Federal 340B Drug Discount Program:
Compliance Issues
FDLI/AHLA Conference: The Intersecting Worlds
of Drug, Device, Biologics and Health Law
Bill von Oehsen
General Counsel, Safety Net Hospitals for Pharmaceutical Access
Principal, Powers Pyles Sutter & Verville, PC
May 22, 2012
Washington, DC
Overview
I. 340B Primer
- Background
- OPA database
- Calculating ceiling price
- GPO exclusion
- Anti-diversion
- Contract pharmacies
- Supply chain dynamics
III. 340B Reform Legislation
- New covered entities
- Changes to discount
- Part D changes
- Medicaid changes
- Integrity provisions
- Recertification
- GAO report
- Orphan drug exclusion
II. Medicaid Intersection
- Duplicate discounts
- Impact on rebates
- DSH inpatient pricing
- Part D and third party
reimbursement
IV. Enforcement
- Overcharges
- Litigation update
- Private right of action
- Diversion
- Audits
1
340B Primer: Background
340B drug discount program requires pharmaceutical manufacturers
participating in the Medicaid program to provide discounts on
covered outpatient drugs purchased by federally-funded clinics and
other safety net providers referred to as “covered entities” (CEs)
The rights and obligations of CEs and manufacturers are set forth in
Section 340B of the Public Health Service Act (PHSA)
Section 1927 of the Social Security Act (SSA) requires
manufacturers to enter into a pharmaceutical pricing agreement
(PPA) with the Secretary of HHS as a condition of Medicaid and
Medicare Part B covering the companies’ outpatient drugs
Under the PPA, a manufacturer agrees to provide discounts and
otherwise comply with 340B requirements
340B Primer: Background (cont’d)
Program is administered by the Health Resources and Services
Administration (HRSA) through the Office of Pharmacy Affairs
(OPA)
Because several aspects of the 340B program depend on
interpretation and application of SSA provisions (e.g. average
manufacturer price, best price, etc.), the Centers for Medicare &
Medicaid Services (CMS) also plays a significant role in 340B
program administration
Originally 12 categories of CEs: high-Medicaid disproportionate
share (DSH) hospitals owned by or under contract with state or
local government; community health centers; ADAPs; family
planning clinics; AIDS, TB and STD clinics; and other grantees
under the Public Health Service Act
CEs and manufacturers are listed in the OPA database
2
3
4
340B Primer: Background (cont’d)
Discounts are calculated using the Medicaid rebate
formula; but 340B pricing is better because (1) sales
do not involve retail pharmacies thereby avoiding
retail mark-ups and (2) 340B providers regularly
negotiate sub-ceiling prices
Use of drugs limited to “patients” of 340B CE
Medicaid billing procedures may need to be adjusted
to avoid manufacturers giving duplicate discounts
340B Primer: Background (cont’d)
Two HRSA contractors: Prime Vendor Program
(PVP) and Pharmacy Support Services Center
(PSSC)
PVP contractor: Apexus
– Negotiates sub-ceiling pricing on behalf of PVP
participants
– Provides other value-added services
PSSC contractor: American Pharmacists Association
– Provides technical assistance to covered entities and other
stakeholders
– Staffs 340B call center
5
340B Primer: Background (cont’d)
Many CEs are only permitted to purchase and use 340Bdiscounted drugs within the scope of their 340Bqualifying federal grants, e.g. HIV, TB, STD, family
planning, and other grant programs established under the
Public Health Service Act
As a result, not all drugs purchased by 340B providers
are subject to 340B pricing
340B Primer: Background (cont’d)
Examples of non-340B drugs purchased by 340B
providers:
1.
Drugs other than factor and related products
purchased by hospitals that operate hemophilia
treatment centers
2.
Drugs purchased by state or local health
departments that are not used within the scope
of their 340B-qualifying federal grants
3.
Inpatient drugs purchased by 340B hospitals
Purchase of the above drugs through 340B is considered
diversion and exposes the covered entity to a potential
enforcement action
6
340B Price Comparisons (2005)
Private Sector Pricing
“Best Price” 63%
42%
Source: Data derived from Prices for Brand-Name Drugs Under Selected Federal Programs, Congressional Budget Office (June 2005); Pharmaceutical Discounts
under Federal Law: State Program Opportunities, William H. von Oehsen (May 2001).
