What to Expect When You Are Expecting an FSS Contract ......© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING. What to Expect When You Are Expecting an FSS

© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING.

What to Expect When You Are Expecting an FSS Contract:

A Practical Guide

Cynthia Bass Associate General Counsel

Sanofi US

“Big Four” Pharmaceutical Pricing Boot Camp May 19, 2014

Constance A. Wilkinson Member of the Firm

Epstein Becker & Green‚ P.C.


• This presentation represents the personal views of the speakers and is not intended to represent Sanofi U.S.’ position or legal advice or those of EBG.

Disclaimer

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• You are excited! You start your new job today. You are working for a new pharmaceutical manufacturer as the Director of Government Pricing and Contracts.

• You have heard about the company’s new drug and you know it will be a blockbuster.

• But wait, your company wants to sell its product to the Department of Veterans Affairs (VA).

• What do you need to do to make that happen?

Introduction

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Overview/Roadmap

History Initial Steps FSS Kick Off

Considerations

Timeline for Obtaining an FSS

Contract

Covered Drugs

Significant Steps of FSS Process

Maintenance of FSS Contract

Hot Button Issues

Critical Factors for Success

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• OBRA ‘90 created the Medicaid Drug Rebate Program that required manufacturers to pay rebates to the states based upon pricing calculations.

• Previously, the VA had received high discounts on the pharmaceuticals that it purchased.

• Because these discounts were included in the Medicaid Rebate calculations, manufacturers discontinued the VA prices, causing the VA to cut back on healthcare coverage and programs.

Omnibus Budget Reconciliation

Act of 1990

History

5



Act of 1990

Veterans Health Care Act of 1992

• The Veterans Health Care Act of 1992 “fixed” the problem by imposing pricing calculations and requirements for vendors, including pharmaceutical manufacturers:

– Master Agreement (MA)

– Pharmaceutical Pricing Agreement (PPA)

– FSS Contract

• Participation in the VA FSS for covered drugs is required if the manufacturer wants to participate in Medicaid.

History

6


• This means the new company needs to become a government contractor. As a government contractor, the company will be subject to additional obligations and prohibitions.

• There are serious potential sanctions for non-compliance.

• Oh, my, what do you do?


Act of 1990

Veterans Health Care Act of 1992

What does this mean for you?

History

7


Initial Steps

• A manufacturer of covered drugs must enter into a MA under which the manufacturer must make available each of its covered drugs on the FSS (38 U.S.C. § 8126(a)(1)).

• The MA outlines the vendor’s responsibilities & obligations associated with the statute. Specifically, the MA requires them to submit non–FAMP data to the VA to establish federal ceiling prices (FCP).

• The terms and conditions of the MA are non–negotiable and the same for all 65 I B contractors. The MA is an evergreen document and, as such, does not expire.

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• The manufacturer must also enter into a PPA and agree to sell to the Big Four purchasers through the FSS or a depot at not more than the FCP (38 U.S.C. § 8126(a)(2)).

– VA, DoD, Coast Guard, and the Public Health Service (including Indian Health Services).

• The PPA Addendum A is updated annually to reflect FCPs of covered drugs for the calendar year.

• PPA Addendum A is available at: http://www.va.gov/oal/docs/business/nac/fssPL102-585_2014PpaAddendumA.docx

• To begin the process and obtain the initial MA, PPA, and Interim Agreement (IA) documents, send an initial request to: [email protected]

Initial Steps

9

http://www.va.gov/oal/docs/business/nac/fssPL102-585_2014PpaAddendumA.docx



mailto:[email protected]


• The VA requires that manufacturers obtain an Interim Agreement (IA) while negotiating a VA FSS contract.

• As part of this process, manufacturers are required to provide to the VA:

– All relevant information regarding the affected drugs

– Relevant information on the company adding the items

– Contact information for the company adding the items

– Registration in the System Award Management (SAM) database

• The timing for this process varies depending on the amount of time it takes the contractor to return documentation.

Initial Steps

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• Identify responsible stakeholders: – Trade

– Managed Markets

– Business Unit Heads

– Legal

– Compliance

– Government and Commercial Pricing

• Develop Project Plan and Communication Plan.

• Conduct kick off with all stakeholders to gain buy in.

• Gather and collect required data.

• Discuss and review data with stakeholders and legal.

FSS Kick Off Considerations

11


• Evaluate any newly acquired products or new products to the market.

• Evaluate any commercial pricing or contracting decisions that may affect the FSS.

• Evaluate and determine the source of all API of products prior to including any products on the FSS price proposal.

• Implement a plan to determine price changes, especially if the tracking customer will be a category of commercial purchasers.

