“Managing a 340B Pharmacy to Optimize Savings in Tough Economic Times”

1. “Managing a 340B Pharmacy to Optimize Savings in Tough Economic Times” 13th Annual Pharmacy Purchasing Network Conference Tuesday August 18, 2009 – 10:50am – 11:50am Las Vegas, Nevada Presented by:John Barnes

2. Overview/ Objectives • 340B Drug Program refresher • Health Care Reform • Stimulus package • 340B Health Care Reform Legislation • 340B Program Improvement & Integrity Act • Patient definition • Contract Pharmacy • Apexus 340B prime vendor program (PVP) • How pharmacy buyers access informational tools and resources for cost containment strategies • Steps pharmacy buyers take to optimize the PVP

3. 340B Program Administration • The 340B Program Team: • HRSA’s Office of Pharmacy Affairs • Pharmacy Services Support Center (PSSC/PharmTA) • 340B PVP Prime Vendor Program (Apexus Inc.)

4. 340B Eligible Covered Entities • Disproportionate Share Hospitals (DSH) • HRSA Grantees: • Federally Qualified Health Centers (FQHC) • Hemophilia Treatment Centers • Ryan White Programs (HIV programs) • Sexually Transmitted Disease programs • Tuberculosis Programs • Title X Family Planning Clinics • Urban 638 Tribal Programs

5. PVP Participants by Entity Type (as of July 2009– 9,178 participants)

6. What Drugs Are Covered Under 340B? Covered drugs: • Outpatient Prescription drugs • Over-the-counter drugs (accompanied by prescription) • Clinic administered drugs within eligible facilities Non-covered drugs: • Vaccines * • In-patient drugs *Aggressive discounts negotiated by the Prime Vendor Program for vaccines and other non-covered products

7. How 340B Pricing Works • Statutory pricing calculation based on a formula reported by drug manufacturers to CMS The 340B Price… • Reflects activity of retail pricing 6 months in past • Is the lower of Medicaid Best or AMP minus 15.1% on brands • Formula: URA = the greater of AMP x 15.1% or AMP – BP • For generics and prescribed OTC drugs, is AMP minus 11.0% • Formula: URA = AMP x 11% • May contain additional discounts if price of drug has increased faster than the rate of inflation (CPI penalty)

8. How 340B Pricing Works • Recalculates on a calendar quarter basis • Is considered confidential • Is a “Ceiling Price” and deeper discounts can be negotiated through the 340B Prime Vendor program or independently

9. 340B Restrictions & Prohibitions • Duplicate Discount Rule • Final guidelines issued August 23,1996 (61 FR 43549) • Discounts are upfront. No backend rebates • Bill Medicaid acquisition cost plus dispensing fee • No billing restrictions for non-Medicaid or line item billed to Medicaid • Medicaid Carve-out Option • Prohibits the sale or dispensing of 340B-priced drugs to persons who are not patients of a covered entity • Prohibits resale or transfer to non-340B entity • Subject to audit by the manufacturer or the Secretary • Does not require separate inventories

10. Patient Qualifications for DSH Entity meets definition of a “patient” (61 FR 55156) if the following criteria are met: • The covered entity must maintain records of health care services for the individual; • The individual must receive care from a health care professional who is employed by or under contract or other arrangements with the covered entity • Responsibility for the care provided must remain with the covered entity

11. DSH Eligible Hospital Contract Options Hospital GPO/Inpatient 340B/Outpatient • Eligible Contracts: • GPO Contract • DSH Inpt Contract • Individual Contract • Eligible Contracts: • PHS Contract • PVP Contract • Individual Contract

12. Types of 340B Pharmacies • In-house pharmacy vs. Contract pharmacy • In-House: no limits to number in-house • Contract Pharmacy: • One or multiple pharmacies (thru alternative methods demonstration projects (AMDP) • Ship To/ Bill To arrangement • Negotiate dispensing fee http://pssc.aphanet.org/about/contractpharmacy.htm

13. HealthCare Reform • President Obama’s healthcare plan has three broad objectives: • To reduce costs so that the system will “work for people and businesses – not just insurance companies” • To provide “affordable, accessible coverage options for all” • To promote prevention and strengthen public health

14. Stimulus Package: Money for 340B Hospitals & Health Centers Federal stimulus legislation enacted in February 2009 provides: • $268.8M increase in Medicaid DSH payments in FY2009 and 2010 • Biggest increases go to NY, CA, TX, NJ, PA, MO • Community health centers get $2B in total funding • $500M for increased demand in services • $1.5M for infrastructure improvements and new centers • Health Information Technology • Incentive payments to hospitals and providers participating in Medicare and Medicaid for adoption of electronic health records and e-prescribing, beginning in 2011

15. Key Players in 340B Health Care Reform - Allies Sen. Jeff Bingaman (D-NM) Sen. John Thune (R-SD) Rep. Bobby Rush (D-IL) Jo Ann Emerson (R-MO) Bart Stupak (D-MI)

