The 340B Drug Discount Program

Transcription

1 The 340B Drug Discount Program Ponaman Healthcare Consulting Ralph V. Moreno Jr. Presented: August 11, 2011

2 Table of Contents...1 THE 340B DRUG DISCOUNT PROGRAM B Overview B Eligibility Enrollment in the 340B Program HEALTH CARE REFORM AND THE 340B PROGRAM 2.1 Health Care Reform and 340B OIG Reports on Oversight of 340B Program B Outlook APPENDICES 3.1 Appendix A: Comprehensive List of Entities Eligible for 340B Enrollment Post H.R Appendix B; Health Care Reform Provisions List of All Effects on 340B Program Appendix C: Detailed Summary of Findings/Recommendations from OIG Reports Appendix D: List of Abbreviations to Health Care Related Terms References 4.1 Sources List Ponaman Healthcare Consulting 09/11/2012 Page 1 of 13

3 340B Overview In 1990, Medicaid developed the Medicaid Rebate Act to control reimbursement of pharmaceuticals for State Medicaid agencies. To offset the rebate, pharmaceutical companies countered by decreasing discounts to non-medicaid markets to remove or at least lesson the rebates provided to Medicaid. The results ultimately left the act ineffective. The 340B Drug Discount Act was established in 1992 under the Veteran s Health Act (VHA) more specifically section 340B of the Health Services Section 10. The primary purpose of the program was to provide discounts on drugs to qualifying entities enabling them to better utilize the limited funding allocated by the Federal Government. This would in turn allow these facilities to support a broader range of patients and provide more comprehensive services. To better illustrate, health care facilities enrolled in the 340B program can apply their savings from prescription and over-the-counter discounts to improve their delivery of care and provide to a population of patients that would otherwise lack the resources to fund their health care. Under the discount program, hospitals, clinics, and other health care centers that qualify receive a discounted price (25% to 50%) 4 on the purchase of 340B medications. The maximum price or ceiling price is the highest allowable price that a manufacturer can charge these entities. Manufacturers may charge less than or equal to this ceiling price (CP) that is calculated by the Health Resources and Services Administration (formerly calculated by the Center for Medicare and Medicaid Services, September 2005) 4. The CP is derived from pricing information that is submitted quarterly from the drug manufacturers. The program annually saves organizations millions of dollars of which can then be directly applied to the patients; however a program such as 340B requires constant monitoring and regulation. Eligibility for 340B The 340B Program provides a great advantage to facilities eligible to participate referred to as Covered Entities (CE s), Legislation has provided strict guidelines to ensure that the discounts only apply to the facilities most in need. Prior to Health Care Reform, the sole beneficiaries of the 340B discount chosen by legislation included: Consolidated Health Centers Federally Qualified Health Centers and Look-Alikes Family Planning Projects Ryan White Program Grantees Black Lung Clinics Comprehensive Hemophilia Treatment Centers Native Hawaiian Health Centers Urban Indian Organizations Certified Tuberculosis Clinics Certain Disproportionate Share Hospitals Certified Sexually Transmitted Disease Clinics 10 Ponaman Healthcare Consulting 09/11/2012 Page 2 of 13

4 In 2010, the Patient Protection and Affordable Care Act (PPACA) expanded the coverage of covered entities to include certain children s hospitals, cancer hospitals, critical access, sole-community hospitals, and rural referral centers 5. A detailed list of covered entities can be furthered reviewed in Appendix A. Additionally, all entities must also meet three operating criterions to then be considered eligible for enrollment in the Drug Discount Program. They are: i. The entity must be owned or operated by state or local government, be a public or private nonprofit corporation granted governmental powers by state or local government, or be contracted with state or local government to provide health care services to low-income individuals entitled to Medicare/Medicaid benefits 6. ii. iii. The entity have a Medicare disproportionate share adjustment percentage greater than 11.75% for the most recent cost reporting period ending before the calendar quarter involved 6. (This is dependent on the number of inpatient days of its Medicaid/Supplemental Security Income patients) The entity must sign a written certification stating they will not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement in compliance with criterion iii 6. The above indicators are determinants for provider eligibility, however there are also qualifications that restrict the patient demographic that could be used for 340B drugs, and these regulations are routinely enforced. The prospected entity must review the provisions relating to the definition of a patient to gain a clear understanding and maintain compliance. An individual is considered a patient of the covered entity only if: The CE has established a relationship with the patient, such that they maintain records of the individual s health care current and historical data 6 The individual receives services from a professional employed or under contractual arrangements (referral) from the entity, so long as responsibility is maintained with the CE 6 The individual receives service/services from CE that reflects the grant funding or FQHC lookalike status that the entity has been approved for 6. (DSH s exempt from this requirement) The status of the patient is deemed NOT applicable if the sole service from the CE is the dispensing of drugs for self-administration or administration in a home setting. Furthermore, an individual is considered a patient if he or she is registered in a State operated AIDS drug purchasing assistance Ponaman Healthcare Consulting 09/11/2012 Page 3 of 13

