340B a small program with tricky compliance field

Although drug spending under the 340B program is a small fraction of drug spending in the country overall, compliance remains important for all entities involved: hospitals, pharmacies, and manufacturers. In a Health Care Compliance Association webinar entitled “340B Program: Finding Clarity in Uncertain Times,” presenters Karolyn Woo and Tony Lesser, both from Deloitte & Touche LLP, advised listeners to allocate the necessary resources to ensure compliance in light of increased audit activity.

340B program

Created by section 340B of the Public Health Service Act (PHSA), the program requires drug manufacturers participating in the Medicaid program to provide outpatient drugs to participating health care organizations at reduced prices. These discounts allow providers to save between 25-50 percent on outpatient drug costs. However, for perspective, 340B spending only accounted for just over $12 billion of the $310 billion spent on drugs in 2015.

Oversight and audits

Despite the program’s relatively small size, Woo and Lesser underscored the necessity of compliance, noting the Health Resources and Services Administration’s (HRSA) increased oversight activity. The agency has recently contracted experienced auditors, who focus on eligibility, drug diversion, duplicate discounts, and billing accuracy. If issues are found during the audit, the HRSA Office of Pharmacy Affairs (OPA) will review these issues, present a corrective action plan to HRSA, and finalize its report. Drug diversion is the most common issue, and repayment to manufacturers was required in over half of the completed audits in fiscal years (FYs) 2015 and 2016. Although there has been no uptick in the number of manufacturer audits recently, HRSA may contact an entity to request certain information outside of an audit, which should be presented as clearly as possible. In addition, specialty pharmacies, which often represent a high percentage of a manufacturer’s 340B revenue, may fall under particular scrutiny.

Compliance plan

Repayment requires that the covered entity and the manufacturer work out a financial remedy in good faith. The process is hampered by outdated OPA information, lack of deadline guidance, and differing repayment calculations. To avoid being placed in this situation, covered entities should create a compliance plan that ensures close oversight of 340B activity, starting with educating staff and reviewing 340B policies and procedures. Entities should perform internal audits to find areas of non-compliance, and learn how to prevent and detect identified issues. When areas of non-compliance are found, they should be reported to manufacturers, HRSA, or other entities as required.

Trump nominates Gottlieb for FDA Commissioner

President Trump intends to nominate Scott Gottlieb, M.D., a resident fellow at the conservative American Enterprise Institute (AEI), clinical assistant professor at New York University School of Medicine, and a member of the HHS Federal Health IT Policy Committee, to the post of FDA Commissioner. The White House announced the nomination, which brought varied reactions from opposite sides of the aisle and a general positive response from the pharmaceutical industry, via a tweet from Press Secretary Sean Spicer.

Gottlieb served as the Deputy FDA Commissioner from 2005 to 2007 and previously served as a senior official at CMS. He has testified before Congress on numerous occasions as an AEI felllow, most recently with respect to EpiPen® price increases and “How Regulatory Barriers Inhibit Pharmaceutical Competition.” Gottlieb noted that FDA regulatory policy has made developing less expensive copies of complex drugs after patent expiration difficult, discussed how the 340B program has put “upward pressure on drug prices,” while noting other change in drug insurance coverage structure, and described obstacles to competitive single source drug pricing.

Various sources report that Gottlieb has close ties to the pharmaceutical industry. Scientific American noted that Gottlieb believes in a quicker approval process for new drugs, but has focused on shortening waiting times for large, clinical trials rather than doing away with efficacy considerations. He commented on this, to an extent, in remarks he made at the 21st Annual International Meeting of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) in May 2016.

Gottlieb has also issued commentary about the Patient Protection and Affordable Care Ac (ACA) (P.L. 111-148). In May 2016, he testified before Congress that the law’s tiered marketplace approach has aided consumers with plan selection, but has forced insurers into narrow design corridors. His testimony regarding the ACA also included a suggestion that CMS move away from mandates and towards incentives to encourage individuals to enter into the insurance market (see Is there a better way than the ACA? Hearing asks experts, Health Law Daily, May 12, 2016). More recently, he coauthored a piece with another AEI fellow, opining that President Trump’s election provided, “a generational opportunity to pursue a new direction for American health care” and making suggestions about how a new health care system should operate. The authors suggested that the system should provide a path to catastrophic health insurance for all, accommodate individuals with pre-existing health conditions, allow access to health savings accounts, and deregulate the medical services market.

Senator Lamar Alexander (R-Tenn), Chairman of the Committee on Health, Education, Labor & Pensions, touted Gottlieb’s “impressive qualifications” in a released statement. His colleague, Ranking Member Patty Murray (D-Wash), expressed “initial concerns” about the nomination, including Gottlieb’s “work with multiple pharmaceutical companies, medical device companies, and investment firms.”