CPAs and ADVISORS. experience access // 340B QUALIFICATIONS, BENEFITS AND CURRENT FOCUS

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1 CPAs and ADVISORS experience access // 340B QUALIFICATIONS, BENEFITS AND CURRENT FOCUS BRIAN M. BELL BRAD K. BROTHERTON DIRECTOR PARTNER

2 MATERIALS COVERED TODAY 340B Program Evolution, Purpose & Benefits HRSA & Manufacturer Audits Omnibus Guidance (Mega Guidance) Compliance Environment 340B: Seven Key Compliance Areas Independent Audits 2 // experience access

3 THE EVOLUTION OF 340B 340B was started with the Public Health Services Act Audit guidelines established. Patient definition clarified. Contract pharmacy process established. HRSA guidance on contract pharmacies allowing multiple relationships. ACA expands eligibility to include 5 new entities HRSA begins audits and Recertification process established Federal judge invalidates HRSA s orphan drug regulation Guidance on outpatient clinics released by HRSA Medicaid duplicate discount prohibition Carve-in/Carve-out On August 28, 2015, HRSA released 340B Omnibus Guidance (Mega Guidance) Orphan drug exclusion 2015 Future GPO prohibition guidance HRSA issues final rule on orphan drug exclusion Compliance Independent Audits Quarterly Auditable Records 3 // experience access

4 340B PROGRAM OVERVIEW PURPOSE Federally mandated drug pricing program Part of Public Health Service Act, section 340B and Medicaid rebate program Drug Manufacturers must provide front-end discounts on covered outpatient drugs purchased by covered entities Provides discounts on outpatient drugs purchased by safety net providers for eligible patients Intended to provide financial relief to those facilities that provide care to the medically underserved Average savings of 25-50% for eligible covered entities on outpatient drugs Purpose of savings: Provide discounts on drugs to patients Expand services by provider to patients Provide services to more patients 4 // experience access

5 5 // experience access HRSA and Manufacturer Compliance Activities

6 340B CONTINUUM EDUCATION EXPANSION COMPLIANCE // experience access

7 COMPLIANCE ENVIRONMENT HRSA AUDITS AS OF 2012 audits 51 now publicly available & final 26 have public letters to manufacturers 18 had no adverse findings 2013 audits 93 now publicly available 59 have sanctions of repayment to manufacturers 21 had no adverse findings 2014 audits 95 now publicly available 60 have sanctions of repayments to manufacturers 19 had no adverse findings 7 // experience access

8 COMPLIANCE ENVIRONMENT HRSA AUDITS 2015 AND BEYOND 2015 audits 86 now publicly available & final 46 have public letters to manufacturers 23 had no adverse findings Audits initially had a collaborative/educational tone but the tone has changed when HRSA began instituting punitive penalties to ensure compliance $6 million in new funding for program integrity efforts approved as part of the 2014 Omnibus spending bill OPA expects to perform twice as many audits in FY 2015 as it did in FY 2014 HRSA will continue to focus on contract pharmacy arrangements, diversion, duplicate discounts and 340B database records 8 // experience access

9 2012 Through 2015 Published Audit Results Contract Pharmacy Oversight 5% Drugs Dispensed to Ineligible Individuals 45% Billing Contrary to the Medicaid Exclusion File 26% Incorrect Database Records 46% 0% 10% 20% 30% 40% 50% Source: Review of Published Audit Results on HRSA website 9 // experience access

10 MANUFACTURER AUDITS Manufacturer Audit Guidelines May only conduct after showing of reasonable cause Manufacturer inquiries to covered entity may help support reasonable cause Important for covered entities to respond to manufacturer inquiries, failure to respond could result in audit Details are not publicly available 10 // experience access

11 GROSS PROFIT MARGINS OF DRUG AND BIOTECH COMPANIES Q // experience access

12 Omnibus Guidance (Mega Guidance) 12 // experience access

13 TIMELINE AND PROCESS August 28, 2015 Proposed guidance released by HRSA October 27, 2015 Comments on the proposed guidance are due Not formal rulemaking, HRSA has requested comments before the proposed guidance is finalized 340B Health, Pharmaceutical Research and Manufacturers of American, American Hospital Association and National Associations of Community Health Centers will submit comments BKD will submit comments It is critical that covered entities submit comments to ensure HRSA understands the potential impact of the proposed guidance Covered entities should be preparing to evaluate impact when finalized 13 // experience access

14 GPO EXCLUSION CLARIFICATION For hospitals enrolled as DSH, children s hospital or freestanding cancer hospital This clarification extends and prohibits the use of a GPO to any pharmacy owned or operated by a DSH covered entity If a covered entity purchases from GPO as a last resort and documents appropriately, the covered entity will not be considered in violation of GPO exclusion Extremely important due to drug shortages The prime vendor program is not considered a GPO subject to this prohibition 14 // experience access

