340B Drug Pricing: Don t Become an HRSA Statistic. Wipfli LLP 1

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1 340B Drug Pricing: Don t Become an HRSA Statistic October 13, 2017 Wipfli LLP 1

2 Today s Agenda 340B Drug Pricing Program Overview Program Benefit Eligibility Program in Operation Contract Pharmacy Regulatory Requirements and Compliance Audit Procedures and Questions to Ask Questions Vicki LaHue, CPA Apexus Certified Expert Wipfli LLP 2

3 340B Drug Pricing Program Overview Wipfli LLP 3

4 340B Drug Pricing Program Overview The 340B Drug Pricing Program ( 340B or the Program ) is a federal program that requires drug manufacturers participating in the Medicaid drug rebate program to provide outpatient drugs to enrolled covered entities at or below the statutorily defined ceiling price. The Program is administered by the Office of Pharmacy Affairs (OPA). OPA and drug manufacturers have the right to conduct compliance audits of participating facilities. A clear audit trail must be created to remain in compliance with the regulations of the Program. To be eligible for 340B drugs: Patient must be an outpatient. Treated at a covered entity. Prescribed by an eligible provider. Covered entity maintains patient healthcare record. Wipfli LLP 4

5 340B Drug Pricing Program Overview Covered Entities Critical access hospitals (CAHs) Disproportionate share hospitals (DSHs) with a DSH adjustment factor of greater than 11.75% Sole community hospitals (SCHs) with a DSH adjustment factor of 8% or greater Children s hospitals Ryan White HIV/AIDS programs Federally qualified health centers Eligible Providers Employed providers Contracted providers Wipfli LLP 5

6 340B Drug Pricing Program Overview Intent of the 340B Program The 340B Program enables covered entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. Wipfli LLP 6

7 340B Drug Pricing Program Overview Enrollment Procedure Enrollment Deadlines Register Start Date January 1-15 April 1 April 1-15 July 1 July 1-15 October 1 October 1-15 January 1 Recertification is required annually after enrollment into the Program to remain in the Program. Entities must notify OPA whenever there is a change in their eligibility. Wipfli LLP 7

8 Program Benefit Wipfli LLP 8

9 340B Program Benefit A typical 340B health center can expect to save approximately 25% off of the average sales price of drugs used for outpatient services. Savings are typically greatest for high-cost brand name drugs. Some drugs have savings approaching 95%+. Drug Name GPO Cost Per Pkg. 340B Cost Per Pkg. Savings Benicar 5 Mg Tab 30 $ $ % Byetta 5 Mcg Dose Pen Inj 1.2 Ml X % Lipitor 20 Mg Tablet 90 Each X % Zestril 10 Mg Tablet 100 Each X % Wipfli LLP 9

10 340B Program Benefit Wipfli LLP 10

11 CMS Proposed Rule July 2017 Wipfli LLP 11

12 CMS Proposed Rule July 2017 Developments to monitor Centers for Medicare and Medicaid Services (CMS) proposed changes would shift 340B savings from OPPS reimbursed covered entities to the Medicare program Reduce OPPS payment rate to hospitals for drugs costing over $120 purchased under the 340B program from average sales price (ASP) plus six percent to ASP minus 22.5% Proposed rule would require hospitals to add a new modifier for drugs NOT purchased through 340B Does not effect critical access hospitals No changes have been proposed for 340B covered entities that are not hospitals. Wipfli LLP 12

13 CMS Proposed Rule July 2017 Future developments to monitor (continued) Final rule to be issued early November with changes effective January 1, 2018 Impact if the proposed change passes estimated as high as 30% reduction in savings to the covered entities effected. Estimated as Medicare reimbursement reduction of approximately $900 million The proposed rule would be implemented under 42 U.S.C (t)(14)(a)(iii)(ii), as CMS does not have authority to implement this through rulemaking. Wipfli LLP 13

14 CMS Proposed Rule July 2017 What is happening to mitigate the proposed rule? AHA has been lobbying against proposed rule September 27, 2017 two hundred twenty-eight (228) House lawmakers urged CMS to abandon its proposed 340B payment cut October 6, 2017 fifty-seven (57) senators urged CMS to carefully consider stakeholder feedback October 11, 2017 The House Energy and Commerce Committee s Oversight and Investigations Subcommittee held a hearing on the 340B program Wipfli LLP 14

