AIDS Drug Assistance Program (ADAP) Contracted Pharmacy Services

1. AIDS Drug Assistance Program (ADAP) Contracted Pharmacy Services Clayton Keene, MS, MSWDirector, Business Development

2. Agenda Topics • Direct Purchase • 340B Federal Drug Discount Program • Contracted Pharmacy Services • Overview and model components

3. 340B Direct Purchase

4. In November 1992, Congress enacted Section 340B of the Public Health Service Act. requires pharmaceutical manufacturers participating in Medicaid to provide discounts on outpatient drugs to "covered entities,“ “Covered entities” = government-supported programs that provide care to the nation's most vulnerable patient populations. “Covered entities" include: high-volume disproportionate share hospitals (DSHs); federally qualified health centers (FQHCs); state operated AIDS drug assistance programs (ADAPs), including the Ryan White CARE Act programs; tuberculosis, black lung, family planning and sexually transmitted disease clinics; hemophilia treatment centers, public housing primary care clinics, Urban Indian clinics and Native Hawaiian health centers. OVERVIEW OF 340B PROGRAM

5. Overview of the 340B Program • Over 10,000 participating covered entity sites and close to 600 pharmaceutical companies are affected by the PHS Act. • Drug discount limited to 340B covered entity • Must be a patient of the 340B provider to be eligible to receive discounted drugs • Discounts are calculated using the Medicaid rebate formula; but 340B pricing is often 10-15% better • Additional price negotiations with Wholesaler and Manufacturer • Economies of scale with central distribution • MCR “bill back” for eligible clients • Less Administrative layers needed by ADAP • Medicaid recipients must be “carved out” of program, and billed via traditional methods of operation, to avoid duplicate discounts

6. U.S. PHARMACEUTICAL MARKET:COMPARISON OF PRICES Private Sector Pricing “Best Price” Source: Data derived from Prescription Drugs: Expanding Access to Federal Prices Could Cause Other Price Changes, U.S. General Accounting Office, GAO/HEHS-00-118, August 2000 and How the Medicaid Rebate on Prescription Drugs Affects Pricing in the Pharmaceutical Market, Congressional Budget Office Papers, January 1996.

7. A lack of working capital to purchase the inventory needed to implement a 340B program A lack of pharmacy and/or PBM experience and knowledge A lack of understanding of the 340B program Too busy with managing the “here and now” Direct Purchase Challenges

8. Medicaid Not Eligible for 340B Federal and State program with State flexibility Poor AND Disabled on SSI Parents, children, pregnant women Medically Needy Prescription drug benefit 200,000 with HIV/AIDS (44% of those in care) $10.4 billion (Federal and State) in 2005 Medicare D 340B eligible Federal program 65 or older OR Permanently disabled Under 65 and receiving SSDI for 2 years No prescription drug benefit Approx 80,000 with HIV/AIDS (19% of those in care) More likely to have AIDS diagnosis and T4 count 0-199* $2.9 billion in 2005 ADAP: Medicaid and Medicare D • SOURCE: Bozzette, et al. “The Care of HIV-Infected Adults in the United States.” NEJM, Vol. 339, No. 26.

9. Contract Pharmacy Services for AIDS Drug Assistance Programs

10. 340B Contracted Pharmacy Services • The Pharmacy Affairs Branch, under HRSA, allows/encourages entities to contract with a pharmacy to act as its agents • Covered entity is required to purchase pharmaceuticals • 340B providers are encouraged to use contracted retail pharmacies rather than incur large costs for a pharmacy program “in-house” • Contracted pharmacy can provide all pharmacy services, including administrative, ordering, dispensing and process management

11. Scope of Work • Formulary Management • Drug procurement and inventory management • Drug utilization review (DUR) • Eligibility verification • Claims processing and reconciliation • Monthly reconciliation reporting

12. Virtual Inventory • Contracted Pharmacy dispenses existing inventory to 340B eligible patients and places orders to the wholesaler on behalf of ADAP to replace the stock dispensed • Benefit: • Maintaining a “virtual” inventory, tracking system, and “ship to-bill to” procedure • Does not require the ADAP to purchase and carry an inventory of 340B drugs upfront • ADAPs not be burdened with inventory reaching expiration or no longer utilized • Guarantees immediate access to medication on the ADAP formulary

13. Inventory Management • A ship to - bill to procedure will be used in which the wholesaler bills the covered entity for the drugs purchased, but ships the drug to Contracted Pharmacy • Contracted Pharmacy submits to ADAP a monthly reconciliation report detailing the ordering and dispensing for that particular month • The detailed invoice would list the number of patients, number of medications dispensed, and pharmacy dispensing/management fee

14. Contract Pharmacy Design • Drug inventory order, dispense, monitoring, replenishment, reconciliation and reporting • Delivery of medications directly to patients (ups, fedex) • Drug utilization review, and reports that show complete utilization data on patients, prescriptions, and prescribing patterns • Monthly invoice and billing procedures that comply with 340B and ADAP requirements • Data provided in both hardcopy and electronic format • "special" data reports • Confirm formulary with 340B prices provided by wholesaler

15. Questions