QAs Amend 0002- FINAL.pdf

Question #2

Original Question: Since the Government is requesting pass through pricing, how does OWCP want to pricing sheet to be completed when pharmacies have different contracted rates across the network? PBMs that own their network (as opposed to leasing) have stronger buying power with pharmacies and reimburse them at directly contracted rates. However, this means there are different contract rates across the network. For example, an NDC at one pharmacy will have different rate than the same NDC at another pharmacy depending on the contract rate the PBM has with both pharmacies.

OWCP Answer: PBM offerors should provide their best possible AWP discount, rebate per brand transaction, and service fee considering all transactions from all pharmacies to have the most competitive total evaluated price. The AWP discount negotiated with this contract is one of the “lesser-than” pricing options of the full pass-through price. The price evaluation will be on the AWP discount, rebate per brand transaction, and service fee not other price options detailed in the “lesser-than” pricing structure of the PWS.

Follow Up Question: The previously submitted a question to OWCP was asked to determine how the pricing sheet should be completed when pharmacies have different contracted rates across the network. At this time, we still need clarification on this question. To be clear, we are not rejecting the concept of “pass through” pricing. Our concern is rather how “pass through” pricing is reflected in the pricing sheet (WORKBOOK).

The points below explain the basis for this concern:

1. Our belief is that a full pass-through pricing model* means that Offeror will charge OWCP the exact amount we paid to a pharmacy for a medication. This belief is derived from the following language in the DOL solicitation:

* See NCPDP Standard (423-DN) - Basis of Cost Determination. Code indicating the method by which Ingredient Cost Submitted (409-D9) was calculated. The cost basis will be the OWCP Pharmacy Fee Schedule, the pharmacy's usual and customary (U&C) rate, the generic maximum allowable cost (MAC), the guaranteed AWP discount negotiated under this contract, or any other price the contractor pays the pharmacy.

2. The A.19-J.4 DISCOUNT+REBATES+FEES+WORKBOOK provides one (1) cell per base period per discount CLINS category (for example, brand retail, generic retail, brand mail order).

Using one cell to contractually reflect “pass through” pricing is not possible as explained in points 3 and 4 below.

3. Most PBMs have over 50,000 directly contracted pharmacies in the network. Each pharmacy contract has a specific AWP discount negotiated rate that is paid for a particular medication (NDC). These rates are not identical. For example, for “Brand Drug A,” we could be contracted to pay Walgreens $50, CVS (under a different contract) $80, and a small local pharmacy (under their own contract) $90.

4. PBM Offerors, like us, that own their pharmacy network are unable to consolidate rates since we honor different contracted rates across our networks. Therefore, we cannot accurately enter one single price per discount CLINS category to comply with the solicitation WORKBOOK as it is currently designed. (To list the contracted medication prices, there would need to be thousands of cells in the WORKBOOK.)

Important notes:

PBMs that own their network consistently have stronger buying power with pharmacies, and reimburse them at directly contracted rates. A PBM that leases its network from a PBM adjudicator (as many of our competitors do), may pay a single consistent rate to the owner of the retail pharmacy network. Consequently, they would not have the issue we are experiencing with the WORKBOOK. However, they will not be able to offer OWCP the rate that was charged by the pharmacy. Instead, they will pay the marked-up rate charged by the PBM processor that contracts with the pharmacy. A PBM that leases its network will never be able to provide OWCP with actual full pass-through pricing because these this information is not available to them.

Recommendations for pricing evaluation We understand the importance of an “apples-to-apples” evaluation across prospective PBMs to achieve the OWCP’s goal of implementing an auditable, transparent pharmacy pricing model, and allow predictability for future spend. For these reasons, we strongly recommend that OWCP consider one of the following two pricing scenarios:

1. AWP Spread Pricing model - the contracted pricing structure currently in place for the FECA program

AWP spread pricing features AWP discounts off a daily feed provided by Medi-Span and a dispense fee. In this model, there are no surprise fees, pass-through charges, or other additional costs applied to your retail and mail order transactions and provides a continuity to OWCP in terms of adjudication and pricing methodology, reporting and analytics, and quality oversight and auditing. Medi-Span files are loaded into our proprietary adjudication engine and processed according to the assigned designations per the receipt of updated files.

With regard to audits, the traditional AWP spread model allows the Offeror to easily support OWCP in satisfying third-party audit requirements within contractual, regulatory, and legal obligations.

