Join Justin Ott and Jerame Hill, as they discuss Visante’s strategies for 340B optimization.
Join Kristin Fox-Smith, MPA, 340B ACE, as she discusses why a covered entity should partner with Visante for their 340B program audits.
Written by: Kristin Fox-Smith (Senior Vice President) and William Wood (RPh, Senior Director)
Those of us actively engaged in the 340B Program are well aware of the scores of issues faced by participating hospitals and it’s not surprising they account for an exceptionally large percentage of all HRSA audits. But, what about other types of Covered Entities (CEs), such as the Specialty Clinics and Grantees? These important CEs are also subject to HRSA audits and face the same severe penalties for non-compliance, including the possibility of repayments to manufacturers.
Over the last decade, Visante‘s industry leading 340B Program Assessment and Integrity Audit Readiness has been successfully implemented in virtually all types of grantees. As a result of our experience in this specialized area, we are pleased to provide our NEW “Need to Know” series of key takeaways for grantees.
We plan to offer this “Need to Know” series over a period of a few months. This schedule will give us the opportunity to add new information as changes in the 340B Program dictate.
HINT: You may want to start by reading our Visante Insider blog titled Manufacturers Create Chaos For the 340B Program from August 21.
Ready? Here is our first “Need to Know” blog for new grantees.
Need to Know #1: You’re new!
Okay, you know that. What else do you know and what do you need to know?
What do you know about the 340B Program? More specifically, what do you know about grantees such as yours?
What do you know about your role? Are you:
- An Authorizing Official (AO)? If so, do you know your role and responsibilities?
- A Primary Contact (PC)? Do you fully understand your role and responsibilities and how they differ from the AO?
- A healthcare provider? How do the 340B rules and regulations impact your role?
- A board member of your newly eligible organization? Did you even know that your organization is newly enrolled in the 340B Program?
- One of the many other 340B stakeholders?
- Medical records
As you can see, there is a lot that a 340B newcomer needs to know. Undoubtedly, you had to learn a lot to enable your covered entity to enroll. Is there more? You bet there is, keep reading!
Takeaway: Newcomers to the 340B Program have a lot to learn. Visante can help!
Need to Know #2: The grant
Non-hospital types of organizations include a variety of health centers, Ryan White HIV/AIDS Program Grantees, and several types of specialized clinics. Some of them receive direct funding while others receive grants. These organizations will be referred to collectively as grantees as they all have similar 340B requirements.
ALL grantees may utilize 340B drugs only within the scope of their grant.
This leads us into Need to Know #2: The grant
Have you read your grant? What is the scope of your grant? For some types of grantees this may be quite limited and easy to define. For others it may not be so straight forward.
A Comprehensive Hemophilia Treatment Center, for example, is expected to provide optimal care using a multi-disciplinary team approach that provides accessible, family-centered, continuous, comprehensive, coordinated and culturally effective care for individuals with hemophilia and other bleeding disorders. As such, the only 340B drugs that would be included in the scope of their grant would be antihemophilic factor VIII or factor IX or other drugs to treat bleeding disorders.
On the other hand, grantees such as Federally Qualified Health Centers (FQHC)
provide primary care services in underserved areas. Primary care services encompass many different drugs which makes utilization within the scope of the grant large. Referrals to outside specialists could even qualify, assuming that the FQHC maintains the appropriate auditable records.
What is the term of your grant? The HRSA Notice of Award will specify a “project period” and will include several terms and conditions, including reporting requirements. What is the grant number? This can be found on Line 4B of the HRSA notice of award. Does it match the grant number shown for your organization of the Office of Pharmacy Affairs Information System (OPAIS)?
What is OPAIS? Keep reading, we will discuss that a bit later.
If your entity is selected for a HRSA 340B integrity audit the grant will be among the documents requested. Do you know where it is and how to obtain it?
Takeaway: Grantees may utilize 340B drugs only within the scope of their grant. Do you fully know the scope of your grant?
Need to Know #3: Navigating OPAIS
What is this OPAIS we mentioned above? OPAIS stands for Office of Pharmacy Affairs Information System.
The 340B registration and pricing databases are collectively known as the 340B Office of Pharmacy Affairs Information System (340B OPAIS). Authorized users of 340B OPAIS must have a user account with appropriate roles and permissions granted by HRSA. The functions a user can perform are determined by the user’s role. Until the user logs in, the user may only access the Public User Guides, Public Search, Reports/Files, and Login functions.