15 CMS Proposed Rule July 2017 What is happening to mitigate the proposed rule? AHA has been lobbying against proposed rule September 27, 2017 two hundred twenty-eight (228) House lawmakers urged CMS to abandon its proposed 340B payment cut October 6, 2017 fifty-seven (57) senators urged CMS to carefully consider stakeholder feedback October 11, 2017 The House Energy and Commerce Committee s Oversight and Investigations Subcommittee held a hearing on the 340B program Wipfli LLP 15

16 Eligibility Wipfli LLP 16

17 340B Patient Definition An individual is a patient of a covered entity and eligible for 340B drugs only if: The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual's health care. 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. An individual will not be considered a patient of the entity for purposes of 340B if the only health care service received by the individual from the covered entity is the dispensing of a drug or drugs for subsequent self- administration or administration in the home setting. Wipfli LLP 17

18 340B Patient Definition (in plain English) In order for a patient to be eligible for 340B in a retail pharmacy setting, they must: Have received outpatient care from the health center under a federal grant/program The drug must be related to the care provided by the health center (responsible for the care). Receive the care from an employed or contracted clinician. Have a record at the health center of the care provided. Wipfli LLP 18

19 Program in Operation Wipfli LLP 19

20 340B Program in Operation Health center must register for 340B status with the OPA. Separate 340B account(s) is established with existing drug wholesaler: Purchasing system remains the same New account contains 340B prices Health center pharmacy purchases eligible drugs on 340B account and all other drugs on GPO/WAC account Wholesaler delivers drugs from both purchase orders. Drugs purchased direct from a manufacturer can be obtained at 340B prices (savings of 25%-50%) No need for separate inventory if tracking system is in place. Wipfli LLP 20

21 340B Program in Operation Covered entity must have policies and procedures specific to the 340B program. Key elements to include: Identification of roles and responsibilities, including an internal 340B audit team. All members must be familiar with the intent of the Program. Program definitions specific to the covered entity. Identification of how savings from the Program will be used at the covered entity and ability to quantify these savings. Definition of material breach specific to the covered entity Covered entity MUST recertify annually. Wipfli LLP 21

22 Contract Pharmacy Wipfli LLP 22

23 340B Contract Pharmacy Regulation for Contract Pharmacies Federal Register / Vol. 75, No. 43 / Friday, March 5, 2010 / Notices Responsibilities of the hospital Written contract agreement in effect prior to being listed on the OPA database Preventing diversion and duplicate discounts Maintaining auditable records Conducting annual independent external audits Meeting all other 340B Program requirements Wipfli LLP 23

24 340B Contract Pharmacy Benefits of a Contract Retail Pharmacy Prescriptions are filled in the usual manner. 340B use is invisible to the customer. Reimbursement is unaffected for non-medicaid prescriptions. Medicaid is subject to rebate/duplicate discount limitations or carve-out for 340B inventory only. Cost savings can be achieved for all qualified patients. 340B savings can average 25% off average sales price Cost savings is realized and revenue is received by the health center with small investments in personnel, equipment, or infrastructure. Wipfli LLP 24

25 340B Contract Pharmacy Operationalizing a 340B Contract Pharmacy 340B in this type of pharmacy requires a two-part test on all prescriptions: Did the customer in the pharmacy receive an outpatient health service from the 340B covered entity within a preceding period of time? ~ (Defined as a reasonable length of time determined by the health center, commonly used is within the last 12 months ) Was the health service proximal to the prescription filled? ~ (i.e., a chest pain patient filling a blood pressure medication would be deemed qualified whereas, the same patient filling a prescription for a skin rash would not because the prescription isn t proximal to the service provided by the 340B health center.) Wipfli LLP 25

26 340B Contract Pharmacy Operationalizing a 340B Contract Pharmacy (Continued) 340B inventory must be invoiced to the enrolled health center. Revenue pass-through and dispensing fees must be calculated, tracked, and paid per the contract terms. Reconciliation of dispense activity to the accumulations must be done on a regular basis. Remember the covered entity is ultimately responsible for the 340B activity. Wipfli LLP 26

