340B Compliance in an Era of Increased Oversight · over 800 hospitals and health systems enrolled...

340B Compliance in an Era of Increased Oversight

Bill von Oehsen Maureen Testoni President/General Counsel Assistant General Counsel

Wednesday, January 25, 20121:00-2:30 PM (Eastern Time)

Phone: (800) 895-0231Participant Code: 31865

Agenda

About SNHPA Current challenges to 340B in Washington Overview of the current 340B compliance landscape:

oversight, auditing and enforcement Upcoming compliance initiatives: recertification and

audits Recertification details Background on audit process and requirements How to prepare for recertification and audits Potential penalties Special considerations for corporate partners SNHPA membership and upcoming events

SNHPA 2 Bill von Oehsen and Maureen Testoni(202) 552-5850 www.snhpa.org

Who is SNHPA?

Non-profit organization representing and supporting

over 800 hospitals and health systems enrolled in 340B

Took lead role in including hospitals in the 340B law

Independent from both the government and the drug

industry

Advocates on drug pricing and other pharmacy matters

affecting safety-net providers

Educates members and 32 corporate partners on 340B

policy developments in Congress and regulatory

agencies


Threats to 340B Are Real

Some key lawmakers believe program should be

scaled back

Some are convinced the program should only apply

to indigent patients

Legislation requiring providers to bill all payers at

acquisition cost is possible

Drug shortage legislation could give manufacturers

“holiday” from 340B pricing

Third party payers singling out 340B pharmacies

for reductionsSNHPA 4 Bill von Oehsen and Maureen Testoni(202) 552-5850 www.snhpa.org

What You Can Do To Help

Get involved in the political process Join us or bring your government relations

representative to Washington for a meeting for corporate partners

First meeting: March 19, 11:30 AM – 2:00 PM at SNHPA (more details to come)

Join/renew membership in the Alliance to Protect 340B


Alliance to Protect 340B

Special initiative launched in 2007 to address: Overly restrictive narrowing of patient definition Fair Medicaid billing/reimbursement

Expanded focus: Reimbursement reductions by third party payers

Significant progress so far – but more work is needed! Over 50 SNHPA member hospitals and corporate

partners have joined We need your help and our hospital members will

appreciate your commitment! For more details, click here or contact Anna Mangum at

[email protected] or (202) 552-5863


Events Leading to Increased Oversight – GAO Report

Requested by lawmakers who wanted to block expansion or sunset program altogether

Findings suggest more oversight is needed: Program has grown significantly -- nearly 1/3 of all

U.S. hospitals enrolled and drug manufacturers question whether all these hospitals deserve 340B pricing

Increased use by hospitals and contract pharmacies, which increases diversion risk

Too much reliance on self-policing Integrity provisions in health reform are helpful, but

HRSA needs to improve oversightSNHPA 7 Bill von Oehsen and Maureen Testoni(202) 552-5850 www.snhpa.org

GAO Report:Recommendations

Four recommendations to HRSA: Conduct selective audits of covered entities to deter

potential diversion Finalize new, more specific guidance on the

definition of a 340B patient; Further specify its 340B nondiscrimination policy for

cases in which drug distribution is restricted and require reviews of manufacturers’ plans to restrict distribution of drugs at 340B prices;

Issue guidance to further specify the criteria that hospitals that are not publicly owned or operated must meet to be eligible for 340B


Congressional Response

Letter from Sen. Grassley (R-IA), Sen. Hatch (R-UT), and Rep. Upton (R-MI) to HRSA requesting “detailed accounting” of its oversight of 340B:

Asked HRSA to answer nine detailed questions

Notes doubling of program in the past decade and says “it is critical that HRSA provides diligent oversight of both the program and its participants.”

To see the letter, go to http://grassley.senate.gov/news/upload/9-22-11-Upton-Hatch-Grassley-letter-to-Wakefield.pdf


Congressional Response (cont’d)

HRSA tells the lawmakers that it plans to: Recertify all covered entities Audit select covered entities beginning in early

2012 Encourage manufacturers to audit covered

entities Senator Grassley blasts HRSA for inadequate

oversight and directs HRSA “to get a handle” on the program


Recertification

Health reform requires HRSA to recertify all covered entities

HRSA notified hospitals this month that they must review and update their contact information

Hospital recertification process to begin April 1, 2012; annually thereafter


Recertification (cont’d)

Applies to hospitals that entered program prior to April 1, 2011

HRSA sending notices to Authorizing Official and Primary Contact advising them to ensure accuracy of information on 340B website

Changes to information must be submitted no later than March 1 ensure processing prior to April 1

HRSA to release more information on process over next two months

Very important that your clients respond to recertification notices – hospitals can become disqualified if they do not recertify!


