340B Drug Discount Program Improving Compliance to Protect Savings and Be Audit Ready Suzanne Herzog Founding Director Rx X Consulting
What is 340B? 340B Overview A drug discount program that allows covered entities to purchase outpatient drugs at or below the statutorily defined ceiling price The program is administered by the Office of Pharmacy Affairs (OPA) within the Health Resources Services Administration (HRSA) How does 340B work? Within the entity: Participating 340B covered entities can administer and/or dispense 340B drugs to eligible patients Contract Pharmacies: A covered entity may also contract with outside pharmacies to dispense 340B drugs to eligible patients on its behalf
Eligibility and Registration Audit Requirements Procurement and Inventory Key Compliance Elements Contract Pharmacy Patient Definition Duplicate Discounts
Eligibility 340B is limited to covered entities as defined by statute, mainly hospitals and grantees Hospital Types Disproportionate Share (DSH), Children s Hospital (PED), Free Standing Cancer Center (CAN), Sole Community Hospital (SCH), Rural Referral Center (RRC), Critical Access Hospital (CAH) Hospital status A private nonprofit hospital under contract with State or local government to provide health care services to low income individuals who are not eligible for Medicare or Medicaid; or Owned or operated by a unit of State or local government; or A public or private nonprofit corporation that is formally granted governmental powers by a unit of State or local government. DSH percentage Captured from Line 33 of the most recently filed cost report DSH or PED or CAN > 11.75% SCH or RRC 8% CAH = N/A
OPA Database Registration Accurate registration is critical Official record of where 340B drugs are maintained and where 340B prescriptions originate Manufacturers rely on database to track discounted drugs OPA Database has two types of registration Parent Site: Main Hospital Includes locations where 340B is used in the four walls of the hospital Child Site: Offsite Outpatient Facilities Reimbursable above line 119 of the most recently filed cost report Requires Outpatient Facility Registration
Recertification Each year covered entities are required to recertify Must review the OPA database for accuracy Authorizing Official Once the recertification period begins, the Authorizing Official only will receive a username and password to perform recertification. The Authorizing Official will be required to log into the 340B database, update information as needed, and attest to the covered entity s compliance with 340B Program requirements.
Eligibility & Registration Best Practices Review MCR each year Verify type of control on Worksheet S-2, Line 21 Confirm DSH percentage on Worksheet E, Line 33 Confirm eligibility of current outpatient facilities and identify new areas eligible for 340B on Worksheet A Demonstrate Child Site Location of Bundled Line Items on MCR Make any changes/updates to registration prior to recertification Maintain a copy of contract with State/Local Government to serve low-income individuals not covered by Medicaid or Medicare (if applicable)
Eligibility and Registration Audit Requirements Procurement and Inventory Key Compliance Elements Contract Pharmacy Patient Definition Duplicate Discounts
340B Procurement Requirements 340B is for outpatient drugs only GPO Prohibition Applies to DSH hospitals, children s hospitals and free-standing cancer centers Statute requires that the hospital does not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement Non-compliance can result in termination from 340B Program Orphan Drug Exclusion Applies to Sole Community and Critical Access Hospitals Statute states that these newly eligible entities cannot purchase orphan drugs using 340B Interpretive Rule Published July 2014
Inventory Controls Virtual inventory Most hospital use a virtual inventory to separate 340B eligible dispensing from non-eligible dispensing (GPO or WAC accounts) Some hospitals also manage physical 340B inventory Certain clinics purchase directly off 340B accounts (no replenishment) Purchasing limited, patient-specific products prospectively on the 340B account 11-digit NDC replenishment required by HRSA Why are inventory controls important? Poor inventory controls can result in diversion and violations of the GPO prohibition or orphan drug exclusion Must have processes in place to account for return to stocks/etc.
Common issues with Inventory Management of CDM to NDC cross-walk in Virtual Inventory Correct NDC need to ensure 11-digit NDC replenishment Ability to purchase at 340B (program efficiency) Unit of measure conversion issues Impacts correct accumulation at NDC package level Both compliance and efficiency issues Practical inventory issues Return to stock
Inventory Management Best Practices Regularly review data feeding split billing software Split billing software accumulations only as good as the data sent Good communication between pharmacy and IT important to ensure everyone understands how to best utilize data for accumulation Perform regular audits of accumulated amounts, quarterly is recommended Review WAC purchasing to identify errors
Eligibility and Registration Audit Requirements Procurement and Inventory Key Compliance Elements Contract Pharmacy Patient Definition Duplicate Discounts
Requirements for 340B Eligibility: Patients 1996 Patient Definition Regulations: The covered entity 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
Medical Record Test Defining eligible patients Prescriber Test and Responsibility for Care What is the relationship between the hospital and provider? Privileges Admitting Privileges to treat persons at a covered entity hospital alone is not sufficient to demonstrate that any person treated by that provider is a patient of the covered entity. To comply with current guidelines, the health care provider must be employed by the covered entity or provide health care under contractual or other arrangements that are accepted as demonstrating that the covered entity retains responsibility for the care provided and for any 340B drug transferred to any individual.
