340B MEGA GUIDANCE WHAT NOW? HFMA REGION 6 DECEMBER 16, 2015

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2 340B MEGA GUIDANCE WHAT NOW? HFMA REGION 6 DECEMBER 16, 2015 Brian Bell Director bbell@bkd.com Claire Torrella Manager ctorrella@bkd.com

3 MATERIAL COVERED TODAY The Health Resources and Services Administration (HRSA) has published the longawaited 340B Drug Pricing Program Omnibus Guidance, more commonly referred to as the Mega Guidance. This presentation will cover recommended changes & clarifications to a number of 340B Drug Pricing Program items, including the Group Purchasing Organization (GPO) Exclusion, patient definition & Medicaid Managed Care Organizations (MCO)

4 MATERIAL COVERED TODAY This presentation has been designed to discuss certain proposed changes, as well as discuss areas where covered entities may see greatest impact to their 340B Drug Pricing Program (340B Program) This presentation should not be relied upon as legal advice

5 QUESTION 1 Has your organization reviewed the Mega Guidance and analyzed how this may impact your 340B Drug Pricing Program? Yes No Unsure

6 EVOLUTION OF 340B 340B started with Public Health Services Act Audit guidelines established. Patient definition clarified. Contract pharmacy process established HRSA guidance on contract pharmacies allowing multiple relationships. ACA expands eligibility to include five new entities HRSA begins audits & recertification process established Federal judge invalidates HRSA s orphan drug regulation Guidance on outpatient clinics released by HRSA Medicaid duplicate discount prohibition carve-in/carve-out On August 28, 2015, HRSA released 340B Omnibus Guidance (Mega Guidance) Orphan drug exclusion 2015 Future GPO prohibition guidance HRSA issues final rule on orphan drug exclusion Compliance Independent Audits Quarterly Auditable Records

7 340B PROGRAM OVERVIEW PURPOSE Federally mandated drug pricing program Part of Public Health Service Act, section 340B & Medicaid rebate program Drug manufacturers must provide front-end discounts on covered outpatient drugs purchased by covered entities Provides discounts on outpatient drugs purchased by safety net providers for eligible patients Intended to provide financial relief to facilities that provide care to medically underserved Average savings of 25-50% for eligible covered entities on outpatient drugs Purpose of savings

8 HRSA AUDIT RESULTS Provide discounts on drugs to patients Expand services by provider to patients Provide services to more patients

9 MANUFACTURER AUDITS Manufacturer Audit Guidelines May only conduct after showing of reasonable cause Manufacturer inquiries to covered entity may help support reasonable cause Important for covered entities to respond to manufacturer inquiries, failure to respond could result in audit Details are not publicly available

10 QUESTION 2 Has your entity undergone an HRSA or manufacturer audit? HRSA Manufacturer Both Unsure

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12 TIMELINE & PROCESS August 28, 2015 Proposed guidance released by HRSA October 27, 2015 Comments on proposed guidance were due Mega Guidance is proposed guidance & not formal regulation. HRSA does not have formal rule-making authority; however, HRSA can issue interpretation &guidance. Guidance is currently proposed & may never be final interpretation Advocates & opponents that submitted comments 340B Health Pharmaceutical Research and Manufacturers of America American Hospital Association Healthcare Financial Management Association BKD also submitted comments Covered entities should be preparing to evaluate impact when finalized

13 GPO EXCLUSION CLARIFICATION For hospitals enrolled as DSH, children s hospital or freestanding cancer hospital This clarification extends GPO prohibition to any pharmacy owned or operated by a covered entity registered as a DSH entity If a covered entity purchases from GPO as a last resort & documents appropriately, covered entity will not be considered in violation of GPO exclusion Extremely important due to drug shortages Prime vendor program is not considered a GPO subject to this prohibition

14 PATIENT DEFINITION Service provided in a location not listed in 340B database is not considered an eligible location Ensuring child sites are registered will continue to be a critical compliance element An individual is not considered a covered patient of covered entity if his or her care is classified as inpatient & billed as inpatient Historically, a patient who was in emergency room, observation or other outpatient area & was later admitted as an inpatient was eligible for 340B drugs up to time of admission Prescription must be written or ordered while patient is classified as outpatient based on payor billing rules Prescriptions written as part of an inpatient stay (discharge prescriptions) often filled under meds-to-beds program or subsequently through contract pharmacy relationships are no longer considered 340B-eligible dispensations

15 PATIENT DEFINITION An individual who receives follow-up care at a private practice (non-covered entity) location is not eligible to receive 340B drugs Individuals must receive health care services from a provider either employed by or an independent contractor of covered entity such that covered entity may bill for services on behalf of provider Previously HRSA required that the provider be employed by, contracted with or had other arrangements with the covered entity Faculty practice arrangements & established residency, internship, locum tenens & volunteer health care provider programs are examples of covered entity-provider relationships that would qualify Physician privileges or credentials at a covered entity are not sufficient to demonstrate an individual is a patient of the covered entity for 340B purposes Referral prescriptions will only be 340B eligible if eligible provider has written prescription Covered entity must maintain records of individual s health care Employees must qualify as an eligible patient & are not automatically 340B eligible due to employment with covered entity An individual would not be considered a patient of a covered entity whose only relationship to individual is dispensing or infusion of a drug. Dispensing of or infusion of a drug alone, without a covered entity provider-to-patient encounter, does not qualify an individual as a 340B-eligible patient

