340B Drug Pricing Program: Overview and Recent Developments November 12, 2015 Kirstin B. Ives Partner and Chair of Healthcare Litigation Group Williams Montgomery & John Ltd. 233 S. Wacker Drive, Suite 6100 Chicago, Illinois 60606 (312) 443-3878 kbi@willmont.com
Learning Objectives n Overview of the 340B program n Recently-Issued Omnibus Mega Guidance n Orphan Drugs n Best Practices, Tips, and Crystal Ball Predictions
Overview of the 340B Program
What is the 340B Program? n Section 340B of the Public Health Service Act n Established in 1992 as part of the Veterans Health Care Act of 1992 n Allows certain hospitals and healthcare providers to obtain discounted prices on certain outpatient drugs from drug manufacturers
Purpose of the 340B Program n Intent of the program: to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. H.R. Rep. No. 102-384(II), at 12 (1992)
Purpose of the 340B Program n Many eligible healthcare facilities are providers of safety net services to the poor. n Major over-arching goal is supposed to be access to pharmaceuticals for more people
Who Runs The 340B Program? n Health Resources and Services Administration (HRSA), agency of Dept. of Health and Human Services n HRSA sets ceiling prices at which covered entities may purchase the covered outpatient drugs
Why Is 340B A Big Deal Lately? n Huge rise in the past decade n One third of all hospitals now participate n GAO estimates that 40% of hospitals eligible
Why Is 340B A Big Deal Lately? n Potential for covered providers to get significant advantages n Purchase at 340B price, reimbursed at Medicare rate
Why Is 340B A Big Deal Lately? n Controversial where do the savings go? n Drug manufacturers vs. Providers n GAO July 2015 report n Covered entities purchase 340B drugs for ALL eligible patients and submit claims for regular reimbursement price n Medicare n Commercial insurance
340B Terminology Term Covered Entity Covered Outpatient Drug Patient 340B Ceiling Price Diversion Duplicate Discount Group Purchasing Organization Orphan Drug Child Site Meaning Provider or program eligible and participating in the 340B program Drug eligible to be purchased at 340B price Individual patient eligible to receive 340B drugs from a covered entity Max price a drug manufacturer may charge for a 340B drug Dispensing 340B drug to ineligible individual 340B discount and Medicaid rebate for same drug Arrangement under which drug prices are negotiated by more than one covered entity Drug designated as an orphan drug by FDA 340B-eligible off-site outpatient location of a Covered Entity
Who is a Covered Entity that can participate in the 340B Program?
Who is a Covered Entity? n As originally enacted in 1992: n Healthcare facilities receiving certain federallyfunded grants n State-operated AIDS drug purchasing assistance programs n Black lung clinics n Native Hawaiian health centers n Urban Indian organizations
Who is a Covered Entity? n Congress adds covered entities as part of Affordable Care Act: n Certain children s hospitals n Certain free-standing cancer hospitals n Critical Access Hospitals (CAHs) n Rural referral centers n Sole community hospitals
Who is a Covered Entity? n Each eligible hospital must: n Be owned by a state or local government; OR n Be a pubic or non-profit hospital formally delegated governmental powers; OR n Be a non-profit hospital under contract with a state or local government to provide services to low-income patients who are not eligible for Medicare or Medicaid
Who is a Covered Entity? n In addition, each eligible hospital must: n Have a minimum disproportionate share adjustment percentage (based on share of hospital s inpatients who are Mediciad and low-income Medicare patients) n Exception: CAHs
Registration n Takes place online through HRSA portal: https://opanet.hrsa.gov/340b/default
Registration n Covered entities must enroll via 340B database before purchasing 340B drugs n Available first 15 days of each calendar quarter n Instructions and handy online user guide: https://opanet.hrsa.gov/opa/manuals/public/1gettingstartedguide.pdf
Registration Child Sites n Registration of main covered entity location only covers one physical address n Each eligible location at different address must be separately enrolled n Need documentation to support eligibility of each location n Hospital child sites must register by location and by service/speciality
Registration MEF n Prevention of duplicate discounts n Carve in entity uses 340B drugs for Medicaid patients n Carve out entity purchases drugs for Medicaid patients through other mechanisms n Make election in 340B database n If carve in, must report ALL Medicaid numbers and NPIs used to bill Medicaid
How Does The Program Work? n In simplest form: n Covered entities distributing eligible drugs to eligible patients.
Eligible Patients n Currently THREE criteria, Mega Guidance proposes SIX criteria n Current criteria: n n n Covered entity must have a relationship with the individual defined as maintaining the individual s health care records Individual receives health care services from a health care professional who is employed by the entity or who provides care under contractual or other arrangements, such that the responsibility for the individual s care remains with the entity; Individual receives service from covered entity that is consistent with the service for which grant funding or federally qualified health center lookalike status has been provided (does not apply to DSH).
