340B Auditing and Monitoring Are You Ready for HRSA November 2, 2017

Learning Objectives Review foundational information regarding the Federal 340B Drug Pricing Program Gain an understanding of the proposed changes to the 340B Program Review the current HRSA audit process and findings Learn audit readiness best practices

Federal 340B Drug Pricing Program Overview

1990 1992 2010 Background Medicaid Drug Rebate Program Omnibus Budget Reconciliation Act 1990 Veterans Health Care Act Section 340B of the Public Health Services Act 1992 Affordable Care Act Expanded Program 2010

Oversight Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs (OPA) Operational Informatics Program Performance and Quality (2014) 340B Prime Vendor Program Apexus

HRSA’s Regulatory Authority Establishing and implementing a binding Administrative Dispute Resolution (ADR) process Providing for the imposition of civil monetary penalties (CMPs) against manufacturers Final rule delayed Issuing precisely defined standards of methodology for calculation of 340B ceiling prices

Non-Hospitals Hospitals Eligible Entities Disproportionate Share Hospital Children’s Hospital Critical Access Hospital Free Standing Cancer Centers Rural Referral Center Sole Community Hospital Non-Hospitals FQHC and “look-alikes” AIDS Drug Assistance Programs Ryan White Grantees Tuberculosis Clinics Black Lung Clinics STD and Family Planning Clinics Public Housing Clinics Homeless Clinics Hemophilia Treatment Centers Urban Indian/Native Hawaiian

Hospital Eligibility Criteria Entity Type Non-profit or Government Contract DSH % Group Purchasing Organization (GPO) Prohibition Orphan Drug Exclusion Applies Disproportionate Share Hospital (DSH) Yes >11.75% No Children’s Hospital (PED) Free-standing Cancer Hospital (CAN) Critical Access Hospital (CAH) N/A Rural Referral Center (RRC) >8% Sole Community Hospital (SCH)

Hospital Ownership Classifications Non-profit Government Owned or Operated Governmental Powers Contract with State or Local Government A contract certified by both the hospital and an appropriate government official Such contract creates “enforceable expectations” for the hospital for the provision of health care services, including the provision of direct medical care

340B Covered Drugs • Inpatient drugs • Vaccines • Insulin • Outpatient prescription drugs • Over-the-counter drugs (with prescription) • Clinic-administered drugs • Biologics (prescription) • Insulin • Inpatient drugs • Vaccines

Pricing Comparison

Growth in 340B Program

What’s New?

New HRSA Secretary Alex Azar Former drug industry executive (Eli Lilly) Conservative credentials Four main priorities Curb the cost of prescription drugs Make health insurance more affordable and available Continue bipartisan efforts to focus Medicare payments on quality Confront the opioid addiction epidemic

340B OPAIS The 340B Office of Pharmacy Affairs Information System Security User accessibility Accuracy Each authorized user will have user account and granted appropriate roles Authorizing Official Primary Contact https://www.hrsa.gov/opa/340b-opais/index.html

Orphan Drugs H.R. 6174 Closing Loopholes for Orphan Drugs Act Introduced Sep 27, 2016 by Rep Welch (D-VT) Discounts orphan drugs that are not being used to treat rare conditions for all entities covered by the program The General Accounting Office (GAO) is actively investigating the pharmaceutical industry for abuse of the Orphan Drug Act

Medicare Payment Reduction FY2018 Medicare Hospital Outpatient Prospective Payment System (OPPS) Proposed Rule Went into effect January 1, 2018 Reduced Medicare Part B payments to 340B DSH and Rural Referral Centers ASP plus 6% to ASP minus 22.5% All drugs purchased through the 340B Drug Discount Program have to be billed to Medicare with a modifier

Medicare Payment Reduction Lawsuit filed Nov 13, 2017 District Court dismissed (Dec 29, 2017) finding it was premature because hospitals had not yet filed claims at the reduced rate Plaintiffs appealed to D.C. Circuit Court of Appeals (Jan 9, 2018) Court granted expedited review Briefs are due by Apr 2, 2018 Oral arguments could be heard as early as April

Medicare Payment Reductions H. R. 4392 Introduced in Nov 14, 2017 by Reps McKinley (R-WV) and Thompson (D-CA) 185 co-sponsors as of Feb 18, 2018 Stop Medicare payment reductions Media reports – Energy & Commerce Chairman Greg Walden (R-OR) has indicated that any Congressional action to address the payment cuts will likely include other changes to 340B

