2/25/2016. Today s Objectives. Disclaimer WHAT S NEW IN THE WORLD OF 340B?

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1 WHAT S NEW IN THE WORLD OF 340B? Jim Donnelly Vice President of Pharmacy Services Hudson Headwaters Health Network Jennifer Bolster Partner Hancock Estabrook, LLP. Friday, February 26 th Today s Objectives To review the current 340B environment Contributing factors around the Mega Guidance To elaborate on what certain proposed changes would mean to your hospital program Disclaimer This presentation has been provided for informational purposes only. It is not intended nor should it be construed to constitute legal advice. 1

2 340B Today Current patient definition Preventing diversion Preventing duplicate discounts Program audits Program oversight Discounts to patients Orphan drugs GPO/Split Billing The Current Patient Definition 1. the covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual's health care; and 2. 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; and 3. the individual receives a health care service or range of services from the covered entity which is consistent with the service or range of services for which grant funding or Federally qualified health center look alike status has been provided to the entity. Disproportionate share hospitals are exempt from this requirement. Lack of Clarity with Current Patient Definition Two Prong Test focused on the patient and covered entity s relationship CE maintains records of the individuals health care AND Patient receives health care from a health care professional who is employed by CE OR provides health care services under contract or other arrangement such that responsibility for care remains with CE Guidance from HRSA on this definition has been scarce HRSA Letter guidance from 2001 prescriptions resulting from services provided outside of a hospital s approved sites may be filled with a 340B drug if the treatment is proximate in type and time to prior services provided to the patient at an approved CE site. What does proximate in type and time mean? 2

3 Diversion Covered Entities are prohibited from reselling or otherwise transferring outpatient drugs to individuals who are not patients of the Covered Entity. Individuals are not considered patients if the only health care services received by the individual from the covered entity is the dispensing of a drug for subsequent self administration or administration in home setting. Use of 340B drugs for inpatients is considered diversion. Covered Entities found to have violated the diversion prohibition will be liable to the manufacturer in an amount equal to the reduction in the price of the drug. Preventing Duplicate Discounts Medicaid FFS OPA Database: Carve in or Carve out Listed on Medicaid Exclusion File Carve in requires that 340B acquisition cost is billed with an additional fee Most carve out due to insufficient fees and complexity in Contract Pharmacy model New York State Medicaid FFS & MMCO In NYS, if an entity determines to use 340B drugs for their Medicaid patients (CARVE IN), they must use them for all of their Medicaid patients, both Fee for Service (FFS) and Medicaid Managed Care Organizations (MCO). NYS Medicaid program uses HRSA's Medicaid Exclusion File to identify all 340B claims (both FFS and MCO) to be removed from the rebate stream, thereby avoiding duplicate discounts. However, additional identifiers are required at the claim submission level for all 340B drug claims. For FFS, all 340B claims must be submitted at acquisition cost, inclusive of all discounts. Changes to how a covered entity uses 340B drugs for its Medicaid patients are effective with HRSA on a quarterly basis only. 3

4 Pharmacy Update from NYS Effective July 23, 2015 *Excerpt from page 11 of State Pharmacy Update Preventing Duplicate Discounts Managed Care ACA amended the rebate provision with an exemption for 340B purchased drugs Attempt to preserve the 340B savings on MMCO pharmacy utilization How are these claims identified? Who is responsible to prevent the duplicate discount? AMP rule places the responsibility on the states CMS says states must provide a way for entities to identify 340B managed care claims Does this change anything in states where there is currently an overly burdensome or untenable mechanism in place? Q & A 4

5 Increased number of audits Audits Completed in 2014: 98 81% Hospitals, 13% FQHC Audits Completed in 2015: % Hospitals, 20% FQHC Audit findings HRSA Audit Readiness 2014 results = 80% of entities had adverse findings, 20% no adverse findings 2015 results = 76% of entities had adverse findings, 24% no adverse findings Are you prepared? Be prepared! Independent Audits Compliance Assessments Internal Auditing Policies and Procedure Staffing Roles OPA Database Prescriber List Internal Audits Medicaid MCO s Inventory/Slow Movers Purchasing, Ordering, & Invoice Processing HRSA Audit Readiness Mini Assessment Do you have a 340B Policy & Procedure manual? Does the appropriate staff understand the information? Do you have key staff identified to take responsibility for program compliance? Are all sites and pharmacies registered? Is the authorizing official information accurate? Are monthly updates completed? Do you notify all necessary parties of revisions? Do you clearly identified solely employed? Are internal audits conducted at least twice a year? Are targeted audits performed for key prescribers? Do you understand how the State handles MCO s? Are you current in your understanding of your vendors processes for carving in or out? Do you review your monthly reports? Do you understand how slow movers are processed for your program(s)? Do you review drug purchases made on your 340B account? Are you being paid per your contract guidelines? Yes No Unsure Yes No Unsure Yes No Unsure Yes No Unsure Yes No Unsure Yes No Unsure Yes No Unsure Yes No Unsure HRSA Audit Readiness Covered Entity to Review and Address 340B Program Policies and Procedures OPA Database Pharmacy Services Agreement(s) Management Services Agreement(s) Active 340B Provider List(s) 5

