The 340B Drug Pricing Program, administered by the Office of Pharmacy Affairs (OPA) under the Health Resources and Services Administration (HRSA), requires drug manufacturers participating in the Medicaid program to provide covered outpatient drugs to certain covered entities (CEs) at a reduced price. Eligible entities may receive significant drug cost savings, but must comply with all regulations. In particular, CEs must ensure that 340B medications are only dispensed to eligible patients and must take measures to prevent diversion.
For over 93 years, Broadlawns Medical Center (BMC) has served the Des Moines, Iowa region with a longstanding history of tending to the health care needs of the community’s most vulnerable citizens. The hospital was established to provide medical care for the indigent, and the same mission of service drives the organization today. This tradition of service is personified through the staff’s commitment to providing exceptional health care, regardless of a patient’s ability to pay for the services provided. The nonprofit health care organization’s campus includes an acute care hospital, primary and specialty care clinics, urgent care, emergency services, lab, radiology, dentistry, inpatient and outpatient mental health, a crisis team, and community-based behavioral support services.
Managing an effective 340B program is one of the cornerstones of BMC’s ability to provide patient care. In that pursuit, developing effective policies and procedures (P&Ps), implementing effective staff training, and conducting robust 340B self-audits to identify areas at risk for noncompliance are crucial. Self-auditing helps the hospital and its contract pharmacy (or pharmacies) drive compliance with all program requirements. In addition, the process:
- Helps identify issues within the hospital and pharmacy before they become problems
- Increases and improves communication between the hospitals, clinics, providers, and pharmacies
- Assists the facility in evaluating the utility of its split billing software
- Helps prevent diversion and duplicate discounts
- Supports patient eligibility
The Risks of Noncompliance
Several risks are inherent with 340B noncompliance, including loss of eligibility, and thus, the savings associated with purchasing medications through the program. If a CE loses its eligibility to participate in the 340B program, this may result in fewer services available for patients.
Another potential risk linked to noncompliance is the requirement to repay 340B discounts to manufacturers. These repayments may total tens of thousands of dollars or more, depending on the medications and quantities distributed. Also, state and Medicare programs may audit a CE’s compliance with the program. Some states, such as Iowa, require an organization to either carve-in or carve-out patients enrolled within the state Medicaid program. If an organization opts to follow the carve-in model, the medication charges must reflect 340B pricing assuming all other qualifications are met. Repayments can be demanded if program entities are noncompliant with the guidelines. Also, be sure to consider the risk of noncompliance for CEs that fall under GPO exclusion rules.
Areas at Risk for Noncompliance
To ensure program compliance, it is critical that the CE is aware of all departments that receive medications and understand the purchasing source for these drugs. For example, IV fluids, anesthesia gases, and radiological products often have 340B pricing. In addition, determining patient and provider eligibility, and documentation of a qualifying visit can be a challenge for 340B facilities.
- Patient eligibility can be difficult to ascertain at the point of sale in a contract pharmacy setting; hospitals often rely on specialized technology and processes, as well as rigorous oversight, to address this challenge.
- While determining provider eligibility can be a stumbling block, it is essential to verify prescribing privileges at the CE.
- Documentation of a qualifying visit may require investigation into the EMR to determine if the prescription does or does not qualify for 340B. For example, BMC now monitors for courtesy scripts for family members or staff, verbal orders from providers that are not entered into the EMR, or prescriptions to treat other family members (for example, Tamiflu for a parent because their child has influenza).
Steps to Ensure 340B Compliance
To ensure 340B compliance, a CE must fully understand the program and the capabilities of any software solutions used to manage the program. The CE must know which type of CE they are and what rules apply under 340B (eg, disproportionate share hospital [DSH] versus critical access hospital, GPO exclusion, orphan drug, etc). The CE also must identify which additional sites, if any, qualify for 340B, and register them as child sites. Remember that each offsite clinic that is reimbursable on the hospital’s Medicare cost report, and that will be using 340B-priced medications, must be registered with OPA. As mentioned earlier, in Iowa, we must register with OPA as either carve-in or carve-out, both of which have different requirements for tracking and reporting, which the CE must be able to audit to prevent duplicate discounts.
