PARTNERSHIP HEALTHPLAN OF CALIFORNIA. Review of 340B Models and Update on PHC s 340B Compliance Program

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Pierce Carter
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1 PARTNERSHIP HEALTHPLAN OF CALIFORNIA Review of 340B Models and Update on PHC s 340B Compliance Program 12/12/2014

2 Agenda Brief overview of 340B Program PHC 340B Program Update Comparison of 340B Models Future Growth of PHC 340B program

3 Brief overview of 340B Program For detailed white paper, contact:

4 Origin of the 340B Program The program extends mandated Medicaid drug discounts to other non-government entities. Purpose: To enable [participating] entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. -PHS Act 1992

5 Models of Filling Prescriptions Using the 340B Program In-House Pharmacy (Including In-House Dispensaries) 340B Covered Entity owns drugs and is fiscally responsible for operation. Located on premises of the 340B Covered Entity For Medi-Cal: only 340B Medications would be used, regardless of PBM payment Contracted Pharmacy 340B Covered Entity owns drugs and pays dispensing fees to one or more contract pharmacies. 340B Covered Entity contracts with pharmacy to provide pharmacy services. For Medi-Cal: some prescriptions filled with 340B stock (if net income positive) others with non-340b inventory (if net income not positive).

6 340B Policy for Medicaid

7 340B Compliance: Medi-Cal Goal: Preventing duplicate discounts on medications. Three organizations must work together to make this work: HRSA holding Covered Entities accountable: Prohibits entities to bill in a way that results in the drug manufacturer paying a duplicate discount on a drug claim -HRSA FAQ, quoting 340B(a)(5) of PHS Act CMS holds State Medicaid agencies accountable: For ensuring that 340B Medications used by Medicaid beneficiaries are excluded from rebates normally given for the same medications; but they need to know a 340b Medication was used, for managed care. DHCS holds Medi-Cal Health Plans accountable: DHCS requires the Health Plan (such as PHC) to identify 340B drugs by tagging them with a specific code in a specific field in the monthly prescription file the Health Plan submits to DHCS.

8 Managed Care Plans May negotiate an arrangement different than AAC + Fill DHCS: The reimbursement rate is based on the contract rate of the individual plan. HRSA: [340B billing to Medicaid managed care plans] depends upon the billing agreement and is not determined by section 340B. Interpretation by Capture Rx: Excludes Medicaid from its 340B Program, nation-wide, unless there is agreement with managed care company that fulfills compliance requirements Other Health Plans and states

9 PHC 340B Policy PHC developed an agreement 340B Covered Entities will be invited to sign-up and participate. 340B Covered Entities that do not choose to sign-up, but choose to bill PHC for 340B Medications, will not be fulfilling their HRSA required 340B compliance responsibilities. PHC will not police/enforce this; it is up to HRSA to audit 340B Covered Entities for compliance and choose appropriate penalty.

10 PHC 340B Program Update

11 340B Program Status Update Pilot in July with six (6) sites of Shasta Community Health Center. On-boarding process in August 2014 delayed due to some issues between CaptureRx and Walmart. All issues have been resolved and on-boarding of all remaining sites has been successfully completed as of September 17, sites from six (6) entities are part of the Contract Pharmacy Program. 13 sites from one (1) entity are part of the In-House Pharmacy Program. The Phase II development in progress (includes Reporting and Invoicing Set-up). A 340B Compliance Program Policy approved by PHC Board On-boarding for January 2015 has begun for the Contract and In-House Pharmacy Programs.

12 340B Compliance Issues and the State Historical Claims PHC sent a letter to DHCS regarding the issue of historical 340B claims. Due to the logistical challenges, PHC recommended all prior 340B claims submitted before PHC s 340B Compliance Program be forgiven; that is not voided and rebilled. DHCS responded to PHC noting it could not ignore federal law and forgive duplicate discounts. Historical data incorrectly identified must be voided and re-submitted upon identification by the 340B Covered Entities. In light of the response from DHCS, PHC ed letters to all prospective 340B Covered Entities. The letter included information regarding the decision set forth by DHCS regarding historical claims.

