340B Program Tool Kit

340B Program Tool Kit June 2014 7501 Wisconsin Avenue Suite 1100W Bethesda, MD 20814 Phone 301.347.0400 Fax 301.347.0459 www.nachc.com 9 Carey Road Queensbury, NY 12804 (855) 835-340B www.340bsolutions.org

340B Program Tool Kit June 2014 This guide is intended to provide training and technical assistance to health centers participating in or considering the Federal 340B Drug Pricing Program. National Association of Community Health Centers Health centers rely in large part on public financial help and need both a unified voice and a dependable source of ongoing research, information, training, and advocacy. To address these needs, the National Association of Community Health Centers (NACHC) was organized in 1971. NACHC works with a national network of local health centers and state Primary Care Associations (PCAs) to serve centers in a variety of ways, including provision of: Research-based advocacy for health centers and their clients. Public education regarding the mission and proven social / economic value of health centers. Training and Technical Assistance for health center staff members and Community Boards. Active alliances with private partners and other key stakeholders to foster the delivery of high quality and affordable primary health services to communities and populations in need. Hudson Headwaters Health Network/Pharmacy Services The roots of the Hudson Headwaters Health Network lie in a single health center opened in 1974 in rural Chestertown, New York. With the subsequent retirement of the area s last private physician, four towns in this mountainous region recognized the continuing and vital need for accessible primary health care. With town support and new Federal funding, Hudson Headwaters Health Network was founded and became a not-for profit Federally Qualified Health Center (FQHC) in 1981. Today the network comprises 16 centers and serves an area more than twice the size of Rhode Island. Hudson Headwaters dedicated Pharmacy Services unit was created as the network began managing its own 340B Drug Pricing Program in 2002. The network soon became the first covered entity in the nation to receive authorization to contract with multiple pharmacies. Revenue generated by the 340B program has allowed Hudson Headwaters to provide both access to care and needed medicines to network patients who most need but can least afford these necessities. In 2006, Hudson Headwaters began offering 340B pharmacy management services to other health centers and covered entities through its proprietary 340B Integrity software. The network s goal is to meet the individual needs of every client participating in the 340B Program. The organization provides consulting, implementation, and management services, as well as audit readiness, to client organizations of any size through national pharmacy companies, supermarket chains, and independent pharmacies. For more information on Hudson Headwaters Health Network Pharmacy Services, contact the pharmacy office at: 9 Carey Road Queensbury, NY 12804 (855) 835-340B www.340bsolutions.org Acknowledgement The National Association of Community Health Centers (NACHC) initiated the production of this toolkit. A special thanks to Pete Townes for assistance. This publication was made possible by grant number U30CS16089 from the Health Resources and Services Administration, Bureau of Primary Health Care. Its contents are solely the responsibility of the authors and do not necessarily represent the official views of the HRSA

Table of Contents Introduction...2 Overview of the 340B Drug Pricing Program...2 Benefits of the 340B Program....2 340B Program Eligibility...2 Eligible Patients....3 Eligible Drugs...3 Registration...4 Recertification....4 Health Center Responsibilities Under the 340 Program....4 Independent Audit....5 Program Integrity...5 Staffing...8 Inventory Management...10 Drug Substitutions....10 Slow Movers...10 Voids, Mistakes, and Errors... 10 Positive Inventory... 11 Inventory Summary.... 11 Provider List....12 Eligibility Issues...12 Staff vs. Contracted Providers: Referral Relationships... 12 Wholesalers...13 Applications....13 Accounts...13 Ordering...13 Invoices...13 Payment...13 Duplicate Discounts...14 How are duplicate discounts handled?...14 Medicaid and Medicaid Managed Care Organizations (MCOs)...14 340B & Audit Readiness: A Mini Self-Assessment....15 Prepare for These Questions...16 Example: 340B Program Audit Policy... 17 Introduction...17 Auditing...18 Sample Template: Internal Audit Form...19 Summary of Internal Audit Results...20 Resources...21 National Association of Community Health Centers 1