Develop Policies and Procedures
After gaining a complete understanding of the rules that apply to your facility and properly registering sites, evaluate the steps required to ensure compliance. An organization’s policy and procedure (P&P) manual should address a wide range of topics defining how it manages its 340B participation; the main focus points should be patient eligibility, preventing diversion, and preventing duplicate discounts (see SIDEBAR 1. 340B Policies and Procedures). When developing P&Ps, be sure to address the following issues:
- Requirements for Loaning Medications. Because borrowing medications between pharmacies can unintentionally result in diversion of 340B medications, procedures for loaning medications should be included in P&Ps. Some institutions keep two physically separate stocks—340B and retail—to avoid potential diversion of product, and to avoid the monitoring required for maintaining a virtual inventory. With a virtual inventory, there is the risk that the loan of a medication bottle can result in diversion in the case that the bottle contains both 340B and retail stock.
- GPO Exclusion Rules. GPO exclusion rules for DSHs, children’s hospitals, and cancer centers, should be audited to validate that covered outpatient drugs are purchased at either WAC or 340B pricing, in compliance with HRSA regulations and statutory requirements.
- Oversight of Contract Pharmacies. Contract pharmacies require oversight from the CE, as the CE is ultimately responsible and accountable for anything that occurs at the contract pharmacy, especially related to diversion and duplicate discounts. The CE should have P&Ps for the contract pharmacies to prevent diversions and duplications. Contract pharmacies also need to follow established practice with Medicaid as directed by the CE in regard to carving-in or carving-out. The CE must create a process for 340B drugs being billed to the CE versus the contract pharmacy, even if drugs are shipped to the contract pharmacy.
In addition, the CE must develop a process to verify patient eligibility and audit the contract pharmacies. Ideally, this is a similar process to what is occurring at the CE—verifying the patient’s medical record associated with the prescription, and that the script was generated from an eligible site and written by an eligible provider. HRSA recommends quarterly reviews comparing prescriptions to dispensing records with a biannual comparison of 340B purchases to dispensing records. Contract pharmacies should also be included in annual independent audits.
P&Ps should include all pertinent 340B data to allow an individual who is not directly working within the 340B rules to understand the guidelines. They should be specific enough to convey the purpose and intent, but broad enough to allow for flexibility, given the pace of change in the 340B program and the dynamic nature of pharmacy operations in a modern health system environment. The pharmacy director, buyer, 340B technician (if applicable), finance, materials management, physician credentialing, and those tasked with approving the P&Ps (ie, authorizing officials, 340B committee) should be involved in developing P&Ps.
Many groups can provide assistance with developing 340B P&Ps, including outside organizations that support 340B, 340B consulting groups, as well as organizations that provide auditing services. Typically, more general 340B P&Ps can be adjusted to fit individual facilities. Other resources include the OPA Website: www.hrsa.gov/opa/ and the 340B Prime Vendor Program Website: www.340bpvp.com. Members of 340B Health can access resources at: www.340bhealth.org.
Once P&Ps are in place, locate all pertinent data that is required from HRSA and establish a process to gather and review the following data:
- Medicare cost report (which sites are eligible)
- A list of providers eligible to write 340B prescriptions (this may come from HR, residency coordinators, the chief medical officer, etc)
- 340B pharmaceutical inventory listing, including contract pharmacy sites
Access to all reports and medical records allows the CE to identify possible diversion, beginning with a process to help ensure all participating sites or facilities are listed under the Medicare Cost Report and OPA. Next, establish who is a qualifying patient and how those patients will be identified, particularly in regard to establishment of medical home. Thereafter, it is essential to educate all staff involved with the 340B program on this definition. Be sure the definition of a qualifying patient is included in P&Ps.