Admittedly this does not achieve actual “transparency.” However, achieving true transparency in a process where leased retail pharmacy networks exist is not attainable, as PBMs that lease a retail pharmacy network are never given the actual amount a pharmacy is paid, so they would not be able to comply with true transparency in the first place. Moreover, as mentioned above, all PBMs that own their own retail pharmacy networks can provide transparency, but not at one single rate, as retail pharmacies have unique, individually negotiated pricing arrangements.

2. A full pass-through model as proposed by OWCP, but includes a “guarantee true-up” of drug pricing and dispensing fees

In this scenario, the Offeror would propose a single “effective discount” rate (and enter this into A.19-J.4 DISCOUNT+REBATES+ FEES+WORKBOOK), but annually perform a true-up of AWP discount drug pricing* and dispensing fees**.

* The true-up of drug pricing is determined by comparing total invoiced drug prices to the total of all invoiced drugs recalculated at the contract guaranteed AWP discount.

** The true-up of dispensing fees is determined by comparing the total invoiced dispensing fees to the total number of all invoiced dispensing fees multiplied by the contract guaranteed dispensing fee.

When the Offeror achieves or exceeds the AWP discount or dispensing fee contract guarantees listed in A.19-J.4 DISCOUNT+REBATES+ FEES+WORKBOOK, the surplus would be retained by OWCP. If the Offeror fails to meet the AWP discount or dispensing fee contract guarantees, the Offeror would reimburse OWCP for the dollar amount of the deficit.

• The Offeror would annually perform a guarantee true-up of AWP discount drug pricing and submit data to validate the calculation of the guaranteed retail pharmacy network and mail order service AWP discounts for each contract year.

• The Offeror would annually perform a guarantee true-up of dispensing fees and submit data to validate the calculation of the guaranteed retail pharmacy network and mail service dispensing fees for each contract year.

• The Offeror would identify and submit an Exclusion file for each true-up, identifying specific NDCs or claim numbers excluded from the annual true-up process and the reason for the exclusion.

• The Offeror would annually reimburse OWCP for any dollar deficit resulting from the discount guarantee true-up of drug pricing and dispensing fees.

With regard to audits, this pricing scenario cannot be audited line by line. Under a transparent retail pharmacy pricing model with a guaranteed rate, a line-by-line transactional audit is no longer relevant. This is because the guaranteed rate model is an aggregated figure. So, it does not matter if a pharmacy received $100 for Brand Drug X on Monday, $50 for Brand Drug X on Tuesday, and $75 for Brand Drug X on Wednesday. What matters is that the OWCP effective rate guarantee of $75 was achieved across all transactions.

DOL Answer for Question #2

DOL appreciates the detailed feedback and thoughtful analysis. For purposes of determining pricing during contract performance, DOL rejects the proposal to only apply AWP Discount pricing to determine prices for drug transactions. DOL also rejects the proposal to have a “guarantee true-up” process.

Please refer to Solicitation as a whole, for all the contract requirements, including definition and application of pass-through pricing during contract administration.

For purposes of submitting price proposals and the price evaluation, please carefully review the Instructions to Offerors for VOLUME III– FACTOR III-PRICE/ DISCOUNTS starting on page

112. In particular, please review the following from the Instructions on Pages 112-113:

During contract administration, this contract will apply a full pass-through price and other fees and rebates to determine the price to charge the Government. See Part 2 Definitions, and PWS 1.6.9.1. For purposes of price evaluation for this solicitation, the Government will only consider proposed pricing based on the guaranteed AWP discount proposed in Attachment J.4 which is one of the six less-than price methodologies used to determine the full pass-through price. Offerors shall not propose any other pricing that does not comply with the pricing template provided. DOL will not evaluate prices for purposes of award using the other five possible less-than prices provided in the full pass-through price structure.

Because the full pass-through price (lowest of six pricing methodologies) shall be applied during contract performance, there is a possibility DOL will pay a lower price than what is proposed in the awardee’s proposed guaranteed AWP discount in Attachment J.4.

Please see Technical Exhibit 14 for some examples. Accordingly, because a higher price than a proposed guaranteed AWP discount will not be used as the full pass-through price instead of a lower, lesser-than price during contract performance, DOL encourages offerors to competitively price their guaranteed AWP discounts to align with the other possible less-than prices. Offerors bear the risk of proposing guaranteed discounts or other prices that are so low that the price is less than the amount the offeror is required to pay the pharmacy through its own agreements. DOL shall not pay anything other than the lowest of the six prices defined by the full passthrough price definition.