Introduction This resource outlines the health center s roles and responsibilities based on guidelines from the Health and Human Resources Administration (HRSA), for 340B Drug Pricing Program compliance. Please note: This resource is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that it does not constitute, and is not a substitute for legal, financial, or other professional advice. Examples of contract language are based on federal law and only reflect general provisions. NACHC recommends that health centers consult with qualified legal counsel to review policies and procedures and draft terms that are consistent with specific state law and tailored to the organization s particular situation. Overview of the 340B Drug Pricing Program The 340B Drug Pricing Program was established in 1992 to provide qualifying patients with affordable prescription drugs. The program is available to several types of safety net health providers, known as covered entities, and it allows these providers to stretch the limited federal resources available to them and to offer a comprehensive set of services. Benefits of the 340B Program According to research commissioned by the National Association of Community Health Centers (NACHC), qualifying providers can save from 15 to 60 percent on the costs of prescription drugs through the 340B program. The exact savings of each provider is dependent on the types of drugs and the amount of drugs prescribed to patients. In addition, providers may use the savings not only to offer reduced prices for low-income patients but to offer services to an expanded group of patients and to offer an expanded set of services. 340B Program Eligibility Although drug manufacturers taking part in the Medicaid Drug Rebate Program are required to provide 340B program discounts, the program is strictly voluntary. Providers must meet the eligibility requirements, and they must voluntarily apply for admission into the program. As of July 2010, 94 percent of eligible providers had enrolled in the program. Eligible providers, known as covered entities include the following: Health centers and look-alikes Family planning projects receiving federal grants Health centers receiving grants under Title XXVI of the Public Health Service Act Native American and Native Hawaiian health centers receiving federal funds Disproportionate share hospitals Children s hospitals Cancer and critical access hospitals Rural referral centers and sole community hospitals National Association of Community Health Centers 2

For purposes of this manual we will be focusing on how health centers and look-alikes utilize the 340B Program, therefore, instead of referencing covering entities, we will reference health centers which includes both grantees and look-alikes. Eligible Patients 1 To be eligible to receive 340B-purchased drugs, patients must receive health care services other than drugs from the health center. The only exception is patients of State-operated or funded AIDS drug purchasing assistance programs. An individual is a patient of a 340B covered entity (with the exception of State-operated or funded AIDS drug purchasing assistance programs) only if: the covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual s health care; and the individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g. referral for consultation) such that responsibility for the care provided remains with the covered entity; and the individual receives a primary health care service or range of services from the covered entity which is consistent with the service or range of services for which grant funding or Federally-qualified health center look-alike status has been provided to the entity. Disproportionate share hospitals are exempt from this requirement. An individual will not be considered a patient of the covered entity if the only health care service received by the individual from the covered entity is the dispensing of a drug or drugs for subsequent self-administration or administration in the home setting. Exception: Individuals registered in a State-operated or funded AIDS Drug Assistance Program (ADAP) that receives Federal Ryan White funding ARE considered patients of the participant ADAP if so registered as eligible by the State program. For more information: Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Patient and Entity Eligibility Eligible Drugs Generally, the 340B Program covers the following outpatient drugs: FDA-approved prescription drugs; Over-the-counter (OTC) drugs written on a prescription; Biological products that can be dispensed only by a prescription (other than vaccines); or FDA-approved insulin. 1 http://www.hrsa.gov/opa/eligibilityandregistration/ National Association of Community Health Centers 3

Registration Health centers must be register with the Office of Pharmacy Affairs (OPA) to be eligible to participate in the 340B Drug Pricing Program. The OPA database is the official source for ongoing 340B information. For technical assistance with registration issues, call 1-888-340-2787 or e-mail ApexusAnswers@340bpvp.com. There are four registration periods each year: January 1 st 15 th (to begin program participation on April 1 st ) April 1 st 15 th (to begin program participation on July 1 st ) July 1 st 15 th (to begin program participation on October 1 st ), and October 1 st 15 th (to begin program participation on January 1 st of the next calendar year). Information in the OPA database is required to be current and accurate. This is where to start your organization s self-assessment for audit readiness. Database change requests, to be completed whenever existing information needs to be updated, can be submitted at any time. Recertification The health center s Authorizing Official must annually recertify that organizational information is current and accurate. This official should have solid knowledge about how the 340B Program works in actual practice within the organization, and about the internal controls that must be in place to be compliant. At annual recertification (February-March each year), the FQHC must confirm: Accurate and complete organizational information on the OPA website Script eligibility and a fully compliant program Current, accurate, and complete program policies / procedures that are regularly tested Complete OPA guidelines for annual recertification (as well as numerous other helpful 340B Program User Guides) can be found at: http://opanet.hrsa.gov/opa_mod/userguides.aspx. Health Center Responsibilities Under the 340 Program Health centers participating in the 340B Drug Pricing Program have a number of responsibilities as covered entities, including the following: Required Keeping the OPA database current Completing annual recertification (February March timeframe) Meeting all eligibility requirements of the 340B Program Maintaining documented 340B policies and procedures National Association of Community Health Centers 4