340B Primer: Calculating Ceiling Price
340B Ceiling Price = AMP – URA
AMP = average manufacturer price in the retail class of trade
unless the drug is an infusion, injectible or inhalation
product
URA = unit rebate amount
for generics: URA = 13%
for brand names: URA = 23.1% or difference between
AMP and manufacturer’s best price, whichever yields a
lower price
Additional discount is built into URA for brand name drugs if
AMP increases faster than the CPI-U rate of inflation
7
340B Primer:
Calculating Ceiling Price (cont’d)
April 1st – 30th
May 1st – 15th
June 15th
July 1st
Days 1-30
Days 31-45
Day 75
Day 90
Manufacturer submits
AMP and BP data
from Jan-March to
CMS
CMS validates data and
calculates the unit
rebate amount and the
340B-ceiling price.
Because in middle of
2nd quarter, price not in
effect until beginning
of 3rd quarter, the next
full quarter.
Manufacturer
sends 340B price
to wholesaler
&/or entries
340B price in
effect for 3rd
Quarter, JulySeptember
340B Primer:
Calculating Ceiling Price (cont’d)
Special procedures for calculating 340B price for new drugs:
– Manufacturers must estimate a new drug’s 340B ceiling
price for the first 3 quarters that the drug is on the market
– After 3 quarters, manufacturers will have AMP and best
price data to calculate the ceiling price
– If the manufacturer overestimates the new drug’s price
during the initial three quarter period, it must issue a
refund to the covered entity upon request
Penny prices – Under informal HRSA policy, if the 340B
formula results in a negative price (because URA exceeds
AMP), then the manufacturer must charge a penny for the
drug
8
340B Primer:
Calculating Ceiling Price (cont’d)
Manufacturers should monitor 340B customer purchasing
trends to protect against over utilization of discounted
drugs
Spikes in 340B sales and high 340B utilization rates of
drugs that are primarily used for inpatients are red flags
Stock replenishment practices make monitoring more
difficult
Although CMS has established policies for restating AMP
and best price for Medicaid rebate purposes, there is no
HRSA guidance on how to restate 340B prices and to
issue refunds – such guidance is now required as a result
of health reform
340B Primer: GPO Exclusion
DSH hospitals are subject to a unique restriction,
namely, they are prohibited from purchasing covered
outpatient drugs through a group purchasing
organization (GPO) or other group purchasing
arrangement. PHSA 340B(a)(4)(L)(iii)
Prohibition against group purchasing does not apply
to drugs provided to DSH inpatients
Hospitals may be prohibited from entering into
bundling, tying or market share agreements if they
can be considered group purchasing and involve
covered outpatient drugs
9
340B Primer: Anti-Diversion
“A covered entity shall not resell or otherwise transfer
the [340B-discounted] drug to a person who is not a
patient of the entity.” PHSA 340B(a)(5)(B)
HRSA has established a three-pronged test for
evaluating whether an individual falls within the
definition of a “patient.” 61 Fed. Reg. 55,156
(10/24/96)
An individual is not a “patient” if the only service
received from the CE is the dispensing of a drug or
drugs for subsequent self-administration or
administration in the home setting. 61 Fed. Reg.
55,156 (10/24/96)
340B Primer: Anti-Diversion (cont’d)
1.
2.
3.
The CE has established a relationship with the individual,
such that the covered entity maintains records of the
individual’s health care; and
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
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.
10
340B Primer: Anti-Diversion (cont’d)
ADAP patients – an individual registered in a state
operated or funded AIDS drug purchasing assistance
program receiving financial assistance under title XXVI
of the PHSA will be considered a “patient” of the
covered entity for purposes of this definition if so
registered as eligible by the state program.
