340B Program Perspectives

1. 340B Program Perspectives Presented by: David Tamayo, MBA MedImpact Healthcare Systems, Inc

2. Agenda • CAH Qualification for Participation in 340B Program • 340B Overview • The Benefits of Participation in the 340B Program • Current Program Concerns • Optimizing 340B From A Program and Financial Standpoint • Q&A

3. Critical Access Hospital Qualification Requirements for 340B

4. 340B Overview • What is the 340B Program? • A federal drug discount program resulting from the enactment of Public Law 102-585, of the Veteran’s Health Care Act, which is codified as Section 340B of the Public Health Services Act • Created in 1992 to expand access to affordable medications to low income populations and support the operations of healthcare safety net organizations. • Pharmaceutical manufacturers whose drugs are covered by Medicaid are required to sell drugs to covered entities at 340B discounts.

5. 340B Overview • What is the 340B Program? • Primary Goals • Provide Drug discounts that limit the cost of covered outpatient drugs • Enable a qualified entity to attain greater financial stability • Benefits in Participating • Access to 340B ceiling pricing • Improve financial stability • Better serve vulnerable patients • Decrease burden upon taxpayers

6. 340B Overview • Program Patient Eligibility Requirements • The Covered Entity must be a qualified entity and registered with OPA to participate in the 340B program. • The Covered Entity must have a record of the patient’s care and a relationship with the patient. • The Hospital Department – Medical Clinic where the patient is treated, must be reflected on the Medicare Cost Report. • The Physician – Provider must be employed by, contracted by, or referred by the Covered Entity. • The Patient must fill the qualified prescription at an affiliated contract pharmacy All Covered Entity patients are eligibleregardless of payor type or income level

7. 340B Overview: Key References

8. 340B Overview • Program Prohibitions: • Diversion • 340B drugs provided to individuals who are not patients • 340B drug dispensed in an area of a larger facility that is an integral part of the eligible and participating entity (e.g. an inpatient service, a non-covered clinic) • Duplicate Discounts • Accessing the 340B Discount + Medicaid Rebate on same drug prescription • Covered Entities must report Medicaid billing status • Inpatient Dispensing • Inpatients are not qualified to receive 340B eligible drugs

9. Benefits of Participating in 340B Program • Access to 340B Ceiling Price • Access to participation in the Prime Vendor Program • Generate both savings and revenue • Can elect to subsidize indigent programs using 340B revenue • Low risk and very low cost if you pick the correct 340B administrator/partner

10. Benefits of Participating in 340B Program 35% additional discount between retail and 340B

11. Benefits of Participating in 340B Program 20% additional discount between GPO and 340B

12. Current Program Concerns • State Medicaid Programs • Double dipping prohibited • States are taking an approach to 340B that may not allow covered entities to generate margins between the contracted Medicaid pharmacy rates and the 340B drug acquisition price • Some State Medicaid programs are only reimbursing 340B drugs at the 340B acquisition price plus an enhanced fill fee • Number of Covered Entities • Limited to non-profit contracted to provide indigent care with local or state government • Many more covered entities realize the potential impact of 340B

13. Current Program Concerns • Definition of Patient • See the Federal Register Notice titled  Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Patient and Entity Eligibility ( Definition of a Patient). (Vol. 61, No.201, pp 55156-55158, October 24,  1996) • Has a relationship been established with the individual patient by maintaining records of the individual patient’s health care? • Are the services provided from providers that you employ, contract or refer to, and does the responsibility for care reside with your organization? • Does the individual patient receive health services consistent with the range of services for which you receive funding? • Does the individual fill their prescription at an affiliated contract pharmacy? • Are Employees Eligible for 340B • See definition of patient • Take the more conservative approach • Future Audits • How are your reporting patient discharges? • Diversion • Data accessibility and how eligibility is determined

14. Questions to Ask Potential 340B Partners • How many 340b customers are currently participating in your program? • How long has the solution employed the 1:many covered entity to contract pharmacy model? • Who sets-up the wholesaler? • Recommendation: Let your 340B administrator / partner set-up your 340B wholesaler for you….why? • Who contracts and sets-up the 340B contract pharmacy network?

15. Questions to Ask Potential 340B Partners • Fees (dispensing, transactional)? • Fixed • Percent of Margin • Combination • Are admin fees applicable to ALL 340B 3rd party claims • “Own” contract pharmacy network fees • “Agnostic” contract pharmacy network fees • Are fees different for indigent/cash pay patients? • Other fees to watch for

16. Questions to Ask Potential 340B Partners • Do you offer a turn-key solution? Solution should include: • Automated eligibility determination • Pharmacy network development, contracting, management, and training • Can optimize use of internal out-patient pharmacy • Can enhance capture of 340B eligible pharmacies lost to the community pharmacies • Claims adjudication using lesser-of methodology • “Own Use” follows patient eligibility criteria • References of hospitals that are already operational • References of hospitals currently undergoing implementation • Acceptance to start program implementation with an LOI instead of a contract. Reason, it will take a minimum of 60 to 120 days to implement an eligible hospital

17. Questions to Ask Potential 340B Partners • Can you provide an implementation timeline that: • Identifies all implementation tasks, and projected dates of completion • Has signature lines for each party to sign-off in agreement that tasks for both parties have been completed every two weeks • That is summarized monthly and sent to the CEO • Can sample reports be provided that illustrate: • Net amounts due the covered entity, less all fees broken out by dispensing pharmacy, program administrator, and wholesaler • Virtual inventory and replenishment actions • Cost of 340B drugs dispensed, and projected wholesale cost of replenishment • Can the reporting system generate “on-demand” reports, as frequently as necessary? • How frequently is data updated?

18. Questions to Ask Potential 340B Partners • Can you provide more than just one or two retail chain pharmacies that will work with you simultaneously? • Especially important to ask when you are in an urban setting • Do you contract and work with independent pharmacies? • Can you provide evidence that you work with independent pharmacies currently? • Not all independents act in your best interest • Outline the steps the 340B Partner will use to help resolve conflict • Provide options of what has worked, and what has not, and do you have references from independent pharmacies that work with you • What is your philosophy in developing a 340B contract pharmacy network, and what are they key factors that guide that philosophy? • What are the key assumptions you make when developing a revenue pro forma (savings and revenue)?

19. Optimizing Your Program • Selecting the contract retail pharmacy, factors to consider: • Patient population by zip code • Current relationship with hospital • 340B 3rd party dispensing fee • Training requirements • Willingness to work with selected administrator

20. Optimizing Your Program: Revenue From A Conservative Pro Forma Perspective

21. Questions

22. Thank You