Helping pharmaceutical manufacturers navigate the complex GP landscape

Identifying and Addressing Revenue Leakage in the 340B Program

Katie Lapins

June 2014

Topics Identify opportunities for revenue leakage and

how they can occur

Develop practical approaches to data analytics to identify potential duplicate discounts and diversion

Navigate options when a manufacturer suspects duplicate discounts and/or diversion

Nothing included in this presentation should be interpreted as management or legal advice

2

Purchases have grown 900% from $0.8 Billion in 2004 to $7.2 Billion in 2013

The number of covered entities (CEs) has grown from 8,600 in 2001 to 16,600 in 2011 (93%)

Hospital participation has grown from 600 in 2005 to 1,600 in 2011 (167%)

Hospital sites have grown from 1,233 in 2005 to 4,426 in 2011 (258%

Since 2010, unique pharmacies serving as contract pharmacies has grown by 770%

Total number of contract pharmacy arrangements has grown by 1,245%

340B/PHS Program Growth

3

4

PHS Clinic

Manufacturer Medicaid

Patient

4

State Medicaid

Step 1: Manufacturer sells Covered Drug to Covered Entity

Step 2: Covered Drug dispensed to Medicaid patient

Step 3: Covered Entity requests reimbursement from State

Steps 4 & 5: State submits rebate request; Manufacturer pays rebate

Mechanics of Duplicate Discount

Duplicate Discounts

Occurs when a CE purchases at 340B price and then submits to Medicaid for reimbursement

Revenue Leakage:

5

Example 1

WAC $ 10.00

AMP $ 8.50

MDRP Rebate $ 1.96

340B Price $ 6.54

Net Price $ 4.57

Example 2

$ 1,500.00

$ 1,450.00

$ 1,334.95

$ 115.05

$ (1,219.90)

Inpatient utilization

Ineligible patient

Contract pharmacies

Rx from ineligible provider and/or site

Dispense to non-340B patient

Examples of Diversion

6

340B Program Audit Results

7

Duplicate Discounts Diversion

Diversion thru CPs

Audit Year 2015*(20 CEs)

5(25%)

6(30%)

4(20%)

Audit Year 2014(75 CEs)

15(20%)

21(28%)

13(17%)

Audit Year 2013(90 CEs)

24(27%)

41(46%)

17(19%)

Audit Year 2012(51 CEs)

18(35%)

9(18%)

9(18%)

* Year to Date

To detect duplicate discounts, manufacturers can compare various sources of data:

PHS/340B contract chargebacks

Claims level detail from State Medicaid invoices

Other claims level type of detail (TRICARE, Part D, GPOs, etc.)

OPA Medicaid Exclusion File (listing of entities that have opted to use 340B drugs for their Medicaid patients)

Compare chargebacks to list of Covered Entities identified by OPA that had problems with information provided to State and/or OPA that could have led to duplicate discounts

Duplicate Discount Detection

8

Unusual purchase patterns, especially relative to other purchasers

Unexplained spike in 340B purchases, especially when the 340Bprice drops or there is penny pricing

High ratio of 340B to non-340B purchases for a products primarily used on an inpatient basis

Inventory for inpatient and outpatient uses being held in the same place

Diversion Detection

9

1 – Exact Match: Same Date, Product, Dispenser, Rx Id

10

Data Analytics Examples

Qty Billed AmtService

DateDispenser ID Rx ID Source

120 424.58 7/15/14 12345678 423854 MDRP CLD

120 424.58 7/15/14 12345678 423854 340B CB

180 929.58 6/9/14 AB123456 7520058 Part D

180 70.00 6/9/14 AB123456 7520058 340B CB

2 – Potential Match: Same Date, Product, Dispenser;

Different Rx Ids

11

Data Analytics Examples (cont’d)

Qty Billed AmtService

DateDispenser ID Rx ID Source

5 49.40 9/10/14 98765432 790184 MDRP CLD

5 49.40 9/10/14 98765432 790187 340B CB

360 1,634.26 12/2/14 BA554433 4635395 340B CB

360 1,636.67 12/2/14 BA554433 2979135 Part D

3 – Potential Match: Same Zip Code, Date, Product

Same zip code for the same product on the same day and dispenser name is similar

12

Data Analytics Examples (cont’d)

QtyBilled

Amt

Service

Date

Dispenser

IDDispenser Name Rx ID Source

14 38.18 9/26/14 AB987654Univ of CO

Hospital Atr43592 TRICARE

60 172.11 9/26/14 68ABCD7U of Colorado

Atrium Phcy 340B7344823 340B CB

4 – Potential Match: Same Product, Location and/or Zip Code within a 21-Day Window

Examine chargebacks & rebates: to help spot rebated fills at same location that claimed PHS chargebacks. Need manual examination to see if the locations are the same but with different names or reporting IDs

13

Data Analytics Examples (cont’d)

QtyBilled

Amt

Service

Date

Dispenser

IDDispenser Name Rx ID Source

10 96.20 8/14/14 BA123456 Walgreens 43592 TRICARE

10 96.20 8/22/14 BA123456 Walgreens 340B 7344823 340B CB

5 – Historical Data

14

Data Analytics Examples (cont’d)

0

1,000

2,000

3,000

4,000

5,000

6,000

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14

If a manufacturer suspects an entity has diverted product and/or received duplicate discounts:

Manufacturers have the right to audit CEs

May wish to simply notify OPA

If manufacturer elects to audit a CE, they must submit audit work plan to OPA

Must have independent auditor

Remediation Options

115

UNC Duke CMC

2011

Annual Revenue $52,580,763 $131,759,091 $21,065,620

Medicare

Medicaid

Commercial

Self-Pay

23.1%

9.7%

22.6%

12.0%

19%

9%

67%

5%

25.6%

18.3%

41.9%

11.3%

2012

Annual Revenue $65,391,050 $135,539,459 Not Available

Medicare

Medicaid

Commercial

Self-Pay

32.9%

12.5%

29.6%

13.7%

19%

9%

67%

5%

Not Available

Senator Grassley’s Letters

15

Walgreens:

Feb. 2012: Walgreens discussed ways to generate revenue from the 340B program in slide presentation

July 2013: 5,400 of the 7,000 Contract Pharmacies were Walgreens

Same time period: Walgreens Senior 340B Inventory & Reconciliation Analyst, posted the following on his LinkedIn page:

the 340B program is “…a relatively new area within Walgreens and is projected to add a minimum of $250 million in incremental revenue over the next 5 years.”

Walgreens “…optimizes client’s 340B program, so they can be more profitable while lowering Walgreens liability.”

Senator Grassley’s Letters

16

“Medicaid and the 340B Program: Alignment and Modernization Opportunities;” National Association of Medicaid Directors; May 2015

“Contract Arrangements in the 340B Program;” HHS Office of the Inspector General Memorandum Report; Feb. 4, 2014 (http://oig.hhs.gov/oei/reports/oei-05-13-00431.pdf)

340B Audit Results (http://www.hrsa.gov/opa/programintegrity/index.html)

Helpful Websites/Interesting Reading

17

Katie LapinsK.Lapins@GP-Specialists.com

303.725.9075