Hoped-for Growth in Bulk Drug Replacement Programs Fails to Materialize

by admin | June 22, 2010 8:36 pm

A Drug Discount Monitor Special Report

Safety Net Hospitals for Pharmaceutical Access Law Fellow Victoria Aufiero contributed to this report.

June 22, 2010 – Nearly a year after a federal watchdog agency gave drug companies its blessing[1] to give hospitals free prescription drugs in bulk for low-income uninsured patients without fear of violating anti-fraud rules, some manufacturers seem as hesitant as ever to launch institutional patient assistance programs (IPAPs).

What’s more, safety-net hospital pharmacy officials report that compliance audits for many companies’ IPAPs, also known as bulk replacement programs, are becoming more time-consuming and labor-intensive—to the point that some are questioning whether IPAPs are worth the effort.

One hospital pharmacist who recently responded to an informal Monitor survey said her hospital dropped one company’s IPAP because its requirements had grown too burdensome. A second said her hospital does not use bulk replacement at all precisely for that reason. A third said that while IPAP rules have become harder to satisfy, her hospital was too deeply invested in them to walk away.

A drug manufacturer consultant involved in the administration of IPAPs, however, says it was unrealistic for hospitals to expect that the July 2009 advisory opinion on IPAPs by the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) would lead to a quick uptick in their number. Most companies inclined to offer bulk replacement programs have already done so, the official says, and those that might be thinking about launching their own have been preoccupied all year with other pressing matters, most notably health care reform.

Furthermore, the official says, many hospitals and other providers displeased with IPAP audits are often ill-prepared for the reviews, suffer from high rates of staff turnover and have weak record-keeping systems. The consultant believes some companies might be favorably inclined to make their compliance requirements more uniform, but only if a way can be found to do so without exposing themselves to federal charges of collusion.

“Tedious” Compliance Requirements

Valaura Hallman, director of pharmacy administration and support services for Grady Health System in Atlanta, says that while her facility greatly appreciates the donations it receives from about a dozen manufacturers, their audits on the whole have grown both in frequency and intensity during the past 15 years.

“We don’t object to the audit process,” she explains. “But sometimes we’re required to pull as many as 200 records for an audit, and getting that information is pretty tedious.”

Hallman and others also say they are sorely disappointed that manufacturers without IPAPs have for the most part disregarded the OIG’s ruling that there is little risk of kickbacks in bulk replacement programs. Hallman, for example, says her hospital could forego spending nearly three-quarters of a million dollars annually if one particular manufacturer without an IPAP was to change its mind. “That would really be a big savings for us,” she says.

Don Price, pharmacy services business manager at VCU Health System in Richmond, Va., blames institutional inertia for the companies’ lack of response to the OIG opinion. “It used to be that their lawyers were their excuse for not having an IPAP,” he says. “Now their excuse is national health care reform. They just want to keep taking the path of least resistance.”

Price says his hospital participates in about 10 IPAPs and saves about $2.5 million annually based upon what otherwise would be the drugs’ 340B purchase price. “That represents almost 10 percent of my outpatient budget,” he notes.

At the same time, however, he says that the staff resources needed to fulfill companies’ IPAP requirements take time away from patient care.

“It would be nice if the companies did something as simple as adopt a common audit requirement, but they never will,” Price laments. “It’s incredibly odd to me that one company can come in and ask to see 10 records and be in and out in a day while another asks for 200 and spends four days here.” Safety Net Hospitals for Pharmaceutical Access (SNHPA), an organization of more than 500 hospitals serving low-income patients, has formed a working group of hospital leaders in the patient assistance area to make recommendations to industry on how to streamline the audit process without undermining the integrity of the programs.

OIG Opinion Yields Little Change

In theory, IPAPs offer manufacturers big advantages over assistance programs for individual patients. These include freedom from having to process thousands of single applications, no need to dispense, package and mail thousands of single prescriptions, and substantial assurance that donations actually help intended beneficiaries because they are used to replace drugs already dispensed.

Companies, however, have been wary of bulk replacement programs for fear of being hauled into court on charges of violating the federal anti-kickback statute. The OIG’s advisory opinion on IPAPs was widely expected to help put such fears to rest.

After investigating a leading manufacturer’s bulk replacement program, the OIG found no evidence that such programs would prompt manufacturers to pressure providers into favoring their products over others. Because such charity drug programs serve outpatients only and the prescribing physician receives no financial compensation, the risk for kickbacks was small, the OIG wrote.

Hospitals’ initial burst of optimism following the opinion, however, has turned to discouragement as the program growth they had hoped for failed to materialize and compliance requirements have often become more onerous.

