[Federal Register Volume 75, Number 43 (Friday, March 5, 2010)]
[Notices]
[Pages 10272-10279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4755]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Resources and Services Administration
Notice Regarding 340B Drug Pricing Program--Contract Pharmacy
Services
AGENCY: Health Resources and Services Administration, HHS.
ACTION: Final notice.
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SUMMARY: Section 602 of Public Law 102-585, the ``Veterans Health Care
Act of 1992'' enacted Section 340B of the Public Health Service Act
(PHS). Section 340B implements a drug pricing program by which
manufacturers who sell covered outpatient drugs to particular covered
entities listed in the statute must agree to charge a price that will
not exceed the amount determined under a statutory formula. The purpose
of this Final Notice is to inform interested parties of final
guidelines regarding the utilization of multiple contract pharmacies
and suggested contract pharmacy provisions, which had been previously
limited to the Alternative Methods Demonstration Project program.
FOR FURTHER INFORMATION CONTACT: Mr. Jimmy Mitchell, Director, Office
of Pharmacy Affairs (OPA), Healthcare Systems Bureau (HSB), Health
Resources and Services Administration (HRSA), 5600 Fishers Lane,
Parklawn Building, Room 10C-03, Rockville, Maryland 20857 or by
telephone through the Pharmacy Services Support Center at 1-800-628-
6297.
DATES: Effective Date: April 5, 2010.
SUPPLEMENTARY INFORMATION:
A. Background
Proposed guidelines for contract pharmacy services were announced
in the Federal Register at 72 FR 1540 on January 12, 2007. A comment
period of 60 days was established to allow interested parties to submit
comments. HRSA, HSB, acting through the OPA, received 32 comments
concerning the proposal.
In 1996, HRSA issued guidelines that permitted covered entities
participating in the 340B Drug Pricing Program to contract with a
pharmacy to provide services to the covered entity's patients (61 FR
43549, August 23, 1996). Those guidelines permitted a covered entity to
use a single point for pharmacy services, either an in-house pharmacy
or an
[[Page 10273]]
individual contract pharmacy. Since 2001, covered entities that have
wanted to use other types of arrangements, or to blend the method of
providing services (e.g. contract pharmacy to supplement an in-house
pharmacy) have needed to apply to the OPA for an Alternative Methods
Demonstration Project (AMDP) and secure approval in order to proceed.
It is important for all covered entities to keep in mind that use
of a contract pharmacy arrangement (single, multiple or AMDP) does not
lessen a covered entity's duty to ensure that the 340B program is being
administered in compliance with the statute and HRSA guidelines. The
covered entity has, and continues to bear, full responsibility and
accountability for compliance with all requirements to prevent
diversion of covered drugs to individuals other than patients of the
covered entity, and to prevent situations in which a drug is subject to
both the 340B discount and a Medicaid Rebate claim. Covered entities
will be permitted to use multiple pharmacy arrangements as long as they
comply with guidance developed to help ensure against diversion and
duplicate discounts and the policies set forth regarding patient
definition. Auditable records must be maintained to demonstrate
compliance with those requirements. Such records must be maintained for
as long as required by Federal, State and local law. Additionally,
compliance with 340B requirements and guidelines does not excuse
individual providers, covered entities, pharmacies, wholesale
distributors or manufacturers from adherence to all other local, State
or Federal requirements.
Covered entities should also be mindful that use of a contract
pharmacy is voluntary. Covered entities are not required to use
multiple contract pharmacies or any contract pharmacy at all. Each
covered entity should conduct its own business review and patient
assessment to determine what level of pharmacy services is needed, and
the appropriate delivery mechanism for those services.
We received many comments in support of the proposal. Many of these
came from covered entities that participate in 340B and highlighted how
their delivery of patient care would be enhanced with a multiple
contract pharmacy option. According to these comments, some patients
currently face transportation barriers or other obstacles that limit
their ability to fill their prescriptions. It would be a significant
benefit to patients to allow the use of more easily accessible,
multiple contract pharmacy arrangements by covered entities. This would
permit covered entities to more effectively utilize the 340B program
and create wider patient access by having more inclusive arrangements
in their communities which would benefit covered entities, pharmacies
and patients served.
Comments raised a number of issues: Audits; protecting against
diversion; network models; limits on the number or location of contract
pharmacies; and the need for model agreement provisions and
certification procedures. Also addressed was the potential impact on
manufacturers, pharmacies, covered entities and patients. Additional
comments challenged the sufficiency of the data used to justify the
changes, and questioned whether the proposed notice was in compliance
with the Administrative Procedure Act.
The following section presents a summary of all major comments,
grouped by subject, and a response to each grouping. All comments were
considered in developing this Final Notice, and changes were made
accordingly. Other changes were made to improve clarity and
readability.
B. Comments and Responses
(1) Administrative Procedure Act (APA) Compliance
Comment: The proposed revisions represent a substantive rulemaking
under the APA because they constitute new obligations and burdens on
manufacturers. They also create new rights for covered entities under
the law.
Response: HRSA disagrees. This guidance neither imposes additional
burdens upon manufacturers, nor creates any new rights for covered
entities under the law. HRSA has used interpretive guidance and
statements of policy to provide guidance since the inception of the
program and to create a working framework for its administration.