6 HRSA Audit Readiness Approximate Timeline of Events Engagement Letter Received from HRSA Data Request Received from HRSA Data Request Due to HRSA HRSA On Site Audit Assessment Time Elapsed (Weeks) *Approximate Timeline of Events is based on Hudson Headwaters previous experience with our clients. HRPS s timeline can be varied. HRSA Audit Readiness Prepare for these questions 1. Are all associated site and off site outpatient facilities of the covered entity registered on the 340B OPA database? 2. Are all contract pharmacies registered on the 340B OPA database? Are all registered contract pharmacies being utilized? 3. How do the contract pharmacies ensure that only patients of the covered entity receive 340B drugs purchased by the covered entity? 4. How do the contract pharmacies determine that only prescribers employed by the covered entity and/or on a contract with the covered entity are submitting prescriptions for the covered entity s patients? 5. If an erroneous prescriber gets into a transaction file, how would this get caught? HRSA Audit Readiness Prepare for these questions 6. What internal controls are used by the contract pharmacies to segregate and track 340B drugs from non 340B, non covered entity pharmacy stock? 7. Please explain what the contract pharmacies replenishment process is? Do they utilize an 11 digit to 11 digit NCD match? If not, explain the process 8. Does each contract pharmacy location conduct an annual wall to wall physical inventory audit? Do they share the result with the covered entity? 9. Since the covered entity has indicated they carve out, please explain how the covered entity prevents Medicaid drugs from being accumulated? 10. Have any discrepancies been found in the monthly reporting been under review? If so what areas? How are they addressed? 11. How does the contracted pharmacy know when to re order drugs? 6

7 HRSA Audit Process HRSA no longer issuing preliminary reports HRSA will issue a final notice with final determination Entity has 30 days to disagree with final report. If agrees, 60 days to submit corrective action plan for HRSA approval. Corrective Action Plan Provide immediate remedy Propose plan for periodic assessment, continuous monitoring, and method to determine when CAP is completed Identify implementation date Devise internal 340B communication/education strategy Provide entity contact person HRSA to provide a general outline dependent on type of finding Audit summary, public letter and corrective action posted on HRSA website Manufacturer Audits Implementation of 340B program monitoring activities to assess and monitor covered entity compliance with 340B requirements and identify reasonable cause to perform 340B audits. 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. Retention of an independent auditor to perform audits of covered entities. Self Disclosure Process Covered Entity Reports Issue to HRSA including the following information: Type and Scope of violation that occurred; Corrective action plan (CAP) to fix the problem moving forward; Strategy to inform affected manufactures (if applicable); and Plan for financial remedy if repayment is owed. Covered Entity Works with Manufacturer to determine any necessary financial remedy in good faith. HRSA Reviews Self Disclosure, including: violation information, CAP, repayment plan and/or completion of plan; and completion of contact to all affected manufacturers. NOTE: HRSA staff will follow up with the covered entity authorizing official if any of the requested information is missing from the self disclosure submitted. HRSA Closes Self Disclosure written communication that the matter is closed. 7

8 Self Disclosure Process Self Reporting Tool by the 340B Prime Vendor Program Goal is to help covered entity re establish compliance as soon as possible, and provide HRSA with all the necessary information to take appropriate action. Includes: Sample letter to HRSA, Sample letter to manufacturers, Format for summarizing non compliance, Template for a CAP, and Tips directly from manufacturers on the best ways to resolve issues quickly and completely. Q & A Policies & Procedures Program Oversight Key part of any 340B program Important to understand your P&P manual Customize to your program Update when needed Annual review All policies should include Title, effective date, review date, policy statement, purpose and procedure 8

