340b contract pharmacy implementation and … · pharmacy of their choice. you can inform them that...

340B CONTRACT PHARMACY IMPLEMENTATION AND

COMPLIANCE

Rebecca Cheek, PharmD., BCACP

Director of Pharmacy-Grace Health

340b Auditor/Consultant-Cheek Consulting

Objectives

• Review 340b program history

• Demonstrate knowledge of the advantages and disadvantages of the contract pharmacy model

• Discuss the implementation of a successful 340b contract pharmacy program

• Discuss compliance and self-auditing practices for contract pharmacy

340b PROGRAM

• Enacted in 1992 by Congress as part of the Veterans Health Care Act, Public Health Service Act, Section 340b.

• Required manufacturers to provide outpatient drugs to eligible entities at decreased prices as a prerequisite for having their drugs covered on Medicaid.

• Administered by HRSA/OPA.

• Intent of the program-”to enable covered entities to stretch scarce Federal resources as far as possible, reaching more patients and providing more comprehensive services”.

Eligible entities

• 16 categories of eligible entities

• Ex: Federally qualified health centers and look-alikes, Ryan White grantees, STD clinics, Black lung clinics

• DSH hospitals, CAH hospitals, pediatric hospitals, free-standing cancer hospitals

340b pricing

• Complicated pricing formula updated quarterly.

• Average manufacturer price (AMP) is the average price that wholesalers pay for drugs to distribute to the retail community.

• Affordable Care Act increased the 340b discount to AMP-13% for generics and OTC products and the lower of AMP-23.1% or best price for branded products. Best price is the lowest price given by the manufacturer to any private sector entity.

340b Savings

• 340b savings belong to the entity.• 340b savings is independent of a patient’s insurance or financial status.• Both insured and uninsured patients may receive 340b drugs.• HRSA recognizes the importance of third party billing to entities-”if

providers were not able to access the resources freed by the drug discounts when they… bill private insurance, programs would receive no assistance from the enactment of the section 340b and there would be no incentive to join”.

340b and Contract pharmacy

• Contract pharmacy arrangements were approved in 1996 but on a one-to-one basis.

• The ability to contract with multiple contract pharmacies was approved by HRSA in 2010.

• Number of contract pharmacies has greatly increased.

340b and Compliance

• Have adequate oversight and/or independent audits.

• Avoid diversion.

• Avoid duplicate discounts.

• OPA site data accuracy.

• Have auditable records.

Types of 340b models

• In-house pharmacy model-Covered entity owns the drugs and pharmacy, assumes fiscal responsibility for the pharmacy and pays the staff.

• Contract pharmacy model-Covered entity owns the drugs, contracts with the pharmacy to provide pharmacy services, but does not manage the pharmacy or pay staff.

• Clinic administered model-Drugs ordered for administration in the clinic sites.

In-house Pharmacy

• Strengths• Having a pharmacist on staff is an asset to the providers and to the patients.

• Pharmacist can manage the entire universe of medication use in the entity.

• Convenient for patients and providers.

• Significant savings can be passed to the patients through the sliding fee program.

• Health center will have complete control over day-to-day operations.

• If successful, can be a revenue center for the organization.

In-house Pharmacy

• Challenges• If not managed well, can be a financial risk to the center.

• Has high start up costs and ongoing costs.

• Start-up time is lengthy and requires much staff time.

• Space.

• Competition.

Contract Pharmacy

• Strengths• Little to no start-up or ongoing financial risk.

• Health center not responsible for day-to-day operations.

• Third party billing/contracts already exist.

• Pharmacy hours and locations may be more convenient to patients.

• Health center does not have to hire the pharmacist but still has access to their clinical knowledge.

Contract Pharmacy

• Challenges• Finding a pharmacy willing to participate-business practice may prevent or they may have

misconceptions or a lack of knowledge about the 340b program.

• Setting up initial contracts may take time.

• Fees can be high-dispensing fees to pharmacy and the administrative fees to a Third Party Administrator if used.

• Less opportunity to provide discounts to patients due to the pharmacy will likely require a dispensing fee that covers its costs.

• Must have designated entity staff to be responsible for oversight-financial and compliance.

HRSA and Contract Pharmacy

• 3/5/2010- 75 Fed Reg 10272. • Allowed entities to contract with multiple contract pharmacies (used to be on a 1:1

basis and not at all if you had in-house pharmacy).

