IdealNet and iContracts GP Presentation

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July 2010

Government Pricing How IdealNet, Inc. and iContracts, Inc. can help you to ensure full compliance

© 2010 IdealNet, Inc.Page 2

Taking Your Business to the Next Level™



Agenda

• Government Pricing Program Discussion

• Government Pricing Compliance Infrastructure Requirements

• Government Pricing Program Best Practices

• Government Audit Initiatives

• iContracts/Government Pricing

• How IdealNet and iContracts can help

• Questions & Discussion





What is Government Contracting?

The contracting landscape for a manufacturer is segmented into two different end customers – commercial customers and government customers. Contracting with each customer segment demands different pricing strategies and compliance responsibilities.

– contracting landscape –

GPO

PBM

WHLSR

HOSP

HMO

PHARMACYMAIL ORDER

commercial government

MEDICAIDPROGRAM

STATES

VA PRIME VENDOR

PHSENTITIES

DSHENTITIES

FSS ENTITIES

• Pricing discounts range between 5% - 20% as driven by competition

• Contract compliance is required by Terms and Conditions or incentive structures

• Pricing is lower than commercial and reflects the largest discounts• Compliance is required by legislation and may carry severe monetary

penalties and criminal charges if violated





What does it mean to contract with the Government?

Government Sector

Manufacturer

CMS(Centers for Medicare &

Medicaid Services)

VA(Veteran Affairs)

DOD(Department of Defense)

PHSEntities

(Public Health Service)

+

MedicaidAgreement

Federal Supply

Schedule Agreement

PricingAgreement

Other Programs(State or Assistance

Programs)+

If a pharmaceutical company elects to contract with the Government sector, it will enter into several agency agreements making its products available to all government entities.

Selective contracting is not allowed in the government sector (e.g., participate in Medicaid but not in PHS pricing is not allowed).

A manufacturer can elect to contract with the government sector to position their product in the Medicaid Drug Rebate Program as well as make its products eligible for purchase by all Federal entities.





How is Government Contracting administered?

CMS &State Agencies

CMS &State Agencies

ManufacturerManufacturerManaged Care Entities

Managed Care Entities

Pharmacy / Retail

Pharmacy / Retail

Medicaid

Rebates

Chargebacks

PrescriptionClaims

PrescriptionClaims

Rebate ($)

Rebate ($)

Rebate Contract

ProductShipment

ProductShipment

Product Shipment

Purchase Product

Bid Contract

Utilization DataUtilization Data

Rebate Agreement

WholesalerWholesaler

1

2

3

VA contracting

PHS pricing

GPO, Hospitals, Government,

Other

GPO, Hospitals, Government,

Other

As part of the overall contract administration process, specific administration of government contracting is focused in three areas – Medicaid pricing & claims, VA contracting and PHS pricing.





Government Pricing Programs

• The Medicaid Drug Rebate Program, Veterans Health Care Act and Federal Supply Schedule reporting and compliance requirements create an interconnected Web of obligations for healthcare manufacturers:– Each program requires various submissions and reporting to government

agencies– All three programs use the same data as the basis for required reports

and submissions– All three programs allow the government to audit related submissions for

compliance– All three programs can expose a manufacturer to significant penalties for

non-compliance





Government Pricing Programs

• A company’s ability to remain compliant with each program is reliant upon its ability to access, manage and analyze transaction level sales and pricing data

• A strong compliance program must also provide the ability to recreate and reconcile pricing submissions at some future point to support an audit or other Government inquiry

• The Government expects program participants to employ a consistent, re-creatable compliance process, driven by strong standard operating procedures and policies





Infrastructure Requirements Government Pricing Compliance

• Policies– Clearly defined interpretations for each program

• Standard Operating Procedures (S.O.P.’s)– Documented method for administering each aspect of the program, including price

calculations

• People– Trained in each Government pricing program– Understanding of commercial business as it relates to each pricing program

• Systems– Automated processes to enforce a consistent approach to: data access; pricing

calculations; securing each policy; calculating rebate payments; and deliver against audit requests





