1. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Compliance Round-Up September 8, 2015 Today’s 340B Focus: Disproportionate Hospitals, Outpatient Clinics and Child Sites 1 ©2015 Aegis Compliance & Ethics Center, LLP

2. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Faculty Ryan Meade, JD, CHC-F, CHRC Managing Director, Aegis Compliance & Ethics Center, LLP rmeade@aegis-compliance.com Steven Weiser, JD, LLM Director, Aegis Compliance & Ethics Center, LLP sweiser@aegis-compliance.com 2

3. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Continuing Goals The goals of the Compliance Round-Up Webinars: Teaching/knowledge transfer Keep you up to date on compliance rules Practical points Assist organizations to develop in-house methods of managing Please share your thoughts, suggestions (and criticisms) 3 3 ©2015 Aegis Compliance & Ethics Center, LLP

4. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Compliance Round-Up: Webinar Overview Administrative Matters Monthly on the 2 nd Tuesday of the month No charge! (feel free to spread the word….) Each session will be 60-75 minutes in duration Each session will begin at 12:00 PM CT If you are unable to participate in the live discussion, each session will be recorded and made available in MP3 format 4 4 ©2015 Aegis Compliance & Ethics Center, LLP

5. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Today’s Guidance Topics on HRSA Omnibus Guidance 5 ©2015 Aegis Compliance & Ethics Center, LLP 340B Program Eligibility and Registration DSH Covered entity eligibility Individuals Eligible To Receive 340B Discounts Registration Drugs eligible for purchase under 340B Program Covered Entity Responsibilities Diversion Duplicate Discount Prohibition GPO Prohibition Maintenance of Auditable Records. Contract Pharmacy Arrangements Program Integrity Annual Recertification

6. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com 6 ©2015 Aegis Compliance & Ethics Center, LLP HRSA’s Proposed Omnibus Guidance Published in Federal Register August 28, 2015 (the “Guidance”) https://www.federalregister.gov/articles/2015/08/28/2015-21246/340b-drug- pricing-program-omnibus-guidance 60-day comment period ends on October 27, 2015. You may submit comments, identified by the Regulatory Information Number (RIN) 0906- AB08, by any of the following methods: Federal eRulemaking Portal: http://www.regulations.gov. Follow instructions for submitting comments. This is the preferred method for the submission of comments. Email: 340BGuidelines@hrsa.gov. Include RIN 0906-AB08 in the subject line of the message. Mail: Krista Pedley, Director, Office of Pharmacy Affairs (OPA), Health Resources and Services Administration (HRSA), 5600 Fishers Lane, Mail Stop 08W05A, Rockville, Maryland 20857. All submitted comments will be available to the public in their entirety

7. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Disproportionate Share Hospitals (DSH) 7 ©2015 Aegis Compliance & Ethics Center, LLP Disproportionate share adjustment percentage. For hospitals qualifying as a DSH, HHS will review a hospital's most recently filed Medicare cost report to ensure the hospital meets the statutorily required disproportionate share adjustment percentage. A children's hospital which is not required to file a Medicare cost report may provide, in a time frame determined by HHS, a statement from a qualified independent auditor certifying that the auditor performed an audit on the records of the children's hospital, that the auditor is familiar with Federal rules and regulations relevant to its findings, and found that the hospital would meet the criterion in section

8. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Child Sites of DSH Hospitals 8 ©2015 Aegis Compliance & Ethics Center, LLP Off-site outpatient facility eligibility Off-site outpatient facilities and clinics will be listed on the public 340B database, and may purchase or use 340B drugs for eligible patients, if (1)the most recently filed Medicare cost report lists each facility or clinic on a line that is reimbursable under Medicare (2) Demonstrates that the services provided at the facility or clinic have associated outpatient Medicare costs and charges.

9. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Child Sites – Children’s Hospitals 9 ©2015 Aegis Compliance & Ethics Center, LLP A Children's hospital which does not file a Medicare cost report, HHS will list an off-site outpatient facility if the parent hospital authorizing official submits a signed statement which certifies the requested outpatient facility: 1.Is an integral part of the children's hospital whose patients meet the requirements of this guidance 2.Would be correctly included on a reimbursable line with associated Medicare outpatient costs and charges on a Medicare cost report, if filed.

10. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Loss of Eligibility 10 ©2015 Aegis Compliance & Ethics Center, LLP A hospital covered entity and its child sites are immediately ineligible upon: 1.Closing of the hospital 2.Upon change of ownership or contract status which results in the hospital failing to qualify under 340B(a)(4)(L)(i) of the PHSA. 3.A hospital which qualifies for the 340B Program on the basis of a disproportionate share adjustment percentage will lose eligibility immediately 4. upon filing of a Medicare cost report for which the disproportionate share adjustment percentage falls below the statutory threshold. 4.A hospital which qualifies for the 340B Program as described in section 1886(d)(5)(F)(i)(II) of the Social Security Act will lose eligibility immediately upon filing of a Medicare cost report for which the hospital does not meet the requirements of section 1886(d)(5)(F)(i)(II) of the Social Security Act.

11. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Loss of Eligibility - Continued 11 ©2015 Aegis Compliance & Ethics Center, LLP 5.A children's hospital which does not file a Medicare cost report will lose eligibility for the 340B Program immediately upon an annual independent audit which results in a disproportionate share adjustment percentage less than or equal to 11.75. 6.A registered child site will lose eligibility in the following scenarios: (a) Immediately upon closing of the clinic or facility or when sold or transferred to any entity. a) Upon filing of a Medicare cost report that demonstrates that the site is not listed as reimbursable, or the services no longer have associated outpatient costs and charges reimbursed by Medicare. b)For hospitals subject to the GPO prohibition, immediately upon use of a GPO for covered outpatient drugs as specified in this guidance.

12. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Individuals Eligible To Receive 340B Discounts 12 ©2015 Aegis Compliance & Ethics Center, LLP Proposed definition of 340B include patients that meet all of the following criteria on a prescription-by-prescription or order-by-order basis: 1.The individual receives a health care service at a covered entity site which is registered for the 340B Program and listed on the public 340B database 2.The individual receives a health care service from a health care provider employed by the covered entity or who is an independent contractor of the covered entity such that the covered entity may bill for services on behalf of the provider. 3.An individual receives a drug that is ordered or prescribed by the covered entity provider as a result of the service described in (2). An individual will not be considered a patient of the covered entity if the only health care received by the individual from the covered entity is the infusion of a drug or the dispensing of a drug.

13. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Individuals Eligible To Receive 340B Discounts - Continued 13 ©2015 Aegis Compliance & Ethics Center, LLP Proposed definition of 340B include patients that meet all of the following criteria on a prescription-by-prescription or order-by-order basis: 4.The individual receives a health care service that is consistent with the covered entity's scope of grant, project, or contract 5.The individual is classified as an outpatient when the drug is ordered or prescribed. The patient's classification status is determined by how the services for the patient are billed to the insurer (e.g. Medicare, Medicaid, private insurance). An individual who is self-pay, uninsured, or whose cost of care is covered by the covered entity will be considered a patient if the covered entity has clearly defined policies and procedures that it follows to classify such individuals consistently 6.The individual has a relationship with the covered entity such that the covered entity maintains access to auditable health care records which demonstrate that the covered entity has a provider-to-patient relationship, that the responsibility for care is with the covered entity, and that each element of this patient definition in this section is met for each 340B drug.

14. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Individuals Eligible To Receive 340B Discounts (Other issues addressed by guidance) 14 ©2015 Aegis Compliance & Ethics Center, LLP Replenishment. To avoid a violation of the statutory prohibition on diversion, a covered entity that utilizes a drug replenishment model may only order 340B drugs based on actual prior usage for eligible patients of that covered entity as defined by this guidance. Repayment. If a 340B drug is found to have been diverted to an individual who is not a patient of the covered entity contrary to the statutory prohibition on diversion, the covered entity is responsible for offering repayment to all affected manufacturers. A covered entity is also responsible for any repayment for 340B drugs diverted from a child site or through its contract pharmacy arrangements. Corrective action requirement. A covered entity should notify HHS of its corrective actions regarding diversion

15. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Examples of Application of Patient Definition in Guidance 15 ©2015 Aegis Compliance & Ethics Center, LLP HRSA discusses the applicability to the patient definition to the following scenarios: 1.An individual that sees a physician in private practice for follow-up care from a covered entity is not an eligible patient since the private practice is not listed in the 340B database. 2.An individual is not an eligible patient when the health care is provided by an organization that has an affiliation arrangement with the covered entity (even if the covered entity has access to the affiliate’s records). 3.Privileges or credentials at a covered entity are not sufficient to demonstrate that a patient treated by the privileged provider is an eligible patient of the covered entity.

16. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Examples of Application of Patient Definition in Guidance - Continued 16 ©2015 Aegis Compliance & Ethics Center, LLP The proposed guidance also emphasized that a covered entity’s employees must independently meet the eligible patient definition and are not automatically eligible patients by status of their employment. Even covered entities with self-funded plans, which are financially responsible for employees’ health care, and contract with loosely affiliated health care professionals, must have its employees independently meet the eligible patient definition.

17. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Drugs Eligible For Purpose 17 ©2015 Aegis Compliance & Ethics Center, LLP The Guidance proposes additional clarity regarding the application of the definition of “covered outpatient drug,” which defines the scope of drugs eligible for 340B Program discounts. It proposes that prescription drugs that are billed to and reimbursed by the Medicaid program under a bundled rate with certain other services (e.g., physicians services, outpatient hospital services, etc.), and which are provided as part of, or as incident to and in the same setting as, those services are not eligible for 340B Program discounts.

18. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Multiple 340B Discounts and Rebates 18 ©2015 Aegis Compliance & Ethics Center, LLP HHS is proposing that no covered entity may obtain 340B pricing on a drug purchased by another covered entity at or below the 340B ceiling price.

19. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Does Guidance Clarify HRSA’s June 18, 2013 FAQ? On June 18, 2013, HRSA released the following FAQ on its website: Question: “Can a hospital subject to the GPO Prohibition use a GPO for drugs that are part of/incident to another service and payment is not made as direct reimbursement of the drug (“bundled drugs”)? For example, diluents for infusions, large volume parenterals used as diluents, etc. See: http://www.hrsa.gov/opa/faqs/http://www.hrsa.gov/opa/faqs/ 19

20. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Definition of Covered Outpatient Drugs and the GPO Prohibition from June 18, 2013 Answer: If the entity interprets the definition of covered outpatient drug referenced in the 340B Statute (Social Security Act 1927 (k)) and decides that bundled drugs do not meet this definition, a GPO may be used for drugs that are not covered outpatient drugs. The decision the entity makes should be defensible, consistently applied in all areas of the entity, documented in policy/procedures, and auditable.”. 20

21. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Definition of Covered Outpatient Drugs and the GPO Prohibition Implications of June 18, 2013 FAQ DSHs may interpret drugs subject to a bundled payment as: (1) not meeting the definition of a “covered outpatient drug” and thus, may be purchased through a GPO or (2) meeting the definition of “covered outpatient drug” and may purchased only through a 340b drug or WAC account. The DSH’s interpretation must be consistently applied in all areas of the entity and document in policy/procedures, and auditable. What is impact of Guidance on this FAQ? 21

22. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com New Guidance on Prohibiting Duplicate Discounts for Medicaid Managed Care Patients 22 ©2015 Aegis Compliance & Ethics Center, LLP 1.Guidance focuses on the coordination of 340B Program purchases with purchasing for Medicaid Managed Care Organizations (MCOs). 2.Covered entities are currently required to report whether they use 340B Drugs for drugs billed to the Medicaid fee-for-service program. 3.Covered entities may similarly choose whether to use 340B Drugs for drugs billed to Medicaid MCOs, if they have mechanisms in place to identify Medicaid MCO patients, and information detailing any distinction in the treatment of Medicaid managed care and fee-for- service patients is made available to HHS.

23. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com New Guidance on Prohibiting Duplicate Discounts for Medicaid Managed Care Patients - Continued 23 ©2014 Aegis Compliance & Ethics Center, LLP 4.Guidance points out the increased risk for duplicate discounts with respect to covered entities’ contract pharmacies, noting that that when a contract pharmacy is registered on the 340B Program public database, it will be presumed that it will not dispense 340B Drugs to Medicaid fee-for- service or MCO patients. 5.If the covered entity wishes to purchase and dispense 340B Drugs to Medicaid fee-for-service or MCO patients through a contract pharmacy arrangement, it must provide HHS a written agreement with its contract pharmacy and State Medicaid agency or MCO that describes a system to prevent duplicate discounts.

24. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Covered Entity Responsibilities 24 ©2015 Aegis Compliance & Ethics Center, LLP Diversion  With respect to drug inventory/replenishment models, HRSA definitively states that an improper accumulation, even prior to the placement of an order, equals diversion and constitutes a violation. Prohibition of Duplicate Discounts  Covered Entities can select whether to use 340B drugs for its Medicaid Managed Care Organization (“MCO”) patients and can vary the selection at different covered entity sites and MCOs as long as such distinction is made available to HHS. In addition, a covered entity should have mechanisms in place to identify MCO patients.

25. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Covered Entity Responsibilities 25 ©2015 Aegis Compliance & Ethics Center, LLP  The proposed guidance reserves the right to make the covered entity MCO carve- in or carve-out information publicly available through an Exclusion File or other mechanism.  With respect to contract pharmacy arrangements, the default position in the proposed guidance is that contract pharmacies will not dispense 340B drugs for Medicaid Fee-for-Service (“FFS”) or MCO patients. The summary to the proposed guidance states that if a covered entity wishes for its contract pharmacy to dispense 340B drugs to Medicaid FFS or MCO patients, the covered entity will provide HHS a written agreement with its contract pharmacy and State Medicaid agency or MCO that describes a system to prevent duplicate discounts. Maintenance of Auditable Records HRSA is proposing a record retention standard of 5 years for manufacturers and covered entities.

26. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com GPO Prohibition 26 ©2015 Aegis Compliance & Ethics Center, LLP HHS is proposing that an off-site outpatient facility which is not participating or listed on the public 340B database is able to access outpatient drugs through a GPO as long as that facility has a purchasing account separate from that of any 340B enrolled site, and that facility ensures GPO-purchased drugs are never provided to outpatients of the hospital or other care sites enrolled in the program.

27. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Exception to GPO Prohibition 27 ©2015 Aegis Compliance & Ethics Center, LLP HHS is proposing to recognize an exception to the GPO prohibition for hospitals that cannot access a drug at the 340B price or at wholesale acquisition cost to prevent disruptions in patient care. The guidance states that HHS will consider a hospital in compliance with the statute if a hospital-covered entity that resorts to using a GPO for covered outpatient drugs in this circumstance documents the facts surrounding the purchase and provides HHS with the name of the drug in question, the manufacturer and a brief description of the attempts to purchase the drug at the 340B price and the wholesale acquisition cost price prior to purchasing the drug through a GPO.

28. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Proposed Compliance Guidelines 28 ©2015 Aegis Compliance & Ethics Center, LLP Notice and hearing for noncompliance HHS is proposing a notice and hearing process under which a covered entity has the opportunity to respond to adverse audit findings and other instances of noncompliance or to respond to the proposed loss of 340B Program eligibility.

29. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Proposed Compliance Guidelines 29 ©2015 Aegis Compliance & Ethics Center, LLP Audits of Covered Entities HHS proposes in the Guidance to establish a “notice and hearing process” under which a covered entity has the opportunity to respond to adverse HHS audit findings or to the loss of 340B Program eligibility. It should be noted that this process would be entirely conducted based on written submissions. Once a notice is sent to the covered entity, the covered entity will have 30 days to respond. The Guidance specifies guidelines for the submission of corrective action plans if there are findings of non-compliance. The Guidance also sets forth the guidelines for manufacturer audits of 340B Program covered entities, including procedures for submitting a work plan for HHS approval prior to conducting an audit and examples of what would be considered “reasonable cause” for a manufacturer audit. HHS states that a covered entity’s refusal to respond to manufacturer questions may be construed as “reasonable cause” for a manufacturer audit.

30. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Termination 30 ©2015 Aegis Compliance & Ethics Center, LLP Proposed conditions for re-enrollment in the 340B Program after a DSH is removed for violation of an eligibility requirement, including the requirement not to use a group purchasing organization: A covered entity removed from the program would be able to re-enroll during the next regular enrollment period after it had satisfactorily demonstrated to HHS that it will comply with all statutory requirements moving forward and is in the process of offering repayment to affected manufacturers, if necessary. HHS is specifically seeking comments on what type of information a covered entity would submit to HHS to demonstrate compliance to re- enroll in the 340B Program

31. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Pharmacy Requirements 31 ©2015 Aegis Compliance & Ethics Center, LLP With respect to contract pharmacy arrangements, the default position in the proposed guidance is that contract pharmacies will not dispense 340B drugs for Medicaid Fee-for-Service (“FFS”) or MCO patients. The summary to the proposed guidance states that if a covered entity wishes for its contract pharmacy to dispense 340B drugs to Medicaid FFS or MCO patients, the covered entity will provide HHS a written agreement with its contract pharmacy and State Medicaid agency or MCO that describes a system to prevent duplicate discounts

32. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Pharmacy 32 ©2015 Aegis Compliance & Ethics Center, LLP HHS is proposing compliance mechanisms for covered entities that contract with pharmacies to dispense 340B drugs. An annual review and audit of contract pharmacy operations will provide covered entities a regular opportunity to review and reconcile pertinent 340B patient eligibility information at the contract pharmacy and help prevent diversion, according to the guidance. As an additional compliance mechanism, covered entities should compare their 340B prescribing records with the contract pharmacy's 340B dispensing records at least quarterly.

33. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Increased Oversight of Contract Pharmacies 33 ©2015 Aegis Compliance & Ethics Center, LLP The Guidance provides that only covered entities may register or make changes to a contract pharmacy listing on the 340B Program database. In addition, it provides that contract pharmacies may be removed from the database and from participation in the program by HHS if HHS determines the pharmacy is not complying with 340B Program requirements. HHS also emphasizes its expectation that covered entities will conduct quarterly reviews and annual independent audits of each contract pharmacy location it has registered, and will maintain the records of such audits. The Guidance states that covered entities should report to HHS “any 340B Program violation” detected through such quarterly reviews or annual audits.

34. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Annual Recertification 34 ©2015 Aegis Compliance & Ethics Center, LLP A covered entity removed for failure to recertify would be able to re-enroll for the 340B Program during the next regular enrollment period after the covered entity has demonstrated to HHS its ability to comply with all 340B Program requirements.

35. 4147 N Ravenswood Ave, Ste.200 Chicago, IL 60613 | 888.739.8194 www.aegis-compliance.com Follow-Up Questions? questions@aegis-compliance.com audiocourses@aegis-compliance.com Next Lecture: Tuesday, October 13 2015 Webinar Archive http://aegis-compliance.com/compliance-roundup-webinars 35