From Price Strategy to Enforcement Risk

So let's talk about potential risks.

I wanna start out by asking Lauren, how do pricing decisions and access pressure distort behavior inside companies in ways that can create other government related exposure? I'm thinking specifically about the False Claims Act and the Anti-Kickback Statute.

I've been involved with those laws for some time.

But Lauren, let me ask you to start out, uh, for those of our listeners who are not familiar with those laws, and especially as they affect the drug industry, define the area and briefly explain what these laws require in the context of the drug industry.

I'll ask you to start out, Lauren, and then Ed, ask you to add on.

Sure.

So everything that we're going to talk about today really lives in the shadow of these two statutes that you mentioned, the False Claims Act and the Anti-Kickback Statute.

So start with the False Claims Act.

At a very basic level, it says that you cannot knowingly submit a false claim for payment to the federal government.

In the drug world, what this means is that every time a prescription is filled for a Medicare or Medicaid patient, a claim goes to the government, and the amount that the government pays is driven by pricing data the manufacturer reported.

Things like average sales price for Part B drugs and average manufacturer price and best price for Medicaid So you have a simple chain.

Manufacturers report pricing data, the government uses that data to set reimbursement, providers submit claims at those rates, and then the government pays.

So if the pricing data at the front end is wrong, all of those downstream claims can suddenly become false claims, and that's the, the structural risk that exists there.

Now, the Anti-Kickback Statute.

The AKS makes it illegal to offer or give anything of value to induce or reward the use of products paid for by federal healthcare programs.

In practice, what that means is that you cannot give prescribers, patients, pharmacies, or channel partners something of value with an eye toward driving prescriptions or purchases of a federally reimbursed drug.

And anything of value, it's important to know, can be very, very broad.

It can include not only cash, but speaker fees, travel, copay assistance, free goods, hub services that might lighten the administrative load in a busy office.

Uh, it can even be data or software that would have business value for a pharmacy or a hospital.

The other piece then that comes into play is the government pricing framework itself.

So AMP, best price, ASP, these are all legal reporting obligations that are tied to whether a manufacturer participates in Medicaid and Medicare.

Every contract, every rebate, every f- fee, every free goods program feeds into those calculations.

So if you misdesign a commercial arrangement so that it's left out of the calculation, you have a- an FCA problem, even without any kickback problem at all.

And if you design that same arrangement in a way that also provides value to prescribers or to channel partners, uh, then you can trigger AKS and FCA together.

Ed, let me ask you to elaborate a little bit on, on that.