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Mega Guidance Is Here!

David Pointer has no actual or potential conflict of
interest in relation to this presentation.
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Introduction
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Where are we today?
◦ Brief Overview of HRSA Audit Findings
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Where are we going?
◦ Mega-Guidance
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340B Program is administered by Health Resources and
Service Administration (HRSA)
Drug manufacturers who participate in Medicaid/Medicare are
required to supply covered outpatient drugs to covered
entities at discounted prices
◦ Program funded by manufacturers, not Medicare or taxpayers
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The intent of the 340B program is to stretch scarce federal
resources to reach a greater number of eligible patients and
provide comprehensive services.
◦ Intent is not to save patients money
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340B Program began in 1992, contract pharmacies became
eligible in 1996, DSH expansion occurred in 2003, children’s
hospitals were added in 2006 and critical access hospitals
were included in 2010.
340B Volume by Type**
Pre 2004 DSH
31%
Post 2004 DSH
50%
HIV
5%
SCH
2%
CAH
2%
Other
10%
340B Purchase Volume (Billion)*
2005
$2.4
2010
$5.3
2013
$7.1
Projected 2019
$16
* Per Apexus
** Per Berkeley Research Group
2012
2013
2014
2015
No findings
42%
21%
19%
26%
Findings
58%
79%
81%
74%
Repayment
45%
63%
65%
57%
State repaid
3%
1%
Per 340B Health
2012
2013
2014
2015
Diversion
33%
58%
60%
42%
Duplicate discount
30%
21%
21%
20%
Inaccurate database
24%
49%
47%
44%
Contract pharmacy oversight
4%
5%
3%
GPO
1%
11%
6%
Inauditable records
1%
Non-reimbursable site
1%
DSH %
1%
1%
Inaccurate Medicaid Exclusion File
2%
Orphan drug violation
5%
Per 340B Health
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May 6, 2015
◦ HRSA submits Mega-Guidance to the Office of Management
and Budget (OMB)

August 28, 2015
◦ Proposed Mega-Guidance is released in Federal Register

October 27, 2015
◦ Deadline to submit comments on proposed guidance ends
(60 days)

Unknown
◦ HRSA finalizes Mega-Guidance
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Mega-Guidance Purpose
◦ Provide increased clarity for stakeholders and strengthen
HRSA’s ability to administer the program effectively

Guidance vs. Rulemaking

Proposed vs. Finalized
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No scripts/orders written outside hospital or child sites
◦ Infusion orders
◦ Referrals, follow-up care, affiliated clinics, non-reimbursable
hospital clinics, providers treating patients outside the hospital
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No 340B for scripts/orders written by providers who are not
employees or independent contractors where hospital bills for
professional fees
New focus on payer status of patient
◦ No discharge scripts
◦ No drugs given to outpatients later billed as part of inpatient stay
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No 340B for Medicaid bundled drugs
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Patient eligibility
Covered entity eligibility
Covered outpatient drug definition/eligibility
Covered entity responsibility
Contract pharmacy
Internal and external audits
GPO Prohibition
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Existing requirements for hospitals
◦ The covered entity has established a relationship with the
individual, such that the covered entity maintains records of the
individual’s health care; and
◦ The individual 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
(e.g., referral for consultation) such that responsibility for the care
provided remains with the covered entity
◦ An individual will not be considered a “patient” of the covered
entity for purposes of 340B if the only health care service received
by the individual from the covered entity is the dispensing of a
drug or drugs for subsequent self-administration or
administration in the home setting.
◦ (61 Fed. Reg. 55156 (October 24, 1996))
Per 340B Health
1.
2.
3.
4.
5.
6.
The individual receives a health care service at a facility or clinic site
which is registered for the 340B Program and listed on the public
340B database
The individual receives a health care service provided by a covered
entity provider who is either employed by the covered entity or who
is an independent contractor for the covered entity such that the
covered entity may bill for services on behalf of the provider
An individual receives a drug that is ordered or prescribed by the
covered entity provider as a result of the service described in (2)
The individual’s health care is consistent with the scope of the
Federal grant, project, designation or contract
The individual’s drug is ordered or prescribed pursuant to a health
care service that is classified as outpatient
The individual’s patient records are accessible to the covered entity
and demonstrate that the covered entity is responsible for care
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Proposed guidance:
◦ For 340B to be used, script/order must be written as a result of a
healthcare service billed as outpatient
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Observations:
◦ Negates discharge scripts
◦ No 340B for drugs billed as an inpatient service, even though the
patient was an outpatient at the time the drug was
dispensed/administered (e.g., Medicare 72-hour rule)
◦ Huge operational impact
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Proposed guidance would prohibit use of 340B to fill
scripts/orders written outside the hospital
Patient eligible for 340B on a script-by-script basis instead of
a patient-by-patient basis
May not impact all facilities
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Proposed guidance:
◦ Order must be written as a result of services provided in the
hospital or a child site to be filled with 340B drugs
◦ “Mere” infusion of drug not enough
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Observations:
◦ Hospitals have overturned audit findings by showing that even
though an order was written outside the hospital, administration
of the order at the hospital or a registered clinic qualified as an
actual health care service for 340B purposes
◦ Proposed change would prohibit 340B use for these orders