Recommended Conducting regular internal audits Contracting with independent auditors for objective review Providing up-to-date eligible prescriber lists to its vendors Providing patient encounter information (via Electronic Health Records (EHRs) when applicable) Reviewing vendor reports to ensure compliance Independent Audit An independent audit is an audit made usually by professional auditors who are wholly independent of the company where the audit is being made. An audit is a planned and documented activity performed by qualified personnel to determine by investigation, examination, or evaluation of objective evidence, the adequacy and compliance with established procedures. The audit may include both financial and compliance review, and testing of internal controls. Program Integrity Health centers participating in the 340B Program must ensure program integrity and maintain accurate records documenting compliance with all 340B Program requirements. Health centers participating in the 340B Program are subject to audit by both the drug manufacturers and the federal government. Failure to comply with the 340B Program requirements may make the health center liable to manufacturers for refunds of discounts or cause the health center to be removed from the 340B Program. 2 The next few sections will address keys to maintaining a compliant program, and therefore, almost guarantying a successful audit. Additional guidance can be found on the HRSA website at http://www.hrsa.gov/opa/manufacturers/pharmaceuticalpricingagreement.pdf. 1. Policies & Procedures Clearly documenting all organizational 340B arrangements is essential to a successful and compliant program. The following section provides and outline for developing policies and procedures that will set health centers up for successful 340B Program audit. Start with a complete description of your 340B program, including your entity s eligibility type, which is health center and an overall description of the health center organization. Remember that although Management Service Providers can determine 340B eligibility based on data supplied by the covered entity and pharmacy, each vendor has unique filters and business rules in place. It is important to identify each vendor process and clarify its uniqueness as related to 340B Program compliance. The health center must have supporting policies and procedures that document appropriate and complete internal controls to ensure compliance. The complexity of your particular compliance program will help determine how detailed the related policies and procedures should be for optimal audit readiness. NOTE: The Federal 340B Prime Vendor Program (PVP) contractor, Apexus (http://www.apexus.org/), provides a number of useful resources to help covered entities develop and support compliant programs through its online 340B University (https://www.340bpvp.com/340b-university/); of special interest here is the detailed Sample 340B Policy & Procedures Manual: A Guide for Community Health Center Leaders, which can be downloaded at https://www.340bpvp.com/340b-university/tools-and-resources/. 2 http://www.hrsa.gov/opa/manufacturers/pharmaceuticalpricingagreement.pdf National Association of Community Health Centers 5

2. Documentation The health should formally document the following in preparation for a 340B Program audit: Basic Program Information Wholesaler address and other contact information Management Services Provider(s) address and other contact information Identify each contracted vendor and related administrative details Have all Management Services Agreements (MSAs) available for review (If included in your program) Gateway Administrator(s) address and other contact information, as well as a description of this organization s function in your 340B Program process Specific Pharmacy Arrangements In-house or internal pharmacy Contracted pharmacies (with addresses and other contact information) National Pharmacy Chain(s) Supermarket Chain(s) Independent Pharmacy All Pharmacy Services Agreements (PSAs) should be available for review Note any unique details of the program, such as: How are Medicaid rebates dealt with? Orphan drugs in or out? Class 2 Drugs in or out? Use of generic equivalents Patient Definition criteria Clinical notes or other substantiating documentation required 3. Data Security, Auditable Records, and HIPAA To ensure audit readiness, policies and procedures addressing data integrity and strict patient confidentiality (especially with regard to full HIPAA compliance) must be documented. Two important areas of focus are as follows: a. The Health Center s Internal Security Controls Typically, this area will already be addressed through the center s existing Health Information Technology (HIT) policies. However, if any unique methods are used to share data with 340B vendors, those secure paths should be specifically identified and the technology used to transfer data and securely share information should be described. Some common methods for ensuring data integrity and security include: Secure FTP Encryption Share file or other secure software National Association of Community Health Centers 6

b. Management Services Providers and Partner Pharmacies Security Controls Most vendors will have a protocol highlighting their data security, and this should be referenced within the health center s policies / procedures. Here is an example of appropriate documentation regarding data security and integrity: The Hudson Headwaters Integrity System is a robust web-based application built to accommodate the complexities of our clients multiple contracted pharmacy arrangements. The system has fully compliant multi-tiered security layers to ensure data integrity and appropriate access security. Our primary and backup facilities have requisite redundant power, networking capabilities, and multiple backup sets enabling the organization to be fully prepared in case of disaster recovery events, and our staff is able to work remotely in the event of such a disaster. National Association of Community Health Centers 7

