1. HRSA’s 340B Drug Pricing Program – An Update
11th Annual PPN Conference
Las Vegas, NV
August 15, 2007
Christopher A. Hatwig, M.S., R.Ph.

2. Objectives Review requirements for DSH participation in 340B
Discuss updates with the 340B Drug Pricing Program to include:
The Office of Pharmacy Affairs (OPA)
The Pharmacy Services Support Center (PSSC)
The Prime Vendor Program (PVP)
Review pending FRNs and 340B legislation

3. Background: 340B Drug Pricing Program
1990 -Congress created Medicaid rebate law
Drug manufacturers responded by increasing prices
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

4. 340B Covered Entities Eligible to Participate
Disproportionate Share Hospitals (DSH)
FQHC LA’s
HRSA Grantees:
Federally Qualified Health Centers (FQHC)
Hemophilia Treatment Centers
Ryan White Programs (HIV programs)
Sexually Transmitted Disease programs
Tuberculosis Programs
Title X Family Planning Clinics
Urban 638 Tribal Programs

6. What Drugs Are Covered? Non-covered drugs: 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
*Aggressive discounts have been negotiated for vaccines and other non-covered
by the Prime Vendor Program

7. Current Patient Definition Requirements for 340B Hospitals
Three criteria to meet:
1. The covered entity must maintain records of health care services for the individual;
2. The individual must receive care from a health care professional who is employed by or under contract or other arrangements with the covered entity; and
3. Responsibility for the care provided must remain with the covered entity.

8. Inventory Management
To ensure compliance and to optimize 340B savings, Most 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 (11 digit match)
Reports/subject to audit
Create NDC-to-CDM crosswalk
Identify charge unit conversions (CDM units versus purchase units)
Match procurement data to utilization data via common NDC code
Identify the appropriate sources of utilization data based on the process flows and the mechanism in which data will be obtained
Track & validate service entities to Medicare cost report
Identify covered patients
Identify qualified points of service
Create reports or use software to track data, create order reports, and merge wholesaler procurement reports to maintain qualified units balance
Use actual utilization data and wholesaler reports to test for errors in order quantities, unit-conversions, NDC’s, etc.

9. 340B Service Options In-House Pharmacy Contracted Pharmacy
Traditional
Telepharmacy
Management company operated
Contracted Pharmacy
Community retail
Mail order
Prescriber Dispensing

10. Current Contract Pharmacy Guidelines
Each covered entity may use only one pharmacy to provide all pharmacy services
The entity has the choice of using either an in-house pharmacy or a contract pharmacy for site
There are no limits on how many in-house pharmacies a covered entity can operate
Larger DSH facilities typically manage their own in-house outpatient pharmacy. Contract model more prevalent in smaller DSH and community health centers
“Ship to, bill to” arrangement

11. Typical 340B Chain of Distribution
AWP
$100
WAC
$84
Non-340B
$70
340B
$51
MANUFACTURER
No Medicaid
Rebate
WAC
Chargeback
340B + Non-340B Acc’ts
WHOLESALER
Non-340B
340B
Payment
MEDICAID
FEE-FOR-
SERVICE
Bill AAC
COVERED ENTITY
CONTRACT
PHARMACY
Dispensing
Fee
Bill U+C
Co-pay
(if applicable)
Dispensed or
Administered
OTHER
PAYERS
Dispensed
Co-pay
ELIGIBLE PATIENT
Powers Pyles Sutter & Verville, PC Bill von Oehsen
(202)

12. The Value of 340B Savings Discounts range from 25 to 50%
DSH see savings in the range of 22 to 40% below GPO prices
A Mathematica study commissioned by HRSA documented an average of 27% savings
Other HRSA grantees see even great savings
The 340B Prime Vendor Program also negotiates sub-ceiling discounts
Although covered entities are entitled to a ceiling price that averages 51 percent of AWP, they may negotiate “sub-ceiling” discounts
Additionally value may be available on inpatient drugs (more later on this)