16. Features of House & Senate 340B Legislation • Extends 340B discounts to the inpatient setting • Expands list of covered entities eligible for 340B discounts • Clarifies the status of children’s hospitals as 340B covered entities • Adds potential new covered entities: • Critical access hospitals (CAHs) • Sole community hospitals (SCHs) • Rural referral centers (RRCs) • Medicare-dependent hospitals • Maternal & child health centers • Substance abuse and mental health centers

17. Features of House & Senate 340B Legislation • Integrity Measures Recommended by OIG • Enhanced ceiling price transparency • Improved accuracy of data on OPA website • Expanded government oversight and enforcement authority over manufacturers and covered entities • Defined administrative procedures to address overcharges and pricing disputes • Expansion of Medicaid Rebate Program • Modifies AMP – increase Medicaid rebate from 15.1% to 23% • Expands Medicaid Rebate Program to 6 million dual eligible's • Extends rebate program to Medicaid managed care plans

18. Federal Register Notice – Patient Definition (72 FR 1543) Clarifies previous FR Notice of October 1996 A clear and enforceable definition to help ensure against diversion and support 340B program integrity Hospitals, CHC’s, and other 340B providers unhappy with proposal Turns 3 step process into 8 step process Could limit 340B facilities’ ability to provide care Status: comment period closed 03/13/07 – awaiting final publication

19. Federal Register Notice – Contract Pharmacy (72 FR 1540) Updates previous FR Notice of August 1996 Builds upon experience with Demonstration Projects Incorporates multiple pharmacies as standard option Network model arrangements would still requires Alternative Methods Demonstration Projects (AMDPs) approval Status: comment period closed 03/13/07 – awaiting final publication

20. Apexus – HRSA’s 340B Prime Vendor • Unique federal purchasing program (public-private partnership) • Voluntary program for suppliers and 340b covered entities • Mission - To improve access to affordable medications for all 340B covered entities by: • Lowering participants’ supply costs by expanding the current PVP portfolio of sub-340B priced products • Providing covered entities with access to efficient drug distribution solutions to meet their patients’ needs • Providing access to other value added products and services meeting covered entities’ unique needs

21. Benefits of PVP to Covered Entities • No risk or cost to participate • No change of distributor required • Easy access to 340B sub-ceiling pricing exclusive to participants • Longer term contracts • Monitoring of distributors to ensure appropriate charges for PVP contract items • Resources available on secure website • Pricing transparency: 340B ceiling price verification & comprehensive sub-ceiling catalog • Reports to help optimize spend

22. Benefits to Covered Entities – cont’d • E-mailed monthly to all participants – includes: • Special Announcements • Contract Highlights • Industry News • FAQ’s • Drug Shortages/Recalls • Supplier Profile • Webinars – • CEO/CFO, • Buyers, FPC • Customized Surveys

24. Benefits to Covered Entities – cont’d

25. The Role of the Buyer/ Purchasing Agent • Buyer significantly impacts the budget • First to notice pricing fluctuations • Monitors wholesaler pricing • Validate wholesalers 340B & PVP pricing • Contact wholesaler immediately with discrepancies • Utilize a formulary to contain costs • Choose the most cost effective selection • Read the Flash –– top 200 changes

26. Cost Containment and Price Validation Tools

28. Example of Best Buy Report by Therapeutic Class

29. Example of Best Buys by Chemical Compound Report

30. Best Price OTC Products Report

31. Summary of Cost Containment Reports • List of 20,000 + NDC’s of 340B selling prices for auditing wholesaler • Therapeutic Class Best Buy • Best Buy report by chemical compound • Best Price Over-the-Counter report

32. Other Value Added Products and Services for Participants • Pharmacy computer systems • 340B virtual inventory tracking/split billing systems • Diabetic meters/strips • Biologicals/vaccines • Pharmacy technology / automation • Prescription vials, labels, printer cartridges • PBM services • Other

33. Steps to Optimize PVP Pricing • Ensure Pharmacy procurement team and management understand the 340B and PVP • Verify selected distributor has loaded PVP contract file within 340B account(s) • Achieve instant savings for products on PVP contract portfolio • Review generic alternatives on PVP contract portfolio and switch to lower cost suppliers • Review other PVP contracted items requiring therapeutic conversion with providers • Review other opportunities for savings such as technology, and pharmacy supplies

34. Contact Information Office of Pharmacy Affairs Phone: 301-594-4353 or 1-800-628-6297 Email: opastaff@hrsa.gov Web: www.hrsa.gov/opa HRSA Pharmacy Services Support Center(APhA) Phone: 1-800-628-6297 Email: lscholz@aphanet.org Web: http://pssc.aphanet.org Prime Vendor Program (Apexus) Phone:1-888-340-2787 Email: jbarnes@340bpvp.com Web: http://www.340bpvp.com

35. Discussion & Questions