Coverage Gap Discount Program (CGDP) Payment Overview

1. Coverage Gap Discount Program(CGDP) Payment Overview Based on HPMS guidance issued Dec. 22, 2010 titled “Coverage Gap Discount Program Payment Process” February 3, 2011

2. Agenda • Introduce the CGDP Third Party Administrator • Review EFT information transmission • Review the two distinct CGDP payment flows • Discuss CGDP reconciliation • Discuss Quarterly Invoice process/reports

3. TPA Roles Under The CGDP • Liaison between Part D Sponsors and Manufacturers in ALL matters related to the Coverage Gap Discount Program • Coordinate notice to Manufacturers of Part D Sponsor Electronic Funds Transfer (EFT) information • Distribute quarterly invoices and associated reports to Part D Sponsors and Manufacturers • Process payment confirmation reports from Part D sponsors and Manufacturers • Confirm “Payment in Full”: Compare Payment Confirmation Report totals to Invoice Report totals; report any discrepancies to CMS

4. TPA Contact Information • All customer support will be provided through our existing Customer Service and Support Center (CSSC) located at Palmetto GBA LLC in Columbia, South Carolina • We will offer ongoing support by our dedicated staff through the CSSC Help Line at 877-534-2772 • Hours of operations - Monday through Friday from 8:00am to 7:00pm EST • Or send inquiries to our email address at: csscoperations@palmettogba.com • Web site address www.CSSCOperations.com

5. Electronic Funds Transfer (EFT) • TPA distributes Part D sponsor banking information to the Manufacturers • Sponsor’s current EFT data stored in APPS will be used for CGDP • EFT information will be made available by the TPA to the Manufacturers via a mailbox on a secure server • The TPA will distribute this information to Manufacturers in mid-February

6. Medicare Coverage Gap Discount Program Agreement • Manufacturer’s Responsibilities • To pay quarterly invoices directly to accounts established by Part D Sponsors via electronic funds transfer • Confidentiality Provisions • Information disclosed to the Manufacturer pursuant to this agreement shall only be used for purposes of paying the discount under the Discount Program

7. Information Verification Sponsors who would like to • Verify current APPS banking information • Verify the name of their banking info contact person Contact : Yvonne Rice at CMS (410) 786-7626 Yvonne.Rice@cms.hhs.gov Sponsors who wish to use a different EFT account for CGDP payments may contact the TPA for further instructions

8. Identification of Funds Transfer To identify payments from Manufacturers look for • Manufacturer’s company name • 15 character identifier example: CGYYQQ8888H1234 CG = coverage gap YYQQ = Year and Quarter of the invoice 8888 = P number without ‘P’ H1234 = Contract number If this 15 character identifier is not visible on the bank statement or online contact your financial institution

9. Coverage Gap Discount Program Payment Overview • Part D Sponsors receive a monthly CGDP prospective payment from CMS • Sponsors advance the Gap Discount at the Point of Sale and submit PDEs recording the Gap Discount amount • CMS aggregates CGDP PDE data and sends to TPA • TPA sends quarterly invoice reports to manufacturers and Part D Sponsors simultaneously • Manufacturers pay the invoiced amount in full to Part D Sponsors • Manufacturers and Part D Sponsors send confirmation of payment to TPA • CMS offsets invoiced and now paid amounts from Part D Sponsors • After benefit year, CMS performs a cost-based reconciliation

10. Two Distinct CGDP Payment Flows • Prospective payment  CGDP Reconciliation • Manufacturer payment to Part D Sponsors of invoiced gap discount amount  CMS offset of invoiced amount NOTE: The CGDP is a new program, separate from any existing rebate arrangements with manufacturers

11. CGDP Payment Flow Prospective payment  CGDP Reconciliation

12. CGDP Prospective Payment • Monthly prospective payment for every non-LIS enrollee • 13 months (last being any adjustments for previous year) • Allows plan to advance coverage gap discount at POS • Prospective payment necessitates a financial reconciliation