13. 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
Harry Hagel and Chris Hatwig (PVP) will discuss their respective roles immediately after my presentation.
New competitive solicitation April, 2004
Five-year agreement signed September 10, 2004
1st option year (3rd full year) approved by Government May 2006
HealthCare Purchasing Partners International (HPPI)
Drug price negotiation services
Multiple wholesale distributor agreements
Other value added products/services
American Pharmacists Association (APhA) (Harry Hagel, Sr. Dir.May 2006)
American Association of Colleges of Pharmacy, American Society of Health-systems Pharmacists and other partners
Services to OPA and 340B covered entities (States)
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 that promote access to clinically and cost effective pharmacy services.
2006/ 6 Projects
2005/ 10 Projects
2004/ 5 Projects
OPA
PVP
PSSC

14. Office of Pharmacy Affairs (OPA) Mission and Function Federal Register 9/21/2004
Responsible for management and oversight of the 340B Programs
Manage pharmaceutical pricing agreements (PPA’s) with industry
Manage covered entity eligibility and enrollment
Promote access to 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

15. First quarter FY ,469 covered entities currently participating in the 340B Drug Pricing Program. The program has grown more than 50 percent since January 2000 and a 4.7 percent growth since January 2005. 10

17. 12

18. 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
This is just a representative example of some of the higher profile issues, you may have others.
Most manufacturer’s focus on diversion, but the for the most part it is inadvertent.
Duplicate discounts occur with some frequency.
Congress is focused on pricing transparency to address incorrect prices.
The next OIG report (if accurate) will drive congressional action.

19. 340B “Program Integrity Pilot Project”
Recommended by the OIG and certain drug manufacturers
Test collaboration of OPA/Manufacturers to jointly publish verified price file to marketplace via the Prime Vendor Program to wholesale distributors
Possible benefits: Increased pricing integrity and transparency
Six manufacturers and one wholesaler currently participating; others encouraged to participate
Project period: April 1, 2007 through March 30, 3008
Manufacturers
Amylin
Daiichi Sankyo
Eli Lilly
Genentech
GlaxoSmithKline
Schering Plough
Wholesalers
AmerisourceBergen
McKesson
Cardinal
OPA Pricing Errors:
Rounding error:  System rounded down data above numeral five at the 6th digit
URA calculation:  System erroneously calculated OTC and generics as AMP -15.1% rather than AMP- 11%.
_ Package size:  Manufacturer reported data and the data purchased from First Data Bank (FDB) do not always agree.  Exploring resolution with the manufacturers and with FDB.
_ No finding of manufacturer pricing error

20. 340B Basics: Regulation and Policy
Policy issued via Federal Register Notice publication.
Process
- OPA drafts guidance
- notice published in federal register
- public comment requested/received
- comments reviewed/considered
- notice finalized
HRSA’s OPA currently has three FRN’s pending comment and final publication

21. Proposed Guidance: Definition of Patient –72 FR 1543
Clarifies previous FRN of October 1996
A clear and enforceable definition to help ensure against diversion and support 340B program integrity
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 its clinics may participate in 340B
Status
Comment Period 1/12/07 – 03/13/07
Comments being reviewed and final publication being developed
Through CE networking, contracting, and other arrangements questions about definition of CE patient have arisen.
HRSA believes current definition of patient provides sufficient guidance for many situations. It is possible that some CE may have intrepreted the definition too broadly with results of potential for diversion; therefore HRSA issued Notice for comment hat includes several examples that provide CE further guidance regarding the relationship of the CE and an individual that makes that individual a patient of the CE.
HRSA sought comments on elements of contract between private non-profit hospital and state/local government and different situations where private non-profit hospitals are granted governmental powers.
1.Clarifies requirement that covered entity must maintain ownership, control, maintenance, and possession of records of the patient’s health care.
2. Clarifies relationship between the covered entity and medical provider who generates prescription of 340B drugs.
3. Provides additional guidance for disproportionate share hospitals (DSHs) as to which affiliated clinics may participate in 340B.
4. Certain case management administrative activities are construed as health care
5. Loosely affiliated networks with no appropriate contractual relationship to eligible entity
6. Extension to facilities not an integrated part of the eligible DSH
7. 340B drugs are provided to employees of health facilities
8. Indian Tribes and Tribal Organizations providing unauthorized services to non-Indians
9. Sub-grantees and/or subcontractors providing services beyond the scope of the sub-grant or subcontract
Some have augured that if implemented these proposed changes could significantly narrow the patient populations eligible for the 340b program. I would argue that the intent of the proposed guidelines is to clarify with greater certainty who is and who is not a “patient” of a CE for purposes of 340B. In publishing the FRN, my intent was to use the process to clarify who a patient is. The purpose of the Administrative Procedures Act is to create public dialogue on proposed rules/guidance. Through public dialogue, better rules and guidance is suppose to result.

