340B ESP Wants to Be Pharma’s Go-to on 340B Duplicate Discounts. Kalderos Says Not So Fast.

A Message from Publisher and CEO Ted Slafsky: We recently welcomed FQHC 340B Compliances Services to our growing list of sponsors. In today’s sponsored content article, FQHC 340B Lead Consultant Michael Gonzalez offers five great tips on how covered entities can keep themselves “audit-ready.” Tom Mirga and I had the pleasure of talking to Michael recently and encourage you to read the piece and check out his company.   

I am also excited to announce that I will be participating, along with my long-time colleague Bill von Oehsen, in a fun virtual happy hour July 22 hosted by 340B Report sponsor PSG. “Bill and Ted’s Excellent Adventure” is part of next week’s 340B Coalition conference. Ty Barnett, the pharmacist-turned-comedian who is a contestant on this year’s America’s Got Talent, will join us! More details about the event, including how to register, can be found below.

Feel free to reach me at ted.slafsky@340BReport.com or click on the button below to learn more about publishing sponsored content and the many other benefits of becoming a sponsor.

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340B ESP Wants to Be Pharma’s Go-to on 340B Duplicate Discounts. Kalderos Says Not so Fast.

When drug manufacturer Merck recently began asking 340B covered entities for their contract pharmacy claims, it instructed them to upload their data to a new company that most entities probably had never heard of—340B ESP.

Hospitals, health centers, and others that follow 340B closely, however, might have heard of 340B ESP’s founder, Aaron Vandervelde. As Managing Director of Berkeley Research Group (BRG), he has written or co-written studies about the 340B program on behalf of Pharmaceutical Research and Manufacturers of America (PhRMA). He’s also done work for the drug-company-led advocacy group AIR 340B and the trade association for private practice oncologists Community Oncology Alliance (COA).

Vandervelde’s research undergirds many public policy arguments for scaling 340B back, particularly for hospitals. He has addressed subjects including 340B program growth; Walgreens’ participation in 340B as a contract pharmacy; 340B hospital contract pharmacy locations; the volume of prescriptions filled at 340B contract pharmacies by Medicaid managed care beneficiaries; 340B hospital acquisitions of or mergers with private oncology physician practices; and 340B hospital Medicare Part B drug reimbursement.

PhRMA, AIR 340B, and COA cite Vandervelde’s research in arguments that hospitals benefit from the 340B program, but low-income and uninsured patients do not, and that the program raises the cost of cancer care. 340B hospitals and other providers counter that Vandervelde has overestimated 340B’s size and mischaracterized the program’s intent and purpose. Other research, they say, shows 340B has little effect on spending on cancer drugs, and that 340B hospitals treat significantly higher percentages of cancer patients who have low incomes, disabilities, and/or are members of racial/ethnic minorities.

340B Report recently exchanged email with Vandervelde about his new business. We also traded email with Steve Zielinski of Kalderos, the data analytics company that until now has had the field that 340B ESP is entering mostly to itself.

Vandervelde said 340B ESP “is operated through Second Sight Solutions, LLC which is a new entity I founded for this technology platform.” He said his new venture “is focused exclusively on addressing program integrity issues in the 340B program” and “the need for this solution is great.”

“HRSA has not addressed duplicate Medicaid rebates and pharmaceutical manufacturers continue to pay duplicate discounts on Medicaid FFS and managed Medicaid utilization despite the statutory prohibition,” he said. “In 2018 and 2019, HRSA found duplicate Medicaid rebates in 30 percent of the covered entities they audited, and this was just for Medicaid FFS beneficiaries. The rates would have almost certainly been higher if they had audited for managed Medicaid utilization as well. Similarly, manufacturers pay significant volumes of ineligible Medicare Part D and commercial rebates because the 340B status of a contract pharmacy claim is typically not communicated to the payer.”

We asked Vandervelde who would be on the hook for repayments if 340B ESP finds duplicate discounts.

“The way in which those ineligible rebates are resolved differs by payer,” he said. “For Medicaid FFS and managed Medicaid rebates, we anticipate manufacturers will first attempt to address the duplicate Medicaid rebate with the state Medicaid programs. Some states require manufacturers to work directly with the 340B covered entities and so in those states recovery would occur through the covered entities…. We anticipate that manufacturers will work together with the 340B covered entities in good faith to resolve the duplicate Medicaid rebates.”

“For Medicare Part D and commercial rebates, recoveries occur directly with the payers according to the terms of the contract between the manufacturer and the payer,” Vandervelde continued. “340B covered entities are not responsible for repayment of duplicate Medicare Part D or commercial rebates.”