Contract pharmacy service guidelines have been considered by HRSA to be
``interpretative rules and statements of policy'' exempt from notice
and comment rulemaking under the APA. Nonetheless, HRSA has published
these guidelines in the Federal Register and provided a public comment
period to obtain input into guideline development. The present
guidelines used this same process. HRSA has considered all comments,
both Federal and public, in developing the Final Guidelines.
Comment: Eleven demonstration projects out of a total of 12,000
covered entities do not give HRSA enough data to expand the scope of
the contract pharmacy model. An additional demonstration project, with
not less than 100 sites, should be the next step to further evaluate
risks and benefits of the expanded model.
Response: At the time of publication of the proposed guidance there
had been 18 demonstration projects. HRSA realizes that only a small
percentage of covered entities have gone through the AMDP process. HRSA
is working with the data that exists, which was overwhelmingly
supportive of the guidelines. Although there have been a limited number
of AMDPs approved, some of the approved projects included a large
number of health care sites and contract pharmacies. The number of
participating health care sites exceeded 50 and the number of contract
pharmacy sites was over 170. The results of the AMDP are not the only
basis for issuing this guidance. The circumstances surrounding pharmacy
practice and the resources available to track transactions have changed
substantially over the past decade. The AMDP provides concrete examples
of the ability of covered entities to utilize multiple contract
pharmacies without sacrificing program integrity. Upon review of the
evidence and current circumstances, HRSA does not find sufficient basis
to continue limiting contract pharmacies to a single site. The
restriction has imposed its own costs by restricting the flexibility of
covered entities in meeting the needs of their patients. Furthermore,
pharmacy and inventory management processes are available that make
utilization of more than one pharmacy readily feasible for many covered
entities without increasing the risk of diversion. The use of multiple
contract pharmacies is not appropriate for all covered entities;
however, we do not find a blanket restriction on all covered entities
to be justified.
(2) Audits
Many commenters presented varying perspectives on the topic of
audits. Multiple comments from drug manufacturers argued that
manufacturers should be given the ability to audit covered entities
that use multiple pharmacy contracting services due to the heightened
risk of drug diversion and duplicate discounts. Other comments focused
on HRSA audit requirements, arguing that they should be identical to
the current standards required for the AMDP. Finally, some comments
supported not having an audit requirement, arguing that audits would be
burdensome and costly for the covered entities.
Comment: The audit requirements from the AMDP process should be
applied to multiple contract pharmacies. There is no evidence of
diversion and duplicate discounts
[[Page 10274]]
because of the audit requirements. Their elimination may lead to
increased diversion and duplicate discounts. Some commenters
recommended retaining the audit requirements for at least a few years
until a track record of compliance with multiple contract pharmacies
can be created. Audits should include a full compliance review of all
mandatory contract terms/requirements including implementation of
tracking system, patient status verification, and providing information
about other pharmacy options.
Response: Although HRSA does not believe that precisely the same
procedures are appropriate as utilized under the AMDP, HRSA agrees that
independent audits can play an important role in ensuring program
integrity. The guidelines have been revised to state that the covered
entity must have sufficient information to meet its obligation of
ensuring ongoing compliance and the recognition of any problem.
Furthermore, the guidelines have been revised to indicate that it is
the expectation of HRSA that covered entities will fulfill their
ongoing obligation by the utilization of independent audits. However,
HRSA leaves it up to covered entities to determine how to meet their
compliance responsibilities. The guidelines intentionally do not
specify the precise method, personnel or items for ensuring sufficient
information is obtained by the covered entity. As long as covered
entities comply with their obligations under the guidelines, HRSA
prefers to leave the method of compliance to the judgment of the
covered entities.
To the extent that any internal compliance activity or audit
performed by a covered entity indicates that there has been a violation
of 340B program requirements, it is HRSA's expectation that such
finding be disclosed to HRSA along with the covered entity's plan to
address the violation.
Comment: A copy of the audits conducted by covered entities should
be submitted to OPA. The results of such audit should be made available
to manufacturers.
Response: HRSA does not feel there is a need for the automatic
submission of audits conducted by covered entities. HRSA believes that
there are already appropriate safeguards in place. Covered entities are
required to maintain auditable records sufficient to demonstrate
continued compliance with 340B requirements; and, to the extent that a
situation warrants, HRSA will request copies of any internal compliance
documents of covered entities.
Comment: Covered entities should be required to conduct audits of
their contract pharmacies and be required to terminate the contract
with pharmacies found to be in violation.
Response: As noted earlier, HRSA agrees that audits can play an
important role in ensuring integrity, and that covered entities are
required to have sufficient information to ensure against diversion and
duplicate discounts. The extent to which an audit of the contract
pharmacy or other arrangement is necessary to satisfy that obligation
will depend upon the individual circumstances. Covered entities have
the responsibility to have agreements with contract pharmacies and
procedures in place sufficient to enable the covered entity to meet its
obligations under the law, including the prohibition on diversion and
duplicate discounts. While an audit capability and various grounds for
termination are terms that could be included in such contracts, there
is no requirement in the guidelines for such terms. However, covered
entities are reminded that they retain ultimate responsibility for
compliance with the 340B program. Covered entities may be well-served
by ensuring that compliance terms are included in their pharmacy
contracts. To the extent that covered entities uncover these problems,
the appropriate response is to report those problems to HRSA and ensure
that they are properly addressed.
