340B DRUG DISCOUNT PROGRAM ARNETT CARBIS TOOTHMAN LLP © 2015, Arnett Carbis Toothman Arnett Carbis Toothman llp 101 Washington St. East Charleston, WV Telephone: (800) Fax: (304)

DISCLAIMER This presentation describes the 340B program standards in place as of the date of the presentation. The program is evolving and some of the standards described are subject to change. Arnett Carbis Toothman does not necessarily endorse, and is not responsible for, any third-party content that may be accessed through links or otherwise. If we can assist you or answer any questions you might have, please call us at , or

340B Compliance and New Things to Know

340B PROGRAM SUMMARY The 340B Drug Pricing Program requires drug manufacturers to provide outpatient drugs to eligible health care organizations/covered entities at significantly reduced prices. The 340B Program enables covered entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. To participate in the 340B Program, eligible organizations/covered entities must register and be enrolled with the 340B program and comply with all 340B Program requirements. Once enrolled, covered entities are assigned a 340B identification number that vendors verify before allowing an organization to purchase 340B discounted drugs. Eligible health care organizations/covered entities are defined in statute and include HRSA-supported health centers and look-alikes, Ryan White clinics and State AIDS Drug Assistance programs, Medicare/Medicaid Disproportionate Share Hospitals, children’s hospitals, and other safety net providers.

340B CURRENT STATE – ORPHAN DRUGS The recent court decision by the U.S District Court for the District of Columbia that excludes all drugs with an “orphan” designation from the 340B Drug Pricing Program for rural and cancer hospitals. In an October 14 decision, the court struck down an interpretive rule by the Health Resources and Services Administration (HRSA) that allowed rural hospitals and other facilities newly eligible for 340B discounts to use the program to purchase orphan drugs when the product will not be used for the orphan indication. The Court’s decision has the potential to directly impact to 340B covered entity rural hospitals (sole community hospitals, critical access hospital, and rural referral centers) and freestanding cancer hospitals as they may no longer be able to purchase orphan drugs at 340B pricing; and raise questions as to HRSA’s authority to issue the changes proposed in its recently Omnibus Guidance as an interpretive rule.

340B CURRENT STATE – ORPHAN DRUGS In the interim, we encourage covered entities to consider the following: The statutory orphan drug exclusion at 42 U.S.C. § 256b(e) only applies to rural hospitals (sole community hospitals, critical access hospital, rural referral centers) and freestanding cancer hospitals. If HRSA does not appeal the Court’s ruling, the above rural hospitals and freestanding cancer facilities would no longer be able to purchase orphan drugs at 340B pricing; Entities subject to the orphan drug exclusion may continue to purchase orphan drugs off of a group purchasing organization (“GPO”) account as they are not subject to the GPO prohibition; The statutory orphan drug exclusion at 42 U.S.C. § 256b(e) does not apply to disproportionate share hospitals or grantees. As a result, these types of 340B covered entities can continue to purchase orphan drugs off of a 340B account; The Court’s analysis and resulting decision may directly impact the viability of HRSA’s proposed Omnibus Guidance. HRSA may lean on Congress for assistance by way of an updated 340B statute the properly grants HRSA broad rulemaking authority; HRSA has the ability to appeal the Court’s decision. This could result in a temporary delay in enforcement regarding the orphan drug exclusion.

PROGRAM ELIGIBILITY Eligible Organizations Only nonprofit health care organizations that have certain Federal designations or receive funding from specific Federal programs are eligible organizations that can register, be enrolled and purchase discounted drugs through the 340B Program. Eligible Patients To be eligible to receive 340B-purchased drugs, patients must receive health care services other than drugs from the 340B covered entity. The only exception is patients of State-operated or funded AIDS drug purchasing assistance programs. Eligible Drugs Generally, the 340B Program covers the following outpatient drugs: FDA-approved prescription drugs; Over-the-counter drugs written on a prescription; Biological products that can be dispensed only by a prescription; or FDA-approved insulin.