Staffing Staff roles and functions for an effective, compliant 340B Program are described in the chart below. These functions do not necessarily represent separate positions within the organization, but rather new roles that can be added to current staff s job descriptions or combined into a new position if appropriate, depending on the complexity of the health center s 340B program. Authorizing Official Primary Contact Wholesaler Administration Wholesaler Pricing, Invoice Review, and Payment Administration Financial Administration Discount Program Administration Typically the CEO, CFO, Director of Pharmacy, or other Corporate Officer, this person is responsible for approving any changes with the OPA, including recertification. This person often has authority to approve/sign contracts for the 340B program (PSAs, MSAs, etc.) The officer should have a strong foundational knowledge base regarding the operational processes of the 340B Program and the controls needed to ensure compliance. This can be any designated representative of the covered entity who works closely with the Authorizing Official to keep him/her continuously informed. This person receives email notifications of OPA changes and may be tasked with keeping the OPA database current and accurate. He or she should have a strong foundational knowledge base regarding all covered entity and pharmacy relationships. This is the primary communication liaison between the covered entity and the wholesaler. A key function is application completion and follow-up (a separate application is required for each 340B pharmacy). This person reviews drug purchases, invoicing, and payments. This is typically someone in an accounting or finance role that already has access permission for Accounts Payable and General Ledger accounts. This team member is responsible for the accounting functions that monitor the reconciliation process for Management Service Providers, pharmacies, and other vendors invoices / payments. This is the communication liaison between the covered entity and the Pharmacy Benefit Management company (PBM) for the entity s 340B discount program. Finance will need the results of the program for inclusion in UDS reporting as appropriate. National Association of Community Health Centers 8

Provider List Administration Internal Self-Auditor Audit Liaison Vendor Management and Contract Pharmacy Relationship Management This is one of the most important functions from the standpoint of program compliance. It involves actively collaborating with a member of the credentialing or Human Resources staff who has a thorough understanding of solely employed providers / specialists and contracted providers, to determine which of these providers meet 340B Program eligibility criteria. The person fulfilling this function is responsible for maintaining an accurate eligible provider list and communicating updates monthly to all vendors (including pharmacies and Management Service Providers). This person is responsible for completion of semi-annual sample or targeted audits, including review of EHR requirements and other criteria to validate compliance. This role involves documentation of findings, ongoing auditrelated communications, and needed follow-up regarding any identified action plans. Documentation of results should be retained and organized for review by outside auditors to illustrate the covered entity s understanding of, and active involvement in, ongoing program compliance. This person works with independent external auditors contracted by the health center to evaluate 340B Program policies, procedures, and internal controls intended to ensure program compliance. This is the communication liaison between the covered entity and the Management Service Provider, all contracted pharmacies, and any other vendors involved in the center s 340B program. This role involves responsibility for monthly review of vendor reports, as well as assistance with communicating any action plans resulting from internal audit findings. National Association of Community Health Centers 9

