340B Pharmacy Update

The Intersection between ADAP
and the 340B Drug Pricing
Program: 340B Pharmacy Update
GREG DOGGETT
ASSOCIATE COUNSEL
SAFETY NET HOSPITALS FOR
PHARMACEUTICAL ACCESS (SNHPA)
NASTAD NATIONAL ADAP TA MEETING
WASHINGTON, DC
JULY 30, 2014
Disclaimer
 This presentation is not to be construed or relied
on as legal advice.
Today’s Agenda
 Patient Definition and Contract Pharmacy
Developments
 HRSA & Manufacturer 340B Audits
 340B Compliance
Who Is SNHPA?
 Non-profit organization representing and
supporting over 1,000 340B hospitals
 Took lead role in including hospitals in the 340B
law
 Advocates on federal legislative and regulatory
issues related to the 340B program
 Educates members on 340B policy developments
and compliance issues
Patient Definition
 1996 HRSA Patient Definition Guidelines
 Covered Entities (CEs) Other Than ADAP



Additional Criterion for Non-ADAP HRSA Grantees


CE maintains records of individual’s health care and
Individual receives health services from health care professional employed by CE
or under contract or other arrangements such that responsibility for care provided
remains with CE
 Service must be more than dispensing of a drug for self-administration or
administration in the home setting
Individuals receives health care service(s) from CE which is consistent with range
of services covered by HRSA grant
ADAPs Only

An individual registered in state-operated or funded ADAP that receives Ryan
White funding is considered a patient of the ADAP if registered as eligible by the
State program.
Patient Definition Cont’d
 HRSA intended to address patient definition in “mega-
reg”
 Widely differing perspectives on future of patient
definition

SNHPA




Basic construct of current definition is sound
Specific terms should be defined to avoid confusion by stakeholders
HRSA should release new guidance or regulation in proposed form, so
that the public has opportunity to comment
PhRMA



Limit to “uninsured individuals”
Physician must be employee or independent contractor
Patient must receive “ongoing care”
Contract Pharmacy
 1996: HRSA permitted a CE to enter into an arrangement
with one pharmacy to dispense 340B drugs to CE’s
qualifying patients if CE did not have own pharmacy
 2010: HRSA allowed CEs to enter into arrangements
with multiple contract pharmacies
 Key 340B program requirements (i.e., patient definition
and duplicate discount prohibition) apply to contract
pharmacies
 CE is responsible for 340B contract pharmacy
compliance and must monitor contract pharmacy

HRSA recommends, but does not require, independent audits
Contract Pharmacy Cont’d
 February 2014 HHS OIG report on contract
pharmacies
Made no findings of wrongdoing
 Found CEs had different understandings of the patient
definition test and how to prevent diversion and duplicate
discounts
 Noted that some CEs do not offer 340B discounts to
uninsured patients at their contract pharmacies
 Found that CE oversight of contract pharmacies varies

Contract Pharmacy Cont’d
 Criticisms of Contract Pharmacy
 Growth
in number of contract pharmacy
arrangements
 Concern about whether uninsured benefit from
contract pharmacy
 HRSA planned to address contract
pharmacy in “mega-reg”
 Limits
on number of contract pharmacy
arrangements?
Audit Background
 340B statute permits HRSA and manufacturers to audit
CEs
 September 2011 Government Accountability Office
report recommended selective audits of covered entities
 HRSA began CE audits in January 2012
 HRSA chose entities they believed most likely to be at
risk
o
Risk determination is based on volume of purchases, complexity
of program administration, and use of contract pharmacies
 Also did “targeted” audits based on allegations of 340B
violations
 51 audits in 2012 and 94 audits in 2013
HRSA Audit Results to Date
 Since 2012: 70 audits posted on website
 At least 130 not yet posted
 Annual number of audits expected to double
 Findings
 3 types: Inaccurate database record, diversion, duplicate
discount
 Most audits have no findings or findings of inaccurate
database
 Repayment obligation
Exists for diversion findings
 Exists for duplicate discount only if state collected rebates

 Areas for Improvement
Timeline of HRSA Audit Process Based on Hospital
Reports to SNHPA
 Pre-Audit: Audit notice, coordination call, data request (2-4
weeks)
 Audit (1-3 days)
 Preliminary Report (6-15 months from audit – average 10
months)
 Final Report (8-23 months – average 13 months)