Rebates are firm-fixed price and must be expressed in dollars per transaction and be applied at point of sale for all specialty and all non-specialty brand name drugs, regardless of whether a rebate was received or not.

The service fee and rebate must be differentiated from the full pass-through price on the OWCP pharmacy data file, in any reports, and on the PBM portals. The service fee is firm-fixed price and must be included in the price billed to the Government for each paid transaction; for reversals, the price, including the service fee, must be included in the reversal. The contractor must pay the network pharmacy, at minimum, the applicable full pass-through price that the contractor bills.

OWCP is aware that offerors’ contracted pharmacy rates will vary across the country. For the price evaluation, PBM offerors should provide their best possible AWP discount, rebate per brand transaction, and service fee considering all transactions from all pharmacies, to have the most competitive total evaluated price. The AWP discount negotiated with this contract is one of the “lesser-than” pricing methodologies of the full pass-through price.

Please keep in mind, however, that the price proposal submission is based on Attachment A19- J.4 – PBM DISCOUNT/REBATE/FEES WORKBOOK which uses AWP Discount pricing, rebates, and service fees for purposes of determining a total evaluated price for proposals. For this procurement, the price evaluation will only use the AWP discount, firm-fixed price rebate per brand transaction, and firm-fixed price service fee for each transaction and will not review or apply any of the other five price options detailed in the “lesser-than” pricing structure of the PWS. See Part 2 Definitions, and PWS 1.6.9.1 and Instructions to Offerors for Factor III (Price).

By only evaluating the proposed AWP discounts from each offeror, this allows a fair, apples-to-apples comparison of each offeror’s proposed pricing for purposes of price evaluation without the submission of the other five lesser than pricing methodologies for price evaluation.

Offerors should note that there is no billing true-up process after the point-of-sale transaction.

The full pass-through price must be applied at the point-of-sale. Requirement 5.6.1 has been updated to reflect this.

Question #3

Original Question: Based on the requirements of the solicitation, the service fee paid to the PBM is separate from the dispense fee associated with pharmacy reimbursement in pharmacy contracts. Where should the dispense fee be added in the pricing sheet? Also, how should this be handled when the pharmacy contract dispense fee varies contract to contract?

OWCP Answer: The dispensing fee is not included in the price evaluation for this procurement.

Do not include dispensing fees in the PBM DISCOUNT REBATE FEES WORKBOOK. The price evaluation and the PBM DISCOUNT REBATE FEES WORKBOOK only includes the AWP discount, rebate, and service fee. During contract administration, payments will be determined by the full pass-through pricing structure (See section 1.6.9.1 PBM Billing/Costs).

DOL will pay the lowest possible pass-through price and that lowest total price could include a dispensing fee. The dispensing fee is not separate of the lowest possible pass-through price it is inclusive of the pass-through price. Examples of pricing transactions at the lowest price of the full pass-through price have been added to section 1.6.9.1 PBM Billing/Costs

Follow up question: Would OWCP reconsider this approach? The dispense fee is a component of total pharmacy costs. In the same way that AWP discounts vary among network pharmacies, dispense fees can vary among different pharmacy contracts — and among different PBMs. By removing them from the evaluation, a crucial element of pricing will not be considered, and this will likely result in improper comparisons.

DOL Answer to Question #3:

The Government will not pay for a dispensing fee that is separate from the full pass-through price. It is up to the Offeror to determine whether any of the six less-than price methodologies include a dispensing fee. If so, the full pass-through price for that particular methodology is inclusive of the dispensing fee. For example, if the OWCP Pharmacy Fee Schedule includes a dispensing fee in addition to a set drug price, then the total of the dispensing fee and drug price is the pass through-price for that pricing methodology because that is what would be directly paid to the pharmacy if it was the lowest price of the six methodologies. In contrast, the AWP Discount price pass-through price does not include a dispensing fee and a dispensing fee should not be considered for determining if the AWP Discount Price is the lowest of the six pricing methodologies.

For the price proposals, any dispensing fee is not included as a separate entry for price evaluation in the PBM DISCOUNT REBATE FEES WORKBOOK. The price evaluation and the PBM DISCOUNT REBATE FEES WORKBOOK only includes the AWP discount, rebate, and service fee. During contract administration, payments will be determined by the full pass-through pricing structure (See section 1.6.9.1 PBM Billing/Costs). DOL will pay the lowest possible pass-through price, which depending on the methodology, could be inclusive of a dispensing fee.