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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
What to Expect When You Are Expecting an FSS Contract:
A Practical Guide
Cynthia Bass Associate General Counsel
Sanofi US
“Big Four” Pharmaceutical Pricing Boot Camp May 19, 2014
Constance A. Wilkinson Member of the Firm
Epstein Becker & Green‚ P.C.
© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• This presentation represents the personal views of the speakers and is not intended to represent Sanofi U.S.’ position or legal advice or those of EBG.
Disclaimer
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• You are excited! You start your new job today. You are working for a new pharmaceutical manufacturer as the Director of Government Pricing and Contracts.
• You have heard about the company’s new drug and you know it will be a blockbuster.
• But wait, your company wants to sell its product to the Department of Veterans Affairs (VA).
• What do you need to do to make that happen?
Introduction
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Overview/Roadmap
History Initial Steps FSS Kick Off
Considerations
Timeline for Obtaining an FSS
Contract
Covered Drugs
Significant Steps of FSS Process
Maintenance of FSS Contract
Hot Button Issues
Critical Factors for Success
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• OBRA ‘90 created the Medicaid Drug Rebate Program that required manufacturers to pay rebates to the states based upon pricing calculations.
• Previously, the VA had received high discounts on the pharmaceuticals that it purchased.
• Because these discounts were included in the Medicaid Rebate calculations, manufacturers discontinued the VA prices, causing the VA to cut back on healthcare coverage and programs.
Omnibus Budget Reconciliation
Act of 1990
History
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Omnibus Budget Reconciliation
Act of 1990
Veterans Health Care Act of 1992
• The Veterans Health Care Act of 1992 “fixed” the problem by imposing pricing calculations and requirements for vendors, including pharmaceutical manufacturers:
– Master Agreement (MA)
– Pharmaceutical Pricing Agreement (PPA)
– FSS Contract
• Participation in the VA FSS for covered drugs is required if the manufacturer wants to participate in Medicaid.
History
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• This means the new company needs to become a government contractor. As a government contractor, the company will be subject to additional obligations and prohibitions.
• There are serious potential sanctions for non-compliance.
• Oh, my, what do you do?
Omnibus Budget Reconciliation
Act of 1990
Veterans Health Care Act of 1992
What does this mean for you?
History
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Initial Steps
• A manufacturer of covered drugs must enter into a MA under which the manufacturer must make available each of its covered drugs on the FSS (38 U.S.C. § 8126(a)(1)).
• The MA outlines the vendor’s responsibilities & obligations associated with the statute. Specifically, the MA requires them to submit non–FAMP data to the VA to establish federal ceiling prices (FCP).
• The terms and conditions of the MA are non–negotiable and the same for all 65 I B contractors. The MA is an evergreen document and, as such, does not expire.
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• The manufacturer must also enter into a PPA and agree to sell to the Big Four purchasers through the FSS or a depot at not more than the FCP (38 U.S.C. § 8126(a)(2)).
– VA, DoD, Coast Guard, and the Public Health Service (including Indian Health Services).
• The PPA Addendum A is updated annually to reflect FCPs of covered drugs for the calendar year.
• PPA Addendum A is available at: http://www.va.gov/oal/docs/business/nac/fssPL102-585_2014PpaAddendumA.docx
• To begin the process and obtain the initial MA, PPA, and Interim Agreement (IA) documents, send an initial request to: [email protected]
Initial Steps
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• The VA requires that manufacturers obtain an Interim Agreement (IA) while negotiating a VA FSS contract.
• As part of this process, manufacturers are required to provide to the VA:
– All relevant information regarding the affected drugs
– Relevant information on the company adding the items
– Contact information for the company adding the items
– Registration in the System Award Management (SAM) database
• The timing for this process varies depending on the amount of time it takes the contractor to return documentation.
Initial Steps
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• Identify responsible stakeholders: – Trade
– Managed Markets
– Business Unit Heads
– Legal
– Compliance
– Government and Commercial Pricing
• Develop Project Plan and Communication Plan.
• Conduct kick off with all stakeholders to gain buy in.
• Gather and collect required data.
• Discuss and review data with stakeholders and legal.
FSS Kick Off Considerations
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• Evaluate any newly acquired products or new products to the market.
• Evaluate any commercial pricing or contracting decisions that may affect the FSS.
• Evaluate and determine the source of all API of products prior to including any products on the FSS price proposal.
• Implement a plan to determine price changes, especially if the tracking customer will be a category of commercial purchasers.