Inventory Management Each health center participating in the 340B Program is responsible for tracking and maintaining their 340B drug inventories. A clear understanding with your Management Service Provider or vendor regarding how the inventory process works is essential to program compliance. With effective oversight, a health center can help prevent such issues as drug substitutions, positive inventory, etc. Drug Substitutions The health center must ensure that appropriate safeguards are in place to prevent drug substitution. Replenishment models use an 11-digit-to-11-digit National Drug Code (NDC) match. Ordering a different NDC than the one dispensed and determined to be 340B eligible is considered non-compliant. Wholesaler accounts should be restricted to disallow automatic substitutions of an equivalent drug when the drug dispensed / ordered is not available. Policies and procedures must define what actions will be taken if a pharmacy is found to have replenished its inventory with a substituted NDC number. Slow Movers Drugs dispensed under the 340B Program which have not reached a full package size or are no longer available for replenishment are termed slow movers. Drugs with no dispense activity for 120-180 days (the period typically identified in Provider and Management Service Agreements) are also considered slow movers. A policy must be in place to address how to reimburse pharmacies for drugs that were included in the 340B Program, but which have not been replenished. Depending on the Management Service Provider and pharmacy relationship, there are two primary options for how this situation may be handled: 1. Void the Transaction All dispense transactions affected by NDCs listed in the slow mover report can be voided so the balance of that drug is zero in the virtual inventory. In essence, this reverses the script from the 340B Program. Pharmacy transaction fees are typically retained, and the management service provider may or may not charge for the void processing. 2. Reimburse Pharmacy Drug Cost If a 340B-covered drug is out of stock or is no longer available in the marketplace, the health center can reimburse the pharmacy for the actual cost of the drug, as determined by the wholesale acquisition cost (WAC). Voids, Mistakes, and Errors The health center and Management Service Providers are responsible for tracking and maintaining 340B inventories as identified in the MSA agreements. Policies must be in place that outlines the processes for monitoring 340B inventory and for correcting voids, mistakes, and errors. National Association of Community Health Centers 10

Positive Inventory NDCs that cannot be reduced through future dispensing activity are considered positive inventory. Over-replenished drugs or positive inventory typically result from voids, mistakes, or errors. To bring inventory back to zero, several options can be considered depending on the circumstances: 1. Return of 340B Drugs - Drugs can be returned by the contracted pharmacy to the 340B wholesaler account if within wholesaler guidelines for returns. 2. Credit / Rebill - If physical inventory is not available and the wholesaler agrees, a credit can be placed on the 340B wholesaler account and a rebill applied to the contracted pharmacy s retail account. This activity is time sensitive (example: 60-90 days) and varies by wholesaler. It is important to understand your wholesaler s guidelines in regard to this process. 3. Destroy Drugs Utilizing a third party vendor to destroy drugs and retain documentation is another option, if cost is reasonable. 4. Other Options For unique circumstances, seek guidance from the OPA: Call: 1-888-340-2787 or E-mail: ApexusAnswers@340bpvp.com Inventory Summary Ultimately, one staff member from the health center should be responsible for the monthly review of inventory reports provided by your Management Service Providers. Health centers can expect audit inquiries on internal purchasing and dispensing controls to monitor inventory. Auditors will also assess the knowledge and understanding of each staff member responsible for monitoring inventory. It is important to maintain updated policies and procedures for each unique pharmacy relationship, to support your entity s inventory monitoring system. National Association of Community Health Centers 11

Provider List One of the key strategies for a successful audit is to actively review and update the health center s list of eligible providers. This is the first layer of a compliant program and a vital data element that vendors use to filter data and determine eligibility. The provider list should be updated at least monthly and distributed to all Management Service Providers and pharmacies. Eligibility Issues Here are some common situations that may require additional scrutiny by the health center: A provider is no longer 100% employed or under contract with the health center A provider has a private practice and works for the health center A provider works for multiple health centers Some of a provider s services are outside the scope of the center s grant funding Management Service Providers and contracted pharmacies have varying filtering logic structures that could be compromised by an out-of-date provider list. In addition, an updated provider list can help the health center avoid potential compliance problems by ensuring that the center is maximizing the eligible script capture rate from its providers, which can directly influence the program s profitability. Staff vs. Contracted Providers: Referral Relationships Policies should be developed to address the issue of contracted providers who are not solely employed by the health center. Providers working elsewhere in the community might also write scripts for non-340b eligible patients. Establishing and defining clear business rules for the inclusion / exclusion of contracted providers according to the pharmacy partner s capabilities will help ensure ongoing program compliance. It is highly recommended that targeted internal audits be conducted by the covered entity to validate that appropriate procedures are in place and related outcomes are as anticipated. 340B University (noted both above and in the Resources section at the end of this manual) provides additional online guidance on this topic; see 340B Policy to Practice Guide - Patient Definition: Referral Relationships, available for viewing and downloading at: https://docs.340bpvp.com/documents/ public/resourcecenter/all_entity_policy_practice_referral_relationships.pdf National Association of Community Health Centers 12