Energy & Commerce Committee Report Issued Jan 10, 2018 Recommends legislative/regulatory changes to 340B Media reports - committee hopes to pass legislation to address the recommendations by the end of March Recommendations that could limit the scope of the program Re-evaluate the purpose of the program Assess whether to change DSH hospital eligibility rules Measure covered entity charity care levels

Energy & Commerce Committee Report Oversight Recommendations - Congress should give HRSA sufficient regulatory authority to adequately administer and oversee the 340B program Improve program integrity Clarify program requirements Monitor and track program use Ensure that low-income and uninsured patients directly benefit from the 340B program Oversight recommendations

Energy & Commerce Committee Report Expand HRSA’s audit scope to cover other features of the program HRSA should promote transparency in the 340B program, including requiring covered entities to disclose information about annual 340B program savings and/or revenue

H.R. 4710 340B PAUSE Act Protecting Access for the Underserved and Safety-Net Entities Act Introduced in Dec 2017 by Reps Bucshon (R-IN) and Peters (D-CA) 2 year freeze on new DSH hospitals and child site registrations for existing DSH hospitals

H.R. 4710 340B PAUSE Act Examples of reporting requirements for DSH, children’s, and cancer hospitals Patients receiving 340B drugs by payer status for each hospital and child site Total costs and total charity care incurred at each child site Aggregate reimbursement and acquisition costs for 340B drugs received by each hospital, including child sites

S. 2312 340B HELP Act Helping Ensure Low-Income Patients Have Access to Care and Treatment Act Introduced in Jan 2018 by Sen. Cassidy (R-LA) 2 year freeze on new DSH hospitals and child site registrations for existing DSH hospitals

S. 2312 340B HELP Act New eligibility criteria for DSH, children’s and cancer hospitals Non-profit hospitals must provide direct medical care to low-income patients ineligible for Medicare/Medicaid that represents at least 10% of costs Hospitals formerly granted governmental powers must have a power that is more than providing services on behalf of the government

S. 2312 340B HELP Act New child site eligibility criteria for DSH, children’s and cancer hospitals Facility must adhere to the parent hospital’s charity care policy and any sliding fee scale policy Secretary must have made a provider-based determination

S. 2312 340B HELP Act Examples of reporting requirements for DSH, children’s, and cancer hospitals Patient mix by payment source for each child site Charity care costs for each child site Difference between 340B drug revenue and acquisition costs by hospital and child site Percent of revenue at each site from physician-administered drugs

S. 2312 340B HELP Act Submit modifier to public and private payers to identify 340B drugs Claims modifier for all covered entities when billing Medicaid FFS or MCOs Medicare Part B Medicare Advantage Medicare Part D

S. 2453 Ensuring the Value of the 340B Program Act of 2018 Introduced in Feb 27, 2018 by Sen. Grassley (R-IA) Require hospitals to include on cost reports The aggregate acquisition costs of the hospitals drugs acquired during the period covered The aggregate revenues the hospital received from all payors for such drugs, disaggregated by insurance status Medicare program Medicaid program Children’s Health Insurance Program Private health insurance Uninsured

FY2019 Budget Proposal Submitted to Congress Feb 12, 2018 Fund HRSA operating cost by imposing a 0.1% user fee for 340B purchased drugs by all covered entities Ask Congress to grant HRSA broad regulatory authority to set standards Require covered entities to report on use of program savings Maintain the Medicare payment reductions Modifications to the redistribution of savings based on uncompensated care

PBM Contracting with Contract Pharmacies PBMs attempting to capture all or part of the 340B savings Pharmacy must report 340B claims through NCPDP submission clarification codes Decreased reimbursement to pharmacy AWP minus 16% for non-340B claims AWP minus 29% for 340B claims Imposition of retrospective DIR fees

HRSA Program Integrity

Key Compliance Elements Program Eligibility and Registration Prescription Eligibility Duplicate Discount Procurement & Inventory Reports & Documentation Audits

Patient Definition CE has established a relationship with the individual and maintains the individual’s health care records The individual receives health care services from a professional employed or under contractual or other arrangement with the CE The individual receives a health care service within the scope of services of the CE (FQHC and “look-alikes”)

340B Eligibility Determination Verify Site Eligibility Clinic/facility registered on HRSA database For hospitals reimbursable outpatient cost center on Medicare Cost Report Verify Patient Eligibility CE maintains records of patient’s health care Verify Provider Eligibility Provider is employed, contracted, or has “other arrangement” with CE Verify Service Eligibility Service is in scope of grant (FQHC) Verify Medicaid Eligibility Carve-in Carve-out