“We have heard a concern that by providing this data, covered entities will become the target for audits. This is absolutely not the intent,” Vandervelde said. “We have also heard requests that we seek this data from the contract pharmacy administrators instead of collecting it from the 340B covered entities. This is also our goal and we encourage all 340B covered entities to engage with their contract pharmacy administrators on this question. The contract pharmacy administrators can only provide this data directly to 340B ESP if it has been authorized by the 340B covered entities. We are prepared to establish protocols with the contract pharmacy administrators to facilitate this data transfer so that 340B covered entities expend very few resources on this initiative.”

Technology entrepreneur Jeremy Docken’s data analytics company Kalderos has dominated the business of helping drug manufacturers and payers identify potential 340B duplicate discounts with 340B covered entities’ assistance. Kalderos recently secured almost $30 million in venture capital for expansion.

Steve Zielinski, Kalderos Senior Director, Industry Relations, contacted 340B Report late last week to address “recent questions about Kalderos and our good faith inquiries.”

“I’ve been receiving calls from covered entities asking if Kalderos has taken a new direction in their approach with duplicate discount claim validations with the manufacturers who are our clients,” said Zielinski. “My answer is no.” He said Kalderos continues to help covered entities and manufacturers work to resolve 340B duplicate discounts using the U.S. Centers for Medicare & Medicaid Services’ Medicaid Drug Rebate Dispute Resolution process. “Kalderos’ work with covered entities and manufacturers has resulted in identifying over $100 million of noncompliant discounts, of which none of our manufacturer clients have sought repayment from a covered entity.”

“As a reminder, we do not ask for data from a covered entity nor do we share specific covered entity information or responses between our clients,” Zielinski said. “Our inquiries just request a yes/no response as to whether a 340B drug was used in the transaction.”

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5 Tips to Stay Audit-Ready

340B audits can be daunting, but they do not have to be if you are prepared. Below are five tips on how to be audit-ready. These are tips that we, FQHC 340B Compliance Services, have found most important after working with over 50 FQHC’s 340B programs.

5 Ways to Stay Audit-Ready

  1. Plan on doing monthly internal audits and follow through with them. They are incredibly important with maintaining compliance and catching claims that may cause diversion. If you are auditing monthly, you will have time to reverse claims that were not eligible 340B claims during the allotted window.
  2. We recommend regularly updating your contracts and OPAIS data to ensure the data matches. This includes contract pharmacies and site locations. There have been many instances where we find that the two do not match, which would result in a finding during an audit.
  3. What you state in your policies and procedures needs to be accurate and followed through with, whether it be how you plan on using excess 340B savings, or how many procedures are in place to maintain compliance. All need to be completed when stated and have records of doing so.
  4. You want to make sure that you are monitoring compliance with clinic administered drugs. These can be easily overlooked or missed, but are just as important as pharmacy 340B transactions.
  5. Lastly, we recommend utilizing all resources available for aiding in 340B compliance. Whether this be attending Apexus 340B University to stay up to date on 340B rules and regulations, or hiring a consultant to help maintain and monitor your 340B operations.

Any steps you take towards managing and monitoring your 340B program will benefit you immensely. These few tips will help keep you compliant and audit-ready.

FQHC 340B Compliance Services is the preferred resource for all community health center needs. Contact us at admin@FQHC340B.com or (760) 780-7469.

In Game Changer, Apexus Says FQHCs, Too, Can Start Using 340B Drugs at Associated Sites Awaiting 340B Registration

It was a big victory for hospitals last month when the U.S. Health Resources and Services Administration (HRSA) said that hospitals unable to register offsite facilities in the 340B program because the facilities were not yet listed as reimbursable on the hospital’s Medicare cost report could nonetheless use 340B drugs at the new sites, to the extent that the sites’ patients are patients of the hospital. Health centers wondered if HRSA would afford them similar treatment.

The answer appears to be yes. Consulting firm Turnkey Pharmacy Solutions reported yesterday in its blog that Apexus, HRSA’s 340B prime vendor, has confirmed to it that FQHCs may similarly begin using 340B drugs at associated sites prior to the sites’ registration in 340B.

Felicity Homsted, Lead Pharmacist Auditor for Turnkey, wrote in the blog that the company asked Apexus whether the logic behind the prime vendor’s June 4 FAQ about hospitals’ ability to use 340B drugs at non-registered outpatient facilities “applies to FQHC associated sites.” Homsted said Turnkey got this answer:

Yes, the patients could be eligible. As stated in the FAQ, the covered entity should evaluate whether the patients of the new site would be considered eligible patients with the patient definition and defined in your policies and procedures.

