Key 340B Compliance Elements and Program Updates

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Key 340B Compliance Elements and Program Updates

Have you been wondering how to keep up with HRSA’s compliance expectations since there has been no new policy released since 2014 and no new compliance related program regulations since 2010?  If yes, then you might be interested to learn that HRSA has been posting program updates in the “News” section of the website for quite some time.  Since May of 2018, updates are being released at an unprecedented rate and appear to be a main source for 340B program expectations.  If you have not yet done so, consider signing up to receive these updates by email.  In previous newsletters Turnkey has summarized many of these updates. In this blog the most important notices as well as other program developments will be highlighted with reference to the specific previous newsletter breakdown of each topic.

A little background as to possibly why updates are occurring as they have been recently… HRSA has consistently told congressional committees that they need additional authority in order to make any changes to the 340B program. Congressional leadership has maintained that HRSA should use its existing authority to make changes to the 340B program. This led to a stalemate between HRSA and Congress with no passage of any filed legislation and no new regulations from HRSA.  However, on the heels of the Government Accountability Office (GAO) report (June 2018) that analyzed covered entities use of contract pharmacies, HRSA swiftly posted updates in response to the main concerns.  These concerns include a lack of assessment for duplicate discounts in Medicaid managed care and that more information is needed regarding how a CE determines the scope of noncompliance with evidence of corrective action prior to closing audits.

In addition to the program updates, the HRSA audit data request (last updated September of 2018) is where additional expectations can be gleaned. In particular, Turnkey observed the need for more robust policy and procedures (e.g., drug waste), crosswalking of the cost report to child sites (a.k.a., Environment Crosswalk or Map of the Environment, ), and specific contract pharmacy contract expectations.  A copy of the data request is posted in Apexus tools. 

Audit results have been another source of information for program expectations.  In particular, just this past July several areas for improvement were released regarding new policy expectations (e.g., contract pharmacy oversight, independent audit requirement, inventory control, and strategies to prevent duplicate discount on drugs reimbursed through Medicaid MCOs).

From the updates, audit data request, audit findings, and as witnessed during multiple HRSA audits, recent compliance developments fall into the following categories:

  1. Hospitals Must Have Proper 340B Eligibility Documentation
    • HRSA announced in the July 2018 Program Update (Program Integrity Analysis) that they will begin selecting random hospitals from the quarterly registration periods to request documentation supporting the eligibility type the hospital selected. Failure to provide the requested documentation before the registration period closes will result in the registration being rejected and requiring the hospital to re-register during the next quarterly registration period.
    • Documentation of hospital eligibility was expanded in the updated Data Request List in the third quarter of 2018 for two groups of hospitals. Hospitals that participate in 340B under the category of (a) being owned or operated by a state or local government; or (b) having been granted governmental powers, must submit documentation to support that status. HRSA auditors are reviewing the submitted documentation as part of the auditing process. July also brought quality assurance checks of previous audits where hospital documentation has passed and then upon review no longer met standards.
    • The March 2019 update further clarifies documentation needed for all three hospital types and stipulates what must be included in an agreement.  The updated hospital registration instructions are posted.
    • Hospital documentation is being requested as a part of recertification.
    • Previous Turnkey newsletter discussions: March 2019 HRSA Update, July 2018
  2. Contract Pharmacy Expectations
    • List All Hospital Locations in Contract Pharmacy Agreement.  Specifically, HRSA notes in audit reports “Area for Improvement” when the contract does not list all of the participating covered entity locations or uses an inclusive statement. If a list is used, hospitals must update the contract when changes occur with their locations using the contract pharmacy arrangement per this page on the HRSA website.
    • Ensure Remedial Action Is Taken for Audit Findings Involving Contract Pharmacies.  HRSA emphasizes in its June 2018 Program Update that it is the covered entities’ responsibility to take remedial action to assure compliance when it discovers diversion or duplicate discount non-compliance relating to prescriptions filled through a contract pharmacy. HRSA makes clear that signing contractual agreements with third parties does not exempt covered entities from the responsibility of ensuring compliance. Liability for and the consequences of errors by third parties remains with the covered entity.
    • There have been desk audits of contract pharmacy (CP) agreements and we know of one instance of HRSA asking for the agreement between the state and the CE when carving in Medicaid at the CP.
    • Previous Turnkey newsletter discussions: March 2019 Tidbit, July 2018
  3. Duplicate Discount Prevention for 340B MCO Drugs and Out of State Medicaid Plans
    • No federal requirements exist for covered entities around the prevention of duplicate discounts for 340B MCO drugs. However, current law prohibits states from collecting rebates on Medicaid managed care claims that are filled with 340B drugs. A 2016 regulation from the Centers for Medicare and Medicaid Services (CMS) gave states two options for how to prevent Medicaid MCO duplicate discounts. States can require MCOs to exclude 340B drugs from data sent to the state. States can instead require covered entities to submit 340B claims data directly to the state or its contractors so the claims can be scrubbed from rebate submissions. As a result of these requirements, many states and many MCO’s have instituted specific policies that covered entities must follow to identify 340B claims.
    • HRSA Issues AFIs for Medicaid MCO Duplicate Discounts: Prior to April 2018, HRSA did not include MCO claims in their review of duplicate discount compliance. Beginning April 1, 2018, if HRSA becomes aware during an audit that the covered entity is not following state rules related to duplicate discount prevention for 340B MCO claims, HRSA will note this as an “area for improvement” in the audit report. It is important to verify whether your state Medicaid agency has policies around Medicaid managed care and 340B and if so, that you can comply with those policies. Routinely and periodically audit your claims to confirm compliance with state Medicaid rules.
    • Newsletters related to MCO Medicaid: August 2019 Q&A, November 2019 Q&A, August 2018 Q&A)
    • Turnkey newsletter related to out of state Medicaid: June 2019 Q&A
  4. Policy and Procedure Area for Improvements (AFIs)
    • AFIs newly added in July 2019:
      • HRSA expects CE to review and update comprehensive written 340B Program policies and procedures – Meaning evidence of policy updates is required
      • Address compliance with HRSA’s patient eligibility guidelines at the CE specifically addressing confirmation of eligibility of site location of service resulting in the prescription or drug order; eligibility of provider as employed or contracted with the CE, or through a referral process; ownership and maintenance of the medical/patient health record for the service resulting in the prescription or drug order; and patient relationship to CE as an eligible patient including how outpatient to inpatient status change is determined.  New July 2019 – is that this should be specified for both the CE and the CP
      • Medicaid Related:
        • Address compliance with HRSA’s duplicate discount prohibition at the covered entity and off-site outpatient facilities for physician administered medications when billing multiple state Medicaid agencies.
        • HRSA expects CE to review and update written 340B Program policies and procedures for the prevention of duplicate discounts on covered outpatient drugs reimbursed through Medicaid managed care organizations (MCOs).
        • New July 2019 HRSA expects covered entities to work with their state to develop strategies to prevent duplicate discounts on covered outpatient drugs reimbursed through Medicaid MCOs.
        • After the 2018 data request update and as of July is now an AFI: HRSA expects a written contract pharmacy contracts to accurately identify by name and address all contract pharmacy locations participating in the contract pharmacy arrangement and registered in 340B OPAIS. The information for contract pharmacies recorded in the 340B OPAIS is provided by the Drug Enforcement Administration database.  A covered entity should maintain policies and procedures which describe the process for ensuring names and addresses in the written contract pharmacy contracts are accurate and an identical match to 340B OPAIS.
      • HRSA expects CE to engage in an independent organization to perform annual audits of its contract pharmacies and to review and update comprehensive written contract pharmacy policies and procedures that include performing independent audits of its contract pharmacies.
      • July updated language in red we are curious about because GPO prohibition is added which is not relevant in the CP universe:
        • Address the process for conducting oversight of its contract pharmacies to prevent diversion and duplicate discount by internal audit including elements of testing, frequency, documentation and process for resolving identified issues. 
        • Ensure controls for the procurement of 340B drugs including compliance with the GPO prohibition including for replenishment to (stocking of) contract pharmacies at 11-digit to 11-digit NDC match including a process for maintaining auditable records to demonstrate proper accumulation where 11-digit match is not met;
      • 340B OPAIS accuracy, specifically regular review and timely update of 340B records for contract pharmacies.
    • Turnkey newsletters: Current September 2019 Newsletter and October 2018 Q&A
  5. Corrective Action Plan Expectations and Re-Audit
    • HRSA updated the “CAP Implementation and Repayment” section of its Program Integrity webpage, which now says that “HRSA may re-audit a covered entity to assess compliance with 340B program requirements.” HRSA’s prior policy was to conduct follow-up audits of entities with audit findings requiring repayment.
    • HRSA updated the same section of the webpage to say that when the same non- compliance finding occurs in the first and second audits, the covered entity must submit additional documentation, determined by HRSA, supporting the implementation of the CAP and any applicable repayment to manufacturers. A second audit finding will trigger a third audit. If the third audit results in the same non-compliance violation, HRSA may deem the violation as “systemic and egregious as well as knowing and intentional” and remove the covered entity from the 340B program for a “reasonable period of time.”
    • Under the “Audit Process” tab, in the section titled “CAP Implementation and Repayment,” HRSA says it expects full CAP implementation, including any settlement with manufacturers, to be completed within six months of the CAP approval date.
    • Only covered entities with audit finding(s) must address noted AFI(s) in the CAP. If there are no findings, HRSA does not require a written response but expects the covered entity to implement the AFI and states they reserve the right to require additional information related to the implementation of the AFI in the future.
    • Beginning April 1, 2018, covered entities subject to targeted audits and re-audits must provide to HRSA additional documentation before HRSA will close the audit. HRSA added this requirement to the Data Request List for audits. This information includes:
      1. A description of how the covered entity determined the full scope of non-compliance
      2. A list of all affected manufacturers, a copy of the letter offering repayment to manufacturers, and a list of all settlements with manufacturers
      3. Documentation of continuous monitoring with periodic assessment related to the previous finding(s)
    • HRSA expects 340B covered entities to submit a CAP when filing a non-compliance self- disclosure. That is not a new policy, however, HRSA included in an August website update that self-disclosure CAPs, including any settlement with manufacturers, are expected to be completed within 6 months of submitting the disclosure to HRSA. Not meeting this expectation may subject the covered entity to an HRSA audit. HRSA expects periodic progress reports, as specified, and a final report at the end of the 6 months.
    • Turnkey newsletter discussion on CAP expectations: July 2018

About Author

Jennifer Hagen, PharmD, 340B ACE

Jennifer Hagen joined the Turnkey Pharmacy Solutions team in October of 2016. She has served in various pharmacy leadership positions including Director of Ambulatory Pharmacy Services for CentraCare Health for over 5 years. Dr. Hagen had operational responsibility for Infusion Pharmacy Services, the Health System’s four retail pharmacies, and was responsible for 340B compliance at St. Cloud Hospital, a 489 bed regional medical center. Jennifer has served as a HRSA peer-to-peer mentor for the past two years and has presented numerous times for 340B University and chaired round table events for 340B Health. Jennifer is a member of our 340B independent auditing team. Her perspective involves rural health program administration.

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