• Must have a written agreement with the Essential Elements defined in statute.

• Must have methods to avoid diversion and duplicate discounts.

• Expected to conduct an annual, independent audit of 340b contract services.

• Covered entity has “full responsibility” for compliance of their contract pharmacy program.

HRSA and Contract Pharmacy

• 2014 HRSA Letter-2/4/2014• Stressed “vigilant oversight” of contract pharmacy arrangements.

• Mentioned 5 compliance areas to be addressed in contract pharmacy programs:• Entity must have adequate oversight and/or annual independent audits.

• Entity must keep auditable records such as policies/procedures and contracts.

• Entity must avoid diversion.

• Entity must avoid duplicate discounts.

• Entity must ensure that their Office of Pharmacy Affairs website information is accurate.

Choosing a Contract Pharmacy for your Entity

• What pharmacies are your patients using?• Can you run a report of where the rxs are being sent?

• Look at pharmacies within a limited zip code.

• Does the contract pharmacy understand and share the mission of the entity?

• Is the pharmacy location and hours convenient to entity patients?

• Does the pharmacy maintain sufficient inventory to supply the needs of the patients?

• Does the pharmacy participate in the insurance plans of the patients?

• Is the pharmacy software capable of producing necessary reporting?

Are you going to use a Third Party Administrator?

• TPAs are not addressed in the statutes or in the guidelines.

• Emerged due to complexity of the program-multiple pharmacies, third party payer agreements, wholesaler agreements.

• Assist entities in the management and ongoing success of the program.

TPA Responsibilities

• Identify and assist with enrollment of pharmacies in the entity’s network.

• Track and accumulate inventory used and replenish inventory by generating wholesaler orders.

• Reconcile payments to pharmacies from third parties and coordinate invoicing of payments to entity and pharmacies.

• Provide reports to entities and pharmacies to track program performance and audit compliance.

Third Party Administrators

• Does the TPA have a system that avoids diversion?• TPA should have filters that support identification of eligible patients.

• Did the rx originate from an eligible 340b location? Site filter.

• Entity has a relationship with the individual and maintains records of the individual’s health care. Patient filter, encounter filter, diagnosis filter.

• The individual receives health care services from a health care provider employed by or under contractual/other arrangements (ex: referral) with the entity. Provider filter.


• Does the TPA have a system to avoid duplicate discounts?• Is there a way to carve out/exclude Medicaid fee-for-service claims from 340b usage

unless a special arrangement has been made with the state?

• Is there a way to carve out/exclude Medicaid Managed care claims if required by the state?

• What is the mechanism for updating the excluded BIN/PCN list?

• Do the reports show the BIN/PCN numbers of the approved 340b claims for easy auditing?


• Does the TPA have adequate inventory and reporting mechanisms?• Is the drug ordering process clear and transparent?

• The TPA does not allow reclassification of claims without the knowledge of all parties.

• The entity has access to all inventory reports and is able to easily track purchases to dispensations.


• Reporting • Dispensing reports include patient’s name, DOB, original date of rx, fill date of rx,

drug, quantity, NDC, provider, insurance billed amount, insurance paid amount, patient copay, administrative fee, dispensing fee, and margin to entity.

• Information is the property of the entity and may not be shared by the TPA.

• Inventory reports include purchase date, invoice number, drug, NDC, quantity, rxs resulting in purchase.

• Accumulator report shows transactions waiting to be replenished and reversals.


• Other contractual considerations:• All information is property of the entity and will not be shared.

• Drugs that can’t be replenished at the required NDC level will be reimbursed at a reasonable rate.

• Upon contract pharmacy termination, there is a method to reconcile both negative and positive inventory.

• Records are maintained for an appropriate time frame after termination.


• Fees/other• All fees are disclosed (software maintenance fees, low usage fees, retroactive claim review fees).

• Vendor should have a stop loss function preventing approval if the claim results in a loss to the entity.

• Entity can terminate with no penalty during the first term.

• Entity can choose wholesaler.

• Administrative fees are fair market value.

• Vendor will not recruit entity patients to their own pharmacy or mail-order pharmacy.

• Vendor can support a sliding scale.

• Can vendor support 340b use in specialty referral rxs?

• How do the funds flow? To the covered entity first?

Decide not to use a TPA?