5 program and receiving financial assistance under title XXVI of the Public Health Service Act 6. After an entity has developed a clear understanding of their responsibilities as covered entities, they can then proceed with enrollment in the 340B Drug Discount Program. Enrollment in the 340B Program There is a distinction between a qualifying entity and a 340B covered entity. An organization is considered a 340B covered entity only after they have completed the enrollment process and their name is listed in the Office of Pharmacy Affairs (OPA) database. It is important to know that a manufacturer or wholesaler will not provide the discount pricing until the covered entity is listed in the system. The enrollment into 340B should be completed as follows 4 : 1. Determine eligibility by ensuring the entity has met all of the qualifying requirements. 2. Fill out the appropriate forms for enrollment. i. 340B Program Enrollment Letter ii. iii. iv. Certification regarding Non-Participation in Group Purchasing Organization (GPO) Inclusion of Outpatient DSH Facilities (If Applicable) Certification of Contract between Private Non-Profit Hospital and Local Government. (Private Non-Profit Facilities) a. The enrollment forms should be submitted 30 days prior to the next effective quarterly date for a start at the next beginning quarter (Jan, Apr, July, Oct) 3. Upon approval from OPA, the entity will be entered into the database and then can choose to assign and implement a Prime Vendor Program (PVP). Under the original legislation of 340B, enrollment into a Prime Vendor Program was a requirement, however it is currently considered voluntary for eligible enrollees. The PVP is a single preferred vendor that facilitates a CE s transition into the 340B Program. They require no fees to enroll and provide great benefits to an organization new to 340B and uncertainties about their purchasing power. Some advantages consist of: Familiarity with the 340B Program including compliance with Federal Law. The power to negotiate pricing lower than the CP using volume and formulary utilization. Training tutorials for education on 340B Ponaman Healthcare Consulting 09/11/2012 Page 4 of 13

6 The use of a PVP can be extremely useful in preventing the misuse of the program, or violating Prohibitions enacted by legislation. Prohibitions were included in Section 340B to maintain ethical practices and prevent diversion. For example, it is illegal for a CE to receive a 340B discount price from the manufacturer while the Medicaid agency concurrently receives a discount rebate. This is referred to as double dipping. Another Prohibition is the act of a Disproportionate Share Hospital engaging in a GPO while using the 340B Program 2. In accordance with Health Care Reform (H.R.), organizations that violate Prohibitions or knowingly attempt diversion of medications are subject to Civil Monetary Penalties (CMP s). Health Care Reform and 340B Program The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 included provisions that impacted the 340B Program 1. Some of the documented changes were the direct result of amendments to the 340B Program, while other changes presented as a consequence of provisions to closely related affiliations. A detailed description of all provisions affecting 340B can be referenced in Appendix B, but for now let us examine a summary of the 340B Program provisions to better understand their impact on the Drug Discount Program. The areas of amendment are centered on the following: 1. Expansion of the 340B Program to entities defined by the Social Security Act (SSA) 2 2. Integrity Provisions: Manufacturers required to improve auditing and data reporting pertaining to: a. Disclosure of CP and to compare the pricing with the HRSA calculation b. Discounts and rebates on sales transactions, readily available for audits c. Refunds and credits as a result of a dispute resolution 3. Integrity Provisions: Covered entities required to improve auditing and data reporting pertaining to 2 : a. Entity information annually updated on the OPA entity database b. Written policy for recording Medicaid billing and performing Pre/Post reviews of CP s c. Establishment of a universal identification for all covered entities Ponaman Healthcare Consulting 09/11/2012 Page 5 of 13