Late yesterday, Homsted provided further details to 340B Report about the news from Apexus. “In the last week I have spoken to seven different FQHCs who have reinforced what a game changer this is for them,” she said. Although 340B registration delays for FQHC associated sites aren’t as extreme as the 22-month delays for some hospital offsite facilities, they are significant, Homsted noted. “FQHC’s could wait up to almost nine months, which was a real barrier to ensuring access to medications for the underserved populations FQHCs care for,” she said.

“We have long sought this recognition,” said Jason Reddish, Partner at Feldesman Tucker who represents many FQHCs. “HRSA’s Bureau of Primary Health Care determines whether a health center location is active, so it only makes sense that the [HRSA] Office of Pharmacy Affairs would respect that determination for 340B eligibility.”

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News in Brief

  • In his latest column for 340B Report sponsor Pharmaceutical Strategies Group, 340B Report Publisher and CEO Ted Slafsky says, “The only chance I see for big changes to our current drug pricing system would be if the Democrats take back the Senate, and Democratic-nominee Joe Biden wins in a landslide.” Slafsky notes that the last time we saw major prescription drug legislation was in 2003, when the Republican-controlled Congress barely passed legislation establishing the Medicare Part D program and Republican President Bush signed it into law. This coming November’s elections “will also determine the direction of the 340B program,” he adds.
  • The U.S. Health and Human Services (HHS) Department on July 10 announced $3 billion in COVID-19 relief to 215 safety-net hospitals that did not qualify for a share of $10 billion in provider relief announced on June 9. HHS simultaneously announced $1 billion in COVID-19 relief for about 500 “specialty rural hospitals, urban hospitals with certain rural Medicare designations, and hospitals in small metropolitan areas” that also did not qualify for funding. On July 9, HHS awarded more than $21 million to expand community health centers and health center look-alikes’ capacity to provide COVID-19 testing.
  • The only way hospitals can obtain the COVID-19 treatment remdesivir “or any other treatments or supplies” is by daily reporting on COVID-19 testing, capacity and utilization, and patient flows either to states or to a federal contractor—not to portals run by the U.S. Centers for Disease Control and Prevention (CDC), Inside Health Policy reported this morning. STAT reported July 10 that hospitals in Houston, Miami, and other new COVID-19 hot spots are on the verge of running out of remdesivir, “one of the few tools proven to work against the disease.” The U.S. Health and Human Services (HHS) Department says the reporting protocol change “will greatly assist the White House Coronavirus Task Force in tracking the movement of the virus, identifying potential strains in the healthcare delivery system, and informing distribution of supplies.” Critics of the Trump administration allege that the change is a politically motivated end-run around CDC.
  • U.S. Centers for Medicare & Medicaid Services Administrator Seema Verma and other senior CMS leaders did not administer and manage $6.4 million in contracts for strategic communications services in accordance with federal requirements, the U.S. Health and Human Services (HHS) Department Office of Inspector General (OIG) concludes in an audit released this morning. OIG found that “CMS allowed a subcontractor individual to perform inherently governmental functions, such as making managerial decisions and directing CMS employees,” and also “and paid some questionable costs.” News organization Politico reported today that OIG found that Verma “violated federal contracting rules by steering millions of taxpayer dollars in contracts that ultimately benefited GOP-aligned communications consultants.” HHS concurred with OIG’s findings and recommendations. CMS disagreed with the findings and largely disagreed with the recommendations.
  • Drug manufacturer Amgen clarifies in a notice on the U.S. Health Resources and Services Administration (HRSA) website that 340B covered entities can use Amgen’s new NDCs for the plaque psoriasis treatment Otezla interchangeably with manufacturer Celgene’s old NDCs in 340B replenishment models. Amgen bought Otezla from Celgene late last year.
  • “Hospitals participating in the 340B drug pricing program provide significantly more care to Medicaid patients and Medicare patients with low incomes than non-340B hospitals,” hospital group 340B Health said in a news release yesterday upon releasing a new report. The group says in an accompanying infographic that 340B disproportionate share (DSH) hospitals provide 75 percent of Medicaid hospital services despite representing 43 percent of all hospitals. 340B DSH hospitals also “treat significantly more Medicaid and low-income Medicare patients at 41 percent vs. 26 percent of patient load,” it said.

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