DSH patients – two clarifications:
1. Third prong of patient definition does not apply
2. Receipt of care outside the hospital does not
disqualify the patient if the individual’s care is
initiated at the hospital and there is a proximate
relationship between the off-site care and the care
provided by the hospital. HRSA letter to SNHPA
(1/26/01)
340B Primer: Anti-Diversion (cont’d)
Available on SNHPA’s website for both members and
non-members are a set of “Principles” that SNHPA
developed to assist with complying with patient
definition requirements
According to SNHPA’s Principles, 340B can be used to
fill prescriptions written within the walls of the hospital
Prescriptions written outside the walls of the hospital
should not be filled with 340B drugs unless they fall
within two limited exceptions:
1. follow-up care
2. contractual care
11
340B Primer: Anti-Diversion (cont’d)
Follow-up care model must comply with proximate
relationship test described in HRSA’s 1/26/01 letter
Regarding contractual care, the costs associated with
the care must be reimbursable on hospital’s Medicare
cost report
This limitation prevents abuses because the cost report
provides documentation of compliance
According to SNHPA’s Principles, 340B should not
be used for physician-administered drugs that are
administered outside the walls of the hospital
340B Primer: Contract Pharmacies
HRSA recognized the difficulties facing 340B covered
entities that lack in-house pharmacies (11,000 as of late
1996)
In 1996, HRSA issued guidelines approving the use of
contract pharmacies to dispense 340B drugs and
requiring manufacturers to offer 340B pricing on drugs
dispensed by contract pharmacies to 340B-eligible
patients
Patients may choose to obtain drugs from any
pharmacy, not just the contract pharmacy
The covered entity must use a “ship to/bill to”
arrangement so that drugs are purchased by the CE but
sent to the contract pharmacy
12
340B Primer: Contract Pharmacies (cont’d)
The CE is responsible for the contract pharmacy’s
compliance with 340B requirements
The HRSA website contains a model agreement between a
CE and contract pharmacy
The CE must self-certify to HRSA that the contract
pharmacy arrangement meets 340B program requirements
The CE must submit information about the contract
pharmacy for use in HRSA’s website database
Effective April 5, 2010, the 340B contract pharmacy
program was expanded such that CEs are no longer
limited to one contract pharmacy arrangement. See 75
Fed. Reg. 10272 (3/5/10).
340B Primer: Contract Pharmacies (cont’d)
The new guidance allows CEs to establish multiple
contract pharmacy arrangements and to supplement inhouse pharmacies with one or more contract pharmacies
CE must actively ensure compliance of its contract
pharmacy arrangement(s) – HRSA strongly recommends
the use of an outside independent auditor
If the entity discovers that diversion or a duplicate discount
problem has occurred, it must notify OPA of the violation
and its plan for remedying the problem, i.e., self-reporting
Right of HRSA and manufacturers to audit CEs extends to
their contract pharmacy arrangements
13
Supply Chain Dynamics
AWP
$100
WAC
$78
Non-340B
$70
340B
$51
MANUFACTURER
WAC
No Medicaid
Rebate
Chargeback
340B + Non-340B Acc’ts
WHOLESALER
Non-340B 340B
MEDICAID
FEE-FORSERVICE
Payment
Bill AAC
COVERED ENTITY
CONTRACT
PHARMACY Dispensing
Fee
Dispensed
Co-pay
Dispensed or
Administered
Co-pay
(if applicable)
Bill U+C
OTHER
PAYERS
PATIENT
Medicaid Intersection: Duplicate Discounts
CE must change their Medicaid billing practices for 340B
drugs but are not required by the government to change
their billing practices for other payers
With respect to Medicaid, CEs should bill at acquisition
cost for most drugs dispensed by pharmacies for selfadministration
The sole reason that CEs must adjust their Medicaid
billing practices is to protect manufacturers from the
duplicate discount problem
14