27 Retail Pharmacy: How Does it Work? It All Revolves Around the Health Center Wipfli LLP 27

28 Retail Pharmacy: How Does it Work? Contract pharmacy arrangements should be beneficial for all Stand-Alone Pharmacy Arrangement Contract Pharmacy Arrangement Pharmacy prescription reimbursement $ 100 Pharmacy prescription reimbursement $ 100 Less drug cost (90) Less drug cost 0 Less revenue passed on to health center (100) Plus dispensing fee received 15 Pharmacy margin $ 10 Pharmacy margin $ 15 Health center revenue $ 0 Health center revenue $ 100 Less health center drug cost 0 Less dispensing fee to pharmacy (15) Less health center drug cost 1 (20) Third party vendor (5) Health center margin $ 0 Health center margin $ 60 Wipfli LLP 28

29 12 Essential Compliance Elements for Pharmacy Contracts 1. Hospital will purchase the drugs. a. Ship to/bill to procedure 2. Agreement will specify the responsibility of the parties a. Dispensing b. Recordkeeping c. Drug Utilization review d. Patient profile e. Patient counseling f. Other clinical pharmacy services Wipfli LLP 29

30 12 Essential Compliance Elements (cont.) 3. Hospital will inform the patient of their freedom to choose a pharmacy provider 4. Contract pharmacy may provide other services to the entity or its patients, (e.g. home care, delivery) 5. The contract pharmacy and the hospital will adhere to all Federal, State, and local laws and requirements. 6. The contract pharmacy will provide the covered entity with reports consistent with customary business practices (e.g. quarterly billing statements, status of collections, receiving and dispensing records) 7. The contract pharmacy, with the assistance of the hospital, will maintain a tracking system to prevent diversion of 340B drugs Wipfli LLP 30

31 12 Essential Compliance Elements (cont.) 8. The hospital together with the contract pharmacy will develop a system to verify patient eligibility 9. Drugs will not be dispensed to Medicaid patients, unless the hospital, the contract pharmacy, and the State agency have an arrangement to prevent duplicate discounts. 10. Contract pharmacy will ensure availability of agreed upon information for periodic independent audits by the hospital 11. Both parties understand they are subject to audits by outside parties pertaining to compliance 12. Upon written request a copy of the contract pharmacy service agreement will be provided to the Office of Pharmacy Affairs Wipfli LLP 31

32 340B Contract Pharmacy Lessons Learned All parties, health center and pharmacy, need to have a good understanding and be in agreement with the benefits of the Program. The health center and the contract pharmacy must have a good working relationship with each other (communication is key). An understanding that the covered entity will need access to contract pharmacy information for verification of qualifying dispenses. The covered entity needs to audit 340B activity at the contract pharmacy on a regular basis. Dispense fees need to adequately reimburse the pharmacy for the internal costs associated with a dispense including overhead and fees incurred after a dispense is processed. Wipfli LLP 32

33 340B Contract Pharmacy Lessons Learned (Continued) Address potential inventory issues that may arise from the contract pharmacy having to replenish 340B inventory from its own non-340b account due to: Only partial bottle available under 340B. Delay in qualifying dispense as 340B due to health center processing, coding delays, etc. Low turnover drugs. Wipfli LLP 33

34 340B Contract Pharmacy Common Contract Pharmacy Issues Dispense eligibility inconsistencies Nonexclusive providers Refills occurring many months after last health center visit Prescription written by provider not included in health center s eligible provider list Prescription for unrelated diagnosis Appropriate processing of Medicaid Managed Care dispenses Oversight of 340B program operations by covered entity Third-party payor contract payment reductions to pharmacies with 340B contract pharmacy arrangements Wipfli LLP 34

35 Regulatory Requirements and Compliance Wipfli LLP 35

36 340B Regulatory Requirements and Compliance All 340B enrolled entities are entitled to utilize 340B in outpatient care areas that are covered by Federal grants/programs and at all contract pharmacies. All enrolled entities are further permitted to utilize contract pharmacies, which act as the covered entity s agent in the dispensing of 340B drugs. The contract pharmacy agreement must: ~ Identify the specific pharmacies (physical addresses) covered by the contract. ~ Incorporate a bill-to-ship-to arrangement where the covered entity retains responsibility for payment for 340B inventory. ~ Clearly define the fee structure and avoid paying the contracted pharmacy on the basis of individual patient profitability. ~ Hold both parties responsible and liable for any noncompliance with 340B regulations. See Federal Register Vol. 61, No. 165, 8/23/96, Pg Vol. 75, No. 43, 3/5/10, Pg Wipfli LLP 36

