340B UPDATEINDIANA HFMA WINTER INSTITUTEJANUARY 28, 2016

Brian BellDirectorbbell@bkd.com

Michael EarlsDirectormearls@bkd.com

• The Health Resources and Services Administration (HRSA) has published the long-awaited 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)

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

MATERIAL COVERED TODAY

Has your organization reviewed the Mega Guidance and analyzed how this may impact your 340B Drug Pricing Program?

Yes

No

Unsure

QUESTION 1

1994 19961992

2000 2010 20112012 2013

340B started with Public

Health Services Act

Guidance on outpatient

clinics released by HRSA

Audit guidelines established.

Patient definition clarified.Contract pharmacy process

established

Medicaid duplicate discount prohibitioncarve-in/carve-out

HRSA guidance on contract pharmacies allowing multiple

relationships.ACA expands eligibility to include five new entities

Orphan drug exclusion

HRSA begins audits & recertification process

established

GPO prohibition guidance

HRSA issues final rule on orphan drug exclusion

2014

Federal judge invalidates HRSA’s

orphan drug regulation

On August 28, 2015, HRSA

released 340B Omnibus Guidance (Mega Guidance)

EVOLUTION OF 340B

2015 Future• Compliance• Independent Audits – Quarterly• Auditable Records

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

Provide discounts on

drugs to patients

Expand services by provider to

patients

Provide services to more patients

HRSA AUDIT RESULTS

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

Has your entity undergone an HRSA or manufacturer audit?

HRSA

Manufacturer

Both

Unsure

QUESTION 2

https://www.federalregister.gov/articles/2015/08/28/2015-21246/340b-drug-pricing-program-omnibus-guidance

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

• September, 2016– Guidance expected to be finalized by HRSA

• 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

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

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

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

Does your entity currently utilize contract pharmacy relationships?

Yes – more than five

Yes – less than five

No

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QUESTION 3

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

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 well-documented 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

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

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

• October 14, 2015 – U.S. District Court for District of Columbia ruled on Orphan Drug Interpretation

• HRSA lacks the authority to allow 340B pricing for orphan drugs used for common indications to

Critical Access Hospitals

Sole Community Hospitals

Rural Referral Centers

Cancer Centers

• These covered entity types must purchase all orphan drugs at non-340B pricing

ORPHAN DRUG RULING

• November 2, 2015 – President Obama signed The Bipartisan Budget Act of 2015.

• Changes reimbursement available for off-campus HOPDs established on or after November 2, 2015 which will result in reduced Medicare payments for non-emergency services performed at these HOPDs

• January 1, 2017 – Off-campus HOPDs established after November 2, 2,015 will no longer be eligible for payment under OPPS

• Non-emergency services will receive payment based on Medicare ASC payment system or the Medicare Physician Fee Schedule

• HOPDS that currently bill under OPPS will be grandfathered for purposes of these provisions and not impacted

• HOPDs under development – AHA ‘s position

BIPARTISAN BUDGET ACT OF 2015

Did your organization submit a comment letter on the proposed guidance on how you may be impacted?

Yes

No

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QUESTION 4

SEVEN KEY COMPLIANCE AREAS

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?

COMPLIANCE – REGISTRATION

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• 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

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

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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

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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 “win-win” solution may be available

THE RESPONSIBILITY FOR AVOIDING DUPLICATE DISCOUNTS IS ON THE COVERED ENTITY!!

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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

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COMPLIANCE – GROUP PURCHASING ORGANIZATION

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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

COMPLIANCE – CONSEQUENCES OF NOT COMPLYING

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• 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

RECOMMENDATIONS

ADDITIONAL RESOURCES

QUESTIONS?

FOR MORE INFORMATION

THANK YOU!Brian Bell Michael EarlsDirector Directorbbell@bkd.com mearls@bkd.com513.562.5562 260.460.4068