Presenting a live 90-minute webinar with interactive Q&A 340B Contract Pharmacy Arrangements: What Does the Future Hold? Structuring Arrangements, Meeting Legal and Regulatory Requirements WEDNESDAY, NOVEMBER 29, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Travis F . Jackson, Partner, King & Spalding , Los Angeles Claire F . Miley, Member, Bass Berry & Sims , Nashville, Tenn. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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340B Contract Pharmacy Arrangements: What Does the Future Hold? November 29, 2017 5
Outline I. Structuring and implementing contract pharmacy arrangements Overview and need for services A. Due diligence B. Fee structures C. What operational and contractual considerations should counsel keep D. in mind when structuring and implementing these arrangements? What compliance challenges must be overcome when structuring a E. contract pharmacy arrangement? II. 340B entity compliance issues Certifications A. Contractor-associated liability B. Covered entity requirements C. III. A look ahead Enforcement and sanctions A. Future of 340B Guidance B. 6
Overview and Need For Services 7
340B Program Overview The 340B Drug Pricing Program ► requires drug manufacturers who participate in Medicaid to provide outpatient drugs to eligible healthcare organizations (“Covered Entities,” or “ CEs ”) at significantly reduced prices. 8
340B Program Overview CEs receive significant discounts on covered outpatient drugs ► Estimated average savings of 20-50% ► Estimated $16 billion in 340B drug purchases in 2016 (5% of U.S. Drug Market), per Drug Channels CEs are defined in statute and include ► HRSA-supported health centers, ► Ryan White clinics and State AIDS Drug Assistance programs, ► Medicare/Medicaid Disproportionate Share Hospitals, ► children’s hospitals, and ► other safety net providers. 9
340B Program Overview: Contract Pharmacies HRSA permits CEs to contract with pharmacies to provide pharmacy services on the CE’s behalf to CE patients. Initially, CEs were limited to one contract pharmacy relationship In 2010, HRSA allowed CEs to enter into multiple contract pharmacy relationships Contract pharmacies (“CPs”) are a growth area, but also one under OIG, GAO, and manufacturer scrutiny 10
Contract Pharmacy Arrangement: Example Process Flow Wholesaler Drugs shipped CE purchases 340B Drugs to CP CP adjudicates script Contract Covered Payer Pharmacy Entity CP remits Payer reimburses CP reimbursement less fee CP dispenses; collects Patient cost-share 340B eligible patient relationship Patient 11
Need For Contract Pharmacy Services HRSA: “[T]he delivery of pharmacy services is central to the mission” of covered entities, which “rely on outside pharmacies to fill the need. It would defeat the purpose of the 340B program if these covered entities could not use their affiliated pharmacies in order to participate in the 340B program [emphasis supplied].” ► 61 Fed. Reg. 43549, 43550 (Aug. 23, 1996). BUT, there is growing backlash among some 340B stakeholders to CP arrangements There is also growing government scrutiny of the 340B program in general 12
Congressional Scrutiny Extensive number of Congressional hearings Potential draft legislation discussed in May 2017: ► At a trade association event, Rep. Collins (R-NY) promised to introduce 340B reform legislation ► Reports indicate that the proposed bill would narrow the eligible patient definition, limit new CE enrollment, limit CPs, and expand HRSA oversight of the program ► Has not been introduced in Congress Even if the Rep. Collins legislation does not materialize, we do expect some legislative package, which may contain one or more of the following: ► Definition of patient ► Limits on contract pharmacies (e.g., by number and/or location) ► Limits on charges for 340B drugs ► Required reporting of amount and use of 340B savings 13
Congressional Scrutiny July 2017 – Testimony of GAO Before Congress “Update on Agency Efforts to Improve 340B Program Oversight” Highlights of Testimony: ► HRSA Audits ► Clarifying Program Guidance on - Definition of Patient - Eligibility Criteria for non-publicly owned hospitals ► Due in 2018 -- Oversight of 340B Contract Pharmacies 14
Reimbursement – 340B Trend to Watch Government Program Capture of 340B Savings 2018: Final Medicare OPPS Rule ► Cuts the applicable payment rate for separately payable drugs and biologicals (other than drugs on pass-through payment status and vaccines) acquired under the 340B program from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent . ► Exemptions for certain rural sole community hospitals, CAHs, PPS-exempt cancer hospitals, and HOPDs subject to site neutrality rules 15
Reimbursement – 340B Trend to Watch Government Program Capture of 340B Savings 2018: Final Medicare OPPS Rule ► The AHA and other advocacy groups filed suit against HHS on11/13/17 . ► The complaint alleges that HHS’s rulemaking was: - arbitrary and capricious; and/or - contrary to law; and - is in excess of the agency’s statutory authority. 16
Reimbursement – 340B Trend to Watch Government Program Capture of 340B Savings 2018: Final Medicare OPPS Rule ► Rep. David McKinley (R-WV) introduced H.R. 4392 to block the 340B OPPS cuts on 11/14/17 ► Bill has been referred to the House Committee on Energy and Commerce and the House Ways and Means Committee 17
Reimbursement – 340B Trend to Watch Government Program Capture of 340B Savings 2016: Medicaid Covered Outpatient Drug Rule ► “[ T]his final rule is designed to ensure that pharmacy reimbursement is aligned with the acquisition cost of drugs and that the states pay an appropriate professional dispensing fee .” ► Requires States to transition to AAC-based methodology for pharmacy reimbursement 18
Reimbursement – What Effect on Contract Pharmacies? OPPS cut due to take effect January 1, 2018 If cuts survive, the 340B program will likely become less attractive to covered entity hospitals Therefore, despite the recent boom in contract pharmacies, will they dry up in the future? 19
340B Program Overview: Contract Pharmacies Contract pharmacy growth has perhaps leveled off: ► Per Apexus: Date # of Unique 340B CPs % Growth 1/1/12 4,238 1/1/13 9,832 132% 1/1/14 13,707 39% 1/1/15 16,269 19% 1/1/16 17,463 7% 1/1/17 18,705 7% 20
Due Diligence 21
Contract Pharmacy Due Diligence Three Areas of Inquiry The Pharmacy 1. The Vendor 2. The Covered Entity 3. 22
The Pharmacy • What is the business justification for the contract pharmacy relationship? • What is the pharmacy’s compliance record? • Is the pharmacy a good fit for the covered entity’s culture? • What processes does the pharmacy have in place to ensure 340B outpatient drugs are dispensed only to qualifying patients? • How does the pharmacy store prescription records? • Is the pharmacy equipped to connect to the covered entity through its EHR? • What restrictions might exist on the pharmacy through managed care or vendor agreements? 23
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