7 4. HRSA and OPA to provide the structure and resources to implement 2 : a. Timely, systematic protocol for dispute resolution between CE s and Manufacturers b. Programs to improve the oversight of sales transactions, cost reporting, and Medicaid billing documentation as CMS sees fit for CE s and Manufacturers c. Database for information to be attained by either party to support a claim submission The impacts from Health Care Reform mark the most significant changes to the program since its creation in 1992; however the changes could be argued as both necessary and justifiable. This is evident as an audit conducted in 2003 by the Office of Inspector General (OIG) noted that in 1999 five manufacturers overcharged 340B entities $6.1 million dollars over a one year review 8. Because of our lapse in regulation, the Federal Government pays out millions of dollars in wasted funding due to discrepancies in reporting practices. That is why many provisions mandate the development of oversight monitoring programs to improve communication between affiliations and remove discrepancies across all levels of data reporting. According to the Act, HRSA and OPA must establish their own oversight and operational structure in order to provide entities the resources to do the same. Lastly, a stipulation in the Act recommended that the OIG perform an analysis on 340B and report its finding to the Government authorities. OIG Studies Report on 340B As evidence that State Medicaid agencies lack the policies and information to efficiently monitor the operations of 340B, the OIG in the Health and Human Services (HHS) performed two studies: 1) Documenting the deficiencies in oversight on the 340B program and 2) Documenting the oversight activities of the 340B program. The detailed findings and recommendations (Appendix C) from both studies support the provisions of Health Care Reform (HCR). Report one explains that the shortcomings of 340B are the result of significant deficiencies in the auditing, reporting, and regulation from HRSA on the transactions conducted between covered entities and manufacturers. The non-disclosure of pricing further complicates matters since the CE s have no way of determining if they are being overcharged. Report two follows the first one by surveying State Agencies to review their policies on 340B oversight. It was reported that few State Agencies effectively utilize written policies to oversee 340B pricing. The majority of agencies concluded that the HRSA does not actively oversee their own databases and do not disclose the information needed to efficiently sustain a written policy or even efficiently make use of the Medicaid Exclusion File (MFE) 9. The lack of communication delays participating CE s from receiving Ponaman Healthcare Consulting 09/11/2012 Page 6 of 13

8 their discounts in a timely manner since manufacturers are unable to determine their eligibility. From the two reports conducted by the OIG, the key takeaways were: OIG Study 1 Key Statistics 7 OIG Study 2 Key Statistics 9 340B entities overpaid for pharmaceuticals by $41.4 million o o Lack of recognition system to account for overcharges Of the entities sampled, 31% of all pharmaceuticals were purchased above the ceiling price 38% of entities surveyed were listed incorrectly as participating in the 340B program HRSA failure to update OPA database 43% of the entities surveyed in the report were listed in the database under incorrect addresses Of 37 sampled entities, 36 paid over the ceiling price for drugs o Entities not given proper resources to self audit charges o Delays and complicates sales transactions between CE s and Manufacturers The final comments from the OIG explain that both CMS and HRSA both agree with the recommendations; however CMS has been the sole entity taking action thus far by encouraging State agencies to incorporate written policies into their Medicaid State Plans, providing alternative methods of identifying 340B claims, and improving communication between State and Federal Agencies to identify errors in the MFE. After time has allowed the enactments of H.R. to set in place, it would be highly advisable for the OIG to provide a follow up report to realize the progresses being made. 340B Outlook It is uncertain how the 340B program will react to the provisions that are still taking shape. However, analyzing the organizations that were most impacted from reform could provide insight on the years to come. Manufacturers overall will be affected greatly by the increase in Medicaid rebate percentages which include both brand and generic drugs. Blockbuster drug manufacturers are likely to be largely impacted by provisions enacted in 2010 including an annual fee ($4 to 5$ million) 5 based on a Ponaman Healthcare Consulting 09/11/2012 Page 7 of 13

