340B Contract Pharmacy
The 340B contract pharmacy model enhances the program’s reach by allowing eligible covered entities to collaborate with retail pharmacies in distributing discounted medications to patients. Designated contract pharmacies dispense 340B drugs at reduced prices to eligible patients, enabling covered entities to capture savings for reinvestment in patient care. However, navigating manufacturer restrictions is crucial for compliance while optimizing the program’s advantages for patient populations.
340B Drug Pricing Program
The 340B drug pricing program, overseen by the Health Resources and Services Administration (HRSA), offers crucial rebates and cost savings to eligible healthcare facilities like hospitals and community health centers. By purchasing outpatient drugs directly from manufacturers at discounted rates, these entities can extend their resources to provide essential medications to uninsured, under-insured, and low-income patients, thereby bolstering access to vital healthcare services. Compliance with program guidelines is essential for participating entities to maintain eligibility and responsibly utilize 340B savings.
Why is 340B Important?
The 340B drug program, established by Congress in 1992 and expanded in 2010, plays a vital role in achieving two primary objectives:
Supporting qualifying hospitals and providers serving vulnerable populations by stretching their limited resources, enabling them to deliver essential services to their communities.
Facilitating access to necessary medications for vulnerable patients who may otherwise struggle to afford them. Participating covered entities experience significant savings—averaging between 25 to 50%—on pharmaceutical purchases. These savings allow them to offer critical services such as free vaccinations, mental health support, and chronic disease management programs to their communities. In 2018 alone, these savings amounted to approximately $67.9 billion.
Who is Eligible?
Entities eligible for participation in the 340B program include:
1. Government-owned or operated facilities at the state or local level,
2. Non-profit organizations with contracts from state or local government entities,
3. Non-profit corporations with governmental authority granted by state or local governments.
What Drugs Are Covered?
Hospitals are mandated to submit an annual Medicare Cost Report (MCR), which utilizes a sophisticated formula to calculate the disproportionate share percentage (DSH). This percentage is instrumental in determining the eligibility of hospitals for the 340B program and categorizes them as follows:
- Disproportionate Share Hospitals (DSH%) with a rate of 11.75% or higher
- Children’s Hospitals with a DSH% of 11.75% or higher.
- Critical Access Hospitals, designated during MCR filing.
- Free Standing Cancer Hospitals with a DSH% of 11.75% or higher.
- Rural Referral Centers with a minimum DSH% of 8%.
- Sole Community Hospitals with a minimum DSH% of 8%.
Who is Eligible?
Your hospital must meet one of these classifications:
- Government-owned or operated facilities at the state or local level,
- Non-profit organizations with contracts from state or local government entities,
- Non-profit corporations with governmental authority granted by state or local governments.
What Drugs Are Covered?
The 340B Drug Pricing Program encompasses a broad spectrum of outpatient prescription drugs available for use in mixed-use facilities and contract pharmacies affiliated with eligible covered entities. These drugs, approved by the U.S. Food and Drug Administration (FDA) and listed on the program’s official database administered by HRSA, comprise:
- Medications for the treatment of both acute and chronic illnesses,
- Specialty drugs,
- Orphan drugs,
- Medications utilized in the prevention or management of various conditions, including but not limited to HIV/AIDS, cancer, diabetes, and cardiovascular disease.
Mixed-use facilities, such as hospitals, community health centers, and other healthcare providers, have the opportunity to access discounted prices for eligible drugs administered to patients receiving outpatient services, regardless of the care setting. Likewise, contract pharmacies associated with covered entities are able to distribute eligible drugs at reduced prices to eligible patients under the care of the covered entity. This extension of the program’s reach enhances accessibility to affordable medications for underserved populations.
Who Can Receive 340B Drugs?
To be eligible to receive 340B-purchased drugs, patients must receive health care services other than drugs from the 340B covered entity. An individual is a patient of a 340B covered entity (with the exception of State-operated or funded AIDS drug purchasing assistance programs) only if:
The covered entity’s criteria for eligibility include:
1. Establishing a documented relationship with the individual to maintain healthcare records.
2. Ensuring that the individual receives healthcare services from a professional employed by the covered entity or through contractual arrangements where the responsibility for care remains with the covered entity.
3. Providing healthcare services consistent with the service range for which grant funding or FQHC Look-Alike status has been granted to the entity.
Why Are Eligibility Qualifications So Important?
To ensure compliance with the 340B program, covered entities must adhere to continuous requirements and uphold auditable records. Failure to meet eligibility criteria may necessitate repayment of discounts to manufacturers. If violations are determined to be widespread, a covered entity could face temporary disqualification from participating in the 340B program.
340B Program Requirements for Maintaining Compliance
Group Purchasing Organization (GPO) Prohibition
Disproportionate share hospitals, children’s hospitals, and free-standing cancer hospitals are prohibited from acquiring 340B covered outpatient drugs via group purchasing organizations or similar arrangements.
