340B Drug Discount Program 2013
May 16, 2013
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Agenda
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340B Program Overview
Covered Entities
Covered Drugs
Covered Patients
Why HRSA Audits
How to Prepare for HRSA Audit
Questions/Answers
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340B Overview
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The 340B drug discount program is a section of the Veterans Health Care
Act of 1992, which requires pharmaceutical manufacturers whose drugs are
covered by Medicaid to provide discounts on outpatient covered drugs
purchased by 340B covered entities
Covered entities can receive discounts based on the utilization of
pharmaceuticals by covered outpatients. Retrospective procurement is used
to realize the discounts based on this utilization
The program is administered by the Office of Pharmacy Affairs (OPA). The
OPA and drug manufacturers have the right to conduct compliance audits of
participating facilities. A clear audit trail must be created to remain in
compliance with the regulations of the program
The purpose of the 340B program is to enable covered entities to stretch
scarce federal resources, reaching more eligible patients and providing more
comprehensive services
Estimated savings are 25%-50% of a drug’s average wholesale price (AWP)
Approximately $6 billion in 340B purchases in 2010
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340B Program Implementation
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Hospitals must file application for 340B status with the Office of Pharmacy
Affairs (OPA)
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Separate 340B account (s) is established with existing drug wholesaler
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Purchasing system remains the same
New account contains 340B prices (“Cost Minus” is applied to 340B purchases)
Wholesaler delivers drugs from both purchase orders (separate invoices for
each account)
Drugs purchased direct from manufacturer can be obtained at 340B prices
Annual recertification is required of all participating 340B covered entities.
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340B Inventory Virtual Inventory Process
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Hospital Covered Entities
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Other Covered Entities
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Federally Qualified Health Centers
Federally Qualified Health Center Look-Alikes
Black Lung Clinics
Ryan White HIV/AIDS Program Grantees
Native Hawaiian Health Centers
Tribal/Urban Indian Health Centers
Comprehensive Hemophilia Diagnostic Treatment Centers
Title X Family Planning Clinics
Sexually Transmitted Disease Clinics
Tuberculosis Clinics
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HRSA Clarification of
Hospital Covered Entity
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Based on 1994 guidance, any outpatient facility
which is an integral component of a DSH will be
included on the Medicare Cost Report and
therefore eligible for 340B pricing
Included means:
 HRSA = As-filed cost report
 Federal Register language = included on the
Medicare cost report
 Statutory language = hospital and patient of
entity
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Covered Drugs
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Program covers only covered entity’s outpatient drugs:
 FDA-approved prescription drug
 Prescribed OTC drug
 Biological drugs that can be dispensed only by
prescription
 FDA-approved insulin
 Excludes vaccines
 Orphan drug exclusion and proposed regulations
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Permitting orphan drug purchases on 340B for patients
treated for a non-orphan disease (i.e. Remicaide for use
with rheumatoid arthritis)
Prohibiting orphan drug purchases on 340B for patients
treated for the orphan disease (i.e. Remicaide for Chrohn’s
disease)
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Patient Definition Overview
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1996 – Final guidance of a patient
2007 – Proposed revisions to definition
July 18, 2012 – Members of Congress ask HRSA for
further clarification on definition of eligible patient
Program isn’t limited to Medicare, Medicaid or low
income patients
Any patient of covered entity may received covered
OP drugs purchased under the 340B program
Patient must be treated at a facility that is providerbased to the covered entity. All new sites must be
enrolled with OPA
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Definition of a Patient
An individual is a patient of the 340B covered entity if:
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The covered entity has established a relationship with the individual, such that
the covered entity maintains records of the individual's health care; and
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The individual receives health care services from a health care professional
who is either employed by the covered entity or provides health care under
contractual or other arrangements (e.g. referral for consultation) such that
responsibility for the care provided remains with the covered entity; and
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The individual receives a health care service or range of services from the
covered entity which is consistent with the service or range of services for
which grant funding or Federally-qualified health center look-alike status has
been provided to the entity. Disproportionate share hospitals are exempt from
this requirement.
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If all 3 requirements are not met, the person is not eligible for 340B drugs
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An individual will not be considered a patient of the covered entity if the only
health care services received by the individual is the dispensing of a drug or
drugs for subsequent self-administration or administration in the home setting
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GPO Exclusion
Can a 340B hospital that is subject to the group purchasing
organization (GPO) prohibition (Disproportionate Share Hospital,
Children's Hospitals, Free Standing Cancer Hospitals) continue to
purchase items from a GPO that are at a lower cost than 340B pricing?
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Answer
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Hospitals that participate in the 340B Program for covered outpatient
drugs and are subject to the GPO prohibition cannot purchase any
covered outpatient drugs through a group purchasing organization or
other group purchasing arrangement
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This “GPO prohibition” is found in the 340B statute, at section
340B(a)(4)(L) and applies even if items are available at a lower price
through the GPO
Hospitals can continue to purchase all products for inpatient operations
through a GPO, even if the outpatient departments participate in the
340B Program
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Hospital Covered Entities
Summary
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GPO Exclusion
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Medicaid Billing: Carve in/Carve out
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HRSA guidelines allow covered entities to comply with the
statute in different ways:
 Bill Medicaid at acquisition cost plus the state allowable
dispensing fee and the state does not request a rebate
(“Carve In”)
 “Carve out” Medicaid drugs from 340B program and
allow state to collect rebates
 Follow state guidelines for applicable billing limits
Covered entities are responsible for working with their state
Medicaid agency to ensure that the agency can identify
drugs purchased through the 340B program and avoid
obtaining rebates on those drugs
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Contract Pharmacies
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No distance or proximity limitation
No longer a limit on number of contract pharmacy
arrangements
Covered entity responsibility to comply, this is important to
remember for contract pharmacy arrangements
Challenges:
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Diversion tracking
Audits & records
Discount Management and tracking
Data exchange
Inventory management
Business terms (payment risk, dispensing fees
Advertising/marketing approval
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Contract Pharmacy Audit
Requirements
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All covered entities are required to maintain auditable
records
Expected to conduct annual audits of contract pharmacies
To be performed by an independent outside auditor as a
way to fulfill their ongoing obligation of compliance
To the extent that any compliance activity or audit
performed by a covered entity indicates that there has been
a violation of 340B Program requirements, such finding
should be disclosed to HRSA along with the covered entity's
plan to address the violation
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WHY HRSA AUDITS?