Patient Eligibility Best Practices Ensure streamlined patient/provider tests for the parent/child sites Provider lists must be developed with 340B eligibility in mind Provider list must be accurate and timely for successful contract pharmacy operations Contemplate points of prescription origination and outside prescribers
Eligibility and Registration Audit Requirements Procurement and Inventory Key Compliance Elements Contract Pharmacy Patient Definition Duplicate Discounts
Preventing Duplicate Discounts During OPA registration, hospitals must answer the following: Will you bill Medicaid for drug purchased at 340B drug price? Carve-In: List Medicaid provider numbers and NPI Generally, must pass through 340B price Carve-Out: Do not list Medicaid provider numbers/npi Bill according to normal standards This information is maintained on the OPA Medicaid Exclusion File
Preventing Duplicate Discounts cont. Physician administered Drugs Often have different state policies UD modifiers 340B price pass through issues Medicaid Managed Care The OPA Exclusion File does not accommodate different responses to Medicaid FFS, physician administered drugs or Managed Care
Best Practices in Preventing Duplicate Discounts Validate OPA Medicaid Exclusion File Listing Connect with Billing Department on practices to develop consistent understanding Document policies for physician-administered, Medicaid managed care transactions
Eligibility and Registration Audit Requirements Procurement and Inventory Key Compliance Elements Contract Pharmacy Patient Definition Duplicate Discounts
Contract Pharmacy Requirements Must be registered as a contract pharmacy in the OPA database Must have an executed contracted prior to registration Should include the Essential Elements of Contract Pharmacy Arrangements See list in 2010 Federal Register Notice (http://hrsa.gov/opa/programrequirements/federalregisternotices/contractph armacyservices030510.pdf) Must carve-out Medicaid unless the covered entity, the contract pharmacy and the State Medicaid agency have established an arrangement to prevent duplicate discounts. Any such arrangement shall be reported to the OPA by the covered entity.
Contract Pharmacy Best Practices Conduct annual independent audits as listed in the essential elements of a contract pharmacy arrangement Ensure that all contract pharmacies are accurately listed in the OPA database Ensure that any provider lists utilized by contract pharmacies are accurate and up-to-date Determine policies and procedures for part time providers
Eligibility and Registration Audit Requirements Procurement and Inventory Key Compliance Elements Contract Pharmacy Patient Definition Duplicate Discounts
HRSA Audits HRSA Audits began in FY2012 To date, 128 audits have been completed Of the 94 Audits with Findings No Finding (34) 27% No Repayment 18% Finding (94) 73% Repayment (77) 82%
Eligibility/Registration Findings 55 of the 128 audits had an eligibility or registration finding Examples of common issues: Incorrect 340B database record Authorizing Official incorrect Incorrect contact information Outpatient facilities not registered or registered incorrectly Use of contract pharmacies not registered Only recently began auditing for the GPO prohibition 5 audits had findings but each audit has corrective action plans pending
Diversion Findings 62 of the 128 audits had diversion findings Examples of common diversion issues: 340B drugs dispensed at ineligible sites 340B drugs dispensed to inpatients 340B drugs dispensed for prescriptions written by ineligible providers 340B drugs not properly accumulated Diversion was found with drugs dispensed/administered by covered entities and by contract pharmacies
Duplicate Discount Findings 31 of the 128 audits had duplicate discount findings Examples of common duplicate discount issues include: Entity was billing contrary to information contained in the Medicaid Exclusion File NPI and Medicaid billing numbers were incorrect on the Medicaid Exclusion File Contract pharmacy was using 340B drugs for Medicaid patients and did not notify HRSA of the arrangement
Manufacturer Audits 340B statute allows manufacturers to audit a covered entity to ensure compliance with 340B drug diversion and duplicate discount prohibitions A manufacturer must first attempt to resolve issues in good faith with the covered entity. If good faith efforts fail, the manufacturer must submit an audit work plan and reasonable cause justification to HRSA prior to conducting the audit. For more information, please refer to the 340B Program Policy Release here: http://www.hrsa.gov/opa/programrequirements/policyreleases/manufact urerauditclarification112111.pdf.
Best Practices in Audit Readiness Maintain all program-related data for 3 years Develop comprehensive written policies and procedures Collaborate with relevant departments on areas of intersection (billing, patient enrollment, finance) Execute Self-Audits Train Pharmacy staff on 340B Operations Review components in HRSA Audit Data request
Speaker Biography Ms. Herzog has been engaged with 340B policy matters for the last decade, both in the public and private sectors. While at the Office of Inspector General, Ms. Herzog worked on a number of projects related to 340B compliance with two reports, in particular, contributing to significant 340B program changes per the Affordable Care Act. Since the inception of Rx X Consulting in 2009, Ms. Herzog has worked as a consultant on a number of projects related to compliance and policy analysis specific to the 340B Program. This includes serving as a sub-contractor to HRSA on program integrity through the American Pharmacists Association and working with several hospitals across the country to establish or improve 340B compliance programs. 30