Wholesalers A drug wholesaler is a company that provides drugs to covered entities, serving as the distributor between the drug manufacturer and the entity. The wholesaler will also directly ship entity-purchased drugs to contracted pharmacies. Wholesalers have an important role in supporting 340B Program integrity; they are responsible for opening accounts with eligible entities only, delivering correct pricing to 340B entities, and properly processing chargebacks with manufacturers. Below are some key areas to consider when working with the wholesaler, both for set-up / follow-through and to maintain program compliance. Applications An application with all required attachments is needed each time a new pharmacy relationship is added to the program. Wholesalers will accept this application only after the contracted pharmacy s information is visible on the OPA database. Note that pharmacies may be registered only during open quarterly periods (from the 1 st - 15 th days of January, April, July, and October of each year). Accounts Account numbers must be assigned before pharmacies can go live. Note that the account set-up process can take several weeks to several months for completion. The health center should at all times have an up-to-date record of all wholesaler account numbers. Ordering Responsible parties tasked with placing drug orders must have access to correct account numbers. Management Service Providers have dispensing, replenishment, and accumulator reports that should correspond to ongoing purchases of 340B drugs. The health center should routinely validate that only 340B-eligible drug purchases correspond with the entity s reporting. Invoices The covered entity must have a routinely-validated process to ensure that all invoices are received. These invoices must then be reviewed to verify that they are consistent with what the health center has actually ordered. In addition, drug pricing should be periodically reviewed for anomalies. If there are any pricing disputes, that cannot be resolved after a good faith attempt between the manufacturer and entity, HRSA can assist by initiating an informal dispute resolution process. Additional details and resources can be found on the HRSA website: http://www.hrsa. gov/opa/manufacturers/pharmaceuticalpricingagreement.pdf. Payment The health center must ensure that all wholesaler invoices are paid in a timely manner. Give special attention to payment terms, to avoid potential extra charges or account suspension. National Association of Community Health Centers 13

Duplicate Discounts A duplicate discount occurs when a drug manufacturer provides both a 340B Program discount and pays a Medicaid rebate to the state on the same drug. Since this is specifically prohibited by 340B Program regulations, it is critical that the health center avoid any such duplicate discounts. Entities may choose to carve in (include) or carve out (exclude) Medicaid and Medicaid Managed Care from their 340B program. How are duplicate discounts handled? A duplicate discount occurs when a drug purchased with a 340B discount is subject to a state Medicaid rebate. To prevent this from occurring, OPA developed the Medicaid Exclusion File. Entities using 340B Program drugs for Medicaid patients must note this in the OPA 340B Program database and must list their Medicaid billing number / National Provider Identifier (NPI) in this Medicaid Exclusion File. Some States use the Medicaid Exclusion File to identify entities using the 340B Program for Medicaid patients; in such cases, the state removes pharmacy claims associated with these entities from rebate requests. Medicaid and Medicaid Managed Care Organizations (MCOs) To avoid duplicate discounts, each covered entity is responsible for correctly identifying and effectively precluding 340B Program prescriptions from being claimed via the state s Medicaid rebate. A health center must also ensure consistent treatment for Medicaid Managed Care Organizations (MCOs). Key related issues include the following: Each state has different policies regarding when they seek Medicaid rebates on pharmacy claims. A health center must understand its own state s policies and must verify that the policies / procedures in place for the health center s 340B program align with those practices. 340B Program drug purchases should only be used in a contract pharmacy situation for Medicaid patients if there is a specific process to prevent duplicate discounts. The center should internally audit this process regularly for each pharmacy relationship, to ensure ongoing 340B Program compliance. National Association of Community Health Centers 14

