Medicare Program; Medicare Coverage Gap Discount Program Model Manufacturer Agreement and Announcement of the June 1, 2010 Public Meeting
2010-08-03 2010-08-03 2010-08-03 2010-08-03 2010-08-03
CMS-2010-0196-0025 CMS-2010-0196-0010 CMS-2010-0196-0028 CMS-2010-0196-0005 CMS-2010-0196-0024
04:00:00 04:00:00 04:00:00 04:00:00 04:00:00
https://api.regulations.gov/v4/comments/CMS-2010-0196-0025 https://api.regulations.gov/v4/comments/CMS-2010-0196-0010 https://api.regulations.gov/v4/comments/CMS-2010-0196-0028 https://api.regulations.gov/v4/comments/CMS-2010-0196-0005 https://api.regulations.gov/v4/comments/CMS-2010-0196-0024
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Filed Electronically Via http://www.regulations.govJune 21, 2010  U.S. Department of Health and Human ServicesCenters for Medicare and Medicaid Services SUBJECT:Comments on CMS-4151-NC on the Medicare Coverage Gap Discount Program Model    Manufacturer Agreement Dear Sir or Madam: On May 21, 2010, the Centers for Medicare and Medicaid Services (CMS or the agency) published a Notice in the Federal Register regarding its Medicare Coverage Gap Discount Program Model Manufacturer Agreement (Agreement), announced a meeting to discuss that Agreement, and invited written comments on that Agreement from interested parties.  The Agreement is part of CMS implementation of the Medicare Part D Coverage Gap Discount recently enacted into law in Section 3301 of the Patient Protection and Affordable Care Act (H.R. 3590), as amended by Section 1101 of the Health Care and Educational Reconciliation Act of 2010 (H.R. 4872) and codified in portions of the Social Security Act.  In part, the statutory changes authorize CMS to implement a discount program for certain Medicare Part D patients through rebates ultimately paid by pharmaceutical manufacturers to Part D Plan Sponsors under certain conditions (the Discount Program). As an $11 billion global leader in medical devices and supplies, diagnostic imaging agents, pharmaceuticals and other healthcare products, Covidien has an interest in how this Discount Program is constituted and implemented. Prior to the Notice of the Agreement, CMS had already issued a draft Guidance on the Medicare Part D Coverage Gap Discount program on April 30, 2010 and invited comments on that draft.  After a brief comment period ending on May 14, 2010, CMS quickly finalized that guidance on May 21, 2010, on the same day it published the Notice inviting comment on the Draft Agreement.  At the outset, Covidien is concerned that CMS may not have completely considered all of the comments it received on the draft Guidance since there was only one week from the close of the comment period until the issuance of the final Guidance.  Accordingly, Covidien wishes to express its concern that CMS take more time to ensure that it adequately considers all comments on the Agreement since the terms of the Agreement will be constitute final action for manufacturers as they will be unable to negotiate changes and will not be empowered to initiate or request changes once the Agreement is signed and in place.Overall, Covidiens primary concerns are overall vagueness and imprecision in the Agreement as well as the lack of clarity regarding expectations of both parties to the Agreement.  Specifically, Covidien wishes to make the following comments: Please Clarify the Role CMS and its Third Party Administrator (TPA) Will Play in the Process of Paying Part D Plans the Applicable Discounts When reading the statute, as amended, two aspects of Congress expectations of CMS role with regard to the Discount Program are clear.  First, Congress forbade the Secretary from handling any of the payments directly through specific prohibitions.  Secondly, and on the other hand, Congress did allow for the possibility that the Third Party Administrator (TPA) hired by CMS to administer the Discount Program would be empowered to handle and facilitate payments by manufacturers since the statute authorizes the TPA to receive, distribute, or facilitate those payments.  In the Final Guidance, however, CMS entirely dismissed the first two of those three options and determined that the TPA will only facilitate those payments by generating the invoices sent to manufacturers and receiving confirmation of payments made and received.  In the Final Guidance, CMS concluded that this approach is most consistent with the statute.Covidien strongly disagrees with CMS conclusion.  The agencys conclusion that this construction of the statute is most consistent with its language absolutely ignores two of the three descriptors in the definition of the TPAs role in the process.  A more meaningful application of the terms of the statute is that Congress intended the TPAs to play a significant role in the entire process for disbursement of payments from the manufacturers to the Part D Sponsors.  While there is some leeway given to CMS in defining this role, clearly the statutes wording indicates the Congressional intent that the TPA is to play a large role in the process  larger than invoicing and confirming payments.In addition, an expanded role for TPAs, beyond that of invoicing and confirming payments makes sense from an organizational standpoint for the Discount Program.  It would also allow the TPA to accurately and timely reconcile the prospective payments it will be making on behalf of CMS to the Part D plans with the actual payments made by manufacturers as it processes the payments through to the Part D plans.  