Many 340B program stakeholders would agree that program integrity was at the forefront of HRSA’s priorities for the 2015 fiscal year. At the 340B Winter Coalition Conference in February, Captain Krista Pedley (Director of Office of Pharmacy Affairs) gave a presentation addressing the 340B Drug Pricing Program and specifically stated, “…program integrity is our highest priority.” At the 340B Summer Coalition Conference in July, Michelle Herzog, Deputy Director of the Health Resources and Services Administration Office of Pharmacy Affairs, provided the HRSA update to participants and clearly stated, “Program integrity remains the highest priority in OPA and HRSA intends to advance that mission and ensure that the 340B Program is sustainable in the long term for all of the stakeholders who participate”.
As you know, the 340B Drug Pricing Program Omnibus Guidance (Mega-Guidance) was published for public comment August 28, 2015. You can find it HERE. And as expected, program integrity was addressed in the 90-page document. Areas that were addressed include:
HHS audit of covered entity
Manufacturer audit of a covered entity
HHS audit of a manufacturer
Much of what is proposed in the Mega-Guidance is consistent with current HRSA’s current policy.
HHS Audit of a 340B Covered Entity
Upon audit, HHS must be provided access to all necessary compliance records of not only the covered entity but also any child sites or pharmacies contracted with the covered entity. If required records are not provided, termination from the program may be recommended. An HHS 340B covered entity audit will consist of reviewing covered entity eligibility and 340B database information among other items. As they are now, results of an HHS audit will be made public.
HHS is proposing a notice and hearing process where the covered entity can dispute initial audit findings and areas of noncompliance identified during an audit. HHS will notify the authorizing official who will have 30-days to respond in writing to each instance of noncompliance and provide supporting documentation if applicable. Please note, that extensions can be request but failure to provide a response by the 30-day deadline will be interpreted as agreement with the audit findings. After all supporting documentation submitted by the covered entity is reviewed, HHS will issue a final notice with its determination. If the final determination deems the covered entity noncompliant, a corrective action plan may be necessary.
The Mega-Guidance states that a corrective action plan (CAP) should include (at minimum):
- the correction of each finding of noncompliance,
- the implementation measures to prevent future occurrences
- plans to make repayment to manufacturers where discounts were incorrectly received
- a timeline for corrective actions to be taken.
HHS will ultimately determine if the CAP is acceptable and may verify the covered entity’s compliance with the CAP at any time. Noncompliance with the corrective action plan may result in termination from the program.
If the covered entity is determined to be ineligible for the program, HHS will determine the termination date and the covered entity will be required to pay the manufacturers back for purchases made after the date of loss of eligibility.
Manufacturer Audit of a Covered Entity
A manufacturer participating in the program can request (at their cost) a HHS audit of a covered entity for suspected duplicate discount and diversion violations provided that they have reasonable cause (we’ll get to that in a minute) of noncompliance in those areas. Prior to requesting a HHS audit, the manufacturer is first responsible for notifying and working with the covered entity to resolve duplicate discount or diversion concerns. If a resolution is not met, the manufacturer must then demonstrate reasonable cause to HHS for audit approval, which per the Mega-Guidance is defined as:
“...that a reasonable person could conclude, based on reliable evidence, that a covered entity, its child sites, or contract pharmacies may violated either section 340B(a)(5)(A) or (B) of the PHSA. Examples of reasonable cause include, but are not limited to:
- significant changes in the quantities of specific drugs ordered by a covered entity without adequate explanation,
- significant deviations from national averages of inpatient or outpatient use of certain drugs without adequate explanation,
- evidence of duplicate discounts provided by manufacturers or State Medicaid agencies.”
HHS is proposing that the manufacturer submit reasonable cause documentation, previous resolution attempts and an audit work plan for HHS approval or revision prior to the commencement of the audit. The manufacturer must use an independent certified public accountant to conduct the audit which should last no more than one year and provide findings back to the covered entity for comment. Upon completion of the audit, a final report should be submitted to HHS. Please note, according to the proposed guidance, the “covered entity must permit an HHS-approved audit to be conducted by the manufacturer’s auditor.” Also note that until HHS deems a covered entity in violation of the 340B program, manufacturers must continue to sell covered outpatient drugs below the 340B ceiling price to the covered entity under investigation.
HHS Audit of a Manufacturer & Its Contractors
The 340B does allow HHS to audit a manufacturer or wholesaler for 340B program compliance. The Mega-Guidance is proposing audit standards which may include an HHS on-site review, off-site review or both after notifying the manufacturer of its intent to audit. If the manufacturer fails to provide records or requested documentation, further action by HHS may be taken or further investigation requested. If areas of noncompliance are identified by HHS, the manufacturer will be afforded a similar notice and hearing opportunity as covered entities described above and a corrective action plan will be required. Finally, the guidance states that any audit findings may be made public although that hasn’t been the case yet.
Additional Program Integrity Measures
As addressed in the 340B contract pharmacy section of the 340B Drug Pricing Program Omnibus Guidance, HHS noted that not all covered entities have measures in place to ensure their contract pharmacies are maintaining 340B compliance. Therefore, HHS is proposing that covered entities are now responsible for compliance adherence for each of their contract pharmacies. As stated in the Mega-Guidance, “HHS is proposing standards for audit and quarterly reviews to ensure that compliance efforts related to contract pharmacies result in the early identification of problems, implementation of corrections, and the prevention of future compliance issues”. While the current expectation is yearly audits of CP’s, the proposed guidance further clarifies that expectation. An annual contract pharmacy audit of each contract pharmacy is now expected and any duplicate discounts or diversion violations identified and corrected should be reported to HHS. Finally, HHS continues to recommend the use of an independent auditor to ensure each contract pharmacy adheres to 340B compliance.
Additionally, HHS addressed maintenance of auditable records in the covered entity requirements section. Failure to maintain auditable records is grounds for termination from the program. HHS is proposing a records retention standard of at least five years (previously three) and this standard would apply not only to the covered entity, but to also the contract pharmacies and child sites.
Conclusion:
While program integrity has always been important in the scope of the 340B Drug Pricing Program, it has never been articulated quite like it is in the Mega-Guidance. If finalized as proposed, covered entities will no doubt face some challenges in the areas of record retention, contract pharmacy quarterly reviews and HHS & manufacturer requested 340B audits. Is your covered entity capable of complying with the proposed guidance in these areas? Are you ready for the implementation of the Mega-Guidance?
Our next few posts will concentrate on the issuance of the 340B Program Omnibus Guidance and the implications hospitals will face if finalized as proposed. Don't miss out on our posts by subscribing to our blog below!