Comment: Manufacturers should be permitted to audit covered
entities that use multiple contract pharmacy services. No reasonable
cause should be required, due to heightened risk of diversion.
Response: We do not agree that utilization of more than one
contract pharmacy creates automatic cause to suspect diversion. The
issue as to whether additional audits by an outside manufacturer are
permitted is addressed in the guidance published in the Federal
Register on that issue (61 FR 65406, December 12, 1996). To the extent
a manufacturer believes there is a reasonable basis to conclude that a
covered entity is in breach of program requirements, it may audit a
covered entity consistent with these guidelines. Additionally, HRSA has
developed a dispute resolution process to provide parties with an
informal mechanism to bring before the Department allegations of
behavior that are in violation of 340B. For further guidance on the
audit and dispute resolution process see 61 FR 65406 (December 12,
1996). As indicated in this guidance, covered entities and contract
pharmacies must retain auditable records of 340B covered drug
transactions sufficient to demonstrate compliance with the requirements
to ensure against diversion to non-patients and against duplicate
discounts.
Comment: It would be burdensome for covered entities to provide
reports and data for audits. It is unclear who would be required to
construct the actual components of the audit, what would be included,
and who would pay for it.
Response: HRSA would like to remind all 340B stakeholders that it
is an option for covered entities to voluntarily enter into contract
pharmacy arrangements. Each covered entity is encouraged to conduct its
own analysis of the costs and benefits of implementing or expanding
their pharmacy services. It is the responsibility of the covered entity
to ensure against diversion and duplicate discounts. Covered entities
may determine how to best meet that responsibility: By performing a
separate audit, including spot audits as part of pre-existing auditing
responsibilities, or via other mechanisms. HRSA believes that including
these issues as part of an independent audit is the best but not
necessarily the only approach to meet covered entities' ongoing
responsibility to know that their covered outpatient drugs are being
appropriately ordered and distributed to their patients.
(3) Diversion
Comment: The proposed guidelines do not adequately describe
safeguards that will combat drug diversion and duplicate discounts.
There should be more severe penalties for violations, especially
duplicate discounts. Reimbursement of any inappropriate discounts is
insufficient and will not deter bad behavior. A covered entity should
be excluded from 340B if it continues to use a pharmacy found to be in
violation of the program.
Response: HRSA believes that there are appropriate safeguards in
place, based on the parameters of the program. HRSA has the ability to
exclude covered entities that abuse the program. HRSA has no statutory
authority to assess additional penalties beyond the authority provided
in section 340B. However, to the extent HRSA is aware that an action by
a covered entity or contract pharmacy may be a violation of the law,
such cases are referred to appropriate authorities.
Comment: The proposed guidance appears to limit the need to
segregate records for easy accessibility by auditors rather than for
purposes related to ensuring there is no diversion. Is this intended,
or is segregation, virtual or
[[Page 10275]]
otherwise, still expected to be used by the contract pharmacy as a
method of showing that diversion has not occurred?
Response: All covered entities are required to have auditable
records sufficient to fully demonstrate compliance with all 340B
requirements. Any covered entity that chooses to utilize a contract
pharmacy must ensure that any such contract fully addresses that
requirement and has the responsibility to ensure that the contract is
actually performed and administered in compliance with those
requirements. Inventory and record segregation is one of many methods
that can be used to ensure compliance with the program guidelines. HRSA
does not intend to limit the methods covered entities may use in order
to remain in compliance with the guidelines. As noted previously,
covered entities and contract pharmacies must retain auditable records
of 340B covered drug transactions sufficient to demonstrate compliance
with the requirements to ensure against diversion to non-patients as
well as duplicate discounts.
Comment: Covered entities should be required to maintain and
provide to HRSA and manufacturers written policies and procedures for
preventing diversion and duplicate discounts in their contract pharmacy
services.
Response: The ultimate responsibility for compliance with all
aspects of the 340B program lies with each covered entity. The contract
arrangements between covered entities and outside pharmacies will have
various terms and procedures, which are acceptable as long as there are
no violations of the program. It is expected that all covered entities
will have written policies and procedures for preventing diversion and
duplicate discounts as part of their obligations to prevent diversion
and duplicate discounts. They are also required to maintain auditable
records. HRSA will not automatically require covered entities to submit
such policies and procedures for HRSA review.
(4) Contract Pharmacy Services Mechanism--Potential Alternatives to
Single Location/Single Pharmacy Model
Comment: HRSA should permit separate covered entity sites to enter
into one comprehensive agreement between the sites and a single
contract pharmacy, instead of requiring a separate agreement for each
site. Additionally, HRSA should permit a covered entity to enter into
one comprehensive agreement with a chain pharmacy binding on multiple
locations of the chain, instead of requiring a separate agreement for
each contract pharmacy site.
