On July 18, 2017, just days after CMS went public with its proposal to reduce Medicare Part B reimbursement to certain 340B covered entities, Congress held its first hearing on 340B Program Oversight since March 2015.  A common thread ran through the testimony of the three testifying witnesses:  Erin Bliss, Assistant Inspector General with HHS-OIG; Dr. Debra Draper, Director of Health Care at the GAO; and, Captain Krista Pedley, Director of the Office of Pharmacy Affairs at HRSA:  Congress needs to legislatively grant HRSA more administrative authority over the 340B Drug Discount Program.  Continue Reading Witnesses at Congressional Hearing on 340B Urge Congress To Give HRSA Broader Regulatory Authority

Despite the efforts of the Department of Health and Human Services (HHS) to combat fraud and contain costs in federal healthcare programs, Medicare’s fee-for-service program (Parts A and B)  and Medicaid were two of the top three culprits for the billions reported to have been improperly paid by the federal government in fiscal year 2014.  Last week, the Government Accountability Office (GAO) published a report summarizing testimony given by the U.S. Comptroller General, Gene L. Dodaro, before the U.S. Senate Committee on the Budget (GAO Report) regarding government efficiency and effectiveness.   In this Report, the GAO revealed that for the first time in four years, the estimate of government-wide improper payments had increased significantly, rising from $105.8 billion in 2013 to almost $125 billion in benefits paid to ineligible recipients in 2014.  Nearly $78 billion of the total was accounted for by improper payments by the Medicare program ($60 billion) and the Medicaid program (nearly $17.5 billion).

The GAO reported that while the Centers for Medicare & Medicaid Services (CMS) demonstrated strong commitment to reducing improper payments, the rate of improper payments remained too high.  The Report made a number of suggestions to CMS for addressing this problem, including exercising its authority (provided under the Affordable Care Act) to strengthen provider and supplier enrollment provisions and performing certain pre-payment and post-payment claims reviews (as previously recommended by the GAO).  For example, the GAO suggested that CMS implement more robust enrollment requirements, such as requiring surety bonds for certain providers, which would make providers more likely to uphold the “promises” made at enrollment.  GAO also emphasized the need for CMS to improve pre-payment claims review and cited an example of using automated edits that can assess the quantity of services provided to a beneficiary by the same provider on the same day, which would more effectively detect fraudulent claims by preventing providers from billing for multiple claims to prevent a claim denial. The GAO also recommended that CMS adapt its systems to allow social security numbers to be removed from Medicare cards. Removal of social security numbers would make this information less accessible to others and therefore help decrease the likelihood of identity theft.

With respect to Medicaid, the GAO noted that third party liability issues remain a major problem for states and recommended that CMS better monitor and share information with states regarding these issues.  The GAO suggested that CMS strengthen states’ program integrity activities by requiring audits. The reporting of key data could also help improve the accuracy of audits and payment recovery.  Finally, the Report emphasized the need for HHS to tighten spending limits on Medicaid demonstrations.  By improving the review and approval process for determining spend limits on such demonstrations, the GAO predicted that HHS could save the federal government another $21 billion over 5 years.

In the face of such a high number of improper payments and pressure to curb further growth, this Report may serve as a useful roadmap of HHS’s enforcement and cost-containment priorities in the coming fiscal year.  Click here for the full Report.

Mother Nature claimed another victim this week.  The U.S. House of Representatives Energy and Commerce Subcommittee on Health was scheduled to hold a hearing on March 5, 2015 – Examining the 340B Drug Pricing Program But with another winter storm aimed at Washington, the hearing was cancelled.  The cancellation came after witnesses had submitted their written testimony to subcommittee staff.

The submissions came from Diana Espinosa, Deputy Administer of HRSA; Debbie Draper, Director of Health Care at the GAO; and Anne Maxwell, Assistant Inspector General for Evaluations and Inspections, HHS-OIG. Several common themes appeared in the HRSA and GAO testimony:

  1. The explosive growth in the 340B program continues. In July 2011 there were 7,000 340B contract pharmacies; as of January 2015 there were 36,000.  In 2005 there were 591 hospitals enrolled as participating covered entities; in 2011 there were 1,673, and as of January 2015 there were 2,170.  HRSA estimates that as of FY 2013, $7.5 billion was spent by covered entities to purchase 340B drugs, representing a savings of $3.8 billion.
  2. In response to the GAO’s 2011 report critical of HRSA’s 340B oversight, HRSA implemented two of GAO’s recommendations: (i) instituting audits of covered entities, and (ii) clarifying non-discrimination policies. But two other GAO recommendations: (i) clarifying hospital eligibility requirements, and (ii) clarifying the definition of a 340B “patient” have yet to be acted on by HRSA.
  3. HRSA planned to address the two unimplemented recommendations in an omnibus regulation that it had intended to issue in June 2014. But confirming prior speculation, the HRSA testimony admits that last summer’s federal court ruling striking HRSA’s orphan drug rule is what caused HRSA to pull back the omnibus regulation and reexamine its regulatory authority.

