2. America’s Voice for Community Health Care The National Association of Community Health Centers (NACHC) represents Community and Migrant Health Centers, as well as Health Care for the Homeless and Public Housing Primary Care Programs and other community-based health centers. Founded in 1971, NACHC is a nonprofit advocacy organization providing education, training and technical assistance to health centers in support of their mission to provide quality health care to medically underserved populations.

3. The NACHC Mission To promote the provision of high quality, comprehensive and affordable health care that is coordinated, culturally and linguistically competent, and community directed for all medically underserved populations.

4. For further information about NACHC and America’s Health Centers Visit us at www.nachc.comwww.nachc.com

5. NACHC 340B Webinar Series Part 3: Recent Developments Cynthia (Cindy) R. DuPree Partner, Draffin & Tucker, LLP February 3, 2016

6. Some information presented in this webinar is based on NACHC comments related to the proposed guidance. (Letter to the Office of Pharmacy Affairs, Health Resources and Services Administration dated October 27, 2015)

7. Today’s Topics Draft 340B Mega-Guidance - Colleen 340B & Medicaid – Colleen & Kersten o Key Issues o Recent Developments in FFS and managed care Overview of Compliance Issues - Cindy

8. Draft 340B “Mega-Guidance”

9. Draft “Mega-Guidance” Published by HRSA last August. Very unclear how “enforceable” it is – Not a regulation; not final; will be challenged in court if finalized. Still, still has useful info on how HRSA would like the program to operate - Health Centers are well-advised to pay attention to many of the proposals

10. NACHC Comments Available at www.nachc.org/regulatorywww.nachc.org/regulatory Based on extensive input from 340B Workgroup, PCAs. Also submitted joint comments with other provider types – One set with other HRSA grantees – Smaller set with coalition of all providers

11. Mega-Guidance: The Big Picture Restated Congressional intent Proposed some clarity in important areas –e.g., record retention, limited distribution networks, contract pharmacies But took a “one-size-fits-all” approach to all types of covered entities -Appeared to be written from hospital perspective

12. Definition of “Eligible Patient” NACHC’s primary area of concern Defined eligibility on a script-by-script basis, not a patient-by-patient basis. Said that FQHC patients can’t get 340B Rx for scripts: –Provided by a specialist/ referral –Written at time of hospital discharge

13. Concerns about “Patient Definition”, #1 NACHC’s formal comments stressed the negative impacts of this proposal: On our patients’ health –23.4% of adults with chronic illnesses report “taking less medication than prescribed, or none at all, due to costs. –FQHC patients are disproportionately at risk - minority, uninsured, children, multiple medical conditions On patients’ finances On FQHCs’ clinical outcomes

14. Concerns about “Patient Definition”, #2 Negative impact on FQHCs’ finances, due to: lower 340B revenues higher spending on discounts lower quality outcomes, leading to lower reimbursement higher operational costs, due to need to keep “separate” inventories

15. Concerns about “Patient Definition”, #3 Contrary to the goals of: – the 340B statute – Congressional intent behind 340B – the Health Center program (emphasis on PCMH, case management) – lowering hospital readmissions

16. NACHC’s Recommendation Create a “patient definition” that reflects the unique structure of the Health Center program. – Use the UDS definition of Health Center patient General concerns – including one- size-fits-all not fitting – were echoed by other HRSA grantee groups.

17. Mega-Guidance: Contract Pharmacies Did not limit the number of contract pharmacies New expectations for oversight: Annual audit of each location using an independent auditor, and Quarterly review of FQHC’s 340B prescribing records with the contract pharmacy’s 340B dispensing records

18. Mega-Guidance: Compliance HRSA repeatedly states that the FQHC is fully responsible for ensuring compliance with all program rules – including at contract pharmacy sites. “Auditable records” – must be kept at least 5 years – term is not defined.

19. Mega-Guidance: Some Other Issues Access to 340B pricing under Limited Distribution Networks Rules around manufacturer audits of FQHCs Intersection of 340B and Medicaid managed care (see next section)

20. Next Steps for the draft Mega-Guidance? Not clear. HRSA received over 800 comments (many from FQHCs.) May not be finalized during this Administration. If finalized, expect lots of lawsuits.

