Identifying the Elements for 340B Drug Program Compliance Management

Although the 340B Drug Pricing Program has been around since 1992, the Patient Protection and Affordable Care Act (P.L. 111-148) provided increased incentives for hospitals to participate in the program. With the increase in hospital participation has come with more questions about this complex program, its requirements, and the impact on hospital’s compliance programs. On June 25, 2013, in a webinar presented by MediRegs, a Wolters Kluwer business, R. Brett Short, CHC, Chief Compliance Officer of University of Kentucky HealthCare  provide answers to some of those questions in a presentation focusing on the 340B the drug program’s compliance implications and providing details for effective compliance management of the 340B drug program.

Overview of the 340B Drug Program

The program requires drug manufacturers to provide outpatient drugs to eligible health care organizations, referred to as covered entities, at signficantly reduced prices resulting in lowered drug costs for patients.  To be eligible to receive 340B drugs, patients must receive health services other than drugs from the 340B covered entity. A patient is defined as an individual who receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements such that responsibility for the care provided remains with the covered entity. The program is administered by the HHS Health Resources Services Administration’s (HRSA’s) Office of Pharmacy Affairs (OPA).  To participate in the 340B program, eligible organizations must register and be enrolled in the 340B program and comply with all of the program requirements. Once enrolled, a covered entity is assigned a 340B identification number that vendors verify before allowing the covered entity to purchase 340B discounted drugs.

Areas with Implications for Compliance

Compliance officers need to be aware of specific issues the statutory prohibition against obtaining covered outpatient drugs through a group purchasing organization (GPO) for certain covered entities.hat can arise when participating in the 340B drug program.

  • Contract pharmacy.  Hospitals must know the requirements before engaging a contract pharmacy and should be aware of sales pitches, Short advised. When a covered entity has an arrangement with a contract pharmacy, the covered entity is responsible for ensuring the arrangement is in compliance with all 340B program requirements. All covered entities are required to maintain auditable records and are expected to conduct annual audits of contract pharmacies that are performed by an independent outside auditor as a way to fulfill their ongoing obligation of compliance. Short recommends quarterly audits, incorporated in the compliance program audit and monitoring schedules and risk analysis.  If the covered entity finds a violation of 340B program requirements, the covered entity should disclose the violation to HRSA along with the covered entity’s plan to address the violation.
  • Patient eligibility and risk of diversion. Diversion occurs when a covered entity provides 340B drugs to individuals that do not qualify as patients as defined under 340B. The covered entity must develop a process for determining patient eligibility that requires the individual to be a patient of the provider of the covered entity and designate an individual who is responsible for identifying eligible patients. The covered entity must (1) have an established relationship with the patient, (2) a record of the health care delivered, and (3) maintain “patient” records.
  • Duplicate Billing. Referred to as double dipping, covered entities may bill Medicaid for the drug or seek a rebate from the manufacturer but not both. The covered entity must not receive a 340B discount and a Medicaid rebate on the same drug.
  • Eligibility. The hospital must ensure that it is meets the 340B program requirements for covered entities and that it has registered parent sites and child sites and, after registration, appear on the OPA database.
  • Eligible Drugs. FDA-approved prescription drugs, over-the-counter drugs written on prescription, biological products that can be dispensed only by a prescription other than vaccines, or FDA-approved insulin.
  • Claims submission. Hospitals must ensure that they are capturing the right data on claims submitted for 340B drugs.
  • Statutory prohibition on participating in group purchasing organizations. Disproportionate share hospitals (DSH), children’s hospitals, and free-standing cancer hospitals participating in the 340B Program are subject to 42 U.S.C. 256b(a)(4)(L)(iii), which states that to participate in the 340B program, these entities may not “obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement.” If a covered entity subject to this prohibition participates in a GPO, the covered entity will no longer be an eligible covered entity and cannot purchase covered outpatient drugs at the section 340B discount prices, according to an HRSA 340B Notice (No. 2013-1).

Effective Compliance Management

Short recommended using the elements found in the Office of Inspector General Compliance Program Guidances as a road map in developing a compliance program. Specifically, Short identified the following elements for effective compliance management.

  • The first element is identifying the players that would participate in 340B compliance including the pharmacy director, the compliance officer, the chief financial officer, counsel, and any other appropriate individuals and designating a person to be  in charge of overseeing the program, Short said.
  • Second, Short advised participants to implement written standards and procedures. This is important because it is the first thing that an oversight agency will ask for when audited, Short said. He also suggested identifying a responsible person for updating and reviewing the 340B policies to ensure standards and policies are current.
  • Third, after policies and procedures are identified, conduct training for appropriate staff, including compliance, pharmacy, billing office and other personnel.
  • Another element Short included was developing open lines of  communication.
  • An essential element for the 340B compliance program is regularly scheduled auditing and monitoring as well as risk assessments. Topics to consider for auditing and  monitoring include who will be conducting the audit or monitoring, will auditing and monitoring be conducted outside of the pharmacy, how are reports of noncompliance monitored, what legal guidance is needed.
  •  Responding to identified deficiencies is another important element, including to whom the report must be made, such as Medicaid; what are the refund obligations, was the violation related to a policy or a person;  is the violation systematic.
  • Enforcement of the 340B requirements is the final element, Short included. Hospitals must be aware of the risks involved in noncompliance such as OPA enforcement regarding manufacturer audits, repayment of discounts, charges of false claims, and civil money penalties.