1. Specialty Pharmacy & 340B: Current Trends
Christopher A. Hatwig, MS, RPh, FASHP President, Apexus

2. Objectives
Identify challenges in the access of limited distribution drugs
Describe the intersection of specialty pharmacy and 340B
Outline 340B Program policy updates and trends

3. Christopher A. Hatwig, MS, RPh, FASHP President, Apexus
Chris Hatwig has served as president of Apexus, the nation's leader in the advancement of ambulatory pharmacy solutions and the support of compliant 340B programs, since Apexus is best known for its role as Health Resources and Services Administration’s contracted 340B Prime Vendor, serving all 340B stakeholders. Recently, Apexus has expanded its service offerings to include the Apexus Manufacturer Refund Service and Acentrus, the health system specialty pharmacy program. Throughout his career, Chris has been committed to developing and implementing solutions to improve efficient access to affordable medications for health systems and the patients they serve.
Before joining Apexus, Chris was the director of Ambulatory Pharmacy Services and Value Analysis Programs at Parkland Health & Hospital System in Dallas, where he practiced for 13 years, managing one of the nation’s largest and most progressive safety net ambulatory pharmacy programs. He was responsible for managing Parkland’s network of ambulatory pharmacies, which processed more than two million prescriptions annually and operated with a drug expense budget of $85MM.
Bio slide for reference for audience (not presented)

4. Apexus Solutions 340B Prime Vendor Program
Advanced 340B Operations Certificate Program
Acentrus
Federal contract with HRSA’s Office of Pharmacy Affairs
Supplier and distributor contracting
340B University and 340B U OnDemand
Apexus Answers call center
Advanced operational training by the industry leader in 340B education
Industry standard for validated 340B expertise
Provides specialized training targeting compliant 340B implementation
50+ hours of comprehensive policy and implementation instruction
The health system solution for specialty pharmacy
Improves access
Open to organizations of all sizes and types, regardless of GPO affiliation
Apexus is a wholly-owned subsidiary of Vizient
You may know us as the prime vendor but our diversification strategy has allowed us to introduce new services over the years.
Mention MRS, reverse refund service (?)

5. The specialty pharmacy market

6. What is Specialty Pharmacy?
The medication therapy management of patients that use high cost medications for the treatment of chronic, complex health conditions.
What is a specialty medication?
Expensive: $4,000 to $5,000 per patient, per month on average and often significantly more
Treatments for complex, chronic and rare diseases
Patient-administered oral or injectable drugs
Provider-administered infused drugs
Management of side effects and risk profiles
High degree of ongoing patient assessment or management
Special handling requirements or unique distribution management
Very brief here—most in the room will know what specialty pharmacy is but good opportunity to set the stage

7. Trends in Specialty ~ 40% of spend 50% of pharmacy spend in 2-3 years
Trend Management
Spend Outlook
Benefits Migration
Adherence
Pipeline
Trends in Specialty
1% of claims are driving
~ 40% of spend
Specialty medications:
50% of pharmacy spend in 2-3 years
Specialty drug coverage approaching
50% Medical
50%Pharmacy
Adherence, discontinuation, appropriate use are challenges
Drug pipeline is
full of: high-cost specialty medications
6/2017
Top Disruptive Trends
Products launching with limited distribution
Payers narrowing their SPP network
Increasing cost of specialty medications
Downward trend in payer reimbursement
Compound annual revenue growth is about 4%
Higher specialty inflation rate of almost 12%
Trend: Benefits migration
50/50 medical/pharmacy
Even if you’re doing a great job managing your pharmacy benefits spend, that’s only half of the picture; pay attention to specialty drugs billed to medical benefit (e.g, specialty outpatient infusion centers). PBMs are encroaching on the hospital’s business
Sales: brand and generic drug sales have remained relatively flat in growth since 2014, and specialty has been climbing.
The specialty industry is approximately $152B in revenue (2015, $96B in Rx; $56B medical), and is expected to grow to $228B in 5 years, outpacing non-specialty revenue growth and becoming 50%+ of overall market
LDDs, Specialty drugs that are dispensed via typically 1-6 pharmacies due to their high complexity, low patient population and high cost, are becoming a significant portion of the specialty drugs in the market
LDDs account for 25% of the drugs in the market today –80% of future drug launches are expected to be LDD
More profitable than non-LDDs
Almost 1/3 of all LDD drugs are in Oncology
Source: National Association of Specialty Pharmacy and EMD Serono

8. Specialty Pharmacy Market Stakeholders
MCOs/
Payers
Health Systems
PBMs
Specialty
Pharmacies
Pharma
Manufacturers
PATIENTS
6/2017
Specialty
Prescribers
Wholesalers
Distributors
GPOs

