March 22, 2010 - The Health Resources and Services Administration's (HRSA) long-awaited multiple contract pharmacy guidelines will provide 340B covered entities with a long-desired way of enhancing pharmacy care for outpatients. But the rules also will come with many unexpected new strings attached to guard against drug diversion and duplicate discounts.
Those safeguards, however, aren't as tough as those sought by the drug industry, which had argued that expanding the number of outlets for 340B-priced drugs would be an invitation for abuse.
The guidelines, which were released on March 5 and take effect on April 5, "create an exciting opportunity for covered entities to fill more of their patient prescriptions using 340B drugs, thereby expanding their savings," says Bill von Oehsen, president and general counsel of Safety Net Hospitals for Pharmaceutical Access. "But with that opportunity comes a heightened responsibility to implement safeguards against abuse and to verify that such safeguards are effective."
"I think it is significant that [the Office of Pharmacy Affairs] emphasized repeatedly and specifically in the notice the obligations on covered entities to engage in meaningful compliance and audit efforts," adds Alice Valder Curran, a partner at the law firm Hogan and Hartson who has represented numerous pharmaceutical manufacturers. "While that should be encouraging to manufacturers, which still may remain concerned regarding the risks of diversion and double-dipping, we will just have to wait and see whether and how the covered entities take the necessary steps to satisfy those requirements."
New Watchdog Requirements Imposed
The guidelines will allow covered entities with an in-house pharmacy to contract with one or more pharmacies. Previous rules barred such entities from any such contracting. Entities lacking an in-house pharmacy were prevented from contracting with more than one pharmacy. About 20 multiple contracting experiments have been allowed under HRSA's alternative methods demonstration project (AMDP) program, typically aimed at helping patients fill their prescriptions without having to travel long distances.
HRSA's guidelines, however, also impose new audit and compliance certification requirements on covered entities. For example, they will be required to take a far more active role than before to ensure pharmacy compliance with rules against diversion and duplicate discounts and to report pharmacy violations immediately upon discovery. In addition, they might have to keep records now for as long as 10 years.
Covered entities were disappointed that the guidelines failed to address whether pharmacy benefit managers and other third-party entities could set up networks of pharmacies and contract with 340B providers to use them. Nor do the guidelines discuss the agency's new interpretations of what can be a covered entity "site" capable of contracting with a pharmacy, or pharmacy sharing arrangements among sites of a given covered entity.
The guidelines do permit a covered entity to contract with a pharmacy chain and not specific stores, as long as the contract lists each chain store expected to dispense the covered entities' drugs. The guidelines, however, do not define "chain," leaving some uncertainty as to whether a covered entity may negotiate with a chain of independent pharmacy franchises such as EPIC and Medicine Shoppe.
Independent Audits are "an Expectation"
When HRSA published its first draft of the guidelines in January 2007, it proposed to eliminate the annual audit requirement it had imposed as a condition for approval of multiple contract pharmacy AMDPs. The agency noted there had been no evidence of drug diversion under any of those projects.
The final guidelines, however, state that covered entities must obtain sufficient information to ensure that contract pharmacies comply with prohibitions against diversion and duplicate discounts. While stopping short of a mandate, HRSA says it has "an expectation" that covered entities will do so through independent audits. It does not, however, dictate the methods 340B participants should use nor does it require them to submit their completed audits.
HRSA is also requiring covered entities to inform it of all noncompliance findings it makes internally and to disclose its corrective plans. Covered entities say having to report all such infractions, without regard to magnitude, will be potentially burdensome.
The guidelines additionally require covered entities to keep records documenting contract pharmacies' compliance with anti-diversion and duplicate-discount prohibitions for "as long as required under federal, state and local law." Some experts believe this could be read to mean for as long as 10 years, as is the case under federal anti-fraud laws. The previous guidelines didn't state how long such records had to be kept.
OPA Moves Closer to Annual Covered Entity Certification
A passage in the Health Resources and Services Administration's (HRSA) new contract pharmacy guidelines suggests that the Office of Pharmacy Affairs (OPA) is moving forward with longstanding plans to require all covered entities to certify once a year that they are in compliance with overall 340B requirements.
The guidelines will require covered entities with contract pharmacy arrangements to attest to the OPA annually that they are meeting all their responsibilities under the new rules.
HRSA adds, however, that OPA "may" conduct a recertification process annually "where covered entities affirmatively certify as to their ongoing compliance with 340B requirements." The passage does not expressly state that this possible new recertification process would apply only to those covered entities that use contract pharmacies.
In an email to The Monitor, OPA Director Jimmy Mitchell explained that at present the agency is "only recertifying those entities for which we are statutorily required to annually verify their status."
"We have for some time stated publicly that should resources and capability become adequate, we intend to verify all covered entity data," he added.
Under HRSA's new guidelines, covered entities with contract pharmacies will be required to verify:
Entities that submit the annual recertification will be listed on the OPA Web site.
HRSA turned down drug manufacturers' requests to cap the number of pharmacies with which covered entities may contract and to require contract pharmacies to verify that an individual is a "current" covered entity patient when filling a prescription. In a break with its old guidelines, HRSA will no longer require covered entities to provide contract pharmacy agreements to manufacturers upon request.
12 "Essential" Contract Elements
HRSA's final guidelines specify 12 "essential elements" that all contract pharmacy arrangements must address, most notably on the prevention of diversion and duplicate discounts. But these are not to be construed as required contract provisions, it says. Covered entities, the agency says, have "the discretion to negotiate contract provisions suitable to their individual circumstances and jurisdictions." But for the first time, however, HRSA is requiring contract pharmacy agreements to specify the information covered entities need to meet their compliance duties and the means for ensuring that the information will be available.
Contract pharmacy agreements also will have to spell out the parties' responsibilities to provide comprehensive pharmacy services such as dispensing, record-keeping and patient counseling. In a change from previous policy, covered entities will now be allowed to provide such services either in-house or at multiple locations.
HRSA rejected requests that covered entities be allowed to band together to serve a common patient population without the agency's prior approval to make the contracting process more efficient. Such arrangements will continue to need prior authorization as an AMDP. However, those specific multiple contract pharmacy arrangements previously authorized as AMDPs will now be allowed to operate outside the AMDP program.
Covered entities say the final guidelines left many of their questions unanswered. For example, it is unclear to them whether existing pharmacy contracts will have to be amended and, if they must be, how much time they will have to get the job done after the guidelines take effect.
OPA has added a Web page on the guidelines to its Web site that includes a list of frequently asked questions. The Pharmacy Services Support Center (PSSC) has also published a "one-pager" on the rules.
PSSC and HRSA also will co-host a webinar on the guidelines on Monday, March 29 at 1 p.m. EDT. Details will be posted here as they become available.