by Bill von Oehsen President and General Counsel Safety Net Hospitals for Pharmaceutical Access 12 th Annual 340B Coalition Conference July 16, 2008 Washington, DC

Disclaimer  This presentation contains my personal views on the subject and is not to be construed or relied on as legal advice Safety Net Hospitals for Pharmaceutical Access Bill von Oehsen

Overview  Three basic compliance areas related to 340B program: 1. Prohibition against manufacturers overcharging covered entities 2. Covered entity compliance with anti-diversion requirements 3. Covered entity and state compliance with duplicate discount/Medicaid billing restrictions Safety Net Hospitals for Pharmaceutical Access Bill von Oehsen

Overcharging  According to an October 2005 OIG report, one out of seven purchases through the 340B program involved overcharging covered entities  Enforcement actions against manufacturers for overcharging have been virtually non-existent except in instances when 340B recoveries are included in federal and state efforts to recoup Medicaid overpayments for best price violations  Although federal and state authorities should continue to include 340B in their Medicaid best price investigations and enforcement actions, other measures are necessary to remedy or prevent 340B overcharging Safety Net Hospitals for Pharmaceutical Access Bill von Oehsen

Overcharging (cont’d)  Measures recommended by OIG and others: Federal monitoring and verification of 340B pricing Ceiling price transparency Increased frequency and regularity of federal audits Guidance on how covered entities can recoup overpayments to manufacturers More meaningful penalties against manufacturers; current enforcement mechanism – exclusion from Medicaid coverage – is not practical Although product shortages is a legitimate reason for rationing 340B drugs, it is not a legitimate reason for charging above ceiling prices Safety Net Hospitals for Pharmaceutical Access Bill von Oehsen Leg

Manufacturer Name Drug Involved Period/Quarter Covered by Settlement Settlement Date Settlement Amount Bayer Kogenate and other Factor/IVIG Products January 1993 – August 31, 1999 Sept $14 Million TAPLupron January 1991 – October 2001 Oct $875 Million PfizerLipitor 1 st Quarter - 4 th Quarter 1999 Oct $49 Million Bayer and GSK Cipro, Adalat CC, Flonase and Paxil Cipro: 1 st Qtr ’96 – 1 st Qtr ’01 Adalat CC: 4 th Qtr ’97 – 1 st Qtr ’00 Flonase: 3 rd Qtr ’97 – 3 rd Qtr ’00 Paxil: 1 st Qtr ‘01 April 2003 Bayer Total: $257 Million At least $2.5 Million to 340B entities GSK Total: $87.6 Million At least $9.4 Million to 340B entities AstraZenecaZoladex January 1991 – December 31, 2002 June 2003 $355 Million Safety Net Hospitals for Pharmaceutical Access Bill von Oehsen (202)

Safety Net Hospitals for Pharmaceutical Access Bill von Oehsen (202) Manufacturer Name Drug Involved Period/Quarter Covered by Settlement Settlement Date Settlement Amount Schering-PloughClaritin January 1998 – December 31, 2002 July 2004 Total: $345 Million At least $10.6 Million to 340B entities KING Pharmaceuticals Entire Drug Line January 1994 – December 31, 2002 October 31, 2005 $124 Million At least $7 Million to 340B entities Schering-Plough Claritin Redi- Tabs and K-DUR Redi-Tabs: 4 th Qtr ’98 – 2 nd Qtr ’02 K-DUR: 2 nd Qtr ’96 – 2 nd Qtr ’01 August 29, 2006 $255 Million civil settlement ($180 Million criminal fines) At least $3.9 million to 340B entities Bristol-Myers Squibb Serzone 1 st Qtr ’97 – 4 th Qtr ‘97 September 28, 2007 $515 million $124,000 to 340B entities Merck Zocor, Vioxx April 1998 – March 2006 February 7, 2008 $671 million $9 million to 340B entities

Diversion Aliquippa Community Hospital post-mortem Good News Criminal action sent message to covered entities – PDMA is a powerful deterrent DSH community reported ACH to HRSA – shows covered entities are self- policing Dispute resolution process worked Bad News Enforcement action took too long Government should have initiated return of discounts – not leave to manufacturers Too easy to enroll ineligible facility – need verification of database information No manufacturer audits No HRSA authority to impose financial penalties Safety Net Hospitals for Pharmaceutical Access Bill von Oehsen Leg

Duplicate Discounts  Covered entities beware! Increased audits and recoupments by state Medicaid agencies for overbilling 340B drugs  Entities should do self-audits and, if discover problems, make voluntary disclosure to HRSA and initiate corrective action plan  Make sure Medicaid billing information reflected in OPA database is accurate – actionable if it is not?  340B providers need better guidance on how to comply with duplicate discount mechanism  States need access to 340B price list to evaluate whether they are being billed at actual acquisition cost Safety Net Hospitals for Pharmaceutical Access Bill von Oehsen Leg