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Regulatory Compliance in 340B Program

Executive Summary

340B Compliance - call 1.877.215.5675 for maximum savings and your protection

Despite a solid growth in the world economy, the healthcare and life sciences sectors - medical services, manufacture medical equipment or drugs, provide medical insurance, bioengineering, pharmaceuticals, diagnostics, bioinformatics and biocomputing etc., are growing at a annual rate of nearly thrice that of any other sector.  For these organizations, data is their most valuable asset - and the potential for mishandling it is their greatest risk. Here I'm describing the Information (a.k.a data) risk management within healthcare enterprises.  Managing information risk calls for covered entities (a.k.a Hospitals) not just to understand the nature and content of their data, but also to be able to prove its accuracy and efficiency. 

Most of the momentum is to manage the risk tand reduce costs incurred while operating in a ponderously regulated environment.  Even more risk resides in possible non-compliance with 340B regulations.  340B Legislation and Regulatory Authority (a.k.a HRSA) captures several issues from 340B operating body such as Non-Eligibility, Missing Audits, Violation in Disproportionate Share Adjustment Percentage, Unable to adopt Duplicate Discount Prohibition, Entities Santioned for non-compliance, GPO Prohibition and No Diversion.

HRSA audited (see details here) 51 covered entities during FY12, encompassing over 410 outpatient facilities/sub-grantees and over 860 contract pharmacy locations. Based on the audit results, it has been clearly identified that 39% of non-hospitals identified with "Incorrect Database Records", 33% of them were dispensing drugs to ineligible Individuals and 33% of them were billing contrary to the MEF (a.k.a Medicaid Exclusion File). This is a clear indication that any reactive implementation of 340B compliance program is bound to be far more costly and less versatile than a planned, prepared, and fully scoped engagement.

This blog examines some of the issues around implementing technologies to increase compliance in the healthcare sector.  It also recommends creating or leveraging Cloud based 340B to bring a covered entity's systems into compliance,  and to deliver the efficiency and productivity benefits of Cloud340B.

What does 340B Compliance Mean?

Cloud 340B Compliance Seal

340B Compliance with currently accepted procedures helps protect a covered entity, manufacturers or a contract pharmacy from risks that come from many different directions such as dissatisfied drug manufacturers, secretary of HRSA, patients, or staff might take action against a covered entity for some perceived  misdemeanor. So companies must need to address the improvments in 340B program integrity listed in the 340B Public Health Service Act for both manufacturers and  covered entities. All these acts demand that covered entities or manufacturers not only prove the accuracy and authenticity of their 340B data, but in many cases also how it was derived and on what information conclusions were based.

Non-compliance of 340B could even lead to the invalidation of an entire business functions. All 340B progress would be halted pending a complete re-collection of all the data. Failure to retain appropriate documentation or datamay also lead to uncertainty regarding agreed contractual terms, or difficulties with responding to information requests under Sec. 340B PUBLIC HEALTH SERVICE ACT. Above all, any publicized failure to comply puts covered entity's reputations and commercial standing at risk.  For manufacturers, HRSA is authorized by enactment to impose civil monetary penalties on companies that knowingly and intentionally overcharge covered entities for 340B drugs.

Why should You Comply?

Risks are extremely high if you don't comply with HRSA's 340B Compliance requirements.  They include loss of credibility, reduced industry confidence, and significant adverse publicity. Both covered entities and manufacturers are subject to penalties if they violate 340B program requirements. For covered entities, the penalty for failing to comply with the 340B program's diversion prevention and duplicate discount provision is forfeiture of the discounts back to the drug manufacturer. Covered Entities will subject to pay a huge penalty along with interest on the discounts or possibility of disqualification or revocation from 340B paticipation to be determined by HRSA. In fact, HRSA makes a case-by-case evaluation as to whether to pursue regulatory action against companies or covered entities that are viewed as out-of-compliance.

How to Prove Secretary that your are Compliance?

