1. Presenter Name Tim Mallett, RPh Director, 340B & Community Health 340B Updates, Audits & Future State

2. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Background Cardinal Health –Director– 340B Pharmacies / Community Health Centers –Late January 2016 Family Health Center –FQHC 45 years in Kalamazoo –Variety of Services 100,000+ patient visits –30,000 patients Director of Pharmacy 12 years –2 Pharmacies ~ 190k rxs –Managed a variety of departments over this time –Quality 2.5 years –Lean Process Improvement 2 years –Started a Michigan 340B Pharmacist group that that meets 2x/year within the PCA

3. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. 340B Program overview When did it originate?  Established by Congress in 1992 (via Section 340B of the Public Health Service Act)  Manufacturers required to participate in 340B as a condition to participate in Medicaid  PPACA expanded the types of entities eligible for the program in 2010  New guidelines further expanded program by allowing entities to contract with multiple community pharmacies in 2010 Who is eligible?  Covered entities include non-profit healthcare organizations that receive funding from Federal programs or have certain Federal designations: − Federal Grantees: Federally Qualified Health Centers (FQHCs), STD / TB Clinics, Community Health Centers, Family Planning Centers, etc. − Non-Grantees: Disproportionate Share Hospitals (DSH), Critical Access Hospitals (CAH), Children’s Hospitals, etc.

4. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Key Players in the 340B Program The Health Resources and Services Administration (HRSA) of the United States Department of Health and Human Services – is the governmental agency responsible for oversight of the program. The Office of Pharmacy Affairs (OPA) within HRSA - is responsible for administration and oversight of the program. Covered entities are those health care organizations eligible to participate in the 340B program. Participating manufacturers – sell to covered entities at or below the ceiling price if they want their drugs to be covered by Medicaid. In-house pharmacies – are owned by covered entities and may or may not be in the same physical space as the medical sites. Contract pharmacies – that may contract with a covered entity to dispense 340B drugs to the entity’s patients. The Prime Vendor – contracted by HRSA to provide training and technical assistance, and is able to negotiate sub-ceiling pricing. Wholesale distributors – purchase from the manufacturer and sell to retail pharmacies and other entities. Courtesy of Sue Veer 2016

5. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Take - Away The 340B Drug Discount Program is NOT federally funded ; rather it is PAID for by the manufacturers

6. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. 340B - The Basics Discounts are provided up-front (aka a lower cost) rather than a rebate after-the-fact. –Price can be no higher than what charged to Medicaid, but can be lower (some Rx cost only a penny). –Discounts average 25% - 50% off average manufacturers price. Purpose: –Enable eligible entities to “stretch scarce federal resources –Increase access for eligible patients –Enable eligible entities to provide more comprehensive services Courtesy of Sue Veer 2016

7. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. More about the savings… The savings generated from participating in the 340B program belong to the eligible entity. –Only reasonable dispensing and administration fees should be paid to a partnering entity like a contract pharmacy. There is no mandate in the law that requires the entity to pass the 340B savings on to patients though most FQHCs choose to do so. Entities most commonly report using 340B savings to: –Increase number of patients served –Reduce RX prices to patients –Increase/enhance services provided Courtesy of Sue Veer 2016

8. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. What prescriptions can be filled with 340B purchased drugs? The Short answer: –Rxs written: At an OPA registered site For patients that meet the current definition of a “patient” By Health Center providers and “specialists” in appropriate situation For care that is within the scope of the Health Center –Alabama Medicaid requires you to bill 340B medications at Actual Acquisition Cost (AAC) plus a dispensing fee ($10.63) –All other insurances can be billed at your Usual and Customary (U&C) price and utilize 340B medications Medicare Part D Commercial Insurance Sliding Fee Scale

9. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Current Definition of Patient 1.The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual’s health care; 2.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 3.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. Reference: 61 Fed. Reg. 55156 (Oct. 24, 1996)

10. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Sliding fee scale for Medications The 340B statute does not dictate how much a covered entity may charge a SFS patient for 340B purchased drugs Section 330 does provide some guidance –A SFS discount must be provided –It does not need to mimic the clinic’s medical, dental or behavioral health SFS –PIN 2014-02 allows the clinic charge enough to cover their cost of the medication or the clinic can chose to pass additional savings on to the patient

11. 340B Current Status & Outlook

12. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Mega Guidance in 2015 Mega Guidance draft released October Final Comments to HRSA on the Mega Guidance were due mid November Patient definition change is the most significant aspect –Moving from the 3 part definition previously discussed –Potentially a 6 part definition Greatest impact –Will exclude Rxs written by specialist Medications provided for outpatient use at the time of discharge from an inpatient hospital stay or ED visit

13. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Mega Guidance Update HRSA received over 1,000 responses during the public comment period –Unsure of the impact on their final decision –None of the final language has been published September 1 st HRSA sent the final draft to the OMB for review –If there are no changes the mega guidance could be released in late November or early December –It could come out sooner or –Be delayed indefinitely Contact www.340BHealth.org to sign up for email updates

14. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. AMP Rule January 2016 Major changes in how pharmacies bill Medicaid Fee For Service (FFS) –Will affect all pharmacies, not strictly 340B pharmacies –April 2017 all FFS Medicaid claims will be billed at Actual Acquisition Cost (AAC) –July 2017 all state Medicaid offices will have to inform CMS on how they will avoid duplicate discounts when 340B medications are used for Medicaid Managed Care Organizations (MCO) Will NOT affect Alabama 340B pharmacies –Already billing at AAC –No MCOs at this time

15. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. President’s FY 17 budget Requests HRSA to have regulatory authority over the 340B program States that 340B medications make up a very small portion of the overall drug market (2%)

16. Audits HRSA scheduled On Site Visit (every 3 years) HRSA/OPA pharmacy specific audit

17. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. HRSA On Site Visit (OSV) Scheduled every 3 years –Includes a 340B review Verifies the existence of appropriate records Focused on –Documentation of 340B PPPs –Patient eligibility –Duplicate discounts –Contract pharmacy (especially oversight) Results submitted to OPA for follow up if there are concerns –Could result in a HRSA/OPA target audit (to be discussed shortly) Clinics should not be found in violation—you know what they are looking for

18. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. HRSA On Site Visit (Con’t)

19. HRSA Pharmacy Specific Audits

20. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. 660% 0% Increase in 340B sales volume in last two years to $12 billion in 2015 Number of HRSA target audits per year 20200 0 Mega-Guidance ruling is expected to bring additional scrutiny on compliance Industry Trends

21. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Types of HRSA 340B Audits Randomized/Risk-based –Complex program administration –Number of child sites –Volume of purchases –Contract pharmacy arrangements Targeted –Allegations of violations

22. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Shaded areas represent states with HRSA audits. Over 10 audits 5 – 10 audits 3 – 4 audits 1 – 2 audits

23. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. OPA Audit results for CHCs

24. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. as of December 31, 2015 Low hanging fruit Courtesy of Sue Veer 2016

25. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Audit Findings Database errors Incorrect Authorizing Official Closed facility listed Incorrect –Facility address –Facility name –Grant Number Facility or site not registered Patient Eligibility Ineligible provider Inadequate medical record documentation Service outside of scope of project/grant OTC drug (340B) without a prescription No auditable records

26. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Audit Findings Duplicate Discount Inaccurate Medicaid Exclusion File listing –“Yes” box not checked –Incorrect NPI/Medicaid billing number –Missing NPI/Medicaid billing number Contract Pharmacy Registered on OPA site but no contract in place Contracted/dispensing but not registered Dispensing without a contract Missing locations or incorrect addresses Ineligible Patients Ineligible Providers Dispensing to MCaid FFS patients Lack of oversight of contract pharmacy

27. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. OPA Sanctions Repayment to manufacturers Termination of: –Contract pharmacies from 340B program –Site from 340B program –Covered Entity from the 340B program

28. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. HRSA Database https://opanet.hrsa.gov/340B/Views/CoveredEntity Confirm all information regularly to avoid database, duplicate discount and contract pharmacy findings

29. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Minimizing your risk Current and complete PP&P that include: –Processes for prevention of diversion where ever 340B medications are utilized: Site eligibility met Patient definition met –Process for ensuring that duplicate discounts don’t occur –Process for oversight of contract pharmacy including: Audits Reporting

30. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Minimizing your risk (con’t) Regular review of HRSA database (previous slide) Corporate wide training programs –Consideration of 340B pharmacy in all site or service related changes –Ensure pharmacy is aware of provider hires and terminations Have a specific PPP that will update your Third Party Administrator (contract pharmacies) Conduct self audits Engage independent auditors

31. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Self-Audit Process Involve a more than just pharmacy –Finance –Compliance Do some level of auditing at least quarterly Include carefully verifying all information on 340B data- base –Includes all child sites and contract pharmacies

32. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Self-Audit sample (Apexus website) 340B, PVP (2016)

33. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.

34. Family Health Center Quarterly Audit

35. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Contract Pharmacy Half of all diversion findings relate to contract pharmacy! HRSA audits are looking for logic that verifies: –Status of patient –Location where prescription originated from –Eligibility of the provider –Verification that covered entity maintains responsibility for patient’s healthcare –Evidence of referral or follow up if script is written at an ineligible location (specialist’s office or ED)

36. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Minimizing your risk—Contract Pharmacy Implement the specific PP&Ps for your contract pharmacies –Avoiding patient eligibility issues Third Party Administrators Other arrangements –Monthly/Quarterly audits –Independent audits (highly recommended but not mandated at this time) Ensure that your monthly statements provide a clear picture –Flow of drugs –Flow of money FQHCs are not in compliance if they do not understand and cannot explain their monthly statements

37. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Conclusion Maximize the benefit of having access to 340B priced medications –The program exists to support your efforts in your communities Follow the rules Be diligent in reviewing the HRSA 340B data-base Proper preparation can eliminate 340B fears!

38. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Contact Tim Mallett, RPh Director—Community Health Centers and 340B Cardinal Health tim.mallett@cardinalhealth.com 269.598.7892

39. © Copyright 2016, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. References Federal Regulation, 61-55156 (1996) Patient Definition, Retrieved 9/10/2016. HRSA Database, https://opanet.hrsa.gov/340B/Views/CoveredEntity, Retrieved 9/10/2016.https://opanet.hrsa.gov/340B/Views/CoveredEntity Prime Vendor Program, https://www.340bpvp.com, Self Audit Sample, Retrieved 9/10/2016.https://www.340bpvp.com Veer, Sue, President/ CEO Carolina Health Centers, Key players, 2016. Veer, Sue, President/ CEO Carolina Health Centers, 340B – The basics, 2016. Veer, Sue, President/ CEO Carolina Health Centers, More about the Savings, 2016. Veer, Sue, President/ CEO Carolina Health Centers, CHCs with Adverse Findings, 2016 39