Specific Considerations for Pharma
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Analysis of
Products Registration CSP Analysis
Audit and Negotiations
Awarded Contract
Maintenance
• Covered Drug Determination
― 42-2A
― 42-2B
• TAA
• Manufacturing Facilities
• Price Proposal
• SAM.gov
• Small Business Subcontracting Plan
• Commercial Customers
• Prices
• Discounts
• Tracking Customers
• Descriptions
• Possible Exemptions
• Audit
• Strategy
• Additional Documentation
• Refresh CSP Data
• Basis for VA’s Decision
• Refresh CSP Data
• Price lists
• IFF and Reports
• Price Reductions
• Modifications
• Annual Requirements
• Contract Renewal
4 weeks 8-12 weeks 4-8 weeks 5 years+ 6 months 4 weeks
Estimated total time - up to 6 months
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• Consider the implications for the definition of a Covered Drug.
Your product is an injectable drug, typically administered by a physician.
• Consider the implications for the Trade Agreements Act.
There are two sources that manufacture the API, one in Germany and one in
Argentina.
• Consider the implications for the Small Business Subcontracting Plan.
Your company does not have a centralized purchasing function and
each business unit has its own contracts.
• Consider the implications for the CSP and Pricing Proposal.
Most of the customers for this product are physicians, clinics and hospitals.
Due to your discounting strategy, even the larger hospital customers pay a
higher price than the physicians.
HYPOTHETICALS
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What is a Covered Drug?
• Analyze products to determine which are covered drugs (38
U.S.C. § 8126(h)(2)).
– Single Source Drugs means a covered drug which is produced
or distributed under an original NDA approved by the FDA,
including a drug product marketed by any cross-licensed
producers or distributors operating under the NDA (42 U.S.C. §
1396r-8(k)(7)(A)(iv)).
Covered Drugs
Challenges/Points to Remember Review VA guidance for specific questions on certain products (e.g., radiopharmaceuticals), including Dear Manufacturer Letters.
Stakeholders/Sources - Manufacturing - Legal
Est. time frame 4-8 weeks 15
© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
What is a Covered Drug? – Innovator Multiple Source Drugs means a drug that was
originally marketed under an original new drug application (NDA) approved by the Food & Drug Administration (FDA) (42 U.S.C. § 1396r-8(k)(7)(A)(ii)).
– Biologics (means any virus, therapeutic serum, toxin, antitoxin, or analogous product applicable to the prevention, treatment or cure of diseases or injuries of man (any biological products identified under 21 C.F.R. § 600.3).
Covered Drugs
Stakeholders/Sources - Manufacturing - Legal
Est. time frame 4-8 weeks
Challenges/Points to Remember The onus is on the manufacturer . VA considers a manufacturer’s research and arguments, but does not conduct its own research.
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What is a Covered Drug?
• Covered drugs are identified as a single form dosage unit of the drug.
• The single form dose must be identified by the NDC-11.
• Manufacturers must specify each package unit utilized for each covered drug as part of the submission of its reporting data.
• The manufacturer must submit separate non-Federal Average Manufacturer Price (non-FAMP) data and establish an FCP on each package unit of a covered drug.
Covered Drugs
Est. time frame 4-8 weeks 17
© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
SAM.gov
• Registration
– Determine if registered in SAM.gov.
– Evaluate number of employees (globally, domestically, etc.).
• Certifications/Representations
– Verify and collect country of origin of API for TAA.
– Investigate status of “responsibility matters”.
– Assess affirmative action policies and procedures.
Registration
Stakeholders/Sources - HR - Manufacturing - Legal
Challenges/Points to Remember - SAM.gov information is certified and
should match other information provided to the VA.
Est. time frame 4 weeks 18
© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Small Business Subcontracting Plan
• Assign owners of subcontracting plan.
• Determine subcontracting amounts and percentages for small businesses for incorporation into plan.
– Investigate process for capture of spend and vendor status (manual/automated).
– Evaluate small business categorizations and spend.
• Develop written standards.
– Incorporate small business subcontracting into corporate policies and procedures.
– Obtain certification from small business vendors.
Small Business Subcontracting Plan
Stakeholders/Sources - Purchasing - Manufacturing - Legal
Challenges/Points to Remember - Consider both historical data and
forecasts to arrive at projected subcontracting goals.
Est. time frame 4 weeks 19
© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Small Business Subcontracting Plan
• Comply with reporting requirements.
– Ensure process to track subcontract dollars to file reports.
– Submit SSR/ISR/SD Business Reports.
• Maintain documentation/recordkeeping.
– Develop process to identify and document outreach efforts to small business and internal training.
• Include requirements for flow down clauses.
– Conduct review of large business subcontracts.
Small Business Subcontracting Plan
Challenges/Points to Remember - Not all subcontracting spend is required to be counted in the subcontracting
base. Exclusions may include: royalties, clinical study payments, Medicaid and commercial rebate payments, etc.
