OIG To Focus on a Number of Prescription Drug Issues in FY 2014

By Delia A. Deschaine & Alan M. Kirschenbaum –

On January 31, 2014, the HHS Office of the Inspector General ("OIG") issued its Work Plan for FY 2014.  The Work Plan sets forth OIG’s priorities for evaluations, inspections, and audits to be conducted in FY 2014 (Oct. 1, 2013 through Sept. 30, 2014).  The 2014 Work Plan describes a number of new and continuing studies and reports on pharmaceutical issues to be conducted by OIG’s Office of Evaluations and Inpections, including the following:

Conflicts of interest involving compendia (p. 23):  Generally, Medicare covers drugs that are approved by FDA and used for indications that are either approved or supported in one or more drug compendia recognized by CMS. OIG explains that, while publishers are required to have “publicly transparent processes for evaluating anti-cancer drug therapies and or identifying potential conflicts related to inclusion of those therapies in the compendia,” there are no such requirements for non-anticancer drugs.  OIG will initiate a new study of the processes used by the publishers of these drug compendia to evaluate anticancer and non-anticancer drug therapies and identify conflicts of interest related to the therapies included in the compendia.

Medicaid Drug Rebate Program (MDRP) (pp. 34-35):  OIG intends to continue its ongoing evaluation of whether manufacturers are complying with average manufacturer price ("AMP") reporting requirements.  In addition, a new review will assess manufacturer compliance with MDRP requirements for calculating rebates for new formulations of existing oral dosage form innovator drugs.  The Affordable Care Act made significant changes to the statutory definition of AMP and added the new formulation provision, effective October 1, 2010.  However, CMS has not issued final regulations to implement these new statutory provisions, many aspects of which are subject to varying interpretations.  Manufacturers who have undergone OIG reviews of their AMP calculation methodologies in the past have faced the difficulty of being reviewed against ambiguous statutory requirements in the absence of written policies and interpretations from CMS.  In reviews of compliance with the new formulation provision of the statute, which is unclear at best, the regulatory void will be even more problematic.  CMS expects to issue its final MDRP rule in May 2014, but if the past is any indication, OIG will be reviewing manufacturer methodologies that predate the final rule.

Coupons for Part D drugs (p. 31):  Continuing a study begun in FY 2013, the OIG will identify the safeguards that drug manufacturers have in place to ensure that Medicare beneficiaries do not use copay coupons to obtain drugs paid for by Part D.  OIG explains that a recent survey suggests that copay coupons for brand drugs cause Medicare to pay more than necessary when less costly versions of the drug are available, and that the use of copay coupons in Federal health care programs “implicates the anti-kickback statute.”

Medicare coverage of off-label uses (p. 22):  Medicare Part B generally covers approved drugs for on-label indications and also off-label indications that are supported in recognized compendia or supported by clinical evidence reported in medical literature.  OIG will conduct a new study of the oversight of CMS and its contractors to ensure that payments for Part B drugs meet the appropriate coverage criteria.

Manufacturer reporting of Average Sales Price ("ASP") (p. 21):  ASPs reported quarterly by manufacturers are used by CMS to set payment rates for drugs covered under Medicare Part B.  OIG previously found that a number of manufacturers were not reporting ASP to CMS, either because they were not required to (because they did not have a Medicaid Rebate Agreement, on which the ASP reporting requirement is predicated), or because they were violating the requirement to report.  OIG will conduct a new study to “determine the potential effect on average sales price reporting if all manufacturers of Part B-covered drugs were required to submit ASPs to CMS …. [and] whether CMS has improved its process for collecting ASP data ….”

Payment for compounded drugs (p. 23):  OIG will conduct a new study to examine the policies and procedures of Medicare Administrative Contractors for processing Part B claims for compounded drugs and assess the appropriateness of such claims.  Medicare pays for compounded drugs only when they are prepared in compliance with the Federal Food, Drug, and Cosmetic Act.  The Drug Quality and Security Act, which was enacted on November 27, 2013, imposes conditions for the lawful compounding of prescription drugs.