May 5, 2009 - A new TRICARE regulation that exempts drugs dispensed by 340B retail pharmacies from newly implemented manufacturer rebates in order to avoid duplicate discounts won’t require those pharmacies to bill TRICARE at actual acquisition cost.
Lisa McNair, the pharmacy specialist at the U.S. Department of Defense who wrote the new regulations, said safety-net pharmacies will be expected to continue to bill the TRICARE pharmacy benefits manager, Express Scripts, as they have in the past. If the Defense Department had mandated billing at actual acquisition cost, pharmacies would have lost critical savings from 340B pricing meant to be used to expand services to needy patients.
Without an exemption from rebates for 340B drugs, on the other hand, manufacturers would have risked giving 340B discounts and TRICARE rebates on the same drugs.
Manufacturer “preferred status” at stake
Under new Defense Department regulations published in March, manufacturers must sell outpatient prescription brand-name drugs dispensed through TRICARE retail network pharmacies at the federal ceiling price (FCP), or provide rebates to the defense department. Drug companies that fail to do so will not receive “preferred status” on the formulary used by the TRICARE Retail Pharmacy Network.
The 60,000-retail pharmacy system provides more than 9 million uniformed service personnel, retirees and their families with prescription drugs. Drugs are also provided through mail order and dispensed at military treatment facilities.
That said, it’s possible that Express Scripts could still try to negotiate future 340B provider contracts that would allow for reduced pharmacy rates – a concession some Medicare Part D plans seek when they negotiate with 340B providers wanting to be included in plan networks.
The TRICARE rules will require manufacturers to price drugs at the FCP – a price 24 percent below non-federal average manufacturer prices (non-FAMP) – or to provide rebates called “refunds” under the Defense Department rules. Drugs not priced at the FCP or rebated will be given a lower status on the TRICARE formula, warned Defense Department Pharmaceutical Operations Chief Thomas J. McGinnis in an April 15 letter to drug makers.
That means patients will have to pay the highest coinsurance allowed for such drugs. The lower status will also require pharmacies to get prior authorization from the TRICARE program before they can dispense the drugs.
Rebates to be paid retroactively
The agreements, which must be signed and returned to the Defense Department by June 1, are effective retroactively to Jan. 28, 2008. That is the effective date of the National Defense Authorization Act of 2008, which mandated the new rebate system. The department expects rebates to be paid retroactively to Jan. 2008, although the rule does not take effect until May 26, 2009.
The rebate will be the difference between the annual average non-FAMP and the corresponding annual FCP for the calendar year. The manufacturer also may calculate the rebate based on the difference between the FCP and the direct commercial contract sales price specifically attributable to a drug’s reported National Drug Code. If there is a negative non-FAMP for a product, no rebate will be due.
Generic drugs and over-the-counter drugs are not subject to the FCP, so those drugs will not be affected by the Defense Department’s rebates. However, rebates will continue to be due on a brand-name product as long as it remains in the market, even after multi-source equivalents have become available. Also exempted from the new rebates are drugs for which TRICARE is the secondary payer and drugs for which non-statutory manufacturer agreements were previously executed, as long as the discounted price set in the agreement is at or below the FCP.
Rebate dispute resolution process in place
A manufacturer may, at any time, request a waiver or compromise of a rebate on any grounds, but for the government to consider it, the manufacturer must calculate and report to the Defense Department the full amount of the refund that would be due if the request is not granted.Manufacturers also have the ability to dispute claims for rebates based on allegedly faulty department utilization data, and rebate payments will be deferred as long as a dispute resolution procedure is unresolved. The dispute resolution process and other program developments are outlined here.