Est. time frame 4 weeks 20
© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Commercial Sales Practices
• Inventory written commercial contracts for pricing policies and terms.
– Analyze preferential terms that translate to value, e.g., bundling, non-
standard warranties.
• Interview sales and finance personnel involved in commercial sales
process to determine adherence to pricing practices and identify
deviations from those practices.
– Determine frequency and justifications for deviations from standard
pricing.
CSP Analysis
Stakeholders/Sources - Purchasing - Finance - Legal - Supply Chain/Sourcing
Challenges/Points to Remember
– Information and data disclosed in the CSP must be complete, current, and accurate.
Est. time frame 8-12 weeks 21
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Commercial Sales Practice
• Prepare disclosure of:
– Commercial sales data
– Most favored customer for each product
– Proposed Tracking Customer
– Justification for pricing where the VA is not receiving the best price
– Deviations and frequency of deviations in pricing policy
– Country of origin
CSP Analysis
Challenges/Points to Remember
– Contractor must update disclosure for any changes to proposed price lists, discounts, or discounting policies which occur after the submission of the offer, but prior to the close of negotiations.
Est. time frame 8-12 weeks 22
© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Strategy • Prepare strategy and determine point of contact for negotiations.
– Negotiation discussions with the VA are conducted by telephone and email.
• Monitor and document any agreements with the VA.
– Tracking Customer Details
– Exclusions to Price Reductions Clause
• Submit final proposal revisions at close of negotiations.
– Update sales data: data expected to be current, accurate and complete as of 60 days prior to submission
Audit and Negotiations
Stakeholders/Sources - Legal - Contract Administrator/Point
of Contact
Challenges/Points to Remember - The VA’s negotiation objectives are to determine
and receive fair and reasonable pricing. Be thorough and complete in completing the CSP.
Est. time frame up to 6 months 23
© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Award Decision
• The VA will award a contract based on:
– Fair and reasonable pricing and terms and conditions
– Satisfactory past performance and financial capabilities
– Regulatory compliance and completion of certifications
– The Government’s best interest
• Upon award, the contractor must submit updated CSP data.
Awarded Contract
Stakeholders/Sources - Legal - Sales - Finance
Challenges/Points to Remember - Being awarded an FSS contract is not
an ending objective. Rather, an FSS contract requires ongoing compliance.
Est. time frame up to 4 weeks 24
© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Ongoing Contract Obligations During Performance • Update Price lists.
• Track IFF and submit reports.
• Monitor Price Reductions to commercial and tracking customers.
• Prepare and submit Modifications. – Additions/Deletions of Products, Price Adjustments,
Administrative/Technical Changes, Mass Modifications
• Update Annual Requirements. – Online representations and certifications in SAM, VETs 100 Reports,
subcontracting plans and associated reporting requirements
Contract Maintenance
Stakeholders/Sources - Sales - Finance - Legal
Challenges/Points to Remember - Maintaining post award contract
compliance and documentation is key to successful audits and renewal negotiations.
Est. time frame 5 years+ 25
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• Covered Drugs
– Evaluate products and determine what products may be 42-2A vs. 42-2B.
– Prepare any justification documents required, if seeking a 42-2B designation.
• Price Lists and Future Price Reductions
– Discuss possible voluntary price reductions with business teams.
– Develop a plan to ensure price list is accurate and updated.
• Change in Sourcing of API/TAA
– Determine and evaluate API on a regular basis, and ensure communication plans are in place for changes in API that may affect FSS awards.
• Post Award Audits
– Evaluate price changes that may require disclosure to the government and changes in FSS awarded prices.
– Ensure products are added or deleted, as needed.
– Prepare a plan for potential VA OIG Audits.
Hot Button Issues
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
• Communication – Stakeholders must provide timely and reliable internal communications. – Company needs to have open communication with VA contracting officer.
• Accountability – Ensure various individuals are held accountable for monitoring or sharing
appropriate information. – The contract is a company-wide contract, not a department-centric
contract.
• Tracking – Develop policies, procedure and protocols to track prices, product
additions, deletions and tracking customers to ensure timely updates to contract.
– Maintain a central location for all documents provided to or correspondence with the government regarding the FSS contract.
Overarching Critical Factors for Success
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• Now, you have completed negotiations with the VA and have handled a pre-award audit.
• You know the obligations of maintaining the FSS contract and have kept the hot button issues in mind as you communicate and coordinate with the Contracting Officer.
• What’s Next?
– Non-FAMP Pricing Calculations and FCP
Looking Forward
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© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.
Questions/Contact
Constance A. Wilkinson Member
Epstein Becker Green, P.C. (202) 861-1378
Cynthia Bass Associate General Counsel
Sanofi US (908) 981-6778
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