HRSA’s 340B Drug Pricing Program 10 th Annual Pharmacy Purchasing Networking Conference August 9, 2005 Las Vegas, NV Christopher Hatwig, M.S., R.Ph.
HRSA’s 340B Drug Pricing Program 10th Annual Pharmacy Purchasing Networking ConferenceAugust 9, 2005Las Vegas, NV
Christopher Hatwig, M.S., R.Ph.
Objectives
Provide an overview of 340B Drug Pricing Program
Discuss the relationship between the OPA, the PSSC, and the PVP
Discuss how hospitals qualify for the program and optimize it benefits
Discuss program challenges and potential legislative related to the program
Background – The Uninsured 49 million Americans without health insurance in
2002 23% of Americans under 65 have no prescription
coverage 27% of uninsured said they needed a prescription
but did not get it, compared to 10% of the insured Kaiser Family Foundation 2002
42% of uninsured with hypertension not taking medication compared to 25% of insured Health Net of
California, June 2001
Background – Economic Disparity Uninsured, non-elderly spent an average of
$30.76 for prescription compared to insured patients who paid $9.96 and $5.53 for a brand or generic prescription respectively.
Health Net of California, June 2001
Drug prices paid by those without drug insurance are 15% higher than those with insurance. Kaiser Family Foundation 1996
Medication Access Strategies Medication Samples Patient Assistance Programs Drug Discount Cards/Coupons Bulk Donation/Purchasing Pharmacy Benefit Management 340B Drug Pricing Program
Background: 340B Drug Pricing Program
1990 -Congress created Medicaid rebate law Drug manufacturers responded by increasing prices
1992 - Congress passed Veteran Health Care Act (VHCA) intended to extend relief to gov’t payers of drugs Act stated that manufacturers participating in Medicaid must sign
a Pricing Agreement to participate in the 340B program Provides discounts on outpatient covered drugs Required drug manufacturers to give best price to
disproportionate share hospitals and certain covered entities grants
Also referred to as “Section 602”, “PHS” or “340B” pricing
Program Administration
Three Legs of the 340B Program Office of Pharmacy Affairs (OPA)
Pharmacy Services Support Center
(PSSC)
340B Prime Vendor Program (PVP)
340B Program
PSSC
PVPOP
A
Office of Pharmacy Affairs (OPA) Mission, Functions and FundingFederal Register 9/21/2004
Responsible for management and oversight of the 340B Programs
Promote access to (Comprehensive Pharmacy Services) clinically and cost effective pharmacy services through: Maximizing the value of participation in 340B Developing innovative pharmacy services Being a Federal resource for pharmacy practice
$2.97 Million Line item in FY2007 President’s Budget Request
Why 340B? Reduce prescription drug expenditures by safety net
providers in order to: Expand health services access to:
Low-income individuals/families Vulnerable populations
Reduce taxpayer burden Average savings 25-50% for covered medications
(NACHC Survey)
Comprehensive Pharmacy Services
Estimated Prices For Selected Public Purchasers, as Percent AWPvon Oehsen; Pharmaceutical Discounts Under Federal Law: State Program Opportunities
Stephen Schondelmeyer, PRIME Institute, University of Minnesota (2001)
100.0%
80.0%
67.9%
60.5%
51.7%
49.0%
47.9%
34.6%
0% 20% 40% 60% 80% 100%
AWP
AMP
Medicaid (Min.)
Medicaid Net
FSS
340B
FCP
VA Contract
Private Sector Pricing
340B Eligible Covered Entities
Federally Qualified Health Centers (FQHC) Hemophilia Treatment Centers (CHTC) Ryan White Programs (RWI, RWII, RWIII, RWIV) Sexually Transmitted Disease/Tuberculosis Programs
(STD/TB) Title X Family Planning Clinics Urban / 638 Tribal Programs Federally Qualified Health Center Look-Alikes (FQHC-LA) Disproportionate Share Hospitals (DSH) Children’s Hospitals (pending clarification of S.1932, the
Deficit Reduction Act of 2005)
Annual Growth of Section 340B Covered Entity Sites by Agency
0
1,000
2,000
3,000
4,000
5,000
6,000
1998 2000 2002 2004 2006 2008(Projected)
Year (as of July 1)
Nu
mb
er o
f co
vere
d e
nti
ties
CMS/ HRSA DSH CDC (STD/TB) IHS (638 & Urban) OS Family Planning HRSA Grantees andFQHC-LA
Eligibility Criteria for Hospitals Must meet one of the following:
Owned or operated by state or local government Granted governmental powers by state or local
government Private non-profit with contract with state or local
government to to provide health care services to low income individuals not eligible for Medicare or Medicaid
Additional requirements: Medicare DSH adjustment % of 11.75 or greater Must withdraw from group purchasing arrangement
(GPO) for outpatient covered drugs Including pharmacy wholesalers’ generic source programs
Disproportionate Share (DSH)
DSH patient percentage defined as:
(Medicaid, Non-Medicare Days) / (Total Patient Days)
+(Medicare SSI Days) / (Total Medicare Days)
obtained from CMS_________________________________________________________________
DSH Percentage
Disproportionate Share Hospital (not sites) 340B Participation (July 1, 2006)
Eligible,Not Registered
72250.24%
Eligible,Registered
71549.76% Eligible,
Registered, Rural 171
23.92%
Eligible, Registered,Urban544
76.08%
N = 1,437 organizations
N = 715 organizations
Eligibility defined as DSH adjustment percentage > 11.75% - to register other criteria must be met.