9 Importance of Auditing Program Oversight Continuous quality assurance/improvement Increasing complexity with multiple pharmacy arrangements Independent Audits HRSA recommends annual independent audit Simulates a HRSA audit following HRSA guidance Gives a total program overview Internal Auditing Program Oversight Conducted by members of your organization Recommend conducting no less than twice per year Internal audit plan, Targeted audits as necessary Audit new or complex arrangements to identify discrepancies/issues Findings and resolutions should be documented Third Party Administrators Contract Pharmacies Managed through 340B Administrators Relieve CE of administrative burdens related to 340B program Ensure 340B Compliance (Prevent duplicate discounts on Medicaid rebates and diversion of 340B inventory to non qualified patients) Replenishment Administration Provide detailed reporting at transaction level (claim, practitioner and claim detail) Financial management Bill to/ ship to program management ALWAYS REMEMBER COVERED ENTITY IS RESPONSIBLE FOR COMPLIANCE WITH 340B PROGRAM REQUIREMENTS 9

10 Q & A Discounts to Patients The statute does not specifically state how 340B drugs are to be priced for patients of the entity. Entities should have indigent care policies and processes through which affordable drugs are made accessible to their patients. Entity Types such as FQHC s have sliding fee requirements outlined by their federal grant. Orphan Drugs Background Orphan drugs have been a topic of much debate over the past few years, but they do not apply to all hospitals equally. Due to their GPO exclusion, DSH hospitals are permitted to purchase orphan drugs at 340B price. PhRMA (a pharmaceutical manufacturer lobbying organization) disagrees with HRSA on how these drugs should be treated with respect to 340B. This includes an interpretive rule published by HRSA that stated orphan drugs could be purchased at 340B price, provided they were not used to treat their rare orphan indication. PhRMA subsequently filed lawsuits questioning HRSA s rule making authority. 10

11 Orphan Drugs Currently PhRMA was successful with their lawsuit. HRSA s interpretive rule was vacated in October HRSA is not expected to appeal the decision any further. Hospitals (except DSH) have had to stop purchasing orphan drugs at 340B price, foregoing the benefit on these medications. Although a hospital might contract with one or more vendors to administer their 340B arrangements, the onus ultimately resides with the hospital to ensure no orphan drugs are being purchased with a 340B subsidy. It behooves all hospitals subject to orphan drug regulations to hedge against potential anomalies by auditing transactions as well as provide feedback to any vendors involved. Orphan Drugs Complexities HRSA publishes a list quarterly with information from the FDA surrounding what drugs should be treated as orphans. Interpretation of the list can be difficult based on strategy and nuances within the pharmaceutical industry. The three most important pieces of information when identifying drugs to be carved out are Generic Name, Trade Name and Contact Company. Generic name represents the chemical name of the medication. Trade name represents the name under which the medication is marketed. Contact company is typically the drug s manufacturer and has one or more labelers, which are reflected by the first five digits of a drug s NDC (National Drug Code) number. If a drug matches on all three of these fields, it should be treated as an orphan drug. If no Trade Name is listed, this piece can be omitted. If the list itself contained further identifying information, such as NDC number, interpretation would be much simpler. Importance of Orphan Drug Court Ruling Orphan Drug Exclusion: ACA amended 340B to exclude drugs designated for a rare disease or condition from 340B pricing (DSH hospitals exception) HRSA Interpretation: 340B pricing is required when the drug is used to treat something other than the Orphan designation rare condition 2014 Court Decision: HRSA lacked authority to promulgate a legislative rule (vacated) 2015 Court Decision: HRSA s interpretative rule inconsistent with ACA (vacated) More on this later 11

12 GPO Prohibition DSH hospitals, children s hospital and cancer hospitals are prohibited from purchasing covered outpatient drugs through a GPO Compliance is an ELIGIBILITY requirement Hospitals must attest to compliance at registration and during recertification Exception Off site outpatient facilities not participating in the 340B program located at different address, not listed in the 340B database, separate drug purchasing accounts, ensure GPO drugs are NEVER provided to hospital outpatients GPO Pricing GPO pricing can be used for inpatients Compliance Concerns: Medication charges for patients whose status changes from Outpatient to Inpatient NO GPO Pricing for Employee Pharmacies: Purchasing GPO drugs for use in an employee pharmacy located within the four walls of the hospital is prohibited. (NOTE: Covered entities may only distribute 340B drugs to their employees that meet the patient definition guidelines set forth under the 340B Program. Evidence of an employer relationship or insurer relationship alone is insufficient to determine 340B patient eligibility.) Q & A 12

