January 20, 2012—The Office of Pharmacy Affairs (OPA) has begun its first-ever audits of 340B covered entities to determine if they are eligible to receive drug discounts, if they have sold or diverted discounted drugs to ineligible patients, and if they are able to prevent and detect instances of drug diversion and duplicate discounts.
Some hospitals have received letters from OPA Director Krista Pedley informing them that they have been selected for an audit of their compliance with 340B program requirements, summarizing what the review will cover, and requesting “specific times for an entrance conference” this month with key hospital management and personnel involved in the 340B program “to collect relevant documents.”
[ms-protect-content id=”2799″]It is not yet known whether OPA has chosen other types of covered entities for audits. OPA officials have said in the past that all types would be considered. Groups representing 340B health centers, family planning clinics, and hemophilia treatment centers said yesterday that they are unaware of any of their members being selected by OPA for audits. Others close to the 340B program say that they, too, have not heard of any non-hospital entities having been chosen.
The total number of audits being conducted is also unknown, as are the criteria that OPA used to pick the entities and the protocol that OPA auditors will follow. Earlier this week, the Monitor asked the Health Resources and Services Administration (HRSA), OPA’s parent agency, for additional information about the compliance audits but has yet to receive a reply.
Calls for More Oversight
The Government Accountability Office (GAO) called on HRSA to selectively audit 340B entities in September as part of a broader effort to enhance program integrity. HRSA has also been under pressure from influential Republican members of Congress to conduct audits and otherwise “get a handle on potential abuse” of 340B drug discounts. In an October letter to those lawmakers, HRSA said that pre-audit interviews would begin in early January and the actual audits in February.
In a letter to one of the hospitals chosen to be audited, OPA said that, following the entrance conference, “a program integrity analyst from HRSA’s Office of Regional Operations will continue to work with you on behalf of [OPA] by phone to coordinate your review.”
The letter continued: “HRSA procedures will, at a minimum, include review of the facility’s policies, procedures and processes that pertain to 340B medications; verification of internal controls in place to prevent diversion and duplicate discounts; and testing, on a sample basis, transactions that pertain to 340B medications.”
OPA told the hospital that “upon completion of our review we will issue you a report outlining our findings.”
“We will not be auditing your financial statements nor offering an opinion on them,” the letter continued. “Our review is not designed to detect fraud.”
The letter did not spell out, however, what would occur if OPA concluded that the audit revealed that program requirements were not met. It is expected that OPA would require some form of corrective action.
It is also unclear if audit findings or related sanctions will be kept confidential or made available to the public. In its Oct. 21 letter to the members of Congress who have concerns about 340B program integrity, HRSA said it expected each audit “and publication of reports” would take two to three months from start to finish.
Types of Data Requested
One hospital that received an audit notification letter was asked to provide OPA’s review team with:
- an enclosed, lockable working space for up to three staff;
- internet access for three computers;
- access to a telephone, fax machine and photo copier;
- parking for up to two vehicles; and
- access to all financial, transactional documents and patient information related to the 340B program.
A separate communication from OPA to the hospital included a far more detailed list of requested data. These included:
- policies and procedures;
- the hospital’s current Medicare cost report;
- a list of all 340B prescriptions issued during a six-month period in 2011, including identifying numbers, wholesale price paid, amount billed, the payer, and the amount paid by the payer;
- the hospital’s state Medicaid agency point of contact;
- a list of all hospitals centers eligible for 340B;
- a list of physicians eligible to write 340B prescriptions;
- a current inventory listing including purchase price and retail value;
- a list of Medicaid excluded drugs;
- a current drug price list;
- inventory balances at the beginning and end of the six-month test period; and
- a list of contacts.
During a meeting of 340B stakeholders in New Orleans in December, OPA Deputy Director Michelle Herzog said that her office would make both its audit protocol and its selection criteria publicly available prior to the audits’ commencement. To date, however, neither is available on the OPA web site.
This morning, OPA’s Pharmacy Service Support Center posted a notice on its web site about a webinar it is holding on April 25 through its 340B peer-to-peer network entitled “Audits: Understanding the Process and Preparing Your Pharmacy.” It will be the fourth in a series of monthly webinars on program integrity topics that begin this month. The others are: 340B Basics to Ensure Integrity (Jan. 25); Systems for Maintaining Integrity (Feb. 29); and Medicaid Billing and Avoiding Duplicate Discounts (March 28). The webinars are open to all providers eligible for or enrolled in 340B.[/ms-protect-content]