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 The process is hampered by outdated OPA information, lack of deadline guidance, and differing repayment calculations.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.

FDA approval of new hepatitis C drug may temper drug prices

Patients with hepatitis C have gained a new treatment option, which may help curb the rising cost of drugs treating the virus. The FDA has approved Zepatier® with or without ribavirin for the treatment of chronic hepatitis C virus infections in adult patients. Previously, the FDA gave Zepatier a breakthrough therapy designation, which is a program designed to expedite the development and review of drugs intended to treat a serious condition after preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over currently available therapy.

Growing competition among hepatitis C drugs may help to stabilize the increasingly high prices for these products. Merck stated that including Zepatier in treatment options for patients with chronic hepatitis C virus (HCV) provides the U.S. “with an unprecedented opportunity to significantly reduce the burden of [the virus.]” Merck has set a list price for Zepatier of $54,600 for a 12-week regimen, which it believes to be in the range of net prices for other 12-week antiviral regimens used to treat HCV. Merck anticipates that its competitive pricing and its comprehensive access strategy to seek broad coverage “will help broaden and accelerate patient access to treatment and move us closer to our shared goal of reducing the burden of chronic HCV in the U.S.”

Compared with the prices of treatments from Gilead Sciences Inc., an early competitor in the market for oral hepatitis C drugs, like Sovaldi® being sold at $1,000 per pill ($84,000 for a single course of treatment) and single-tablet regimen Harvoni® with a list price of $94,500, Zepatier is expected to be a welcome addition to the market. In December 2015, the Senate Committee on Finance found, through its own investigation, a revenue-driven pricing strategy behind Sovaldi, which caused Medicare and Medicare to spend more than $5 billion on Sovaldi and Harvoni in 2014. Financial statements showed U.S. sales of the drugs through public programs and private payers totaling $20.6 billion after rebates in the first 21 months following Sovaldi’s introduction to the market.