9 combination of market share and sales in addition to paying a Medicare Gap Fee. Under Medicare Part D, manufacturers will provide 50% discount on brand name medications to patients who reach the Medicare coverage gap 4. Also, redefinition of the AMP 5 and changes to discount caps could mean that the combination of rebate and discounts could be higher than the price of the drug essentially forcing manufacturers to pay for the use of their drug. Financially, CE s will likely see benefits from the provisions made in reform due to increased Medicaid rebate prices. Patients in the years to come should benefit immensely provided increased accessibility and increased coverage for prescription drugs. The compliance provisions will directly impact all affiliates and the addition of Civil Monetary Penalties (CMP) s could result in out of pocket expenses for violations from manufacturers and CE s. To protect the future stability of the 340B Program for the future, the following considerations need to be accomplished: CE s, manufacturers, and the Federal Agencies must all provide collaborative oversight to decrease wasted spending. The Federal Agencies should keep close oversight on the activities of manufacturers to ensure they do not avoid the Medicaid market in order to make up lost revenues. All entities that are eligible for enrollment in 340B should do so and select a PVP to maximize their savings, and continue to increase accessibility of care. The OIG should conduct a follow up report to monitor the progress of the affiliate reporting programs. The 340B program has undoubtedly improved the accessibility of healthcare services to a large magnitude of vulnerable populations as well as provides the necessary stability for healthcare providers to ensure the sustainability during the complicated economic times. The integrity of our nation will be the foundation to ensuring that programs such as 340B continue to make an impact for the years to come. Ponaman Healthcare Consulting 09/11/2012 Page 8 of 13

10 Appendices 340B Drug Discount Appendix A: The comprehensive list of eligible enrollees able to participate in the 340B Drug Discount Program following the enactments of Health Care Reform List of All Eligible Entities for Participation in the 340B Program Organization Defined Section Federally-Qualified Health Center FQHC Look-Alikes Consolidated Health Centers 330(e) PHSA Migrant Health Centers 330(g) PHSA Health Care for the Homeless 330(h) PHSA Healthy Schools/ Healthy Communities Health Centers: Residents Public Housing 330(i) PHSA Office of Tribal Programs or Urban Indian Organization PL and 25 USCS 1651 Family Planning Program Receiving grant or contract 1001 PHSA and 42 USCS 3001 Early Intervention HIV Services Subpart II of Part C Title XXVI of Ryan White Care Act Title III of RWCA State-Operated AIDS Drug Assitance Program Financial Assistance under Ryan White Care Act Black Lung Clinic Receiving funds under Black Lunch Benefits Act 30 USCS 901 Comprehensive Hemophilia Diagnostic Treatment Center Receiving grant under Social Security Act 501(a)(2) Native Hawaiian Health Center Receiving funds under the Native Hawaiian Health Care Act of USCS Urban Indian Organization Receiving funds from Indian Health Care Improvement Act 25 USCS 1601 Non-State or Local Entity Assistance under Title XXVI of Social Security Act Subparagraph D Sexually Transmitted Disease or Tuburculosis Treatment Through State or Local government approved by Secretary 318 (42 USCS 247c) and 317(j)(2) (42 USCS 247b(j)(2) Disproportionate Share Hospital Social Security Act 1886(d)(1)(B) Children's Hospital Social Security Act 1886(d)(1)(B)(iii) Critical Access Hospital Social Security Act 1820( c )(2) Free Standing Cancer Hospital Social Security Act 1820( c )(2) Rural Referral Center Social Security Act 1886(d)(5)(c )(i) Sole Community Hospital Social Security Act 1886(d)(5)(c )(iii) (1), (2), (5) Ponaman Healthcare Consulting 09/11/2012 Page 9 of 13

