340B For Ryan White Grantees
by
William von Oehsen
Principal
Powers Pyles Sutter & Verville, PC
2012 Ryan White Grantee Meeting
November 27, 2012
Washington, DC
Overview
I. 340B Primer
- Background
- Covered entities
- Calculating ceiling price
- Covered entity restrictions
- Contract pharmacies
III. 340B Reform Legislation
- Medicaid changes
- Integrity provisions
- Recertification
IV. Audits
II. Covered Entity Restrictions
- Duplicate discounts
- Anti-diversion
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Bill von Oehsen
william.vonoehsen@ppsv.com
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
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Bill von Oehsen
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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
Two HRSA contractors: Prime Vendor Program (PVP)
and Pharmacy Support Services Center (PSSC)
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Bill von Oehsen
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340B Primer: Covered Entities
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
– AIDS, TB and STD clinics
– family planning clinics
– and other PHSA grantees
The non-hospital CEs are only permitted to purchase and
use 340B-discounted drugs within the scope of their
340B-qualifying federal grants
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Bill von Oehsen
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340B Primer: Covered Entities (cont’d)
Patient Protection and Affordable Care Act (PPACA)
added 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 340B hospitals must either be publicly owned or be a
private nonprofit contracting with a state or local
government to provide indigent care
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Bill von Oehsen
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340B Primer: Calculating Ceiling Price
340B ceiling price = average manufacturer price
(AMP) minus unit rebate amount (URA)
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
Penny prices – Under informal HRSA policy, if URA
exceeds AMP, then the manufacturer must charge a
penny for the drug
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Bill von Oehsen
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340B Primer: Covered Entity Restrictions
Medicaid billing procedures may need to be adjusted to
avoid manufacturers giving duplicate discounts
Use of 340B drugs limited to “patients” of CE
HRSA and manufacturers may audit CEs
Penalties applicable to CEs:
– Corrective action
– Discount refunds, with interest if violation is knowing and
intentional
– Disenrollment if violation is knowing, intentional,
systematic and egregious
– Criminal sanctions under Prescription Drug Marketing Act
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Bill von Oehsen
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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
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Bill von Oehsen
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340B Primer: Contract Pharmacies (cont’d)
The CE is responsible for the contract pharmacy’s
compliance with 340B requirements
The CE must self-certify to HRSA that the contract
pharmacy arrangement meets 340B program
requirements
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).
Right of HRSA and manufacturers to audit CEs extends
to their contract pharmacy arrangements
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Bill von Oehsen
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CE Restrictions: Duplicate Discounts
CEs usually 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 generally have to bill at
actual acquisition cost (AAC) or reduced rates for 340B
drugs dispensed by pharmacies for self-administration
The sole reason that CEs must adjust their Medicaid
billing practices is to protect manufacturers from the
duplicate discount problem
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Bill von Oehsen
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CE Restrictions: Duplicate Discounts (cont’d)
Step 1:
Manufacturer
sells drug at
340B
discount
Covered
Entity
Manufacturer
Step 5: Manufacturer
pays rebate on 340B
drug
Step 4: State
submits rebate
request
Step 3: CE bills Medicaid
for 340B drug
State
Medicaid
Agency
Medicaid patient
Step 2: 340B drug
is dispensed to
Medicaid patient
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STEPS 1 AND 5 = DUPLICATE
DISCOUNT
Bill von Oehsen
william.vonoehsen@ppsv.com
CE Restrictions:
Duplicate Discounts (cont’d)
Options
Medicaid
Carve-In
Medicaid
Carve-Out
Shared Savings
Covered Entity
Procedures
State Medicaid
Procedures
Bills state at AAC or reduced rate
and submits pharmacy’s Medicaid
billing number to HRSA for posting
on website
Using HRSA’s exclusion file,
state excludes from rebate
requests any claims paid under
billing number posted on HRSA
website
Purchases its Medicaid outpatient
State includes covered entity’s
drugs outside 340B program,
claims in rebate request files
withholds billing number from
HRSA website and bills Medicaid at
regular non-340B rates
Same as carve-in option except
covered entity and state enter into
alternative billing and payment
arrangement
Pays enhanced dispensing fee or
rates above 340B AAC
CE Restrictions: 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)
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Bill von Oehsen
william.vonoehsen@ppsv.com
CE Restrictions: 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.
