Office of Inspector General (OIG) issues new compliance guidance for manufacturers doing business with Medicare, Medicaid and other federal health programs.
Managed care folks are heaving a sigh of relief over a final compliance guidance issued by the Office of Inspector General (OIG) offering drug manufacturers standards for doing business with Medicare, Medicaid, and other federal health programs. They feel the final version, issued last month, is a considerable improvement over the draft version, released last September, which raised questions about such everyday practices as the use of rebates and drug switching. In fact, the Academy of Managed Care Pharmacy (AMCP) was so uncomfortable with the draft guidance that it wrote a letter to the OIG late last year, asking the agency to issue clear and unambiguous standards related to rebates and formularies.
According to Bill Hermelin, director of government relations and general counsel of AMCP, the association participated in two of four stakeholder meetings held by the feds to discuss the draft guidance. Hermelin feels the OIG listened to AMCP's concerns, since rebates, cast in a somewhat negative light in the draft version, are clearly stated as a legitimate form of price concession in the final guidance and one that health plans and pharmacy benefit managers can continue to seek from drug manufacturers.
AMCP is also pleased that the final guidance clarifies the issue of rebate disclosure. The OIG document stated that rebate information should be disclosed to the clientin this case, the government; it did not require disclosure to the public. AMCP agrees. It believes the government is entitled to rebate information from manufacturers and PBMs. It opposes public disclosure of rebates, since, as Hermelin explained, "in a competitive marketplace, if everybody knew what kind of discounts the other guy was getting, all the rebates would dry up."
Another change is a section devoted to formularies new to the final guidance. Addressing AMCP's concern, the OIG document recognizes formularies as legitimate and valuable in drug benefit management. They would be objectionable only under certain circumstances, such as if pharmacy and therapeutics committees weighed drug cost before efficacy and safety, or if manufacturers offered financial incentives to M.D.s or R.Ph.s to influence formulary decisions.
Related to this point, AMCP is glad OIG clarified the type of drug switching it considered inappropriate. This is when payments are made by manufacturers to health providers to shift patients from drug A to their drug, Hermelin explained. It does not relate to the formulary decision-making process, where changes are made from one drug to another.
Like AMCP, the Pharmaceutical Care Management Association (PCMA) and individual PBMs, such as AdvancePCS and Medco Health, are comfortable with the clarification offered by the new voluntary guidance. PCMA said OIG "recognizes many of the proven PBM tools" for holding down Rx drug costs. A Medco Health spoleswoman said the guidance focuses solely on practices "directly affecting federal health programs, not the private sector contracts." She claimed, "We are already doing what the guidelines are asking."
Hermelin said AMCP can live within the final guidance criteria. But he believes the new standards will have a "chilling effect" on manufacturers as they operate in the marketplace. Conscious that federal authorities are looking over their shoulders, manufacturers have already started to respond to the draft guidance, he noted. This will only continue with the release of the final standards of conduct, he said.
Judy Chi. Managed care groups pleased with new marketing standards. Drug Topics May 19, 2003;147:48.