At the July 340B Coalition meeting in Washington DC, the Assistant Inspector General for Evaluation and Inspections for the Office of Inspector General (OIG), Ann Maxwell, presented on the “Government Watchdog’s Perspective”. Maxwell gave a brief high level overview covering three areas the OIG has been investigating and auditing in the 340B arena:
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Ceiling price
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Intersection of the 340B Program with other federal healthcare programs
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Contract pharmacy arrangements
She stated, “The OIG has been engaged in the 340B program for the last decade and they will continue to keep it on their radar.” She emphasized the main focus of the OIG initiatives for the 340B drug pricing program is preventing diversion and duplicate discounts referring to this as the “twin pillars” of the program.
AREAS OF INVESTIGATION
1. Ceiling price – Maxwell discussed the OIG study investigating how the ceiling price was calculated and if drugs were being charged appropriately. In 2005, they found that 14% of total purchases made by 340B covered entities exceeded the ceiling price. The OIG also found issues with the calculation of the 340B ceiling prices and had concerns about the covered entity database that Health Resources and Services Administration (HRSA) had established. She said, “HRSA has been very responsive to our recommendations and almost all the things the OIG recommended to strengthen program integrity have been enacted”. She mentioned one recommendation the OIG continues to believe is important to the success of the 340B program and has not yet been implemented is increased transparency in the ceiling price for 340B purchased drugs.
2. Intersection of the 340B program with other federal healthcare programs – Maxwell also summarized the OIG investigation of reimbursement arrangements between the 340B drug pricing program and Medicaid. Their recent study found that half of the states did not have 340B payment policies. All of the states indicated that they anticipated that billing was at acquisition cost; however, states do not have pricing information to establish a prepayment edit. Additionally, only 20 states attempt to enforce their 340B payment policies but only if errors are found in a post payment audit.
In response to the OIG investigation, CMS directed states to develop and clarify 340B payment policies. HRSA also issued a Program Notice to clarify the use of the 340B Medicaid Exclusion File replacing a Program Notice issued in February 2013. In addition, the OIG is reviewing what methods are in place to prevent duplicate discounts in Medicaid Managed Care and if the methods are effective. They anticipate this report to be out in 2016.
The OIG is also looking at the intersection between the 340B drug pricing program and Medicare Part B. The Government Accountability Office (GAO) recently released a report on the work they have done in this area and Maxwell mentioned that the Medicare Payment Advisory Commission (MedPAC) is engaged in this area as well. The OIG is reviewing total payments that Medicare Part B made for 340B drugs and the differential between the payments that Medicare is making and the acquisition cost that hospitals receive by purchasing through the 340B program. The OIG’s focus is to explore what shared savings might look like between the two programs.
3. Contract Pharmacy Arrangements – Maxwell discussed the concerns the OIG has with how contract pharmacy arrangements complicate the prevention of duplicate discounts and diversion. The OIG investigated the different methods contract pharmacies use to identify eligible prescriptions. Some pharmacies check eligibility up front and some pharmacies check eligibility on the backend by matching prescription data with patient data. The OIG believes the difference in approaches has led to the same type of prescription being considered eligible and ineligible depending upon the pharmacy’s approach. The study found that most contract pharmacy arrangements carve-out Medicaid. However, she did mention that carving out is easier to do up front in a fee for service setting but more difficult to do in Medicaid Managed Care program since it is not always easy to distinguish between private insurance or Medicaid Managed Care.
Although HRSA has maintained that external audits along with internal monitoring is expected, Maxwell said few 340B covered entities are currently satisfying this expectation. When the OIG reviewed contract pharmacy oversight, they found the most common way entities are overseeing contract pharmacies is through their own internal monitoring. Maxwell stated, “We have been told that a lot of the issues we have brought up in contract pharmacies will be addressed in the upcoming Guidance.”
Maxwell concluded by mentioning a few other specific areas the OIG is reviewing. The OIG has audits going on in 23 states to see if they are collecting rebates on physician administered drugs. They are also focusing on identifying areas of potential prescription fraud in Medicare Part D, reviewing increased prices in generic drugs and reviewing specialty drug program efficiency and integrity. She said she was not able to go into great depth on work currently underway, but said studies are due for release in 2016.
THE TAKE-AWAY
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Federal regulators have been and will continue to review the 340B drug pricing program from every direction.
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Get your house in order. It’s essential that covered entities understand their 340B program. If you don’t understand it, get help.
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Annual external audits are necessary. HRSA has made it clear that annual external audits are expected and this was echoed throughout the conference and the RECENTLY RELEASED MEGA-GUIDANCE.
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Integrity is imperative. We cannot say it enough!
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