SOLE-SOURCE DETERMINATION MEMO

FOR SUPPLIES AND SERVICES

*AMENDMENT*

Date: November 27, 2023 January 26, 2026

Sole source number: Original: S-29100-00009104 Amendment: S-29100-00015836

To: Kimberly Mainwaring, Designated Procurement Officer DOC Contracts and Procurement Office

Requestor: Kostas Giannopoulos, Pharmacy Special Programs Manager Agency/division: Oregon Department of Corrections (ODOC) Program/office: Health Services/Pharmacy Contract specialist: Kimberly Mainwaring

Agency Sole source rule: Sole source authority:

DOC OAR 125-247-0275 OAR 125-246-0170(2)

Estimated total contract value: $219,780.00 $800,000.00

Description of goods or services: Craneware Sentrex Split-Billing Subscription Software

1. Background: This sole source justification applies to the purchase of:

Health Services is seeking a pharmacy split-billing software solution that will allow the ODOC to expand its participation in the 340B drug pricing program. By utilizing 340B split-billing software, Health Services expects a substantial increase in cost avoidance, improved efficiency within ODOC pharmacies and a reduced risk of program noncompliance.

The 340B Drug Pricing Program is a US federal government program created in 1992 that requires drug manufacturers to provide outpatient drugs to qualifying healthcare organizations at significantly reduced prices. These discounts typically range from 25% to 50% for pharmaceutical purchases. The program helps safety-net providers, called “covered entities,” stretch their limited financial resources to treat more patients, expand services, and improve care.

The 340B Program is overseen by the Health Resources and Services Administration (HRSA) of the Department of Health and Human Services. HRSA enforces program objectives, assesses risk, and ensures participating entities comply with applicable laws and regulations.

By participating in the 340B program, covered entities are subject to audit by HRSA and by drug manufacturers. During a HRSA audit, a covered entity must demonstrate compliance with the following key elements:

• Policies and procedures outlining the entities’ compliant operation of the program

• Records of drug transactions and patient eligibility for those receiving 340B purchased drugs

• Internal controls to prevent diversion, including to ineligible patients and between covered entities

Critical to compliance is ensuring that patients receiving 340B drugs meet program requirements and HRSA’s “definition of a patient”. HRSA’s eligible patient definition is outlined in Federal Statute and states “An individual is a ‘patient’ of a covered entity … only if:

1. the covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual’s health care; and

2. the individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g., referral for consultation) such that responsibility for the care provided remains with the covered entity; and

3. the individual receives a health care service or range of services from the covered entity which is consistent with the service or range of services for which grant funding or federally qualified health center look-alike status has been provided to the entity…”

Entities found in violation of these requirements must repay savings on divergent claims and, in especially grievous cases, can be terminated from participation in the 340B program. This makes inventory management, maintenance of auditable records, and documentation of qualifying healthcare services crucial to ensuring 340B compliance.

To meet inventory management requirements, pharmacies participating in 340B typically utilize one of two inventory models:

1. A pharmacy using a separate physical inventory model maintains individual 340B inventories for each covered entity they service. These inventories must be separated from the pharmacy’s regular drug stock and from each other. This model requires a large amount of physical space and the ability to determine 340B prescription eligibility at the time a prescription is being dispensed.

This model is typically used by pharmacies who purchase a limited number of medications through 340B and who can easily determine patient eligibility.

2. A replenishment inventory model allows a pharmacy to purchase an initial drug inventory as non-340B and use that inventory to fill both 340B and non-340B prescriptions for all patients. The purchase histories of replacement drugs are “neutralized” when they enter the pharmacy, losing their identity as a 340B or non-340B and instead becoming part of the one physical inventory. Replenishment models are made possible using split-billing software which retroactively identifies and records whether a dispensed prescription was 340B eligible. The pharmacy then reviews these records to determine whether the replacement product should be ordered from the covered entities’ 340B account or the pharmacy’s non-340B account. Upon receiving the product, it once again becomes “neutral”, and the drug initially dispensed assumes the purchase identify of the drug arriving.

This model is typically used by pharmacies who serve both 340B and non-340B patients and who may not always know a patient’s eligibility at the time of dispense.

Health Services has been operating a 340B program since July 1st, 2020. ODOC qualifies for 340B participation by receiving in-kind contributions paid for with Section 318 grant funds through the Oregon Health Authority. Section 318 funds are used for the treatment and prevention of Sexually Transmitted Diseases (STDs). For a patient’s prescriptions to be eligible for 340B discounted pricing, the patient must have received a qualifying healthcare service that falls under the scope of grant. In ODOC’s case, this means a patient must have received a service related to the treatment or prevention of STDs.

ODOC operates 12 correctional facilities, each registered with HRSA as a separate covered entity. Two ODOC institutional pharmacies serve as distribution centers for these entities and perform 340B pharmaceutical ordering on their behalf and through separate distributor accounts.

Currently, ODOC operates a separate physical inventory model and therefore obtains only 12 medications through the 340B discounted pricing. All 12 medications are for the treatment of Hepatitis C (HCV) or Human Immunodeficiency Virus (HIV), which allows the pharmacy to identify 340B eligible prescriptions at the time of dispense.

Upon receiving a prescription for one of these 12 medications, ODOC pharmacists verify prescriber eligibility using the pharmacy’s prescription processing software, CIPS. If a prescriber is deemed eligible, the pharmacist processes the prescription as 340B, and the prescription is filled from the ordering entity’s 340B stock.