21. QUESTIONS ON THE DRAFT MEGA-GUIDANCE?

22. 340B and Medicaid

23. Key Issues under Medicaid #1 of 3 #1. Avoiding duplicate discounts Duplicate discount = when a manufacturer is asked to give both a 340B price and a Medicaid rebate on the same unit of drug

24. Avoiding Duplicate Discounts There are various ways to do this. One option is to “carve-out” Medicaid – Means you keep Medicaid patients outside of your 340B program, so they do not receive 340B drugs. Other options entail careful tracking/ reporting of which Rx were filled with 340B Rx.

25. Key Issues under Medicaid: #2 & #3 #2. Who gets the (single) discount? – The Health Center (or other covered entity?) – The State Medicaid Agency? or – The Managed Care Organization (MCO)? #3. Which discount are they getting? - Typically, the final price is slightly lower under 340B pricing than under Medicaid rebate

26. Different answers for FFS vs Managed Care Answers to #2 & #3 vary depending on whether fee-for-service or managed care. Under fee-for-service, answers are fairly clear. Under managed care, there is currently much uncertainty (& activity)

27. Medicaid Fee-for-Service & 340B CMS issued clear guidance late last month. - See Final Rule on Medicaid Covered Outpatient Drugs at www.nachc.org/regulatory The State Medicaid Agency gets the benefit of the 340B price. – State must pay 340B providers only their Actual Acquisition Cost (AAC) plus a dispensing fee. – If FQHCs can negotiate prices below 340B ceiling price, State can choose to let them keep the difference.

28. Medicaid Managed Care

29. ACA expanded Medicaid Drug Discount program to Medicaid MCO patients Cannot have duplicate discounts No further regulation clarifying interaction with 340B policy and practice States and MCOs have stepped in with own requirements Managed care rule expected Summer 2016

30. Current Policy Options Under Medicaid Managed Care Option Carve-In? (Use 340B drug for MCO patients) Cost to FQHC for 340B Drug Reimbursement to FQHC for 340B drug FQHC Proceeds (Reimbursement less cost) Savings to State/MCO (Full rate less reimbursement) 1Yes340B rate ($5) Full rate ($10) $5$0 2Yes340B rate ($5) Medicaid discount rate ($7) $2$3 3AYes340B rate ($5) 340B rate ($5) $0$5 3BNoFull rate ($10) Full rate ($10) $0$3 Example Prescription Full rate = $10 / 340B rate = $5

31. QUESTIONS ON MEDICAID AND 340B?

32. Compliance Expectations

33. Audits are underway! HRSA is continuing to increase its audit activity of the 340B Program. Pressure is coming from all sides.

34. HRSA 340B Audits

35. 2015 HRSA Audits Shaded areas represent states with HRSA audits. Over 10 audits 5 – 10 audits 3 – 4 audits 1 – 2 audits

36. CHC audits – 2014 & 2015 Shaded areas represent states with HRSA audits.

37. Entity Audits Completed as of December 31, 2015

38. HRSA Audit Findings - 2014 2014 - CHC adverse findings are higher than average.

39. HRSA Audit Findings - 2015 2015 - CHC adverse findings are higher than average.

40. CHCs with Adverse Findings as of December 31, 2015

41. Let’s review further

42. Incorrect 340B database record 2015 HRSA audit findings –Incorrect address entries –Incorrect contact information for Authorizing Official –Offsite outpatient facilities not listed –Registered a contract pharmacy without a contract in place –Incorrect entry for Primary Contact

43. 2015 HRSA audit findings –340B drugs dispensed for prescriptions originating from ineligible sites –340B drug dispensed at a contract pharmacy for a prescription written at an ineligible site –340B drug dispensed at a contract pharmacy for a prescription written by an ineligible provider –340B drug dispensed to an inpatient –340B drug dispensed for prescription not supported by responsibility of care –340B drugs were not properly accumulated Diversion

44. Duplicate discount 2015 HRSA audit findings –Inaccurate or incomplete information in the Medicaid Exclusion file –Medicaid billing numbers and NPI numbers were incorrect on the Medicaid Exclusion file –Entity was billing Medicaid contrary to information included in the Medicaid Exclusion file

45. Oversight of contract pharmacies 2015 HRSA audit findings –No oversight by covered entity of contract pharmacy 340B operations

46. Actual Findings

47. Incorrect 340B database record Contract pharmacy is not registered correctly Contracted Pharmacy Service Agreement This agreement is entered into by and between Parent FQHC at 123 Rural Road, Anytown, TX. and Local Pharmacy, whose principal place of business is located at 456 Main Street, Anytown, TX. CH99999CFQHC Child Site Local Pharmacy 456 Main Street Anytown TX1/1/2014 Registered in the name of one child site, rather than the parent.