Medicaid Intersection: Duplicate Discounts
Step 1:
Manufacturer
sells drug at
340B
discount
Step 5: Manufacturer
pays rebate on 340B
drug
Manufacturer
Step 4: State
submits rebate
request
Step 3: CE bills Medicaid
for 340B drug
Covered
Entity
State
Medicaid
Agency
Medicaid patient
Step 2: 340B drug
is dispensed to
Medicaid patient
STEPS 1 AND 5 = DUPLICATE
DISCOUNT
Medicaid Intersection:
Duplicate Discounts
Options
Covered Entity
Procedures
State Medicaid
Procedures
340B PassThrough
Bills state at actual acquisition cost
(AAC) and submits pharmacy’s
Medicaid billing number to HRSA
for posting on website
Excludes from rebate request files
any claims paid under billing
number posted on HRSA website
Medicaid
Carve-Out
Purchases its Medicaid outpatient
drugs outside 340B program, bills
Medicaid at regular non-340B rates
and submits “N/A” for posting on
HRSA website
Includes covered entity’s claims in
rebate request files
Shared
Savings
Same as 340B pass-through option
except covered entity and state enter
into alternative billing and payment
arrangement
Pays enhanced dispensing fee or
above AAC rates
15
Medicaid Intersection:
Duplicate Discounts (cont’d)
No need to change billing procedures if there is no duplicate
discount problem to begin with. Examples: if 340B drugs
are (1) billed to Medicaid managed care organizations
(MCOs), or (2) paid for by Medicaid as part of an allinclusive rate or otherwise bundled
Historically, there was generally no duplicate discount
problem for physician-administered drugs, so 340B
providers did not have to adjust how they billed Medicaid
for such drugs
Situation has changed in light of regulations issued by CMS
in 2007 requiring states to collect NDC information in order
to facilitate rebate requests for physician-administered drugs
Medicaid Intersection:
Impact on Rebates
340B prices should have no direct impact on the size of
rebates that manufacturers must pay to state Medicaid
agencies
340B prices are exempt from Medicaid best price and
AMP, and these exemptions apply to both 340B ceiling
and sub-ceiling prices
By contrast, while 340B ceiling prices are exempt from
federal supply schedule (FSS), non-federal AMP (nonFAMP) and federal ceiling prices (FCP), sub-ceiling
prices are not exempt unless negotiated through the
prime vendor program
16
Medicaid Intersection:
DSH Inpatient Pricing
Since passage of the Medicare Modernization Act (MMA),
inpatient prices paid by DSH hospitals no longer affect
Medicaid rebates
Section 1002 of MMA requires that, effective December 8,
2003, manufacturers should exclude from their Medicaid
“best price” calculations any price of an inpatient drug sold
to a 340B hospital
Best price exemption  AMP exemption for DSH inpatient
drugs
Under proposed AMP rule, CMS declines to extend
inpatient best price exemption to newly-eligible 340B
hospitals
Medicaid Intersection:
DSH Inpatient Pricing (cont’d)
Manufacturers have complained about potential adverse
impact on FCP and FSS prices
SNHPA has tried to work with Department of Veterans Affairs
(VA) to address the second issue
According to VA “Dear Manufacturer” letter, if a
manufacturer extends its outpatient 340B ceiling prices to the
inpatient side for all DSH hospitals, the VA will exempt those
340B inpatient prices from the VA’s Non-FAMP calculations
and from the FSS most favored customer and price reduction
provisions
A subsequent VA letter applies FSS hold harmless policy to
generic drugs
17
Part D and Third Party Reimbursement
Increasing number of Part D plans, Medicaid MCOs,
commercial payers and their PBMs are ratcheting
down payments to providers
340B provider groups view this trend as undermining
intent of 340B program
– Medicaid and Part D plans see it as saving tax dollars
– Private payers see it as reducing insurance costs for
consumers
Providers considering market-based and legislative
options to address this challenge
Drug industry position?
