Q&A with Maureen Testoni,
General Counsel of Safety Net Hospitals
for Pharmaceutical Access
Pharmacy Purchasing & Products: What areas of 340B are at highest risk for noncompliance?
Maureen Testoni: After speaking to dozens of hospitals that have gone through HRSA audits (HRSA began auditing 340B-enrolled covered entities in 2012), I see two challenging areas commonly arise: ensuring that 340B pricing is used only for hospital outpatients, and properly communicating to HRSA regarding the use of 340B drugs for Medicaid patients. The complexity of achieving compliance in these areas drives these issues; I certainly have not witnessed any intentional misconduct or any large-scale system problems.
For hospital outpatients, the risk of noncompliance occurs when these patients are subsequently admitted, which often happens with emergency department patients. Because the 340B program is for outpatient drugs only, drugs that are administered before the patient is admitted may be purchased at 340B pricing, but after the patient is admitted, 340B drugs can no longer be used. Hospitals must carefully track the admission of such patients, because if an error occurs, HRSA will categorize that finding as diversion (giving 340B drugs to individuals that are not eligible for the program). If this occurs, hospitals may be required to repay the drug manufacturer the value of the 340B discount.
Special rules govern the use of 340B medications for Medicaid patients. While it is acceptable to use 340B for these patients, the law prevents drug companies from having to pay rebates to state Medicaid programs for 340B drugs, and certain rules exist with which covered entities must comply to make this work. It is the responsibility of the covered entity to ensure that they do not cause a duplicate discount to occur; therefore, when 340B pricing is used for Medicaid patients, the covered entity must submit their Medicaid billing numbers to the federal government. That information is then entered into the state Medicaid database, thus preventing additional rebates from being requested of drug companies for those medications. Basically, the duplicate discount prohibition protects drug companies from providing both a 340B discount and a Medicaid rebate on the same product.
A total of 51 covered entities were audited in 2012, and HRSA recently released a notice stating that, for hospitals, the three most common areas of noncompliance were obtaining covered outpatient drugs through a group purchasing organization (ie, GPO prohibition; 42%), dispensing drugs to ineligible individuals (ie, diversion; 36%), and billing contrary to the Medicaid exclusion (ie, duplicate discount; 24%). When a covered entity engages in any of these practices, it can be sanctioned. Sanctions may include repaying manufacturers the value of any discount that was received in error, and in some cases, the sanctions may include interest on those repayments. Depending on how egregious the error, the covered entity could potentially be removed from the 340B program.
Interestingly, although the GPO prohibition is cited by HRSA as an area of noncompliance for 2012 audits, we are not aware of any audit that found a violation of law in this area. Rather, it would appear HRSA issued “areas of improvement” on the GPO issue to underscore a 2013 policy statement concerning the GPO prohibition. The prohibition applies to disproportionate share hospitals, children’s hospitals, and freestanding cancer hospitals only, and prevents hospitals from using a GPO to purchase covered outpatient drugs.
Released in February 2013, the HRSA policy statement requires virtually all hospitals subject to the GPO prohibition to make significant changes to their inventory management procedures. HRSA takes the position that the February 2013 statement was simply a restatement of its existing policy. However, since so few hospitals interpreted the policy as it is described in this new policy release, HRSA recognized that there was confusion on this issue and ultimately gave hospitals until August 7, 2013 to comply. In some of the audits for the period prior to August 7, 2013, HRSA noted in the audit reports that hospitals were using the old inventory system and recommended that hospitals ensure compliance with the new policy release by August 7, 2013, which they have done.
PP&P: What steps should be taken to ensure that your 340B program is compliant?
Testoni: On May 9 of this year, HRSA—based on the findings of its audits—published 340B best practices that hospitals should become familiar with. These best practices include:
Ensuring that comprehensive P&Ps are in place is vital to 340B compliance. P&Ps should specify criteria for determining whether a patient is eligible for the 340B discount and outline compliance with the duplicate discount requirements. If the GPO exclusion applies to your hospital, this should also be delineated in P&Ps. Moreover, P&Ps should include policies for proper inventory management, including a strategy for maintaining 340B drugs separately from drugs that are purchased under non-340B pricing.
In addition to P&Ps, conducting regular self-audits is strongly encouraged. One effective method of evaluating 340B compliance is to model the self-audit on HRSA’s auditing method: pull a sample of actual 340B claims and trace those claims through the entire process. Review each patient’s record and confirm that the patient was seen at the hospital, that the visit occurred in a proper space in the hospital, that the patient was an outpatient, and that the drug was purchased at the correct price. Conducting a full review of a random sampling of patients, wherein each patient’s chart is verified against P&Ps, is an effective method of uncovering areas of noncompliance, especially holes in your system that you may be unaware of.