37 340B Regulatory Requirements and Compliance Audit Trail All participating health centers MUST maintain an audit trail for ALL 340B purchases. Data required for the audit trail includes: Policies and procedures All 340B enrolled entities agree to be 340B purchase history GPO purchase history List of eligible points of service CDM to 11-digit NDC Crosswalk Specifications used to define outpatient utilization query Patient billing records including patient classification (IP/OP) subject to audits at the time they join the Program. Audits can be requested by OPA and by pharmaceutical manufacturers. Wipfli LLP 37

38 340B Regulatory Requirements and Compliance Official Sources of 340B Information: HRSA APEXUS Wipfli LLP 38

39 340B Regulatory Requirements and Compliance Top 10 Pitfalls of Participating in the 340B Program 1. Poor tracking of activity, eligible patients, qualified providers, etc. 2. Incomplete, inaccurate database 3. Lack of contract pharmacy oversight 4. Having too many contract pharmacies 5. Poor audit trail 6. Ineligible patients receiving 340B drugs 7. Use of a third-party administrator without deference to compliance 8. Failure to register all child sites 9. Medicaid election to exclude 340B for Medicaid patients 10. Overlooked 340B opportunities Wipfli LLP 39

40 Audit Procedures and Questions to Ask Wipfli LLP 40

41 Policies and Procedures Review policies and procedures and update to reflect current information and practice Include information outlining how eligible provider lists are maintained, what department is responsible for generating the list and making updates to the third-party software. Include the frequency for the updates Identify team members within the hospital to be involved in the review and approval process of the 340B P&P Manual as well as oversite of 340B program integrity. Include legal counsel as part of the program integrity efforts Material Breach Threshold: Determine the threshold limit for which a material breach within the program would require reporting to HRSA. Example: if the amount is greater than 10% of total 340B purchases. Quantify the savings from the 340B program, and identify what those savings will be used for. Wipfli LLP 41

42 Split-billing software Carefully review the ordering process on a daily/weekly basis, to determine the software is appropriately splitting orders. If a drug that is typically used in the inpatient setting is falling to the 340B account, this should be a red flag Review accumulations for the following: Is this a new product? Is the billing unit correct? Is it being charged correctly? Is the feed from the charging system correct? Wipfli LLP 42

43 Compliance Self Audit Item Description Frequency Third-party software maintenace Review software updates, CDM/NDC mapping Daily/ Monthly Transaction audit: Audit "x" amount of hospital transactions (surgery, Monthly Hospital ER, clinic, etc) for eligibility Transaction audit: Audit "x" amount of contract pharmacy transactions Monthly Contract Pharmacy for eligibility File transfer audit Audit files transfering from the covered entity to the Monthly third party software Targeted audit Audit "x" amount of of transactions of targeted drugs Quarterly (ie, high cost drugs) or program requirements Provider Audit Audit the eligible provider list within the split-billing software to ensure that eligibility matches the provider criteria set by the covered entity Quarterly 340B Policies and Procedures Mock HRSA Audit Sample Audit Schedule Review all 340B-related policies and procedures Conduct a full program review to mirror HRSA's audit procedures. Annually Annually Wipfli LLP 43

44 Questions to Ask 1. Who is charged with oversight of the 340B Program? 2. Are policies in place regarding the 340B Program to address the following? 3. Are 340B Program drugs being used only at internal pharmacy or are contract pharmacies being utilized? 4. Did the covered entity complete the recertification? 5. Are the appropriate child sites registered? 6. What procedures are being performed internally to verify the 340B Program is working appropriately and complying with regulations? 7. Have you had an external compliance review of your 340B Program? 8. Is your 340B Program profitable? 9. What are your quantified 340B savings being used for? 10. What software is being used to monitor the 340B Program? Who is responsible for maintaining the criteria in the software program? How often is it reviewed? 11. Has your facility elected to exclude Medicaid transactions from 340B-qualifying activity? Are procedures in place to ensure no duplicate discounts are being received? Wipfli LLP 44

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47 Today s Presenter: Vicki LaHue, CPA Apexus Certified 340B Expert Director, Health Care Practice vlahue@wipfli.com wipfli.com/healthcare Wipfli LLP 47

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