340B Membership Procedures and Validation

One of the most problematic issues for Pharmaceutical Manufacturers for the past few years has been putting effective procedures and tools in place to manage their 340B Contract Eligibility. It can be an issue with potentially dramatic impact. For example, offering the 340B price to a non-eligible entity can lead to disastrous results: inaccurate computation of Best Price, the reporting of incorrect AMP and BP data to the government, incorrect payments of Medicaid rebates to States, incorrect reporting to the VA of Non-FAMP data, and the incorrect reporting of 340B pricing (where government agencies or eligible entities may not have been charged the correct price), all of which lead to potentially enormous False Claims Act violations, regardless of whether it was a simple mistake or due to a lack of sufficient procedures and systems on the part of the manufacturer. The worst part is that it may be happening without a manufacturer even being aware.

The problem of managing 340B Contract Eligibility is two-fold. First, historically there was no very reliable source for current 340B eligibility information. Second, manufacturers' systems had inconsistent customer data, with duplicates and other historical issues, based upon insufficient procedures and systems. The OPA's 340B Eligibility List has improved and should be relied upon for a current source of eligibility information. But even with this, it has been very difficult to match up the OPA data with the manufacturer's data in its systems.

During recent investigations, the Federal Government has made it clear that the onus is on the manufacturer to ensure that only 340B eligible entities receive 340B pricing. If a non-eligible entity were to receive 340B pricing the manufacturer has potentially computed an inaccurate Best Price; in other words, the price offered the non-eligible entity potentially could have set the Best Price during that rebate period. It is important to underscore the legal principle that, under the False Claims Act, a manufacturer need not be intentionally defrauding the government; all that is required to establish liability is "reckless disregard of the truth." Therefore, manufacturers without policies and procedures in place to ensure that only 340B entities receive this pricing could be exposed to potentially enormous liability under the False Claims Act.

This means that the manufacturers offering 340B prices must:

• have processes in place to perform at least a quarterly review of the OPA's 340B eligibility list, identifying customers who may be in the manufacturer's system that need to be end dated;
• keep their contracting system up to date on a quarterly basis with additions or deletions of customers; and
• reject chargebacks submitted by wholesalers for reimbursement of sales to non-eligible entities

CIS Government Programs Specialists can assist you with:

• 340B Membership Validation and Historical Impact Analysis: Perform a validation, or "scrubbing," of your existing historical customer data and conduct an analysis to see if there is a potential impact on your historical calculations.
• 340B Membership Updating Procedures and Systems: Develop policies and procedures related to 340B membership updating, including procedures for researching and documenting new additions based upon chargeback submissions, as well as systems and procedures for end-dating eligibility. This often can present the most difficulty to the manufacturer, as it has been very difficult to create data mapping between the OPA membership and the manufacturer's contracting system. CIS can implement this system for you and perform the initial scrubbing of your existing customers.