A formal training program is not required for staff managing the 340B program; however, ensuring staff has the appropriate education required to manage the program is critical to success. Multiple online resources are available, including courses offered through HRSA, 340B Health, as well as free online courses from the Apexus 340B University. All staff involved with the program should receive training, with different levels of training provided based on the staff member’s level of interaction with the program. At a minimum, training should occur annually for those with limited interactions with 340B, while those who are involved in the program on a daily basis may find value in more frequent education and training events.
Ideally, the following practices should occur on a daily basis: split-billing software accumulator adjustments, auditing invoices for NDCs that may need to be added to accumulate earnings, and using 340B software to verify package size. In addition, BMC audits outpatient medications on a daily basis, looking for verbal scripts, provider addresses, and for providers that are not eligible under 340B. Our goal is to correct orders prior to sending replenishment requests through the split-billing vendor, as it is easier to audit on a daily basis rather than make corrections after orders have been submitted.
Monthly random patient samples, which should include contract pharmacies as well as miscellaneous use, should be obtained and audited to verify eligible patients, visits, and providers. These samples also should evaluate for Medicaid exclusions based on carve-in or carve-out (GPO exclusion) and orphan drug status (which applies to critical access hospitals, freestanding cancer hospitals, sole community hospitals, and rural referral centers). No specific number of samples is required, but it is recommended to pull samples from multiple locations and multiple sites over time. BMC does not use any contract pharmacies, but for those utilizing a contract pharmacy that is not under the umbrella of facility, the recommendation is to audit at least one patient a month from each contract pharmacy.
A best practice is to update prices within the health system on a quarterly basis. Prices should be requested from the wholesaler, uploaded, and shared with the split-billing software vendor. Ideally, NDCs should be compared on the shelf with what is accumulating within the software. Compare invoices for 340B pricing to GPO pricing to ensure you are paying the lowest price. Some NDCs for the same product can be priced higher under 340B than GPO, and simply changing product can increase savings. When making any product switch, take into consideration GPO prohibition requirements, if applicable, as well as any impact on and updates needed for the 340B software system.
It may be wise to partner with an independent auditor to conduct an overall 340B audit on an annual basis, including onsite, contract pharmacies, and miscellaneous use. The annual audit should review the terms of the vendor agreement and contract pharmacy agreements. Using a company that is pharmacy-based or has extensive working knowledge of day-to-day pharmacy operations is recommended. A pharmacy technician, who is well-trained and educated on the 340B program and the associated requirements, can perform the daily, monthly, and quarterly audits internally. (See SIDEBAR 2. Self-Auditing at BMC.)
Self-auditing enables BMC to identify systemic issues and address them immediately, so they do not continue to be problematic. It also helps identify areas of weakness within the program, such as physician eligibility and GPO prohibitions. Audits evolve as organizations become more knowledgeable regarding the 340B program. When auditing for 340B compliance, remember that many of the areas that should be investigated are outside of the pharmacy. Networking with other organizations that have gone through audits conducted by HRSA or independent auditors can provide useful insights into how to adjust audit data or checklists.
Ensuring Ongoing 340B Compliance
To ensure ongoing compliance, it is helpful to dedicate at least one individual with a comprehensive understanding of patient eligibility and access to the medical record to program management. Moreover, it is important to network with other 340B institutions to discuss challenges identified during audits. In addition, consulting with an independent auditor to discuss issues can be helpful in ensuring ongoing program integrity.
Moving forward, taking steps to ensure continued 340B compliance is critical to safeguarding access to the program. A commitment from BMC’s pharmacy leadership to support continuing staff education to participate in Webinars and conferences that focus on the specifics of the 340B program has been extremely useful. We are fortunate that BMC administration recognizes the value of the 340B program and offers resources to help ensure compliance with the program, as organization support is critical to ongoing compliance efforts.
A Sample 340B Program Checklist is available at pppmag.com/340Bcompliance
David Seiler, PharmD, an employee of Cardinal Health, is Director of Pharmacy for Broadlawns Medical Center in Des Moines, Iowa. He graduated from The University of Iowa College of Pharmacy and completed an ASHP Specialty Residency in Pediatrics at All Children’s Hospital in St. Petersburg, Florida. David is a member if the adjunct faculty at Drake University College of Pharmacy and offers a management elective rotation.