13 340B Compliance Issues and the State (cont d) Present and Future To ensure compliance, HRSA requires 340B Covered Entities and Managed Care Plans like PHC to enter into agreements that prevent duplicate discounts. This agreement specifies how the 340B Covered Entity and the Plan will properly identify 340B medications so that the State does not receive discounts on those medications. This is part of the foundation of PHC s 340B Compliance Program. DHCS applauded the 340B Compliance Program and formally approved it as of 7/31/14. DHCS selected PHC s 340B Compliance Program as an example to model during a recent audit by the Office of the Inspector General (OIG) on rebates and 340B in Managed Care.

14 Comparison of 340B Models

15 Comparison of two models - Pros Contract with community pharmacies Operationally easier for providers and health center Greater revenue (detailed modeling later) In-House pharmacy only More control over pharmacy operation May use pharmacy staff for other purposes (higher marginal costs for meds) Easier for patients to pick up at visit/easier starts Compliance easier to monitor

16 Comparison of two models - Cons Contract with community pharmacies Small health centers: low volume makes program less viable for pharmacies Depends on cooperation of different chains with 340B Administrator Depends on willingness of 340B administrator to work with PHC 340BX Clearinghouse Compliance more complex In-House pharmacy only Need to hire and supervise pharmacy staff Regulation of having In- House pharmacy Need to get inspection and approval from PBM to bill for meds for PHC members Health center may not be as convenient for patients as neighborhood

17 Modeling 340B Revenue Variables to consider Part I Total number of PHC patients, capitated and special members Number of prescriptions per month (0.8 overall, average) Percentage of prescriptions written by PCP Percentage of prescriptions filled at 340B pharmacy Generic use rate (87% average) PHC Compliance fee: ($4.50 for Contracted; $0.01 In-House)

18 Modeling 340B Revenue Variables to consider Part II 340B administrator fee (Contracted model) Pharmacy fill fee (Contracted model) Fixed and marginal costs (In-House model) Monthly cost for Health Center to monitor 340B administrator (Contracted model) Average income (PBM payment 340B Acquisition Cost) for each model: Sample data analysis: $33 per script for In-House $200 per script for Contract

19 340B Income Model: Real time review

20 Estimating 340B Income Monthly Income Number of Patients IH Model Contracted Model Mixed model 1000 ($7,500) ($940) ($11,500) 2000 ($5,200) $3,100 ($8,000) 5000 $2,090 $15,300 $2, $14,000 $36,000 $19, $26,000 $56,000 $37, $38,000 $76,000 $55, $50,000 $97,000 $72, $63,000 $117,000 $90,000 $140, B Income by Health Center PHC population $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 ($20,000) IH Model Contracted Model Mixed model

21 Anticipated Growth of 340B Program at PHC

22 340B Entities in PHC Service Area B Covered Entities ( Entities ) within 14 county service area # of Entities Compliance/Contracting Status # of Actual Agreements 40 Entities that have signed an Agreement with PHC 6 Contract (27 sites) 1 In-House (13 sites) 127 Entities planning to sign an Agreement with PHC 27 Contract 12 In-House 42 Entities reporting they will not bill PHC in the future N/A 3 Entities who have not responded N/A Entities Planning to Sign an Agreement # of Entities Type of Pharmacy Arrangement (self-reported) 59 Contract 37 In-House 31 Both

23 Steps for Contracting with PHC s 340B Compliance Program The 340B Covered Entity responds to the initial letter from the PHC 340B Project Coordinator. The 340B Covered Entity Enters into agreement with PHC based on the 340B Compliance Program On-boarding Schedule. The 340B Covered Entity s 340B Administrator/Third Party Administrator (TPA) must be able to work with 340BX Clearinghouse (CaptureRx). On-boarding of new 340B Covered Entities occurs on a quarterly basis. The 340B Covered Entity provides proposed measures for the 340B QIP/PQP to PHC for approval by PHC s 340B Advisory Committee.

24 Questions?

25 Thank You

The 3 Keys to Success in Your 340B Program. Rob Nahoopii, PharmD, MS, BCPS CEO Turnkey Pharmacy Solutions A 340B Management Company

The 3 Keys to Success in Your 340B Program Rob Nahoopii, PharmD, MS, BCPS CEO Turnkey Pharmacy Solutions A 340B Management Company Objectives Provide a description and overview of the 340B program Discuss