Getting Started with HRSA’s Pharmacy Services Support Center (PSSC)
American Pharmacists Association (APhA) American Association of Colleges of Pharmacy, American
Society of Health-systems Pharmacists and other partners 5-yr. Contract Services to OPA and 340B covered entities
Information and analysis Relationships and networking Program development/Technical Assistance Partner with schools of pharmacy to encourage students to
develop projects in 340B Safety-net organizations Free to eligible covered entities
How Does a Hospital Register to Participate in 340B Program?1. Determine the hospital’s DSH Adjustment Percentage
(must be >11.75%)
2. Complete 340B Drug Program Enrollment Letter
3. Complete form to certify non-participation in outpatient Group Purchasing Organization (GPO)
4. Complete form for adding outpatient facilities (as appropriate)
Access registration forms at http://www.hrsa.gov/opa/dsh.htm
Enrollment Periods with OPA
Application deadline:
December 1 March 1 June 1 September 1
Begin purchasing:(upon written confirmation from OPA)
January 1 April 1 July 1 October 1
NOTE:NOTE: Database of covered entities updated Database of covered entities updated quarterly.quarterly. Few Few exceptionsexceptions
What Drugs Are Covered?
Covered drugs: Outpatient Prescription
drugs Over-the-counter drugs (if
accompanied by a written prescription)
Clinic administered drugs within eligible facilities
ER drugs Drugs in other amb care
settings (e.g. day surgery)
Non-covered drugs: Vaccines Drugs given to the patient
in inpatient care settings
Manufacturer’s Role - Pricing Structure for 340B and Medicaid
Medicaid and 340B entities receive prices based on either “Best Price” or Average Manufacturer Price (AMP) – 15.1% for branded drugs
Additional discounts are applied if price increases exceed the Consumer Prime Index (CPI)
Generic manufacturers are required to provide a discount of 11% off of AMP
“Best Price” is not part of generic calculation
Pricing are recalculated and submitted quarterly
Discounts are upfront…..no rebates
Dilbert on Rebates….
Manufacturers Role (cont.) - 340B/Outpatient Pricing
Manufacturers must provide 340B pricing if their drug is to be covered by Medicaid
Manufacturers cannot sell covered drug above 340B ceiling price to covered entity
Manufacturers are not prohibited from selling outpatient drugs at below 340B ceiling price Various methods (direct, via wholesaler or PVP) Not required to offer negotiated sub-ceiling price to other covered
entities or Medicaid Prices offered covered entities are exempt from “best price”
calculation Sub-ceiling prices extended covered entities are exempt from the
VA’s Non-FAMP calculation ONLY WHEN offered through HRSA’s Prime Vendor
Patients meet eligibility requirements when….
1) The covered entity has established a relationship with the individual by maintaining records of the individual’s health care
2) The individual receives services from a provider either employed, contracted, or referred by the covered entity and responsibility for care remains with covered entity
Note - An individual is not considered a “patient” if the sole health care service received is the dispensing of a drug
Q: Would a hospital’s employees be eligible to receive 340B priced drugs?
In most cases, covered entities must bill Medicaid at acquisition cost plus dispensing fee. Drugs purchased under 340B cannot be subject to both
the 340B discount and Medicaid rebate (“Duplicate Discount Rule”)
No billing restrictions for non-Medicaid patients or in situations where Medicaid is not line-item billed for outpatient drugs Clinic administered medications Medicaid managed care
Medicaid Carve-out Option (in some states)
Program Billing Restrictions
340B Program - Anti-diversion
Prohibits resale or transfer of discounted drugs to anyone other than patient of covered entity
Covered entities are responsible for implementing procedures to prevent diversion and produce audit reports.