340B Policies and Procedures
P&Ps must encompass:
- CE registration, recertification, and ensuring the 340B database is up-to-date
- Steps to prevent duplicate discounts at CE, offsite outpatient facilities, and contract pharmacies, including detailing how Medicaid will be billed (ie, carve-in versus carve-out) if applicable
- A description of the procurement process (including contract pharmacy, if applicable)
- Procedures to prevent GPO prohibition violations (applies only to DSHs, pediatric hospitals, and cancer centers)
- Diversion-prevention policies for the CE and contract pharmacies, including:
- Site eligibility
- Referral/responsibility of care remaining with CE
- Medical/patient health record
- Patient eligibility (including status changes)
- Provider eligibility (or relationship to the CE)
- Consistent with scope of grant (if applicable)
- A strategy for conducting oversight of contracted pharmacies, if applicable
- A plan for 340B inventory or replenishment/accumulation is accounted for (including NDC matching), if applicable
- Defining covered outpatient drugs, including exclusions
- A determination of when and how the CE would self-disclose, including the CEs’ definition of noncompliance material breach
Self-Auditing at BMC
Consider the following issues when conducting a 340B self-audit:
- Who are the players (pharmacies, providers, clinics, etc)?
- How does the facility define patient eligibility?
- Is an audit trail readily available and easy to follow?
- What is the process for navigating patient records?
In addition, create a checklist that focuses on five areas:
- Exclusion (GPO prohibition, if applicable)
- Duplicate discount prevention
BMC uses two different processes for 340B auditing—one for the outpatient clinics and one for the outpatient pharmacy.
Self-Auditing Process for Outpatient Clinics. For outpatient clinics, the process is software-driven and focuses on tracking utilization via the EMR and data sent to the split-billing vendor. Working with the IT department, patients are identified as inpatient or outpatient by their registration numbers. Patients that qualify as outpatient are identified by insurance status, and any patient with a state-offered plan is shifted to a separate spreadsheet; the remaining patients and medications received can be requested under 340B pricing. As a DSH hospital, BMC falls under the GPO exclusion rule, so any medications covered by the state-offered plan are ordered through the wholesaler at WAC pricing. Auditing of these data feeds occurs on a daily basis; we use a sample of patients from the three reports to validate that the software is placing patients into the correct spreadsheet (outpatient state program, 340B-eligible, or inpatient). Then, the software confirms how data flows though the split billing software, to the wholesaler, and in the correct account.
Self-Auditing for the Outpatient Pharmacy. The outpatient pharmacy is somewhat more complicated, as patients are not receiving medications for immediate administration at the clinic. Our process starts with identifying qualifying providers within the pharmacy system. Qualified providers are flagged within the system, and updates are performed on a quarterly basis. When providers leave the facility or retire, we receive notifications from the CE and update the software immediately. Using the pharmacy software, we run a daily report of the eligible providers and the date the prescription was received. This report then can be audited for patient and prescription eligibility (typically 60 to 70 patients). This report is data-sorted in several ways to look for items to verify or flag to pull off the final report that the split-billing software generates for 340B. Auditing of the prescriptions entails utilization of the hospitals EMR to verify billable visits/encounters (establishing medical home). Things we commonly look for in the report include:
- Missing medical record numbers
- Compounded prescriptions
- Secondary state insurance plans to verify they have been billed correctly
- Discharge prescriptions (to verify patient had been discharged prior to scripts being released)
- Courtesy scripts from prescribers (including those written for an employee, a family member of the patient, or a family member of the prescriber)
- Verbal orders
- Handwritten prescriptions
- Location of provider (some providers work multiple sites and not all qualify for 340B status)
Once the report of the above information has been finalized by the 340B coordinator, it is sent to the split-billing software for processing.
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