Patient eligibility requirements, hospital pharmacy officials say, vary from company to company and it is common for a company’s rules to change from one audit to the next. One official notes that some companies restrict IPAP eligibility to U.S. citizens while others limit it to legal residents. Another says she was perplexed by an auditor’s request for her pharmacy’s architectural and engineering diagrams. Several complained that auditors often have no experience with pharmacy or, as one put it, “are just out for the kill.”

Other hospital officials describe questionable requirements such as documentation of a patient’s lack of insurance both at the time of enrollment in an IPAP and at the time of dispensing and the retention of such records, and verification of a patient’s self-reported supplemental income even when it would not have altered his or her eligibility for assistance. Many complain of the need to keep and later be able to produce multiple boxes of actual prescriptions or documents proving that drugs were not billed to Medicaid.

Firms “Doing Their Due Diligence”

The consultant involved in IPAP administration, however, says manufacturers are simply “doing their due diligence” to ensure that the free products they provide are benefiting patients, not institutions, “and in no way look like any sort of inducement.”

“They have to have some level of oversight once they give you a free product,” the official says, adding that it is common for audits to disclose problems such as IPAP drugs being inadvertently billed.

While many similarities exist among programs, audit requirements vary from company to company because IPAPs are not uniform, the consultant says. “Some target just health centers, others hospitals, others just certain types of hospitals,” the official explains. “Patient population pools are different.” Scheduling of compliance reviews frequently is triggered by the volume of drugs dispensed or administered. Companies, the official continues, cannot jointly develop uniform audit standards due to the constant threat of being charged with collusion. “That’s why there’s not a single IPAP form.”

The official also suggests that hospitals must shoulder some of the responsibility if audits are rocky. “What we find is that those that are organized well, do well,” the consultant says. “If you know what you’re doing and why, and where the product goes, it goes smoothly.”

The official also challenges the perception that manufacturers greeted the OIG opinion with a deaf ear. “Maybe they’re not making big public announcements, but those with programs in place are opening them up to more facilities or to different types of facilities,” the consultant notes.

One System Turns to Individual PAPs

Barriers to assistance, whether perceived or real, are causing some hospitals to weigh alternatives such as such as focusing on other cost-saving measures or relying more on individual PAPs. The Los Angeles County Department of Health Services (LACDHS), the nation’s second largest public health system, has taken the second approach.

In 2006, LACDHS negotiated an innovative contract with its drug wholesaler, Cardinal Health, giving the company financial incentives to help the system’s patients obtain free pharmaceuticals through drug companies’ individual PAPs. Mainly by substituting inventories of costly drugs with free ones from PAPs, some county facilities are now “recovering” in one quarter nearly 20 percent of their drug expenditures.

The county has focused on individual PAPs rather than on bulk replacement programs because they have proven to be simpler and less labor-intensive to administer, says LACDHS Pharmacy Affairs Director Amy Gutierrez. Under the contract, Cardinal pharmacy technicians work on site at LACDHS facilities processing patients’ PAP applications, verifying their income eligibility, obtaining physicians’ signatures and the like all at the wholesaler’s expense.

In return, Cardinal receives a percentage of the recovered value of the drugs. Cardinal also supplies LACDHS with a full-time pharmacist who helps the department identify which PAPs deliver the highest rates of return. “It’s much better to target a drug where you are going to recover $1,000 than one where you are going to recover only $10,” Gutierrez notes. Oncology drugs top the department’s priority list.

According to Gutierrez, thanks to the contract LACDHS recovered $170,000 during just six months at one facility during fiscal 2007-08, $2.4 million over 12 months at two sites during 2008-09, and $4 million at nine sites during the first nine months of 2009-10. It anticipates between $7 million and $9 million in recoveries during fiscal 2010-11.

Gutierrez says she has yet to find a single downside to the effort. “This has been a very good partnership between a wholesaler and a health care system,” she continues. “I highly recommend that health care systems reach out to their wholesalers to see if they are able to tap into a similar program. It is the right thing to do for patients in need, and makes good business sense from both the wholesaler and provider perspective.

In addition to such services provided by all of the major wholesalers, other companies with expertise in the federal 340B drug discount program are developing PAP solutions.

SunRx, for example, recently unveiled its new PAP Simplified program, which builds on its 340B Simplified software suite that helps hospitals and other providers with inventory management and split billing.

“Patient assistance programs can provide medications for free or at significant discounts to families in need, but heavy administrative burdens for patients and providers often stand in the way,” says company CEO Tim Liebmann. “Our solution streamlines the PAP process, reduces the burden on providers, and creates more widespread and convenient access to affordable medications.”

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