340B Drug Program Compliance: Focus on Disproportionate Hospitals

Transcription

1 340B Drug Program Compliance: Focus on Disproportionate Hospitals Part II: 340B Drug Program Compliance: Pharmacy Operations and the DSH January 29,

2 Faculty Stephen J. Weiser, JD, LLM Director

3 Today s Agenda: Part II: Brief Review of 340B Program Dispensing and Administration of 340B Drugs Elements of a Retail Pharmacy Contract Mixed Use Setting and Inventory Control Compliance Definition of Covered Outpatient Drugs and the GPO Prohibition 3

4 Questions During the session, please general questions to: We will do our best to address all of your questions within the allotted time. 4

5 Review of Session I The 340B Program The 340B Drug Program requires drug manufacturers to sell covered outpatient drugs at a discount to Covered Entities which may result in significant savings for participating providers, estimated to be 20% 50% on the cost of pharmaceuticals. The purpose of the 340B Program is to enable those entities to stretch scarce resources, thereby reaching more eligible patients and providing more comprehensive services. Disproportionate Share Hospitals that enroll in the 340B Program are covered entities and are hereinafter are referred to as DSHs ) 5

6 The 340B Drug Program: Eligible Patients 340B Eligible Patients for DSHs are defined as: (1) the DSH has established a relationship with the individual, such that the DSH maintains records of the individual's health care; and (2) (a) the individual receives health care services from a health care professional; (b) who is either employed by the DSH or provides health care under contractual or other arrangements (e.g. referral for consultation); (c) such that responsibility for the care provided remains with the DSH. 6

7 340B Drug Program Statutory Prohibitions 1. Prevent diversion to ineligible patients. DSHs must not resell or otherwise transfer 340B drugs to ineligible patients; 2. Prevent duplicate discounts. 42 USC 256b(a)(5)(A)(i) prohibits duplicate discounts; that is, manufacturers are not required to provide a discounted 340B price and a Medicaid drug rebate for the same drug. DSHs must accurately report how they bill Medicaid drugs on the Medicaid Exclusion File; 3. Not participate in a GPO for covered outpatient drugs. (This requirement only applies to disproportionate share hospitals, free standing cancer hospitals, and children s hospitals.) 7

8 Dispensing and Administration of 340B Drugs To Eligible Patients Determining Outpatient Status: DSHs are responsible for ensuring they are in compliance with all 340B Program requirements, including compliance with the 340B definition of eligible patient. Decisions regarding inpatient and outpatient status must be auditable, transparent, and consistent with the 340B statute, guidelines, and regulations. Entities should establish written policies and procedures specific to inpatient/outpatient designations and be able to demonstrate compliance with this policy. 8

9 Dispensing and Administration of 340B Drugs To Eligible Patients Determining Outpatient Status: Physical presence of the patient in the outpatient department alone is not sufficient in determining inpatient vs. outpatient status. DSHs are responsible for ensuring they are in compliance with all 340B components of the definition of eligible patient. Decisions regarding inpatient and outpatient status must be auditable, transparent, and consistent with the 340B statute, guidelines, and regulations. Entities should establish written policies and procedures specific to inpatient/outpatient designations and be able to demonstrate compliance with this policy. 9

10 Dispensing and Administration of 340B Drugs To Eligible Patients Determining Outpatient Status: Billing status alone is not sufficient for determining outpatient status. DSHs are responsible for ensuring they are in compliance with all of the components of 340B Program definition of eligible patient. Decisions regarding inpatient and outpatient status must be auditable, transparent, and consistent with the 340B statute, guidelines, and regulations. Entities should establish written policies and procedures specific to inpatient/outpatient designations and be able to demonstrate compliance with this policy. 10

11 Relevant Policies and Procedures for Identifying 340B outpatient status Existing policies and procedures may not necessarily be consistent for identification of an eligible 340B eligible patient. The following policies and procedures may or may not be helpful in identifying an outpatient for purposes of 340B: Policies and procedures of commercial health insurers and other third party payers for identification of outpatient status including precertification requirements and listings for inpatient and outpatient admissions. Policies and Procedures for Centers for Medicare and Medicaid Services ( CMS ) relating to observation services, outpatient admissions, and inpatient admissions. 11

