Making Sense of Government Programs: Assessing the Impact of Expanding Rebates, Discounts and...

Results In Revenue

© 2012 Model N, Inc. All information is proprietary and confidential.

Making Sense of Government Programs – Assessing the Impact of Expanding Rebates, Discounts and Customer Behavior on Pre and Post Deal Contracting Strategy

Jesse Mendelsohn, Associate Director Model N

Kris McGraw, Solutions Principal Model N

Ron Sandhu, Associate Director High Point Solutions

© 2012 Model N, Inc. All information is proprietary and confidential. Results In Revenue

Agenda

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Time Topic

1:30 – 1:45 Aligning Objectives between Regulatory and Commercial: The Old and the New

1:45 – 2:00 Current analyses your peers are performing today

2:00 – 2:10 What’s coming in the near and distant future?


Aligning Objectives: Regulatory & Commercial

• Never before has commercial contracting practice been established with as much input from the regulatory practice

• As recently as 5 years ago there was a large disconnect

• DRA was the engagement … Health Care Reform is the marriage

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• What are the regulatory implications of commercial contracting strategies?

• Oldies but goodies: Will a new contract strategy set a new BP?

Is the revenue we’re going to make from the new strategy offset by likely increase in Medicaid rebate liability?

Are downward trends in my commercial prices decreasing my ASP? How will this impact Medicare physician reimbursement and the competitiveness

of my drug in the Medicare market?

Will a contract change result in a lower price for my FSS tracking customer? Is the revenue I’m going to make from the lower tracking customer price offset by

a potential decreased FSS price?

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• New Ones due DRA and more recently HCR: Is my contract pricing or rebate arrangement a bundle?

Will I need to reallocate discounts and rebates as part of my government pricing processes?

Will the revenue we make by the bundled arrangement be offset by increases in Medicaid liability?

Is my pricing and rebate relationship with retail community pharmacies still sound business now that their sales have a greater impact on AMP? As retail community pharmacy prices and rebates now comprise most of the AMP

calculation for non-5i drugs, are the strategies still sound given their greater impact on my Medicaid liability?

If a product has a small volume of retail community pharmacy transactions, a single misresolved chargeback can have dramatic repercussions.

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Are my line extensions / new formulations still profitable? Is the new HCR URA calculation increasing my Medicaid liability?

• Are my Managed Medicaid units “double dips”? A unit rebated as part of a commercial PBM contract can then be

submitted again as part of a managed Medicaid invoice. This may be contractually allowed – however you may consider analyzing

your commercial agreements to limit these “double dips.”

• Is my branded prescription fee assessment (IRS) impacting my NDC’s profitability? Is the government calculating their purchases correctly? Should I dispute? How does this impact my bottom line?

• Is the rigid definition of “exclusively pediatric” increasing my rebates?


What are your peers doing today?

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Current Behaviors Pre and Post Deal Contracting Strategy

• Pre-deal, the business wants to know the impact of any new programs, especially when bundles are a factor in BP determination.• Details of credit, voucher, coupon, replacement, and sampling programs• Details of Patient Assistance Programs operated or funded by Company

o (administration, mechanics, personnel and funding)

• Managing accruals with healthcare unknowns/changing program coverage. • Some Manufacturers’ products could become 5i depending upon final rule.

• Impact of price increases including their timing.• Analysis of sales percentages broken down in detail by COT and

channel• Avoid revenue leakage

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Analysis ImpACT of working together

• Using Analytics to Make Better Pricing and Contracting Decisions• Synthesize internal & external data• Segment prices and set “fair market” prices

• Executing Contracts and Measuring Compliance to Reduce Net Revenue Erosion• Eliminating fragmented processes & systems• Increased leverage during negotiation stages• Forecast and track deal economics

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What does the future hold?

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• Expansion of Medicaid/CHIP to non-elderly adults and children with incomes up to 133 percent of the Federal Poverty Level

• Individual mandate to obtain health insurance, or financial penalty for failing to do so

• Will add approximately 40M new lives to Medicaid and Health Exchanges

• Medicaid Managed Care Plan utilization is now eligible for MDRP rebates

Key Provisions in Health Reform

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Effects of Reform on Health Insurance Coverage

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Source: Congressional Budget Office and the staff of the Joint Committee on Taxation

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lled

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• New York• Massachusetts• Hawaii• Vermont

However, Medicaid Expansion under Health Reform will not impact all states equally…

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• New Jersey• California• Alabama

• Texas

• Medicaid expansion will disproportionately affect states with low levels of coverage

• States with low coverage, or lacking coverage for childless adults, will see reductions of 40% to 50% in uninsured adults below 133% of FPL, vs. reductions of 10% to 20% for states with wider coverage

Source: The Kaiser Commission on Medicaid and the Uninsured


How Much Difference One Year Can Make…

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Source: Congressional Budget Office and the staff of the Joint Committee on Taxation

• Higher unemployment and lower wages will increase people eligible for Medicaid, and impact eligibility for health exchanges

• Growth in private health insurance premiums has slowed over the last several years

March 2011 Estimate March 2012 Estimate

Updated CBO Estimates for 2016

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Effects of Eliminating Individual Mandate on the Uninsured

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Source: “Effects of Eliminating the Individual Mandate to Obtain Health Insurance” – June 16, 2010, Congressional Budget Office and the staff of the Joint Committee on Taxation

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Trends in Managed Medicaid…

• Historically, Managed Medicaid ineligible for MDRP rebates established under OBRA ‘90, incentivizing states to create FFS programs or carve out prescription drug coverage

• Nevertheless, States have been experimenting with Managed Medicaid since the 1980’s

• The trend of states moving from FFS to Managed Medicaid will likely accelerate• Texas, New York, Ohio recently carved pharmacy benefits back into

Managed Medicaid

• With mounting budgetary pressures, states are increasingly mandating managed care for previously exempt populations, like people with disabilities

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How will contracting strategies with PBMs evolve?

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PBMs

INDUSTRY STRUCTURAL CHALLENGES

NEW POTENTIAL SOURCES OF

REVENUE

INCREASING GOVERNMENTAL

SCRUTINY• Transparency Reqs.• % Scripts:• Retail vs. Mail• Generic vs. Brand• Amount & Type of

Price Concessions, and Pass Through

• Expansion in Managed Medicaid

• Health Exchanges• Employer Plans?

• New approvals in many therapeutic areas are slowing

• After patent cliff, less opportunity for brand to generic switching


Key Questions for Manufacturers…

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• Who will be the “winners” in the health insurance exchange marketplace?

• Which commercial plans have experience in the Medicaid marketplace, placing them at a competitive advantage?

• Double discounts on Managed Medicaid utilization?


Key Considerations & Best Practices

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• More important than ever not to inadvertently set a new Best Price

• Multi-Disciplinary Pricing Committee• Recognize product-specific impacts

• For example, Single Source and Innovator products with Best Price discounts in excess of 23.1%

• Develop informed reserves, accruals, and forecasts• Clearly define contracting objectives (profitability,

customer significance)• Develop “win” and “lose” scenarios, and turn lost

bids into opportunities to test “loss” scenarios


Thank you!

• Ron Sandhu• [email protected]

• Kris McGraw• [email protected]

• Jesse Mendelsohn• [email protected]

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Making Sense of Government Programs: Assessing the Impact of Expanding Rebates, Discounts and...

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Transcript of Making Sense of Government Programs: Assessing the Impact of Expanding Rebates, Discounts and...