22. Proposed Guidance: Contract Pharmacy –72 FR 1540
Updates previous FR Notice of August,1996
Builds upon experience with Demonstration Projects
Incorporates multiple pharmacies as standard option
Network model arrangements would still require Alternative Methods Demonstration Projects (AMDPs) approval
Status
Comment Period 1/12/07 – 03/13/07
Comments being reviewed and final publication being developed
Through CE networking, contracting, and other arrangements questions about definition of CE patient have arisen.
HRSA believes current definition of patient provides sufficient guidance for many situations. It is possible that some CE may have intrepreted the definition too broadly with results of potential for diversion; therefore HRSA issued Notice for comment hat includes several examples that provide CE further guidance regarding the relationship of the CE and an individual that makes that individual a patient of the CE.
HRSA sought comments on elements of contract between private non-profit hospital and state/local government and different situations where private non-profit hospitals are granted governmental powers.
1.Clarifies requirement that covered entity must maintain ownership, control, maintenance, and possession of records of the patient’s health care.
2. Clarifies relationship between the covered entity and medical provider who generates prescription of 340B drugs.
3. Provides additional guidance for disproportionate share hospitals (DSHs) as to which affiliated clinics may participate in 340B.
4. Certain case management administrative activities are construed as health care
5. Loosely affiliated networks with no appropriate contractual relationship to eligible entity
6. Extension to facilities not an integrated part of the eligible DSH
7. 340B drugs are provided to employees of health facilities
8. Indian Tribes and Tribal Organizations providing unauthorized services to non-Indians
9. Sub-grantees and/or subcontractors providing services beyond the scope of the sub-grant or subcontract
Some have augured that if implemented these proposed changes could significantly narrow the patient populations eligible for the 340b program. I would argue that the intent of the proposed guidelines is to clarify with greater certainty who is and who is not a “patient” of a CE for purposes of 340B. In publishing the FRN, my intent was to use the process to clarify who a patient is. The purpose of the Administrative Procedures Act is to create public dialogue on proposed rules/guidance. Through public dialogue, better rules and guidance is suppose to result.

23. Proposed Guidance: Children’s Hospitals (new FRN)
References section 6004 of the DRA
Clarifies that children’s hospitals are subject to the same 340B responsibilities as other covered entities
Describes application procedures for children’s hospitals
Reaffirms drug manufacturers’ responsibility to furnish discounts under Pharmaceutical Pricing Agreement (PPA).
Feasibility of an independent auditor to verify eligibility
Status
Published in Federal Register July 9, 2007
Sixty day comment period closes September 7, 2007

