Life Sciences government pricing is filled with complexity and rigorous compliance requirements. Understanding the intricacies of government contracts and ensuring compliance with pricing regulations are crucial for businesses operating in these fields. So what are the questions to ask about government pricing?
Here are 20 essential queries to help you navigate the complexities of government pricing, ensuring both compliance and strategic pricing optimization.
Basic Understanding and Compliance
- What are some basic government pricing terms I need to understand? Here are a few terms to ask the experts about: Best Price, Average Manufacturer Price (AMP), and the Federal Supply Schedule (FSS) 340B and NFAMP.
- What specific laws regulate government pricing in my industry? Familiarize yourself with laws such as the Medicaid Drug Rebate Program (MDRP), Medicare Prescription Drug, Improvement, and Modernization Act (MMA), False Claims Act (FCA), Inflation Reduction Act (IRA), Anti-Kickback Statute,
- What are the penalties for non-compliance? Penalties can range from financial fines to exclusion from future government contracts.
Setting and Adjusting Prices
- How is an Average Manufacturer Price calculated? AMP is a complex calculation based on actual prices paid to the manufacturer for sales to Retail Community Pharmacies (RCPs) and excludes certain sales to entities like government payers.
- How frequently should I adjust prices under government contracts? Government prices are derived by calculating a ceiling price which is required to be reported on a monthly, quarterly and annual basis depending on the calculation. Depending on the government program, a manufacturer could lower prices like PHS or FSS but price adjustments higher than the ceiling price would typically be a compliance violation and an overcharge to the government. So, with the exception of a heavier discount, prices are typically not adjusted. This is worth exploring with our professional services experts.
- Are there any limits to how much I can increase prices? Price increases on federal contract are often restricted due to the ceiling prices. However, it is important to note increasing prices faster than rate of inflation will result in additional penalties in Medicaid and Medicare, and often cause the products to be sold at penny prices under 340B program
Reporting and Transparency
- What pricing information must I disclose publicly? Self-disclosures of overbilling in the 340B program is required to disclose publicly but all other pricing information submitted to CMS is private.
- How do I report pricing data to government entities? Through standardized forms and electronic reporting systems designated by the government like Medicaid Drug Program (MDP) for Medicaid and 340B/Health Resources and Services Administration (HRSA) for PHS price reporting.
- How can I ensure my pricing data remains transparent and accurate and what are the consequences of inaccurate pricing reports? Consequences can include audits, fines, and reputational damage. Regular audits and using reliable data management systems can help.
Rebates and Discounts
- What types of rebates and discounts are required in government contracts? The Units Rebate Amount (URA) for Medicaid is calculated using AMP, Best Price and additional inflationary components. Ceiling prices are used for programs like 340B and Federal Supply Schedule (FSS).
- How do I calculate and apply rebates correctly? Follow the guidelines provided in your contract and use accurate and complete transactional information.
- Are there specific reporting requirements for rebates and discounts? Yes, details of all rebates and discounts must be reported as per contract stipulations.
Audits and Reviews
- How often can I expect audits on my pricing practices and what will that involve? The frequency of government pricing audits depends on various factors, including triggering events like incorrect reporting. The audits will be performed by the Office of Inspector General (OIG) or CMS and adequate documentation including transaction data and standard operating procedures should be available.
- How should I prepare for an impending government pricing audit? Ensure all documentation is accurate and readily available.
- What are common issues found during pricing audits? Common issues include misreported prices due to incorrect product set up or transactional data misses and non-compliance with federal contracts.
Contract Negotiations and Modifications
- What strategies should I employ during contract negotiations to secure favorable pricing terms? Price negotiations are only with Federal Supply Schedule and Part D for selected manufacturers only. Manufacturers may also negotiate with supplemental rebates but to assume all GP prices are negotiable is incorrect. You may update to “while many prices in government programs are not negotiable, preparing for negotiations for Federal Supply Schedule or Part D with adequate documentation is important while understanding the strict pricing rules leave little room for price increases.
- How can I negotiate contract modifications if initial pricing becomes unsustainable? Negotiating with Federal Supply Schedule is allowed by manufacturers should be prepared to provide strong justifications and evidence for requesting a price increase (e.g., increased cost of goods)
- What is the process for renegotiating prices if external market conditions change significantly? Typically involves submitting a contract modification supported with reasoning for the requested change.
Resources and Assistance
- What resources are available to help understand and manage government pricing requirements? Government websites, industry seminars, and your RLDatix Life Sciences professional services experts
Understanding and preparing for government pricing regulations is crucial for maintaining compliance and optimizing your pricing strategies. By proactively addressing these questions, businesses can avoid costly penalties and enhance their profitability in government contracts.
For ongoing support and detailed guidance, reach out to our team of RLDatix Life Sciences Professional Services experts, who can help answer these questions, and offer advice tailored to your company’s needs.