115th Annual Convention

Date: Monday, October 14, 2013 Time: 4:00 p.m. – 5:30 p.m. Location: The Walt Disney World Swan and Dolphin Resort, Southern Hemisphere Salon 3 Title: 340B Contracting Essentials and Best Practices

ACPE # 207-000-13-118-L04-P 0.15 CEUs ACPE # 207-000-13-118-L04-T Activity Type: Knowledge-based Speaker: Alan Arville, Epstein Becker Green Robert Judge, Director of Hospital Sales, Catamaran Pharmacist Learning Objectives: Upon completion of this activity, participants will be able to: 1. List and discuss the most important elements of a 340B contract. 2. Discuss how to breakdown your 340B contracts to establish policies and procedures for contract

implementation. 3. Describe the clauses that can cost your pharmacy the most money and how to make sure you are properly

covered by your contract. Technician Learning Objectives: Upon completion of this activity, participants will be able to: 1. List and discuss the most important elements of a 340B contract. 2. Discuss how to breakdown your 340B contracts to establish policies and procedures for contract

implementation. 3. Describe the clauses that can cost your pharmacy the most money and how to make sure you are properly

covered by your contract. Disclosures: Alan Arville declares no conflicts of interest or financial interest in any product or service mentioned in this program, including grants, employment, gifts, stock holdings, and honoraria. Robert Judge declares no conflicts of interest or financial interest in any product or service mentioned in this program, including grants, employment, gifts, stock holdings, and honoraria. NCPA’s education staff declares no conflicts of interest or financial interest in any product or service mentioned in this program, including grants, employment, gifts, stock holdings, and honoraria.

NCPA is accredited by the Accreditation Council for Pharmacy Education as a provider of continuing pharmacy education. This program is accredited by NCPA for 0.15 CEUs (1.5 contact hours) of continuing education credit.

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A Pharmacy’s Guide to 340B Contract Pharmacy Services 

Best PracticesAlan J. Arville

Epstein Becker Green

Robert JudgeCatamaran

October 16, 2013

Disclosures

• Alan Arville declares no conflicts of interest or financial interest in any product or service mentioned in this program, including grants, employment, gifts, stock holdings and honoraria.

• Robert Judge declares no conflicts of interest or financial interest in any product or service mentioned in this program, including grants, employment, gifts, stock holdings and honoraria.

Learning Objectives

1. List and discuss the most important elements of a 340B contract.

2. Discuss how to breakdown your 340B contracts to establish policies and procedures for contract implementation.

3. Describe the clauses that can cost your pharmacy the most money and how to make sure you are properly covered by your contract.

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Agenda

• 340B Program Overview

• Contract Pharmacies and Administrators

• Contract Pharmacy Services Agreements

• Contract Pharmacy Best Practices

Introduction to the 340B program

340B Background

Established in 1992 statute

(Section 340B of the Public

Health Services Act)

Requires manufacturers

to sell “covered outpatient drugs” to certain

“covered entities” at

greatly reduced price

Includes 2 major

prohibitions:• Diversion to

non-340B patients

• Duplicate discounting

Requires mechanism to ensure that

entities comply with duplicate

discount prohibition

Administered by HRSA’s Office of Pharmacy Affairs

340B Prohibitions and Requirements

Duplicate Discounts

Diversion

Exclusions

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Intent of the 340B Program

1. HR Rep No. 102–384, pt 2, at 12 (1992).

Stretch scarce federal resources1

Reach more eligible patients1

Provide more comprehensive 

services1

Expand services offered to patients

Provide services to 

more patients

Reduce price of pharmaceuticals for patients

340B Pricing

340B Basics - Pricing

NetworkPrice

340BPrice

Average savings: 35‐40%

AWP

Network Reimbursement

340B Program Cost

340B Discount

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340B Overview – Who is Eligible?

www.hrsa.gov/opa/dsh.htm

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DSH (Disproportionate Share Hospitals) – Hospitals with a DSH adjustment > 11.75% ~2,300 today

Affordable Care Act of 2010 added nearly 3,000 additional Covered Entities Children’s Hospitals Critical Access Hospitals Free Standing Cancer Hospitals

Rural Referral Centers Sole Community Hospitals

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What Qualifies a Rx for 340B Prices?

Eligibility is a function of the relationship between a Covered Entity, Prescriber, Patient and Pharmacy

To qualify for 340B pricing, a prescription must meet the following criteria: Written for a patient with a care-based relationship with the Covered Entity

The Covered Entity maintains records of the individual's health care

Care is provided by a health care professional who is either employed by the Covered Entityor provides health care under contractual or other arrangements (e.g. referral for consultation)

Key is that responsibility for the care provided remains with the Covered Entity: Pharmacy-only care does not qualify for 340B

Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Patient and Entity Eligibility 340B‐Qualified 

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What Requirements Are Placed on 340B Covered Entity ?