Penalty for failing to comply forfeiture of discounts back to the manufacturer disqualification from program
HRSA and manufacturers may audit covered entities
Contract Pharmacy Alternative Guidelines established in Federal Register Notice - August
23, 1996 Allows covered entity to contract with a community
pharmacy to dispense 340B drugs and provide pharmacy services to patients of the covered entity
Allowed one contract pharmacy arrangement unless approved by HRSA as Alternative Methods Demonstrations Projects
“Ship to, bill to” arrangement Does not require dual inventory Pharmacy must provide covered entity with reports
“consistent with customary business practices” Covered entity and pharmacy subject to audits
Growth in 340B Contracted Pharmacy Arrangements
70 104151 225
364
699
1,075
1,449
1,824
2,199
0
500
1,000
1,500
2,000
2,500
1999 2000 2001 2002 2003 2004 2005 2006 2007(Projected)
2008(Projected)
Year (as of July 1 each year)
DSHDSH Program Optimization Inventory Management
340B splitting software Prime Vendor Program - added value for
outpatient DSH Inpatient Pricing – added value for
inpatient
Inventory Management To ensure compliance and to optimize 340B savings,
DSH will need to utilize 340B pricing within mixed (inpt/outpt) patient care settings
Two options in meeting program guidelines: Separate physical inventories Virtual inventory management using split billing software
Requirements to avoid diversion of 340B product: Retrospective replenishment program NDC to NDC match (no substitution) Reports/subject to audit
Split Billing Software Implementation plan is required
Interface of billing and pharmacy systems Drug product selection Setup and maintenance of NDC to CDM crosswalk P&Ps for staff Routine reports/audits
Added costs for software & staffing (optional) Examples of products available for use with any
pharmacy wholesaler system: Talyst (IHS) Dimension 21
Typical 340B Chain of DistributionTypical 340B Chain of Distribution
MANUFACTURER
MEDICAIDFEE-FOR-SERVICE
WHOLESALER
COVERED ENTITY
ELIGIBLE PATIENT
CONTRACTPHARMACY
WAC Chargeback
Payment340BNon-340B
OTHER PAYERS
Bill AAC
Bill U+C
No Medicaid Rebate340B + Non-340B Acc’ts
Co-pay(if applicable)Dispensed or
AdministeredDispensed Co-pay
DispensingFee
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
AWP $100
WAC $84
Non-340B $70
340B $51
HRSA’s 340B Prime Vendor Program (PVP)
Agreement signed September 10, 2004 Awarded to HealthCare Purchasing Partners Intl. (HPPI) Voluntary program for covered entities and manufacturers Contracting for sub-ceiling pricing on branded and generic
pharmaceuticals Represents 2700 eligible covered entities with over $2.5 billion in
340B purchases annually 23 pharmaceutical suppliers contracted
AstraZeneca, Bedford, GSK, Novo-Nordisk and others >2400 items priced below 340B ceiling price
Discounts range from 1-70% below ceiling
PVP - Benefits to Eligible DSHs Single national contracting entity to leverage
outpatient purchases of all DSH with the industry No risk or added cost to participate No change of distributor required Does not conflict with DSH’s inpatient purchasing
program (GPO) Access to sub-ceiling prices and other discounts Pricing transparency (via website) Longer term contracts
PVP – Other Discounted Products and Services GSK Vaccines Diabetic Meters/strips – Bayer (Ascensia) , HDI (True Track) Inventory management/tracking solutions – D21, Talyst Patient Assistance Program Software – MedData Auditing and overcharge recovery services – e-Aduit, ST Health Repackaging services – DSI’s Care340B Ambulatory pharmacy dispensing technology – Automed, ScriptPro
Integrated voice response (IVR) systems – Voice Tech
Prescription vials/labels/printer cartridges -Tri-State
PVP Participants by Entity Type (as of 07/27/06 – 2745 participants)
HIV Programs, 81
Title X Family Planning, 488
Disproportionate Share Hospitals, 897
Community Health Center, 877
Sexually Transmitted Disease Treatment,
232
Tuberculosis , 159
Other, 11
Avg. Sub-ceiling Savings for Carolinas Health Systems’ Facilities for PVP Contract Purchases
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Carolinas Medical CenterMyers Park
Carolinas Medical CenterBiddle Point Pharmacy
Carolinas Medical CenterNorthpark
Behavorial Health Center -CMC