To ensure diversion of 340B drugs does not occur, pharmacy must maintain a perpetual inventory for 340B drugs. Currently, this is accomplished using an Excel ledger, where pharmacy staff must manually record all 340B transactions including the receipt, dispense, return and waste of all 340B drugs for each of ODOC’s institutions. Staff monitors this tracker on a regular basis to identify and reconcile possible errors.

In the event of a HRSA audit, ODOC would need to use the Excel inventory ledger to demonstrate compliance with inventory management requirements and allow for prescription transaction tracing. This causes significant concern due to the increased risk of error associated with manual data entry.

If the pharmacy continues with “business as usual,” ODOC will forego considerable cost savings and continue to rely on the manual tracking and recording of inventory. Making a minor expansion of the program without split-billing software would require Health Services to identify a small number of other STD specific medications that would allow the pharmacy to determine patient eligibility at the time of dispense. This would increase the risk of non-compliance and the burden on pharmacy staff for a minimal impact on cost avoidance. For these reasons, Health Services recommends investing in split-billing software for the complete expansion of the 340B program. Doing so will allow ODOC to retroactively determine patient eligibility and therefore greatly increase the number of patients and medications eligible for340B discounted pricing.

Split-billing software is provided by a third-party vendor as a SAAS or cloud-based service and functions by comparing data from a patient’s medical history against a sequence of 340B eligibility checkpoints. After a prescription is dispensed, the software determines 340B patient eligibility by reviewing data points related to meeting HRSA’s definition of a patient. Typical data points include:

1. Patient name, date of birth, and ID number

2. Qualifying healthcare service and date

3. The medical providers name, NPI and DEA numbers

4. The location or facility at which the healthcare service took place

The split-billing software then determines retroactively whether a dispensed prescription is eligible for 340B replenishment. The software records the amount of medication dispensed under the appropriate pharmaceutical account for each eligible transaction through a process called “accumulation”. Once a full package size of a medication has accumulated under a single account, the pharmacy places an order under the corresponding account with the pharmaceutical distributor. When the replacement medication is received, it once again becomes part of the neutral inventory.

Because of the significant cost associated with implementation of split-billing software, and to fully determine the capabilities and requirements most impactful to ODOC, Health Services, in conjunction with Procurement and ITS, began pursuing a pilot project.

The split-billing pilot project has been outlined as a 18-to-24-month 24 to 48 month long project with a not to exceed budget of $250,000 $800,000. This budget encompasses all implementation, on-going services, and licensing costs. The software will be implemented at both ODOC pharmacies, the Salem Correctional Pharmacy and Four Rivers Correctional Pharmacy. The pharmacies will continue to place 340B drug orders on behalf of the covered entities they service, resulting in a minimal impact on the institutions themselves.

ODOC will complete a pilot project with the Craneware Group with a 2448-month contract for a total fee of $219,780$800,000. The agreement includes implementation and training at both ODOC pharmacies.

During the pilot project, pharmacy staff will utilize and familiarize themselves with the software so they can gather more detailed information on the desired attributes of a long-term solution. During the pilot project, ODOC will solicit for a long-term software solution through a formal solicitation process.

2. Amendment Purpose: Due to the constant change of federal program regulations with regards to the 340b rebate program, ODOC requires additional time with the pilot program to thoroughly identify all needed requirements for success. Therefore, the pilot program is being extended to 48 months, with additional funding to support the subscription fees and any additional programming needs. ODOC will be releasing a competitive procurement process once these requirements have been identified.

3. Prospective contractor/vendor:

Legal entity name: The Craneware Group Address: 800 Fairway Drive #400, Deerfield, FL 33441

Protests are due by 3:00 PM within seven calendar days after the first date the notice is posted on OregonBuys. Protests must be sent via mail, email, or hand carried to the following address: Protests via telephone will not be accepted.

Oregon Department of Corrections Procurement and Contracts Section ATTN: Kimberly Mainwaring Address: 3723 Fairview Industrial Drive SE 200 Phone: 971-372-1792 Email: Kimberly.l.mainwaring@doc.oregon.gov

Agency reserves the right to purchase additional services to include expansion (time or services or both) of the pilot project, including additional funding and time for up to a total time of three years, due to any unforeseen circumstances.

3. Written findings of fact (market research):

The findings below must include factual information supporting the determination that meet the sole source requirement in statute.

Pursuant to ORS 279B.075, Agency must conduct market research that supports the assertion that there is only one source that can provide the goods or services. Market research includes utilization of the internet, trade journals, agency vendor lists, professional organizations, studies, catalogs/industrial periodicals, vendor sources, yellow pages, etc.

Agency must select at least one of the findings and prepare the determination as it specifically relates to the good or service being procured. More than one finding can be addressed. The findings are as follows:

Pursuant to ORS 279B.075 (2)(a): Provide findings supporting the determination that the efficient utilization of existing goods requires the acquisition of compatible goods or services from only one source. Not applicable or

Pursuant to ORS 279B.075 (2)(b): Provide findings supporting the determination that the goods or services required for the exchange of software or data with other public or private agencies are available from only one source. Not applicable or Pursuant to ORS 279B.075 (2)(c): Provide findings supporting the determination that the goods or services are for use in a pilot or an experimental project.

Agency intends to pilot software as part of ODOC’s requirements development stage for a permanent solution for a 340b split-billing solution. The results of the pilot will be part of the Request for Proposal solicitation.

or Pursuant to ORS 279B.075 (2)(d): Any other findings that support the conclusion that the goods or services are available from only one source. Not applicable

APPROVED:

By:

Signed by DPO electronically via OregonBuys Kirk N. Rhoades or acting DPO