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Covered Entity Growth
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Increased Scrutiny Continued
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Letter to HRSA on July 18, 2012
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Letter to UAB on May 10, 2012
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HRSA 340B Integrity Audits
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Nearly 20 years after creation of 340B, HRSA exercising authority
to audit covered entities. On February 10, 2012, 340B participants
received notice from HRSA that audits would occur
HRSA had been under pressure from Congress and federal
oversight groups to prove that only those parties eligible for the
program’s benefits receive them
According to HRSA, they will make its audit results public after the
agency ensures its methods are consistent and audited entities
have an opportunity to respond to the findings
Focused compliance problems:
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Diversion – Refers to a covered entity providing drugs bought through the 340B
program to people not eligible for the program’s prices.
Duplicate Discounts – These occur when a state obtains Medicaid rebates for a
drug that a covered entity bought through the 340B program.
Group Purchasing Organization (GPO) prohibition
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340B Audits
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According to Safety Net Hospitals for Pharmaceutical Access,
HRSA has already completed 51 audits, most involving hospitals
HRSA has planned as many as 400 for 2013
2012 audits included covered entities that included hospitals
and retail pharmacies
The audits will include pharmacy contracts between 340B
covered entity and any outside pharmacy
2013 and forward:
 Easily retrievable data
 All covered entities audited in the future
 Regulations will be tightened, not sure when
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Audit Process
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According to HRSA, the first question asked is, “Do you have
policies and procedures in place to define who is and who is
not a patient?”
Required standard information in pharmacy data file, such
as:
 Prescriber
 Patient
 NDC number
 Fill date
 Billing amount
 Acquisition cost
 Encounter dates
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HRSA Audit Example Timeline
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2/4/13 - Email from HRSA Director informing Pharmacist in
Charge of the audit
2/8/13 - Email from auditor to make arrangements for
on-site visit on 2/28-3/1/13
2/9/13 - Email with data requests forwarded to Director of
Pharmacy and Pharmacist in Charge
2/11/13 - Received site visit agenda from auditor
2/15/13 - Conference call with both auditors to review
data requests (request electronic files by 2/18/13)
2/28-3/1/13 - HRSA On site visit
3/15/13 - Exit conference call
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Audit Sample
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Small number of encounters sampled
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Selected from recent 6 months
28 – 50 encounters
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Prescription Number
NDC
Product Name
Quantity dispensed
Date prescription written
Date prescription filled
Provider name
NPI
Patient name
Medical record number/Patient ID number
Payer
The wholesale price paid (acquisition price)
The amount billed for the drug
The amount actually paid by the payer and patient
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Findings/Penalties
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According to March 5, 2012 program release,
findings may be referred to the Office of Inspector
General or the U.S. Department of Justice
On February 8, 2013 HRSA has released a
document by hospital with OPA findings, Sanction
and Corrective Action with Completion Date
The file is very basic and states that information
on corrective action plans will be updated once
approved by HRSA.
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Audit Tips
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Conduct mock audits
Develop effective policies and procedures
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Create 340B task force for program oversight
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Patient eligibility
Duplicate discounts
Appropriate Medicaid billing
Multidisciplinary: Representation from pharmacy, administration, legal and
finance
Group should meet periodically to review organizations operations against the
340B program standards and opinion letters
Keep current on developments/updates
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Be prepared for 340B integrity audit
Risk Assessment
HRSA Website
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http://www.hrsa.gov/opa/
http://www.hrsa.gov/opa/faqs/index.html
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How can Arnett Foster Toothman help?
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Arnett Foster Toothman has assisted multiple clients with 340B mock audits, pharmacy
policy and procedure compliance assistance and 340B benefit calculations
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Conduct a mock HRSA 340B Integrity audit
 Review of policies and procedures regarding the procurement, inventory,
distribution, dispensing, and billing for covered outpatient drugs
 Documentation of internal controls applicable to the policies and procedures
identified above
 Review of policies and procedures to prevent the resale or transfer of drugs to a
person or persons who are not patients of the covered entity
 Review records of drug procurement and distribution and test whether hospital
has obtained a discount only for those programs authorized to receive discounts
by section 340B of the PHS Act
 Arnett Foster Toothman follows HRSA data request and audit protocol in order to
mock actual HRSA Integrity Audit
 This will provide the organization with a corrective plan of action, if necessary,
and readiness when the actual HRSA audit occurs
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Q&A
Questions ?
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Thank You!
Brenda Christman, Member
Arnett Foster Toothman PLLC
155 E Broad Street, Suite 2100
Columbus, OH 43215
614-223-9209
brenda.christman@afnetwork.com
Brian Bell, Manager
Arnett Foster Toothman PLLC
155 E Broad Street, Suite 2100
Columbus, OH 43215
614-223-9209
brian.bell@afnetwork.com
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