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340B -- Termination of a 340B Account

340B: Eligibility – All Good Things Come to an End -- sometimes

First: A bit of a history lesson.  Chaucer was the first to say “All Good Things Come to an End”, although in the original 1300’s Poem ‘Troilus and Criseyde’, he said, “But at the laste, as everything hath ende, She took hir leve, and nedes wolde wende”.  As my Curmudgeon coalition members might note, that sounds nothing at all like the contemporary saying, but literary historians concur this was the original. . .

Now to the sad business of the loss of 340B Eligibility.

There are a number of reasons a 340B Covered Entity (CE) may lose 340B eligibility.  The top reasons include a drop of the DSH Percentage below the minimum, use of GPO drugs for outpatients, failure to provide oversight (which can include failure to do an annual external audit of contract pharmacies), failure to re-registration, or failure to provide all required documentation during re-registration, the list is unfortunately longer.

Let us say, for the sake of time: Your CE meets all required criteria, and you re-register, then you received an email from HRSA verifying you completed re-registration.  But, about a week later, you receive a shocking e-mail from HRSA notifying you that your CE is scheduled for 340B termination in a few weeks.  This is usually due to an Authorizing Official (AO) failing to respond to a HRSA email demanding more information.  For whatever reason, HRSA does not copy the Primary Contact (PC) on e-mails to the AO related to re-registration.  As many AO’s are extremely busy people, and must scan hundreds of emails daily, it is not too difficult for them to miss a crucial HRSA email.

You check the ‘History’ tab on your HRSA website, and sure enough, you see something like this:

If the text is too small to read, it just says ‘Value Before”: Active and “Value After”: Terminated, along with the exact date and time for the scheduled termination.  This is normally the end of the same month.

If you are like the other PC’s I know, you are on a panic call to Apexus within minutes in an effort to see what you might do to resolve what appears to you to be a terrible mistake.  Apexus will tell you, in brief, you are out of luck.  HRSA’s routine stance is that the CE had three e-mailed notices of a deficiency of some sort, and failure to resolve that request results in 340B termination.

Again, if you are like the PC’s I know, you spend a certain amount of time wondering what you did wrong, and trying to recall if your resume is updated, because you are now worried about job security.  Let that go as quickly as you can, and start working on regaining 340B eligibility!

Re-starting a Terminated 340B Covered Entity Account

Here are our recommended steps:

  1. Gain an understanding of what caused the termination. In second quarter 2018, the dominant cause is failure to provide confirmation of the Governmental official, which is done on the form titled “AGREEMENT TO PROVIDE HEALTH CARE SERVICES TO LOW INCOME INDIVIDUALS” you can get this from your CPS 340B consultant if needed. Plan to regain your Governmental official’s signature and email address.
  2. Immediately notify your C-Suite and your manager.
  3. Plan on how you will manage your 340B purchases and inventory.
    1. Note that HRSA states, ‘Last Date That 340B Drugs Purchased’ along with the termination date.
      1. Do not place an order on the last date if the invoice will be dated with the following day’s date.
      2. Do not ‘stock-up’. This is not approved by HRSA, and we know there are situations where HRSA has audited the termination process.  Inappropriate inventory builds could be considered malicious, and have the potential of being investigated by the OIG for criminal intent.
  • Cancel your WAC account (if this applies) at the same time you cancel your 340B account.
  1. Virtual inventories are easy. HRSA considers virtual inventories are ‘Blended’, and as such, any item in a virtual inventory is not identified as to WAC, GPO or 340B.  There is no additional special handling.
  2. Physical (or ‘pure’) inventories have specific handling guidelines that include:
    1. No transfer or sale outside of entities under the same Parent ID. If your parent ID is terminated, you cannot transfer or sell your 340B stock. However, you can do the following:
      1. Deplete as much inventory on hand before the termination date through normal usage and replenishment (if needed) using WAC until the termination date;
      2. Return unopened packages for credit; and/or
      3. Contact your wholesaler and request a 340B invoice credit and a WAC rebill for remaining items you cannot return. I understand all manufacturers are quick to approved credit-rebills such as this.
    2. Any inventory that cannot be managed as described above must be destroyed by HRSA guidelines. This can be verified in Apexus’ FAQ’s.
  3. Note that when you cease contract pharmacy usage, there will likely be a spike in true-up costs based on your agreement with your contract pharmacies. In some (preferred) situations, the TPA will simply reverse these transactions.
  4. Suspend your Split Billing Software and your Contract Pharmacy TPA. Note that all accumulators are reset to zero, so expect a spike in WAC for the first few weeks when you return to 340B eligibility.
  5. Develop a process with your AO that allows you to backstop them in the case of missed or neglected HRSA emails.
  1. On the first possible chance, reenroll with 340B. This is usually the 1st-15th of the following month, and it becomes effective the first of the next Calendar Quarter.
  2. On the first day after termination, turn off all billing modifiers for Medicaid, managed Medicaid or Medicare: you are not gaining discounts, do not let the state underpay you with ASP – 22.5% - you will revert to ASP + 6%.

Contract Pharmacies and Child Sites

HRSA rules allow you to register all child sites at the same time you register your parent site, but you will need to reregister your contract pharmacies after your 340B ID is active again, which would be January 1st.  You may consider renegotiating the contract for terms more amenable for you during this time, or treat this as just a gap in contract pharmacy services, and continue with your existing agreement. Just be sure all contract pharmacy agreements, new or old, are in place before you register them. 

Site Specific

There are going to be additional steps specific for each CE.  Consider treating this as if it were your first 340B registration, and use this opportunity to retrain everyone, and reinstate your Oversight Committee.  Contact your CPS 340B Consultant for added support.

Calculating the Cost of Loss of Eligibility

One of the first questions we hear when this happens is “What’s the fiscal Impact?” This varies wildly by CE.  A quick thumbnail answer is to take your aggregated annual savings (including WAC offset, etc.) and divide it by four.  You may get close with more sophisticated calculation techniques, but at the end of the day, even the best calculation is little more than a guess.

You may also consider the costs of restarting the program.  Although you can re-register your child sites at the same time you register your parent site, you’ll lose, at a minimum, one quarter of Contract Pharmacy savings (see above for why).  As mentioned above, there will also be a transient spike in WAC purchases (if it applies to your CE type) as your accumulators re-normalize.

340B: More than a Pharmacy Program

One of the few silver linings to this cloud is that this provides a great opportunity to remind everyone at your facility that 340B is not just a pharmacy program, but one that involves a great number of other personnel, with some obviously more crucial to the program than others.

Re-educate your staff and the members of your oversight committee to the value of teamwork and watching each other’s backs.

Then manage your ‘New’ 340B program with a new perspective on the value it brings to your organization.

Posted: Thursday, August 27, 2020

Tags: CPS Blog Posts