1. 340B Auditing and Monitoring Are You Ready for HRSA
November 2, 2017

2. 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

3. Federal 340B Drug Pricing Program Overview

4. 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

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

6. 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

7. 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

8. 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)

9. 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

10. 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

11. Pricing Comparison

12. Growth in 340B Program

13. What’s New?

14. 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

15. 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

16. 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

17. 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

18. 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

19. Medicare Payment Reductions
H. R 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

20. 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

21. 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

22. 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

23. H.R B 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

24. H.R B 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

25. S B 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

26. S B 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

27. S B 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

28. S B 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

29. S B 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

30. 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

31. 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

32. 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

33. HRSA Program Integrity

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

35. 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”)

36. 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

37. 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

38. 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

39. 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:

40. 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:

41. 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

42. 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

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

44. 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

45. HRSA Areas of Focus
Eligibility
Duplicate Discounts
Diversion

46. HRSA Standard Data Request

47. 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.

48. 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

49. 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

50. 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

51. Questions?
Thank You!

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