340B: ARE WE MONITORING COMPLIANCE EFFECTIVELY AND EFFICIENTLY

(1)

experience clarity //

CPAs & ADVISORS

340B:

ARE

WE

MONITORING

COMPLIANCE

EFFECTIVELY

AND

EFFICIENTLY

September 17, 2014

Michael Earls, CPA, Senior Manager September 17, 2014

OVERVIEW OF TODAY’S PRESENTATION

Todays presentation has three (3) primary learning

objectives:

1. Discuss recent developments of the 340B drug program 2. Apply recommended audit procedures to ensure

ongoing compliance

3. Apply recommendations for opportunities to maximize

savings, some of which may have additional

(2)

Please ask questions!

Will hold 5 – 10 minutes for Q&A and available afterword,

but feel free to ask throughout the presentation

3 // experience clarity

340B PROGRAM: QUICK OVERVIEW

Primary stakeholders of 340B Drug Program: 1. Drug Manufacturers

2. Covered Entities

3. Office of Pharmaceutical Affairs

4. Patients

Patient Protection and Affordable Care Act (PPACA) expanded definition of covered entity

Program intent: “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services”

(3)

Established by §602 of Veterans Health Care Act of 1992

Codified as §340B of Public Health Service Act (PHSA) Section 340B instructs Department of Health and Human Services (HHS) to enter into agreements with drug manufacturers of covered outpatient drugs (required if participating in Medicaid/Medicare Part B)

Administered by Office of Pharmacy Affairs (OPA) within the Health Resources Services Administration (HRSA)

Prime Vendor Program (PVP) – currently Apexus

From

1992

– 2011

Program

growth

due

to

several

new

laws

expanding

the

ability

to

participate

Medicare Prescription Drug, Improvement and Modernization Act of 2003

Deficit Reduction Act of 2005 PPACA

(4)

From

1992

– 2011

As

of

2011,

number

of

hospitals

participating

reached

1,673,

or

1/3

of

all

U.S.

hospitals

16,500+

covered

entity

sites,

nearly

double

the

number

reported

in

2001

(approximately

8,600)

In

2011,

the

GAO

issued

report

on

340B

Drug

Program,

concluding

concerns

around

HRSA

’

s

oversight

of

program

Provides discounts on outpatient drugs purchased by “safety net”providers and 11 types of federal grantees for eligible patients

Spending on 340B drugs estimated at $6 billion annually in 2011

Average savings of 25 – 50% for eligible covered entities on outpatient drugs

Manufacturers expressed concerns around savings; and are they being used in ways consistent with purpose of program

(5)

Provides

discounts

on

outpatient

drugs

purchased

by

“

safety

net

”

providers

and

certain

types

of

federal

grantees

for

eligible

patients

(FQHC,

etc.)

Savings

can

be

used

to:

Provide discounts on drugs to patients Expand services by provider to patients Provide services to more patients

340B PROGRAM: RECENT DEVELOPMENTS

Several

recent

communications

from

HRSA/OPA

and

others:

Orphan drug rule changes – 2013 (see next slide) (N/A to most in the room today)

Recertification changes (annual requirement) – 2013 Program audit results – 2014

340B Drug Pricing Program: Important Benefit, Significant Responsibility – 2014

Contract pharmacy oversight – 2014

Hospital registration overview – 2014 (N/A to most in the room today)

(6)

HHS

Fiscal

2014

Budget

and

OIG

Work

Plan

Charity

Care

concerns

(2014

– Alliance

for

Integrity

Reform

of

340B)

Continued

negative

media

attention

Federal

Court

vacates

orphan

drug

rule

– 2014

and

subsequent

responses

from

HRSA

(N/A

to

most

in

the

room

today)

2013

Recertification

Process

Changes

Some

changes

to

recertification

process

authorizing

officials

should

be

aware

of

Changes

emphasize

importance

of

understanding

qualification

requirements

Some

very

specific

attestations

that

caused

many

covered

entities

to

challenge

internally

their

(7)

2013

Recertification

Process

Authorizing official must attest to following eight statements

“As an Authorized Official, I acknowledge the 340B covered entity’s responsibility to abide by & further certify on behalf of the covered entity that:

1. allinformation listed on the 340B Program database for the covered entity is complete, accurate, and correct; continued on next slide

2. the covered entity meets all 340B Program eligibility

requirements, including section 340B(a)(4)(L)(iii) if applicable – the Group Purchasing Organization prohibition – which ensures

that the covered entity does not obtain covered outpatient drugs

through a group purchasing organization or other group

purchasing arrangement;

3. the covered entity is complying with allrequirements and

restrictions of Section 340B of the Public Health Service Act and

any accompanying regulations or guidelines, including, but not

limited to, the prohibition against duplicate discounts/rebates

under Medicaid and the prohibition against transferring drugs

purchased under 340B to anyone other than a patient of the

entity;