Recertification (cont’d)

HRSA said it will issue “policy letter” on hospital criteria for 340B eligibility

Contact information regarding recertification questions: Pharmacy Services Support Center (PSSC)

Help Line: (202) 449-9473 HRSA: [email protected]


Preparing for Recertification

Check hospital’s enrollment information on OPA’s website to ensure accuracy, especially of Authorizing Official and Primary Contact, including phone and e-mail information, Medicaid exclusion information, and ship to/bill to information

Make sure hospital’s locations are enrolled and appear on OPA website, especially locations to which drugs are shipped.

Remove locations that are no longer open or eligible to participate


Audits

Both HRSA and manufacturers are authorized to perform audits

HRSA audits began this month Per HRSA letter to targeted hospital, audits to cover:

Eligibility of covered entity to participate Whether 340B drugs have been diverted to nonpatients Whether there are proper controls in place to

prevent/detect diversion and duplicate discounts Hospital is responsible for compliance status of itself and its

contract pharmacies Special compliance requirements apply to contract

pharmacy arrangements


Audits: Diversion

Controlling HRSA guidelines: 1996 guidance on the definition of patient (61

Fed. Reg. 55156); and 1994 guidance on outpatient clinics (59 Fed.

Reg. 47884) These guidelines are broad and subject to

various interpretations Office of Pharmacy Affairs (OPA) has taken

increasingly narrow positions on guidelines, especially regarding patient definition


Audits: Diversion (cont’d)

SNHPA’s Principles to Prevent Diversion are based on HRSA guidance, e.g., Morford Letter

OPA has retreated from guidance underlying SNHPA’s Principles. Examples: Prescriber must be employed by or under contract with

hospital Site of care must be in a hospital facility

These interpretations are primarily communicated via PSSC’s technical assistance program

Although interpretations are reflected in HRSA’s 2007 proposed changes to patient definition (72 Fed. Reg. 1543), HRSA plans to withdraw the changes


Audits: Duplicate Discounts

Controlling HRSA guidelines: 1993 guidance on preventing duplicate discounts (58

Fed. Reg. 30458); and 2000 guidance clarifying duplicate discount billing

requirement (65 Fed. Reg. 13983) Requires covered entities to submit to HRSA the

Medicaid provider numbers of their entities and clinics that will not use 340B (i.e., those that “carve-out” ) Must inform HRSA of changes in hospital’s policy May also look at whether covered entity is billing

Medicaid appropriate rate, e.g., actual acquisition cost (AAC) in states that require AAC


Audits: Contract Pharmacy

Controlling HRSA guidelines: 2010 guidance on contract pharmacy arrangements

(75 Fed. Reg. 10272) Requires:

Written contract “bill to, ship to” arrangement Specific compliance elements, such as maintenance

of tracking system by contract pharmacy to prevent diversion

Covered entity is ultimately responsible for ensuring diversion and duplicate discounts requirements are followed


Audits: Contract Pharmacy

HRSA recommends: Quarterly comparison of patient prescriptions to

dispensing records by contract pharmacy Independent audit by covered entity annually Bi-annual comparison of 340B drug purchasing

and dispensing records by contract pharmacy Make sure covered entity takes ownership of

patient verification process and that process will stand up to scrutiny


Audits: Potential Penalties

Repay manufacturer the 340B discount If diversion violation is “knowing and intentional,”

covered entity also pays interest If diversion violation is “systemic and egregious,”

covered entity is removed from 340B program and banned from re-entry for a reasonable period

To date, HRSA has issued cease-and-desist letters before applying penalties and let manufacturers take lead in seeking recoupment of discounts

Termination of covered entity from program has been limited to only two cases and entity’s 340B status was questionable to begin with


Audits by OPA

Audits to be both random and targeted at suspected violators

We are aware of a test audit conducted on least one hospital and were told there were such audits of at least 3 other covered entities

Initial audits began January 2012 HRSA expects to take 2 to 3 months to

complete ground work and publish final written report for each covered entity


Audits by OPA (cont’d)

Audit protocols were to be released to the public; SNHPA has contacted HRSA to inquire if they are available

Audit plan to be sent to targeted entities Pre-audit interview to take place prior to audit Please let us know if you know of a hospital

that is scheduled to be audited or has been audited!


Audit by OPA (cont’d)

Office of Regional Operations (ORO) will take the lead in conducting audits ORO located in all 10 HRSA regions Both CPAs and pharmacists on staff Key contact: Thomas Pettin, [email protected]


Areas to be Reviewed

Review of: policies and procedures eligibility of hospital centers that use 340B

drugs relationship of physicians who write 340B

prescriptions inventory and past purchases contracts

Test a sample of prescriptions for compliance


Audits by Manufacturers

Controlling HRSA guidance: 61 Fed. Reg. 65406 Confirmed in recent “Program Notice”, release No. 2011-3