340B Reform:
New Covered Entities
Five new categories of hospitals eligible for 340B:
– Free-standing children’s hospitals with DSH adjustment >
11.75%
– Free-standing cancer hospitals with DSH adjustment >
11.75%
– Critical access hospitals
– Sole community hospitals and rural referral centers with
DSH adjustment ≥ 8%
All new hospitals must either be publicly owned or be a private
nonprofit contracting with a state or local government to
provide indigent care
Only children’s and cancer hospitals are subject to GPO
exclusion
18
340B Reform:
Changes to Discount Percentage and AMP
Increased Medicaid rebate percentage for brand name
drugs (15.1% to 23.1% ), clotting factor and pediatric
drugs (15.1% to 17.1%), and generic drugs (11% to 13%)
Reformulated drugs are subject to inflation penalty based
on original drug’s launch price adjusted by CPI-U
AMP redefined to exclude non-retail prices except for
infused, injected, inhaled, instilled or implanted drugs
AMP changes under proposed rule would extend to 340B
prices
340B Reform:
Part D Changes
Medicare Part D coverage gap or “donut hole” fixed
Co-pays will be reduced to 25% for “donut hole” drugs
by 2020
– Manufacturers began covering 50% of cost of brands
this year
– Government subsidy will eventually cover 25%
Manufacturers are not protected from duplicate
discount problem when 340B drugs used in coverage
gap
19
340B Reform:
Medicaid Changes
Drugs covered by MCOs now subject to rebates
unless purchased through 340B
HHS must provide guidance describing options for
billing 340B drugs to Medicaid
Pending AMP rule would extend Medicaid AAC
reimbursement proposal to 340B drugs although
CMS is apparently open to shared savings options
340B Reform:
Integrity Provisions
HHS must issue regulations to establish formal dispute
resolution process
Current process is voluntary and outcomes are not legally
binding
Must exhaust this process before proceeding to court
Both manufacturers and CEs must use this process
HRSA issued an advance notice of proposed rulemaking
(ANPRM) soliciting public input. 75 Fed. Reg. 57233
(9/20/10)
Proposed rule has not been issued yet
20
340B Reform:
Integrity Provisions (cont’d)
HHS is also required to make 340B ceiling prices
available to CEs, e.g., via a password-protected database
HHS must develop a system for verifying the accuracy of
340B price calculations
– Methodology and standards for calculating ceiling
prices must be developed and published
– Government must regularly compare its ceiling price
calculations with manufacturer-reported prices
– HHS must perform “spot checks” of sales transactions
– Pricing discrepancies must be researched and remedied
340B Reform:
Integrity Provisions (cont’d)
Drug manufacturers must allocate drugs in short supply
proportionally between 340B and non-340B providers
Refunds are owed to CEs in the event of an overcharge,
including when AMP and best price are restated – PVP
has a product to help with true-ups
HHS is required to issue guidance on the refund process
Manufacturers are subject to civil monetary penalties for
knowing and intentional overcharges
HRSA received comments pursuant to another pending
ANPRM. 75 Fed. Reg. 57230 (9/20/10)
21
340B Reform:
Integrity Provisions (cont’d)
CEs are subject to civil fines for knowing and
intentional violations of 340B anti-diversion and
Medicaid billing requirements
– Fines in form of interest on difference between
340B price and non-340B price
Single, universal, and standardized identification
system for identifying CE sites
CEs must certify 340B compliance and update
contact information at least annually
Recertification
Focus of recertification is that CE information on OPA
database is accurate and up to date
Hospital recertification process: key dates
– 4/20: Rural referral, sole community, children’s and
freestanding cancer hospitals
– 4/27: DSH hospitals
– 5/4: Critical access hospitals
Applies to hospitals that have been in program for one
year, so does not apply to hospitals that entered program
after June 1, 2011
22
Recertification (cont’d)
Can only be completed by the hospital’s authorizing
official, who will receive an e-mail with an ID and
password giving access to the hospital’s recertification
information
Three weeks to complete process
Two-step process in which hospitals must:
– Correct information for existing sites and/or decertify sites
that no longer exist or use 340B drugs
– Certify that hospital meets 340B requirements
Recertification (cont’d)
Per Recertification Guide on OPA website, CEs will be
required to certify that:
– CE has continuously met all 340B requirements since enrolling
in 340B
– CE will disclose to OPA any breach of any 340B requirement;
failure to do so could result in CE remitting to manufacturer the
340B discount
– All information on database is complete, accurate, and correct
– CE maintains auditable records
– CE has systems in place to reasonably ensure compliance
CEs should check the OPA database after being notified that
recertification is complete
23
340B Reform: GAO Report
Government Accountability Office (GAO) issued firstever report on 340B in September; ordered by Congress
in 2010 as part of health reform
Report was to explore:
– Should 340B be expanded given that millions of
uninsured patients will gain coverage?
– Does 340B hinder access at non-340B facilities?
– Are CEs using savings “to further program
objectives?”
