Pharmaceutical Government Pricing Software: Inclusion of US Territories into MDRP

 

Introduction

Relasoft offers pharmaceutical manufacturers software and managed services to handle all activities related to Government Pricing and regulations. That includes processing invoices from Medicaid Drug Rebate Program (MDRP), Medicare Part D Coverage gap Discount Program,and Tricare, as well as direct and indirect customer classification by Classes of Trade.

One of the changes that had to be reflected in the pharmaceutical government pricing software was an inclusion of US territories into Medicaid Drug Rebate Program.

 

Effect of  US Territories Inclusion into MDRP

The inclusion of US territories affected the key pharmaceutical Government Pricing factors and the software: Average Manufacturer Price (AMP), Best Price (BP) and Average Sales Price (ASP).

Average Manufacturer Price (AMP) is a core of the Government Pricing calculations, and it applies to both brand and generic manufacturers. AMP is a base factor used to calculate Unit Rebate Amount (URA). MDRP rebates are based on the URAs.

Average Manufacturer Price (AMP) is defined in § 447.504(a) as ““the average price paid” to the manufacturer for the drug in the United States by wholesalers for drugs distributed to retail community pharmacies and retail community pharmacies that purchase drugs directly from the manufacturer”, see Federal Register.

Two other core factors of the pharmaceutical Government Pricing, BP and ASP, are pertinent to brand products only.

After several delays, the definition of what is considered “United States” has finally changed. Effective January 1, 2023, the MDRP definition of “United States” includes five US territories: American Samoa, Guam, Northern Mariana Islands, Puerto Rico and the Virgin Islands.

The change affects two aspects of the manufacturers’ interactions with the MDRP:
1. Manufacturers are now required to include sales, chargebacks, rebates and other discounts to the newly included territories into the government pricing calculations, and
2. Should the territories desire to join MDRP, the manufacturers will need to pay rebates to the territories.

According to Federal Register, even if a territory decides not to join MDRP, sales to that territory must still be included into GP calculations.

USPS state codes for the territories are as following:

Code       Territory
AS           American Samoa
GU          Guam
MP          Northern Mariana Islands
PR           Puerto Rico
VI            Virgin Islands

Currently, only Puerto-Rico decided to join MDRP. The other territories are not planning to join soon.

Recommendation

Manufacturers need to update their Government Pricing software to reflect these changes.

We recommend that the territory inclusion be made dynamic in the anticipation for possible GP re-statements. The 2023Q1 should be set as the start date of the territory participation.

The dynamic territory membership in MDRP makes re-calculating government pricing data for historical periods easy, accurate and consistent. It also allows sufficient time for software testing.

 

Summary

An inclusion of US territories into MDRP effective January 1, 2023 requires changes to pharmaceutical government pricing software configuration.

The post lists USPS codes for the territories to identify relevant customers.

Keeping the inclusion date dynamic makes data preparation for any potential re-statements easy.

 

Relasoft Pharma Suite platform helps pharmaceutical manufacturers to handle all aspects of Government Pricing activities. To check how our software can benefit your company, please call us at 416-783-1027, or submit a question here at Contact Us