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12/8/2014340B: 20 Years of Quiet Followed byRapid Growth, Visibility and Public DebateAndrew L. Wilson, Pharm.DVice President340B SolutionsHCCA Gulf Coast2014 Annual ConferenceHouston, TXMcKesson Corporation Confidential and ProprietaryDisclaimerThis presentation, is for the sole use of program participants.Comments, assessments and opinions are solely those ofthe presenter and reflect general industry practices. They donot constitute recommendations and are not suitable for usewithout legal, regulatory, compliance and other businessreview and validation.This presentation does not represent or reflect McKessonpolicy or practice unless specifically so identified.1
12/8/2014What is the 340B Program? Federal program created in 1992 Benefits providers serving the indigent Discounted pharmaceuticals Outpatient drugs only Compliance & administration Creates an opportunity for “covered entities”to contract with retail pharmacies toimprove accessWhy 340B? When the Medicaid Drug Rebate program was created in 1990, ithad an unanticipated consequence: Manufacturers began to withdraw low prices they had offered tocharitable entities and government payors in order to avoid setting newBest Prices Congress responded with the Veterans Health Care Act of 1992,which, among other things, exempted certain sales from Best Price VHCA Section 602 requires manufacturer participation in the 340Bprogram as a condition of participation in Medicaid and MedicarePart B.2
12/8/2014Government Oversight and “Regulation” Human Resources and Services Administration (HRSA,) Healthcare Systems Bureau (HSB) Office of Pharmacy Affairs (OPA) Manages contracts with manufacturers Manages enrollment of covered entities Provides regulatory and subregulatory guidance HRSA website: www.hrsa.gov/opa Office of Inspector General of HHS340B Program Status and Growth 5,800 Covered Entities andChild Sites1 27,000 Contract PharmacyArrangements1 900 ManufacturersParticipating2 9B Pharmaceutical Market3 Many 340B Software Vendors,Consultants and Associations 200-400 HRSA audits plannedannually1.2.3.Office of Pharmacy Affairs database, hrsa.gov/opa: Accessed May 1, 2014.McKesson Internal dataBRC “340B Growth Drivers” December 2, 20143
12/8/2014340B Covered Entities (CE’s)ClinicsHospitals FQHC and look-alikes DSH Consolidated health centers Critical access hospitals Family planning Sole community hospitals HIV / ADAP Rural referral centers Black lung Freestanding cancer centers Hemophilia Children’s hospitals Native Hawaiian Urban Indian STD TBProprietary Information of McKesson Corporation340B Covered Entities“Five Flavors”Nonprofit/ Gov’tContractDSH%GPOExclusionOrphan DrugExclusionCritical Access HospitalsYesNoNoYesRural Referral CentersYes 8%NoYesSole Community HospitalsYes 8%NoYesFreestanding Cancer HospitalsYes 11.75%YesYesNonprofit/Gov’t ContractDSH%GPOExclusionOrphan DrugExclusionDSH HospitalsYes 11.75%YesNoChildren's HospitalsYes 11.75%YesNoClinicsYesNoNoNoNew Entity TypeOriginal Entity TypeProprietary Information of McKesson Corporation84
12/8/2014340B Covered EntityRequirements Must meet the entity-specific requirements set out in the statute andinterpretive regulations Hospitals: government owned or controlled, or If non-government, non-profit and have an agreement with a governmententity Meet uninsured/Medicare/Medicaid DSH threshold Must apply for participation Must be listed on the HRSA website May not double-dip with Medicaid (some “carve out” Medicaid purchases) Mixed use settings must segregate inventory May not divert product to non-patients DSH may not use GPO-purchased drugs for outpatients340B Covered Outpatient Drugs5
12/8/2014GPO Prohibition DSHs, children’s hospitals and free-standing cancer hospitalsmay not obtain covered outpatient drugs through a GPO Many hospitals will need three purchasing channels Outpatient 340B Outpatient non-340B (for Medicaid Carve Out or non-patients) Inpatient (GPO permitted) Replenishment of 340B inventory with GPO purchases isprohibited 340B Program Release 2013-1340B Patient DefinitionAn individual is a "patient" of a covered entity, and eligible for340B drugs only if:1.The covered entity has established a relationship with the individual,such that the covered entity maintains records of the individual'shealth care;2.The individual receives health care services from a health careprofessional who is either employed by the covered entity orprovides health care under contractual or other arrangements(e.g. referral for consultation) such that responsibility for the careprovided remains with the covered entity;3.An individual will not be considered a "patient" of the entity forpurposes of 340B if the only health care service received by theindividual from the covered entity is the dispensing of a drug or drugsfor subsequent self- administration or administration in the homesetting12Proprietary Information of McKesson Corporation6
12/8/2014Medicaid Duplicate Discount No Medicaid rebate for 340B discounted drugs When a covered entity bills Medicaid on for drugs purchased under 340Brules (OP Rx and MD Administered,) the state must not seek a Medicaidrebate for that prescription The OPA web site provides a listing of Medicaid billing numbers to allowexclusion Billed dispensing and administration by 340B providers must besegregated by the State and excluded from rebate bills submitted tomanufacturers. The 340B statute allow covered entities to “carve out” Medicaid and allowthe State to seek rebates340B Program Growth7