9. Fragmentation of the Specialty Supply Chain
Limited Distribution Drugs
Specialty pharmacy networks and limited specialty distributors
HUB interaction to facilitate access
Increased data and reporting requirements
Increased patient and prescriber confusion
Payers are
Increasing the use of prior authorizations
Using accreditation to limit specialty pharmacy network participation
Requiring the use of their own or contracted specialty/mail service pharmacies
Talking points for LDD
Decrease inventory costs – limited number of distributors and SP’s stocking product
Us of data to gather metrics to measure
Time to therapy
Adherence rates
Prescriber activity
Payer coverage detail (co-pay amounts, use of assistance programs)
Patient status
Discontinuation and reasons
Service level agreements relative to network participation and performance guarantees for network access

10. Impact of Coordinated Care
Rx but no fill
Start Therapy
Compliance
Persistency
Abandonment
Adherence
Time to Fill
NDC blocks, tiers, growth of closed lives plans, OOP increases, growth of Medicare
Focus on getting the Rx to pharmacy: E-Prescribing at 35% in 2015**
PAs, SEs, testing, benefit mgmt
Taking as directed
Counseling and training
Downdosing
100%>>
Holistic view of the patient
Rich education and support
Monitoring
According to AMCP*, the rates of abandonment and adherence result in 15-45% loss of revenue
Engagement
1st 3 Months Define Regimen
Outcomes
15-45%*
20-35%
20%
Side-effect mgmt
Was never sufficiently addressed by industry because of competing priorities and degree of effort required to change
Education
Source: Blue Fin Group
* AMCP JMCP 2015 adherence reports ** Surescript article August 2016 10

11. Primary Challenges Access to LDD and payer networks
Support from leadership, provider, and patients
Ability to continue to provide high-quality continuity of care
Managing risk in an evolving value-based reimbursement model
Allocation of appropriate resources
Operating a new/different service line
Data acquisition and management
Increased competition
Recognition by industry
Shift from cost to revenue lens
Access to LDD and payer networks – we’ve talked a lot about these, let’s look at some other challenges
Support from leadership, provider, and patients: It is crucial to get buy-in from the C-suite, get support from the referral sources, and tell a resounding story to your patient population
Providing high quality continuity of care:
Managing risk in an evolving value-based reimbursement model
Allocation of appropriate resources: There are competing priorities in a health system and some may lack the necessary pharmacy experience and infrastructure, therefore allocation of appropriate resources will be instrumental for assuring success.
Operating a new/different service line:
Data acquisition and management
Increased competition: There is an established specialty pharmacy market with three (3) companies having 75% market share (by revenue generated from pharmacy-dispensed specialty drugs) and PBMs directing patients to owned/operated specialty pharmacies.
Recognition by industry: There are limited number of hospital based specialty pharmacies in the US
Shift from cost to revenue lens: Change your mind set to look at specialty from a cost model to a revenue model

12. Continuity of Care and Its Impact
CURRENT STATE: Time to Treatment: 7-10 days, and often longer

13. Continuity of Care and Its Impact
FUTURE STATE: Time to Treatment: 1-2 Days

14. How Do You Manage Specialty Patients If You Do Not Have a Specialty Pharmacy?
Most specialty pharmacy services can be performed out of an ambulatory/retail pharmacy
Start with those therapeutic areas you are known for
Determine those services you can perform and those you need assistance
Track patient servicing success and revenue/profit growth
Perform an opportunity assessment of potential specialty volumes if your program was more mature
Contract with a channel partner to perform those services you are unable to
Only applies to some people in the room

15. 340B Program background & intersection with specialty pharmacy

16. 340B Statute and Intent Resulted from a 1992 federal statute
340B University - March 3, 2016
340B Statute and Intent
Resulted from a 1992 federal statute
Manufacturers participating in Medicaid Drug Rebate Program must sign a Pharmaceutical Pricing Agreement (PPA) with the Secretary of Health and Human Services
The manufacturer agrees to charge a price for covered outpatient drugs that does not exceed the 340B price
To permit covered entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.
-- H.R. Rep. No (II), at 12 (1992)
The 340B program is the result of Section 602 of the Public Health Service Act, which was enacted in The 340B statute requires that manufacturers of “covered outpatient drugs” (or, those participating in the Medicaid Drug Rebate Program), sign an agreement with the Secretary of Health and Human Services. In this agreement, the manufacturer agrees to charge no more than a ceiling price: the 340B ceiling price.
Obligation to sell****