Authorized users may use OPAIS to initiate Covered Entity/Manufacturer registrations, change requests, or to respond to annual recertification requests.
Public users only have access to a limited selection of the system’s capabilities which include a variety of search criteria to search for Covered Entities (CEs), Contract Pharmacies (CPs), and Manufacturers (MFRs). Public users can also review and download a variety of available reports and files.
Now that you know what the OPAIS is, why do you need to understand it?
Among the findings that HRSA may issue following an audit is one for failure to maintain the accuracy of the covered entity’s information as it appears on the OPAIS. This can occur for things as seemingly minimal as incorrect entries for address, site ID, and name for offsite outpatient facilities. HRSA has been known to issue this finding even when the address for a contract pharmacy shown on the OPAIS differed from that on the contract by a little as a suite number!
A review of all of your OPAIS information should be part of your internal audit process and should include verification of:
- the name of your entity including address and shipping addresses, type of entity, and 340B ID number
- your grant number
- your AO and PC including their contact information
- your Medicaid billing status including whether you are carved in or carved out and all NPI and Medicaid billing numbers if you are carved in.
- If you are carved in you MUST also check the Medicaid Exclusion File (MEF) to verify the NPI and Medicaid billing numbers for all participating sites
- ALL contract pharmacies including proper addresses
Takeaway: Review of the OPAIS is a task that is fairly simple to accomplish. Don’t risk a HRSA audit finding for something this easy!
Written by: Kristin Fox-Smith (Senior Vice President), Douglas E. Miller (PharmD, Senior Director), William Wood (RPh, Senior Director)
In recent weeks, several drug manufacturers announced plans to discontinue offering 340B drugs to contract pharmacies. These actions, in addition to plans by some manufacturers to require Covered Entities to upload contract pharmacy claims to a new and unproven vendor’s software platform, have created new challenges to 340B Covered Entities already burdened by the COVID-19 pandemic.
It comes as no surprise to those of us who have worked with the 340B program for many years that these actions began almost immediately after the Health Resources and Services Administration (HRSA) stated that HRSA’s power to enforce 340B guidance is limited.
At the recent 340B Coalition Virtual Conference; Admiral Krista Pedley, Director of HRSA’s Office of Pharmacy Affairs (OPA) stated: “HRSA’s enforcement ability is limited, as guidance does not provide HRSA appropriate enforcement capability.” This statement came shortly after the U.S. House Appropriations Committee turned down HRSA’s request to give it broad regulatory authority over the 340B program.
Was HRSA’s announcement that its authority is limited what the drug manufacturers have been waiting for? The following statement from the highly regarded “340B Report” seems to think so: “The wave of drug manufacturer activity all appears to trace back to HRSA’s position that it cannot enforce its 340B program guidance absent a clear violation of the 340B statute.”
The first “salvo” was fired by Merck in late June. Merck issued strongly worded “requests” that 340B Covered Entities start submitting a wide array of 340B contract pharmacy claims data as part of what the company calls a new “integrity initiative.” Part of Merck’s letter involves requests for commercial, Medicare Part D, and Medicaid managed care claims data that are beyond the scope of the 340B statute. In the letter, Merck asked Covered Entities to begin uploading contract pharmacy claims data every two weeks into a new and unproven vendor’s software platform, 340B ESP platform of Second Sight Solutions. Second Sight Solutions is a prescription drug information technology company that collects 340B contract pharmacy claims data on manufacturers’ behalf.
Although the company letter was described as a request, Merck said it might take “less collaborative, and substantially more burdensome” action against uncooperative entities. It asked entities to begin supplying the requested data by August 14.
Those of us that follow 340B closely might have heard of 340B ESP’s founder, Aaron Vandervelde. As Managing Director of Berkeley Research Group (BRG), he has written or co-written articles about the 340B program on behalf of Pharmaceutical Research and Manufacturers of America (PhRMA). He has also done work for the drug-company-led advocacy group AIR 340B and the trade association for private practice oncologists Community Oncology Alliance (COA). PhRMA, AIR 340B, and COA cite Vandervelde’s research in arguments that hospitals benefit from the 340B program, but low-income and uninsured patients do not, and that the program raises the cost of cancer care.