Duplicate Discounts
The 340B statute prohibits duplicate discounts, which arise when a covered entity secures a 340B discount on a medication while a Medicaid agency simultaneously receives a manufacturer rebate for the same medication. Covered entities are required to implement measures to prevent such duplicate discounts.
Program Eligibility
Annually, covered entities are required to recertify their eligibility and promptly inform the Office of Pharmacy Affairs of any changes in their eligibility status. In case of such changes, it is incumbent upon the covered entity to notify OPA immediately and cease drug procurement through the 340B Program.
Medication Diversion
Subparagraph (B) of 42 USC 256b(a)(5) prohibits the resale of 340B drugs to individuals who are not patients of the entity.
Auditable Records
Covered entities are subject to audits by both federal authorities and drug manufacturers, necessitating ongoing readiness for 340B audits to maintain program compliance.
Database Accuracy
Covered entities must be listed in the 340B database and possess a unique 340B ID to qualify for the program. It is mandatory to maintain updated information in the database and ensure accurate listing of all details. Wholesalers are prohibited from shipping 340B drugs unless there is an exact match of site/address in the database.
Contract Pharmacy(ies)
Before dispensing 340B drugs on behalf of the covered entity, contract pharmacies are required to register for the 340B Program and be included in the 340B OPAIS. It is the responsibility of covered entities to ensure that their contract pharmacy arrangements adhere to all 340B Program requirements.
Outpatient Facility Enrollment
Enrollment of outpatient facilities is a crucial and reimbursable aspect incorporated within the most recent hospital cost report filing. To fulfill OPA requirements, the following documentation must be submitted:
– Worksheet A and C from the most recently filed cost report. Supplemental documentation should be provided if clinics are bundled on the worksheet (e.g., working trial balance).
– Worksheet S-2 from the most recently filed cost report for sites with a distinct Medicare number from the primary hospital.
– Worksheet E, part A, from the most recently filed cost report for hospitals with a DSH adjustment percentage requirement.
In instances where the facility name differs from the cost reporting listing, documentation demonstrating inclusion of the outpatient facility in the most recent cost report is necessary.
How is 340B Compliance Monitored?
340B Auditing:
HRSA conducts audits of both covered entities and drug manufacturers to ensure compliance with 340B requirements. Drug manufacturers also have the authority to audit covered entities if they can demonstrate reasonable cause and obtain prior approval from HRSA. However, their audits are limited to compliance issues related to patient definition and duplicate discounts.
340B Recertification:
All 340B covered entities are required to recertify annually. During the recertification process, the Authorizing Official must log into the 340B OPAIS, update information as necessary, and attest to the covered entity’s compliance with 340B Program requirements.
Registration Dates and Deadlines:
Quarterly registration periods occur from the 1st through the 15th of January, April, July, and October. This is the designated time for submitting new registrations. Approved registrations will have a start date set for the first day of the following quarter.
Gathering Required Information:
It is essential to have all necessary documents readily available. For instance, the latest filed Medicare cost report is required. If 340B drugs will be used for Medicaid patients, the Medicaid billing number and/or National Provider Identifier must be provided. Written contracts for contract pharmacies must be completed before registration.
Optimizing Your Pharmacy for 340B
Contract Pharmacies:
Establish effective communication channels, strong compliance mechanisms, and carefully select pharmacies to ensure smooth integration and adherence to program requirements, including recent manufacturer restrictions.
Specialty Pharmacies:
Forge solid partnerships with experienced specialty pharmacies in 340B programs, streamline referral processes, and utilize technology to improve medication management and patient care.
Patient Referral Program:
Establish streamlined communication protocols between covered entities and referral sites to facilitate prompt patient referrals and offer comprehensive support services, enhancing patient access to discounted medications and promoting better health outcomes.
Entity-Owned Pharmacy:
Implement efficient inventory management systems, adhere to 340B program requirements, and utilize data analytics to optimize cost savings and enhance patient outcomes. Notably, current manufacturer restrictions do not apply to entity-owned pharmacies.
How Will the 340B Program Likely Change in the Future?
The 340B drug pricing program remains a subject of extensive discussion, drawing both advocates and critics who hold strong opinions on its various aspects. In the current landscape, heightened manufacturer restrictions underscore the significance of understanding and engaging with contract and specialty pharmacies.
Manufacturers now require prescription information to be sent to a third party for verification, adding to the workload of hospitals and 340B staff. In response to these restrictions, hospitals are exploring avenues to mitigate losses, including considering the benefits of owning an entity-owned pharmacy, which currently operates without manufacturer restrictions (although this may change in the future).
Moreover, the referral program presents an opportunity to counteract the effects of manufacturer restrictions.
Multiple legislative initiatives are currently under consideration, likely to impact the program. Despite these developments, the 340B program continues to play a vital role in providing vulnerable communities with access to quality healthcare.