n Major takeaway: Eligible Patients n To be eligible to receive 340B-purchased drugs, patients must receive health care services other than drugs from the health center. n Exception: patients of state-operated or funded AIDS drug purchasing assistance program
Eligible Drugs n Generally program covers the following outpatient drugs: n FDA-approved prescription drugs n OTC drugs written on a prescription n Biological products that can be dispensed only by a prescription (other than vaccines); and n FDA-approved insulin
Eligible Drugs n Program does NOT cover: n Inpatient drugs n Orphan drugs for certain covered entities
Compliance and Enforcement
Compliance and Enforcement n Hot Issues What do I need to know? n Diversion n Duplicate discounts n Group purchasing n HRSA Audits n Manufacturer Audits
n Diversion Compliance and Enforcement n Cannot give 340B drugs to individuals not considered patients n Duplicate discounts n Carve in, carve out, but know which one and how it works
Compliance and Enforcement n Group purchasing prohibition n Prohibition against group purchasing for certain covered entities n Applies to: n DSH hospitals n Cancer hospitals n Children s hospitals n Applies to all covered outpatient drugs dispensed by the hospital, even if patient is not eligible to receive 340B drugs
Audits n Both federal government and manufacturers n Failure to comply could make entity liable to manufacturers for refunds and/or cause termination from 340B program n HRSA robust auditing program as of FY2012 n Expects to audit each covered entity once every 5 years n Results posted on OPA website
Audits n What do they look at? n Eligibility status, including GPO prohibition compliance n Duplicate discounts n Diversion
Audits n What should a covered entity do ahead of time? n Clearly document all organizational 340B arrangements n Description of your program: n Why are you eligible? n What internal controls do you have in place for compliance? n Carving in or carving out? n How are you ensuring only patients are receiving 340B drugs?
Compliance Takeaways n Your 340B program is continuous work in progress n Keep the OPA database current n Complete annual recertification n Maintain documented 340B policies and procedures
HRSA Omnibus Guidance Released August 28, 2015 Comments closed October 27, 2015
What is the Mega Guidance? n 340B Drug Pricing Program Omnibus Guidance n 90-pages of HRSA-authored guidance n Published in Federal Register August 28, 2015 n 80 Fed. Reg. 52,300
What Is It Supposed To Do? n Proposes changes to the administration of the 340B program n Addresses a broad range of topics: n Definition of patient n Contract pharmacy compliance requirements n Hospital eligibility criteria n Eligibility of off-site locations
What Do I Need to Know? n Changes to criteria on who is considered an eligible patient n Changes to covered entities n GPO prohibition n Records maintenance n Notice and hearing for non-compliance n Termination/re-enrollment
Additional Criteria for Eligible Patient 1. Individual receives a health care service at a facility or clinic site, which is registered for the 340B program and listed on the public 340B database. 2. Individual receives a health care service provided by a covered entity provider who is either employed by the covered entity or is an independent contractor for the covered entity, such that the covered entity may bill for services on behalf of the provider. 3. Individual receives a drug that is ordered or prescribed by the covered entity provider as a result of the service described in the second criterion.
Additional Criteria for Eligible Patient 4. Individual s health care is consistent with the scope of the federal grant project designation or contract. 5. Individual s drug is ordered or prescribed pursuant to a health care service that is classified as outpatient. 6. Individual s patient records can be accessed by the covered entity and demonstrate that the covered entity is responsible for care.
Covered Entity Changes n Non-Hospital Eligibility n Child sites can be eligible n Hospital Eligibility n Government nexus n Disproportionate share percentage n Loss of eligibility
Group Purchasing Organization Prohibition n Group purchasing arrangement defined n Created to leverage the purchasing power of multiple entities to obtain discounts from manufacturers, distributors, and other vendors based on collective buying power. n Proposes three exceptions n Child sites meeting certain criteria n Patient status changed from inpatient to outpatient n Where hospital cannot access drugs at 340B prices and provides written report to HRSA
Records Maintenance n Required to maintain auditable records n But still not defined. n 5 year record retention requirement n Includes 5 years after program termination n Systemic vs. non-systemic
Notice and Hearing for Non-Compliance n Audit notice and hearing process n Gives covered entity 30 days to respond in writing n Corrective Action Plans n Final audit results made publically available
Termination/Re-enrollment n Covered entity loss of eligibility notification requirements n Covered entity is liable to manufacturers for repayment of 340B discounts when there is ineligibility for any reason n Re-enrollment after demonstration of compliance and repayment
What Is NOT Addressed? n Still no dispute resolution process between covered entities and manufacturers n Problematic neither side has recourse
Orphan Drugs n Hot issue! n What is an orphan drug? n Drugs that treat rare diseases or conditions n Designated as such by the Secretary n Many can be used to treat other non-rare diseases n 340B pricing for pre-aca covered entities
Orphan Drugs n Congress adds new covered entities under ACA, but excludes orphan drugs n the term covered outpatient drug shall not include a drug designated by the Secretary under section 526 of the Federal Food, Drug Cosmetic Act for a rare disease or condition
Orphan Drugs n HRSA said this means 340B pricing for orphan drugs NOT being used for their orphan purpose n Example: Prozac designated as orphan drug for autism and body dysmorphic disorder, but NOT for depression
Orphan Drugs n October 14, 2015 court says NO n Orphan drugs are not covered for ANY purpose for post-aca covered entities n PHARMA v. HHS, No. 14-1685 (D.D.C. Oct. 14, 2015) n Expansion to other areas of 340B HRSA guidance?
Resources n HRSA website http://www.hrsa.gov/opa/index.html n 340B University OnDemand Apexus https://www.apexus.com/solutions/education/340b-u-ondemand
Questions?
Contact Information Kirstin B. Ives Partner and Chair of Healthcare Litigation Group Williams Montgomery & John Ltd. 233 S. Wacker Drive, Suite 6100 Chicago, IL 60606 (312) 443-3878 kbi@willmont.com