340b contract pharmacy arrangements -...

340B Contract Pharmacy Arrangements Complying With Legal and Regulatory Requirements When Structuring Arrangements

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WEDNESDAY, FEBRUARY 27, 2013

Presenting a live 90-minute webinar with interactive Q&A

Michael B. Glomb, Partner, Feldesman Tucker Leifer Fidell, Washington, D.C.

Alan J. Arville, Principal, Ober Kaler, Washington, D.C.

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presented by:

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FELDESMANTUCKERLEIFERFIDELLLLP

© Feldesman Tucker Leifer Fidell LLP. All rights reserved.

340B Contract Pharmacy

Arrangements

Michael B. Glomb, Partner

February 27, 2013

The Role of Contract Pharmacies

in Implementing a 340B Drug

Program



www.FTLF.com

Overview

• Key features of 340B Discount Program

• History/development of contract pharmacy

model

• Operational considerations

• Pharmacy program management vendors

• Procurement considerations

• HRSA compliance initiatives

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www.FTLF.com

Disclaimer

• Presentation is intended as general

information only, not as specific legal advice

• Opinions expressed are mine

• Consult qualified legal counsel for specific

advice.

6



www.FTLF.com

340B Essentials

• Enacted in 1992 – Section 340B of the Public Health Service Act (42

USC 256b)

• Applies only to “covered outpatient drugs” as defined in the Medicaid

statute (Social Security Act, Section 1927(k))

• Requires drug manufacturers to sell covered drugs to at a substantial

discount (25% to 50% off the AWP, according to HRSA)(the “ceiling

price”) in order to have the drug covered under Medicaid

• 340B discount is computed based on Medicaid rebate formula:

• 23.1% (single source/innovator multiple source drugs)

• 17.1% (certain clotting factors and HHS-approved pediatric drugs)

• 13% (non-innovator multiple source drugs)

• Ceiling price = AMP minus Unit Rebate Amount (URA)

• Available only to certain types of organizations - Covered Entities (CE) -

specified in the statute

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www.FTLF.com 8

340B Essentials - Covered Entities

HRSA Grantees Hospitals

Comprehensive Hemophilia Treatment

Centers

Federally Qualified Health Centers

Native Hawaiian Health Centers

Tribal/Urban Indian Health Centers

Ryan White Programs

Title X Family Planning Clinics

STD, Black Lung, TB Clinics

Disproportionate Share Hospitals

Critical Access Hospitals

Rural Referral Centers

Sole Community Hospitals

Children’s Hospitals

Free Standing Cancer Hospitals



www.FTLF.com

340B Essentials

• 340B drugs may be dispensed only to a “patient”

of a CE and may not be resold – i.e. “diversion”

prohibited

• CE may not request payment under Medicaid for

a 340B drug if that drug is subject to the payment

of a rebate to a state Medicaid agency – i.e.

“duplicate discounts” prohibited

9



www.FTLF.com

Genesis of Contract Pharmacy Arrangements

• Statute does not address contract pharmacies

• Many (if not most) non-hospital CEs did not have an in-house

pharmacy, limiting benefit of 340B Program to CEs and patients

• In 1996, HRSA permitted CEs to contract with a commercial

pharmacy to dispense 340B drugs to eligible patients, on limited

basis (61 Fed Reg. 43549 (August 23, 1996))

• One contract pharmacy per delivery site

• No chain pharmacy arrangements

• No contract pharmacy if CE operated an in-house pharmacy

• More robust approaches allowed pursuant to an Alternative

Methods Demonstration Project (AMDP)

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www.FTLF.com

Genesis of Contract Pharmacy Arrangements

• HRSA issued revised guidance in 2010 (75 Fed. Reg. 10272

(March 5, 2010)

• Allows contracting with multiple pharmacies,

pharmacy chains, and/or operating an in-house

pharmacy

• Applies to all contract pharmacy arrangements

• Guidance replaces all prior guidance

• AMDP still available for other arrangements, e.g.

network delivery models

• Substantial emphasis on compliance – in fact, not just

on paper

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www.FTLF.com

Operational Features

• Operational Features

• “Ship to” “bill to” drug purchasing

• Separate inventories, but virtual “electronic”

inventories permitted

• “Replenishment” model widely accepted

• Premium on record-keeping and

documentation

• CE retains ultimate responsibility for

compliance



www.FTLF.com

Contract Pharmacy Compliance

• Key compliance concerns

• Diversion

• Duplicate Discounts - CE’s contract

pharmacy may not dispense drugs

purchased at 340B price to Medicaid

patients unless the contract pharmacy and

the state Medicaid agency have

established “an arrangement” to prevent

duplicate discount

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www.FTLF.com

340B Service Vendors

• Since 2010 (expanded scope of pharmacy contracting)

numerous vendors offering 340B management services

have entered the market

CE cannot “outsource” its compliance

responsibility

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www.FTLF.com 15

Procurement Tips

• Address covered CE - specific requirements

• Follow responsible/required procurement practices

• Exercise due diligence

• Read (and understand) the contract

• Focus on value received

• Pay attention to your vendor(s)

• Auditable records

• Independent audits



www.FTLF.com

HRSA Compliance Initiatives

• In response to GAO report and

Congressional interest, OPA has begun:

• Re-certification of all CEs, including contract

pharmacy arrangements

• Random and targeted compliance audits of

CEs (diversion and duplicate discounts)

• Significant uptick in 340B purchases and/or large

contract pharmacy networks attract audits

16



www.FTLF.com

Resources

• OPA: www.hrsa.gov/opa

• Apexus (Prime Vendor):

www.340bpvp.com

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www.FTLF.com 18

Contact Information

Michael B. Glomb Feldesman Tucker Leifer Fidell LLP

1129 20th Street, NW

Washington, DC 20036

(202) 466-8960

[email protected]

Key Considerations in Drafting and Negotiating 340B Contracts

340B Contract Pharmacy

Arrangements

Friday, February 27, 2013

Alan J. Arville

Principal

Ober|Kaler 202.326.5020

[email protected]

SESSION OVERVIEW

What is the 340B Contract?

Preliminary Points

HRSA Essential Elements

Other Key Contractual Provisions

Pharmacy Considerations

Covered Entity Considerations

20

PRELIMINARY POINTS

What is the 340B Contract?

Contract Pharmacy Services Agreement

Vendor Services Agreement

21

PRELIMINARY POINTS

Ask for the contracts at the BEGINNING of

discussions (and confirm negotiability).

Are the HRSA essential elements covered?

Do the operational procedures accurately reflect

the actual arrangement?

Are the liability provisions fair?

22

HRSA ESSENTIAL ELEMENTS

“Ship to, bill to” provisions

Comprehensive pharmacy services

Patient choice

23


Pharmacy can provide other services…but 340B

pricing only for Covered Entity patients

Compliance with applicable law

Contract pharmacy will provide reports

24


Suitable tracking system

System to verify patient eligibility

Prevention of Medicaid duplicate discounts

25


Information needed for independent audits

Accessibility of pharmacy records for outside

audits

Copy of contract to OPA upon request

26

OTHER KEY PROVISIONS

See HRSA Suggested Contract Provisions

Operational Provisions

Inventory Replenishment

Slow Movers

Discontinued NDCs

27

OTHER KEY PROVISIONS

Anti-Kickback

HIPAA

Change of Law

28

PHARMACY CONSIDERATIONS

What are the pharmacy’s responsibilities?

How is the formulary set?

Operational Procedures

Are they seamless?

Can they be operationalized?

PBM Contracts

29

COVERED ENTITY CONSIDERATIONS

Do the vendor and contract pharmacy have skin in

the game?

Is there an exclusivity provision? Is there an out?

Fee adjustments

Scrutiny/Future of 340B

30

More questions, please contact me.

Alan J. Arville

Principal

Ober|Kaler 202.326.5020

[email protected]

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