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Bill von Oehsen
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CE Restrictions: 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.
Third prong of patient definition does not apply to
340B hospitals
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Bill von Oehsen
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340B Reform: Medicaid Changes
PPACA extended Medicaid rebate program to drugs
covered by managed care organizations (MCOs) unless
purchased through 340B
– Provision prohibiting duplicate discounts is different from
fee-for-service provision
– CEs believe burden is on states, not CEs, to implement
HHS must provide guidance describing options for billing
340B drugs to Medicaid
Proposed AMP rule would extend Medicaid AAC
reimbursement proposal to 340B drugs although CMS is
apparently open to shared savings options
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Bill von Oehsen
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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
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Bill von Oehsen
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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
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Bill von Oehsen
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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)
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Bill von Oehsen
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340B Reform: Recertification
Focus of recertification is that CE information on OPA
database is accurate and up to date
Hospital recertification process was recently completed,
although OPA granted extensions to some hospitals
Two-step process in which hospitals had to:
– Correct information for existing sites and/or decertify sites that
no longer exist or use 340B drugs
– Certify that hospital meets eight 340B compliance standards
Both SNHPA and SNHPA members have objected to scope
of eight recertification statements and process used to
establish them
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Bill von Oehsen
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340B Reform: Recertification (cont’d)
Per Recertification Guide on OPA website, CEs are
required to certify that:
– CE has continuously met all 340B eligibility requirements
since enrolling in 340B
– CE will disclose to OPA any material breach of a 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
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Bill von Oehsen
william.vonoehsen@ppsv.com
340B Reform: Recertification (cont’d)
Contact information regarding recertification questions:
– Pharmacy Services Support Center (PSSC) Help Line:
(202) 449-9473
– HRSA: 340B.recertification@hrsa.gov
Helpful links
– http://hrsa.gov/opa/policyreleases.htm
– http://pssc.aphanet.org/faqs/340b-recertification-faqs/
– http://healthcarecommunities.org/FAQs.aspx?id=429497
1289
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Bill von Oehsen
william.vonoehsen@ppsv.com
340B Reform: Recertification (cont’d)
Make sure covered entity and child sites are registered
correctly
You must register all off-site locations, even if they are
not purchasing drugs
Pharmacies are not registered as child sites; they are
listed as “ship to” sites instead
If pharmacies are owned by separate legal entity from
CE, than they should be registered as contract
pharmacies rather than “ship to” sites
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Bill von Oehsen
william.vonoehsen@ppsv.com
340B Reform: Recertification (cont’d)
Regarding “ship to” requirement:
– If pharmacy is located within CE, it can be listed as a
“ship to” address but not required
– Standalone pharmacies must be listed as “ship to”
address for CE parent or child site (whichever one they
primarily serve)
– If pharmacy is serving many different sites (e.g., a parent
and several child sites), it should be listed as “ship to”
address for parent site
Can be helpful in avoiding duplicate discount problems
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Bill von Oehsen
william.vonoehsen@ppsv.com
New OPA Registration Deadlines
Effective October 1, there are shorter time periods in
which to enroll in the program
Registration Period
Oct 1-15
Jan 1-15
Apr 1-15
July 1-15
Start Date
Jan 1
Apr 1
July 1
Oct 1
Applies to registration of covered entities, outpatient
facilities and contract pharmacy
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Bill von Oehsen
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Update on Audits
As with other federal health care programs, such as
Medicare and Medicaid, 340B providers are now subject to
audits
Government audits started in January
51 audits completed in 2012 – 5 are “targeted”
At least 4 final reports issued; no adverse findings
Audits are now also being conducted by manufacturers
What we have learned so far:
– important to have written policies and procedures
– HRSA acknowledges patient definition is difficult to apply
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Bill von Oehsen
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