NON-HOSPITAL COVERED ENTITIES -FQHC’s -FQHC Look-Alikes -Native Hawaiian Health Centers -Tribal/Urban Indians Health -Ryan White HIV/AIDs Program Grantees -Comprehensive Hemophilia Diagnostic Treatment Centers -Title X – Family Planning Clinics -Sexually Transmitted Disease Clinics -Tuberculosis Clinic -Black Lung Clinics The Child Sites of Non-Hospital Covered Entities and Sub-Recipients of Federal Grants must be registered on the HRSA Database.

HOSPITAL COVERED ENTITIES 1.Government owned and operated hospitals. 2.Hospitals that have been “formally granted governmental powers by a unit of state or local government. 3.Hospitals that have a contract with state or local government not covered by Medicare or Medicaid. 4.Hospitals that meet the Disproportionate Share (DSH) adjustment hospitals, Children’s Hospitals and Cancer Hospitals.

340B REGISTRATION / RECERTIFICATION Health centers must be registered with the Office of Pharmacy Affairs (OPA ) There are four(4) registration periods each year: January 1 st – 15 th (to begin participation on April 1 st ) April 1 st – 15 th (to begin participation on July 1 st ) July 1 st – 15 th (to begin participation on October 1 st ) October 1 st – 15 th (to begin participation on January 1 st ) Annual recertification (February – March), the FQHC must confirm: Accurate and complete organizational information on the OPA website. Script eligibility and a fully compliant program Current, accurate, and complete program policies/procedures that are tested regularly.

340B Audits and Self Compliance

HRSA DATA REQUESTS Typical data request: For a specific six-month period in the preceding year, 340B drug orders and/or prescription dispensation records. Including NDC, acquisition price, quantity issued, patient/Rx number, payer, NPI, ordering site/location. Policies and procedures (P&Ps) Most recently filed Medicare cost report 340B prescriber list

HRSA DATA REQUESTS Typical data request: Current 340B inventory and documentation of last physical inventory count/reconciliation. Schedule of 340B drug purchase orders Listing of contract pharmacies and copies of contracts Organizational chart

HRSA DATA REQUESTS Typical data request: Documentation supporting organizational status including indigent care contract Descriptions of various systems (electronic health records, 340B purchasing, split billing, etc.)

HRSA ON-SITE AUDIT Audit encompasses all child sites and contract pharmacies. The auditor will verify CE and child site eligibility and review P&Ps. Auditor will examine a subset of six-month 340B transactions by randomly selecting prescriptions in the following areas: Mixed-use areas Contract pharmacies In-house retail pharmacies High-cost drugs

HRSA AUDIT PROTOCOL Minimal guidance governing conduct of 340B audits. According to HRSA Release No , HRSA uses an audit protocol “specific to the 340B Program” but the protocol has never been made public. The 340B audits do not follow government auditing standards (GAS) Auditors are fact finders and are not to share preliminary audit findings or observations. There is NO formal exit interview.

HRSA FINAL AUDIT REPORT The CE receives a Final Audit Report (FAR) FAR typically lists “findings” and “areas of improvement” Findings are alleged program violations. Areas of improvement are for less serious problems that are potential findings. If the CE disagrees with the FAR, it must submit a Notice of Disagreement within 30 days.

HRSA FINAL AUDIT REPORT If the CE agrees with the FAR, it must submit a proposed Corrective Action Plan (CAP) within 60 days CAPs are required for findings but not areas of improvement CAP typically requires CE to post on the website of HRSA’s Office of Pharmacy Affairs (OPA) a public letter reciting findings for which CE is “responsible for repayment” to manufacturers.

HRSA AUDIT TIMELINE Day 0 - CE receives engagement letter Day 15 - CE has introductory teleconference and receives data request Day 45 - CE submits requested data Day 60 - Audit occurs Month 5 – HRSA issues FAR Month 7 – CE responds to FAR (two extensions allowed) Month 10 – HRSA issues revised FAR Month 12 – CE proposes corrective action plan (if necessary)

THINGS TO CONSIDER Who will pull together the information needed for the data request? Who will be responsible for various aspects of the audit? Purchasing? Medical records? Medicare cost report? Does someone at your hospital understand your 340B recordkeeping system? Could they trace a drug from ordering to dispensing to billing

340B COMPLIANCE RECOMMENDATIONS Leadership Committee Developing a leadership committee to foster compliance and expectations for the 340B program. The purpose is to communicate and maintain benefit and compliance for all aspects of the 340B program to include: Pharmacy Department Quality Department Finance Department Entity Operations Contract Pharmacy Compliance Risk Management

340B COMPLIANCE RECOMMENDATIONS (CON’T) Education and Training Develop and maintain staff knowledge as related to the 340B program. Establish knowledge requirements for the staff. Identify potential gaps with staff knowledge, and create training based on knowledge gaps. Educate participating staff on EHR, accumulation and 340B drugs that qualify for the 340B program. Develop and maintain comprehensive 340B policies and procedures.