12 Elements of a Retail Pharmacy Contract Options for 340B Pharmacy Implementation In-House Pharmacy, in which the DSH owns drugs, pharmacy and license; purchases drugs; is fiscally responsible for the pharmacy; and pays pharmacy staff. Provider/In-House Dispensing, in which the DSH owns drugs; employs providers licensed in the state to dispense; holds a license for dispensing for the participating providers; and is fiscally responsible for operating and dispensing costs. Contract Pharmacy Services, in which the DSH owns drugs; purchases drugs; pays (or arranges for patients to pay) dispensing fees to one or more contract pharmacies; and contracts with pharmacy to provide pharmacy services. 12

13 340B Transactions: In-House Pharmacy 13

14 Retail Pharmacy Contracts 340B Entities must conform with OPA Contract Pharmacy Requirements in guidance published by HRSA Notice Regarding 340B Drug Pricing Program Contract Pharmacy Services* (To be discussed in detail in Part II!) * gisternotices/contractpharmacyservices pdf 75 Fed. Reg. p ; (March 5, 2010) 14

15 Retail Pharmacy Requirements DSH must have a written contract with a specified pharmacy. DSHs that have more than one 340B eligible site at which it provides health care may have individual contracts for each such site or include multiple sites within a single pharmacy services contract. 15

16 Retail Pharmacy Requirements The DSH has the responsibility to: ensure against illegal diversion and duplicate discounts; and maintain readily auditable records; and meet all other 340B Drug Pricing Program Requirements. 16

17 Retail Pharmacy Requirements Use of Multiple Pharmacies DSH must have written agreement and procedures with each pharmacy that includes all program requirements and includes: (1) a full listing of all pharmacy locations that may be utilized under that agreement; (2) the operation under the contract continues to meet all 340B Drug Pricing Program requirements and does not create diversion of covered drugs or duplicate discounts; 17

18 Retail Pharmacy Requirements Use of Multiple Pharmacies DSH must have written agreement and procedures with each pharmacy that includes all program requirements and includes: (3) the arrangements are one of the two following models either individually or in combination: (i) The use of multiple contract pharmacy service sites, and/or (ii) the utilization of a contract pharmacy(ies) to supplement in-house pharmacy services (iii) the arrangement involves a single identifiable 340B covered entity and does not include a network, or other similar arrangement, of more than one covered entity unless specifically authorized in writing by HRSA through an AMDP or by other official written authorization. 18

19 Retail Pharmacy Requirements Compliance Elements 1. The DSH will purchase the drug, maintain title to the drug and assume responsibility for establishing its price, pursuant to the terms of an HHS grant (if applicable) and any applicable Federal, State and local laws. A ship to, bill to procedure is used in which the DSH purchases the drug; the manufacturer/wholesaler must bill the DSH for the drug that it purchased, but ships the drug directly to the contract pharmacy. 19

20 Retail Pharmacy Requirements Compliance Elements (continued) 2. The agreement will specify the responsibility of the parties to provide comprehensive pharmacy services (e.g., dispensing, recordkeeping, drug utilization review, formulary maintenance, patient profile, patient counseling, and medication therapy management services and other clinical pharmacy services). 3. DSH will inform the patient of his or her freedom to choose a pharmacy provider. 4. The contract pharmacy may provide other services to the DSH or its patients at the option of the DSH (e.g., home care, delivery, reimbursement services). 5.The contract pharmacy and the DSH will adhere to all Federal, State, and local laws and requirements. 20

21 Retail Pharmacy Requirements Compliance Elements (continued) 6.The contract pharmacy and the DSH will adhere to all Federal, State, and local laws and requirements. 7.The contract pharmacy will provide the DSH with reports consistent with customary business practices (e.g., quarterly billing statements, status reports of collections and receiving and dispensing records). 8.The contract pharmacy, with the assistance of the DSH, will establish and maintain a tracking system suitable to prevent diversion of section 340B drugs. The DSH will establish a process for periodic comparison of its prescribing records with the contract pharmacy s dispensing records to detect potential irregularities. 21

22 Retail Pharmacy Requirements Compliance Elements (continued) 9. Both parties will develop a system to verify patient eligibility subject to modification in the event of change in such guidelines. Both parties agree that they will not resell or transfer a drug purchased at section 340B prices to an individual who is not an eligible DSH patient. The DSH understands that it may be removed from the list of covered entities because of its participation in drug diversion and no longer be eligible for 340B pricing. 10. Neither party will use drugs purchased under section 340B to dispense Medicaid prescriptions, unless the DSH, the contract pharmacy and the State Medicaid agency have established an arrangement to prevent duplicate discounts. All arrangements shall be reported to the OPA, HRSA, by the DSH. 22