The next drug manufacturer to announce a similar plan was Sanofi. The letter sent from Sanofi to covered entities stated: “Sanofi will require 340B covered entities to submit claims data for 340B prescriptions of Sanofi products filled through its contract pharmacies.” The letter goes on to say “340B covered entities that elect not to provide 340B claims data will no longer be eligible to place Bill To / Ship To replenishment orders for Sanofi products dispensed through a contract pharmacy.”
The letter adds, beginning October 1, entities must submit the requested data to 340B ESP, the same contractor Merck is using, every two weeks. HRSA’s only comment to date states it “is aware of Sanofi’s requests to covered entities and is working to better understand their plan.” We hope to receive updates from HRSA in the near future as it relates to these types of manufacturer changes.
Yet another drug manufacturer, Novartis, has now announced that it intends to begin collecting and analyzing 340B Covered Entities’ contract pharmacy claims data to mitigate duplicate 340B drug discounts and “ineligible rebates.” As recently as August 18, Novartis declined to address reports that it is joining Merck and Sanofi as clients of Second Sight.
In a similar policy release on August 17, AstraZeneca sent letters to 340B Covered Entities and their wholesalers informing them that, effective October 1, it “only will process 340B pricing through a single contract pharmacy site for those covered entities that do not maintain their own on-site dispensing pharmacy.” In the event a Covered Entity does not have an owned outpatient pharmacy, they will need to make a selection of only one contract pharmacy to limit their bill to/ship to arrangements.
So far HRSA’s only comment has been “We are in the process of reviewing the information.”
In addition to the above-named manufacturer actions; AstraZeneca and Eli Lilly announced restrictions to sales of their products to contract pharmacies.
Lilly took the first step when it said it would only allow contract pharmacies to get discounted units of Cialis if a 340B provider did not have an in-house pharmacy.
Following the Lilly announcement, AstraZeneca informed Covered Entities that, starting Oct. 1, it no longer will offer 340B pricing to Covered Entities with on-site outpatient pharmacies for any of its drugs dispensed through contract pharmacies.
In response to Lilly’s action, 340B advocacy organization 340B Health sent Lilly a letter stating that “we believed its policy change was contrary to the 340B statute” and requested a meeting with company officials to discuss further. Lilly declined a follow-up meeting and insisted that it is on firm legal ground in cutting off access to program discounts through contract pharmacies.
AstraZeneca said it believes the change is consistent with HRSA guidelines and operative 340B statutory provisions in a written statement.
An article published in Modern Healthcare on August 19 made the following statement: “Pharmaceutical companies appear to be testing how far they can challenge sub regulatory guidance issued by the Health Resources and Services Administration that allows 340B providers to receive discounts for working with multiple contract pharmacies.”
As we stated above, it does appear obvious that the drug manufacturers are indeed testing how far they can go in challenging HRSA’s lack of statutory enforcement authority.
COVID-19 implications for 340B
The Secretary of the Department of Health and Human Services (HHS) Alex Azar, declared a public health emergency under the Public Health Service Act (PHSA) on January 31, 2020, to aid the nation’s healthcare community in responding to 2019 novel coronavirus. The declaration stated in part, “The emergency declaration gives state, tribal, and local health departments more flexibility to request that HHS authorize them to temporarily reassign state, local, and tribal personnel to respond to 2019-nCoV if their salaries normally are funded in whole or in part by Public Health Service Act programs. These personnel could assist with public health information campaigns and other response activities.”
On March 13, 2020, the President declared a public health emergency under the National Emergencies Act, a move that frees up billions of dollars in federal funds and sets the Federal Emergency Management Agency in motion.
As a result of the COVID-19 pandemic and concerns voiced by many Covered Entities, HRSA issued the following statement: HRSA understands that many 340B stakeholders are concerned about the evolving impact of the COVID-19 pandemic. The circumstances surrounding this public health emergency may warrant additional flexibilities, especially to affected 340B covered entities. To the extent a 340B stakeholder has a specific circumstance where they believe their COVID-19 response may affect their compliance or eligibility in the 340B Program, the stakeholder should contact the 340B Prime Vendor at 1-888-340-2787 (Monday – Friday, 9 a.m. – 6 p.m. ET) or firstname.lastname@example.org . The 340B Prime Vendor will coordinate with HRSA to provide technical assistance and evaluate each issue on a case-by-case basis. Below are general flexibilities that covered entities should adhere to during this public health emergency.