Response: Each covered entity retains its own responsibility for
compliance with the program. With respect to a covered entity with
multiple sites, HRSA agrees that a single covered entity may contract
for sites that are integral parts of the covered entity and for which
it has legal control of so long as all of the requirements are met in
the contract. This approach maintains and recognizes the central
responsibility of the covered entity. In the case of agreements with
``chain pharmacies,'' there appears to be potential for loss of
accountability without a clearly established relationship between the
actual pharmacy site and the covered entity. Covered entities are not
precluded from entering into agreements with chain pharmacies, however,
each participating pharmacy location must be listed on the contract and
comply with the requirements.
Comment: One comment suggested that HRSA should clarify the
definition of ``multiple.'' The commenter interprets ``multiple'' to
mean that an FQHC could contract with more than one pharmacy, including
more than one site of a chain pharmacy, more than one independent
pharmacy, or a combination of chain sites and independent pharmacies.
Additionally, the commenter interprets ``multiple'' to mean that a
covered entity with an in-house pharmacy could use any acceptable
contract pharmacy arrangement to supplement the in-house pharmacy. The
commenter encourages OPA to adopt this interpretation in the final
guidance.
Response: HRSA agrees with the comment about the meaning of
``multiple'' and believes that the Final Notice is clear with respect
to this meaning.
Comment: Does a covered entity that currently has an agreement with
only one contract pharmacy need to revise its agreement with that
pharmacy if the entity subsequently enters into agreements with
additional pharmacies?
Response: The covered entity may need to revise its existing
contract, depending on the terms that it contains. There is no
requirement in the guidelines to revise contracts, as long as they meet
the criteria outlined. All entities are encouraged to seek competent
counsel to assess their needs.
Comment: The proposed guidelines do not provide cautionary language
about possible negative results of implementing a multiple contract
pharmacy model. Some small pharmacies that currently contract with
covered entities may be hurt by implementation of the guidance due to
reduced business. More guidance and decision analysis tools should be
provided to guide the process of deciding whether to implement.
Response: HRSA notes that participation in any multiple contract
pharmacy models is completely voluntary. All stakeholders are
encouraged to conduct a full business analysis to determine whether to
implement a multiple contract pharmacy model before moving forward.
HRSA also provides free technical assistance for covered entities,
including assistance with business analysis, to help navigate these
issues. Ultimately, the decisions and responsibility for those
decisions lies with the covered entity.
(5) Network Models
Comment: Multiple commenters proposed that network arrangements
(i.e. arrangements involving a network of more than one covered entity)
should be permitted under the guidelines without prior approval from
HRSA. They argued that network arrangements would decrease the burden
on covered entities and contract pharmacies by simplifying the
contracting process and maintaining multiple inventory records. They
also made the point that networks would also encourage parties to
participate in 340B and therefore, expand access to eligible patients.
Response: HRSA understands the comments that a network model might
potentially ease the administrative burden for participants in some
cases. However, due to ongoing concerns about maintaining the integrity
of the program with such complex arrangements, at this time, we decline
to include network models in the guidelines without the added scrutiny
of the AMDP process. HRSA will reassess the appropriateness of the
utilization of networks outside the AMDP process as sufficient
experience with them is gained in the future.
Comment: Some comments urged HRSA not to permit networks of
multiple covered entities outside the framework of the AMDP process and
requested confirmation that under the new guidance the development of a
network of 340B covered entities will remain subject to the entire
process now applicable to the AMDPs.
Response: HRSA agrees that covered entity networks should remain
under the AMDP process, as indicated in the response to the prior
comment.
Comment: ``All covered entities participating'' language is
unclear. Does it mean a covered entity with multiple sites, a network
model, or a DSH would need to name each covered entity that
[[Page 10276]]
has an agreement with a pharmacy under contract with the covered
entity? If so, that would be burdensome on the entity, which would need
to research and identify other covered entities that may contract with
a particular pharmacy. What is the justification for requiring a
covered entity to specify the names and 340B ID numbers of other
participating covered entities?
Response: If a covered entity wants to use any alternative to a
single location/single pharmacy model, it must submit its name and 340B
identification number, and the names of all participating pharmacies to
HRSA. Network models will still need to go through the AMDP process.
The commenter is correct that the ``all covered entities
participating'' language is unclear, because such arrangements only
apply to a single covered entity. The language has been changed in
response to this comment.
Comment: The guidelines should limit the numbers and geographical
locations (not over State lines) for contract pharmacy relationships.
Perhaps contract pharmacies should only be added one at a time.
Monitoring various sites by the covered entity may be extremely
difficult unless safeguards are in place.
Response: HRSA understands the commenter's concerns, but at this
point, HRSA declines to limit the number of arrangements, as long as
each arrangement meets our guidelines. Each covered entity retains the
obligation to ensure its program remains compliant with the guidelines.
HRSA does not intend to prescribe the methods covered entities use to
run their programs or to ensure compliance at this time. Each covered
entity and contract pharmacy is responsible for ensuring that its
particular contracting arrangements and operations conform to the
requirements of all applicable Federal, State and local laws and
regulations.