Specific Considerations for Pharma

12


Analysis of

Products Registration CSP Analysis

Audit and Negotiations

Awarded Contract

Maintenance

• Covered Drug Determination

― 42-2A

― 42-2B

• TAA

• Manufacturing Facilities

• Price Proposal

• SAM.gov

• Small Business Subcontracting Plan

• Commercial Customers

• Prices

• Discounts

• Tracking Customers

• Descriptions

• Possible Exemptions

• Audit

• Strategy

• Additional Documentation

• Refresh CSP Data

• Basis for VA’s Decision

• Refresh CSP Data

• Price lists

• IFF and Reports

• Price Reductions

• Modifications

• Annual Requirements

• Contract Renewal

4 weeks 8-12 weeks 4-8 weeks 5 years+ 6 months 4 weeks

Estimated total time - up to 6 months

13


• Consider the implications for the definition of a Covered Drug.

Your product is an injectable drug, typically administered by a physician.

• Consider the implications for the Trade Agreements Act.

There are two sources that manufacture the API, one in Germany and one in

Argentina.

• Consider the implications for the Small Business Subcontracting Plan.

Your company does not have a centralized purchasing function and

each business unit has its own contracts.

• Consider the implications for the CSP and Pricing Proposal.

Most of the customers for this product are physicians, clinics and hospitals.

Due to your discounting strategy, even the larger hospital customers pay a

higher price than the physicians.

HYPOTHETICALS

14


What is a Covered Drug?

• Analyze products to determine which are covered drugs (38

U.S.C. § 8126(h)(2)).

– Single Source Drugs means a covered drug which is produced

or distributed under an original NDA approved by the FDA,

including a drug product marketed by any cross-licensed

producers or distributors operating under the NDA (42 U.S.C. §

1396r-8(k)(7)(A)(iv)).

Covered Drugs

Challenges/Points to Remember Review VA guidance for specific questions on certain products (e.g., radiopharmaceuticals), including Dear Manufacturer Letters.

Stakeholders/Sources - Manufacturing - Legal

Est. time frame 4-8 weeks 15


What is a Covered Drug? – Innovator Multiple Source Drugs means a drug that was

originally marketed under an original new drug application (NDA) approved by the Food & Drug Administration (FDA) (42 U.S.C. § 1396r-8(k)(7)(A)(ii)).

– Biologics (means any virus, therapeutic serum, toxin, antitoxin, or analogous product applicable to the prevention, treatment or cure of diseases or injuries of man (any biological products identified under 21 C.F.R. § 600.3).

Covered Drugs

Stakeholders/Sources - Manufacturing - Legal

Est. time frame 4-8 weeks

Challenges/Points to Remember The onus is on the manufacturer . VA considers a manufacturer’s research and arguments, but does not conduct its own research.

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What is a Covered Drug?

• Covered drugs are identified as a single form dosage unit of the drug.

• The single form dose must be identified by the NDC-11.

• Manufacturers must specify each package unit utilized for each covered drug as part of the submission of its reporting data.

• The manufacturer must submit separate non-Federal Average Manufacturer Price (non-FAMP) data and establish an FCP on each package unit of a covered drug.

Covered Drugs



SAM.gov

• Registration

– Determine if registered in SAM.gov.

– Evaluate number of employees (globally, domestically, etc.).

• Certifications/Representations

– Verify and collect country of origin of API for TAA.

– Investigate status of “responsibility matters”.

– Assess affirmative action policies and procedures.

Registration

Stakeholders/Sources - HR - Manufacturing - Legal

Challenges/Points to Remember - SAM.gov information is certified and

should match other information provided to the VA.

Est. time frame 4 weeks 18


Small Business Subcontracting Plan

• Assign owners of subcontracting plan.

• Determine subcontracting amounts and percentages for small businesses for incorporation into plan.

– Investigate process for capture of spend and vendor status (manual/automated).

– Evaluate small business categorizations and spend.

• Develop written standards.

– Incorporate small business subcontracting into corporate policies and procedures.

– Obtain certification from small business vendors.


Stakeholders/Sources - Purchasing - Manufacturing - Legal

Challenges/Points to Remember - Consider both historical data and

forecasts to arrive at projected subcontracting goals.




• Comply with reporting requirements.

– Ensure process to track subcontract dollars to file reports.

– Submit SSR/ISR/SD Business Reports.

• Maintain documentation/recordkeeping.

– Develop process to identify and document outreach efforts to small business and internal training.

• Include requirements for flow down clauses.

– Conduct review of large business subcontracts.


Challenges/Points to Remember - Not all subcontracting spend is required to be counted in the subcontracting

base. Exclusions may include: royalties, clinical study payments, Medicaid and commercial rebate payments, etc.



Commercial Sales Practices

• Inventory written commercial contracts for pricing policies and terms.