340B COMPLIANCE RECOMMENDATIONS (CON’T) 340B Compliance Conduct monthly internal and external audits. Collect, analyze, and disseminate the data to evaluate and guide improvement to the 340B program. Develop consistent and systematic process to regularly audit 340B procurement, administration/dispensing, and billing transactions at all sites utilizing 340B drugs. Maintain records of all audit results, reporting, and actions taken to correct/improve 340B processes. Establish process to review all audit findings and action items.

340B COMPLIANCE RECOMMENDATIONS (CON’T) 340B Independent Audit An independent audit is recommended yearly, by HRSA and the results are a guide for measure and action plans. They also can accompany internal self audit records in the event of a HRSA audit. An independent audit is an audit made usually by professional audits who are wholly independent of the company or vendors of the entity where the audit is being made. An audit is a planned and documented activity performed by qualified personnel to determine the adequacy and compliance with established standards and procedures. The audit may include both financial and compliance review, and testing of internal controls. Let the audit work for the entity, any issues or problem areas should have recommendations that accompany them to aid in the process of having a 100% compliant 340B Program.

HRSA AUDIT TIPS Clearly identify an official responsible for monitoring registration, enrollment, and 340B database issues Provide that official with sufficient and on-going education and training to assure conversancy with HRSA requirements in this area and with evolving policy changes Clearly identify an individual who is responsible for demonstration of auditable records (billing, clinical, and procurement) Engage your third-party vendor early in the audit process and request assistance

HRSA AUDIT TIPS Establish calendar reminders with relevant dates such as:  Enrollment window for new child sites or contract pharmacies  Termination of existing child sites or contract pharmacies  Recertification  Examination of 340B database to ensure continued accuracy of all information and elections  Pre-filing monitoring of Medicare DSH adjustment %  Filing of the CE’s annual Medicare cost report and ascertaining that the CE continues to meet the applicable DSH adjustment %  Review and updating of applicable contracts with state or local governments  Regular review of 340B record auditability

HRSA AUDIT TIPS Establish calendar reminders with relevant dates such as:  Enrollment window for new child sites or contract pharmacies  Termination of existing child sites or contract pharmacies  Recertification  Examination of 340B database to ensure continued accuracy of all information and elections  Pre-filing monitoring of Medicare DSH adjustment %  Filing of the CE’s annual Medicare cost report and ascertaining that the CE continues to meet the applicable DSH adjustment %  Review and updating of applicable contracts with state or local governments  Regular review of 340B record auditability

340B PROGRAM Questions To Think About…

340B PROGRAM 1.Are all contract pharmacies registered on the 340B OPA database? Are all registered contract pharmacies being utilized? 2.How do contract pharmacies ensure that only patients of a covered entity receive 340B drugs purchased by that entity? 3.In an ineligible provider gets into a transaction file, how does this get identified and rectified? 4.What internal controls are used by contract pharmacies to segregate and track 340B drugs from non-340B, non-entity pharmacy stock? 5.If the entity carves out, how does it prevent Medicaid drugs being accumulated? 6.Have any discrepancies been found in monthly reporting? If so, in what areas? How are these discrepancies addressed?

340B PROFICIENCY SELF-ASSESSMENT Self – Assessment FullPartialNone List data reviewed during HRSA audit. Compare the HRSA and manufacturer audit processes and scope. Discuss the steps in the HRSA audit process List the factors that dispose an entity to higher risk of a HRSA audit. Identify staff necessary to participate in HRSA audit. Identify staff necessary to participate in self-audit. Develop and execute a corrective action plan (CAP). Write standard operating procedure to include self-auditing process, frequency, and actions as a result. Develop a request for proposal (RFP) for an independent auditor for a 340B entity. Select an independent auditor for a 340B entity.