340B: What Should Be on Your Compliance Radar

7th Annual GHA
Officers Retreat
September 3 – 5, 2014
Reynolds Plantation
Greensboro, Georgia
340B Participation?
What is your role?
Program intent
To permit covered entities “to stretch
scarce Federal resources as far as possible,
reaching more eligible patients and
providing more comprehensive services.”
H.R. Rep. No. 102-384(II), at 12 (1992)
What is the 340B Drug Program?
• Section 340B of the Public Health Service Act
requires drug manufacturers who wished to
sell drugs to the Medicaid program to provide
reduced pricing.
What is the 340B Drug Program?
• Reduced pricing applies only to
– covered entities,
– covered patients, and
– covered outpatient drugs.
What is a covered entity?
• Facilities or programs listed in the 340B
Statute as eligible to purchase drugs through
the 340B Program and appear on the Office of
Pharmacy Affairs Database (OPA).
– A pharmacy is not an eligible 340B covered entity.
Which entities can participate?
• Hospitals
– Disproportionate Share Hospitals
– Children’s Hospitals
– Freestanding Cancer Hospitals
– Rural Referral Centers
– Sole Community Hospitals
– Critical Access Hospitals
• Community Health Centers/FQHCs
• Certain specialized clinics (STD, HIV, etc.)
Hospital DSH percentage?
• Certain hospitals must meet disproportionate
share adjustment percentages for the most
recent cost reporting period before the
calendar quarter involved:
– Disproportionate Share, Children’s, Free Standing
Cancer: > 11.75%
– Sole Community, Rural Referral Center: ≥ 8%
– CAH – no DSH requirement
Additional requirements?
• Additional requirements for hospitals
– Must be owned and operated by state or local
government, or
– Private, non-profit under contract with state to
provide care to indigent populations, or
– Be granted governmental powers
• Formal recognition to provide healthcare for medically
indigent population in state
What is a covered entity?
• Facilities or programs listed in the 340B
Statute as eligible to purchase drugs through
the 340B Program and appear on the Office of
Pharmacy Affairs Database (OPA).
– A pharmacy is not an eligible 340B covered entity.
OPA database
Compliance look-out
• Inaccurate OPA database information
– 26% of 2013 HRSA audits
– 29% of 2012 HRSA audits
– Addresses, contacts, terminated covered entities,
contract pharmacies
How can this happen?
What is a covered drug?
• An FDA-approved prescription drug, an overthe-counter (OTC) drug that is written on a
prescription, a biological product that can be
dispensed only by a prescription (other than a
vaccine), or FDA-approved insulin
• Drugs can only be dispensed to qualifying
Compliance look-out
How can this happen?
1996 definition
Compliance look-out
How can this happen?
Compliance look-out
• Ineligible patient
• Ineligible prescriber
Are employees 340B eligible?
GPO Prohibition
• Applies to DSH, PEDs and CANs
• Does not apply to CAHs, SCHs, RRCs
Why a GPO prohibition?
• Manufacturers feel that if a hospital is getting
the 340B deep discount on covered outpatient
drugs, it should not be entitled to additional
GPO discounts for covered outpatient drugs.
34OB and GPO
Compliance look-out
• Which areas in the hospital system use drugs
purchased under GPO contracts?
– Inpatient only areas
– Non-provider-based areas outside of four walls
– Inside four walls ONLY if not legally part of the
covered entity
GPO tracking requirements
Manual inventories
• Prospective purchase methodology
– Drugs purchased at the 340B discount price will
kept physically separate from all other drugs
– Drugs will be taken from the 340B manual
inventory when needed to dispense to an eligible
– Beginning and ending inventory counts should be
reconciled considering purchases and eligible
patient usage
Manual inventories
Purchase drugs at
340B prices
use of drug
Issue drug to
eligible patient
Maintain in a
Audit requirements
Beginning Inventory
Ending Inventory
Compliance look-out
• Do any of the 340B entities maintain manual
• Can they be reconciled from purchase to
dispense/administration to a patient?
Virtual inventories
• Replenishment methodology
– Drugs purchased at 340B discount can be
commingled with other drugs
– Drugs will be dispensed to patient, and dependent
upon patient type, will be tracked as a 340B
dispense (use tracking software)
– 340B dispensations will be used to support future
340B purchases
Tracking dispensations for support
or claims feed
Drug purchasing audit trail
Must have supporting dispensations
to support orders
Must have supporting dispensations
to support orders
Compliance look-out
• Are dispensations in 340B tracking software
(GPO and 340B) tested routinely for:
– Drug conversion accuracy
– Dosage compared to medical chart
– Location of patient at time of dispense
– Posting of ALL purchases
– NDC matching
NDC matching
NDC tracking requirements
• Drugs purchased to replace stock used on
340B eligible patients must bear the same
National Drug Code (NDC) 11-digit match as
the one dispensed.
• Exceptions are very limited and can be
replenished only in cases where only a 9 digit
match is available.
• This NDC-to-NDC match is difficult and
sometimes impossible to achieve.
Multiple NDCs
How do I know which
NDC was given to
patient? Since we
don’t use bar codes, I
will have to use one
NDC as the proxy.
Drug – ABC is purchased
using two NDCs.
• NDC 1
• NDC 2
Primary NDC
Primary NDC – most
common 340B purchase
Less common versions of
same drug Secondary NDC A
Secondary NDC B
Secondary NDC C
flow to
accumulator with
this NDC for 340B
Actual NDCs will not
flow to accumulator
until designated as the
primary. Cannot be
replenished under
340B until shows up in
Compliance look-out
• How often are primary NDCs revised?
– Dispense “feed” to accumulator
– Charge “feed” to accumulator
• Are only “exact” 11-digit matches used in
replenishment, or are “substitutions” used?
• How often are 340B/GPO replenishments
tested for support?
Compliance look-out
There are savings up to 50% on drug costs.
• Volume of 340B purchases
• Use of contract
• Public comments
regarding 340B
• Prior history
340B avg. annual savings - $31.7 million
Contract pharmacies
• Are contract pharmacy arrangements
Understand the compliance risks
Participate in monitoring and audits
Educate yourself and staff
Keep a look-out for Program changes
For more information
Cindy DuPree, CPA
[email protected]
Sarah Dekutowski, CPA
[email protected]

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