13 WHERE IS 340B GOING? Where did the Mega Guidance come from? Released by HRSA August 2015 Amid pressures to provide greater oversight for the 340B program Attempt to further clarify the agency s interpretation of program requirements for all stakeholders Criticism of 340B Oversight Rapid Growth of 340B Program brought attention from OIG and Congress OIG report 2014 Inconsistencies with HRSA s administration of 340B Program Interpretation of Eligible Patients Contract Pharmacy Diversion Medicaid MCO administration issues duplicate discounts Uninsured Patients not receiving discounted drug price OIG report 2014 Inconsistencies with HRSA s administration of 340B Program March 2015 House of Rep. Committee on Energy and Commerce First hearing on 340B in 10 years. 13

14 Mega Guidance Background Originally announced as a Mega Rule (HRSA is granted only limited legislative rulemaking authority for 340B) Historically Informal Guidance Notices, Releases, FAQs, Prime Vendor Program ACA allows HRSA rulemaking on administrative dispute resolution, calculation of ceiling prices and CMP standards against manufacturers Orphan Drug Ruling The original Mega Rule was withdrawn as a result of the orphan drug ruling stating that HRSA has limited authority to engage in rule making. Enforceability of the Mega Guidance Will the Guidance be considered binding and enforceable? Legislative vs Non Legislative Rules Non Legislative Rules: Interprets the statute, not legally binding. Not within the express authority delegated by the statute Courts may afford some level of deference to the extent the interpretation has power to persuade Legislative Rules: To be binding must fall within the ambit of rulemaking authority Courts must give deference when Congress delegated authority and interpretation is within scope of that authority Key changes in the proposed Mega Guidance 340B Program Eligibility and Registration Drugs eligible for purchase under the 340B Program Patient Definition* Covered Entity Responsibilities Contract Pharmacy Arrangements Program Integrity 14

15 340B Program Eligibility and Registration Timeline for Registering Sites Waiting for child sites to appear on EHB (non hospital) or Most Recently Filed Cost Report Termination and use of 340B/GPO purchased drugs Registration and Termination Upon loss of eligibility of a parent site, child site, or termination of any contract pharmacy arrangement, the covered entity must immediately notify HHS and stop purchasing and using 340B drugs. GPO Prohibition for Certain Covered Entities (b) Drug replenishment models Covered Entities should maintain records demonstrating that the replenishment model, along with any associated software, is used in a manner that complies with the statute. Program Eligibility Private non profit hospital must have a contract with a State or local government to provide health care services to low income individuals who are not eligible for Medicare or Medicaid. Certification by the hospital s 340B Program authorizing official and an appropriate government official that there is a contract currently in place between the private, non profit hospital and the State or local government to provide health care services to low income individuals who are not entitled to Medicare or Medicaid. Contract should create enforceable expectations for the hospital for the provision of health care services, including the provision of direct medical care. The Proposed Patient Definition 1. The 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. The individual receives a health care service provided by a covered entity provider who is either employed by the covered entity or who is an independent contractor for the covered entity, such that the covered entity may bill for services on behalf of the provider. 3. An individual receives a drug that is ordered or prescribed by the covered entity provider as a result of the service described in (2). 4. The individual s health care is consistent with scope of the Federal grant, project, designation, or contract. 5. The individual s drug is ordered or prescribed pursuant to a health care service that is classified as outpatient. 6. The individual s patient records are accessible to the covered entity and demonstrate that the covered entity is responsible for care. 15

16 The Proposed Patient Definition 1. The 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. Clarification Needed home visits, telemedicine, providers working at sites that are included in scope and on EHB (under other ) but not on 340B DB On a prescription by prescription basis B Site of Service Requirement Patient receives a health care service from the covered entity Covered Entity is medically responsible for the care Patient seen by physician at private practice not listed as child site DOES NOT qualify (even if follow up to covered entity visit) Access to patient s records by covered entity, does not make the individual a patient of that covered entity (loose affiliations are not enough) The Proposed Patient Definition 2. The individual receives a health care service provided by a covered entity provider who is either employed by the covered entity or who is an independent contractor for the covered entity, such that the covered entity may bill for services on behalf of the provider. Clarification needed on what this means. 16

17 2. Billing Requirement New Element: Covered Entity must be able to bill for the provider s services that resulted in the issuance of the prescription (NOTE: Does not say CE must bill for the services) Challenge for entities that do not employ or bill for practitioners seeing patients Medical Staff Privileges NOT ENOUGH Referrals by Covered Entity Outside Providers Prescriptions not Eligible Faculty Practice, Residents, Locums, Volunteers, Interns Qualify The Proposed Patient Definition 3. An individual receives a drug that is ordered or prescribed by the covered entity provider as a result of the service described in (2). Eliminating referrals Not considered patient if only health care received from the covered entity is the infusion or dispensing of a drug. 3. Drug Prescribed as a Result of the CE Service Use of telemedicine, telepharmacy, remote and other health care service arrangements are permitted so long as allowed by law Operationalizing: How can pharmacies relate a drug order to a specific billable service Sufficient connection to the service that was received 17