UNC Percentage Savings by PVP Contract – June ‘05 - May ‘06
-30%
-25%
-20%
-15%
-10%
-5%
0%
PVP - Benefits to Suppliers Increased outpatient sales & market share to all DSHs Access to the largest teaching hospitals training medical
residents Access participant list with verified 340B eligibility - updated
biweekly A low cost, efficient means of contracting with the nation’s
safety-net providers Medicaid best price, Non-FAMP, and ASP price protection Pricing transparency Long term contracting
PVP Enrollment & Implementation
Download and process participation agreement www.340bpvp.com
Select pharmacy wholesaler PVP notifies wholesaler to load PVP portfolio of sub-
ceiling prices to your 340B account Activated on 1st or 15th of each month
For DSH Entity can maintain any sub-ceiling pricing if negotiated
independently Continue use of GPO for inpatient drugs PVP Pricing is utilized in all 340B/outpatient areas
Disproportionate Share Hospitals
DSH Drug Pricing Options
DSH Inpatient Program
(NOT 340B)
340B(OUTPATIENT)
340B PRIME VENDOR
DSH Inpatient Program Highlights Section 1002 of MMA: Amended Medicaid Rebate Law to exclude
inpatient prices from best price reporting by drug manufacturers Program is voluntary for manufacturers
Should not expect all manufacturers to participate Should not expect savings to always equal 340B program discounts
No GPO exclusion for inpatient - Contracts can be negotiated by GPO or by DSH independently
Complete and accurate lists of eligible members must be maintained by GPOs
Pricing list is restricted to DSH members of GPO Some hospitals report 10% or greater in added savings over typical
GPO prices
DSH Inpatient Program - Non-FAMP Pricing Exemption
VA policy - 340B DSH inpatient prices can be excluded by manufacturers from the its non-FAMP and FSS for the branded products and Most Favored Customer clauses when
Manufacturer requests a ‘hold harmless’ letter and dear manufacturer letter from the VA listing specific NDCs
Manufacturer offers 340B ceiling price on all NDCs for drug (nothing more, nothing less)
DSH Drug Pricing Options340B
ProgramPrime Vendor
ProgramDSH Inpatient
Program
Managed by HRSA’s OPA
HPPI Each GPO
Eligible entities
12,000+ 12,000+ 700+
Patients benefiting
Outpatients Outpatients Inpatients
Supplier participation
Mandatory Voluntary Voluntary
Anticipated savings
20 – 25% below GPO
pricing
Varies on select products
“340B Like” savings on select
products
Future Issues with the 340B Program
Pending Federal Register notices to modify current guidance: 340B Patient Definition Multiple Contracted Pharmacies Children’s Hospital Participation in 340B
Major Program Challenges Related to Integrity Issues
Possible Legislation
Patient Definition GuidanceSummary of Newly Proposed Guidance
Clarifies requirement to keep records of the patient’s health care
Clarifies relationship between covered entity and medical provider who generates prescription of 340B drugs
Provides guidance for DSHs as to which clinics may participate in 340B
Proposed Contract Pharmacy Guidance
Incorporates Multiple Pharmacies as standard option.(1) the use of multiple contracted pharmacy service sites, and/or (2) the utilization of a contracted pharmacy to supplement in-house
pharmacy services.
Keeps Alternative Methods Demonstration Projects (AMDP) for covered entities seeking to utilize networks and OPA will continue to review whether networks create potential for unlawful diversion.
Updates the contract pharmacy guidance in general.
Children’s Hospitals
Section 6004 of the DRA amends only the Social Security Act & Not Public Health Service Act (PHSA) Children’s hospitals must agree to abide by the
requirements of section 340B of the PHSA as condition of participation
Status under Pharmaceutical Pricing Agreement? Technical Amendment?
340B Program Integrity Concerns
Office of the Inspector General (OIG Reports) Industry
Covered entity compliance Diversion Patient definition Duplicate discounts
Covered Entities Industry compliance Overcharges Restrictive pricing practices (specialty distributors, IVIG, etc.) Pricing transparency
HRSA’s Response to Program Integrity Challenges 2005/2006 October 1, 2005 OPA began computing 340B ceiling
prices using data provided by CMS and a third party contractor for package size data.
OPA requested drug manufacturers to voluntarily submit 340B quarterly Prices to OPA and to its Prime Vendor
Began comparison of OPA computed prices with drug company prices and wholesaler price files
Sent cease and desist letters for 340B Violations Began verification of covered entity data in Database
HRSA’s Response to Program Integrity Challenges 2005/2006 continued
Participated with OIG/DOJ to prosecute 340B violations Worked with OIG/DOJ to process settlement agreement and
refunds (Chiron, King, and others) OPA is working with the industry stakeholders to voluntary
improve pricing integrity, increase transparency; disclose pricing errors and to refund overcharges • Ad Hoc Industry Workgroup
Drafting recommendations to OPA for improvements in pricing integrity and transparency
The ONLY UNIQUE identifier for a 340B covered entity is the 340B ID number. Do NOT use HIN or DEA to confirm 340B participation
340B Legislation
Expansion efforts(1) Rural hospitals – included in MMA(2) Children’s hospitals – included in DRA(3) Inpatient drugs and critical access hospitals –
S.1840, H.R.3547 Integrity improvement and 340B reform
(1) Funding to strengthen enforcement and increase price transparency – S.4
(2) Future hearings and legislation expected
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
Buyers’ Roles with 340B
Ensure all DSH eligible facilities are enrolled in 340B, PVP, and DSH inpatient programs to maximize savings
Compare 340B/PVP program pricing with GPO contract pricing and recommend purchase of products providing “best value” across classes of trade
Monitor pricing changes at the beginning of each quarter to: Identify significant price increases/decreases and
recommend changes when appropriate Ensure PVP pricing is loaded correctly Ensure key independent agreements are loaded correctly
Buyers’ Roles in Improving Compliance and Program Integrity Take leadership roles with inventory management
systems to ensure NDC to NDC matching Ensure compliance with GPO exclusion on
outpatient covered drugs Ensure wholesaler generic source or other auto-sub
programs are not loaded within outpatient account Document uncontrollable exceptions - IVIG
Ensure full implementation; No “cherry picking”
340B Program AssistanceHRSA / Office of Pharmacy Affairs (OPA)
www.hrsa.gov/opa
Pharmacy Services Support Center (PSSC) pssc.aphanet.org or 800-628-6297 Technical Assistance Support - 866-PharmTA
340B Prime Vendor Program/HPPI www.340Bpvp.com or 1-888-340B PVP
Typical 340B Chain of DistributionTypical 340B Chain of Distribution
MANUFACTURER
MEDICAIDFEE-FOR-SERVICE
WHOLESALER
COVERED ENTITY
ELIGIBLE PATIENT
CONTRACTPHARMACY
WAC Chargeback
Payment340BNon-340B
OTHER PAYERS
Bill AAC
Bill U+C
No Medicaid Rebate340B + Non-340B Acc’ts
Co-pay(if applicable)Dispensed or
AdministeredDispensed Co-pay
DispensingFee
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
AWP $100
WAC $84
Non-340B $70
340B $51
Drugs administered to patients after hospital admission Q: How should my hospital handle situations
where an ER patient who has received 340B-priced drugs is subsequently admitted as a hospital inpatient?
Drugs administered to patients after hospital admission Q: How should my hospital handle situations
where an ER patient who has received 340B-priced drugs is subsequently admitted as a hospital inpatient?
A: This depends on the billing policies of the hospital. Drugs administered to patients up until the time of admission may be purchased through the 340B programs, but not after admission.
340B discounted drugs and “own use” Q: If we use 340B discounted drugs for “own use”
does that meet the prohibition against drug diversion?
340B discounted drugs and “own use” Q: If we use 340B discounted drugs for “own use”
does that meet the prohibition against drug diversion?
A: Not necessarily. Covered entities are required not to resell or otherwise transfer 340B purchased drugs to an individual who is not a “patient” of the entity. Selling drug to an employee may meet “own use” guidelines but it does not necessarily meet 340B use guidelines.
Hospital employees Q: Can hospital employees have
prescriptions filled at the hospital outpatient pharmacy using 340B medications?
Hospital employees Q: Can hospital employees have
prescriptions filled at the hospital outpatient pharmacy using 340B medications
A: Depends on whether the employees meet the 340B “definition of patient”. The fact that they are employees of the DSH is relevant.
DSH Inpatient Pricing Q: Can my hospital participate in the DSH
inpatient program if I do not register for the 340B program with OPA ?
DSH Inpatient Pricing Q: Can my hospital participate in the DSH
inpatient program if I do not register for the 340B program with OPA
A: No, in order to qualify for DSH inpatient programs the hospital must first enroll and implement the 340B program for its outpatient facilities
340B prices and inpatient drugs Q: Are 340B prices available when purchasing in
patient drugs?
340B prices and inpatient drugs Q: Are 340B prices available when purchasing in
patient drugs? A: No. Section 340B applies to covered outpatient
drugs only. However, section 1002(a) of the MMA excludes DSH inpatient drug purchases from the Medicaid “best price” calculation, making it easier for manufacturers to voluntarily offer discounts on inpatient drugs to DSH’s participating in 340B.