As required in Section 340B of the Public Health Service Act, pharmaceutical manufacturers participating in Medicaid must sell outpatient drugs at discounted prices to healthcare organizations that care for many uninsured and low-income patients.
Since the early 1990s, the 340B Drug Pricing Program has provided financial help to hospitals and healthcare organizations serving vulnerable communities to manage rising prescription drug costs. This program is widely utilized across the healthcare industry; according to the Government Accountability Office (GAO), 40% of all hospitals in the US participate in the 340B program. The six main types of covered entities are community health centers (CHCs), children’s hospitals, hemophilia treatment centers, critical access hospitals (CAHs), sole community hospitals (SCHs), rural referral centers (RRCs), and public and nonprofit disproportionate share hospitals (DSH). There are also ten categories of non-hospital covered entities that are eligible, based on receiving federal funding.
For their part, the healthcare organizations participating in this program must continue to meet program requirements as laid out by the Health Resources and Services Administration (HRSA) if they want to purchase drugs at the 340B price. If you’re a 340B covered entity, there are a few things you must do to keep benefiting from discounted drug prices:
- Keeping the information you have on file with the Office of Pharmacy Affairs (OPA) accurate and up to date. That means reporting new outpatient facilities or contract pharmacies.
- Annually recertifying eligibility.
- Preventing diversion of 340B drugs to ineligible patients.
- Reporting how they bill Medicaid fee-for-service drugs on the Medicaid Exclusion File. (Manufacturers are prohibited from providing a discounted 340B price and a Medicaid drug rebate for the same drug, so covered entities must show how they’re billing Medicaid drugs.)
- Be prepared for program audits, maintaining auditable records, and documenting compliance with 340B Program requirements.
It’s that last point that we’re going to talk about in depth. 340B audits review a covered entity’s compliance with respect to eligibility status, including compliance with the Group Purchasing Organization (GPO) prohibition as applicable, duplicate discounts, and diversion. If you haven’t already experienced one firsthand, you’ll learn quickly that audits are a very involved process. A pharmacy audit checklist will help organize, ensure completeness, and simplify it.
The Importance of Audits
The backbone of the 340B Program is program integrity and compliance. HRSA requires that all covered entities maintain accurate records documenting compliance with all 340B Program requirements. While we all hope that everyone is complying with program rules, audits are necessary to prove due diligence. For that reason, both internal and external audits are an important component of program integrity.
In the case of external audits, covered entities can be audited by HRSA or manufacturers (at the discretion of HRSA). Anyone who is found to be noncompliant with 340B Program requirements may be liable to manufacturers for refunds of the discounts they have obtained or be removed from the program entirely.
In addition to external audits, internal audits are also a valuable practice for pharmacies, hospitals, and healthcare organizations. These self-assessments prepare you in the event of an external audit and will help you catch issues before they come to the attention of HRSA or manufacturers.
Your Pharmacy Audit Checklist
A pharmacy audit checklist is an absolute imperative to ensure that your audits stay on track. Whether you’re facing an internal or external audit, the process will be similar and you can follow the same checklist.
Identify key personnel: In the event you’re selected for an external audit, auditors will want to meet with key covered entity management to discuss expectations for the onsite audit. In an internal audit, these will also be the personnel setting and communicating audit procedures to the organization, among the most important of those will be setting a time frame.
Gather data on your administration of the 340B Program: For external audits, auditors will request specified documents, including policies, procedures, and internal controls. Much in the same way, you’ll want to review all your own 340B policies and procedures, any relevant policies of vendor software, copies of any contracts with state or local governments, your 340B contract(s) with pharmacies and/or other 340B-service provider(s), and the most recently filed Medicare Cost Report Worksheets.
Select drug transaction sample: Assessing sample transactions is a key method used to determine your compliance with the 340B Pricing Program. During an external audit, 340B drug transaction records will be tested on a sample basis, so in an internal audit, you’ll want to do the same. Make sure that each 340B service area is included in the sample, and that you’re pulling samples from a six month continuous time frame within the prior year. You’ll also want to select two samples containing around 25 transactions each; one should cover high cost drugs and the other should cover Medicaid transactions.
Verify your eligibility: Because you must recertify every year for the 340B Pricing Program, a vital part of your internal audit — and something external auditors will be reviewing — is your program eligibility. That means ensuring all of your information (Medicaid billing information, points of contact, designation as one of the eligible health centers, etc.) is all up to date and accurate. A key requirement of the program, maintaining internal controls that prevent diversion and duplicate discounts, should also be verified.
Perform assessment of data: 340B Program compliance should be assessed at all facilities and contract pharmacies. During assessment, the relevant policies and procedures should be reviewed, paying close attention to how they are operationalized.
Interview all personnel participating in the audit: Depending on the structure of your organization (DSH, RRC, CAH, etc.), interview questions may vary slightly, but in general, financial managers, pharmacy directors, purchasing coordinators, and administrators should be asked to explain 340B compliance controls, how drugs are billed, and specific procedures followed. These questions are standard from audit to audit, and for internal audits, an audit assessment software is preferred.
Test 340B drug transaction records: Whether you or auditors are testing transaction samples, the goal is to ensure that healthcare was provided by a professional with a demonstrated relationship with the covered entity — whether through employment, contract, or other records — and that drugs were not diverted to ineligible patients or that a duplicate discount was sought.
Make corrections: After you’ve completed an internal audit, the next logical step is to correct any area not meeting the assessment criteria. This is your opportunity to address problems before they come up in an external audit. In the case of external audits, OPA issues a final report to the covered entity, and if they find any problems, they’ll request a corrective action plan (CAP) from you.
Maintain an audit schedule (for internal audits): To prove your due diligence and consistently demonstrate program integrity, it’s important to repeat your pharmacy audit checklist at regular intervals and maintain records of all self-assessment activity.
340B Self Assessments are Easier With ComplianceBridge
Audits are a central component to participating in the 340B Drug Pricing Program. We understand that the entire process, from start to finish, can be incredibly overwhelming, and one area that becomes particularly time consuming is the personnel interviews. You have to schedule a time to interview all participants, conduct the interviews, record the answers, and then analyze the results to identify areas of weak compliance. So much already goes into running a health center — you shouldn’t have to waste time and energy developing and maintaining this process as well.
A more sustainable, affordable, option for you is ComplianceBridge’s auditing software. Easily create question sets, ask conditional questions, and weight each question differently to aid in analysis. Send questions out to exactly who needs them, and watch in real-time as results come in. Reminders will ensure everyone completes their interview questions on schedule.
Analyze responses broadly or drill down to specific respondents and questions to see how each participant answered. Results are intuitively displayed in ComplianceBridge, and you have the ability to export them for further analysis in other applications and use in audit reports. The best part is that ComplianceBridge will save a record of all of your auditing efforts, so when external auditors come knocking, you’ll be prepared.
Your 340B pharmacy audit checklist may seem daunting, but when you employ the right tools and software, you’ll be pleasantly surprised how easy ensuring program integrity can be. To our auditing platform in action, request a demo with ComplianceBridge today.
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