Proposed guidance:
◦ No 340B for referrals, follow-up care or care in unregistered
“affiliated clinics”
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Observations:
◦ HRSA audits have allowed in limited situations
◦ Difficult to document
◦ May not significantly impact many facilities
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Proposed guidance:
◦ No 340B for scripts/orders written outside registered hospital and
child sites
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Observations:
◦ May impact treatment at:
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Nursing homes
Correctional facilities
Indigent clinics
School clinics
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The legal argument:
◦ Hospitals using a self-insured plan are responsible for care given
to employees covered by plan
◦ HRSA audits have said this relationship is not sufficient for 340B
use; not recommended currently
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Proposed guidance would unequivocally prohibit this
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Current: Employed, contracted or under other arrangement
Proposed:
◦ Either employed by, or an independent contractor for, the hospital
◦ Such that the covered entity may bill for services on behalf of the
provider
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Note:
◦ “Simply having privileges or credentials is not sufficient”
◦ Is more required than provider being on premises of hospital?
 Creates operational burdens to track and distinguish
◦ Interpreting “may bill for services on behalf of the provider”
 Hospital does bill or could bill?
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Current: A drug is eligible for 340B if it is a “covered
outpatient drug,” as defined in section 1927(k) of the Social
Security Act
Proposed guidance: For the 340B program, a drug will not be
considered a covered outpatient drug if the drug:
◦ (1) is “provided as part of, or as incident to and in the same
setting as” the following services: inpatient hospital services;
hospice services; dental services, except that drugs for which the
State plan authorizes direct reimbursement to the dispensing
dentist are covered outpatient drugs; physicians’ services;
outpatient hospital services; nursing facility services and services
provided by an intermediate care facility for the mental retarded;
other laboratory and x-ray services; and renal dialysis; and
◦ (2) receives a bundled payment by Medicaid and does not receive
direct reimbursement for the drug.
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Not entirely clear what is intended:
◦ Different than current bundled drug policy
◦ May not impact all states similarly
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Proposed guidance:
◦ A hospital must notify HRSA if it is no longer eligible or has
violated a 340B program requirement
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Implications:
◦ No materiality standard
 Current statement used in recertification: Entities must contact HRSA if
there is any “material” change in 340B eligibility and/or “material
breach” of key program requirements
◦ Most hospitals currently correct minor errors without notifying
HRSA
◦ This could be a regular notification for many facilities
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GPO prohibition only applies to DSH and free-standing
children’s and cancer hospitals
Does not apply to CAH, RRC or SCH
Proposed guidance lists three exceptions:
1. GPO could be used in clinics that:
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Have a different physical address
Are not registered in 340B
Ensure GPO drugs are never provided to outpatients at hospital or child
sites
Purchase drugs through a wholesale account separate from parent entity
2. GPO could be used for drugs given to an inpatient when insurer
subsequently classifies as an outpatient
3. GPO could be used when 340B and WAC pricing are unavailable
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Hospitals may use remaining GPO drugs after start date in
340B
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Proposed guidance continues to prohibit GPO use for
ineligible outpatients
Would also prohibit GPO use for drugs that are difficult to
track (e.g., IV solutions, contrast media, anesthesia) unless
paid in bundled manner by Medicaid
FAQ allowed hospitals to interpret the definition of covered
outpatient to decide if “bundled drugs” meet this definition,
and if not, “a GPO may be used for drugs that are not covered
outpatient drugs.”
Some hospitals have identified certain drugs they believe are
outside of 340B based on this FAQ
Would need to use WAC for such drugs if hospital can’t track
340B and GPO use
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Proposed guidance:
◦ All child sites must be listed in the contract
◦ Only covered entities may register contract pharmacies
◦ Makes clear that CEs are responsible for contract pharmacy
oversight and preventing diversion and duplicate discounts
◦ CEs must conduct annual independent audits
◦ CE must conduct a quarterly review of each contract pharmacy
location (e.g., comparing CE’s prescribing records with
pharmacy’s dispensing records)
◦ CE must notify HRSA of any noncompliance found during a
quarterly review or annual independent audit
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Proposed guidance:
◦ CE cannot use contract pharmacy to dispense 340B drugs
to Medicaid FFS or MCO patients without HRSA-approved
written agreement with state or MCO
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Seeking alternatives to filed cost report test
◦ Could greatly shorten timeline for new child sites
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GPO Prohibition
◦ Confirms ability to exclude some off-site locations from 340B (and
GPO prohibition)
◦ Confirms ability to use existing GPO inventory
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Allows different carve-in and carve-out decisions for Medicaid
fee-for-service and Medicaid managed care
Consideration of permitting CEs to use 340B only if
appropriate for service delivery (e.g., could use non-340B
account if more appropriate for a specific service, instead of
carving-in or carving-out by Medicaid billing number)
Does clarify some existing rules
Tightened audit standards
David Pointer, President
SolutionsRx
P.O. Box 212
Gainesville, Missouri 65655
(417) 679-0141
[email protected]