– Analyze preferential terms that translate to value, e.g., bundling, non-

standard warranties.

• Interview sales and finance personnel involved in commercial sales

process to determine adherence to pricing practices and identify

deviations from those practices.

– Determine frequency and justifications for deviations from standard

pricing.

CSP Analysis

Stakeholders/Sources - Purchasing - Finance - Legal - Supply Chain/Sourcing

Challenges/Points to Remember

– Information and data disclosed in the CSP must be complete, current, and accurate.



Commercial Sales Practice

• Prepare disclosure of:

– Commercial sales data

– Most favored customer for each product

– Proposed Tracking Customer

– Justification for pricing where the VA is not receiving the best price

– Deviations and frequency of deviations in pricing policy

– Country of origin

CSP Analysis

Challenges/Points to Remember

– Contractor must update disclosure for any changes to proposed price lists, discounts, or discounting policies which occur after the submission of the offer, but prior to the close of negotiations.



Strategy • Prepare strategy and determine point of contact for negotiations.

– Negotiation discussions with the VA are conducted by telephone and email.

• Monitor and document any agreements with the VA.

– Tracking Customer Details

– Exclusions to Price Reductions Clause

• Submit final proposal revisions at close of negotiations.

– Update sales data: data expected to be current, accurate and complete as of 60 days prior to submission

Audit and Negotiations

Stakeholders/Sources - Legal - Contract Administrator/Point

of Contact

Challenges/Points to Remember - The VA’s negotiation objectives are to determine

and receive fair and reasonable pricing. Be thorough and complete in completing the CSP.

Est. time frame up to 6 months 23


Award Decision

• The VA will award a contract based on:

– Fair and reasonable pricing and terms and conditions

– Satisfactory past performance and financial capabilities

– Regulatory compliance and completion of certifications

– The Government’s best interest

• Upon award, the contractor must submit updated CSP data.

Awarded Contract

Stakeholders/Sources - Legal - Sales - Finance

Challenges/Points to Remember - Being awarded an FSS contract is not

an ending objective. Rather, an FSS contract requires ongoing compliance.

Est. time frame up to 4 weeks 24


Ongoing Contract Obligations During Performance • Update Price lists.

• Track IFF and submit reports.

• Monitor Price Reductions to commercial and tracking customers.

• Prepare and submit Modifications. – Additions/Deletions of Products, Price Adjustments,

Administrative/Technical Changes, Mass Modifications

• Update Annual Requirements. – Online representations and certifications in SAM, VETs 100 Reports,

subcontracting plans and associated reporting requirements

Contract Maintenance

Stakeholders/Sources - Sales - Finance - Legal

Challenges/Points to Remember - Maintaining post award contract

compliance and documentation is key to successful audits and renewal negotiations.

Est. time frame 5 years+ 25


• Covered Drugs

– Evaluate products and determine what products may be 42-2A vs. 42-2B.

– Prepare any justification documents required, if seeking a 42-2B designation.

• Price Lists and Future Price Reductions

– Discuss possible voluntary price reductions with business teams.

– Develop a plan to ensure price list is accurate and updated.

• Change in Sourcing of API/TAA

– Determine and evaluate API on a regular basis, and ensure communication plans are in place for changes in API that may affect FSS awards.

• Post Award Audits

– Evaluate price changes that may require disclosure to the government and changes in FSS awarded prices.

– Ensure products are added or deleted, as needed.

– Prepare a plan for potential VA OIG Audits.

Hot Button Issues

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• Communication – Stakeholders must provide timely and reliable internal communications. – Company needs to have open communication with VA contracting officer.

• Accountability – Ensure various individuals are held accountable for monitoring or sharing

appropriate information. – The contract is a company-wide contract, not a department-centric

contract.

• Tracking – Develop policies, procedure and protocols to track prices, product

additions, deletions and tracking customers to ensure timely updates to contract.

– Maintain a central location for all documents provided to or correspondence with the government regarding the FSS contract.

Overarching Critical Factors for Success

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• Now, you have completed negotiations with the VA and have handled a pre-award audit.

• You know the obligations of maintaining the FSS contract and have kept the hot button issues in mind as you communicate and coordinate with the Contracting Officer.

• What’s Next?

– Non-FAMP Pricing Calculations and FCP

Looking Forward

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Questions/Contact

Constance A. Wilkinson Member

Epstein Becker Green, P.C. (202) 861-1378

[email protected]

Cynthia Bass Associate General Counsel

Sanofi US (908) 981-6778

[email protected]

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What to Expect When You Are Expecting an FSS Contract ......© 2014 EPSTEIN BECKER GREEN, P.C. ALL RIGHTS RESERVED. ATTORNEY ADVERTISING. What to Expect When You Are Expecting an FSS

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