Self-audits should be conducted on a quarterly basis. Alternatively, doing a mini-audit quarterly and a major audit annually also is an effective strategy. For facilities that have a robust compliance department, 340B audits should be included in their audit plans; otherwise, pharmacy may conduct these audits in concert with staff members from the medical records and finance departments.
The Safety Net Hospitals for Pharmaceutical Access (SNHPA) Web site contains samples of actual data requests that HRSA auditors have sent to covered entities selected for audits. These data requests may ask the hospital to verify that they have P&Ps in place and that they are able to pull certain claims to verify information. Reviewing these data requests can be particularly useful when determining how to prepare for a HRSA audit.
PP&P: What resources are available to ensure 340B compliance?
Testoni: The SNHPA Web site contains an abundance of information on 340B implementation, operations, and compliance, including sample practice guidelines and checklists. In addition, Apexus, the contractor designated by the government as the prime vendor for the 340B drug-pricing program, provides educational support to promote program integrity. Apexus’ mission is to leverage its expertise in delivering maximum value to 340B stakeholders by promoting program integrity, optimization, and compliance. The government’s Web site, the OPA within HRSA, also contains valuable information on program requirements, implementation, and integrity. (See Text Box for Resources.)
PP&P: Any tips for developing P&Ps and ensuring adherence?
Testoni: P&Ps must be developed to address the major areas of 340B compliance, which include diversion, duplicate discount, eligibility of the covered entity (including compliance with the GPO prohibition for certain hospitals), registration, and contract pharmacy. To develop P&Ps or evaluate existing ones, hospitals can start by reviewing the P&P materials on the SNHPA or Apexus Web sites, which outline the major compliance requirements. Since 340B hospitals already have systems in place to address these issues, the next step may simply be putting in writing your hospital’s existing procedures. Thereafter, hospitals should regularly review these procedures to identify and address any areas where change may be required. P&Ps should be considered living documents, as they require regular revision to incorporate any updates, such as new federal or state guidance, or new software or other system changes that the hospital has adopted.
To ensure adherence with P&Ps, you will need to engage in multiple efforts, including conducting regular training of employees on the sections of P&Ps that impact them, ensuring P&Ps are easily accessed by employees, and conducting regular self-audits. If an issue is discovered during an audit, your P&Ps will serve as a resource to identify where the system breakdown occurred, allowing you to address it accordingly. It is also important to review and update P&Ps on a regular basis—not less than annually—as there have been numerous compliance developments in the 340B program just over the past two years. Pharmacy departments generally have areas that they check on a daily, weekly, and monthly basis that are intended to alert them to potential compliance issues.
It is essential to include all stakeholders when developing P&Ps to ensure 340B compliance; in this pursuit, pharmacy and finance collaboration is particularly crucial. A significant component of 340B compliance—making sure that 340B drugs are dispensed only to individuals who are authorized to receive them—is determined by the location where the patient is seen, as it must be both reimbursable on the Medicare cost report and properly registered with the government to allow eligibility. Determining these issues may not be directly in pharmacy’s purview; as such, the finance department should be an integral part of the team.
PP&P: Do you expect the number of 340B HRSA audits to increase moving forward?
Testoni: Without question. HRSA has conducted audits of 218 covered entities since it began auditing in 2012. Fifty-one took place in fiscal year (FY) 2012, and 94 took place in FY 2013. About 73 have taken place so far in FY 2014, with more expected, since the government’s FY does not end until September 30. HRSA also has suggested that twice as many audits as occurred in FY 2014 will occur in FY 2015.
Maureen Testoni is General Counsel of Safety Net Hospitals for Pharmaceutical Access (SNHPA), which represents hospitals and health systems enrolled in the 340B program. She oversees a team of attorneys that work to influence law and policy regarding the 340B program. With extensive experience in health care regulatory law and policy, Maureen provides assistance to hospitals on 340B implementation and compliance matters, as well as policy guidance. Maureen received her law degree from The George Washington University National Law Center, with honors, and her BA in public policy from the University of Chicago. She is a member of the DC and Virginia bars.
Apexus Prime Vendor Program Web site.
Healthcare Systems Bureau. US Department of Health and Human Services.CDR Krista Pedley, Director, Office of Pharmacy Affairs. http://www.hrsa.gov/opa/updates/140509auditresults127kb.pdf
Safety Net Hospitals for Pharmaceutical Access Web site.
US Department of Health and Human Services Web site.Office of Pharmacy Affairs.
340B Drug Pricing Program.