340B Compliance in an Era of Increased Oversight
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- Lenard Copeland
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1 340B Compliance in an Era of Increased Oversight Bill von Oehsen President/General Counsel Maureen Assistant General Counsel Wednesday, January 25, :00-2:30 PM (Eastern Time) Phone: (800) Participant Code: 31865
2 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
3 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 SNHPA 3 Bill von Oehsen and Maureen
4 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 reductions SNHPA 4 Bill von Oehsen and Maureen
5 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 SNHPA 5 Bill von Oehsen and Maureen
6 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 or (202) SNHPA 6 Bill von Oehsen and Maureen
7 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 oversight SNHPA 7 Bill von Oehsen and Maureen
8 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 SNHPA 8 Bill von Oehsen and Maureen
9 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 Hatch-Grassley-letter-to-Wakefield.pdf SNHPA 9 Bill von Oehsen and Maureen
10 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 SNHPA 10 Bill von Oehsen and Maureen
11 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 SNHPA 11 Bill von Oehsen and Maureen
12 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! SNHPA 12 Bill von Oehsen and Maureen
13 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) HRSA: SNHPA 13 Bill von Oehsen and Maureen
14 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 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 SNHPA 14 Bill von Oehsen and Maureen
15 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 SNHPA 15 Bill von Oehsen and Maureen
16 Audits: Diversion Controlling HRSA guidelines: 1996 guidance on the definition of patient (61 Fed. Reg ); and 1994 guidance on outpatient clinics (59 Fed. Reg ) 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 SNHPA 16 Bill von Oehsen and Maureen
17 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 SNHPA 17 Bill von Oehsen and Maureen
18 Audits: Duplicate Discounts Controlling HRSA guidelines: 1993 guidance on preventing duplicate discounts (58 Fed. Reg ); and 2000 guidance clarifying duplicate discount billing requirement (65 Fed. Reg ) 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 SNHPA 18 Bill von Oehsen and Maureen
19 Audits: Contract Pharmacy Controlling HRSA guidelines: 2010 guidance on contract pharmacy arrangements (75 Fed. Reg ) 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 SNHPA 19 Bill von Oehsen and Maureen
20 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 SNHPA 20 Bill von Oehsen and Maureen
21 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 SNHPA 21 Bill von Oehsen and Maureen
22 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 SNHPA 22 Bill von Oehsen and Maureen
23 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! SNHPA 23 Bill von Oehsen and Maureen
24 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, SNHPA 24 Bill von Oehsen and Maureen
25 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 SNHPA 25 Bill von Oehsen and Maureen
26 Audits by Manufacturers Controlling HRSA guidance: 61 Fed. Reg Confirmed in recent Program Notice, release No 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 SNHPA 26 Bill von Oehsen and Maureen
27 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 audit Report will be shared with OIG Unclear whether it will be publicly available SNHPA 27 Bill von Oehsen and Maureen
28 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 SNHPA 28 Bill von Oehsen and Maureen
29 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 ) 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 SNHPA 29 Bill von Oehsen and Maureen
30 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 SNHPA 30 Bill von Oehsen and Maureen
31 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 SNHPA 31 Bill von Oehsen and Maureen
32 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 SNHPA 32 Bill von Oehsen and Maureen
33 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 SNHPA 33 Bill von Oehsen and Maureen
34 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 SNHPA 34 Bill von Oehsen and Maureen
35 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 SNHPA 35 Bill von Oehsen and Maureen
36 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 SNHPA 36 Bill von Oehsen and Maureen
37 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 SNHPA 37 Bill von Oehsen and Maureen
38 Upcoming Events (cont d) 8 th Annual 340B Coalition Conference Co-Hosted by Apexus Hotel del Coronado San Diego, CA Feb. 29 Mar. 2, Great exhibiting/networking opportunities! SNHPA 38 Bill von Oehsen and Maureen
39 Upcoming Events (cont d) Baltimore Roundtable Mercy Medical Center March 6, :30 AM-2:30 PM Stay tuned for details! SNHPA 39 Bill von Oehsen and Maureen
40 Upcoming Events (cont d) 16 th Annual 340B Coalition Conference Co-Hosted by Apexus July 9-11, 2012 Omni Shoreham Hotel Washington, D.C. SNHPA 40 Bill von Oehsen and Maureen
41 Contacts Bill von Oehsen President/General Counsel (202) snhpa.org Ted Slafsky Executive Director (202) Maureen Assistant General Counsel (202) Fred Moxley Manager, Event Planning (202) Kara Stencel Director, Government Relations (202) SNHPA 41 Bill von Oehsen and Maureen
42 SNHPA s New Home th Street, NW Suite 910 Washington, DC Phone: Fax: SNHPA 42 Bill von Oehsen and Maureen
43 Question & Answer Session To ask a question via your telephone, press *1 to connect to the operator and be put in the queue To ask a written question, click on the Q&A button at the top left of your screen The presentation is available for download by clicking on the handouts button ( ) at the top right of your screen SNHPA 43 Bill von Oehsen and Maureen
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