48. Does it matter? Thank you for contacting Apexus Answers, if a contract pharmacy is registered under one specific child site, then only patients from that one child site can get 340B drugs from the registered contract pharmacy. However if the contract pharmacy is registered under the parent site then all entities in a parent/child relationship may use those contract pharmacies as long as that wording is in the contract. Please see the FAQ below:

49. Incorrect 340B database record All eligible locations are not listed in the contract. Only 3 of the 5 eligible child site locations are listed in the contract. Contract pharmacy is registered under the parent entity.

50. Incorrect 340B database record Contract was not executed before the pharmacy registration date in the OPA database. CH99999 FQHC Parent Local Pharmacy 456 Main Street Anytown TX1/1/2014

51. Incorrect 340B database record Often covered entities are unable to locate copy of contract signed by both parties.

52. Incorrect 340B database record Contract pharmacy address is incorrect in OPA database. CH99999 FQHC Parent Local Pharmacy P.O. Box 1110 Anytown TX1/1/2014 The address for the pharmacy in the HRSA database is a P.O. Box while the contract states a street address. The actual “ship-to” address should be listed on the database.

53. Individual Dispense Testing Prescriptions were generated in ineligible locations. Discharge prescriptions were provided to patients while in the hospital. Hospital services are non-FQHC services. Dr. John Doe

54. Individual Dispense Testing Prescriptions were generated in ineligible locations. Physicians were moonlighting in other locations which were not affiliated with the covered entity.

55. Individual Dispense Testing Unable to locate support in FQHC medical record for 340B replenishment drugs purchased by contract pharmacy Obtained listing of invoices for period Selected invoice sample Selected NDC from invoice in sample Obtained dispense records to support NDC purchased Traced patient dispense support to medical record documentation Obtained listing of invoices for period Selected invoice sample Selected NDC from invoice in sample Obtained dispense records to support NDC purchased Traced patient dispense support to medical record documentation

56. Policies and Procedures

57. Common oversights Updates to manual Location of pertinent files Contract pharmacy information Training methods, frequency, responsibility Enrollment Re-certifications Self-auditing Use of savings

58. Recommendations

59. Pharmacy Contracts

60. Pharmacy contracts

61. Additional information for review –Signatures –Dates prior to registration –Addresses –Locations –Duplicate discounts –Diversion –Freedom of choice

62. Pharmacy contracts Additional information for review –Definition of 340B covered drug –Eligibility and adjudication –Tracking and accumulations –Pricing to patients –Discounts/sliding fees –Transaction fees –Processor fees –Medicaid

63. Pharmacy contracts Additional information for review –Slow moving drugs –Voids, mistakes, errors –Reporting to covered entity –Updates to filters (prescribers and locations) –Replenishment of inventory –Flow of money (Collections and expenses) –Audits of records

64. Self-audits

65. Audits of records

66. Self-audits Supplier Invoice Start here to insure that all 340B purchases are included in the population for the sampling. Drug NDC Select specific drugs from the sample invoices for verification of supporting dispenses. Matching Dispense Using dispense records, identify patient(s) that received the drugs which were directly purchased/replenished. Patient record Trace dispense to patient records to verify eligible visit, eligible location, and eligible prescriber to support drug dispensed.

67. Independent audits Should be performed annually Should be performed by an independent party –Not the covered entity staff This is self-auditing –Not the contract pharmacy or processer staff “Fox guarding the hen house” Independent = “no skin in the game”

68. Want to learn more?

69. NACHC Information NACHC website guidance Upcoming webinar 2/10 – Compliance/Self-audits Focus on: Policies and procedures External audits Internal audits Audit tools

70. For more information or questions: Cindy DuPree Draffin & Tucker, LLP Atlanta, Georgia cdupree@draffin-tucker.com NACHC and America’s Health Centers www.nachc.com