HRSA "Best Practice" Recommendations for 340B Contract Pharmacy Non-Compliance

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HRSA "Best Practice" Recommendations for 340B Contract Pharmacy Non-Compliance

HRSA, HSB, and OPA just posted an update.  I will explain the full names represented by the three abbreviations to the left at the end of this blog. These three agencies jointly released a document they called “Best Practices for Entities: Resolving Contract Pharmacy Related Non-Compliance”.  Catchy title, if you are one of managers losing sleep over contract pharmacy compliance.

The document provides excellent guidance straight from HRSA.  What follows below in red text is the text of the document with suggestions of the actions you might take if you experience non-compliance in your contract pharmacies.


Here we go:

Material Breach

In a contract pharmacy arrangement, the covered entity retains responsibility to prevent diversion and duplicate discounts, maintain auditable records, and meet all other 340B Drug Pricing Program (340B Program) requirement s. Any covered entity that chooses to utilize a contract pharmacy must ensure that any such contract fully addresses these requirements; and that the covered entity and the contract pharmacy adhere to the contract term s. To the extent that there has been a violation of 340B Program requirements at a contract pharmacy, the covered entity must notify impacted manufacturers and attempt in good faith to resolve issues directly with manufacturers and wholesalers. Additionally, if there is a material breach, it is HRSA's expectation that the covered entity would disclose this information to HRSA along with the covered entity's plan to address the violation. HRSA and manufacturers (pursuant to an approved audit work plan), can audit covered entities and their contract pharmacies.

A KEY point noted in the opening paragraph is “Material Breach”.  HRSA expects each covered entity (CE) to self-report non-compliance if there is a ‘Material Breach’.  HRSA leaves the actual definition of what constitutes a Material Breach to the individual CE.  Your oversight committee should help in determining what constitutes a Material Breach, and if you would like additional guidance in this area, contact your Comprehensive Pharmacy Services 340B consultant.

HRSA expects you to resolve non-compliance, whether that reach the level of a material breach or not. In addition, here is a link to a tool to help establish what constitutes a Material Breach.

Resolution of Non-Compliance Without Involving the Covered Entity

HRSA is aware of a resolution practice by which a contract pharmacy and/or third party administrator (TPA) attempts to make restitution for 340B transactions that have been dispensed, but later deemed 340B ineligible. This practice involves the contract pharmacy/TPA directly providing repayment to the manufacturer(s) for transactions the contract pharmacy/TPA no longer considers 340B-eligible, and instead considers them retail pharmacy transactions. In some cases, this may occur without the prior knowledge or engagement of the covered entity. HRSA has concerns with this settlement practice and is encouraging stakeholders to review their contracts with contract pharmacies and TPAs related to this practice . A covered entity should consider the risk it assumes by agreeing to terms whereby the contract pharmacy/TPA makes repayments on its behalf in ways that may not comply with 340B policy. Based on HRSA's understanding, it may not be transparent to stakeholders. Such repayment also would not comply with 340B Program requirements that the covered entity retain responsibility for ensuring full compliance and integrity of its use of the 340B Program, including any activities performed by its contracted pharmacy and/or TPA.

A presentation by Feldesman Tucker Leifer Fidell LLP this week claimed this was ‘Likely a Direct Shot at Walgreens’ method of correcting over-replenishment…’ HRSA specifically states they have concerns with this practice. They encourage CE’s to review their agreements with their contract pharmacies and TPA’s, especially since the CE retains full responsibility for this action, even if they are not directly involved.  A substantial number of the CE’s I work with share HRSA’s concern on this topic.  Perhaps this new release will change those affected contract pharmacy vendors stand on this issue.

Remedial Action is the CE’s Responsibility

HRSA reminds us that the Covered Entity remains responsible to “ensure compliance, work in good faith…, and …notify HRSA (in a material breach).

Regardless if you are in material, breach or not, always involved your CPS 340B Consultant first.  If you are in non-compliance at a material level, you start by working with OPA, and we suggest you involve your CPS 340B Consultant.  If the non-compliance is not at a material breach level, you work directly with affected manufacturers (we suggest you involve your CPS 340B Consultant first).  The Manufacturers offer these suggestions (via HRSA).

Note that there is often a significant amount of work in collecting, organizing and assessing the financial impact of non-compliance. Note that some manufacturers may want to perform additional audits to confirm the information you supply to them.  Manufacturer’s must gain HRSA approval prior to performing any audit.

Using Reclassification (Credit/Rebill) to Resolve Non-Compliance

One method to resolve ineligible 340B purchases is to request a Credit/Rebill from the wholesaler.  As noted in the HRSA comment in this red box, HRSA recommends transparency in the process, whereby the CE notifies both the affected manufacturers as well as your Wholesaler.  As noted, maintain clear documentation of not only the process and amounts involved, but also all communications.  Maintain these records for a period of three years as detailed in your 340B policy and procedure.

The Importance of Being Earnest

Actually, this is about the importance of an updated P&P, but I could not help but refer to Boscoe Godfrey, a gentleman for whom CPS named an annual award.  Boscoe’s real name was Ernest, and in fact he played the title role in a college production of ‘The Importance of Being Ernest’.  Just a little known Boscoe fact.

But HRSA reinforces the need for an updated P&P.

If you need assistance in updating your policy and procedure, contact your CPS 340B Consultant.

Consider Involving Your Legal Team for All 340B Agreements

HRSA suggests understanding and agreeing to all terms with your contract pharmacies. This should include a clause defining the process to resolve non-compliance.

Hopefully anyone reading this engaged their legal team when they negotiated their contract pharmacy contracts.  If not, and if you are not satisfied with the terms, check with your legal team to determine if the agreement can be revised before its termination date.

The Buck Stops Here

HRSA’s last comment seems to be common sense, but see BD’s definition of common sense…

BD Dictionary of Common Terms:  Def:"Common Sense" -- that knowledge you possess that you feel everyone else should know as well.

Remember the Covered Entity remains responsible for Compliance at all times.  A contract with a TPA does not change this.

And Finally

I promised to explain the three abbreviations (HRSA, HSB, OPA) at the start of this blog.  I suspect most readers already know, but if not:

HRSA                     Health Resources and Services Administration

HSB                        Healthcare Systems Bureau

OPA                       Office of Pharmacy Administration


As always, we hope you gain use from these blogs.  ‘See’ you next time.


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