Government Pricing Program Best Practices





Best PracticesGovernment Pricing Compliance

• Data Integrity

• Consistent Implementation of Government Pricing Policies

• Preserving and Protecting Government Pricing Compliance Methodologies

• FSS Tracking Customer Creation and Monitoring

• Government Audit Response Capability






• Data Integrity– Properly classifying transaction level data for use in Government Pricing

calculations– Employ a consistent process for accessing ERP, contract management

and legacy data – Data “cleansing” – ensure the data is accurate and valid– Data storage – store and secure all transaction level data used in

calculations






• Consistent Implementation of Government Pricing Policies– Maintain a formal written Government compliance policy and procedure

document– The ability to apply a consistent set of Government pricing policies that

reflect corporate S.O.P.’s– Need to provide the capability to take the transactions and calculation

logic and apply them on a consistent Qtr to Qtr basis– The ability to filter transactions, classes of trade, customers, etc., when

building policies






• Preserving and Protecting Government Pricing Compliance Methodologies– The ability to secure your Government Pricing compliance methodologies

to eliminate risks of:• Lost documents• Pricing policy documents becoming outdated / inaccurate

– Deal with the “loss of corporate memory” when key people leave the company

– The ability to properly handle business changes, and reflect those changes within Government pricing policies and submissions






• FSS Tracking Customer Creation and Monitoring– Historical transaction analysis to identify “like” customers and comply with

CSP requirements– Employ a monitoring process that effectively analyzes all tracking

customer related activity:• Research and understand price violations• Resolve and document violations

– When tracking customer price violations occur, properly recalculate and monitor the new tracking price

– Disclosing all FSS tracking customer price violations within the mandated window of time






• Government Audit Response Capability– The ability to quickly and accurately respond to government audits and

information requests – Deliver the exact set of transactions, calculations and pricing data

previously submitted to the Government– Reach back in time to properly articulate

the company’s policies and interpretations– Manage the cost, stress and business disruption that can occur during a

Government audit





Government Audit Initiatives

• Certain companies targeted each year based on their turn in queue

• Others based on past issues and performance

• Can be requested by contracting officers and other officials

• Voluntary Disclosures generally result in some sort of review by the government

• How can the risks associated with potential adverse findings be mitigated?





Application Overview

iContracts/Government Pricing





How IdealNet and iContracts can help





Assessment of current policies, procedures, controls and systems

• Medicare Part B – Average Sales Price

• Medicaid Drug Rebate Program (Average Manufacturer Price, Best Price, Unit Rebate Amount, nominal price and prompt pay discount pricing)

• Public Health Service – 340B price offering and membership eligibility

• Federal Supply Schedule – Non-Federal Average Manufacturer Price (Non-FAMP) and Federal Ceiling

• Price (FCP)

• Medicare Part D

• 2010 Healthcare Reform Legislation

• Various other governmental agency price reporting requirements





Implementation of updated policies, procedures, controls and systems

• Practical recommendations and solutions that take into consideration the needs and reporting environment of the manufacturer

• Develop calculation methodology policy and standard operating procedures (SOPs)

• Develop and present training materials to all levels of management and operations

• Expert testimony and assist counsel related to:– Qui Tam Allegations– Whistleblower Allegations– DOJ inquiries and investigations– Anti-Kickback Statute and False Claims Act Violations

• Corporate Integrity Agreement (CIA) preparation and negotiation

• Independent Review Organization (IRO) as required under the CIA





Support iContracts implementation

• Document all required calculations– Generate detailed formulas for each specific calculation– Create corresponding documents which detail and facilitate

implementation of the formulas within the iContracts environment

• Create detailed data flow/integration functional and technical specifications for all required interfaces to and from the iContracts environment– Based on other existing manufacturer systems to be interfaced– Can also supplement iContracts technical personal with interface

designers and coders

• As needed, provide targeted business expertise to iContracts technical staff during the implementation

• Generate and execute manufacturer specific test scenarios in partnership with iContracts





Questions & Discussion





IdealNet, Inc. Overview





IdealNet, Inc. Overview

• Expert business and technical consulting firm to the Life Sciences industry since 1994

• Domain expertise:– 16+ years focused on optimizing contract management processes across multiple industries– Design, development and deployment of leading industry solutions including SOP’s, training

materials, filing guidelines, and GP software package implementation– Only employs seasoned staff with relevant expertise

• Business strength:– Track record of successful commercial and government pricing projects with many Tier 1

Pharmaceutical manufacturers as well as Biotech and Medical Device manufacturers

• Industry leading Medicaid and Government Pricing compliance support services:– Production of complete Policy and Procedure frameworks required to maintain compliance with

the Medicaid Drug Rebate, Veteran’s Healthcare Act and Federal Supply Schedule laws





Learn how iContract’s Government Pricing solution can help your organization in conjunction with IdealNet’s expert Government Pricing services

Contact Todd Venetianer at [email protected]

Contact Christopher C. Biddle at [email protected]

Thank You

Visit us online at www.idealnetinc.com

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IdealNet and iContracts GP Presentation