CE agrees with or disputes findings
Corrective action plan required if CE does not dispute findings
 Final Determination by HRSA (if still challenging findings)
(4 months - ? (several are pending))
 Judicial Review
New Policies for HRSA Audits
 New policies issued on July 3
 No preliminary audit report; just one chance to appeal




findings
HRSA no longer asking for details about how CE will
determine the scope of non-compliance and the remedy
Manufacturers notified of repayment obligation via public
letter that outlines duplicate discount/diversion finding(s)
CE and manufacturer to determine the scope of repayment.
If parties do not agree, may pursue voluntary dispute
resolution.
Audit stays open until CE reports to OPA that all repayment
issues have been settled; re-audit within one year
General Lessons Learned from HRSA Audits
 Important to have written policies and procedures
 Accuracy of information on HRSA website
 Example: If using 340B for Medicaid patients, the
Medicaid billing numbers/NPIs used to bill those drugs
must be listed in OPA’s Medicaid exclusion file
Manufacturer Audits
 Bound by Government Auditing Standards and
standards in 1996 guidance (61 Fed Reg. 65406,
Dec. 12., 1996)
o
o
o
o
o
o
Must use an independent public accountant
CEs may be subject to only 1 audit at a time
Audit period can be no more than 1 year
Must continue to provide 340B discount during audit
If parties cannot agree on audit findings, may pursue
resolution by HRSA through voluntary dispute resolution
procedures set forth in 1996 guidance
Limited to duplicate discount and diversion issues only
Manufacturer Audits Cont’d
 Reasonable Cause
o “Significant changes in quantities of specific drugs
ordered by a covered entity and complaints from
patients/other manufacturers about activities of a
covered entity may be a basis for establishing reasonable
cause” (61 Fed Reg. 65406, Dec. 12, 1996)
o To show “reasonable cause,” manufacturers may make
inquiries of CEs (e.g., letters)
o Important for CEs to respond to manufacturer inquiries
Manufacturer Audits Cont’d
 Slow growth in number of manufacturers audits
 8 approved since 2012
 Results not publicly available
 Increasing number of inquiries regarding 340B
purchases
 HRSA may audit based on manufacturer complaint
 Manufacturer look-back period
So far, negotiated by the parties, without HRSA
involvement
 No federal guidance permitting unlimited look-back
period

Audits & Repayment
 Under 340B statute, violation of diversion or duplicate
discount prohibition could require repayment of 340B
discount
 Repayment issues related to audits

More than just the claim identified by HRSA; must identify all
claims that were subject to the problem



Up to CE and manufacturer to identify look-back period
HRSA does not dictate actual amount of money to be repaid;
determined through manufacturer and provider collaboration
HRSA does not have position on whether repayment can be
done via credit or cash payment

Will issue more guidance on how to calculate repayment
340B Compliance and the Current Enforcement
Environment
19
 Increase in HRSA audits and inquiries
 Increase in manufacturer inquiries
 Annual recertification for all CEs
 HRSA plans to issue new guidance in many
program areas
Purpose/Benefits of 340B Compliance Plan
20
 Helps organization think systematically about
implementing and operating 340B program
 Demonstrates a covered entity’s good-faith
commitment to compliance
 Increases the likelihood of preventing, identifying,
and correcting mistakes or improper activity

Set up system to identify and correct errors
 Minimizes financial loss to 340B participants
 Note: Having a compliance plan does not ensure
perfect compliance 100% of the time!
Key Elements of a 340B Compliance Plan
21
 Policies and Procedures (P&Ps)
 Employee Training
 Senior management involvement
 Internal monitoring and auditing
 Proactive response to deficiencies
 Corrective action plans
 Disclosure to drug manufacturers and government, if
warranted
340B Compliance Plan Resources
22
 Office of Pharmacy Affairs Website:
http://www.hrsa.gov/opa/

Federal Register notices, policy releases, FAQs, audit
information

Regularly review FAQs even if you think you understand the
requirements!!!
 Apexus/Prime Vendor Program (PVP) Website:
https://www.340bpvp.com/controller.html

FAQs, samples P&Ps, self-audit outlines


Regularly review FAQs even if you think you understand the
requirements!!!
APEXUS Answers call center – 1-888-340-2787
Additional Questions?
23
Greg Doggett
Associate Counsel
Safety Net Hospitals for Pharmaceutical Access
1101 15th Street, NW, Suite 910
Washington, DC 20005
Phone: 202-552-5859
greg.doggett@snhpa.org