24. Patient Safety/Clinical Pharmacy Initiative
Patient Safety Problem:
IOM reports medication errors injure 1.5 Million people and cost billions annually.
Pharmacy services in HRSA programs & safety-net partners growing rapidly.
HRSA desires these programs to be the best and safest in the United States.
FY 2007 and FY 2008 Senate Appropriations Committee Reports
Collaboration with external and internal stakeholders
Major pharmacy organizations, 340B Coalition members and others
Contract with Mathmatica Policy Inc.
Collaborate with HRSA Quality Center; HRSA programs, ARQH, NQF and others to identify safety-net best practice models of safe and effective clinical pharmacy services
Improve patient safety and improve outcomes
encourage win-win relationships with colleges and schools of pharmacy
sustainable and reproducible
Use “collaborative care model” to transfer to other safety-net providers
Celebrate what’s working
Figure out what caused it to work
Provide opportunity for other safety-net providers to commit to implement model that works
If you think your organization excels in patient safety/ clinical pharmacy, we want to hear from you. Contact me, I want to follow up with you. Problem: IOM says Medication Errors Injure 1.5 Million People and Cost Billions Annually. Pharmacy services in HRSA programs & Safety Net partners growing rapidly.
Initiative Purpose & Methods:
Learn best practices from high performing Safety Net providers with low error rates and great health care outcomes
Systematically apply best practices across the Safety Net, at bold national scale
Generate Results: safer practices, lower error rates, more and better pharmacy services, improved health outcomes on chronic diseases, lower costs

25. FY 2008 $2.94 Million Budget Request for OPA
House & Senate Appropriations Committees
Funds will enable OPA to begin to
Improve Program Integrity
Increase compliance with 340B pricing requirements
Publish Federal Register Notices to clarify 340B guidance
Improve OPA-IS and begin annual verification of covered entity data
Increase stakeholder training and technical assistance
Improve Program Transparency
Evaluate collaborative 340B Pricing “Pilot” and possibly expand it
Encourage voluntary manufacturer posting of pricing files to the 340B Prime Vendor secure Web site

26. HRSA Pharmacy Services Support Center at APhA

27. About PSSC
Established through a contract between APhA and HRSA, signed September 27, 2002.
Enhances Office of Pharmacy Affairs (OPA) resources to optimize the value of the 340B program in order to provide affordable, comprehensive pharmacy services that improve medication use and advance patient care and patient access to affordable drugs.

28. Pharmacy Services Support Center
Information management
Organizing pharmacy expertise and resources
Responding to 340B inquiries
Providing technical assistance
Policy analysis
Monitoring pertinent policy developments
Communication and education on policy issues impacting 340B and pharmacy services.
Networking
Communication and education
Project development

29. Learning Management System

30. PSSC PharmTA
Free technical assistance for 340B-eligible entities interested in setting up or enhancing clinically and cost-effective pharmacy services
To request TA:
Call

31. Optimization Resources
Program Assessment
financial
operational
compliance/integrity
Implementation Plans
Financial Analysis
Formulary Management

32. 340B Action Plans

33. Interactive Financial Analysis

34. Formulary Management

35. HRSA’s 340B Prime Vendor Program

36. The Prime Vendor Program
In addition to the cost savings available through the 340B Program, its Prime Vendor Program (PVP) provides additional savings to DSH’s and HRSA grantees
The mission of the PVP is to improve access to affordable medications for all 340B covered entities by:
Lowering participants’ supply costs by expanding the current PVP portfolio of sub-340B priced products
Providing covered entities with access to efficient drug distribution solutions to meet their patients’ needs
Providing access to other value added products and services meeting covered entities’ unique needs
Participation is free and voluntary for all 340B eligible participants

37. Estimated Prices For Selected Public Purchasers, as Percent AWP von Oehsen; Pharmaceutical Discounts Under Federal Law: State Program Opportunities 0%
20%
40%
60%
80%
100%
AWP
100.0%
AMP
80.0%
Medicaid (Min.)
67.9%
Medicaid Net
60.5%
FSS
51.7%
Private Sector Pricing
340B
49.0%
FCP
47.9%
VA Contract
34.6%
Stephen Schondelmeyer, PRIME Institute, University of Minnesota (2001)

38. HPPI’s History as the PVP
Late AmerisourceBergen (ABC) subcontracted the responsibilities of Prime Vendor Program to HPPI
Sept – HPPI awarded PVP contract by HRSA
Jan/Feb – HPPI met or exceeded all 26 performance criteria within the contract. HRSA granted contract extension through 2008
July to Sept., 2007 – Program transitions to new non-profit company named Apexus

