Common pitfalls in 340B audits (and how to avoid them)

At the recent Medicaid Drug Rebate Program (MDRP) Summit, officials from the HRSA Office of Pharmacy Affairs, Office of Special Health Initiatives shared the common pitfalls that manufacturers make that show up in 340B audits.

Julie Zadecky, pharmacist, Office of Pharmacy Affairs, Office of Special Health Initiatives, listed the most frequent audit findings they gathered on data from the past five years. She then described them and offered risk mitigation strategies.

Occurrence of pitfalls

• 44% Charging more than the ceiling price
• 32% Inaccurate 340B OPAIS records
• 32% Failure to submit quarterly 340B ceiling price information
• 24% Failure to offer the 340B ceiling price
• 16% Failure to determine the difference between new drug price estimates and actual ceiling prices

Source: HRSA. HRSA 340B Program Audits of Manufacturers, MDRP Summit, 9/25/24.

Charged more than 340B ceiling price
To pitfall No.1, Zadecky said, “This one is pretty easy to avoid with good policies and procedures and good communication with your wholesale partners. This finding usually occurs due to rounding errors or a failure to update your pricing files with your wholesale partners.”

Zadecky outlined how the ceiling price is calculated as average manufacturer price (AMP) minus unit rebate amount (URA). However, the calculation gets tricky factoring in HRSA’s published package adjusted price. “And that’s a calculation. This is where the rounding happens,” explained Zadecky. “It’s AMP minus URA times package size times case package size then rounded to two decimal places.”

There is also a penny pricing exception that if the AMP minus the URA is less than a penny, Zadecky said, “We’ll round there to one penny and multiply by package size … so your bottle of 100 penny price tablets will be $1 rather than less than $1 if we did the normal calculation.”

Another overcharging scenario in this finding is restatements. Zadecky explained in those cases manufacturers need to correct any overcharges with covered entities with restatements.

Prevention strategies

Implement robust policies and procedures

• Maintain clear communication with wholesale partners
• Ensure accurate calculation of ceiling prices (AMP minus URA)
• Be aware of the “penny pricing” exception
• Pay attention to rounding methodologies:
• AMP rounded to six digits
• URA rounded to four digits (positions 5 and 6 padded with zeros)

Incorrect 340B OPAIS Record

“The next finding is a really easy one to avoid,” Zadecky told the audience. “This is just to keep your OPAIS [Office of Pharmacy Affairs Information System] record up to date.” The OPAIS is the only way the manufacturer can be reached by HRSA, according to Zadecky.

“If an AO [authorizing official] or PC [primary contact] leaves the company, it’s important for that information to be updated through an online change request,” she noted.

Fields that can’t be changed on the OPAIS record are the PPA [Pharmaceutical Pricing Agreement] official and the PPA addendum official. As a historic reference, it remains with the person who signed the original agreements.

Prevention strategies

• Maintain the following key fields:
• Manufacturer name and subname
• Authorizing official details
• Primary contact information
• Company street address
• Submit an online change request promptly when key personnel leave the company.

Failure to submit quarterly 340B ceiling price information

The next common pitfall—failure to submit quarterly 340B ceiling price information to HRSA—is closely tied to the previous pitfall, an incorrect OPAIS record.

Zadecky explained that the statute requires HRSA to collect information from manufacturers to verify the accuracy of 340B ceiling prices and make the ceiling prices available to covered entities. Since the 340B OPAIS pricing component is the sole mechanism by which HRSA collects pricing information, when the system opens the correct recipients need to get the notifications.

The AO and PC will receive email notifications when the pricing window opens, with daily reminders until submission. Zadecky said, “Our system is fed with CMS data, and what you put in, [the system] compares it, and if there’s a discrepancy, we just need a good explanation for it.”

To avoid findings, Zadecky said it’s best to provide pricing for all OPAIS NDCs and explain any discrepancies between MDRP data and manufacturer reports using the system’s editable dropdown menus. Of the drop downs, she explained, “Those are just common ones we find, and they are editable, so you can add more information if you want or take information away.”

The recent Q4 ceiling prices process illustrates the quarterly reporting timelines: the window opened August 15, submissions were due within 10 business days, followed by a two-week HRSA adjudication period, with prices published on September 13. The next reporting window for Q1 2025 prices opens around November 15.

Prevention strategies

• Provide pricing information for all NDCs in OPAIS
• Explain any discrepancies between MDRP data and manufacturer-reported data
• Adhere to the quarterly reporting schedule provided by HRSA

Failure to offer the 340B ceiling price

The next finding—failure to offer the 340B ceiling price—differs from overcharging, as it involves not making the ceiling price available at all. “It’s not just a miscalculation. This occurs when a manufacturer doesn’t provide ceiling prices to their wholesale partners, or just doesn’t offer the price at all,” Zadecky said. “Frankly, it’s a lack of awareness that you participate in the 340B program.”

Prevention strategies

• Ensure 340B ceiling prices are calculated and made available for all covered outpatient drugs
• Ensure all relevant departments are aware of 340B program participation and obligations
• Provide 340B ceiling prices through all established distribution channels
• 
  

Failure to determine differences between estimated and actual ceiling prices for new drugs

This finding relates to the proper handling of new drug pricing. The CMP rule provides the methodology for estimating new drug prices. Zadecky explained that calculation is to subtract the applicable rebate percentage from the wholesale acquisition cost (WAC).

This can be done for up to four quarters, or until AMP is established, at which point the actual ceiling price must be calculated. Zadecky said, “If the actual ceiling price is less than the charged estimated price, manufacturers are required to refund covered entities for the difference within 120 days of determining that overcharge.”

Prevention strategies

• Follow new product pricing estimate formulas, consistent with CMP rule
• Establish actual 340B ceiling prices no later than the fourth quarter so that the drug is available for sale
• Issue credits/rebills or refunds within 120 days of determining overcharges

Lauren D’Onofrio, program analyst, Office of Pharmacy Affairs, Office of Special Health Initiatives, wrapped up the session outlining the steps of the audit process and the manufacturer’s response. The steps are:

1. Audit report: Received within 90 days of the site visit
2. Disagreement period: Optional opportunity to provide additional documentation
3. Corrective action plan (CAP): Required within 60 days of receiving the final report
4. Attestation and closeout: Confirm implementation of CAP and finalization of repayments

D’Onofrio suggested that a good corrective action plan response would include using the provided template or ensuring all required elements are addressed. Manufacturers should then describe immediate and future corrective actions. Plans to identify affected covered entities should also be outlined and include the correct contact information for covered entities. Finally, manufacturers need to detail all improvements to prevent future occurrences.

She said the overall key to success in the 340B processes are:

• Maintaining accurate records
• Implementing robust policies and procedures
• Ensuring clear communication across all relevant departments and with wholesale partners
• Staying informed about program requirements and updates