(6) Model Agreement Provisions/Covered Entity Compliance Elements
In the final guidelines the phrase ``Model Agreement Provisions''
has been changed to ``Covered Entity Compliance Elements'' to better
reflect the purpose of the elements and to distinguish them from model
contract provisions.
Comment: Covered entities with multiple contract pharmacy
arrangements should have written contracts with each pharmacy,
including procedures to ensure against drug diversion and duplicate
discounts, to maintain records available for audit, and to meet all
other 340B requirements. Covered entities should submit these contracts
and procedures to HRSA.
Response: HRSA agrees in part, which is why the guidelines do
require a covered entity to have a contract that specifies all
participating pharmacy locations. Such contracts must include adequate
terms to ensure compliance with all aspects of the 340B program as
listed in the Covered Entity Compliance Elements. However, at this
time, HRSA does not have the need, or the resources to collect and
review each contract. The covered entity bears responsibility for
compliance with the program and will be held accountable in the event
of non-compliance.
Comment: HRSA should create a single list of model contract terms,
add suggested language on duplicate discount prohibition, and require
covered entities to certify that their contracts use these terms or
apply to HRSA for approval to use alternative terms.
Response: The Appendix of the guidelines does include a list of
suggested contract provisions. HRSA has included provisions necessary
to ensure that covered entities and contract pharmacies understand and
agree not to violate 340B provisions. Because of the wide diversity of
covered entities, it would be impossible to include provisions that
would respond to the needs of all covered entities.
Comment: Manufacturers should be allowed to request copies of the
contracts between the covered entities and contract pharmacies.
Response: Manufacturers are certainly permitted to request copies
of such contracts, however, HRSA declines to mandate that covered
entities must provide copies of contracts upon any request. In the
event a manufacturer demonstrates a reasonable need for the copy of a
contract and its request for a copy of the contract has been denied,
the manufacturer may ask OPA to obtain a copy. The suggested Covered
Entity Compliance Elements include providing a copy of the contract
pharmacy service agreement upon the request of the Office of Pharmacy
Affairs.
Comment: The Appendix provisions impose additional requirements not
discussed in Section (3) of the proposed guidance and the suggested
provisions in Section (3) do not appear in the Appendix. The Appendix
does not mention the 340B prohibition on duplicate discounts.
Response: The Suggested Contract Provisions, found in the Appendix
of the Guidelines, are not meant to be comprehensive, exhaustive, or
required. They offer a model format and sample provisions, but are not
intended to be used as the complete terms of the contract.
Comment: Covered entities should not be permitted to use
alternative mechanisms other than the model agreement provisions. The
use of alternatives would increase OPA's oversight responsibilities,
which may lead to different standards or the potential for abuse. A
commenter also cited GAO/OIG reports on lack of oversight of the
program to support his/her assertion that the model provisions should
be required.
Response: The Covered Entity Compliance Elements are not intended
to be required contract provisions. All covered entities must certify
that all of the elements have been addressed; however, HRSA gives the
covered entities the discretion to negotiate contract provisions
suitable to their individual circumstances and jurisdictions. The
various complexities of covered entities and the pharmacies with whom
they will contract led HRSA to permit flexibility between the parties
in designing their contract terms. HRSA does not intend to review
contracts. As under the previous guidelines, the covered entity is
ultimately responsible for assuring full compliance with 340B.
HRSA disagrees with the comment that recent reports by the GAO and
the OIG would support the creation of a standard uniform contract. HRSA
has worked diligently to implement the recommendations of both the GAO
and the OIG, and HRSA does not believe that dictating to covered
entities specific contract language that must be used in all contracts
regardless of individual circumstances would assist in those efforts at
this time.
(7) Miscellaneous Comments
Comment: Anti-kickback provisions may prohibit pharmacies from
offering Medication Therapy Management and Pharmacy by Mail activities
that would be beneficial to 340B and patients.
Response: Covered entities are not exempt from anti-kickback
provisions. Section 340B does not authorize HRSA to grant any
exceptions whether beneficial or not. It is recommended that covered
entities get competent professional legal advice when appropriate.
Comment: In section B(3)(c), the proposal states that the
manufacturer is not required to offer the 340B drug price if the
patient declines to use the contract pharmacy. If however, the
manufacturer does extend the 340B price in this case, please clarify
whether this extension sets a new best price for the drug.
[[Page 10277]]
Response: The 340B drug pricing program does not restrict the
prices that manufacturers voluntarily choose to offer to patients
outside the parameters of the program. Whether such actions serve to
set a new best price for a drug is beyond the scope of this guidance.
We encourage anyone with specific best price questions to consult with
the Centers for Medicare & Medicaid Services.
Comment: To prevent drug diversion, an additional contract
requirement should be added that the contract pharmacy may not fill or
refill a prescription using 340B medications until the covered entity
confirms that the individual is a patient of the entity at the time the
prescription is filled. There should also be an independent, annual
audit to review the covered entity's policies and procedures for
patient verification.
Response: The program guidelines for 340B make it clear that only
individuals who are patients of the covered entity are eligible for
drugs purchased under the program. Like all other program requirements,
responsibility for compliance lies with the covered entity, which must
structure agreements and systems appropriately to ensure that diversion
does not occur. Technical assistance may be available for help with
implementation and compliance for the 340B program, and maximizing the
value of comprehensive pharmacy services for their patients. However,
HRSA has chosen not to require time-of-services verification as
suggested in the comment.