• Same contracting considerations.• Pharmacy must have space to keep 340b inventory separate.• No borrowing between stocks.• Staff must be educated on the program-diversion, duplicate discount.• Pharmacy must have a mechanism to identify eligible patients and providers.• Pharmacy must have a mechanism to differentiate 340b and non-340b drugs

in their software.

Decide not to use a TPA?

• Pharmacy must have a mechanism to avoid duplicate discounts.

• Pharmacy software must be able to generate appropriate dispensing, inventory, and financial reports.

• Pharmacy will generate 340b drug orders based on usage-possibly “trigger points”.

You’ve decided on the Pharmacies and whether to use a TPA-Now what?

• Contract Pharmacy Services Agreement• Regardless of whether the entity has decided to use a TPA or not, a formal written

agreement must be signed and executed prior to registering the contract pharmacy arrangement on the OPA website.

• Contract must include HRSA’s Essential Elements

• Other areas to consider when developing contract?

Contract Pharmacy Services Agreement-HRSA’s Essential elements

• Ship to/Bill to-The covered entity actually purchases the drug and the wholesaler ships directly to the pharmacy. The order may have been generated by the TPA/pharmacy but it is placed on the entity account.

• Comprehensive pharmacy services-The contract pharmacy will provide “comprehensive pharmacy services”. Some examples from HRSA include “dispensing, recordkeeping, drug utilization review, formulary maintenance, patient profile, patient counseling, and medication therapy management and other clinical pharmacy services”.


• Patient choice-Entity must inform patients that they are free to choose a pharmacy of their choice. You can inform them that they will get a discount at certain pharmacies if they are sliding fee.

• Other services-Pharmacy may provide other services to patients such as home delivery, etc.

• Compliance with law-Entity and pharmacy will adhere to federal, state and local laws.


• Contract pharmacy reports-The pharmacy must provide the entity will reports that are consistent with standard business practices. The contract should be clear if it is the pharmacy or the TPA that will supply these reports.

• Tracking system/patient eligibility-The entity and pharmacy must work together to establish and maintain a tracking system to prevent diversion and verify patient eligibility.

• Medicaid duplicate discount prohibition-There is a process where 340b drugs will not be used to fill Medicaid rxs.


• Audits-The pharmacy/TPA must make available the necessary information needed for an independent or self-audit.

• HRSA and manufacture audits-The pharmacy must ensure that records of the entity are made available to the entity, HRSA and the manufacturer in the event of an audit.

• Contract available to OPA-A copy of the contract must be provided to OPA upon request. OPA is requesting copies of random contracts at registration.

Contract Pharmacy Services Agreement-Key issues

• Anti-Kickback statute-prohibits the exchange of anything of value in an effort to reward the referral of federal health care program business (Medicaid/Medicare).

• HIPAA-disclose information only in circumstances of treatment, payment, and operations. TPAs may not be considered “covered entities” and may not have PHI shared with them without a Business Associates Agreement.


• Type of inventory model used• Physical-pharmacy orders 340b inventory and keeps separate from their own non-340b

inventory. 340b eligible rxs are filled using only the 340b inventory. Orders are placed when needed.

• Virtual (replenishment)-a non-340b drug is dispensed from the pharmacy’s stock and the quantity is accumulated. When the quantity of the drug accumulated reaches a full package size, the drug is reordered on the 340b account.


• Inventory remediation (true-up)-addresses situations where the pharmacy inventory can’t be timely ordered (physical) or replenished (virtual) by the entity. Ex: drug shortages, discontinued drugs, slow movers. How long before the inventory is to be paid back to the pharmacy and at what price?

• Formulary-does the contract allow for the entity to determine that certain drugs will not be eligible for 340b use. Ex: controlled substances, cosmetic drugs, large package sizes like 500/1000ct.


• Third party reimbursements and copays-does the contract address the flow of funds? Typically the entity or the TPA will invoice the contract pharmacy the anticipated third party reimbursement and copays received after the dispensing fee is deducted. Could also have automatic EFT payments from the pharmacy.


• Dispensing fees-should be a “win-win” for the pharmacy and the entity. HRSA does not give guidance on an appropriate dispensing fee. Start with determining the pharmacy’s cost to dispense a rx including overhead, supply costs. Generally a flat fee for each rx. Other models may ask for a percentage of the margin or a combination of a lower flat fee and a percentage. Consult legal counsel to ensure fees are consistent with 330 guidelines and anti-kickback statutes.