In response to the COVID-19 pandemic, HRSA has issued several positions of flexibility including:
- Record keeping
- Temporary expansion sites
- 340B audits
With respect to the GPO Prohibition, HRSA has issued the following statement:
HRSA is unable to waive the 340B statutory requirements, specifically with respect to the Group Purchasing Organization (GPO) prohibition pursuant to section 340B(a)(4)(L)(iii) of the Public Health Service Act. Hospitals that are subject to the GPO prohibition include disproportionate share hospitals, children’s hospitals, and freestanding cancer hospitals.
These hospitals may not use a GPO for covered outpatient drugs at any time, including private label products. However, if a hospital is unable to purchase a covered outpatient drug at the 340B ceiling price, the covered entity should first try to obtain the drug at wholesale acquisition cost (WAC). If it is also unable to purchase the product at WAC due to shortages, a hospital may use a GPO (or GPO private label products). Hospitals do not need to report this information to HRSA under the COVID-19 public health emergency. The covered entity should address these situations in their policies and procedures, and it must continue to keep auditable records. This is a significant change, and appropriate documentation and record keeping is critical for compliance success in regard to this allowance.
In a webinar presented by PPSV on April 3, the following statement was made concerning Relaxed Documentation Standards for Patient Definition:
- OPA will accept an abbreviated medial record, self-reporting of patient medical and insurance information, and contact information for volunteer health workers to support patient relationship
- These relaxed documentation standards apply to all health care visits, not just telehealth
A webinar presented by 340B Health on April 2, 2020, discussed several recent HRSA audits that indicate more flexibility in defining the location where a prescription is written.
In addressing COVID-19 and Patient Definition it stated:
- Covered Entities should address definition of a 340B patient during an emergency in Policies & Procedures
- Care is being provided by a health care professional employed by the hospital or under a contractual or other relationship or arrangement (e.g. referral for consultation); and
- The hospital owns the medical record or has joint access to the medical record with the professional providing the care
- If an abbreviated health record such as a single form or note page is maintained during a public health emergency, the record, at a minimum:
- Identifies the patient
- Records the medical evaluation, including any testing, diagnosis, or clinical impressions, and the treatment provided or prescribed
In addition, it stated that HRSA:
- Appears to be more flexible around location where prescription is written
- May not be required to be written on the premises; not tied to receiving referral notes from non-hospital clinics
- The covered entity must still show:
- Patient received services at the hospital documented in the medical record
- Hospital owns, or has access to, the record that documents the care
- No change related to infusion orders o
- May be written by outside providers; hospital does not need to have access to records maintained by outside providers but must administer the infusion to the patient and document the procedure
A 340B Health webinar titled COVID-19 Webinar 340B Flexibilities on April 7 discussed several new HRSA flexibilities related to the COVID-19 pandemic. The webinar addressed several enrollment flexibilities including:
HRSA, upon request and review, is allowing some entities to immediately enroll in 340B. Case-by-case requests are to be submitted to the 340B Prime Vendor Apexus at 1-888-340-278 for:
- Immediate registration of facilities and contract pharmacies
- Temporary moving of clinics from within a hospital’s four walls
The request must include
- confirmation that the need for immediate registration is related to the hospital’s response to COVID-19
- a detailed explanation of the urgency for immediate registration
- a specific description of what the facility will be used for
- and confirmation that the facility is listed as reimbursable on the Medicare Cost Report and meets all other 340B program requirements
The HRSA website, under the COVID-19 Resources section, provides the following statement: HRSA understands that the use of technology in health care delivery during this time is critical, and that telemedicine is merely a mode by which the health care service is delivered. For the 340B Program, HRSA recommends that covered entities outline the use of these modalities in their policies and procedures and continue to ensure auditable records are maintained for each eligible patient dispensed a 340B drug.
Although HRSA has previously stated that telemedicine is merely a mode by which the health care service is delivered, there have recently been significant changes to telehealth rules and regulations in response to the COVID-19 pandemic that offer increased flexibility to 340B covered entities.
Specific new advantages include:
- Waiving Medicare coverage for telehealth services regardless of whether patient is in a rural area
- Waiving the “originating site” requirement, meaning services can be provided to beneficiaries in any healthcare facility, as well as in their home.
New Telehealth covered services now include:
- Emergency department visits
- Observation day management
- Critical care
- Home visits
- Intensive care
- Radiation treatment management
- Established Patient Requirement Eliminated for:
- Remote patient monitoring
- Telephone calls and virtual check-ins
- Digital e-visits
- Medicare pays the same amount for telehealth services as it would if the service were furnished in person.
