Multiple Stakeholders Send Letter to Secretary Sebelius Urging One-Year Transition Period for AMP- Based FULs (Including a primer on the history and acronyms)

By: Chris Cobourn | On: April 15, 2014 | In: CIS Compliance Blog | General | Government Programs

In an April 9^th letter to CMS, multiple stakeholders sent a joint letter to Kathleen Sebelius, Secretary of the Department of Health and Human Services. In this letter, the stakeholders express their concerns about CMS’ plans to implement AMP-based FULs in July 2014 and ask for a one-year transition period.

The key argument in the letter is a concern that the states are not ready to make such a quick transition and need time to be able to implement that change.  Part of the reason given for why the states cannot be prepared by July is that they require legislative or regulatory changes and would need more time for cost of dispensing fee studies and filing State Plan Amendments (SPAs).

From another perspective, I would also agree with delaying AMP-based FULs as CMS has not yet published the Final AMP Rule which will define how manufacturers must calculate AMP.  Manufacturers have been operating without regulatory direction since the implementation of the Patient Protection and Affordable Care Act (PPACA) which redefined AMP in October 2010.  The legislative language defining AMP in PPACA was minimal, and manufacturers have had to make assumptions in what was considered an “interim period” while waiting for the Final Rule. However, this “interim period” has now lasted more than two years.  CMS published proposed rules in February 2012 which would make significant changes to the calculation of AMP (http://cis-partners.com/cis-compliance-blog/pharma-compliance/the-proposed-amp-rule-some-initial-thoughts/), but manufacturers don’t know which items will ultimately be included in the Final Rule.  If the Final Rule is released in May, as is posted on the Office of Information and Regulatory Affairs website (http://cis-partners.com/cis-compliance-blog/amp-rule-delayed-again/), there would be a defined date for when the rule becomes effective and hwen manufacturers need to start calculating AMP under the new rules.

Quick History and Acronyms Primer

For the reader who may not be a savvy in all of this terminology, AMP, or Average Manufacturer Price, is calculated by pharmaceutical manufacturers and reported to CMS.  AMP has been used since the beginning of the Medicaid Drug Rebate Program to determine the Unit Rebate Amount (URA) paid by manufacturers to the States for Medicaid utilization.  Under the 2007 Final AMP Rule, CMS proposed to also use AMP to determine the Federal Upper Limit, or FUL, which is the most that a State can reimburse a pharmacy for its Medicaid dispensed units.  The National Association of Chain Drug Stores (NACDS) successfully sought and was granted a court injunction on implementation of the rule which pushed out the implementation of AMP-based FULs.  The concept of AMP-based FULs was later integrated into PPACA, with a new definition of AMP, and the injunction was withdrawn.  Although the February 2012 Proposed Rule provided language around how manufacturers would calculate AMP, there was a broad consensus across industry stakeholders disagreeing with some of the proposed key elements. In particular, the rule proposed the use of a “build up methodology” when calculating AMP (http://cis-partners.com/cis-compliance-blog/pharma-compliance/the-amp-comments-keep-coming-in-and-what-about-the-build-up-amp-methodology/), and many stakeholders commented that this methodology would not accurately reflect the average price paid to manufacturers for drugs sold to the retail class of trade (this recent April letter gave me flashbacks to the last industry stakeholders’ letter making that case to CMS – http://www.regulations.gov/#!documentDetail;D=CMS-2012-0012-0265).

AMP-Based FULs Calculated with an Interim AMP?

That is a lot of information in a few sentences, but the point I want to make from my perspective, is that if CMS was to start publishing AMP-based FULs for use by the States in July, those FULs would be based upon the “interim AMP methodologies” that are subject to shift significantly after the Final AMP Rule is published.  Although the April 9^th letter is making the case for delay based upon the States’ ability to meet the deadline, I think it is also a concern that CMS would be basing FULs on AMPs that they have yet to define.

For more information about the April 9^th letter, see the NACDS article “Transition Period Necessary to Ensure Patient Access to Pharmacy Services, Stakeholders Tell HHS.”