12/8/2014340B Market GrowthWhy is 340B Important forHospitals and Clinics? Deep discounts & savings Business and patient care relationships supporting continuityof care Revenue to offset uncompensated and under-compensatedcare8
12/8/2014What is a 340B Ceiling Price? Discount version of a Medicaid rebate, delivered via a chargeback Formula for the ceiling price, determined quarterly: AverageManufacturer Price (AMP) less the Unit Rebate Amount for themost recently reported quarter Branded Drug URA (AMP x 23.1% or AMP – BP) plus anyadditional CPI-U rebate Generic Drug URA - AMP x 13% The ceiling price is loaded onto manufacturer contracts databasesat the wholesalers for point of purchase chargeback-baseddiscountsHow do Covered Entities Access 340B?Only listed “Covered Entities” can purchase 340B-priced drugs–Significant Contracts oversight, including MFR audits340B contracts attached to specific customer accounts–340B Clinics – all accounts–340B Hospitals – Outpatient/Ambulatory/Retail only–GPO Exclusion for Hospitals (DSH, PED, FSC)Two types:–Hospital “Split Billing”–Contract Pharmacy–Both are driven by software that indentifies eligible patients and prescriptions–Split Billing dispensing records or patient charges–Contract Pharmacy Rx Claims matched to CE EMR Distributors assist in sorting, delivering, managing and providing insight into splitpurchasing18Proprietary Information of McKesson Corporation9
12/8/2014340B Chargeback ProcessModel N: Best Practices for Managing PHS 340B ChargebacksTracking Requirements Hospital must be able to track that the drugs purchased on the 340Baccount were administered to an outpatient in an eligible point of service Patient level detail Identify qualified patients Patient Type, Status, and/or Point of Service Separate inventory in “clean areas” The 340B program must be implemented in all qualified outpatient points ofservice Both “Mixed” & “Clean” areas2012/8/2014Proprietary Information of McKesson Corporation10
12/8/2014340B Split Billing21Proprietary Information of McKesson Corporation DSH Children’s Critical Access Sole Community Rural Referral Cancer Clinics Distributors Cardinal ABC Sentry Regionals Software Inventory Management Networks Payment allocation 340B Vendors Macro Helix Sentry Walgreens (WAG Only) CaptureRx SunRx Wellpartner ConsultantsPharmacies Covered EntitiesSoftware & ServiceHospitals & Clinics340B Market Components RetailPharmacy Small Chains Walgreens,CVS, RiteAid Independent Specialty &Others Diplomat WAG Specialty CVS /Caremark PBMs?22Proprietary Information of McKesson Corporation11
12/8/2014Where did “contract pharmacy” come from? Federal Register, Volume 75, No. 43 – Friday, March5, 2010 Notice– Multiple contract pharmacies allowed– Contract requirement, suggestedprovisions– Essential compliance elements– Compliance expectationsProprietary Information of McKesson Corporation23What is a Contract Pharmacy? 340B Program provides anopportunity to eligible clinics toprovide outpatient pharmacy services many clinics do not own/managea retail pharmacy Contract pharmacy enables functionsof retail pharmacy, without startupcosts, continuing operations supportthrough a contract with a localpharmacy 1996 Federal Register guidelines –allow for flexibility of contractpharmacy as long as 340B programintegrity is protected12
12/8/2014Contract Pharmacy: How Does It Work?The Prescription Process 100ReimbursementPharmacy Processesand Dispenses 340BPrescription 15Rx ClaimThird-PartySoftwareVendor 60 85Hospital / Clinic ReplenishesRetail 340B Stock 80 20Clinic / Hospital Payment,Retain Vendor Fee 5Who Benefits in a Claims-based 340BContract Pharmacy Arrangement & How?BenefitBeneficiaryBenefitDirect340B covered entity Clinic-Continuity of careDrug savingsProfits from reimbursementComplianceInventory managementContract retail pharmacy-Enhanced dispensing feeIncreased trafficIncreased RxFront-end salesComplianceInventory managementUnder-insured & uninsured patients- Cheaper/free care & medsTaxpayer- Lower costIndirect13
12/8/201430,000Cumulative Contract Pharmacy RelationshipsActive OnlyLarge ChainISMC / Hospital / MiscGroceryMass MerchantDistinct Covered Entity - Contract Pharmacy Relationships25,00020,00015,00010,0005,00002010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q228McKesson Corporation Confidential and Proprietary14
12/8/2014340B Hot Topics OIG Studies–Accuracy and Availability of 340B Pricing–Savings Potential with Med Part B pass through Manufacturers– PhRMA challenging Orphan Drug Regulation in Federal court– Manufacturer audits of covered entities– Shift to specialty channel29-Neulasta (Amgen)-Betaseron (Bayer)12/8/2014McKesson Corporation Confidential and ProprietaryHRSA Audits of Covered EntitiesAudit Update (1/19/14) lts/results.html 51 covered entities audited Adverse Findings for 32 of 51, or 63% of CEs auditedTypes of Findings–Diversion 16, 31% of CEs audited–Duplicate discounts 18, 35% of CEs audited–Incorrect 340B database record 15, 29% of those audited–Some CEs had multiple findings–53% of Audited CE’s had a finding of diversion, duplicate discount or bothOPA requires hospitals to seek remediation of any unearned 340B discount with manufacturers3015
12/8/2014Manufacturer Audit IssuesManufacturer Audits16
12/8/2014Manufacturer AuditsApexus: 340B Prime Vendorwww.340BPVP.com17
12/8/2014340B Tools and ResourcesCompliance Resources18
12/8/2014Questions?19
340B contracts attached to specific customer accounts - 340B Clinics - all accounts - 340B Hospitals - Outpatient/Ambulatory/Retail only - GPO Exclusion for Hospitals (DSH, PED, FSC) Two types: - Hospital "Split Billing" - Contract Pharmacy - Both are driven by software that indentifies eligible patients and prescriptions
