BP and the True-up Process
In this post I focus on Best Price ("BP") and the industry concept of the BP True-up. Before diving in, let's review a couple of key concepts from the ACA Final Rule that manufacturers should consider in implementing and documenting their BP methodology:
- CMS defines the Best Price for a single source or an innovator multiple source drug as “the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or government entity in the United States in any pricing structure, in the same quarter for which the AMP is computed”.
- The final rule explicitly permits manufacturers a 12-quarter period to restate the Best Price without first contacting and gaining approval from CMS.
- There is no “statute of limitations” outlined in the final rule. The manufacturer has the responsibility to ensure that the reported BP accurately reflects all transactions during a period. CMS has stated that manufacturers must "adjust the best price for a rebate period if cumulative discounts, rebates or other arrangements subsequently adjust the prices..."
With these concepts in mind, there are two factors I recommend you consider when establishing your BP methodology and the True-up process:
- What is your contracting strategy? Direct contracts, GPO agreements, and "traditional" rebate contracts tend to create a predictable liability. These types of contracts allow for an accurate BP determination in the current period. More complex rebate strategies (e.g. value based or market share rebates) may limit the accuracy of your current BP predictions.
- What are your internal capabilities for monitoring data? BP True-ups are driven by lagged transactional data and the more contracts in place the more data is generated "after the fact". Having an appropriate review process for late arriving data is key to ensuring that your reported BP remains accurate.
As you are creating your BP True-up methodology, it is important to choose the correct time frame and align with CMS guidance. Many manufacturers utilize a 12-month BP True-up process and that is a good starting point. Keep in mind that a one-time 12 month look back may not meet CMS guidance based on the contracting strategy and data factors noted above. Even though you may often find that 95% of your lagged data arrives within 12 months, my experience is that there are often outliers that must be considered for BP.
If you have any questions about BP feel free to reach out through the contact form below. I will be happy to schedule some time to review in detail.
Published on April 2, 2021
by Scott Hoffman
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