Southwest Consulting Associates Blog

As speculation regarding what will be within the “Mega-Guidance” swirls around, there seems to be a growing consensus that there may be some change in criteria for hospital eligibility.  Currently, the 340B statute requires that private, non-profit hospitals must have a contract with their state or local governments to provide services (charity care) to low-income individuals who are not covered by Medicare or Medicaid.  At this time, there is no specific requirement for the amount of charity care that must be provided by the hospital for 340B program eligibility.  One theory is that HRSA will propose a specific threshold of charity care that a hospital must provide to be eligible for, or retain eligibility in the 340B program and this, in all likelihood, will be monitored using S-10 data found on the Medicare cost report.

Health Resources and Services Administration (HRSA) sent the 340B Omnibus Guidance (Mega-Guidance) to the Office of Management and Budget (OMB) on May 6, 2015.  Assuming the OMB takes the average 90 days to review, the proposed guidance could be published in the Federal Register for a comment period around mid-August. There is speculation that since the OMB reviewed much of it last year as the “340B Mega-Rule”, the review period may not take as long.  There is no minimum period for reviewing the 340B Omnibus Guidance so it is possible for it to be published sooner.  

Eli Lilly, Parke-Davis, Squibb, and Bayer, just to name a few, are all names I’ve heard since I was small.  There were two pharmacies in the town where I grew up; my grandfather owned one and my father worked at the other. Where some kids have stories about playing on playgrounds after school, I have stories of putting away inventory.  I learned my alphabet by re-shelving drugs at the end of the day.  These names to me are like distant relatives.  They’ve been selling chemical compounds to drugstores for almost 150 years now.  After everyone realized that they couldn’t just use Laudanum for everything, probably the first “drug” that was ever to be patented, produced and sold, was Bayer’s Aspirin.  Eli Lilly was among the first companies to make gelatin capsules and to mass-produce penicillin.  Parke-Davis, now owned by Pfizer, was first known for the drug Cascara, an herbal laxative, which is still used today.  Squibb, now Bristol-Meyers Squibb, got its start by originating the process to make pure Ether and manufacturing Chloroform.  These companies have been around since the mid-19th century and are giants in the drug industry.   

Is your facility at risk of being terminated from the 340B program due to a GPO prohibition violation?

It appears HRSA is aggressively auditing for Group Purchasing Organization (GPO) violations in DSH hospitals participating in the 340B program.  A GPO prohibition violation can remove a covered entity from the 340B program.  During SNHPA’s April 9, 2015 Webinar “Update on 340B Audits”, they mentioned they were aware of at least 9 covered entities since November 2014 with this audit finding.  In fact, SCA is aware of 2 hospitals in the last few months with a GPO prohibition violation audit finding that received an audit recommendation of “immediate removal from the 340B Drug Pricing program”.  These entities are in the process of appealing the finding.

The 340B program’s major compliance focus has historically been targeted at covered entities and whether those covered entities are in full compliance with program requirements, but there are also requirements for drug manufacturers that seem to be underexamined, and in many cases, do not receive near the scrutiny of the covered entity compliance requirements. Manufacturer’s 340B compliance is just as important and this year, Health Resources and Services Administration (HRSA) appears to be moving forward on drafting guidance for manufacturers as well as increasing manufacturer audits and imposing civil monetary penalties for overcharging providers.

The 340B Congressional Hearing that was scheduled for March 5th, and cancelled due to a snowstorm, was rescheduled and held yesterday March 24th at 10am EST.  Ms. Diana Espinosa from HRSA, Ms. Ann Maxwell from the OIG, and Dr. Debra Draper from the GAO appeared as witnesses at the hearing and were asked to give a 5 minute summary of their submitted written testimony.  The subcommittee members then moved on to a Q&A session to further understand the functionality of the 340B program and its current impact.  While there were a few members that questioned the actions of HRSA and the 340B program with skepticism and derision, the overall hearing proved to be positive, enlightening, and educational for house members.

In our last post, we focused on HRSA’s 2015 agenda item to complete at least 200 340B audits and listed several risk factors that could increase the likelihood of a 340B entity being selected for an audit.  There is no way to be certain if an audit for your 340B entity is on the horizon, but here are some things you may want to do to get your facility ready, just to be on the safe side.  Que The Temptations’ “Get Ready” in the background...

Last year, and then again at the 340B Winter Coalition, HRSA announced that they planned on performing at least 200 340B audits by the end of 2015.  According to the latest data, they had completed 33 as of January 13th.  And according to Commander Pedley’s 340B Winter Coalition address (see highlights HERE), program integrity is OPA’s highest priority.  So, if you haven’t received your 340B audit notification letter yet, be on the lookout.  

On Thursday February 5th, 2015, at the 340B Winter Coalition, Commander Krista Pedley (Director of Office of Pharmacy Affairs) gave a presentation addressing the 340B Drug Pricing Program.  In this presentation, although many things were covered, the main take-a-ways were what to expect from HRSA in 2015 including:

Included in the 2016 budget proposal issued by the Obama Administration on February 2, 2015, OPA is requesting a >100% in funding. A portion of the increase ($7,000,000) is budget based and the balance, $7,500,000, would be derived from user fees the agency plans to initiate. Among other things, OPA plans to double its current staff through this additional funding. If approved at this level, the budget for OPA will be more than 5.5 times its 2012 operating budget and the additional funding will be to further advance the agency's program integrity initiatives.