340B Reform: GAO Report (cont’d)
Key findings by GAO:
– Program supports and expands access to services
– CEs use savings in ways consistent with purpose of
program
– 340B pricing does not affect provider access with two
exceptions – IVIG and penny pricing
– 340B providers concerned over drug pricing
overcharges
24
340B Reform: GAO Report (cont’d)
Other key findings:
–
–
–
–
–
Program has grown significantly
Increased use by hospitals and contract pharmacies
May result in greater diversion risk
Too much reliance on self-policing
Integrity provisions in health reform are helpful, but
HRSA needs to improve oversight
340B Reform: GAO Report (cont’d)
GAO recommendations to HRSA:
1. Conduct selective audits of CEs
2. Finalize new, more specific guidance on the
definition of a 340B patient
3. Further specify its 340B nondiscrimination policy for
cases in which distribution of drugs is restricted and
require reviews of manufacturers’ plans to restrict
distribution of drugs at 340B prices
4. Issue guidance to further specify the criteria that
private non-profit hospitals must meet to be eligible
for 340B
25
340B Reform: GAO Report (cont’d)
In the wake of the GAO report, key Republican
lawmakers requested HRSA to provide detailed
accounting of its oversight of 340B
Notes doubling of program in the past decade and says
“it is critical that HRSA provides diligent oversight of
both the program and its participants.”
Sen. Grassley press release implies program only for
Medicaid patients, program costing taxpayers, expresses
concerns about “sustainability”
More recent requests for information directed to
SNHPA, PVP, PhRMA and BIO
340B Reform:
Orphan Drug Exclusion
“Orphan drugs” are excluded from scope of covered
outpatient drugs subject to 340B discounts
Exclusion only applies to orphan drugs purchased by
newly-eligible rural and cancer hospitals
“Orphan drugs”
– (1) are designed to treat rare diseases and conditions
that affect fewer than 200,000 patients in the U.S. or,
– (2) if the disease or condition affects more than
200,000 patients in the U.S., will produce sales that
fail to cover R&D costs
26
340B Reform:
Orphan Drug Exclusion (cont’d)
HRSA issued proposed regulation that would:
– Limit the prohibition "to uses for the rare disease or
condition for which the orphan drug was
designated”
– Include tracking and recordkeeping requirements
See 76 Fed. Reg. 29138 (5/20/11)
Congress removed children’s hospital from the ban
pursuant to legislation subsequent to health reform
SNHPA and other hospital groups are seeking to repeal
orphan drug ban entirely
Enforcement: Overcharges
Prior to health reform, government only had one remedy
for addressing manufacturer overcharges – exclusion
from Medicaid
Consequently, government enforcement actions have
been virtually non-existent except in instances when
340B recoveries are included in federal and state efforts
to recoup Medicaid overpayments for best price
violations, promotion of off-label indications, etc.
Department of Justice is investigating allegations of
340B overcharging independent of potential Medicaid
rebate violations
27
Enforcement: Litigation Update
Manufacturer
Name
Drug Involved
Period/Quarter Covered
by Settlement
Settlement
Date
Settlement Amount
Bayer
Kogenate and
other
Factor/IVIG
Products
January 1993 – August
31, 1999
Sept. 2000
$14 Million
&
$200K for 340B
TAP
Lupron
January 1991 – October
2001
Oct. 2001
$875 Million
Pfizer
Lipitor
1st Quarter - 4th Quarter
1999
Oct. 2002
$49 Million &
$567K for 340B
Bayer and GSK
Cipro, Adalat
CC, Flonase
and Paxil
Cipro:
1st Qtr ’96 – 1st Qtr ’01
Adalat CC:
4th Qtr ’97 – 1st Qtr ’00
Flonase:
3rd Qtr ’97 – 3rd Qtr ’00
Paxil:
1st Qtr ‘01
April 2003
Bayer Total:
$257 Million
At least $2.5 Million
to 340B entities
GSK Total:
$87.6 Million
At least $9.4 Million
to 340B entities
Enforcement: Litigation Update (cont’d)
Manufacturer
Name
Drug Involved
Period/Quarter Covered by
Settlement
Settlement
Date
Settlement Amount
AstraZeneca
Zoladex
January 1991 – December 31,
2002
June 2003
$355 Million
Schering-Plough
Claritin
January 1998 – December 31,
2002
July 2004
Total: $345 Million
At least $10.6 Million to
340B entities
KING
Pharmaceuticals
Entire Drug Line
January 1994 – December 31,
2002
October 31,
2005
$124 Million
At least $7 Million to
340B entities
Schering-Plough
Claritin RediTabs
and K-DUR
Redi-Tabs:
4th Qtr ’98 – 2nd Qtr ’02
August 29,
2006
$255 Million civil
settlement
($180 Million criminal
fines)
At least $3.9 million to
340B entities
K-DUR:
2nd Qtr ’96 – 2nd Qtr ’01
28
Enforcement: Litigation Update (cont’d)
Manufacturer
Name
Drug
Involved
Period/Quarter
Covered by
Settlement
Settlement
Date
Settlement
Amount
Bristol-Myers
Squibb
Serzone
1st Qtr ’97 – 4th Qtr ‘97
September 28,
2007
$515 million
$124,000 to 340B
entities
Merck
Zocor, Vioxx
April 1998 – March
2006
February 7,
2008
$671 million
$9 million to 340B
entities
Cephalon Inc.