Visante strongly recommends that all Covered Entities be vigilant to HRSA’s recommendation that Covered Entities outline the use of these modalities in their policies and procedures and continue to ensure auditable records are maintained for each eligible patient dispensed a 340B drug.
Temporary Expansion Sites
The 340B Health webinar referenced above also discussed recent CMS guidelines to permit hospitals to provide inpatient and outpatient services in locations beyond their existing walls, including:
- Ambulatory surgical centers
- Free-standing emergency departments
- Inpatient rehabilitation hospitals
- Hotels and dormitories
Notably, CMS considers services provided in temporary expansion sites to be “hospital based.”
HRSA has made the following statement regarding 340B audits: Based on the current COVID-19 pandemic, HRSA is moving towards conducting 340B Program covered entity audits remotely (virtually) for the next several months while we monitor and assess the impact on the covered entities. If a covered entity has specific questions regarding an audit once it has been engaged, please contact the Bizzell Group (the 340B audit contractor) at email@example.com who will coordinate with HRSA based on the specifics of the request. HRSA will continue to monitor the COVID-19 response and provide updates accordingly.
Due to the time constraints encountered in dealing with the COVID-19 pandemic, 340B Health requested postponement of the 340B compliance audits. HRSA responded stating:
- Onsite audits will be changed to virtual review
- Case-by-case accommodations may be granted as requested:
- additional preparation time
An article in the May 15 issue of Modern Healthcare reported that some safety-net hospitals are concerned that delays of non-urgent procedures due to the COVID-19 pandemic could make them ineligible for the 340B drug discount program.
The article stated that hospitals are concerned drastic changes in the number of patients treated could alter their payer mixes and temporarily change their 340B eligibility. Obviously, the opposite effect could also occur. Depending on the long-term economic impacts of the pandemic, there is also a chance that more facilities might become eligible if their Medicaid patients increase.
Shahid Zaman, a principal policy analyst at America’s Essential Hospitals, stated “HRSA has some discretion over enforcement. So far, the agency has only said that hospitals concerned about their eligibility should reach out to Apexus, the 340B Prime Vendor, for technical assistance on a case-by-case basis.”
The hospital demands have gained some traction with lawmakers. Sen. Ben Sasse (R-Neb.) in April introduced a bill to pause 340B redeterminations, and a bipartisan group of 121 House lawmakers asked congressional leadership to give hospitals extra flexibility in the event their payer mixes change. However, the proposal was left out of the House Democrats’ fifth COVID-19 legislative package.
The COVID-19 pandemic has resulted in several flexibility changes that affect 340B covered entities. These changes have been made by both HRSA and CMS.
While the changes may certainly be beneficial to covered entities, Visante cautions ALL TYPES of covered entities that such changes are NOT permanent. The pandemic crisis that created the need for many flexibilities will end at some time. Will the flexibilities also end? Will there be a period during which some flexibilities may be terminated while others continue? Time will tell.
Visante strongly suggests 340B Covered Entities understand that at some point rules and guidelines made more flexible will revert to those in effect prior to the COVID-19 pandemic. Visante also urges Covered Entities to address all of the new flexibility situations in their policies and procedures and to continue to maintain auditable records.
340B Drug Pricing Program COVID-19 Resources
HRSA website March 2020 FAQ
Telehealth and Covid-19 PPSV Webinar April 3, 2020
340B Health Audit Trends Webinar April 2, 2020
340B Health COVID-19 Webinar May 7, 2020 340B Flexibilities
Your 340B Report for Thursday April 16, 2020
Modern Healthcare May 15, 2020
Surprise move by HRSA creates expedited 340B pathway for new provider-based off-site locations
In a surprise and significant move, 340B Health announced that according to information they have received from HRSA, hospitals will no longer have to wait until new provider-based off-site locations appear on a filed Medicare cost report (MCR) to be eligible to participate in the 340B program. This change would materially impact hospitals time to use 340B drugs for eligible patients in those locations and could reduce that time by up to 22 months, which would create valuable savings to help support the care of their most vulnerable patients.
Under this change, HRSA is allowing hospitals to consider patients 340B-eligible in new locations of the hospital that are reimbursable under Medicare cost reporting rules, even if the new location has not yet appeared on a filed MCR. This move supports and is consistent with HRSA’s focus on the statutory meaning of “patient,” as Medicare considers such individuals to be patients of the hospital even though they have not yet appeared on a filed MCR.