Annual Quarterly Monthly Daily 340B Compliance Audits HRSA database Pharmacy Services Agreements Policies and procedures Independent audit Annual Provider file update (additions/deletions monthly) Payer filter review Site file update Split billing configuration options Quarterly Utilization Accumulations Duplicate discounts WAC purchases Monthly Purchases and product received Purchases and accumulator debits Purchase reconciliation with invoice Daily

HRSA Audits Risk-Based Audits Targeted Random Complex program administration Number of child sites Number of contract pharmacy arrangements Volume of 340B purchases Targeted Allegations of violations Directed as a result of a Bureau of Primary Health Care operational site visit Random

HRSA Audit Findings 2016 – 206 Audits 2016 – Audit Findings 109 (53%) Disproportionate Share Hospital 35 (17%) Community Health Center 23 (11%) Critical Access Hospital 16 (8%) Other Grantee 9 (4%) Sole Community Hospital 8 (4%) Rural Referral Center 6 (3%) Pediatric Hospital 2016 – 206 Audits 122 (59%) had adverse findings 108 (52%) resulted in repayment to manufacturers 12 (6%) resulted in termination of contract pharmacies 2 (1%) resulted in termination of CE or offsite facility 2016 – Audit Findings 1 Publically available information as 01/16/2018 from the following sources: http://www.hrsa.gov/opa/program-integrity/audit-results/fy-16-results.html

HRSA Audit Findings 2017 – 147 Audits 2017 – Audit Findings 59 (40%) Disproportionate Share Hospital 41 (28%) Critical Access Hospital 21 (14%) Community Health Center 13 (9%) Other Grantee 8 (5%) Sole Community Hospital 5 (3%) Pediatric Hospital 2017 – 147 Audits 82 (56%) had adverse findings 69 (47%) resulted in repayment to manufacturers 10 (7%) resulted in termination of contract pharmacies 4 (3%) resulted in termination of CE or offsite facility 2017 – Audit Findings 1 Publically available information as 01/16/2018 from the following sources: http://www.hrsa.gov/opa/program-integrity/audit-results/fy-1-7results.html

HRSA Audit Findings Diversion Duplicate Discounts 340B originating or written at ineligible sites 340B drugs dispensed by ineligible providers 340B drugs not properly accumulated 340B drugs dispensed to inpatients Duplicate Discounts Inaccurate or incomplete information in MEF Billing Medicaid contrary to MEF listing No controls to prevent duplicate discounts

HRSA Audit Findings Incorrect 340B Database Records Incorrect Authorizing Official or Primary Contact Offsite facilities not listed or listed incorrectly Incorrect address for facility Incorrect shipping address Incorrect entry for Grant Number Contract Pharmacy Oversight Entity did not provide oversight Registered contract pharmacy without written pharmacy services agreement in place

HRSA Sanctions Repayment to manufacturers Termination of contract pharmacies Termination of child site Termination of covered entity Corrective action plans

HRSA Audit Steps Pre-Audit Onsite Audit Post-Audit Engagement letter Scheduling Data request Onsite Audit Opening meeting Staff interviews Data sample review Post-Audit Preliminary findings Notice and hearing Corrective action plan Final report Public notice Attestation

HRSA Areas of Focus Eligibility Duplicate Discounts Diversion

HRSA Standard Data Request

Policy and Procedures CE registration/recertification Description of procurement Prevention of GPO violations/orphan drug exclusion Definition of covered outpatient drugs/exclusions Oversight of contract pharmacies 340B inventory replenishment/accumulation Prevention of diversion Prevention of duplicate discounts Self-disclosure and material breach.

Drug Orders Prescriptions In-house and Contract Data Requirements Drug Orders Prescriptions In-house and Contract Unique identifying number Drug name/NDC Acquisition price Account purchased through Quantity Patient ID number Payer (Medicaid) Ordering provider Location administered/ordered/prescribed Dispensed, reversed or returned to stock

Other Items Proof of employment, contract, or credentialing Listing of wholesalers and 340B purchase orders Listing of contract pharmacy utilized and PSA Copy of any self-disclosures made to OPA Listing of all accounts used to purchase drugs for parent and off-site outpatient facilities Listing of clinics/locations where health care services are provided List of Medicaid billing numbers and NPI numbers Notice of Grant Award

Be Prepared Develop a plan through written policies and procedures Build a team Develop a plan through written policies and procedures Regularly review and update 340B Database Maintain organized records Regularly evaluate your 340B Program through internal review Work with 340B Program vendors to ensure prevention of diversion and duplicate discounts Work with your State Use 340B Program Resources

Questions? Thank You!

Cheryl Hetland Director cheryl.hetland@CLAconnect.com 612-376-8423