15 PATIENT DEFINITION Service provided in a location that is not listed in the 340B database is not considered an eligible location Ensuring child sites are registered will continue to be a critical compliance element An individual is not considered a patient of the covered entity if his or her care is classified as inpatient and billed as inpatient Historically patient who was in ER, observation or other OP area and was later admitted as an inpatient was eligible for 340B drugs up to the time of admission Would further implications for entities subject to 3 day window Prescriptions written as part of an inpatient stay (discharge prescriptions) often filled under meds-to-beds program or subsequently through contract pharmacy relationships are not longer considered 340B eligible dispensations within contract pharmacy arrangements 15 // experience access

16 PATIENT DEFINITION An individual who receives follow-up care at a private practice (noncovered entity) location is not eligible to receive 340B drugs Individual must receive health care services from a provider who is either employed by or is an independent contractor of the covered entity such that the covered entity may bill for services on behalf of the provider. Previously HRSA required that the provided by employed by, contracted or other arrangements (referral for consultation) with the covered entity Physician privileges or credentials at a covered entity is not sufficient to demonstrate an individual is a patient of the covered entity for 340B purposes Referral prescriptions will only be 340B eligible if an eligible provider has written the prescription 16 // experience access

17 MEDICAID AND MEDICAID MANAGED CARE Covered entities are now able to make a determination for both Medicaid Fee for Service and Medicaid Managed Care Organizations when determining to carve in or carve out Medicaid Prevention of duplicate discounts remains the requirement of the covered entity Critical for covered entity to maintain dialogue with state Medicaid agencies to prevent duplicate discounts 17 // experience access

18 CONTRACT PHARMACY ARRANGEMENTS HRSA defines a contract pharmacy as a pharmacy that is not covered by the covered entity Could threaten existing contract pharmacy arrangements involving pharmacies that are not legally separate from covered entity Under contract pharmacy arrangements, both Medicaid FFS and Medicaid MCO dispensations will be excluded from the 340B Drug Program unless a well-documented plan from the covered entity, managed care company and state Medicaid agency clearly states how duplicate discounts will be mitigated 18 // experience access

19 INDEPENDENT AUDIT EXPECTATION Mega Guidance emphasizes the continued importance and expectation of an annual independent audit being perform HRSA is proposing standards for audit and quarterly review of contract pharmacy arrangements to ensure that compliance efforts result in Early identification of problems Implementation of corrections Prevention of future compliance issues Maintain auditable data for a period of not less than 5 years 19 // experience access

20 INDEPENDENT AUDITS HRSA S VIEW HRSA believes that covered entities that do not regularly review and audit contract pharmacy operations are at increased risk for compliance issues Annual audit of each location will provide covered entities: Regular opportunity to review and reconcile 340B patient eligibility information Prevent diversion Covered entity should compare 340B prescribing records with contract pharmacy s dispensing records at least on a quarterly basis to prevent: Diversion Duplicate discounts Conducting these audits using an independent auditor will ensure the pharmacy is following all 340B program requirements and provide the covered entity with ability to timely report any violations if applicable 20 // experience access

21 21 // experience access Compliance Environment

22 SEVEN KEY COMPLIANCE AREAS Eligibility Diversion Contract Pharmacy Orphan Drugs Registration Duplicate Discounts Group Purchasing Organization 22 // experience access

23 WHAT ARE YOUR TOP RISKS RELATED TO 340B? Do you know what your top risks are? Do your risks include all your registered sites, contracting pharmacies, etc.? How do you plan to minimize these risks? How will these risks be identified? 23 // experience access

24 COMPLIANCE REGISTRATION Registration Covered entity must register with HRSA Each eligible entity location that plans to use 340B drugs (clinic or offsite outpatient department) must be separately registered Information should be collected by the authorizing official during the annual recertification process 24 // experience access

25 COMPLIANCE REGISTRATION Recertification process for all covered entity types is required annually or covered entity will be removed from the Program Authorizing official must attest to eight statements 8 25 // experience access

26 COMPLIANCE RECERTIFICATION PROCESS 1. All information listed on the 340B Program database for the covered entity is complete, accurate & correct; 2. The covered entity meets all 340B Program eligibility requirements 3. The covered entity is complying with all requirements & restrictions of Section 340B of the Public Health Service Act IS YOUR AUTHORIZING OFFICIAL READY TO ATTEST TO THESE 3 QUESTIONS? 26 // experience access

27 COMPLIANCE DIVERSION Diversion Drugs can only be used on an outpatient basis for covered entity s patients as defined by HRSA Use for other individuals constitutes prohibited diversion Focus on defining patient & covered entity What is covered entity? Where services are provided Physicians must be employed or under a contractual or other arrangement Entity should have a listing of approved 340B physicians 27 // experience access