11 Appendix B: Detailed summary of both the direct and indirect provisions of Health Care Reform that impacted the 340B Drug Discount Program. Health Care Reform Changes Relevant to 340B (1), (2), (5) Topic Changes to Base Medicaid Rebate Percentage retroactive to January 1, Donut hole coverage of Medicare D Medicaid Unit Rebate Amount Line Extension (H.R. 4872, 1206) Tax on Pharmaceutical Manufacturers Using the Upper Limits of the AMP Effective Date January 1, 2010 Extend Medicaid Rebates January 1, Explanation of Change Brand Name Drugs: Increased to 23% Clotting factors and Pediatric exclusive use increased to 17% Non-innovator drugs increased to 13% 2011 Manufacturers are to provide a 50% discount on brand-name prescriptions filled during Medicare D coverage gap House-passed requires potential substitute calculation of Medicaid rebate for line extensions for oral solid dosage forms of innovator products. The greater of: o Usual calculation o AMP times highest additional rebate of any strength s percentage of AMP 2011 Tax on companies with branded pharmaceutical sales of more than $5 million. o Fee delayed on sales of brand name pharmaceuticals for use in governmental health programs to 2011 o Increases revenue raised by the fee by $4.8 billion. October 1, ( 2503) Secretary to calculate Federal upper reimbursement limit no less 2010 than 175% of the weighted average of the most recently reported Monthly AMP for therapeutic and pharmaceutical equivalent drug products. Extension to Medicaid MCO s (Sec 2501(2)(c )) 2010 Extend Medicaid Eligibility 2014 Eligibility change with change in Federal Poverty Level requirements (Sec 2001) PHS Expansion of Covered Entities January 1, B pricing affected from redefinition of AMP and increase in the Medicaid Rebate percentage. Added Covered Entities Including: Children s Hospital, Free-standing Cancer Hospital, Critical Access Hospital, Rural Referral Center, Integrity Provisions for Increased Compliance for Covered Entities, Manufacturers, and HRSA Credit or Refund for Covered Entities 2011 HRSA: provide full disclosure of ceiling prices on OPA website HHS: develop system to ensure accuracy of pricing by manufactures, routinely audit sales transactions, and investigate discrepancies providing corrective action if needed. CE: annually update contact information on OPA database HRSA: provide guidance on methods of billing Medicaid HRSA: 180 days from effective date must implement a formal dispute resolution process between CE s and Manufacturers o Deadlines to ensure timely resolution o Accessible information for entities to support the merits of their claims 2011 HHS Secretary is to create procedures for manufacturers to issue refunds and to oversee sales transactions to capture overcharging HHS is required to provide follow up to discrepancies and provide disciplinary action when needed. Civil Monetary Penalties 2011 HRSA is to assign monetary penalties to manufacturers or CE s that engage in failing to comply with any part of the PHS. Ponaman Healthcare Consulting 09/11/2012 Page 10 of 13

12 Appendix C: Summary of Findings and Recommendations from the Office of Inspector General s Reporting on the Oversight and Policies Related to the 340B Drug Discount Program OIG Report 1: Deficiencies in 340B Oversight Findings 7 Due to systemic problems with the accuracy and reliability of the Government s record of the 340B ceiling price, HRSA is unable to appropriately oversee the 340B Program o 28% of 340B ceiling prices missing from records HRSA lacks the oversight mechanisms and authority to ensure that 340B entities pay at or below the 340B ceiling price o Since 2005, HRSA has yet to establish system for calculating ceiling price Participating entities cannot independently verify that they receive the correct 340B discount due to confidentiality provisions OIG Report 1: Deficiencies in 340B Oversight Recommendations 7 CMS and HRSA should work together to ensure accurate and timely pricing data for the Government s official record of 340B ceiling prices HRSA should establish detailed standards for its calculation of 340B ceiling prices HRSA should institute oversight mechanisms to validate its 340B price calculations and the prices charged to participating entities o Implement auditing and spot checking with manufacturer invoices against calculated ceiling prices HRSA should seek authority to establish penalties for PHS Act violations HRSA should provide participating entities with secure access to certain pricing data to help approximate 340B ceiling prices. OIG Report 2: Oversight Activities Related to 340 Drug Plan Findings 9 Only 50% of states have implemented a written policy guiding covered entities to bill Medicaid at cost for 340B-purchased drugs. States lack necessary pricing information to conduct pre-pay edits, while only 20 states conduct post-pay reviews to identify overpayment. o States do not have access to AAC or 340B ceiling price 30 states reported using alternative methods outside the Medicaid Exclusion File to report 340B claims and prevent duplicate discounts. o 10 of these states do so because of reported inaccuracies in the MEF. OIG Report 2: Oversight Activities Related to 340 Drug Plan Recommendations 9 CMS initiate mandates for states to create written 340B policies o Options should be provided to help states implement policies CMS inform states on tools they can use to identify 340B Claims o Medicare Exclusion File o NCPDP Telecommunication Standard HRSA share 340B ceiling prices with the states o Create database that at the very least discloses incidences of over-charge HRSA, in conjunction with CMS, audit to improve accuracies in the Multiple Exclusion File Ponaman Healthcare Consulting 09/11/2012 Page 11 of 13