39. Apexus Non-profit subsidiary corporation - June 18, 2007
HRSA fully supported
Dedicated to managing the PVP with HRSA
BODs will include representation from the PVP’s participants
Transition will be seamless for HRSA and PVP participants
Minimal change to PVP logo

40. 340B PVP Updates
Contracted from a single national distributor to 13 national, regional, and specialty distributors
Expanded to over 5,200 participants
Contracted with 50 suppliers representing over 2,800 products and services
Major MIS Related Projects:
New contract management system software being implemented
Major modifications to PVP participant databases
Building interface to HRSA’s database for eligibility
Expanding demographic data to include multiple contract pharmacy relationship and unique identifiers for participants

41. 340B PVP Updates (cont.)
Two additional FTE’s (Analyst, Pharmacy Director), plus Pharmacy Intern
Three participant councils provide program guidance (DSH, CHC, and Title X Family Planning)
Average sub-340B savings on PVP contract sales across all participants for 2006 was 17%
Lilly, Wyeth, X-Gen added to list of companies posting ceiling prices
Partnered with national organizations representing covered entities to conduct 340B-related education and compliance programs

42. PVP Participants by Entity Type (as of 7/19/07 – 5231 participants)

43. Supplier Agreements Source: 340B PVP website
Allendale Pharmaceutical
Alliant Pharmaceuticals
Astra-Zeneca Pharmaceuticals
Abraxis Pharmaceutical
Akorn Inc.
ASD (flu vaccine)
Bayer Diagnostics
Bedford Labs
Can-am Care LLC
Caraco Pharmaceutical Labs
Cytogen (pending)
FFF (flu vaccine)
G&W Laboratories
Geritrex Corporation
GlaxoSmithKline
Hawthorne Pharmaceuticals, Inc
Home Diagnostics Inc.
Early Detect
Lilly & Company
Major Pharmaceuticals
Medicure
Morton Grove Pharm Inc.
NitroMed Inc.
Novartis Vaccines
Novo Nordisk
Okomoto USA Inc.
Organon USA, Inc.
Paddock Labs
RD Plastics Co Inc.
Rx Elite Holdings, Inc.
Sandoz Pharmaceutical
Sciele Pharma
Teva Health Systems
Total Pharmacy Supply
Tri State Distribution
Stratus Pharmaceuticals
Trinity Biotech
X-Gen Pharmaceuticals
Watson Pharma Inc.
Wyeth Pharmaceuticals

44. PVP Sub-ceiling $avings by Quarter

45. DSH Inpatient Program

46. DSH Inpatient Pricing
Section 1002 of MMA: Amended Medicaid Rebate Law to exclude inpatient prices from best price reporting by drug manufacturers
Program is voluntary for manufacturers
Exeption to “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 and pricing is restricted to DSH members only
Some hospitals report 10% or greater in added savings over typical GPO prices

47. SNHPA Survey Results: DSH Inpatient Discounts
SNHPA survey indicates hospitals have received post-MMA inpatient discounts on only 12 percent of their most commonly used brand name drugs
70 percent of the discounts were contingent on hospitals guaranteeing a certain market share
Small and rural hospitals are the least likely to receive inpatient discounts under Section 1002 because of requirements placed on contracts
SNHPA has advocated for legislation to address the inpatient pricing. Members of Congress have introduced legislation that would mandate 340B pricing on DSH inpatient drugs – see S.1376 and H.R.2606

48. Safety Net Inpatient Drug Affordability Act S 1376/ HR 2606
Expands 340B program to new entities
Permits GPO within inpatient
Extends discounts to inpatient
Credit paid to Medicaid for inpatient discounts based on formula
Modifies AMP
Increases OPA authority and resources for enforcement and improves pricing integrity
Permits multiple contract pharmacies
January 1, 2008

49. Contact Information
Office of Pharmacy Affairs
Phone: or
Web:
Pharmacy Services Support Center
Phone:
Web:
Prime Vendor Program
Phone:
Web: