Author Archives: Rob Nahoopii, PharmD, MS, 340B ACE

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340B and Fee-For-Service Medicaid AAC Requirements

A topic we have covered in our client newsletter in the past, but is long overdue for a full discussion is 340B actual acquisition cost (AAC) requirements for fee-for-service (FFS) Medicaid billing in many states. In 340B audits we perform for clients, we review the AAC requirement and note if there is any risk. However, it is not something specifically looked at by HRSA, since the covered entity (CE) billing AAC does not impact if a Duplicate Discount occurred. To be clear, we are not talking about Duplicate Discount risk here, we are just talking about whether a CE billed an FFS Medicaid plan correctly.

You may be thinking, “if it is not a significant HRSA audit risk, then what is the big deal?” The short answer, is, Government Dollars. We don’t talk about it much, but the 340B program savings isn’t government dollars, it’s manufacturer discounts. Therefore, the legal and financial risks are smaller. When it comes to government dollars, there is the potential for a financial penalty and even legal penalties. Inappropriate billing of Medicaid and Medicare can raise Fraud, Waste, and Abuse concerns. Although this normally refers to egregious acts of commission, such as billing for services you did not actually provide, it is possible that accidental over billing could be considered a form of abuse. Typical fines are 1.5 times the issue/amount in question (e.g., overbilling in the case of charging incorrectly).

Back to 340B, we now have this interesting intersection of 340B and government dollars. This occurs when an FFS Medicaid plan requires a CE to bill at AAC. Many state’s FFS Medicaid plans require this today, and one of the more engaged (that is about the most positive term I can use) states is California. In the past year, California has been sending out self-audit letters for CEs to self-audit their AAC billing. This occurs primarily with the retail side of 340B; however, they have also sent self-audit letters to CEs for hospitals/clinic administered drugs. So far, we have not heard of penalties on top of the payback request, but it is possible. The time period they are using is December 2016 to current. California is using December 2016 because that is when the federal court’s temporary ban on the California AAC law was lifted. If you are in California, we strongly encourage you to plan on receiving a letter at some point in the near future.

Although most of the AAC enforcement is in California, it is likely that states are seeing what California is doing, and noting the positive financial result. As such, more states might try to enforce AAC billing as well. Your assignment for the month is to check your state requirements and confirm you are billing correctly, and remember to check any other states you bill. Don’t just check to make sure you are billing the right dollar amount, also make sure you are billing with the correct NPI or Medicaid provider numbers, and modifiers if needed. If you are a Turnkey (SpendMend) client, ask us for help on identifying your state’s requirements if needed.      

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340B Program Legislative & Regulatory Update

For those of us in the 340B program trenches, it feels like we are constantly under assault from our legislatures (e.g., Senate and House bills with detrimental effects on 340B), regulatory agencies (e.g., CMS reimbursement, HHS/HRSA interpretations of the law), drug manufacturer groups (e.g., PhRMA doing anything possible to dismantle the program), and even the judicial system (e.g., courts considering the viability of the ACA). I don’t know about you, but as we have gone about our work to keep the 340B program functional for the last 28 years, there is this gnawing in the back of my head that something big could happen to 340B. Oddly enough, we have not seen a significant change in the program in quite some time. The question is, are we due for a big change or with everything else going on in the country and world, are we likely to maintain 340B in its current state? My crystal ball is currently broken, but let’s break down what we do know and where the biggest risks are today.

Judicial: The Affordable Care Act (ACA) was determined to be invalid by the lower Federal courts in December of 2018. This was a lawsuit filed in February 2018 by 20 states and led by Texas (2 states have since dropped off the case, Wisconsin and Maine). In December of 2019, the 5th Circuit Court of Appeals affirmed the lower court’s decision on the unconstitutionality of the individual mandate but did not decide on whether the rest of the ACA should also be struck down. Instead, they referred the case back to the lower courts. In an interesting turn of events, the Supreme Court has stepped in and has agreed to review the case. A request was made for an expedited review, but in January, the Supreme Court said no to an expedited review and will likely hear arguments for the case in October 2020. It is highly likely that a decision will not be made until after the presidential election. If you have read this far, and are now wondering, “okay, so what does this mean for 340B,” then let me remind you of the various changes the ACA made to 340B:

  • Most Importantly: It added the rural hospitals to 340B qualification. This includes our critical access hospitals (CAH), rural referral centers (RRC), and sole community hospitals (SCH) and of course their lower (or none for CAH) DSH% thresholds for entering the program. A repeal would mean a loss of these covered entity (CE) types.
  • Medicaid Expansion: At least for the states that took the Medicaid Expansion, this increased DSH percentages and likely allowed for additional hospitals to qualify. If we see a decrease in DSH percentage, we will see a decrease in qualified hospitals (in addition to the loss of the rural hospitals).
  • MCO Medicaid: It was the ACA that allowed state Medicaid agencies to seek Medicaid rebates on MCO Medicaid paid claims in addition to the FFS Medicaid paid claims. At least this would clear up how we handle MCO Medicaid, but it will be a large budget loss for the Medicaid program.
  • Annual Recertification: Hmm, I think this was a good thing (albeit a pain sometimes). I remember when some hospitals would lose their DSH percent but “forget” to tell HRSA. I am not sure why they would stop this, but technically it was added as part of the ACA.
  • 340B Pricing Oversight: Both the HRSA ceiling price website and monetary penalties were likely the result of the ACA. Again, I hope they wouldn’t stop the website now, but it is thanks to the ACA.

As you can see, losing the ACA will have a significant impact on the 340B program. Not a ton we can do about it, I suppose hoping the RBG (i.e., Ruth Bader Ginsburg) can maintain her health through the year would be good. Many pundits believe the current Supreme Court would likely keep the ACA intact (mostly), but a switch of one of the liberal justices for a more conservative one could change the dynamics of the Supreme Court such that a full repeal of the ACA becomes more likely.

I think I used up most of my time on that one, so what else . . .

Legislative: Although we saw a slew of bills from both the Senate and House in 2019 regarding 340B, nothing actually passed. Yes, NOTHING! To be fair, some of the bills were pro-340B, so it would have been nice to see some of them come through. However, here we are in 2020, a re-election year. The House and Senate are split Democratic and Republican, respectively, and it is unlikely we will see 340B bills being passed in this session either. One area of potential risk is around drug pricing legislation. This is a hot topic and people on both sides of the aisle have an appetite to do something. Where 340B has some risk is if any of the drug pricing bills affect the 340B ceiling price calculation and/or provide exemptions to manufacturers on 340B for participating (e.g., one of the international pricing index bills had some provisions on 340B exemptions).

Regulatory: I think this is where we will continue to see an erosion of 340B savings. On both a Federal and State level. CMS is still decreasing drug reimbursement with an ASP minus 22.5% on status indicator K drugs for most hospitals (i.e., they left out CAH and SCH that are rural for now). This is in addition to the reduction in clinical payments for off-site clinics, often referred to as “site neutrality.” States, such as California, are pushing all retail prescriptions to FFS Medicaid, where an actual acquisition cost (AAC) plus a fee is required. This is where it is critical to work with your states and ensure they are aware of the impact these decisions can have on patients and the healthcare system.

I tried to not take too many sides, rather just share what we are hearing and seeing. I would like to end on a positive note. In 2019, West Virginia, Minnesota, South Dakota, Montana, and Oregon all passed laws prohibiting discriminatory reimbursement by health plans. Nice work to those states, and there are additional states working on similar legislation for 2020. I would love to see all states pass a similar law in order to protect 340B from payors harvesting 340B savings for themselves. If your state isn’t already working on it, then maybe they should be. Now is a good time (it is always a good time) to reach out to your legislatures and ensure they are aware of how important the 340B program is to hospitals, clinics, and patients in their communities.

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Medicare Site Neutral Payments – Changing Healthcare

To preface, Medicare site neutral payments refer to the technical portion of outpatient bills. This does not refer to drug reimbursement cuts down to ASP minus 22.5% for 340B sites, which is a totally different topic (especially with a federal court judge determining that the drug reimbursement Part B cuts by Medicare are in violation of federal law). Site neutrality is the Medicare change in reimbursement to mimic private physician billing and hospital outpatient departments that are more than 250 yards away from a hospital. This financial payment reduction is not 340B specific and applies to all hospitals. 

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Creating Your Impact Profile and Why?

With various pending federal legislation bills having “transparency” components, we feel it is prudent that all covered entities should have an Impact Profile. At the 340B Coalition meeting last month, a good definition of the Impact Profile was given as,

“It is a written elevator speech for your 340B program.”

I really like that definition, we should be able to accurately and concisely discuss: Who we serve, What kind of care is being provided, How 340B helps patients, and What would happen if 340B was taken away.
In addition, tell your story. The facts above are good, but what really can impact the person you are trying to educate is the story of actual patients and how they benefit. When I was a pharmacy director at a 340B DSH hospital, I would share the following story:
A young adult male patient in our Endocrinology clinic had an increase in his HgA1C (i.e., a marker for how well a patient’s diabetes is being controlled). A discussion with our pharmacist in the clinic identified that the patient was rationing his insulin toward the end of the month as he could not make his co-payment for his prescription. Because of 340B, we were able to provide this medication to the patient at a significantly reduced price, and he could not believe it, and he teared up as he thanked our staff. Three months later his follow-up visit showed his HgA1C was back inline and he was feeling better. Because of this, we started a 340B Charity Voucher program that provides this benefit to many more patients who needed help with their prescriptions, and as we looked at the data in aggregate, we were able to document a statistically significant decrease in these patient’s HgA1C measurements.

To help you create your Impact Profile, 340B Health has provided a really good resource.  Once you have created your Impact Profile, and maybe even have a story to share, then here comes the Why! 340B is under attack, and PhRMA is leveraging as many legislators and presidential contacts they have to either reduce or kill the 340B program. That is their goal! We need every covered entity to reach out to their federal senators and representative to share what 340B means to the people in their communities they represent. Please go to the 340B Health legislation page to see the anti-340B bills and ask your senators and representatives to oppose them. In addition, ask them for 5 minutes so you can share what 340B means to patients in your community. Then be ready to share your Impact Profile and your 2-minute Elevator Speech and remind them that this program costs taxpayers very little, but the impact on patient care is significant.

We can save 340B, but only if we all do our part. We can’t hope that 340B Health and other organizations will do it for us, we all need to carry the water!

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340B Update: Omnibus Withdrawal & 340B Coalition Conference

Well, big news out yesterday. As of 1/30/2017, the 340B Omnibus Guidance is officially withdrawn.

Where does that leave us?

Well, that brings be to my second topic, the 340B Winter Coalition Conference. I am in my seat on our airplane to San Francisco. I am excited for this conference, as the legislative sessions will be very hot topics. We, Turnkey, are taking 7 staff to the conference, and have our booth (come visit us at booth 57 if you are attending). In the event you are not attending, we will share some of the follow-up to what the discussion is around the post-Omnibus withdrawal 340B landscape. My personal thought is that HRSA may be waiting for rule making authority to formally write more specific rules and guidance on the 340B program. Especially around the 340B patient definition. Of course, this would require legislation, which is why I am excited to hear from 340B Health about all the bills in the senate and house. We also have to worry about the current ACA repeal potential and how that might affect our ACA covered entities (i.e., CAH, RRC, SCH, and CAN). Stay tuned my friends!

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340B Updates- Happy Thanksgiving!

We often have our name mistaken for Turkey (instead of Turnkey), and during this time of the year, we totally embrace it! Happy Thanksgiving!!!

-The Turnkey Pharmacy Solutions Team

Well, it has been awhile since you have heard from me. Some nice posts by Jen Cook and Jennifer Hagen since my last one. Speaking of which, Turnkey is super excited to have Jennifer Hagen on the Turnkey team. She became full-time with us in October. She just stepped down from her post as the ambulatory service pharmacy director for a large DSH hospital. She has experience as a 340B faculty member and with peer-to-peer. I must admit, she is starting to make me look bad!

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Each year, OPA requires each 340B Covered Entity to recertify. For Hospital Covered Entities, OPA has tentatively set Aug. 10 through Sept. 7 as the time to recertify. Emails will be sent to both the Authorizing Official as well as the Primary Contact, listed on the OPA database.
Once the recertification period begins, the Authorizing Official only will receive a username and password to perform the recertification. The Authorizing Official will be required to log into the 340B database, update information as needed, and attest to the covered entity’s compliance with 340B Program requirements.
It is imperative that both the Authorizing Official and Primary Contract are current and accurate. If recertification is not completed in the eligible window, the covered entity will be terminated from the program, and will have to re-enroll during the next open enrollment period.
If we can help you with the recertification process, or if you have any questions, feel free to reach out to Turnkey Pharmacy Solutions, at

340B covered entities must annually recertify their eligibility to remain in the 340B Drug Pricing Program and continue purchasing covered outpatient drugs at discounted 340B prices.
Advance email notifications with preliminary information about the recertification process are sent to the following contacts:

• Primary Contact
• Authorizing Official

Once the recertification period begins, the Authorizing Official only will receive a username and password to perform recertification. The Authorizing Official will be required to log into the 340B database, update information as needed, and attest to the covered entity’s compliance with 340B Program requirements.
The covered entity must ensure the contacts listed in the 340B database are accurate at all times to receive all notifications.

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340B Program Updates – Been Awhile

Is that an Elephant in the Room?

340B Elephant-in-the-RoomHi All! Yes, it has been awhile (we have been auditing, a lot!). Our sincere apologies, we need to bring back our 340B Blog A game. The team at Turnkey Pharmacy Solutions has been growing and the leadership team is learning how to handle the growth and work effectively with our team. In addition to Roxanne, we now have Jen and Annie supporting audits with our core team (and a few per diem staff as additional support). We also added an operations manager to oversee operational functions of the organization (so excited for Chelsea to start on April 4th!) We are not the only ones with change, the 340B program has had significant changes recently, and we are going to share two big ones! Hold on to your hats . . .

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340B Mega-Guidance – Now What?

Our Top Three Concerns with the 340B Mega Guidance

340B Mega Guidance Comments NeededOver the last month, many of our clients have been asking for input on the 340B Mega-Guidance (officially titled: 340B Drug Pricing Program Omnibus Guidance). We have also been onsite conducting external 340B audits and are already assessing the impact of the Mega-Guidance if it is finalized in its current form (which has some significant consequences). In case you have been hiding under a rock, here is a link to the official document: 340B Drug Pricing Program Omnibus Guidance.

For focus, we are going to address the three (3) areas of the 340B Mega Guidance that we feel will have the most impact. We strongly recommend all affected parties provide comments to HRSA on how this would impact your covered entity. (We will cover additional areas in the next post)

1) Covered Outpatient Drug Two-Part Limiting Definition Test (pg. 22): This one is tough! The primary focus is concerned around bundled drugs being non-covered outpatient drugs. What is interesting is that it focuses on Medicaid reimbursement, and only mentions other third party payors as part of a contrasting statement at the bottom of page 22.

The two-part limiting definition states that a drug is a non-covered outpatient drug and not eligible for 340B pricing if it is 1) “provided as part of, or incident to and in the same setting as the services listed in section 1927(k)(3),” which are just about every outpatient area you can think of; and 2) the drug can be paid by Medicaid as part of the service “and not as direct reimbursement for the drug.”

The guidance then states that this limiting definition to exclude drugs from 340B purchasing does not apply when “a drug is provided as part of a hospital outpatient service which is billed to any other third party [not Medicaid] or directly billed to Medicaid.

It seems clear in the preceding wording that the definition is based on Medicaid reimbursement. However, the exclusion states how Medicaid is billed. We definitely need some clarification on which one it is. We feel that basing it on reimbursement is very difficult as every state Medicaid can have different formularies for what is separately reimbursed. Covered entities may attempt to bill separately and that is how drugs have accumulated up to this point. We are also concerned if it is solely based on reimbursement that ACO/Medical Home models (i.e., capitated patient payment systems) could fall into a “bundled payment system” and all drugs administered to patients in these service models would be non-covered outpatient drugs. This would adversely incentivize covered entities to not enter into ACO or ACO like agreements. Also, think about CAH hospitals and how they are cost-based reimbursed by CMS. Would these drugs also not count since there is no direct reimbursement for the drug, rather a percentage reimbursement based on actual cost? This would result in a negative impact on CMS as they are paying for care based on actual cost. Finally, how do we even accumulate on a model that requires us to know the ultimate reimbursement of a patient? It is very tough indeed.

Please think about the impact on your covered entity and provide comments as appropriate.

2) Infusion Services Orders Need to Be Written from a Qualified Location and Provider (pg. 26): “The dispensing of or infusion of a drug alone, without a covered entity provider-to-patient encounter, does not qualify an individual as a patient for purposes of the 340B Program.” This one is pretty straight forward. If the order for the infusion services drug was not written from a qualified location by a qualified provider for a qualified patient, then you cannot use 340B. In fact, if you are subject to the GPO Prohibition, you need to use WAC. Ouch!

I think back to my DSH hospital. We had agreements with our providers (e.g., oncology clinic providers), but they were technically a different business unit of our parent organization, and therefore not a qualified child site or location. We felt that our infusion service visit was the qualified visit as we provided care and had at least in part joint responsibility of care for that infusion. If the patient coded, it was our infusion clinic that provided the care for that patient. This scenario is clearly not going to be okay with the current language. The hard part is that this infusion center is where we provided charity care and took insurance plans that many providers were unwilling to take due to reimbursement issues. To have to buy these drugs on WAC is a significant concern.

If your site has an infusion center that services patients that do not have orders written from qualified locations, you may want to assess the impact on your program and share your perspective with HRSA.

3) Outpatient versus Inpatient Status for Qualification (pg. 27): “… an individual cannot be considered a patient of the entity furnishing outpatient drugs if his or her care is classified as inpatient.” It also states that “An individual is considered a [qualified 340B] patient if his or her health care service is billed as outpatient to the patient’s insurance or third party payor.”

This is the section that many people are interpreting that patients who discharge from the hospital as inpatients could not have their drugs filled as 340B. The other interpretation is that accumulation systems need to accumulate based on how a drug is billed, or more accurately, how it is reimbursed by payors. Once again, like the non-covered outpatient drug issue, we don’t always know when we are dispensing the drug what the insurance status will be. We know what the patient’s status is at the time the drug is being dispensed.

An interesting test is this: If a covered entity were to use a physically separate inventory (i.e., 340B, GPO, and WAC if it is a DSH), the pharmacy technician would fill the patient’s order using a specific inventory based on the patient’s status at that exact point in time. They would not be factoring in Medicare’s 72 hour rule or a two-midnight rule, as they don’t have a crystal ball to know if the patient is going to be admitted as inpatient or not.

The discharge prescription part is really concerning. At my previous hospital, we were attempting to identify patients at high risk of medication non-compliance and providing a financial support process for their discharge medications. CMS has recognized the importance of medication adherence and teaching at discharge as well, and now include it as part of their “Core Measures” for success. Many hospitals have instituted a discharge prescription program to ensure patients leave the hospital with all of their needed medications. For GPO Prohibition hospitals, they would now need to buy their inpatient discharge medications at WAC. Once again, adversely incentivizing hospitals to create such programs that have a significant impact on readmissions to the hospital (a significant cost for healthcare as a whole).

Please assess how this may impact your covered entity, and provide comments as appropriate.

There are other areas of concern, and some areas we feel are positive (e.g., GPO Prohibition exemptions). We will continue the discussion, but wanted to start with these three first. Please provide your comments to HRSA, and please remember that the deadline is October 27th, 2015. Below are the information and ways on how to submit comments:

You may submit comments, identified by the Regulatory Information Number (RIN) 0906-AB08, by any of the following methods. Please submit your comments in only one of these ways to minimize the receipt of duplicate submissions. The first is the preferred method.

Federal eRulemaking Portal: Follow instructions for submitting comments. This is the preferred method for the submission of comments.

Email: Include RIN 0906-AB08 in the subject line of the message.

Mail: Krista Pedley, Director, Office of Pharmacy Affairs (OPA), Health Resources and Services Administration (HRSA), 5600 Fishers Lane, Mail Stop 08W05A, Rockville, Maryland 20857.

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340B Mega Guidance & Coalition Notes

The Wait is Over

340B Mega Guidance340B Mega Guidance: Well played by the government. We had some news about delays and later than September, and BOOM, 340B Omnibus Guidance is published in August (love it). First, if you did not already see it or know it came out, the 340B Mega Guidance is out for comment and you can read the 90 page document here: My preference is to click on the pdf link to the right on the page and get the pdf. If this link stops working and you want the pdf, contact us and we will send you the copy.

We are currently digesting all of the document and determining impact to covered entities based on our experience with HRSA 340B audits and our own external audits we have conducted. Our plan is to get a more detailed analysis out early next week for your reading pleasure. My initial read through highlighted the following critical changes/clarifications:
– Patient Definition and the providers and location is much stronger, tight contract pharmacy filtering is needed.
– Inpatient hospital discharge prescriptions may not count (this will likely have some significant comments).
– Morford Letter language regarding follow-up care is officially dead.
– Infusion Services orders written externally (i.e., non-qualified area) are likely an issue.
– Non-covered outpatient drug language may require a re-look at purchasing of products and how they are billed and reimbursed.
– Responsibility for care is “medical” and not financial, so anyone doing the employee is a patient approach for 340B needs to really consider if they meet the new enhanced patient definition.
– MCO Medicaid officially mentioned as part of Duplicate Discount.
– One other article already written mentioned contract pharmacy entirely could be an issue, but I did not read it that way. We will follow-up on this.

More to come as we analyze it!

340B Conference Notes:

Wow, I feel like a slacker for taking so long on these. It has been on my to do list, but client work had to come first (did I mention I am almost a diamond for frequent flyer status for the year, and I don’t always fly that airline). So, this is not a detailed analysis of every session, rather the key points and learning I gleaned that I feel are important for covered entities.

HRSA Audit numbers: as of the conference, 135 audits conducted FY2015, on track for the 200 audit goal (I’ll say so, our team has been on site for 6 this year). Since 2012, this makes 363 audits by HRSA. This includes over 4000 child sites and over 9000 contract pharmacies. Once again, complexity (many child sites) and many contract pharmacies increase your risk of an audit.

Track & Trace: HRSA has had regular meetings with FDA. No resolution at conference time on how Track & Trace and contract pharmacy will sit with the FDA. It is currently not an exemption. My colleague wrote an article based on Gregg Dodgett, 340B Health, and Jason Atlas, Apexus, presentation at the conference. You can find it here: Bottom line is you should plan on having a mechanism to get the right Track & Trace documents to your contract pharmacy(ies). We partnered with Drug Track IQ to make sure we had a solution available for our clients. Check it out if you are still not sure what to do (there is a free white paper on what you need to do). The FDA enforcement of dispensers starts on November 1st, 2015.

Apexus 340B by the numbers: I really like Chris Hatwig’s myth buster numbers. Regarding the exponential growth of covered entities in the recent years, he said that it is due the child site enrollment and that the actual number of DSH hospitals have actually decreased. In fact, I believe the specificity of what to enroll as a child site that HRSA has expected has more to do with the increase than anything else. If you remember, some sites with child site hospitals would just enroll the hospital as a child site. Today, you enroll every single department, service line, cost center on your cost report that is visible if it has a different physical address compared to the parent entity (if it administers 340B drugs or writes prescriptions that are captured as 340B). So each child site hospital now has numerous separate child listings. Definitely could be the cause for the apparent increase in registrations.

Another myth:Total 340B spend – We know that a lot is made about the growth in the 340B program, however, it is still only 1.5 to 3% of total purchases. So, it may seem like huge growth, but percentage wise as compared to the total drug spend, it is still a small fraction of drug purchases.

To not go too long on this post (sorry, you might be thinking it is too late for that), other hot topic areas covered are manufacturer pay back, self reporting, and auditable records. We will cover in a future post. Next will be our concerns with the Mega Guidance. Stay compliant my friends! -Rob Nahoopii