(8)

4. the covered entity maintains auditable recordsdemonstrating

compliance with requirements described in paragraph (3) above;

5. the covered entity has systems/mechanisms in placeto ensure

ongoing compliance with requirements described in (3) above;

6. if the covered entity uses contract pharmacy services, that the

contract pharmacy arrangement is being performed in accordance

with OPA requirementsand guidelines, including, but not limited

to, that the covered entity obtains sufficient information from the

contractor to ensure compliance with applicable policy and legal

requirements and the entity has utilized an appropriate

methodology to ensure compliance (e.g., through an independent

audit or other mechanism);

continued on next slide

7. the covered entity acknowledges its responsibility to contact OPA

as soon as reasonably possible if there is any material change in

340B eligibility and/or material breachby the covered entity of

any of the foregoing; and

8. the covered entity acknowledges that if there is a breach of the

requirements described in paragraph (3) that the covered entity may be liableto the manufacturer of the covered outpatient drug

that is the subject of the violation, and depending upon the

circumstances, may be subject to the payment of interest and/or

(9)

These

attestations

are

very

important!

Critical

to

understand

where

340B

is

being

utilized,

and

compare

independently

to

database

What

are

your

systems/mechanisms

for

ensuring

ongoing

compliance?

Material

breach

– FAQ

ID

1665

(Apexus)

– refers

to

non

‐

compliance

with

any

340B

program

requirements

Compliance

trends

March 2010 – PPACA requires GAO study on use & oversight of 340B program

September 2011 – GAO issues report

Covered entities are effectively using the program Oversight is lacking

Need for clearer guidance evident (specifically regarding definition of patient)

(10)

Brief

history

(continued)

October 2011 – HRSA OPA issues response to Senator Grassley’s concerns, similar to GAO report

Indicates selected audits will begin in 2012 March 2012 – Policy release describing audits Expansion of covered entities & appeal of contract

pharmacy option have created additional attention to program

Compliance

trends

Common findings from HRSA reviews include Incorrect database information

Diversion and duplicate discounts

*Compliance with these requirements remains hospital’s obligation even

in contract pharmacy arrangement

Expectation of Corrective Action Plan for Findings

When diversion & duplicate discount findings occur, timelines & resolution processes are required

(11)

Compliance

trends

What

potential

findings/concerns

are

we

seeing:

Lack of formal policies and procedures

Incorrect database information

Evaluation of differing contract pharmacy dispensation fee arrangements

Internal processes to review the program

Understanding of how to MD election was made and potential effect on Managed Care plans

Others

340B

Drug

Pricing

Program:

Important

Benefit,

Significant

Responsibility

– 1/2014

Continued emphasis from HRSA and belief 340B Drug Program is critical in stretching scarce federal resources Notes studies support covered entities using savings to expand volume of care to vulnerable patient populations HRSA stated “the 340B program provides eligible entities with an important benefit that comes with significant responsibility”

(12)

Contract

Pharmacy

Oversight

– 2/2014

HRSA re‐emphasizes commitment to strengthening 340B program integrity

Indicates it has renewed focus around contract pharmacy arrangements

Covered entities remain ultimately responsible for compliance; compliance challenges are unique

Stronger language around independent audits expected Indicated no oversight, violation of program

requirements

HHS

Fiscal

2014

Budget

and

OIG

Work

Plan

$6 million of additional funding for program oversight

Endorsed by SNHPA and PhRMA

Work plan includes two program initiatives:

Contract pharmacy arrangements and extent to which

covered entities and HRSA oversee compliance

Determine what steps HRSA has taken to address OIG’s

previous recommendation to provide 340B‐covered entities

(13)

Negative

Media

Attention

There is an element of reputational risk in addition to compliance risk!

Many articles written by media and other groups scrutinizing the 340B drug program:

Senator Grassley ‐letters to HRSA, NC Hospitals, Walgreens

Many other examples

However, many publications as well defending the 340B drug program (SNHPA, HRSA, others)

340B PROGRAM: WHAT IS HRSA AUDIT PROCESS

Audit

process

as

described

on

HRSA.gov:

Only one audit of a covered entity permitted at any one time. When HRSA has received request from manufacturer to conduct an audit, HRSA will determine whether audit should be performed by Government or manufacturer

Audits will be performed in minimum time necessary with minimum intrusion on covered entity’s operations

(14)

HRSA

Audit

process

(continued):

HRSA’s 340B Program audits review covered entity compliance with respect to eligibility status, including compliance with the Group Purchasing Organization (GPO) prohibition as applicable (see 42 USC 256b(a)(4)(L)(iii)), duplicate discounts, and diversion as defined by42 USC 256b(a)(5)(A) and (B)

HRSA regional auditors conduct audit field work for the HRSA Office of Pharmacy Affairs (OPA)

HRSA

Audit

process

(continued):

HRSA regional auditors obtain and review select program data and internal controls.

Audit procedures include, at a minimum:

review of relevant policies and procedures and how they are

operationalized;

verification of eligibility, including GPO and outpatient clinic eligibility; verification of internal controls to prevent diversion and duplicate

discounts, including appropriateness of inpatient/outpatient

designations and Medicaid exclusion file designations;

review of contract pharmacy compliance; and

(15)

HRSA

Audit

process

(continued):

HRSA regional auditors forward preliminary findings to OPA for review.

OPA reviews the preliminary findings, drafts a Final Report and issues the report to covered entity, with a request for a corrective action plan (if applicable).

340B PROGRAM: KEY AUDIT DEFINITIONS

Diversion

340B drugs to individuals not meeting outpatient criteria Drugs relate to services for inpatients/NRCC areas of hospital

Prohibits resale or transfer of drugs purchased at 340B to person not a patient of covered entity

Focus on defining “patient”& “covered entity”

Most recent definition of “patient”―1996 Who is “covered entity”?

Medicare cost report test & where services are provided Where finance & pharmacy operations meet

(16)

Duplicate

discounts

– recent

program

notice

340B laws prohibit application of both 340B price discount (front end) & 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 (GPO exclusion

needs considered)

Carve‐in Medicaid – Requires verifying Medicaid exclusion file

is accurate

What about Medicaid managed care or other state programs

with Title XIX funding?

340B PROGRAM: KEY AUDIT DEFINITIONS

Medicaid

duplicate

discount

Some states slow to establish & communicate Medicaid billing requirements & 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 states where you file claims―a “win‐win”solution may be available

(17)

340B PROGRAM: COMPLIANCE CONCERNS

Consequences

of

noncompliance

Repayment of discount

Suspension from 340B program

Possible CMPs for knowing & intentional violations

Does

this

give

rise

to

false

claim

liability

(ripe

for

qui

tam

actions?)

Changing

landscape

of

enforcement

&

audit

340B PROGRAM: GENERAL AUDIT CONSIDERATIONS

Audits

can

be

performed

internally

by

a

covered

entity

or

by

an

outside

third

party

What

if

our

third

‐

party

administrator

is

performing

self

‐

audit

functions?

What

should

be

included

in

an

audit?

How

often

should

an

audit

be

performed?

(18)

Common findings from HRSA audits: being prepared is critical Performance of internal review procedures throughout the year is critical (there are free sample audit guides available, including from APEXUS)

Is an internal review enough? Covered entities should consider independent mock reviews performed by independent third party

New compliance challenges, including “expectation of”annual independent audits, especially surrounding contract pharmacy relationships

340B PROGRAM: AUDIT PREPARATION

Preparing

for

an

audit

– examples

internal

procedures

: Gather all policies & procedures related to 340B

Obtain data policies for any vendor software

Obtain copies of all 340B contracts with pharmacies and/or other 340B service providers

Obtain all Medicaid ID numbers, provider numbers & NPIs for all entity sites billing Medicaid (including Medicaid managed care) for 340B drugs & point of contact with State Medicaid agency (could represent multiple states & MD contracts)

(19)

Preparing

for

an

audit

– examples

internal

procedures

Obtain population of all 340B dispensations for specified period of time (typically six months) & select samples based on high‐cost drugs & Medicaid transactions Additional procedures should be developed around contract pharmacy relationships

Who internally should perform this self‐monitoring? Is internal review enough based on expectation of

independent audits?

Other

compliance

considerations

What type of entity did you apply as? Capture correct NDC for OP drug used

Manual vs. use of third‐party vendor to track activity Third‐party vendor “self‐audits”

Are we really monitoring compliance? Compliance committee – do you have one?

(20)

As a covered entity, you will need to decide which is most

effective and efficient approach

Typical sample size of 50 per 6 month period, can

fluctuate based on how often being reviewed (internally

vs. externally)

Where should focus be? Main site, child sites, contract

pharmacy, Medicaid, higher‐cost drugs?

Expectation of an independent audit – how often

performed and what is process?

Existence of 340B compliance committee (IA)?

340B PROGRAM: OPPORTUNITIES

Consideration

of

contract

pharmacy

relationships

Don’t

jump

all

in

– be

mindful

of

compliance

challenges

Financial

performance

of

contract

pharmacy

relationships

(not

just

about

compliance)

Appropriate

monitoring

of

changing

NDC’s

and

(21)

340B PROGRAM: CONCLUSION

Questions?

THANK YOU FOR ATTENDING. LEARN MORE AT BKD.COM

FOR MORE INFORMATION Michael R. Earls, CPA Senior Manager [email protected] 260.460.4068

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