6/11/2013. South Carolina Primary Health Care Association. Overview. 340B Essentials. Disclaimer. 340B Essentials. 340B Essentials

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1 South Carolina Primary Health Care Association 2013 Clinical Network Retreat June 9, 2013 Preparing for and Surviving a 340B Audit presented by: Michael B. Glomb, Partner of Overview Key features of the 340B program 340B patient definition Manufacturer and HRSA audits Preparing for a 340B audit Surviving a 340B audit F E L D E S M A N T U C K E R L E IF E R F ID E L L LL P 2 Disclaimer Presentation is intended as general information only, not as specific legal advice Opinions expressed are mine; do not necessarily reflect views of SPHCA Consult qualified legal counsel for specific advice 340B Essentials Enacted in 1992 Section 340B of the Public Health Service Act (42 USC 256b) Applies only to covered outpatient drugs as defined in the Medicaid statute (Social Security Act, Section 1927(k)) Requires drug manufacturers to sell covered drugs at a substantial discount (25% to 50% off the AWP, according to HRSA)(the ceiling price ) in order to have the drug covered under Medicaid 340B discount is computed based on Medicaid rebate formula: 23.1% (single source/innovator multiple source drugs) 17.1% (certain clotting factors and HHS-approved pediatric drugs) 13% (non-innovator multiple source drugs) Ceiling price = AMP minus Unit Rebate Amount (URA) Available only to certain types of organizations - Covered Entities (CE) specified in the statute (e.g. FQHCs) B Essentials 340B drugs may be dispensed only to a patient of an FQHC and may not be resold i.e. diversion prohibited FQHC may not request payment under Medicaid for a 340B drug if that drug is subject to the payment of a rebate to a state Medicaid agency i.e. duplicate discounts prohibited 340B does not govern patient charges; normal FQHC requirements apply 340B Essentials Numerous dispensing models may be used (subject to state pharmacy laws), singly or in combination: Physician/provider administration Physician/provider dispensing Clinic-operated pharmacy In-house commercial pharmacy Contracted commercial pharmacy(s) (subject to HRSA guidelines) 5 6 1

2 340B Eligible Patients Patient Definition (61 Fed. Reg (October 24, 1996)) FQHC has established a relationship with the individual, such that the FQHC maintains records of the individual s health care; and The individual receives health care services from a health care professional who is either employed by the FQHC or provides health care under contractual or other arrangements (e.g. referral for consultation) such that the responsibility for the care remains with the FQHC (emphasis added); and 340B Eligible Patients The individual receives a health care service or range of services from the FQHC which is consistent with the service or range of services for which grant funding or FQHC look-alike status has been provided to the 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 FQHC is the dispensing of a drug or drugs for subsequent self administration or administration in the home. An individual registered in a state operated or funded AIDS drug purchasing assistance program is considered a patient B Eligible Patients NOTE: Appropriate scope of patients for 340B purposes is controversial HRSA proposed significant revisions to the 340B Patient Definition. (72 Fed. Reg (January 12, 2007)) New proposal may be on the horizon Common issues Specialty referrals Discharge prescriptions Off-premises services Contracted providers and volunteers Patient record maintenance Case management A covered entity shall not request payment under Medicaid for prescribed drugs with respect to a drug that is purchased at 340B price if the drug is subject to the payment of a rebate to the State The Secretary of DHHS shall establish a mechanism to ensure that covered entities comply [with this provision] (42 USC 256b(a)(5)(A)(i)and(ii)) 9 10 The mechanism to prevent duplicate discounts: Relies on state-issued Medicaid provider number to identify prescriptions filled using drugs purchased at 340B price State does not claim manufacturer rebate on drugs reimbursed under FQHC s Medicaid provider number Applies only to fee-for-service (FFS) claims Clarification on Use of the Medicaid Exclusion File, (Release , February 7, 2013) HRSA initially stated that CE s should bill Medicaid at actual acquisition cost plus a reasonable dispensing fee established by the state Medicaid agency (June, 1993) HRSA later instructed CEs to follow billing guidelines established by their state s Medicaid agency (March, 2000) ACA instructed HHS to develop more detailed guidance on methodologies and options for billing Medicaid

3 ACA requires manufacturers to pay rebates on Medicaid MCO drugs, except for 340B drugs No duplicate discount issue Medicaid agencies can claim rebate on non-340b drugs (raises reporting issues) No Federal guidance to date Some states are applying policies developed for FFS reimbursement to MCOs Contract Pharmacy Arrangements Statute does not address contract pharmacies Many (if not most) non-hospital CEs did not have an in-house pharmacy, limiting benefit of 340B Program In 1996, HRSA allowed CEs to contract with a commercial pharmacy to dispense 340B drugs to eligible patients, on limited basis (61 Fed Reg (August 23, 1996)) One contract pharmacy per delivery site No chain pharmacy arrangements No contract pharmacy if CE operated an in-house pharmacy More robust dispensing models allowed pursuant to an Alternative Methods Demonstration Project (AMDP) Contract Pharmacy Arrangements HRSA issued revised guidance in 2010 (75 Fed. Reg (March 5, 2010) Allows contracting with multiple pharmacies, pharmacy chains, and/or operating an in-house pharmacy Applies to all contract pharmacy arrangements Guidance replaces all prior guidance AMDP still available for other arrangements, e.g. network delivery models Substantial emphasis on compliance in fact, not just on paper Contract Pharmacy Arrangements Operational Features Ship to bill to drug purchasing Separate inventories, but virtual electronic inventories permitted Replenishment model widely accepted Premium on record-keeping and documentation (Important audit implications!) FQHC retains ultimate responsibility for compliance Contract Pharmacy Agreements Key contract elements Ensure existence of tracking system suitable to prevent diversion of 340B drugs FQHC has reasonable access to facilities and records to ensure efficacy of tracking system FQHC establishes price to be charged to patients Mechanism to collect patient and third party payments Ensure patient freedom of choice Prohibit resale or transfer of drugs Penalty for diversion, i.e., reimburse FQHC amount equal to the discount No dispensing to Medicaid patients (unless there is system to prevent duplicate discounts) Access for manufacturer and federal audits Access for annual FQHC audits Reasonable dispensing fee (taking into account services provided) Contract Pharmacy Compliance Key compliance concerns Diversion Duplicate Discounts - FQHC s contract pharmacy may not dispense drugs purchased at 340B price to Medicaid FFS patients unless the contract pharmacy and the state Medicaid agency have established an arrangement to prevent duplicate discounts 18 3