Manufacturer informs covered entity in writing of violation of law Must have reasonable cause Can be based on changes to ordering patterns or patient

complaints Parties have 30 days to resolve in good faith Manufacturer must file audit work plan with HRSA at

least 45 days before audit Must inform covered entity at least 15 days before audit

takes place


Audit Process

Neither HRSA nor manufacturers are subject to a limit on amount of time for audit

Oral briefing by manufacturer or government at end of audit

Written report by manufacturer or government at end of auditReport will be shared with OIGUnclear whether it will be publicly available


Audit Process (cont’d)

Covered entity has 30 days to respond: Steps it will take to address findings, or Rationale for disagreement with findings

Covered entity may challenge findings using voluntary dispute resolution procedures Mandatory dispute resolution procedures under

PPACA? Hearing by HRSA prior to determining penalty Covered entity has right to appeal HRSA decision

to federal court per Administrative Procedure Act


Audit Protections for Covered Entities

Government bound by Government Auditing Standards

Manufacturer bound by Government Auditing Standards and standards in 1996 guidance

Government will follow 1996 guidance (61 Fed Reg. 65406) regarding scope of audits and auditing protocols

Manufacturers must use an independent public accountant

Covered entities may be subject to only 1 audit at a time

Audit period can be no more than one year


Audit Protections for Covered Entities (cont’d)

Manufacturers must continue to provide 340B discounts during audit

Records that may be reviewed are limited to covered entity records and records of organizations that work with covered entities to buy, dispense, and obtain Medicaid reimbursement for outpatient drugs that directly pertain to potential 340B violations Ensure that HIPAA privacy rule is followed

regarding records shared with manufacturers


Preparing for Audits: Diversion

Depending on your relationship with the covered entity, you may play a critical role in helping them to comply with 340B requirements

Audit the procedures and reports you use when working with covered entities

Reports are only as good as the information that goes into them How are your reports populated? Example: covered entity found that virtual

inventory was initially populated with both inpatient and outpatient data


Audit Steps: Duplicate Discounts

Determine whether covered entity provided its Medicaid number to OPA and whether it bills Medicaid at AAC Since HRSA stopped requiring AAC billing in

2000, your state may no longer require AAC billing

Test to make sure hospital is billing in accordance with state requirements

If carving out, test that claims are appropriately captured and billed


Importance of Maintaining Documentation

Examples of documentation that should be maintained: Pharmacy dispensing records, including NDC of

drug dispensed and quantity of drug dispensed Hospital billing records, including location of

service rendered Wholesaler purchasing records, including 340B

purchased records to support dispensing history If unsure of applicable requirements or whether

it meets requirements, document efforts to clarify same


Working with Auditors

Covered entity should coordinate with its legal counsel and compliance officer when it is first notified of audit

One person should be designated to be responsible for working with auditors, coordinating document review, and/or access to employees

A specific location should be designated for auditors to use every day as their work area

Covered entity should know the name of the individual in charge of the audit and all other individuals who will be working in its facility


Working with Auditors

If you are involved in an audit: Maintain your own record of auditors’

questions, documents reviewed, etc. Coordinate closely with the covered entity Cooperate


Special Considerations for Corporate Partners

Growing scrutiny of 340B means hospitals and corporate partners need to emphasize their commitment to patient care and access

In marketing and other communications about 340B, exercise caution in making claims and statements about cost-savings and revenue generation New SNHPA Corporate Partner Compendium: some

submissions need to be revised to reflect this sensitivity

Use care in marketing material and customer interactions at 340B Winter Conference and other venues


Special Considerations for Corporate Partners (cont’d)

In communications, avoid phrases such as: Increasing profits Revenue enhancement Boost your bottom line Expand 340B to more populations

Check your website to make sure it is not contributing to the 340B “optics problem”


Upcoming Events (cont’d)

8th Annual 340B Coalition Conference

Co-Hosted by ApexusHotel del Coronado

San Diego, CA

Feb. 29 – Mar. 2, 2012www.340Bwinterconference.org

Great exhibiting/networking opportunities!



Baltimore RoundtableMercy Medical Center

March 6, 2012

11:30 AM-2:30 PM

Stay tuned for details!



16th Annual 340B Coalition ConferenceCo-Hosted by Apexus

July 9-11, 2012Omni Shoreham Hotel

Washington, D.C.www.340bcoalition.org


Contacts

Bill von OehsenPresident/General Counsel(202) [email protected]

Ted SlafskyExecutive Director(202) [email protected]

Kara StencelDirector, Government Relations(202) [email protected]

Maureen TestoniAssistant General Counsel(202) [email protected]

Fred MoxleyManager, Event Planning(202) [email protected]


SNHPA’s New Home

1101 15th Street, NW

Suite 910

Washington, DC 20005

Phone: 202-552-5850

Fax: 202-552-5868

www.snhpa.org


Question & Answer Session

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To ask a written question, click on the Q&A button at the top left of your screen

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340B Compliance in an Era of Increased Oversight · over 800 hospitals and health systems enrolled...

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