13 Appendix D: List of Abbreviation to Health Care Related Terms Identification of Abbreviations For Health Care Related Terms DSH FQHC CE CMP AIDS CHC AMP AWP HRC PPACA VHA PHSA SSA OIG CP RWHA GPO OPA HRSA HHS CMS PVP MFE USCS MCO Disproportionate Share Hospital Federally Qualified Health Center "Covered Entity" Civil Monetary Penalty Acquired Immuno-Deficiency Syndrome Community Health Center Average Manufacturer Price Average Wholesale Price Health Care Reform Patient Protection and Affordable Care Act Veterans Health Act Public Health Services Act Social Security Act Officer of Inspector General "Ceiling Price" Ryan White Health Act Group Purchasing Organization Office of Pharmacy Affairs Health Resource and Services Administration Department of Health and Human Services Center for Medicare and Medicaid Services Prime Vendor Program Medicaid Exclusion File United States Code Service Managed Care Organization Ponaman Healthcare Consulting 09/11/2012 Page 12 of 13

14 References 1. Grossman, Edward G., and Craig A. Sterkx. "COMPILATION OF PATIENT PROTECTION AND AFFORDABLE CARE ACT." Docs.house.gov. US House of Representatives, 9 June Web. 11 Aug < 2. McUbrey, Betsy. "Healthcare Reform Law Leads to Significant Changes to the 340B Program." Law Flash (2010). Morgan, Lewis, Bocklus. Washington Government Relations, 14 Apr Web. 10 Aug < 88ad-46dd20006e11/>. 3. Multiple Contributors. "Office of Evaluations and Inspection." Office of Inspector General U.S. Department of Health and Human Services. Department of Health and Human Services, Web. 09 Aug < 4. Pharmacy Services Support Center. "Pharmacy Affairs & 340B Drug Pricing Program." Office of Pharmacy Affairs. Department of Health and Human Services, Web. 09 Aug < 5. Recklaus, Rob. "340B Provisions in the New Health Care Reform Law." Safety Net Hospitals for Pharmaceutical Access. SNHPA, Web. 08 Aug < 6. Richardson, Katheryne. "About The 340B Drug Program." PSSC. American Pharmacy Association, Web. 10 Aug < 7. United States. Department of Health and Human Services. Office of Inspector General. Deficiencies in the Oversight of the 340B Drug Pricing Program. By Daniel R. Levinson pdf 8. United States. Department of Health and Human Services. Office of Inspector General. Pharmaceutical Companies Overcharged 340B Entities. By Janet Rehnquist. Department of Health and Human Services, 01 June Web. 08 Aug < 9. United States. Department of Health and Human Services. Office of Inspector General. State Medicaid Policies and Oversight Activities Related to 340B Purchased Drugs. By Daniel R. Levinson. Department of Health and Human Services, 01 June Web. 10 Aug < pdf>. 10. PSSC. "Pharmacy Affairs and 340B Drug Pricing Program." Health Resource and Services Administration. Department of Health and Human Services, Web. 9 Aug < Ponaman Healthcare Consulting 09/11/2012 Page 13 of 13