28 COMPLIANCE DUPLICATE DISCOUNTS Duplicate discounts 340B laws prohibit application of both 340B price discount (front end) and payment of pharmacy rebate to state Medicaid (back end) on same drug claim General options for covered entities Carve-out Medicaid - from 340B drug purchases Carve-in Medicaid - requires verifying Medicaid exclusion file is accurate Medicaid managed care 28 // experience access

29 COMPLIANCE DUPLICATE DISCOUNTS Medicaid duplicate discount Some states have been slow to establish and communicate Medicaid billing requirements and potential modifiers Transition to Medicaid managed care has created confusion Contract pharmacies should not Carve-in unless arrangement with state Medicaid exists Recommendation Engage in ongoing dialogue with Medicaid pharmacy directors of the states where you file claims a winwin solution may be available THE RESPONSIBILITY FOR AVOIDING DUPLICATE DISCOUNTS IS ON THE COVERED ENTITY!! 29 // experience access

30 COMPLIANCE CONTRACT PHARMACY Contract Pharmacy HRSA allows providers to enter into arrangements with multiple contract pharmacies to dispense 340B drugs to qualifying patients of providers Covered entity is responsible for compliance & must monitor contract pharmacies HRSA recommends independent audits 30 // experience access

31 COMPLIANCE REPORT CONTRACT PHARMACY OIG on Contract Pharmacy Arrangements in the 340B Program February 2014 Memorandum Report: Contract Pharmacy Arrangements in 340B Program, OEI Report stated that it creates complications in preventing diversion & duplicate discounts Report noted that some covered entities do not: 1. Offer 340B discounts to uninsured patients at their contracted pharmacies 2. Provide sufficient oversight of contract pharmacies 3. Many do not engage outside independent auditors to review them 31 // experience access

32 COMPLIANCE GROUP PURCHASING ORGANIZATION GPO Restriction: Certain hospitals (acute care with DSH > 11.75%, children s, cancer) may not purchase any covered outpatient drugs through GPO. Inpatient drugs may be purchased through a GPO. Hospitals may purchase outpatient drugs through the Prime Vendor Program (APEXUS). The GPO Prohibition pertains to: Disproportionate Share Hospitals Pediatric Hospitals Cancer Centers Drug purchases through GPO (Group Purchasing Organization) contracts cannot be used for outpatients covered by 340B 32 // experience access

33 COMPLIANCE- ORPHAN DRUG RULES Orphan drug rule is applicable to covered entities participating as SCH, RRC, CAH and free-standing cancer hospitals Since 2010, these types of covered entities have been unable to purchase orphan drugs at 340B price, regardless of illness the drug was prescribed to treat July 23, Health Resources Services Administration (HRSA) published long-awaited final regulations on orphan drugs May 23, Federal Judge invalidates 340B orphan drug regulation July 21, 2014 Interpretive Rule issued which does not exclude use of drugs for conditions or diseases other than the orphan designation October 9, 2014 PhRMA filed lawsuit in federal court against interpretation 33 // experience access

34 COMPLIANCE- ORPHAN DRUG RULES January 2015 HHS files motion for summary judgment Potential compliance concerns or issues if 340B-covered entity uses orphan drugs within 340B-eligible patients Development of auditable tracking system How to ensure prescriptions filled at covered entity s retail pharmacy or through contract pharmacy were not related to treatment of the rare disease (is an eligible dispensation) 34 // experience access

35 COMPLIANCE CONSEQUENCES OF NOT COMPLYING Repayment of discount to manufacturer Removal from 340B Program Possible Civil Monetary Penalties for knowing & intentional violations Potentially false claim liability (ripe for qui tam actions?) 35 // experience access

36 RESOURCES Resource HRSA OPA About 340B Program Audits of Covered Entity Policy Releases OPA FAQs HRSA 340B Peer-to-Peer Webinars 340B Prime Vendor Program 340B Prime Vendor Program FAQs Description HRSA Office of Pharmacy Affairs homepage HRSA Program Integrity Page HRSA Policy releases regarding the 340B Drug Pricing Program HRSA Office of Pharmacy Affairs Frequently Asked Questions (FAQs) Register for upcoming 340B Peer-to-Peer Webinars and listen to past webinars Call Center Phone: Web: Prime Vendor Program Frequently Asked Questions (FAQs) 36 // experience access

37 THANK YOU FOR MORE INFORMATION // For a complete list of our offices and subsidiaries, visit bkd.com or contact: Brian M. Bell// Director bbell@bkd.com // Brad K. Brotherton// Partner bbrotherton@bkd.com //