This would be an earlier reconciliation of the prospective payments than the annual reconciliation anticipated by the Final Guidance.  The annual reconciliation anticipated by the Final Guidance would allow Part D plans to hold both the prospective payments and also the actual payments for up to a year  all the while depriving CMS and the government treasury of that money.  It is doubtful that this outcome was part of the Congressional intent in passing the statute.The Proposed 14 Day Turnaround Time for Manufacturers to Pay the Invoices from the Discount Program is Unreasonable and UnclearWhile the provision in the Agreement that requires manufacturers to pay the invoices they receive from the TPA to the Part D plans within 14 days may be intended to reflect the statutory window allowed for Part D plans to pay pharmacies for claims, this does not make sense based on the monthly prospective payment provision from CMS to Manufacturers in the Final Guidance.  CMS attempt to make the manufacturers payment terms reflect those required of Part D plans to their pharmacies would make sense but for the fact that CMS will be paying the Part D plans the prospective payments prior to the Plans even having to pay any discounts.  In addition, the Final Guidance anticipates a yearly reconciliation of the prospective payments versus actual payments.  This means that Part D plans will be receiving their prospective payments from CMS prior to the beginning of a given month, their actual payments from manufacturers within 14 days of invoicing, but not have to reconcile the prospective to the actual until months, possibly up to 12 months, after the first prospective payment is received.  Under this approach, there should be little or no burden on the Part D plans, financially speaking, if manufacturers are allowed a more reasonable time frame to process the invoices due to CMS advancing the prospective payments under this scheme.At the same time, manufacturers are being asked to process hundreds, possibly thousands, of invoices, all received in one day, within two weeks.  While pharmaceutical manufacturers are sophisticated organizations, they are not organized to process invoices in high volume in short turnaround times, especially once a quarter.  At this time, Covidien does not accept payment requirements of less than 60 days in any of its commercial contracts.  To require us to pay these invoices in 14 days will amount to an onerous requirement by CMS that we will potentially need to add staffing and/or re-engineer our accounts payable functions to accomplish something that is not evidently the intent of Congress in the statute.  In addition, we are forced by other government requirements on publicly-traded companies including Sarbanes-Oxley to have financial controls in place that guarantee our organization has properly reviewed, and substantiated both the accuracy and need to pay all invoices as part of the approval process.  Doing so for the potentially voluminous claims data underlying the amounts invoiced under the Discount Program and conducting the appropriate due diligence prior to initiating payment means that 14 days between the invoice and payment is too short a timeframe for all of these activities to be done in a controlled and fiscally responsible manner. This reality has been acknowledged in the design of other similar government programs involving related payments.  The TriCare Rebate program allows 70 days from receipt of data and invoices before payment is due and the Medicaid Rebate program allows 38 days.  To require that the invoiced amounts be paid for this Discount Program in up to one fifth of the time as these similar programs seems unrealistic and arbitrary.  CMS should follow the lead of similar government programs and change the payment cycle in its Draft Guidance to a more realistic time to prevent undue financial pressure on manufacturers since the prospective payments are designed to prevent these discounts from creating undue financial pressure on the Part D plans.In addition, the Agreement is unclear on exactly when the 14 day period begins.  Is it intended to commence when the invoice is generated, when the invoice is sent, or when the invoice is received?  Given the short amount of time that the contract allows for payments to be reviewed and processed, and the current versions potentially large penalties for failure to pay on time, this is a key question that must be clarified prior to finalization of the Agreement.Please Clarify whether the Discount Program Payments will be Made by Manufacturers to Part D Plan Sponsors or to Individual PlansBetween the Final Guidance and the Agreement, it is unclear whether manufacturers will need to make payments to Individual Part D plans based on their PDEs or to Part D Sponsors, each of whom may be running multiple plans.  This is a key point that should be made clear in the Agreement since that is where manufacturers payment obligations will be created.  It may mean a difference between hundreds of invoices and thousands of invoices for an individual manufacturer.  Clarity in the Agreement will allow for manufacturers to begin preparing for the process well before the actual invoices arrive. Please Clarify What Sort of Documentation of Electronic Payment Will Need To Be Transmitted to CMS by Manufacturers Within One Day of Payment Being Made to Part D Sponsors  The Agreement, at Section II (m), requires manufacturers to provide CMS with electronic documentation in a manner specified by CMS that details the successful transmission of such payments of quarterly discount payments to Part D Sponsors.  