HRSA will continue to require that hospitals register these new off-site locations with the Office of Pharmacy Affairs Information System (OPAIS) once they have appeared on a filed MCR. Previously, use of 340B in a provider-based clinic that had not yet appeared on a filed MCR risked receiving a diversion finding in a HRSA audit. 340B Health has indicated that it is their understanding that hospitals no longer are at risk of receiving a diversion finding in such circumstances if they outline those situations in their policies and procedures and maintain auditable records. With this change, Visante recommends that 340B hospitals using this new opportunity under these new HRSA provisions make sure that they are auditing sufficient numbers of claims from these new locations to demonstrate full compliance with all 340B program requirements including that the hospital maintain a record of the patient’s care, maintain a relationship (employment, contractual, or other arrangement) with the health care professional treating the patient, and maintain responsibility for the patient’s care.
340B hospitals should address the use of 340B drugs in new provider-based outpatient clinics and services that are not included in the most recently filed MCR and include language in their policies and procedures that explains why patients seen in these locations are considered to be eligible patients of the hospital as outlined in the 1996 guidance (e.g., the outpatient department meets Medicare provider-based rules to be treated as part of the hospital). If a wholesale distributor will not ship 340B drugs to locations that are not registered on OPAIS, a hospital may need to ship those orders to a registered “ship to” location of the hospital and redistribute them to the eligible locations where they are needed for eligible patients. If this is the case, hospitals should maintain clear and auditable records of these purchases and transfers.
While this change will certainly help address COVID-19 pressures It is important to note that this change is intended to continue in effect after the public health emergency ends. We understand that HRSA and Apexus will update their FAQ pages to address this new information and hospitals should watch for this change in guidance documentation.
Understanding the unique role of a 340B program pharmacy buyer and inventory specialist
By Kristin Fox-Smith (MPA), Senior Vice President, Hospital & Health System Services and Eduardo Mendez, Senior Consultant
Inventory support and supply chain management are important areas for the success of hospitals and health systems. This is especially true in the case of a 340B covered entity. As such, the pharmacy buyer plays a critical role in a well-run program. In Visante’s experience, however, we see that there is often confusion concerning the role of the pharmacy buyer. This can negatively impact the program overall and so we thought it would be helpful to explain the difference in being a pharmacy buyer at a non-340B covered entity and a pharmacy buyer at a 340B covered entity.
The general role of a pharmacy buyer and inventory specialist at a non-340B covered entity is to procure, receive and maintain the appropriate inventory levels of medications utilized within their hospital and health care organization. Many people think of a pharmacy buyer and inventory specialist as a pharmacy staff member that enters orders on a wholesaler website and serves the basic function of transmitting orders. A pharmacy buyer has the challenge of keeping the right balance of an on-hand inventory to meet the patients and prescribers need, while also staying within a pre-determined medication budget. Having the analytical skills to keep the right balance is challenging, given that this role must also take into consideration the operational workflow of the pharmacy, external customers, along with other stakeholders, within and outside of the pharmacy.
A pharmacy buyer at a 340B covered entity has another layer of analytics to perform even in advance of procurement. A pharmacy buyer at a 340B covered entity must take into consideration the compliance and optimization skills necessary to support their covered entity type, along with being mindful of inventory spend and appropriate wholesaler account utilization. Critical to the success of a pharmacy buyer and inventory specialist is the understanding of 340B compliance and strategies around account set-up and maintenance, pharmacy agreements, loan and borrow, short dated drugs, and medication shortage management strategies to ensure appropriate 11-digit NDC ordering, when possible.
Given the considerations of each covered entity, 340B split billing vendor is also important, given that the management of secondary wholesalers and direct orders, along with excluded drugs and carve outs may require separate handling and audit oversight. With the complexity of moving parts within a hospital and health system’s supply chain management, it is important to provide the necessary education and training to assist pharmacy buyers and inventory specialists in being successful. Many split billing TPA’s provide specific training for a buyer and inventory management role, but many hospitals and health systems fail to create proper operational processes to document the components of the role that have an impact on overall 340B health. Visante has extensive experience supporting all types of resources within a 340B program and can provide the expertise necessary to aide inventory and supply chain staff in the areas specific to compliant inventory management.