Comment: Pharmacy records from contract pharmacies should be made
available to covered entities to ensure patient safety and continuity
of care.
Response: HRSA agrees that this might be beneficial for patient
care and encourages the parties to include such terms in their contract
agreements. However, this is a decision which will be left to the
contracting parties. In any case, the covered entity must have
sufficient records or direct access to records for the covered entity
to meet its responsibility to ensure compliance and to provide a
complete audit trail to verify that there is no diversion or duplicate
discounts.
Comment: HRSA should include in its final guidance and suggested
contract provisions, language to reinforce that all savings from the
340B program should remain with the covered entity. Without written
guidance, all savings will not be returned to the covered entity.
Response: HRSA agrees that the intent of the 340B program was to
permit the covered entities to stretch scarce Federal resources, and
that the benefit of the program was intended to accrue to the covered
entities. However, the covered entity is free to negotiate how it
chooses to use any such funds as it sees fit. For example, the covered
entity is free to choose to use those dollars to pay contract
pharmacies for their services or for extra services such as delivery.
C. Contract Pharmacy Services Mechanism
These final guidelines replace all previous 340B Program guidance
documents addressing non-network contract pharmacy services, including,
but not limited to, the ``Notice Regarding Section 602 of the Veterans
Health Care Act of 1992; Contract Pharmacy Services,'' (61 FR 43549)
and any individual correspondence issued by HRSA on the subject.
(1) Basic Compliance Issues in Utilization of Pharmacy Services
Contracts
A covered entity that wishes to utilize contract pharmacy services
to dispense section 340B outpatient drugs must have a written contract
in place between itself and a specified pharmacy. A single covered
entity that has more than one 340B eligible site at which it provides
health care may have individual contracts for each such site or include
multiple sites within a single pharmacy services contract. This
mechanism is designed to facilitate program participation for those
covered entities that do not have access to available or appropriate
``in-house'' pharmacy services, those covered entities that have access
to ``in-house'' pharmacy services but wish to supplement these
services; and covered entities that wish to utilize multiple contract
pharmacies to increase patient access to 340B drugs. The covered entity
has the responsibility to: Ensure against illegal diversion and
duplicate discounts; maintain readily auditable records; and meet all
other 340B Drug Pricing Program requirements (See: http://www.hrsa.gov/opa/introduction.htm). HRSA has provided essential covered entity
compliance elements below as guidance for the type of contractual
provisions expected in such agreements. Suggested contract provisions
are also in the Appendix. All covered entities utilizing a contract
pharmacy must comply with the certification requirements described in
(5) below.
(2) Potential Alternatives to Single Location/Single Pharmacy Model
In addition to contracting with a single pharmacy for each clinical
site, covered entities may pursue more complex arrangements that
include multiple pharmacies only if: (a) There is a written agreement
and procedures that meet the requirements outlined above in (1) between
the covered entity and each pharmacy; (b) the written agreement
includes, and fully addresses, all of the essential elements outlined
in (3) and (4) below and a full listing of all pharmacy locations that
may be utilized under that agreement; (c) the operation under the
contract continues to meet all 340B Drug Pricing Program requirements
and does not create diversion of covered drugs or duplicate discounts;
(d) the arrangements are one of the two following models either
individually or in combination: (i) The use of multiple contract
pharmacy service sites, and/or (ii) the utilization of a contract
pharmacy(ies) to supplement in-house pharmacy services (the use of
multiple contract pharmacy service sites refers to any arrangement
wherein a covered entity site seeks to provide drugs at 340B discounted
prices for its patients at more than one pharmacy location).
Supplementing in-house pharmacy services with a contract pharmacy
refers to any arrangement wherein a covered entity site purchases drugs
at 340B discounted prices for its patients at both an in-house pharmacy
and at least one additional contract pharmacy location; and (e) the
arrangement involves a single identifiable 340B covered entity and does
not include a network, or other similar arrangement, of more than one
covered entity unless specifically authorized in writing by HRSA
through an AMDP or by other official written authorization.
(3) Essential Covered Entity Compliance Elements
The following are essential elements to address in contract
pharmacy arrangements: (a) The covered entity will purchase the drug,
maintain title to the drug and assume responsibility for establishing
its price, pursuant to the terms of an HHS grant (if applicable) and
any applicable Federal, State and local laws.
A ``ship to, bill to'' procedure is used in which the covered
entity purchases the drug; the manufacturer/wholesaler must bill the
covered entity for the drug that it purchased, but ships the drug
directly to the contract pharmacy. See Section 1 of Appendix. In cases
where a covered entity has more than one site, it may choose between
having each site billed individually or designating a single covered
entity billing address for all 340B drug purchases.
(b) The agreement will specify the responsibility of the parties to
provide comprehensive pharmacy services (e.g.,
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dispensing, recordkeeping, drug utilization review, formulary
maintenance, patient profile, patient counseling, and medication
therapy management services and other clinical pharmacy services). Each
covered entity has the option of individually contracting for pharmacy
services with a pharmacy (ies) of its choice. Covered entities are not
limited to providing comprehensive pharmacy services to any particular
location and may choose to provide them at multiple locations and/or
``in-house.''