This provision needs to be clarified to provide exactly what documentation CMS is going to require prior to the Agreement being finalized.  It is difficult for a manufacturer to commit to such a requirement, without understanding clearly what it entails or at least what it is anticipated to be at the outset.  At this time, after thorough review of this provision we remain unsure as to exactly what documentation, and at what level of detail, could be provided to CMS to meet this requirement. The Dispute Process for Manufacturers to Note Dubious or Questionable Invoice Items Is UnfairThe Dispute Process outlined in the Agreement in Section V seems to be premised on the conviction within CMS that there is so much oversight of its Part D programs that the invoices will be incorruptible.  The agency said as much in its Public Meeting when the issue was raised as CMS responded by outlining the amount of oversight, internal and external audit, and review already in place over the program. Unfortunately, based on manufacturers experience with previous programs such as the Medicaid Rebate program and the Tricare Rebate program, that is not usually the case.  In both of those programs, each of which have some of the same oversight that CMS has described, there are consistent and frequent mistakes in the billing process that need to be disputed and settled, as evidenced by the volume of PPAs  (prior period adjustments) under the Medicaid Rebate program.  It is unrealistic to expect that there will be no errors in the discount program since it will also be driven from individual claims data where many of the problems originate.  The Part D plans have acknowledged as much in their comments on the Draft Guidance when they suggested the need for them to be able to initiate retroactive revisions to correct mistakes.  Coincidentally, on June 1, 2010, the same day that CMS was assuring the attendees at the Public Meeting on the Agreement of the soundness of its controls around the PDE data, the OIG released a report criticizing those same controls and urging that they be strengthened.As it stands now, however, manufacturers will be expected to pay all claims  even if they are facially and obviously incorrect. A glaring example is if an invoice contains discount information for a product that is not one of a manufacturers products.  CMS may believe that this will not happen due to its oversight, but it happens consistently with both Medicaid Rebates and Tricare Rebates, even years after the programs have matured.  Similarly, there may be a claim with a typographical error in quantity which magnifies the claim by thousands so that a company that normally pays $30,000 a quarter in discount payments may be invoiced for $3,000,000 for a quarter.  Based on the existing rebate programs this is not an unrealistic scenario, but under the draft Agreement, the manufacturer would have no recourse but to pay and then recover  or try to do so.  It is not reasonable to expect manufacturers to pay blatantly incorrect and burdensome amounts just because they were invoiced by the governments TPA.  We strongly urge this be rectified in the Final Agreement. The Secretary Should be Obligated to Provide Manufacturers with Sufficient Information at the Time of Invoicing to Justify Payments and to Allow for Meaningful DisputesThe Agreement fails to outline the information that manufacturers will be provided to support the invoiced amounts.  For that information to be useful, and for the Dispute provisions of the Agreement in Section V to have any meaning, that information needs to include sufficient detail of the claims level information to provide the manufacturers with a meaningful opportunity to dispute.  Covidiens recommendation is that this information should be similar to, if not identical to, the information provided by Tricare to support its rebate invoices.  This information is claims-level information that identifies the drug, the pharmacy, the prescription number, the quantity in the prescription, the amount adjudicated, the amount paid by the Part D plan, and the amount requested to be reimbursed.  Anything less than this will mean that manufacturers have no ability to review and dispute the amounts they are being required to pay due to a lack of data as to what constitutes and justifies those invoiced amounts. The Agreement Designates the Secretary as the Sole Decision Maker Regarding a Beneficiarys Eligibility for the Discount Which is At Odds with the Final Guidance Placing that Responsibility Solely with the Part D Sponsor Due to Availability of InformationIn Section III (g), the Agreement states that the Secretary shall be the sole source of information regarding beneficiary eligibility to receive the applicable discount and the Secretarys determination regarding beneficiary eligibility is not subject to audit or dispute by Manufacturer.  Yet, in the Final Guidance and in the Public Meeting, CMS made it clear that the Part D plans are the only parties with the access to all of the necessary information to determine, on a transaction-by-transaction basis, whether a beneficiary qualifies for the Discount Program at any time for any transaction.  