January 152016Final AMP Rule: Downstream Impact of AMP Rule Significant for 340B Covered Entities

- By Keith Chop, Managing Partner

While the Final AMP Rule is generally seen as a positive for most stakeholders, as it increases transparency and may generate additional “voluntary” 340B covered entity manufacturer discounts, it would be naïve to think that the full burden of implementing the required changes will fall on state Medicaid programs. It is expected that covered entities will have a large role in ensuring compliance with AMP Rule requirements through process redesign and enhanced reporting and monitoring systems.

Just ask your covered entity counterparts in California, which is one of a handful of states that has already approved State Plan Amendments (“SPA”) where reimbursement is the lesser of Actual Acquisition Cost (“AAC”) or the 340B ceiling price. In fact, California went as far as requiring 340B covered entities to “carve in” Medicaid outpatient drug usage for 340B eligible patient claims.

And so this begs the question, what could be the downstream negative impact of the more “equitable” reimbursement changes the AMP Rule may bring to 340B covered entities.

In this time when states are looking to cut costs, Alinea analyzes a few key points that outline some of the unintended consequences for covered entities that may result from the Final AMP Rule.

Requiring 340B Covered Entities to “Carve In” FFS Medicaid

As a potential bi-product of the AMP Rule, which will require state Medicaid programs to put systems and processes in place to ensure adherence to AAC reimbursement requirements, there is a chance that the states may require covered entities to “carve in” Medicaid as the states look to reduce costs and also fund 340B administrative resources. If a Medicaid carve in were required, as California currently requires, 340B covered entities would likely see a reduction in savings and revenue generated in the retail, contract pharmacy, and inpatient pharmacy settings. In certain cases, 340B covered entities may opt to dis-enroll from the program as savings would not support the resources necessary to manage the program compliantly. As a lobbying effort, covered entities should assess the impact of a required Medicaid carve in to communicate the impact it will have to safety net hospitals.

Dispensing Fee Considerations

States are required to submit plans to CMS revising their 340B payment methods within a year of the April 1, 2016. Consequently, covered entities should engage in a collaborative effort to communicate the necessity for higher reimbursement dispensing fees for 340B Medicaid outpatient drugs. CMS has acknowledged that 340B entities incur additional costs to dispense 340B drugs such as compliance monitoring, 340B program management, technology to adhere to 340B reporting requirements in addition to patient populations in most need of complex and expensive drug therapy. In previous years covered entities were successful in negotiating an equitable 340B revenue share with states. In the same vein, state Medicaid may be open to discussions to adjusting dispensing fees for various providers. 340B covered entities should take the necessary steps to model dispensing fee scenarios and open up a dialogue with Medicaid to negotiate a more favorable dispensing fee.

Medicaid Managed Care – An Uncertain 340B Future

The AMP Rule stipulates that states should not collect rebates on 340B drugs paid by managed care organizations (“MCOs”) and must create a process to exclude 340B MCO claims from their rebates request. While it appears that states will carry the burden of creating the process to exclude MCO’s from rebate requests, what is not clear is how states will choose to treat 340B MCO claims in the future, with concerns that states may require covered entities to prohibit the use of 340B for Medicaid managed care claims. While the 340B MCO prohibition is not a new discussion, the fact that a tracking mechanism for 340B MCO claims will now be a requirement may prompt states to take that additional step to prohibit 340B MCO claims. This type of prohibition would have a substantial financial impact as 340B MCO claims would be subject to GPO prohibition statutes requiring covered entities to purchase those drugs at the much more expensive wholesale acquisition cost (“WAC”). Covered entities, such as children’s hospitals, with high MCO payer concentration would be most adversely affected.