the near future.

Contact Information:Michael Sharp, R.Ph.Mike@SharpRx.netC 317-565-9875www.SharpRx.net Questions/Discussion 18