September 26, 2012—After a year of unprecedented scrutiny of 340B covered entities, there are signs the Office of Pharmacy Affairs (OPA) is beginning to look more closely at whether drug manufacturers are fulfilling their obligations under the drug discount program and might even begin auditing some companies.
OPA is “in the process of looking into some issues” with drug manufacturers’ 340B pricing, the office’s director, Cmdr. Krista Pedley, said on Sept. 11 at a major pharmaceutical pricing conference in Chicago.[ms-protect-content id=”2799″]
“From the very start, we have had the authority to audit both [340B] covered entities and manufacturers,” Pedley reminded drug industry government contract and pricing experts gathered for the annual Medicaid Drug Rebate Program summit. “We need to ensure on the manufacturer side that there is compliance, that there is not overcharging….So understand that we do have the authority to audit manufacturers.”
The Affordable Care Act called for the development of standards and methods for the calculation of 340B ceiling prices, for the establishment of civil monetary penalties for manufacturers that overcharge covered entities, and for a mandatory 340B dispute resolution process. OPA has not issued regulations to implement those provisions, saying it lacks the funds to carry them out.
During a separate talk during the Chicago conference, drug industry attorney Alice Valder Curran, a partner in the firm Hogan Lovells, advised company representatives to pay close attention to the types of questions that OPA has been telling providers enrolled in 340B to be prepared to answer during an audit “and think about what that might look like if you’re a manufacturer.”
“What are you going to do if you get that letter?” she said. “Ask yourself, ‘What would I have to produce in response to an OPA audit request? What compliance documentation and support do I have?'”
Covered Entity Audits
Much of the conversation at the conference focused on what happens next now that OPA has audited 51 covered entities and, in a related oversight initiative, has delisted 267 sites from the program following the first annual recertification of hospitals’ eligibility for 340B drug discounts.
Addressing the audits, Pedley said, “Are we finding issues? Of course we are.” But because there are no formal regulations for the 340B program, “it is very difficult for us to quickly work through the audits,” she continued. “We have to ensure what we say about [the audit findings] and the penalties that apply to them are supportable by statute….It is going to take us a while.”
“We know there are going be a bunch of entities owing refunds to manufacturers,” Curran said during her presentation. Questions that manufacturers should be asking, she continued, include:
- Who will quantify the refund amount?
- Will there be a materiality threshold for refunds?
- In instances in which an entity is found to have received discounts during an extended period of ineligibility, will there be a limit on the number of years for which refunds are owed?
“It will benefit everyone to have clear guidance so we all know what the rules are,” Curran said.
In other news from the conference:
Manufacturer audits. Pedley said that, thus far, OPA has received only three work plans from manufacturers that want to conduct their own audits of covered entities. Curran said part of the reason for the small number is that audits are burdensome and costly and “there is no guarantee of recovery and I’m auditing a customer who may not like this very much when I’m done.”
“One of the biggest reasons I’ve heard from manufacturers about why they don’t want to audit [covered entities] is because they are their customers,” she continued. “Or, maybe I want to audit them but I don’t want them to have to pay me back.”
Releasing audit and recertification findings. OPA is “still working through” how it will make information about its covered entity audit and recertification initiatives available to the public and in what forms. “We don’t just want to simply post things on our Web site,” Pedley said. “We want to be strategic about how we’re going to make this information available. We’re asking ourselves how we can help entities learn from this process.”
Terminating covered entities. OPA is “moving toward” indicating in real time in its database whenever a covered entity is terminated from the program, Pedley said. Currently, it makes such changes once per quarter. “We need to find a way to inform you of the terminations so you don’t have to go to our database every day,” she told the manufacturer representatives.
340B patient definition. In response to a question from the audience, Pedley said her office is still “in the process of revising” the definition of patient for purposes of 340B discounts “to ensure it is updated to reflect the current marketplace.” During a webinar in August, she said that 340B stakeholders would be seeing new patient definition guidance “in the near future.”
340B service vendors. Responding to another question, Pedley said that although OPA has no authority to audit companies that provide split-billing software and related services to 340B entities, she could see using findings from the covered entity audits “to get the message out to entities” to not assume that using a vendor automatically guarantees that they are compliant.
“Let’s say we do 51 audits and we find noncompliance at five sites and, guess what, they all use the same vendor,” Pedley explained. While OPA “wouldn’t necessarily” name the vendor, she said, “maybe there’s some type of information we can give out to people.”[/ms-protect-content]