(c) The covered entity will inform the patient of his or her
freedom to choose a pharmacy provider. If the patient does not elect to
use the contracted service, the patient may obtain the prescription
from the covered entity and then obtain the drug(s) from the pharmacy
provider of his or her choice.
When a patient obtains a drug from a pharmacy other than a covered
entity's contract pharmacy or the covered entity's in-house pharmacy,
the manufacturer is not required to offer this drug at the 340B price.
(d) The contract pharmacy may provide other services to the covered
entity or its patients at the option of the covered entity (e.g., home
care, delivery, reimbursement services). Regardless of the services
provided by the contract pharmacy, access to 340B pricing will always
be restricted to patients of the covered entity.
(e) The contract pharmacy and the covered entity will adhere to all
Federal, State, and local laws and requirements.
Both the covered entity and the contract pharmacy are aware of the
potential for civil or criminal penalties if either violates Federal or
State law. [The Department reserves the right to take such action as
may be appropriate if it determines that such a violation has
occurred.]
(f) The contract pharmacy will provide the covered entity with
reports consistent with customary business practices (e.g., quarterly
billing statements, status reports of collections and receiving and
dispensing records). See Section 2 of Appendix.
(g) The contract pharmacy, with the assistance of the covered
entity, will establish and maintain a tracking system suitable to
prevent diversion of section 340B drugs to individuals who are not
patients of the covered entity. Customary business records may be used
for this purpose. The covered entity will establish a process for
periodic comparison of its prescribing records with the contract
pharmacy's dispensing records to detect potential irregularities. See
Section 3 of Appendix.
(h) The covered entity and the contract pharmacy will develop a
system to verify patient eligibility, as defined by HRSA guidelines.
The system should be subject to modification in the event of change in
such guidelines.
Both parties agree that they will not resell or transfer a drug
purchased at section 340B prices to an individual who is not a patient
of the covered entity. See 42 U.S.C. 256b(a)(5)(B). The covered entity
understands that it may be removed from the list of covered entities
because of its participation in drug diversion and no longer be
eligible for 340B pricing. See Section 4 of Appendix.
(i) Neither party will use drugs purchased under section 340B to
dispense Medicaid prescriptions, unless the covered entity, the
contract pharmacy and the State Medicaid agency have established an
arrangement to prevent duplicate discounts. Any such arrangement shall
be reported to the OPA, HRSA, by the covered entity.
(j) The covered entity and contract pharmacy will identify the
necessary information for the covered entity to meet its ongoing
responsibility of ensuring that the elements listed herein are being
complied with and establish mechanisms to ensure availability of that
information for periodic independent audits performed by the covered
entity.
(k) Both parties understand that they are subject to audits by
outside parties (by the Department and participating manufacturers) of
records that directly pertain to the entity's compliance with the drug
resale or transfer prohibition and the prohibition against duplicate
discounts. See 42 U.S.C. 256b(a)(5)(c).
The contract pharmacy will assure that all pertinent reimbursement
accounts and dispensing records, maintained by the pharmacy, will be
accessible separately from the pharmacy's own operations and will be
made available to the covered entity, HRSA, and the manufacturer in the
case of an audit. Such auditable records will be maintained for a
period of time that complies with all applicable Federal, State and
local requirements.
(l) Upon written request to the covered entity, a copy of the
contract pharmacy service agreement will be provided to the Office of
Pharmacy Affairs.
(4) Ongoing Responsibility of Covered Entity To Ensure Compliance
Covered entities are responsible for ensuring that the system of
distribution chosen fully meets statutory obligations of ensuring
against diversion to non-patients or creating a situation that results
in a State Medicaid Program seeking a rebate on a discounted drug. The
covered entity remains responsible at all times for the disposition of
covered outpatient drugs it purchases through a contract pharmacy.
Annual audits performed by an independent, outside auditor with
experience auditing pharmacies are expected, although the exact method
of ensuring compliance is left up to the covered entity. The covered
entity must have sufficient information to ensure it is meeting that
responsibility. Independent audits are particularly valuable where the
covered entity utilizes multiple pharmacy options. They should follow
standard business practices for audits, including audit trails provided
by the entity to the auditor, and use of standard reports. The precise
methodology utilized to ensure compliance and obtain the necessary
information is up to the covered entity given its particular
circumstances and, for example, might include spot audits where the
system in place permits. Drug diversion and duplicate discounts are a
significant concern of HRSA and all efforts to avoid these problems
should be well documented. In the event a covered entity determines
that drug diversion or duplicate discounts have occurred or that it is
otherwise unable to comply with its responsibility to reasonably ensure
compliance, then it must take immediate remedial action to assure
compliance and notify the OPA about such compliance problems and
actions taken to remedy those problems.
(5) Certification
Under section 340B, if a covered entity using contract pharmacy
services requests to purchase a covered outpatient drug from a
participating manufacturer, the statute directs the manufacturer to
sell the drug at a price not to exceed the statutory 340B discount
price. If the covered entity directs the drug shipment to its contract
pharmacy or pharmacies, the covered entity must comply, under any
distribution mechanism, with the statutory prohibition on drug
diversion and duplicate discounting.