13. CGDP Reconciliation • Cost-based reconciliation • Separate from Part D payment reconciliation • Takes place after the sixth invoicing and payment processing cycle for the benefit year • CGDP reconciliation is based on: • Submitting Contract – includes PDE data submitted by plan for Part D eligible beneficiaries even if not enrolled in plan • All accepted PDE data submitted by contract • Conducted at the contract/PBP level

14. Calculating the CGDP Reconciliation • Compares actual CGDP costs incurred to total CGDP prospective payments received: Actual CGDP Costs – CGDP Prospective Payments • The reconciliation adjustment can be positive or negative • After the CGDP reconciliation for the benefit year: • CMS will discontinue additional CGDP offsets • Part D Sponsors will receive payment for invoiced CGDP costs from the manufacturer

15. CGDP Reconciliation Scenarios

16. CGDP Payment Flow Manufacturer payment to Part D Sponsors of invoiced gap discount amount  CMS offset of invoiced amount

17. Quarterly Invoice Report Process Overview • Part D Sponsors advance Gap Discount at the Point of Sale • Part D Sponsors submit PDEs to CMS recording the Gap Discount amount • CMS aggregates PDE data and sends to TPA • TPA sends quarterly invoice reports to manufacturers and Part D sponsors simultaneously • Manufacturers pay the invoiced amount in full to Part D sponsors within 38 days • Manufacturers send confirmation of payment to TPA within 5 days • Part D Sponsors send confirmation of payment receipt to TPA within 5 days • The TPA sends payment confirmation statistics to CMS • CMS offsets invoiced and now paid amounts from Part D Sponsors through APPS

18. CGDP Timeline for Q1 2011

19. What PDEs Are Included On An Invoice? • Final action accepted PDEs w/reported gap discount received during a quarter • Certain PDEs may be pended from an invoice at the discretion of CMS

20. Defining “Final Action” • When Sponsor adjusts or deletes previously saved record, the most recent record saved is designated as final action record • Invoice excludes final action deleted records because they no longer have a reported gap discount

21. Quarterly Invoice Reports • Allows Sponsors to know how much they should expect and from which manufacturer • Sponsors will receive three reports from the TPA: • Sponsor Detail Report • Sponsor Invoice Report • A Gap Discount PDE Tracking Report • Sponsors will send the TPA one report: • Confirmation of Payment Report

22. Quarterly Invoice: Sponsor Detail Report Format

23. Quarterly Invoice: Sponsor Invoice Report Format

24. Gap Discount PDE Tracking Report • Released at the same time as other quarterly invoice reports • Allows sponsor to know which “final action” accepted PDEs with a reported gap discount were put on the invoice and which were not • Future enhancements to this report include adding a reason code explaining why PDEs did not get placed on an invoice

25. PDE Data Validation Website • When CMS pends Gap Discount PDEs and they require a Sponsor response, we will post them on the PDE Data Validation Website • Sponsors are expected to respond promptly to all PDEs posted to the Validation Website • The timeliness standard will be stricter for Gap Discount PDEs because they require a Sponsor response before they will be released to an invoice (response expected within 2 weeks of posting) • In the near future, CMS will initiate compliance action against Sponsors who fail to respond

26. Confirmation of Payment Report • Method for Sponsors to communicate to the TPA that they were paid in full, per the terms of the Manufacturer Agreement • Based on the Manufacturer Total rows from the Sponsor Invoice Report • Sponsors will add payment confirmation details to the records and transmit back to the TPA • Additional file format and process instructions will be forthcoming

27. CMS Offsets • Following the Quarterly Invoice cycle, CMS will offset Invoiced amounts from Part D Sponsors • Processed through APPS • For the Q1 2011 invoice, offsets will be processed in the August 2011 APPS payment

28. Questions? Please submit all questions regarding the CGDP Payment Process to our dedicated email box PDEjan2011@cms.hhs.gov