Available only to individuals who meet the 340B patient definition

Prohibition against diversion, resale or transfer

Prohibition against “Double Dipping” on Medicaid rebates

GPO exclusion (for certain Covered Entity types)

Orphan Drug exclusion (for certain Covered Entity types)

Audits and record keeping

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340B Program – Getting Drugs to Patients

340B Statute allows a variety of ways to dispense medications

340B Eligible

Entity

ContractPharmacy

Tele‐Pharmacy

Provider Dispensing

FacilityPurchasing 

Clinic Administered Meds(no dispensing pharmacy)

In‐HousePharmacy

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340B Contract Pharmacy Models

Multi-pharmacy networks allowed since March, 2010

Regulatory change increased: Opportunity Participation Complexity

Regulatory guidelines may differ, especially at the state level

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16,649

* Year as of October 1 each year

Growth of 340B Contract Pharmacies

HRSA Office of Pharmacy Affairs, July 2013

Principal 340B Pharmacy Arrangement

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Responsibilities of a 340B Contract Pharmacy

Execute a formal agreement between pharmacy and Covered Entity whereby: Pharmacy uses its inventory to fill Rxs for 340B eligible patients

Covered Entity replenishes pharmacy inventory using 340B program costs

Pharmacy receives a dispense fee from Covered Entity for services

Contract Pharmacy should: Be “inventory neutral”

Remit amounts collected from payers and patients for paid claims to Covered Entity

Follow Covered Entity practices to prevent diversion and double dipping on Medicaid rebates

Receive a dispense fee for services provided

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Contract Pharmacy Model - Pros & Cons

Pros Cons

• Easy to start• Capture first fills & refills

• Lower operating costs• Increased patient access

• Potential for greater savings/revenue capture

• Administrative overhead

• Federal oversight• Contract negotiation• Responsibility for pharmacy compliance with 340B

• True‐up exposure

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340B Contract Pharmacy Administrators

Increasingly, Contract Pharmacy relationships are managed through 340B Administrators

Integrate participation of key stakeholders

Relieve Covered Entity of the administrative burdens related to 340B program Enable Covered Entity to focus on its core mission as a healthcare

provider

• Covered Entity: enrollment in 340B programs; outreach initiatives to increase participation

• Patients: pharmacy fulfillment that offer patients access to 340B priced medication

• Pharmacy: adjudication, reimbursement and inventory replenishment to participate in program

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340B Contract Pharmacy Administrators

• AHC• CaptureRx• PSG

• RxStrategies• SunRx• Wellpartner

Admini-strator

• Walgreens• Coordinated Care Network• RiteAid

Chain & Community Pharmacies

• Sentry Data Services• MacroHelix• Talyst

Split Billing Software

Companies

340B Covered Entities

Examples

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340B AdministratorResponsibilities

Generally utilize a post adjudication system Ensure that prescriptions & patients meet 340B requirements

Prevent “Double Dipping” on Medicaid rebates and “Diversion” of 340B inventory to non-qualified patients

Replenishment administration Track and accumulate dispensed inventory: Use Contract Pharmacy’s

inventory for first fill; Covered Entity replenishes inventory after dispensing is complete

Provide detailed reporting at transaction level (claim, practitioner and claim detail)

Financial management Bill to/ ship to program management

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340B Contract Pharmacy Process

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Contract Pharmacy – Pharmacy Replenishment

PBM

$

$ $

Order

Replenishment Order

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Contract Pharmacy Service Agreement

• HRSA issues revised guidance in 2010• Allows contracting with multiple pharmacies

(previous 1996 guidance only allowed one contract pharmacy per delivery site).

• Requires written agreement between CE and Contract Pharmacy.

• Contract must address HRSA’s “Essential Elements.”

• CE must conduct annual independent audits.• CE retains ultimate responsibility for

compliance.

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Contract Pharmacy Service Agreement

• What is the 340B Contract?• Contract Pharmacy Services Agreement• Vendor Services Agreement

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HRSA’s Essential Elements

• Ship to, Bill to Provisions• Comprehensive Pharmacy Services• Patient Choice

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HRSA’s Essential Elements

• Other Services• Compliance with Law• Contract Pharmacy Reporting

Quarterly billing statements,

status reports of collections and receiving and dispensing records.

Consider role of 340B Processor.

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HRSA’s Essential Elements

• Tracking System/Verify Patient Eligibility The Covered Entity is “ultimately responsible” for 340B

compliance.