18 The Proposed Patient Definition 4. The individual s health care is consistent with scope of the Federal grant, project, designation, or contract. No Change The Proposed Patient Definition 5. The individual s drug is ordered or prescribed pursuant to a health care service that is classified as outpatient. The individual is classified as outpatient when the drug is ordered or prescribed. Discharge Prescriptions filled as an outpatient. The patient s classification is determined by how the services are billed to the insurer. An individual who is self pay, uninsured, or whose cost of care is covered by the covered entity will be considered a patient (if P&P s are in place etc.) Clarification is needed here. How can inpatient be defined differently for different patients? The Proposed Patient Definition 6. The individual s patient records are accessible to the covered entity and demonstrate that the covered entity is responsible for the care. A provider to patient relationship. That each element of this patient definition in this section is met for each 340B drug. 18

19 Covered Entity Responsibilities May make different determinations regarding carve in or carveout status for MCO patients than it does for FFS patients. An Entity can make different decisions by covered entity site and by MCO. HHS is seeking comments regarding alternative mechanisms to supplement the 340B Exclusion file. Contract pharmacy If an Entity wishes to use 340B for Medicaid FFS or MCO s through a contract pharmacy arrangement then the Covered Entity will provide HHS a written agreement with its contract pharmacy and State Medicaid agency or MCO that describes a system to prevent duplicate discounts. State notification In the event that a covered entity is unable to use a 340B drug for a Medicaid FFS or MCO patient in a particular instance, it is expected to document the reason and have a mechanism in place to notify the State Medicaid Agency or MCO. Contract Pharmacy Arrangements (a) Registration Only Covered Entities can register these arrangements, not a vendor or pharmacy. (b) Compliance with statutory requirements Prevention of diversion. Prevention of duplicate discounts. A covered entity s contract pharmacy may not dispense 340B drugs to Medicaid patients of the covered entity unless the covered entity has submitted information to HHS regarding the arrangement and has systems in place with the State Medicaid agency and contract pharmacy to ensure duplicate discounts do not occur. Contract pharmacy oversight. CE is expected to conduct quarterly reviews and annual independent audits of each contract pharmacy location. ANY violation detected through quarterly reviews or annual audits should be disclosed to HHS. Program Integrity HHS Audit of a Covered Entity (a) Provision of auditable records. Failure to maintain auditable records may result in termination from the 340B program. Comment The expectation of auditable records is understood; but a clear definition of what HHS means by the term should be provided. (b) Notice and hearing. HHS provided a 30 day response deadline. Though reasonable in most cases, entities may need more time based on complexity of the findings. Can an extension be requested? 19

20 Other Key Points Drug Inventory / Replenishment models If the covered entity improperly accumulates or tallies 340B drug inventory, even if it is prior to placing an order, the covered entity has effectively sold or transferred drugs to a person who is not a patient in violation of section 340B(a)(5)(B) THIS IS A BIG CONCERN Comment At what point in time is an accumulation considered improper? Replenishment models can be fully compliant with systematic processes to identify and address improper accumulations and maintain auditable tracking of eligible dispensing and replenishment. Other Key Points Repayment A manufacturer retains discretion as to whether to request repayment based on its own business considerations a manufacturer may prefer not to accept payments below a de minimis amount or to process repayments owed through a credit/rebill mechanism. A covered entity must notify HHS and each affected manufacturer of diversion and is expected to document notification attempts in auditable records. Note there is no use of the word material as there is currently. report any material breach Entities could not define a materiality threshold and would be required to report every improper accumulation or breach no matter how small or easily repaired through normal processes. Other Key Points Eligibility of Off Site Outpatient Facilities and Clinics (Child Sites) Child Site registration required for those not at the same physical address as the parent covered entity. All off site facilities and clinics must be listed separately even if they share a common location Sites must be listed as a reimbursable line of the covered entity s Medicare cost report and have associated outpatient Medicare costs and charges for their services. Charges may be problematic for those sites where indigent, employees etc. are seen and no charges are incurred. 20

21 4 steps every hospital should take as a result of the Mega Guidance 1. Assess the potential impact of the proposed program changes 2. Develop contingency plans for each risk area 3. Conduct an audit of your program a. Not just measuring against current standards, but also by the proposed Mega Guidance 4. Make your voice heard Q&A 21