17. Major 340B Compliance Areas
340B University - March 3, 2016
Major 340B Compliance Areas
Duplicate discount prohibition
No diversion (patient definition)
Certain hospitals only
Group Purchasing Organization (GPO) Prohibition
Orphan drug exclusion
There are several major compliance areas that we will emphasize next. The first two, the Duplicate Discount Prohibition and No Diversion (Patient Definition) are discussed in the statute and guidelines. The final areas, the Group Purchasing Organization (GPO) Prohibition and the Orphan Drug Exclusion, pertain to certain hospitals only. -

18. What Is a Contract Pharmacy?
A pharmacy that enters into an agreement with a covered entity to provide services to the covered entity’s patients, including dispensing entity-owned 340B drugs.
COVERED ENTITY
CONTRACT PHARMACY/
SPECIALTY CONTACT PHARMACY
340B VENDOR

19. Bill To – Ship To Overview
340B University - February 16-17, 2016
Bill To – Ship To Overview
WHOLESALER
HRSA requires the covered entity to maintain ownership of the 340B medication up to dispensing to eligible patient
Inventory via “bill to – ship to” wholesaler arrangement
Covered entity receives invoice and T3 data
Contract pharmacy receives inventory and T3 data without 340B pricing information
Ship To
Bill To
Inventory
Invoice
Define T3 – transaction; history, statement, and information
CONTRACT PHARMACY/SPECIALTY CONTRACT PHARMACY
COVERED ENTITY

20. Necessary Components of a Channel Partner Agreement
Products/Services
Dispensing Support Services (DSS)
Health system-branded call center and administrative support such as new patient onboarding, prior authorization coordination, prior authorization appeals support, third party financial assistance, clinical management and refill coordination, benefit investigation, and prescription renewal coordination
Contract Pharmacy Services
Channel partner to serve as a contract pharmacy, where there is a bill-to-ship-to arrangement
Access to limited distribution drugs and payer networks
Backup Pharmacy
Pharmacy services when there is no bill-to-ship-to option or payer block

21. 340B Program Updates

22. Policy Updates
HRSA proposed CMP delay to July 2018 per Federal Register Notice
Energy and Commerce Committee Hearing: primary themes include growth, oversight, use of savings, transparency, HRSA’s lack of rulemaking authority
Energy and Commerce Committee letters to select covered entities
Leaked draft executive order
CMS proposed rule OPPS 340B reimbursement changes (ASP+6% to ASP %)

23. OPPS Proposed Rule Reimbursement change from ASP + 6% to ASP – 22.5%
Applies to all separately reimbursable drugs under OPPS
Will not apply to offsite locations not reimbursed through OPPS (non-exempt locations)
Intended to be closer to cost based reimbursement
Expected savings to federal government = $900M/yr
Operational changes to implement modifiers for non-340B medications
Comments due Sept 11 (specific areas requested by CMS)
3,241 comments received
80 records with “340B”

24. DIR Fees Adjustment of dispensing fees to account for DIR fees
340B contract pharmacies
340B entity-owned pharmacies
Specialty pharmacies
340B contract Rx: the contract Rx is hit with the DIR fee, but is not receiving the full 3rd party reimbursement on the 340B drug (only dispensing fee or a % of revenue). That means some contract pharmacies might adjust dispensing fees to CEs (or other fees) to account for this DIR fee “hit.”
340B entity-owned Rx: CEs who fill RXs outside of 340B because it is cheaper for the patient (don’t adjudicate)---then the CE is later hit with higher DIR fees in its entity-owned pharmacy because the patient looks “non-compliant” because the payer didn’t receive the data.
Specialty Rx: Some specialty pharmacies are passing the specialty DIR fees onto the covered entities
Since you have different people in the room, key message here is that they all need to consider how DIR fees are handled in the partnership and make sure that those expectations are set in the contract terms.

25. 340B Political Landscape: AIR 340B Messages
Needy patients are not receiving benefit from 340B, especially at hospitals
Hospital eligibility criteria needs to be changed
Hospitals charity care declining
Duplicate discounts are rampant
Bring back mega-guidance
Contract pharmacy shouldn’t be allowed (or limited)
340B hurts local community providers

26. 340B Oversight Dashboard
Also mention 340B Use of Savings tool on our website
The purpose of this tool is to provide covered entities with a framework for monitoring and communicating 340B oversight based on best practices. Although the 340B statute does not specify how 340B Program savings must be used, the intent of the program is to provide savings to the safety net organizations that participate in the program. Therefore, as a best practice, dashboards can be a helpful way for an organization to identify and depict the role the 340B Program may play in supporting an organization’s mission as a safety-net provider