• Type of reimbursement model• All claims-every claim that is deemed 340b eligible is filled using 340b drugs regardless

of the margin to the entity.

• Profit only model-only those claims that result in a positive margin to the entity after taking into account the cost of the drug, administrative fee to the TPA and dispensing fee to the pharmacy.

• Brand only model-only brand name products are filled with 340b drugs as most if not all would result in a positive margin to the entity.


• Sliding fee• How are you going to structure your sliding fee program?

• The patient only pays the acquisition cost of the drug plus a small copay?

• The patient pays the acquisition cost of the drug, copay and pharmacy dispensing fee?

• The patient pays a percentage of the Usual and Customary rate of the pharmacy?

• The entity pays for the drug and dispensing fee and the patient only pays the copay?


• Wholesaler-can the entity choose the wholesaler?

• Third party payer clawbacks-occur when the third party retroactively reverses claims after the reimbursement and copays have already been paid to the entity. Could occur as a result of an audit.

• Reclassification of claims-ex. Deciding that a claim should not have been filled with 340b or should have been filled with 340b but was not. Reclassification should not occur without the knowledge of all parties. How far back can the entity request a reclassification of a claim?


• Ability to suspend services-contract may provide a method to give advance notice of suspension of services by either party if the objectives of the arrangement are not being met. Ex: patient complaints, entity not being paid, entity not being current with wholesaler payments.

• Change of law provision-ability to amend or even terminate the contract pharmacy agreement in the event new laws or regulations have a material economic impact on the arrangement.

Next step: Policies and Procedures

• How do you determine your contract pharmacy network? • Type of inventory model employed-physical, virtual. • Describe inventory methods in detail from ordering to dispensation.• How does the entity avoid diversion?

• How are eligible patients identified?• How are eligible providers identified?• How are changes to the patient/provider list communicated to the pharmacy?• What if there is a provider that is non-exclusive to the entity?• What happens to rx 340b eligibility if a provider leaves the organization?

Policies and Procedures

• How does the entity avoid duplicate discounts in the contract pharmacy?• BIN/PCN of FFS Medicaid are excluded/carved out?• What about MCO’s?• What are the state requirements?• How do you communicate this information to your pharmacies/vendor?

• Describe the contracting and registration process.• Describe self-audits and oversight. What type? How often? Who? • Independent audits• Material breach

Contract Pharmacy registration

• OPA allows contract pharmacies to be registered on the OPA database only one time per quarter.

• Registration dates are Jan. 1-15, April 1-15, July 1-15, and Oct. 1-15. • Once a pharmacy is registered, it becomes eligible to purchase and dispense 340b

drugs the first day of the next quarter. • The Primary Contact of the entity may register a contract pharmacy but the

Authorizing Official must approve the relationship.**Remember-contracts must be signed by both parties before registering the contract pharmacy.

Contract Pharmacy registration

• The demographic information-name, store number, address-of the contract pharmacy registered on OPA must match exactly what is on the contract. Be sure the correct information is on the signed contract before you register the pharmacy.

• Carve in/carve out-Please note-the question on the OPA website that asks “Will you use 340b drugs for Medicaid patients?” does not apply to contract pharmacy. It applies to the entities in-house clinic use of 340b medications. Contract pharmacy is a mandatory carve-out of Medicaid unless an arrangement has been made with the state to avoid duplicate discounts.

Contract Pharmacy Compliance-Diversion

• Determining site eligibility• First and foremost requirement. Rx must result from an encounter at an eligible 340b

entity.

• How does the contract pharmacy/TPA determine site eligibility? Claims data? Encounter data?

• Provider is linked to a specific location?


• Determining patient eligibility• What is your definition of an active patient? Having been seen within the last year?

• Does the contract pharmacy/TPA require a patient file be sent to them? How often? What information is included? Last encounter? Diagnoses?

• Can the TPA support an HL-7 interface with real time encounter data?

• Will you give ID cards to the sliding fee patients? If not, how will the pharmacy identify those patients?


• Determining provider eligibility• Does the contract pharmacy/TPA require that a provider file be sent to them? Who will send it? How

often?

• Does the contract pharmacy/TPA have a mechanism to only fill new rxs from providers that are just starting with the entity and not refills from their previous employment?

• Is the provider simply linked to a location?

• What if the provider is non-exclusive to the entity and “moonlights” somewhere else?

• Do you use residents/locum tenens? Are they going to be included on your list?

• What do you do if a provider leaves the entity? Who communicates the information to the pharmacy/TPA?


• Will you allow referral rxs to be filled with 340b drugs at your contract pharmacy? Does your TPA have a special service to assist with referrals? How will the contract pharmacy know if there is a documented referral and consult notes?

• Will you allow Emergency room and discharge rxs to be filled with 340b drugs at your contract pharmacies? How will you ensure that these are your patients?

• What do you do if you find a diversion issue?

Contract Pharmacy Compliance-Duplicate discount

• Do you know your state policies surrounding 340b and contract pharmacies?

• Fee-for-service Medicaid claims must not be filled with 340b drugs at the contract pharmacy unless the entity and the state have arranged a method to avoid a duplicate discount.

• Does your state require MCO claims to be carved out at contract pharmacies as well?

• How does your contract pharmacy know what patients have Medicaid? How do they ensure that they don’t use 340b drugs to fill their rxs at the pharmacy?

• If you use a TPA, do you provide them with a list of Medicaid BIN/PCN/groups that you want carved out? How often do you update the list?

• Are you able to easily monitor for duplicate discount issues from your reports?

• What happens if you find a duplicate discount issue at your contract pharmacy? Be sure the pharmacy/TPA does not “fix” or “reclassify” any claims that may have an issue until all parties are involved.

Calculating 340b Savings

• In-house-Review purchase history. • GPO/retail price-340b price=Savings.

• Contract pharmacy• Reimbursement-(340b actual acquisition cost of drug+dispensing fee+admin

fee+sliding fee subsidization+DIR fees)=Savings

Use of 340b Savings

• Be able to discuss what you use 340b savings for.• Help patients receive affordable medication.

• Expand patient services-case management, behavioral health, clinical pharmacy services.

• Other non-reimbursable services.

Oversight-Building a Culture of Compliance

• A culture of compliance must exist at every covered entity.

• There should be clear organizational goals for 340b compliance and the staff must have the tools necessary to accomplish these goals.

• 340b compliance goals should align with goals dealing with the 330 grant, organization mission and vision for patient care.

• Senior leadership must be continually educated on the 340b program and the importance of compliance.


• Ways to incorporate 340b into the compliance program:

• Have the organizational chart show 340b staff.

• Include 340b items on monthly meeting agendas.

• Inform the providers on the benefits of the program and why they must comply with regulations.

• Have a reporting tool/process that can be used by all staff to report 340b violations/incidents.

• Incorporate 340b knowledge requirements in position descriptions for each group.

• Establish annual competency verification and documentation requirements for all staff and leadership.


• Establish mechanisms to monitor, assess, verify and document staff knowledge and competency like quizzes.

• Establish method to communicate regular and relevant updates to leaders.• Staff view HRSA, Apexus webinars.• Support attendance of key staff and leaders at national meetings.• Monitor and document all staff 340b training activities.• Have every person identified complete knowledge self-assessment that are relevant to

his group.• Develop on-going training at time of hire and annually for staff.

Oversight and Compliance

• Nothing prepares you for an OPA audit better than ongoing self-auditing of your program.

• Be able to demonstrate that you have “adequate oversight”.

• Follow policies and procedures.

• Staff should be able to discuss your 340b program and how it impacts them.

OPA Audits

• Failure to comply with 340b requirements makes entities liable to the manufacturer for refunds of the 340b discount obtained and removal from the program.

• Risk of an OPA audit increased by:• # of outpatient facilities

• # of contract pharmacies

• Complexity of program

• Volume of 340b purchases

Developing a Corrective Action Plan

• Describe the offense.

• How did you identify and how are you going to prevent in the future?

• Did policies and procedures need to be updated?

• What is your plan to notify manufacturers?

• What is the plan for continued monitoring?

Developing a Corrective Action Plan

• HRSA/OPA expect full implementation of the CAP within six months of findings.

• Entity may be required to submit additional documents after the CAP is sent to HRSA.

• Entity will be subject to re-audit.

Remember

• Covered entities are ultimately responsible for all 340b compliance.

• Program integrity is a fundamental priority for HRSA.

• Oversight, oversight, oversight!

Questions?

• Contact info• Rebecca Cheek, PharmD, BCACP

• [email protected]

340b contract pharmacy implementation and … · pharmacy of their choice. you can inform them that...

Documents