Gabitril,
Actiq, and
Provigil
January 2001 through
at least 2006
October 2008
Total: $425
Million
At least $1.8
Million for 340B
entities
Enforcement: Litigation Update (cont’d)
Manufacturer
Name
Drug
Involved
Period/Quarter
Covered by
Settlement
Settlement Date
Settlement Amount
Eli Lilly
Zyprexa
September of 1999
- March of 2001
January 2009
Total: $1.43 Billion
More than $75,000 to
340B entities
Aventis
Pharmaceuticals
Azmacort,
Nasacort,
and Nasacort
AQ
October. 1, 1995 to
September 30, 2000
May 28, 2009
$95.5 million total
$6.5 Million to 340B
entities
2000-2004
October 19, 2009
$118 Million,
$7.3 Million for 340B
entities
Mylan
Pharmaceuticals
Inc. and UDL
Laboratories Inc
Various
29
Enforcement:
CE Private Right of Action
Neither the 340B statute nor implementing guidelines
explicitly give covered entities a private right of action
against manufacturers for alleged overcharges
In a federal case called Santa Clara v. Astra U.S.A. the
U.S. Court of Appeals for the Ninth Circuit held that 340B
providers do have a private right of action based on their
status of as third party beneficiaries of the pharmaceutical
pricing agreements between manufacturers and HHS
U.S. Supreme Court overturned Ninth Circuit in a
unanimous 8-0 decision rendered on March 29, 2011.
Enforcement: Diversion
There are few documented instances of diversion
The most visible incident of diversion involved Aliquippa
Community Hospital (ACH) reselling 340B drugs to
freestanding cancer clinics
SNHPA reported ACH to HRSA which led to ACH being
audited and terminated
Federal government invoked its criminal enforcement powers
under the Prescription Drug Marketing Act – sending a strong
message of intolerance to CEs
A manufacturer successfully brought a claim against ACH to
recoup its 340B discounts using HRSA’s dispute resolution
process
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Enforcement: Audits
HRSA commenced auditing CEs in January in response
to GAO report
HRSA intends to conduct 50 audits in 2012 and 5 will be
“targeted”
Audits are focused primarily on hospitals
Corrective action expected
HRSA acknowledges current patient definition is
difficult to apply
No final audit reports issued yet
Not aware of any manufacturer audits yet
Additional 340B Resources
 Office of Pharmacy Affairs
◦ www.hrsa.gov/opa
 340B Prime Vendor Program
◦ www.340Bpvp.com
 Pharmacy Services Support Center
◦ 1-800-628-6297 or www.pssc.aphanet.org
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Upcoming Conferences
16th Annual 340B Coalition Conference
July 9-11, 2012
Omni Shoreham Hotel
Washington, DC
www.340bcoalition.org
Special discounts for Monitor subscribers
and PVP suppliers!
Drug Discount Monitor
www.drugdiscountmonitor.com
Comprehensive coverage of 340B, Medicaid rebates,
Part D, PAPs, drug pricing litigation &
investigations
Call (202) 552-5856 to subscribe or click
“Subscribe” on our home page
Discounts on multi-user subscriptions & 340B
Coalition conference fees
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SNHPA Contacts
Bill von Oehsen
General Counsel
(202) 872-6765
william.vonoehsen@snhpa.org
Ted Slafsky
President/CEO
(202) 552-5860
ted.slafsky@snhpa.org
Tom Mirga
Executive Editor, Drug Discount Monitor
(202) 552-5853
tom.mirga@drugdiscountmonitor.com
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