This latter position seems irreconcilable with the Secretary being the sole source of information regarding beneficiary eligibility.  Either the Part D plans or the Secretary is most capable, but not both.  We strongly urge CMS to clarify this section of the Agreement. The Penalty Provisions Fail to Distinguish Between a Late Payment and a Failure to Pay Meaning that a Payment Delayed by One Day Potentially Creates a Burdensome Obligation for a 25% Civil Monetary Penalty In Section IV (a), the Secretary is authorized to impose a Civil Monetary Penalty (CMP) on manufacturers that sign the Agreement but fail to pay the discount invoices without defining what failing to pay means.  For example, it could mean simply not paying within 14 days.  If that is the case, the penalty 25% of the amount owed is unreasonable.  On the other hand, the CMP might be intended to apply to manufacturers who consistently and flagrantly fail to pay for extended periods, in which case the penalty might be more appropriate.  This section needs to be clarified, but in any event CMS should provide a means for an intermediate remedial provision to address administrative-type errors such as late payments.  The Medicaid Rebate program and the Tricare program include interest provisions to apply to late payments and have larger, more significant penalties allowed for manufacturers that do fail to pay over a significant period.  Similar provisions should be included in this Agreement. Adjustment Clause in Sec. V.(d) Suggests that Future Adjustments Will Be Made Based on Items that are not Within the Knowledge of Manufacturers or CMS but Not Otherwise Required to Be Disclosed by the Agreement.This clause allows adjustments to future discount payments if, in part, there are changes to the negotiated rates upon which the discount payments are based.  This is unfair, however, because these changes would be based on information that CMS has indicated it has no direct knowledge of, the negotiated rates between Part D plans and dispensing pharmacies.  Similarly, the manufacturers awareness of the negotiated rates does not begin until an invoice is received.  Accordingly, the parties are trying to agree to future changes based on information to which neither party has access or control.  This seems potentially burdensome as a vague and undefined commitment that manufacturers are being required to make.  It also seems unnecessary, because manufacturers are already committed, elsewhere in the Agreement, to reimbursing all Part D plans for all discounts appropriately given.  The anticipated future changes, once they are actual discounts, will be within the scope of the Agreement already.  Therefore, this clause is, at best, unnecessary and potentially very unfair when it relies on information outside the knowledge of either party so it should be deleted.The Definition of a Discount that a Manufacturer is Obligated to Make Under the Agreement fails to Limit it to Applicable BeneficiariesIn Section 1 (c) of the Agreement, the term Applicable Discount is defined without respect to the status of the underlying beneficiary which are detailed in Section I (a) under the definition of Applicable Beneficiary.  Further, in Section II (a), the manufacturers obligation to pay Applicable Discounts is described, once again without reference to the status of the underlying beneficiary or the term Applicable Beneficiary.  Without these references, the contract arguably creates an obligation on the part of a manufacturer to pay any discount granted by a Part D plan without regard to whether the Part D plan has properly established that the underlying beneficiary qualifies under the contract as an Applicable Beneficiary, i.e. that the beneficiary is in the coverage gap; is not a member of a qualified retiree program or the recipient of an income-related subsidy, etc.  Without that qualification, it appears that the obligations the contract creates for manufacturers are broader than described or authorized by the Statute.   The Agreement Requires Manufacturers to have Electronic Connectivity to Receive Medicare Part D Discount Information Report Without Defining the Type or Extent of Such ConnectivityCMS has to be clear in its expectations particularly since it is asking for an open-ended commitment from manufacturers.  To create a broad requirement without providing details, when CMS clearly has expectations at this time of what their process will require, is needlessly indefinite and confusing.  The Agreement will allow the Secretary to make changes as necessary to the program requirements going forward, but reasonable notice of CMS current expectations should be given to manufacturers being required to sign the Agreement.  This same comment applies to any expectations CMS may have with regard to electronic invoicing, electronic payments, or other electronic data exchanges that it anticipates being requirements of Discount Program participation.Covidien appreciates the opportunity to comment on the draft Agreement in order to try to develop the best document, and accordingly the best Discount Program, possible.  Sincerely,  Brian D. ElsberndSr. Compliance CounselCovidien Pharmaceuticals Cynthia G. Tudor, Ph.D. Director, Medicare Drug Benefit and C  D Data Group Craig Miner, R.Ph, J.D.Senior Technical Adviser, Medicare Drug Benefit and C  D June 21, 2010Re: Medicare Coverage Gap Discount Program Model Manufacturer AgreementDear Drs. Tudor and Miner,The National Viral Hepatitis Roundtable is a coalition of more than 175 public, private and community based organizations dedicated to the elimination of viral hepatitis in the United States.  