340B & Audit Readiness: A Mini Self-Assessment Read the following questions and note your responses, as helpful guidance to your health center s 340B program and related audit readiness. With respect to your organization, is each statement: completely true (Yes), partially true (Part), not at all true (No), or you don t know (DK)? Internal Audits Staffing Roles Provider List OPA Database Medicaid MCOs Inventory/Slow Movers Purchasing, Ordering, and Invoice Processing Orphan Drugs Does your organization conduct internal audits of your overall 340B program at least twice a year, as well as selected target audits on key providers? Does your organization have key staff identified to take responsibility for the compliance of your 340B program? Is your provider list updated monthly? Does your organization notify Management Service Providers and partner pharmacies of any changes regularly and consistently? Does the list clearly identify solely employed vs. contract providers? Is your organization registered on the OPA database, with all child sites and partner pharmacies? Do your Authorizing Official and other key staff members review this database for accuracy and completeness prior to recertification? Does your organization understand how the state handles Medicaid and Medicaid MCOs as they relate to the 340B program? Does your organization review monthly drug inventory reports? Does it understand how the slow mover process works within all partner pharmacy relationships? Does your organization review drug purchases made on your 340B account? Has Finance reconciled inventory reports to balance sheet accounts? Are you being paid by partner pharmacies and/or Management Service Providers per contract guidelines? Does your organization carve-in Orphan Drugs? If so, is there a process in place to ensure that 340B-eligible scripts are procuring these drugs for appropriate purposes? Yes Part No DK Yes Part No DK Yes Part No DK Yes Part No DK Yes Part No DK Yes Part No DK Yes Part No DK Yes Part No DK National Association of Community Health Centers 15

Prepare for These Questions The questions below are intended to be thought-provoking to health centers Authorizing Officials and other key staff members responsible for compliance with the 340B Program. They have been collected from HRSA and independent auditors who reviewed a contracted pharmacy virtual replenishment business model. A health center s policies / procedures should address these questions, the answers to which are unique to each entity and pharmacy relationship. The purpose of reviewing these questions is simply to validate that key staff responsible for 340B Program compliance and recertification have a thorough understanding of the entity s program. 1. Are all contract pharmacies registered on the 340B OPA database? Are all registered contract pharmacies being utilized? 2. How do contract pharmacies ensure that only patients of a covered entity receive 340B drugs purchased by that entity? 3. How do contract pharmacies determine that only providers who are employed by and/or contracted with the covered entity are submitting prescriptions for the entity s patients? 4. If an ineligible provider gets into a transaction file, how does this get identified and rectified? 5. What internal controls are used by contract pharmacies to segregate and track 340B drugs from non-340b, non-entity pharmacy stock? 6. What is each contract pharmacy s replenishment process? Do they utilize an 11-digit-to-11-digit NDC match? If not, how does the alternative process comply with 340B Program guidance? 7. Does each contract pharmacy location conduct an annual wall-to-wall physical drug inventory? Do they share the results with the covered entity? 8. If the covered entity carves out, how does it prevent Medicaid drugs being accumulated? 9. Have any discrepancies been found in monthly reporting? If so, in what areas? How are these discrepancies addressed? 10. How do contract pharmacies know when to re-order drugs? National Association of Community Health Centers 16

Example: 340B Program Audit Policy Introduction (Health center name) has registered with the Federal Office of Pharmacy Affairs (OPA) as a 340B Program Covered Entity. The center contracts with retail pharmacies in the community to provide pharmaceutical services to patients and to administer the Federal 340B Drug Pricing Program for discounting drugs to eligible patients. The health center abides by all prohibitions and requirements of the 340B Program as stipulated in the Federal Register: Vol. 75, No. 43 (March 5 2010). To ensure full compliance with 340B regulations, the center has adopted the following audit processes: 1. To prevent resale of 340B drugs, contract pharmacies have adopted a replenishment model in which a 340B drug is re-ordered only after it has been dispensed to eligible patients. 2. To prevent diversion of 340B drugs to non-eligible patients, internal audits of contract pharmacy dispensing records exclude prescriptions not written for health center patients by health center providers or authorized referral prescribers. 3. To prevent duplicate discounts, internal audits of contract pharmacy dispensing records exclude prescriptions reimbursed by Medicaid, Medicaid Managed Care Organizations (MCOs), AIDS Drug Assistance Programs (ADAPs), and Family Health Plus (FHP). When implementing a new contract pharmacy arrangement, an initial audit of (#) scripts per pharmacy site is selected from all 340B prescriptions dispensed during the first (#) months. This audit is conducted to ensure that there are no prevalent issues. To ensure continuing compliance, additional audits are conducted every (#) months; these audits verify that 340B drugs are dispensed to individuals who meet the definition of patient per the Federal Register: Vol. 61, No. 207 (October 24 1996). National Association of Community Health Centers 17