4 340B Service Vendors HRSA Compliance Initiatives Since 2010 (expanded scope of pharmacy contracting) numerous vendors offering 340B management services have entered the market FQHC cannot outsource its compliance responsibility In response to GAO report and Congressional interest, OPA has begun: Annual re-certification of all CEs, including contract pharmacy arrangements Random and targeted compliance audits of CEs (diversion and duplicate discounts) Significant uptick in 340B purchases and/or large contract pharmacy networks attract audits 20 Manufacturer Audits Written notice to CE of alleged violation, based on reasonable cause 30 day period for good faith resolution Audit work plan submitted to HRSA for review at least 45 days before proposed audit Within 15 days HRSA: Determines whether government or manufacturer will conduct audit Approves, modifies, or disapproves audit work plan 15 days notice of audit to covered entity Manufacturer Audits Audit must be conducted by independent auditor following Government Auditing Standards Oral briefing at end of audit Written report (shared with OIG) Covered entity has 30 days to respond Describe corrective action Disagree with findings Covered entity can challenge findings using voluntary dispute resolution procedures HRSA Audits At discretion of HRSA targeted and random Initiated by engagement letter from OPA Introductory teleconference and request for copies of specified documents (policies, procedures, internal controls) Entrance conference with key management staff Audit performed by HRSA Regional Office auditors following Government Auditing Standards HRSA Audits Audit procedures include Review of relevant policies and procedures and their implementation Verification of CE eligibility Verification of internal controls to prevent diversion and duplicate discounts Medicaid exclusion file listing Contract pharmacy compliance Testing 340B transaction records on sample basis Exit interview with concerns and preliminary findings noted

5 HRSA Audits OPA reviews preliminary findings with covered entity including obtaining any necessary additional and potential resolution and/or remedy Once report is finalized, findings and entity s response summarized on the OPA website Further OPA follow up as needed Potential Sanctions HRSA Sanctions Corrective action - prospective After notice and hearing: Repay amount of discount to manufacturer Pay interest on discount for knowing and intentional diversion Removal from 340B Program and disqualification for a reasonable period of time if violation was systematic and egregious Collateral Sanctions False Claims OIG and related penalties Preparing for an Audit (Be a Scout!) Identify and understand the compliance requirements Assess risks for your health center OPA site registration (OPA vs. BPHC standard) Medicaid Exclusion File status = actual practices Medicaid billing practices Contract pharmacies Properly registered Valid contract with HRSA - specific provisions Oversight/audit of pharmacy operations Preparing for an Audit (Be a Scout!) Patient eligibility Documentation of treatment/service Documentation of prescription by qualified provider Documentation of specialty referral Written policies and procedures Do they exist Are they followed Is staff knowledgeable about your 340B program Are personnel trained, as appropriate Audit trail Purchasing/dispensing records If asked, can you document ( Show me the paper! ) Preparing for an Audit (Be a Scout!) Conduct periodic compliance reviews Internal self audits Focus on adequacy of internal controls and documentation Consider independent audits (may be required for contract pharmacy operations) Monitor OPA, SPHCA, NACHC, etc. for updates/alerts on 340B law, guidelines, policy, and audit issues Preparing for a Scheduled Audit Review guidelines appropriate to audit Manufacturer audit HRSA audit Review 340B compliance requirements Review and respond to initial data request and keep copies/record Establish audit response team (e.g. pharmacy, finance, billing, CMO, compliance/legal)

6 Preparing for a Scheduled Audit Conduct a dry run and correct /update as necessary OPA registrations Exclusion file status Policies and procedures Medicaid billing issues Brief/prepare staff likely to be interviewed Surviving a 340B Audit Provide adequate and private space for auditors to work Designate a contact person to address document and interview requests Consider HIPAA issues Keep a record of documents provided/persons interviewed Listen to exit interview correct any errors/misperceptions Respond to audit findings as appropriate Some Audit Resources Clarification of Manufacturer Audits of 340B Covered Entities (Release , November 21, 2011) Manufacturer Audit Guidelines (61 Fed. Reg (December 12, 1996)) Clarification of HRSA Audits of 340B Covered Entities (Release , February 8, Contact Information Michael B. Glomb Feldesman Tucker Leifer Fidel LLP th Street, NW Washington, DC (202) mglomb@ftlf.com Apexus (Prime Vendor):