DOD Issues Guidance on Section 703 Refund Program

By Alan M. Kirschenbaum –

Yesterday, we reported on the Department of Defense’s final regulation implementing section 703 of the National Defense Authorization Act for Fiscal Year 2008 (NDAA-2008).  The regulation establishes a framework for manufacturers to pay refunds to the government on NDA drugs dispensed to TriCare beneficiaries under the TriCare Retail Pharmacy ("TRRx") Program.  The TriCare Management Authority ("TMA") has issued additional information on the refund program in the form of a Dear Manufacturer Letter and an FAQ guidance.  Among other things, the new guidance states that the deadline for payment of refunds on TRRx utilization from January 28, 2008 (the effective date of NDAA-2008) through December 31, 2008 is May 26, 2009, unless a waiver or compromise is granted.

TMA has also posted on its website a draft of the standard refund pricing agreement between the manufacturer and TMA that is provided for under the final rule.  Under the agreement, a manufacturer agrees to provide refunds to TMA each quarter on covered drugs within 70 days after receiving retail utilization data.  The manufacturer must choose, for all of its covered drugs and for the duration of the agreement, (1) the method of calculating the refund (i.e., either non-FAMP minus FCP, or direct commercial price to the pharmacy minus FCP), and (2) whether to calculate the refund using units as reported in the utilization reports, or as converted to the package size of the 11-digit NDC number (rounding down extra units).  It appears that the all-or-nothing nature of the selections would preclude the flexibility to use the contract pharmacy price method for certain drugs and pharmacies (i.e., those covered by contracts) while using the non-FAMP method for non-contracted drugs and/or pharmacies.

For its part, TMA agrees to consider the manufacturer’s covered drugs for tier 2 status at the next scheduled P&T Committee review of the applicable drug class, and to ensure that the manufacturer’s tier 2 drugs are available without preauthorization.  The agreement also provides for a dispute resolution procedure and dispute codes, and permits a manufacturer to withhold payment of disputed units pending resolution of the dispute.  The FAQ states that the final version of the agreement will be mailed to manufacturers next week.  Utilization data for 1Q 2009 will be available on April 15.