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Contract Pharmacies Come Under 340B Scrutiny

Kate Traynor

The federal agency that oversees the 340B Drug Pricing Program recently announced a renewed focus on ensuring that program participants adhere to policies related to the use of contract pharmacies.

The February 5 announcement from the Health Resources and Services Administration (HRSA) followed the release of a report on the program from the Office of Inspector General (OIG) of the Department of Health and Human Services.

OIG found inconsistencies in the way contract pharmacies determine whether prescriptions are 340B program–eligible, potentially resulting in diversion of 340B-purchased drugs and other problems.

The 340B program was created in 1992 to allow qualified health care entities to purchase outpatient medications at discounted prices for use by low-income patients. Participants in the 340B program include safety net hospitals, federally qualified health centers, and AIDS drug assistance programs.

According to HRSA, 18% of these so-called covered entities use contract pharmacies to dispense 340B-covered drugs. Covered entities are responsible for ensuring that their contract pharmacies adhere to all program policies.

"Because these arrangements are so complex, it's really important that providers adequately oversee their contract pharmacies to ensure compliance," said HRSA Program Analyst Adam Freeman in an audio interview released by the agency.

HRSA recommends that covered entities use an independent auditor to ensure contract pharmacy compliance. But only 7 of the 30 health care entities whose staff were interviewed during development of the OIG report indicated the use of an independent auditor.

The failure to provide oversight of contract pharmacies is a violation of 340B program requirements, according to HRSA, and the agency states that it will not allow the contracting arrangement to continue in such cases.

HRSA's biggest stated concerns about contract pharmacy oversight are preventing diversion, or the use of 340B-purchased medications for patients who are not eligible for the drugs, and avoiding duplicate discounts, which occur when a state Medicaid program receives a rebate for a drug purchased through the 340B program.

Past audits by HRSA have found instances of diversion and duplicate discounts at contract pharmacies.

OIG based its report on interviews with staff at 15 disproportionate-share hospitals, 15 community health centers, and 8 organizations that help covered entities manage their 340B programs.

According to the report, different interviewees interpreted the same hypothetical scenarios in different ways. In some cases, the entities' interpretations would have resulted in 340B program violations.

For example, when presented with the case of a physician who works part-time at a covered entity but also sees patients in private practice, one interviewee indicated that all of the physician's prescriptions would be considered 340B eligible because of the affiliation with the covered entity.

In this case, the use of 340B-purchased drugs to fill prescriptions for patients from the private practice would violate 340B rules, constituting product diversion.

Other interviewees said that in the scenario described above, they would always or sometimes deem the physician's prescriptions 340B ineligible on the basis of the facilities' prescriber lists or a manual review of the prescribing data.

"Health care providers seem to be interpreting the program rules differently, which suggests that the rules aren't entirely clear," Freeman said.

One program participant was less circumspect on the issue of interpreting 340B regulations.

"The government did not give us any guidelines" for the program, said Ramesh Patel, senior director of pharmacy services and clinical research at Swedish Covenant Hospital in Chicago.

Ramesh Patel

"They said, 'This is the law,' and you follow the law. So people are trying to interpret whatever they can interpret," said Patel.

Swedish Covenant was audited by HRSA in 2012, and the agency found instances in which the hospital's contract pharmacy dispensed 340B-purchased drugs to ineligible patients.

Patel said the problem stemmed from physicians' use of the hospital's paper prescription pads to write courtesy prescriptions for hospital staff and others. He said that when the paper prescriptions were presented at the contract pharmacy, the staff saw the prescribers' hospital affiliation and automatically filled the prescriptions using 340B-purchased drugs.

Patel said that when the hospital first enrolled in the 340B program, there were no vendors offering software to manage program compliance. Later, when these software products became available, they were prohibitively expensive, considering the relatively small volume of 340B-eligible prescriptions filled.

He said Swedish Covenant withdrew from the 340B program after the HRSA audit but has since switched to electronic prescribing, installed software to track prescriptions for 340B eligibility, and reenrolled in the program.

"Now, I'm very comfortable with it, because now whenever my outpatients...have a prescription filled, it matches my registration in the hospital. So we are not going by looking at the prescriptions" by hand, Patel said.

He said that the hospital's 340B revenue previously amounted to $10,000–$15,000 per month. His vendor is confident that that number will be substantially higher under the electronic system.

"I'm going to be in a phase of evaluating [the system] for a year or so," Patel explained.

He said the HRSA auditors found inadvertent "penny stuff" that resulted in money owed to the hospital by manufacturers as well as money the hospital needed to repay. The audit itself took three days, and the corrective action plan included multiple rounds of review that ultimately encompassed about 18 months' worth of full prescription data.

Patel said he believes audits are necessary to discourage intentional misuse of the program; nevertheless, he said, "you don't want to be 340B audited."

After the release of the OIG report, HRSA published on its website tips for ensuring that contracting pharmacy arrangements meet the agency's expectations. The agency announced in January that it will issue additional guidance by June on compliance requirements for contracting pharmacy arrangements, eligibility, and other issues.

Christopher Topoleski, ASHP's director of federal regulatory affairs, said ASHP does not have an official policy on the use of contract pharmacies for 340B-purchased drugs. He encouraged members to take advantage of 340B program assistance offered by Apexus, the prime vendor for the program.

The company offers this assistance in the form of 340B University, which is held before ASHP's Summer Meetings and Midyear Clinical Meeting and at other times during the year.

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