Our primary focus is on chronic hepatitis B and chronic hepatitis C, which disproportionately affect people color and of lower social and economic status. Research into new therapies for hepatitis B and C are ongoing and several promising new treatments are in development.I am writing to express our concern with the CMS draft agreement for manufacturers for participation in the Medicare Part D Coverage Gap Discount Program.  Specifically, we believe that the restrictions on labeler codes and disallowance of mid-year agreements may cause delays in access by Medicare recipients to new, innovative drugs from manufacturers who are bringing a drug to the market for the first time.  We recommend CMS establish a process for new companies to enter into the Medicare Part D Coverage Gap Discount Program agreement with CMS mid-year.  The community we serve needs and deserves a timely review consistent with your other drug benefit review practices. In many cases, their lives are depending on it.Sincerely, Martha SalyDirector 1.The definition of manufacturer appears to include repackagers.  How are repackager products going to be treated? 2.There is a general concern about how the electronic list of NDCs will be updated and communicated out to Plan Sponsors. Could you clarify the requirements around maintaining the online electronic database? We recommend CMS include a requirement that manufacturers have to make sure they provide current data information electronically as well as NDCs. We believe this requirement could mitigate the risk of claims being adjudicated incorrectly based on incorrect NDCs.3.We are concerned that the manufacturer contract does not include language related to the distinction of this discount program from the rebate agreements. The overall risk is that monies will be taken from rebate agreements and affect the overall DIR.  While there has been guidance delineating expectations, there has not been any formal requirements placed on these manufacturers.In order to mitigate this risk, we recommend the following contractual language:The Manufacturer hereby acknowledges that the discounts payable under this Agreement shall not change any negotiations between Part D sponsors or other entities with the Manufacturer to obtain additional rebates, discounts, or other price concessions for drugs purchased in the Coverage Gap or throughout the Part D benefit.  CMS expects that the Manufacturer will continue to engage in such negotiations and provide such price concessions on applicable drugs available throughout the Part D benefit and in the Coverage Gap.4.We agree with the language CMS provides regarding the penalty on late payments and believe this remedy will ensure Part D sponsor will be made whole for any cost incurred by the delay in payment.5.We agree with the language CMS provides regarding the requirement of manufacturers to pay invoices being disputed. We believe this will alleviate any burden on plans.6.As demonstrated in the statistics provided at the June 1, 2010 Gap Conference, drug manufacturers are sharply increasing the price of drugs included in this Discount Program, thereby circumventing the intent of this legislation. In order to deter this behavior, we believe a possible remedy would be to include a clause ensuring no price increases through the contract year. 7.Due to a general concern about the affect on brand drug utilization during the gap, we would like CMS to track brand drug utilization and brand price increases in applicable brand drugs once the discount program starts on 1/1/2011.8.In the event a manufacturer decides to terminate an agreement, will CMS provide language on how to handle the associated phone calls? Will CMS provide model letters describing how we should communicate this change to beneficiaries? Thank you for the opportunity to provide comments on CMS-4151-NC Medicare Coverage Gap Discount Program Model Manufacturer Agreement. Re:Medicare Coverage Gap Discount Program Model Manufacturer AgreementDear Ms. Tudor and Mr. Miner,The Caring Ambassadors Program advocates for people living with lung cancer and hepatitis C. While the disease states are very different, the needs of the patients are strikingly similar. Both disproportionately affect people of lower social and economic status and both are in great need of new and better therapies. We are concerned with CMS draft agreement for manufacturers for participation in the Medicare Part D Coverage Gap Discount Program.  As we understand it, the reliance on labeler codes in combination with not allowing mid-year agreements may cause delays in access and availability to new, innovative drugs from manufacturers who are bringing a drug to the market for the first time.   We recommend CMS establish a process for new companies to enter into the Medicare Part D Coverage Gap Discount Program agreement with CMS mid-year. Without a process for permitting new companies the opportunity to enter into an agreement with CMS when a new therapy first comes to market, beneficiaries may not have access to that new therapy for an extended period of time.  The community we serve needs and deserves a timely review consistent with your other drug benefit review practices. In many cases, their lives are depending on it.Sincerely,Lorren SandtExecutive Director