16 QUESTION 3 Does your entity currently utilize contract pharmacy relationships? Yes more than five Yes less than five No Unsure

17 MEDICAID & MEDICAID MANAGED CARE Covered entities are now able to make a determination for both Medicaid Fee for Service & Medicaid Managed Care Organizations when determining to carve in or carve out Medicaid Prevention of duplicate discounts remains requirement of covered entity Critical for covered entity to maintain dialogue with state Medicaid agencies to prevent duplicate discounts

18 CONTRACT PHARMACY ARRANGEMENTS HRSA defines a contract pharmacy as a pharmacy not covered by covered entity or child site Under contract pharmacy arrangements, both Medicaid FFS & Medicaid MCO dispensations will be excluded from 340B Drug Program unless a welldocumented plan from covered entity, managed care company & state Medicaid agency clearly states how duplicate discounts will be mitigated. Plan must be submitted to & approved by HRSA

19 INDEPENDENT AUDIT EXPECTATION Mega Guidance emphasizes continued importance & expectation of an annual independent audit being performed HRSA is proposing standards for audits & quarterly reviews of contract pharmacy arrangements to ensure compliance efforts result in Early identification of problems Implementation of corrections Corrective action plans Prevention of future compliance issues Maintain auditable data for a period of not less than five years

20 INDEPENDENT AUDITS HRSA S VIEW HRSA believes covered entities that do not have regular reviews and audits completed of their contract pharmacy operations are at increased risk for compliance issues Annual audit of each location will provide covered entities with Regular opportunity to review & reconcile 340B patient eligibility information Prevent diversion Covered entity should compare 340B prescribing records with contract pharmacy s dispensing records on at least a quarterly basis to prevent Diversion Duplicate discounts Conducting these audits using an independent auditor will ensure pharmacy is following all 340B program requirements & provide covered entity with ability to timely report any violations, if applicable

21 RECENT DEVELOPMENTS Orphan drug ruling Bipartisan Budget Act of 2015

22 POLLING QUESTION 4 Did your organization submit a comment letter on the proposed guidance on how you may be impacted? Yes No Unsure

23 SEVEN KEY COMPLIANCE AREAS

24 WHAT ARE YOUR TOP RISKS RELATED TO 340B? Do you know what your top risks are? Do your risks include all your registered sites, contracting pharmacies, etc.? How do you plan to minimize these risks? How will these risks be identified?

25 COMPLIANCE REGISTRATION Covered entity must register with HRSA Each eligible entity location that plans to use 340B drugs (clinic or offsite outpatient department) must be separately registered Information should be collected by the authorizing official during the annual recertification process Recertification process for all covered entity types is required annually or covered entity will be removed from the Program Authorizing official must attest to eight statements 25 // experience access

26 COMPLIANCE DIVERSION Diversion Drugs can only be used on an outpatient basis for covered entity s patients as defined by HRSA Use for other individuals constitutes prohibited diversion Focus on defining patient & covered entity What is covered entity? Where services are provided Physicians must be employed or under a contractual or other arrangement Entity should have a listing of approved 340B physicians 26 // experience access

27 COMPLIANCE DUPLICATE DISCOUNTS Duplicate discounts 340B laws prohibit application of both 340B price discount (front end) and payment of pharmacy rebate to state Medicaid (back end) on same drug claim General options for covered entities Carve-out Medicaid - from 340B drug purchases Carve-in Medicaid - requires verifying Medicaid exclusion file is accurate Medicaid managed care 27 // experience access

28 COMPLIANCE DUPLICATE DISCOUNTS Medicaid duplicate discount Some states have been slow to establish and communicate Medicaid billing requirements and potential modifiers Transition to Medicaid managed care has created confusion Contract pharmacies should not Carve-in unless arrangement with state Medicaid exists Recommendation Engage in ongoing dialogue with Medicaid pharmacy directors of the states where you file claims a winwin solution may be available THE RESPONSIBILITY FOR AVOIDING DUPLICATE DISCOUNTS IS ON THE COVERED ENTITY!! 28 // experience access

29 COMPLIANCE CONTRACT PHARMACY Contract Pharmacy HRSA allows providers to enter into arrangements with multiple contract pharmacies to dispense 340B drugs to qualifying patients of providers Covered entity is responsible for compliance & must monitor contract pharmacies HRSA recommends independent audits 29 // experience access

30 COMPLIANCE GROUP PURCHASING ORGANIZATION GPO Restriction The GPO Prohibition pertains to DSH, Pediatric Hospitals and Cancer Centers Drug Purchases through GPO contracts cannot be used for outpatients covered by 340B 30 // experience access

31 COMPLIANCE CONSEQUENCES OF NOT COMPLYING 31 // experience access

32 RECOMMENDATIONS Understand how these proposed changes may impact your 340B Program Make certain to have up-to-date & robust policies & procedures Form a 340B compliance committee that meets several times a year Include CEO, CFO, CNO, pharmacy, IT, medical records Perform audits & compliance reviews regularly Understand your 340B Program benefits & how those benefits are used by your covered entity

33 ADDITIONAL RESOURCES

34 QUESTIONS?

35 THANK YOU! FOR MORE INFORMATION Brian Bell Claire Torrella Director Manager