One of the highest compliance risk areas of the 340B Drug Pricing Program is contract pharmacy. However, the return can be great and with the proper processes and monitoring in place, I would encourage you to look hard at this opportunity. Not only do contract pharmacies allow you to increase or continue patient services in a covered entity to benefit patients, but they can also help to expand your reach to support the underserved populations in your community. Contract pharmacy arrangements support the intent of the 340B Program as much as any other portion of the 340B Program.
The covered entity is responsible for ensuring compliance of their contract pharmacy arrangements with all 340B Program requirements to prevent diversion and duplicate discounts (75 Fed. Reg. 10272, March 5, 2010). If the covered entity is not providing contract pharmacy oversight, it is considered a violation of the program requirements. The covered entity will be required to terminate the contract pharmacy arrangement and provide repayment to the drug manufacturer.
Providing oversight of contract pharmacies can be extremely complex, but external resources are available and beneficial to ensure compliance with the many aspects of the program. HRSA has provided “5 Requirements for 340B Compliance in Contract Pharmacy”:
Conduct independent annual audits and provide adequate oversight. The proposed mega-guidance has also added quarterly audit expectations.
Maintain auditable records at the covered entity and the contract pharmacy. This also includes written policies and procedures outlining contract pharmacy oversight and a written contract between the covered entity and the contract pharmacy, listing each contract pharmacy individually before registering the contract pharmacy in the HRSA database. The contract pharmacy may not distribute 340B purchased drugs until it has been registered, certified and listed in the HRSA database.
Only 340B eligible patients receive 340B purchased drugs.
Medicaid must be carved out unless alternate arrangements have been made with the State Medicaid Agency and approved by HRSA.
Maintain accurate information in HRSA’s 340B database.
Reviewing HRSA’s audit results will give some insight on where the auditors are focusing. From 2012 through 2015, HRSA has conducted 444 on-site audits which includes over 5,000 outpatient facilities and sub-grantees and over 11,000 contract pharmacy locations. HRSA has already conducted over 60 audits for 2016. HRSA has posted audit results for 152 of the 200 audits they performed in FY 2015. Below are some of the notable HRSA audit findings for covered entities with regards to contract pharmacy from FY 2015:
47% - had a finding related to contract pharmacy
11% - had more than one type of finding related to contract pharmacy
9% - had contract pharmacy arrangements terminated
41% - had to repay drug manufacturers
33% - dispensed prescriptions written at ineligible sites not supported by responsibility of care
15% - registered a contract pharmacy without a contract in place
6% - did not provide contract pharmacy oversight
3% - incorrect contract pharmacy address
1% - billed Medicaid without notification to HRSA
When Southwest Consulting Associates audits a facility, we see these same types of issues in contract pharmacy. You must be able to link a prescription back to a qualified visit showing that the covered entity had responsibility for the patient’s care surrounding the prescription. The contract pharmacy must be able to match the prescription to a qualified encounter and an eligible physician. Auditing, monitoring and self-reviews are crucial to the success of the program.
One other thing to keep in mind is the volume of 340B prescriptions going through your contract pharmacies. We know that HRSA uses a risk stratification methodology to select covered entities for audit. All facilities will be audited at some point; however, those facilities with a high volume of purchases, high number of child sites and high number of contract pharmacies are audited first and more often. Monitor the volume going through each contract pharmacy and make sure the volume is high enough to be worth the risk. If there is a low volume of 340B prescriptions going through a contract pharmacy, the covered entity may want to look at terminating their contract with the pharmacy.
Don’t be afraid of contract pharmacy; it is a valuable asset to your community. Start slow with a manageable number of contract pharmacies in an area where the covered entity serves the highest target population. Ensure you have the correct monitoring in place and obtain external assistance when you need it. AND DON’T FORGET, AN ANNUAL INDEPENDENT AUDIT AND CONTRACT PHARMACY OVERSIGHT IS EXPECTED!