340B Participation body need not only to follow best practice and standards in complying with HRSA regulations, but also be able to prove they are doing so.
Legal cases against a 340B Participation—whether brought by a government body or by a drug manufacturer—are won or lost on the weight of evidence.
Covered Entities or drug Manufacturers that can readily access all documents that are relevant to an action, and prove their validity, are likely to see an action dismissed or settled at a far earlier and less damaging stage of the proceedings. The more easily you can supply required information, the better your chance of being viewed as a compliant 340B participants.  Following options are widely recommended and practiced with 340B community when it comes to auditing.

1) Self Assessment:- This method is to enable entity leaders to quickly assess the basic level of 340B program integrity resources provided by contract pharmacy vendors to help the entity achieve 340B compliance​. HRSA provides a 340B Compliance Self-Assessment that helps participant to estimate the level of 340B integrity in identifying the eligibility of 340B Patient definition, to deliver no duplicate discounts, able to adequately replenish inventories and able to provide the proper fee structure that aligns with 340B Program.  

2) ​Full Third Party Auditing:-  There are lots of advantages in performing audit using a third party 340B auditors. This type of audit would be performed on-site by a third party audit team including pharmacists, analysts, and specialists in pharmacy benefits. The evaluation report would prepare a covered entity for an actual HRSA audit and indicate areas to be addressed which may compromise the covered entities participation in the 340B program. Despite the coverage of the third party is pretty wider, but its an expensive process.  

3) Proactive Assessment through SaaS:- There are several software products in the market that reviews the program policies, procedures and processes pertaining to 340B medications. However there are a few SaaS based solutions like Cloud 340B performs the Verification of internal controls in place to prevent diversion and duplicate discounts, identifies effectiveness of procedures in place over procurement, inventory, distribution, dispensing and billing of 340B drugs.  Most importantly, this method proactively captures if the program is not implemented in accordance to the requirements of 340B program. This procedure is widely accepted as one of the best practice as it saves plenty of time and money to the 340B participant.

Benefits of 340B Compliant

1) Greater Reputation:- Being compliant to 340B builds trust and brand loyalty to HRSA, 340B program participants, employees, patients and every stakeholders. Also, a good 340B compliance program can have significant, positive, secondary benefits on business operations.

2) Quality Improvements:-  A good 340B compliance program should help prevent errors or failures before they occur or detect at an infancy stage. It reduces the need to do lots of rework. High levels of quality are an essential ingredient to achieve hospital's service objectives. Quality, a source of competitive advantage, should remain a hallmark of a covered entity's services. High quality is not an added value but it is an essential basic requirement. Quality does not only relate solely to the end services a Hospital provides but also relates to the way the Hospital employees do their job  and the work processes they follow to produce products or services.

3) Greater Efficiency:- In fact it is common to all industries but especially in Healthcare, increasing the ROI to stakeholders of the covered entities or any 340B program participants is the fundamental agenda. Through a better quality and compliance, the efficiency of the overal program will be improved.

4) Finest Brand and Loyalty:- Being a 340B Compliant is a solid indication to your stakeholders that compliance is the utmost priority of your organization. It endorses your ethics and commitment to your business. Most importantly, patients, vendors and employees trust you and that builds your brand loyalty.

5) Competitive Differentiation:- As a 340B Participant and a service provider to the Healthcare sector, we have found that good compliance is a key differentiator that helps patients drive better outcomes more efficiently while reducing risk.

Platform for Compliance

The most effective approach is to consider all desparate systems and create a unified integration platform that brings all relevant data and puts it into a common and widely usable format. Cloud 340B is extremely flexible and efficient approach to solving the challenges of compliance is to track metadata and integrate information from multiple systems in a Service Oriented Architecture.  It is easily deployed, and smart shared data services help to eliminate data silos and simplify integration efforts for consistent views of information across the covered entities.

Finally, the result is increased flexibility to develop integration solutions quickly, and easily evolve them to adjust to 340B Program change—including changes in regulations that require a covered entity to alter its business processes.

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