Auditing Procedures have been developed to verify the following: 340B Regulation 1. The individual receives a health care service or range of services from the covered entity consistent with the service or range of services for which grant funding or Federally Qualified Health Center look-alike status has been provided. 2. The individual receives health care services from a health care professional who is either employed by the covered entity or provides appropriate health care (e.g., referral for consultation) such that responsibility for the care provided remains with the covered entity. 3. The covered entity has established a relationship with the patient such that the entity maintains records of the individual s health care. 4. Situations are prevented in which a drug is subject to both the 340B discount and a Medicaid rebate claim. 5. Auditable records are maintained to demonstrate ongoing 340B Program compliance. Audit Methodology 1. Verify that the 340B drug is the result of service provided at the health center, and that the service is within the approved scope of the center s program. 2. Verify that the prescriber is employed or otherwise authorized by the health center at the time the prescription was written. 3. Verify that the patient has a medical record at the health center. 4. Perform monthly review of contract pharmacy dispensing reports to ensure exclusion of all prescriptions where a claim is submitted to Medicaid. 5. Perform monthly review of detailed dispensing reports for all 340B prescriptions from the Management Service Provider (for the contract pharmacy or in-house pharmacy); verify that the contract pharmacy dispensing system is auditable based on terms stipulated in the Pharmacy Service Agreement. National Association of Community Health Centers 18

Sample Template: Internal Audit Form (Use to Record Audit Results) Site: Covered Entity Name Contract Pharmacy: Pharmacy Name Sample Size: # Scripts Auditors: Person(s) Conducting Audit Period Covered*: to (* Recommended interval = No longer than 6 months) 1. Rx Number 2. Health Center Patient 3. Authorized Prescriber 4. Encounter Documented 5. Medicaid / MMCO / ADAP / FHP (Insert #) Yes / No Yes / No Yes / No Yes / No #12345678 #12345678 #12345678 Audit Key 1. RX Number Note specific script identifier, per pharmacy. 2. Health Center Patient Verify that patient has a medical record at the health center. 3. Authorized Prescriber Verify that prescription was written by an eligible provider (health center employee or authorized referral). 4. Encounter Documented Verify that last date patient seen at the health center is within one year of script s written date. 5. Medicaid / MMCO / ADAP / FHP Verify whether or not script is subject to any other drug discount / rebate mechanism, per state Medicaid guidelines and other program parameters. National Association of Community Health Centers 19

Summary of Internal Audit Results Purpose: To summarize the steps taken to validate compliance with 340B Program regulations. Note any noncompliant situations. The bottom sections (Action Plan / Audit Conclusion) are of primary importance; specify a detailed action plan, an appropriate timeline, and a communication plan to remedy any non-compliant areas (with responsible persons clearly identified). 340B Program Requirements 1. The individual receives a health care service or range of services from the covered entity consistent with the range of services for which grant funding or Federally-Qualified Health Center look-alike status has been provided. 2. The individual receives health care services from a health care professional who is either employed by the covered entity or provides health care (e.g., referral for consultation) such that responsibility for the care provided remains with the covered entity. 3. The covered entity has established a relationship with the individual such that the covered entity maintains records of the individual s health care. 4. Situations are prevented in which a drug is subject to both the 340B Program discount and a Medicaid rebate claim. 5. Auditable records are maintained in order to demonstrate 340B Program compliance. Observations 1. Clinical documentation should exist in patients electronic medical records indicating that services are within the entity s scope of service (within one year of scripts written dates). Findings: XXXX 2. Prescriptions should be written by a health center employee or otherwise authorized prescriber. Findings: XXXX 3. A medical record should exist for all patients in the sample. Findings: XXX 4. All scripts should not have payment made by Medicaid, MMCO, ADAP, or FHP. Findings: XXXX 5. Weekly and monthly reports of all 340B prescriptions should be maintained by the covered entity. E-scripts should also be maintained in the Electronic Health Record. Findings: XXXX Action Plan (List action plan steps, with identification of responsible persons, for all findings) Audit Conclusion (Timeline of the action plan; communication plan; contact information) National Association of Community Health Centers 20

Resources Health Resources & Services Administration (HRSA) http://www.hrsa.gov/index.html (HOME PAGE) HRSA 340B Drug Pricing Program / OPA http://www.hrsa.gov/opa/ Prime Vendor Program (PVP / Apexus) https://www.340bpvp.com/controller.html 340B University (Apexus) https://www.340bpvp.com/340b-university/ PVP Resource Center (Apexus) https://www.340bpvp.com/resource-center/ OPA 340B Program User Guides http://opanet.hrsa.gov/opa_mod/userguides.aspx National Association of Community Health Centers 21