Continue Reading Mother Nature Axes 340B Hearing, But Written Testimony Survives

Written by: Thomas S. Crane and Lauren Moldawer*

Last week, the Government Accountability Office (GAO) released a report examining group purchasing organization (GPO) practices.  The GAO questioned whether the current structure of GPO funding through administrative fees is appropriate and urged the Department of Health and Human Services (HHS) to explore whether hospitals are appropriately reporting the revenue from GPO administrative fees on their cost reports when such fees are passed down to hospitals.

GPOs are purchasing intermediaries between health care providers – mostly hospitals – and vendors of medical and pharmaceutical products and services. Providers use GPOs because GPOs tend to take on the administrative burden of negotiating contracts, and they are seen as having better bargaining power given their ability to pool purchasing. GPOs are funded through an administrative fee charged to the vendors, which are permitted by a statutory exception and safe harbor under the Anti-Kickback Statute. Continue Reading GPO Fees Under Scrutiny by the GAO

Written by: Ellyn L. Sternfield

Adhering to the axiom that the best defense is a good offense, SNHPA (Safety Net Hospitals for Pharmaceutical Access), an organization of close to 1000 hospitals participating in the 340B Drug Pricing Program, is attempting to defend its members’ 340B Program operations.  Through the 340B Program, qualified safety net providers obtain deep discounts on outpatient drugs for their patients.

In an earlier article, I discussed how the GAO and other entities have questioned whether the 340B Program is operating as a safety net program, or has become a profit center for hospitals, and whether access to 340B drugs should be limited to needy, uninsured patients.  I also posted about recent Congressional inquiries over the use of hospital revenues earned from billing government and private insurers the full price for discounted 340B drugs provided to insured beneficiaries.

SNHPA has now issued a Report entitled “Setting the Record Straight on 340B” in which it contends that the intent of the 340B Program is to enable safety net providers to use their access to deeply discounted drugs to stretch scarce resources and use resulting revenues to serve more patients.   From SNHPA’s point of view, the 340B Program is working just as intended.

SNHPA asserts that the 340B statute defines the types of entities that can qualify to purchase 340B drugs, but does not limit the types of patients that can receive the drugs.   While there is existing federal government guidance on who can qualify as a “340B “patient,” it does not state that a patient must be uninsured in order to receive a 340B drug.  SNHPA does agree with the GAO and other 340B Program critics that the government definition of a “340B patient” needs to be updated and clarified.

Nevertheless, the heart of the controversy over the 340B Program’s operations still comes down to purpose – Is the 340B Program intended to provide uninsured safety net patients with access to outpatient drugs, or is it intended to provide safety net providers with enhanced revenue to increase patient access to health services?  Until the federal government definitively answers this question, the debate will go on.

Things are drastically changing for covered entities under the 340B program.  In the last 18 months several factors have led the Health Resources and Services Administration (HRSA) to ramp up its oversight and auditing of covered entities. Since the 340B drug pricing program was created in 1992 to provide discounted outpatient prescription drugs to qualifying safety net providers serving uninsured and indigent patients, the HRSA has mostly taken a hands-off approach to oversight. That all changed with the passing of the Affordable Care Act, which required the Government Accountability Office (GAO) to review the 340B program.  At the same time, criticism of the 340B drug program is increasing.  Congress, the GAO, and now a consortium of pharmaceutical, pharmacy, and medical associations are calling for 340B drug program reform.  Providers who administer the 340B drug program need to prepare now to justify their access to and distribution of 340B drugs.

“The Pressure Is on for 340B Entities,” a recent Law360 article written by Ellyn Sternfield of Mintz Levin’s Health Law Practice, discusses what covered entities should do in this radically changed environment and includes tips to prepare for increased government oversight and 340B compliance audits.

Yesterday the Senate Finance Committee posted an open letter on its website to the health care sector soliciting industry stakeholder insights on ways to combat fraud, waste, and abuse in the Medicare and Medicaid programs.  This letter comes on the heels of an April 25th hearing at which the members questioned government officials from the Department of Health and Human Services’ Office of the Inspector General (HHS-OIG), the Centers for Medicare & Medicaid Services, and the Government Accountability Office about the effectiveness of fraud-fighting efforts.  The open letter now invites a broader audience, including the private sector, to opine on the best ways to prevent and detect unlawful conduct and waste involving government health care programs.

The Committee is requesting actors in the health care sector to submit “white papers” in PDF or Microsoft Word format that address potential improvements in the following categories:

  • Program Integrity Reforms to Protect Beneficiaries and Prevent Fraud and Abuse
  • Payment Integrity Reforms to Ensure Accuracy, Efficiency and Value
  • Fraud and Abuse Enforcement Reforms to Ensure Tougher Penalties Against Those Who Commit Fraud

The white papers should be submitted via email by June 29th to ProgramIntegrityWhitePapers@finance.senate.gov.  The Committee members plan to have their staff review the white papers and then compile a summary document highlighting key proposals later in 2012.

This letter is the most recent instance where the government has sought the expertise of the private sector in addressing fraud, waste, and abuse.  Another example came to light in February 2012, when HHS-OIG issued its report related to the Pharmacy Compliance Roundtable, where it convened compliance professionals in the pharmaceutical industry.  There, the private sector players discussed their experiences with Corporate Integrity Agreements (CIAs) and other compliance efforts initiated by the government with HHS-OIG representatives.  Prevention is becoming the new focus of fraud-fighting efforts, and the government needs private sector cooperation to achieve its goals in this area.