To provide HRSA and manufacturers with assurance that the covered
entity has acted in a manner which limits the potential for drug
diversion, covered entities should submit to OPA a certification that
it has signed and has in effect an agreement with the contract pharmacy
or pharmacies that satisfies both (3) and (4) above (i.e. that the
contract(s) fully address the issues listed in (3) and that the covered
entity has a
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plan to meet its ongoing responsibilities to ensure compliance). The
names of those covered entities which submit a certification, or an
alternate mechanism approved by OPA, will be listed on the OPA Web site
for the convenience of participating drug manufacturers and wholesaler
distributors.
In addition, any covered entity that has opted to utilize any
pharmacy arrangement described in (2) must specify which arrangement or
combination of arrangements it is utilizing and the names of any
pharmacies participating when registering. Covered entities seeking to
materially change this arrangement that entail changes in the covered
entity database should notify OPA of any such proposed changes and be
aware that some changes may require advanced notice to manufacturers
and wholesalers as part of quarterly updates to the database.
In order to ensure accuracy, integrity and transparency, the OPA
may conduct a recertification process periodically (most likely
annually) where covered entities affirmatively certify as to their
ongoing compliance with 340B requirements. It is currently expected
that the annual process would include certification by a duly
authorized official: (1) That all information listed on the database
for that covered entity is complete, accurate, and correct; (2) that
the covered entity met the 340B eligibility requirements throughout the
prior year and continues to do so; (3) that any contract pharmacy
arrangement was actually performed in accordance with specified
requirements including, but not limited to, that the covered entity
obtained sufficient information from the contractor to ensure
compliance with applicable policy and legal requirements; and (4) the
methodology utilized to ensure compliance (e.g. through independent
audit or other mechanism).
(6) Anti-Kickback Statute
Contract pharmacies and covered entities should be aware of the
potential for civil or criminal penalties if the contract pharmacy
violates Federal or State law. In negotiating and executing a contract
pharmacy service agreement pursuant to these guidelines, contract
pharmacies and covered entities should be aware of and take into
consideration the provisions of the Medicare and Medicaid anti-kickback
statute, 42 U.S.C. 1320a-7b(b).
D. Appendix--Suggested Contract Provisions
The following suggested contract provisions are included for
illustrative purposes and are not intended to be comprehensive,
exhaustive or required. They offer sample provisions for
consideration, but are not intended to be used as the complete
terms of the contract. Given the variances among many jurisdictions and
among the numerous types of covered entities, HRSA has decided at this
time not to include a complete model contract in this notice.
(1) ``The covered entity owns covered drugs and arranges to be
billed directly for such drugs. The pharmacy will compare all shipments
received to the orders and inform the covered entity of any discrepancy
within five (5) business days of receipt. The covered entity will make
timely payments for such drugs delivered to the pharmacy.''
(2) ``The covered entity will verify, using the contract pharmacy's
(readily retrievable) customary business records, that a tracking
system exists which will ensure that drugs purchased under the 340B
Drug Pricing Program are not diverted to individuals who are not
patients of the covered entity. Such records can include: Prescription
files, velocity reports, and records of ordering and receipt. These
records will be maintained for the period of time required by State law
and regulations.''
(3) ``Prior to the contract pharmacy providing pharmacy services
pursuant to this agreement, the covered entity will have the
opportunity, upon reasonable notice and during business hours, to
examine the tracking system. For example, such a tracking system may
include quarterly sample comparisons of eligible patient prescriptions
to the dispensing records and a six (6) month comparison of 340B drug
purchasing and dispensing records as is routinely done in other
reconciliation procedures. The contract pharmacy will permit the
covered entity or its duly authorized representatives to have
reasonable access to contract pharmacy's facilities and records during
the term of this agreement in order to make periodic checks regarding
the efficacy of such tracking systems. The contract pharmacy agrees to
make any and all adjustments to the tracking system which the covered
entity advises are reasonably necessary to prevent diversion of covered
drugs to individuals who are not patients of the covered entity.''
(4) ``The pharmacy will dispense covered drugs only in the
following circumstances: (a) Upon presentation of a prescription
bearing the covered entity's name, the eligible patient's name, a
designation that the patient is an eligible patient of the covered
entity, and the signature of a legally qualified health care provider
affiliated with the covered entity; or (b) receipt of a prescription
ordered by telephone or other means of electronic transmission that is
permitted by State or local law on behalf of an eligible patient by a
legally qualified health care provider affiliated with the covered
entity who states that the prescription is for an eligible patient. The
covered entity will furnish a list to the pharmacy of all such
qualified health care prescribers and will update the list of
prescribers to reflect any changes. If a contract pharmacy is found to
have violated the drug diversion prohibition, the contract pharmacy
will pay the covered entity the amount of the discount in question so
that the covered entity can reimburse the manufacturer.''
Dated: March 2, 2010.
Mary K. Wakefield,
Administrator.
[FR Doc. 2010-4755 Filed 3-4-10; 8:45 am]
BILLING CODE 4165-15-P