23 Retail Pharmacy Requirements Compliance Elements (continued) 11. Both parties will identify the necessary information for the DSH to meet its ongoing responsibility of ensuring that the elements listed herein are being complied with and establish mechanisms to ensure availability of that information for periodic independent audits performed by the DSH. 12. Both parties understand that they are subject to audits by the Department and participating manufacturers of records that directly pertain to the entity s compliance with the drug resale or transfer prohibition and the prohibition against duplicate discounts. Such auditable records will be maintained for a period of time that complies with all applicable Federal, State and local requirements. 13. Upon written request to the DSH, a copy of the contract pharmacy service agreement will be provided to the Office of Pharmacy Affairs. 23

24 Retail Pharmacy Requirements Compliance Elements (continued) For suggested contract provisions, see Appendix D at 75 Fed. Reg. p ; (March 5, 2010) Link: ederalregisternotices/contractpharmacyservice s pdf 24

25 Mixed Use Setting and Inventory Control Compliance Q. What is a mixed use setting? A: Mixed-use settings, are those in which a DSH provides 340B drugs to outpatients in an emergency department or outpatient facility where there is an adjoining surgery department where both inpatients and outpatients are treated. A hospital may use 340B-discounted drugs for patients treated in mixed-use settings that appear as reimbursable cost centers on the hospital s most recently filed Medicare cost report and meet the definition of a patient under the 340B statute. 25

26 Mixed Use Setting and Inventory Control Compliance A hospital may use 340B-discounted drugs for patients treated in mixed-use settings that appear as reimbursable cost centers on the hospital s most recently filed Medicare cost report and meet the definition of a patient under the 340B statute. The hospital must develop appropriate tracking systems to ensure that covered outpatient drugs purchased through the 340B program are not used for hospital inpatients. It is the responsibility of the hospital to ensure appropriate safeguards are in place to protect against diversion. If a hospital is unable to implement an effective tracking system, it should not use the 340B program in that setting. 26

27 340B Drug Split-billing Solution What is the purpose of Split-billing software? Split billing software is used in settings where a 340B entity uses multiple wholesaler contracts for drug purchasing. This software helps the entity track and separate ( split ) the 340B eligible dispensations from the non-340b dispensations, and ultimately builds purchase orders based on varied information. 27

28 340B Drug Split-billing Solution 340B Three Way Split Billing Addresses issues relating to administering 340B Drugs in a mixed use setting. Addresses Compliance with GPO Prohibition 28

29 340B Drug Split-billing Solution Mixed-Use Inventory Drug Order Drug Administration Accumulator GPO Non GPO/WAC 340B 29

30 Three Way Splitters!! Let s review some definitions that will help us understand three way splitting software and retail pharmacy account terminology. 30

31 Definitions Relating to Pharmacy and 340B Drug Sales Actual Acquisition Cost (AAC): The net cost of a drug paid by a pharmacy. AAC may vary by container size and whether or not the drug was purchased from a manufacturer or wholesaler. AAC typically includes discounts, rebates, chargebacks, and other price adjustments, but excludes dispensing fees. States may define AAC differently for purposes of Medicaid reimbursement, and some states ask entities to determine or reimburse using an estimated acquisition cost. 31

32 Definitions Relating to Pharmacy and 340B Drug Sales Wholesaler: A drug wholesaler is an organization that provides drugs to entities, serving as the distributor between the drug manufacturer and the entity. Typically states define the term wholesaler, so exact definitions may vary within a particular state. Wholesale Acquisition Cost (WAC): The price paid by a wholesaler (or direct purchasers) in the United States for drugs purchased from the drug s manufacturer or supplier. Publicly available WAC lists do not represent actual transaction prices and do not include prompt pay or other discounts, rebates or reductions in price. 32

33 Definitions Relating to Pharmacy and 340B Drug Sales National Drug Code (NDC): Drug products are identified and reported using a unique, threesegment number, called the National Drug Code (NDC), which serves as a universal product identifier for human drugs. FDA publishes the listed NDC numbers and the information submitted as part of the listing information in the NDC Directory which is currently updated semimonthly. It is an 11 digit number; the first segment (5 digits) of the NDC indicates the manufacturer, the second segment (4 digits) indicates the drug product, and the third segment (2 digits) indicates the package size. 33

34 Definitions Relating to Pharmacy and 340B Drug Sales Average Manufacturer s Price (AMP): is the average unit price paid in the United States to the manufacturer by wholesalers for drugs distributed to the retail pharmacy class of trade, after deducting customary prompt pay discounts (excluding direct sales to hospitals, health maintenance organizations and to wholesalers where the drug is relabeled under the distributor s ND. Originally created as a benchmark by Congress to aid in calculating Medicaid rebates. Because 340B is calculated based upon AMP, changes proposed changes of the definition will result in changes to the 340B program. The base AMP is the calculated AMP for the first full quarter after the market date of the drug. 34