27. 340B Trend: Medicaid 340B State Policy
Covered Outpatient Drug Rule
CMS State Plan Amendment (SPA) requirements for States
States must reimburse 340B entities and contract pharmacies (FFS) based upon actual acquisition cost (AAC) plus a professional dispensing fee
SPAs due by June 30, 2017
29 states + DC have approved SPAs
[Stats per SPA Comparison file]
The COD final rule was published on February 1, 2016, and provided required changes that all States must make in their reimbursement for Medicaid fee for service (FFS) claims. The states must develop a SPA that contains reimbursement methodology that the state plans to use to establish the 340B ceiling price as well as the professional dispensing fee, and state how this methodology will be incorporated into its pharmacy reimbursement policies.
The states must reimburse 340B entities and their contract pharmacy providers for FFS based on:
Actual acquisition cost (AAC) plus
A professional dispensing fee (PDF) established by the single state agency
This SPA addressing 340B reimbursement changes must be in effect on April 1, 2017 and filed with CMS by June 30, 2017
The Managed Care Organizations are NOT required to abide by the COD rule and are not required to reimburse product at AAC plus a PDF
Since 2015, 340B-Medicaid inquiries have increased 45% in the call center.

28. 340B Trend: Medicaid 340B State Policy
SPAs due by June 30, 2017:
29 Approved SPAs (Maine not one of these)
86% of States require 340B AAC by invoice for Retail 340B claims
7% of states require retail claims at AAC for both FFS and MCO
62% of States require 340B AAC by invoice for PAD 340B claims
Other methodology includes:
WAC-%
WAC+%
ASP+6%
U&C
340B Ceiling
Cost to Charge Ratio
Just present what is in the blue (the rest is just for reference)
Date of update 10/3/17
Our call center has been getting a steady increase in the type and complexity of Medicaid calls. We have been collecting data—on contacts, on policy, on SPAs.
Obtain up to date SPA information right before presentation (24 approved SPAs)
AAC invoice 86%, ceiling 10%, WAC 3%
Of those states that have defined AAC at all, 7% of them also applied it to MCO
Share some subset of the data on the slide—likely just will address the data on the slide, but could add a few details. Data below is for reference (this will not be in the presentation):
Approximately 86% of States require retail pharmacy claims to billed at AAC
Approximately 7% (2 states DE and IO) of States apply AAC to both Fee for Service and Managed Care
Approximately 53% of States require claim level identification of 340B claims (SCC at POS) in addition to accuracy expectations of the Medicaid Exclusion File
Significant Operational challenges with SCCs
Clinic administered/Physician administered claims
Approximately 62% of States require AAC billing. The remainder utilize 340B ceiling or other surrogate pricing strategies like WAC - %
Approximately 35% of States require claim level identification of 340B claims (UD modifiers
Significant Operational challenges with UD modifiers
Challenges SCC- clear that retrospective 340B eligibility used in many institutions result in the inability to include SCC at claim adjudication
Challenges UD modifiers- requires billing department to ensure modifiers only used on COPD and on claims from 340B eligible areas. Also requires potentially 2 CDMs to managed difference billing requirements for Medicaid vs. non-Medicaid payers.

29. Maine Medicaid FFS Policy
Proposed Rule: C.M.R., Chapter 101, MaineCare Benefits Manual (MBM), Ch. II, Sec 80, Pharmacy Services Section Reimbursement D. Reimbursement for 340B Drugs Providers or entities who purchase drugs under the 340B policy, must sign a memorandum of understanding (MOU) with the state. When the state and the entity reach an agreement on the billing process, reporting process, specific covered drugs, and pricing standards this MOU must be individualized to include the term of these components.
SPA has NOT been finalized and language included is from DRAFT language

30. Apexus Answers Call Center
Apexus Answers is the only HRSA-aligned national call center
Staff in constant communication with HRSA to ensure that messaging is consistent
FAQs available on apexus.com
Average monthly interactions ~1,500 – 2,000
Tiered levels of response: can handle from basic to complex
Top inquires topics in the call center in the past year:
Can you help me register our outpatient facility?
Does this drug have a 340B price?
Which patients can use 340B drugs—referrals, etc.?
One thing that differentiates our call center is the focus on quality of responses. This year Apexus has taken rigorous quality focus that includes peer quality review, internal and external quality review. The accuracy of the information we share is of utmost importance to us, and we are investing resources to ensure our call center continues to provide the high quality that you have come to expect.
Most popular FAQ used with Manufacturers:
Various State Medicaid contact information
Policy-wise it is GPO-related FAQ’s (Conditions for GPO Use, GPO Use and definition of covered outpatient drug)
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