• Medicaid Duplicate Discounts Prohibited

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HRSA’s Essential Elements

• Covered Entity Independent Audits• HRSA and Manufacturer Audits• Contract Available to OPA

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Key Legal Compliance Concerns

• Contract Pharmacy Compliance Concerns• Diversion• Duplicate Discounts – CE’s contract pharmacy may not

dispense drugs purchased at 340B price to Medicaid FFSpatients unless the contract pharmacy has established “an arrangement” to prevent duplicate discounts

• Orphan Drugs

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Key Legal Compliance Concerns

• Anti-Kickback Law Prohibits the exchange (or offer to exchange) of anything of

value, in an effort to induce (or reward) the referral of federal health care program business (e.g., Medicare and Medicaid patients)

• Federal and State Privacy• Change of Law

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Operational and Financial Considerations

• Replenishment• What is the timing and process?

• Periodic “True-Up”• Discontinued NDCs• Slow Moving Drugs

• Formulary• All-in or are there

carve-outs?

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Operational and Financial Considerations

• Third Party Reimbursement and Co-Payments• Dispensing Fees

• Should result in a “win-win” for both the contract pharmacy and the Covered Entity

• Reports from the Covered Entity

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Contract Pharmacy Agreement Checklist

Are all of HRSA’s essential elements covered by the contract pharmacy services Agreement?

Do the operational procedures set forth in the contract pharmacy services agreement accurately reflect the actual arrangement?

Can the contract pharmacy adopt the operational procedures with minimal impact on the pharmacy’s standard workflow and drug inventory management?

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Operational and Financial Considerations

• Designation of Wholesaler• Third-Party Payor Clawbacks• Retroactive Classification• Ability to Suspend Services

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Common Pitfalls and Challenges

Successful Contract Pharmacy arrangements depend on Open lines of communication: e.g., periodic

checkpoints, meetings and phone calls among participants

Clear escalation process to address problems Clear understanding of program operations Collaboration to ensure win-win program

Common pitfalls: Not understanding cost of doing business Lack of financial and accounting systems to support

340B program Not tracking inventory accumulation and

replenishment Not understanding criteria used to “carve-in” 340B

eligible claims, inability to access data used to establish eligibility and carve-in

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Contract Pharmacy Agreement Checklist

Are the contract pharmacy’s responsibilities under the contract pharmacy services agreement appropriate (e.g., the contract pharmacy should not be responsible for preventing diversion if it is “blind” as to which patients are 340B eligible)?

Has the contract pharmacy conducted any due diligence on the proposed 340B Administrator? Does the 340B Administrator have a reputation for dealing with contract pharmacies fairly and providing good customer service?

Will the contract pharmacy, Covered Entity, and 340B Administrator establish a team with representatives from each party that will meet regularly to review various aspects of the contract pharmacy arrangement?

Contract Pharmacy Best Practices

• Conveniently located and have operating hours that are convenient to Covered Entity.

• Employees who can communicate in patient’s preferred language• Ability to distribute drug information in patient languages

Location&

Capability

• Have sufficient inventory of drugs used by the Covered Entity • Maintain sufficient supply of over-the-counter (OTC) drugs and

medical supplies • Possess the ability to order special items on request

Inventory

• Possess ability to participate in the various insurance plans of the Covered Entity’s patients

• Be able to carve-out certain claims from third party payornetworks as directed by the Covered Entity

3rd Party payor

networks

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Contract Pharmacy Best Practices

• Participate in Covered Entity patient education guidelines• Have the ability to share medication compliance information • Be properly staffed to provide these services, if required

Care management

initiatives

• Comply with all Covered Entity policies and procedures related to their 340B program.

• Ensure no diversion of drugs bought by the Covered Entity• Work with Medicaid to remove potential duplicate discount/rebates

Program compliance

• Regularly schedule meetings between contract pharmacy(ies) and Covered Entity management

• Continuously seek to improve continuity of care as it relates to Covered Entity and patient access to the 340B program

Coordination

Contract PharmacyCritical Success Items

Cost toDispense

Compensation

Know 3rd

Party PayorAgreements

VirtualReplenishment

WorkingCapital

True-uptiming &

rate

Impact on WholesalerAgreements

New patientsv. existing patients

PBM audit protection

NCPDP 340B Flag

Requirement

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Resources: Where to Go for Help

Apexus (340B Prime Vendor)ApexusAnswers@340bpvp.com(888)340-2787

HRSA’s Office of Pharmacy Affairs (OPA)http://www.hrsa.gov/opa

Health Resources and Services Administration (HRSA)http://www.hrsa.gov (800) 628-6297

Safety Net Hospitals for Pharmaceutical Access (SNHPA)http://www.safetynetrx.org/(202) 552-5850

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Thank You!

For More InformationAlan J. Arville

Epstein Becker Green

1227 25th Street, NW

Washington, DC 20037

202.861.1805

Aarville@ebglaw.com

Robert Judge

Catamaran

1600 McConnor Parkway

Schaumburg, IL 60173‐6801

(971)302‐7140

robert.judge@catamaranrx.com