35 Definitions Relating to Pharmacy and 340B Drug Sales Average Wholesale Price (AWP): A publicly available, national average of list prices charged by wholesalers to pharmacies. AWP is not defined in legislation, and does not account for discounts. AWP is sometimes referred to as a sticker price, as it is not an actual price paid by most purchasers. AWP was once used as a primary basis of pharmacy reimbursement, but there is a trend moving away from this practice. 35

36 Definitions Relating to Pharmacy and 340B Drug Sales Dispensing Fee: A dispensing fee is the charge for the professional services provided in association with prescription dispensing. Most prescription payers reimburse on the basis of a benchmark of the drug cost (i.e., ASP, AMP, AWP, WAC, AAC, etc.) plus a dispensing fee. 36

37 Definitions Relating to Pharmacy and 340B Drug Sales Accumulator: An accumulator records charges of drugs in the Outpatient setting in one bucket to be purchased using the 340B account; inpatient setting charges are placed in a second bucket; and other miscellaneous charges go into a third bucket, or trash can, for further review. 37

38 Definitions Relating to Pharmacy and 340B Drug Sales Replenishment: Replenishment occurs when a non-340b drug is initially dispensed to a 340B eligible patient, and an entity later replaces the non-340b dispensed drug with 340B purchased inventory. The replaced inventory, although it was purchased at 340B prices, is no longer considered 340B inventory, as the title passes to the pharmacy after purchase. DSHs use a stock-replenishment model, where items are purchased from the 340B account to replace the items that were used from existing inventory. 38

39 Definitions Relating to Pharmacy and 340B Drug Sales Replenishment. (continued) HRSA s position is that the GPO prohibition is violated when DSHs engage in a replenishment model in which the DSHs purchases covered outpatient drugs through a GPO and subsequently either engages in (1) replenishing through accounting by replacing the GPO purchased drug with a drug purchased under 340B; or (2) otherwise reclassifying the method of purchase after dispensing. The GPO prohibition is violated upon use of a GPO to obtain covered outpatient drugs and cannot be fixed or cured by subsequently changing the characterization through accounting or other methods. (See: Policy Release Compliance through Replenishment To be further discussed in Part III) 39

40 340B Drug Split-billing Solution Mixed-Use Inventory Drug Order Drug Administration Accumulator GPO Non GPO/WAC 340B 40

41 Definition of Covered Outpatient Drugs and the GPO Prohibition On June 18, 2013, HRSA released the following FAQ on its website: Question: Can a hospital subject to the GPO Prohibition use a GPO for drugs that are part of/incident to another service and payment is not made as direct reimbursement of the drug ( bundled drugs )? For example, diluents for infusions, large volume parenterals used as diluents, etc. See: 41

42 Definition of Covered Outpatient Drugs and the GPO Prohibition Answer: If the entity interprets the definition of covered outpatient drug referenced in the 340B Statute (Social Security Act 1927 (k)) and decides that bundled drugs do not meet this definition, a GPO may be used for drugs that are not covered outpatient drugs. The decision the entity makes should be defensible, consistently applied in all areas of the entity, documented in policy/procedures, and auditable. 42

43 Definition of Covered Outpatient Drugs and the GPO Prohibition Implications of June 18, 2013 FAQ DSHs may interpret drugs subject to a bundled payment as: (1) not meeting the definition of a covered outpatient drug and thus, may be purchased through a GPO or (2) meeting the definition of covered outpatient drug and may purchased only through a 340b drug or WAC account. The DSH s interpretation must be consistently applied in all areas of the entity and document in policy/procedures, and auditable. 43

44 Questions? 44

45 Next Session: February 5, 2014 Part III: Audits by the Office of Pharmacy Affairs and Manufacturers: Focus on Diversion, Duplicate Discounts and GPO Prohibition Agenda Challenges in compliance with the GPO Prohibition (Discussion of Policy Release Policy Release Compliance through Replenishment and Audit and Inventory Control Issues and Implications for Medicaid Care In and Carve Outs) Auditing Administration and Dispensing to Eligible Patients Auditing DSH s Relationships with Physicians When 340B Compliance impacts Tax Exempt Status and Fraud and Abuse Compliance? Penalties for Non-Compliance with 340B Requirements 45