Congress Acts to Close 340B Orphan Drug Loophole
The Closing Loopholes for Orphan Drugs Act was originally introduced by Representative Peter Welch (D) Vermont, on June 13, 2017, in a previous session of Congress, but was not enacted. The legislation was reintroduced on September 27, 2019, by Representative Welch and Representative David McKinley (R) West Virginia as HR 4538. This is a very important bill for sole community hospitals, critical access hospitals, rural referral centers, and freestanding cancer clinics to correct the situation created under the Affordable Care Act which prohibited these covered entities from purchasing orphan drugs at 340B prices. The proposed legislation is receiving support from key industry groups such as AHA and ASHP.
The Affordable Care Act (ACA) allowed for the addition of critical access hospitals, sole community hospitals, rural referral centers, and freestanding cancer centers as covered entities eligible to participate in the 340B Program. However, the ACA also prohibited the newly added covered entities from purchasing orphan drugs at 340B prices. FDA orphan drug designation is given for a specific indication related to the treatment of a rare disease in patient populations under 200,000 and orphan drug status provides incentive benefits for pharmaceutical manufacturers such as fee waivers, market exclusivity, and tax credits. The majority of drugs with orphan status are also approved and marketed for other indications outside of the orphan indication. However, under the current ACA provision no matter what the indication for the drug, if it has orphan status it cannot be purchased at 340B prices by the above referenced covered entities.
The Closing Loopholes for Orphan Drugs Act is designed to correct this situation and will allow critical access hospitals, sole community hospitals, rural referral centers, and freestanding cancer centers to purchase orphan drugs at 340B prices to treat an indication other than the orphan indication. This change will allow covered entities to use these drugs to support the intent of the 340B Program for non-orphan indications just like any other drug in the 340B Program while also preserving the benefits for manufacturers for the orphan indications.
The challenge for Covered Entities in this approach will be how to differentiate drug use and 340B purchases “by indication.” Will split-billing systems and EHRs be able to address this issue through the application of modifiers to capture eligible indications? Will this create the need for Covered Entities to include this as another element of their 340B audit process to validate compliance? Closing the orphan drug loophole certainly presents an additional opportunity for sole community hospitals, critical access hospitals, rural referral centers, and freestanding cancer clinics but it will also come with compliance challenges.
CMS Not Giving Up on 340B Based Payment Cuts
The Centers for Medicare and Medicaid Services (CMS) has not given up on attempting to take a piece of hospital 340B Program savings via reimbursement cuts. Prior to 2018, the department of Health and Human Services (HHS) determined reimbursement based on the Outpatient Prospective Payment System (OPPS) formula of average sales price plus six percent. But HHS moved to reduce payments to hospitals using 340B pricing in 2018 when it altered the OPPS formula for 340B covered entity reimbursement to average sales price minus 22.5%. This resulted in a very significant 30 percent cut for 340B hospitals.
Several hospital groups elected to sue HHS over the cuts last year. The hospital groups opined that HHS overstepped its authority when it reduced 340B reimbursements and there is no basis in law for paying 340B hospitals less than the full statutory rate. A federal judge last December sided with the hospitals and reversed the cuts because the HHS had based the new rates on agency estimates of 340B hospital drug acquisition costs and not the drugs’ average sales prices. However, hospitals were not eligible to go back and recoup their losses on the cuts to date under that ruling. 340B Health has noted that Medicare officials “can implement a remedy that is easily administered, not disruptive to the Medicare program or its beneficiaries, does not require new rulemaking, and fully compensates 340B hospitals for the amount lost due to the unlawful payment reduction,” and has called on the administration to implement a remedy that recalculates 2018 and 2019 pay rates at the full statutory rate and retroactively pays back affected hospitals with interest.
Despite the December ruling against CMS’s 340B reimbursement cuts, the agency has appealed and has plans to move ahead with the changes if successful on the appeal. If the appeal is successful, the CMS will require data on the actual prices that hospitals pay for drugs under the 340B program to calculate average sales prices and make the cuts. To reinforce this, the CMS issued a notice that it will collect this 340B pricing information. CMS indicated in it’s notice: “This will ensure that the Medicare program uses taxpayer dollars prudently while maintaining beneficiary access to these drugs and allowing beneficiary cost-sharing to be based on the amounts hospitals actually pay to acquire the drugs.”
Join Kristin Fox-Smith, MPA, as she discusses how Visante helps hospitals and 340B Covered Entities improve their revenue cycle performance within the outpatient and ambulatory services and retail services.