A 340B Contract Pharmacy is a retail establishment that complies with the requirements of the 340B Drug Discount Program in order to supply prescription medications to patients who are treated by qualifying organizations. Contract pharmacies are frequently covered organizations’ first choice when it comes to dispensing 340B medications to patients for a variety of reasons. For instance, the majority of hospitals prefer that their in-house or on-campus retail pharmacies be run by third parties rather than the hospitals themselves.
When it comes to the process of filling prescriptions issued by their physicians, several hospitals have reached contract pharmacy arrangements with various pharmacies in their regions. As a result, they are able to give their patients with increased levels of convenience, access, and choice.
Contract pharmacies should never cost a health system more in fees and charges than they earn in prescription savings. This is because the 340B program was created to assist low-margin, negative-margin, and non-profit healthcare institutions in filling revenue gaps common to their business models.
How do you explain 340B?
The Problem — The 340B Drug Pricing Program has been providing financial assistance to hospitals that serve underprivileged areas in order to assist them in managing the escalating costs of prescription medications for more than 25 years now. The Public Health Service Act, specifically Section 340B, mandates that pharmaceutical companies that take part in Medicaid must offer outpatient medications at reduced pricing to health care organizations that provide treatment to a large number of patients who lack health insurance or have a low income.
- Community health centers, children’s hospitals, hemophilia treatment centers, critical access hospitals (CAHs), sole community hospitals (SCHs), rural referral centers (RRCs), and public and nonprofit disproportionate share hospitals (DSH) are examples of the types of organizations that provide services to low-income and indigent populations;
Other examples include rural referral centers (RRCs) and rural referral centers (RRCs). Patients are able to save money on the cost of outpatient pharmaceuticals thanks to 340B hospitals’ participation in a program that stretches the limited resources available from the federal government.
- The program also allows these hospitals to provide more healthcare services to the communities and patients they serve;
- Hospitals are able to give free treatment to uninsured patients, provide services in mental health clinics, distribute free immunizations, and implement medication management and community health initiatives because to the savings they get from the 340B program;
According to the Health Resources and Services Administration (HRSA), which is in charge of administering the 340B program and is responsible for determining eligibility, enrolled hospitals and other covered entities can achieve savings ranging from 25 to 50 percent on average when purchasing pharmaceuticals.
- Despite increased oversight from HRSA and the program’s proven record of reducing government spending and expanding access to patient care, there are those who want to scale it back or significantly reduce the benefits that eligible hospitals and their patients receive from the program;
This is despite the fact that the program has a proven record of doing both of those things.
What is the purpose of the 340B Drug Pricing Program?
Covered organizations are able to reach more eligible patients and provide more complete treatments thanks to the 340B Program, which enables these entities to make the most of the limited federal resources they have access to. The manufacturers who take part in Medicaid have agreed to offer outpatient pharmaceuticals to insured entities at costs that are much lower than the market rate.
Why is 340B important?
The 340B medicine discount program is an extremely significant program for hospitals that fall under the category of “safety net.” As healthcare providers continue to fight the COVID-19 epidemic and the associated uncertainties, the financial security that may be achieved by a robust 340B program becomes even more vital.
Caravan Health possesses a significant amount of knowledge on 340B, and we just announced the launch of a new line of 340B support services for prescription drug claims submitted under Medicare as well as commercial insurance plans.
When thinking about the future of your 340B program at your hospital, the following five crucial aspects are important to bear in mind.
The majority of covered entities are not submitting all claims that are qualified.
Covered companies are not taking advantage of around 80 percent of the 340B discounts that are currently available.
When you capture all qualifying 340B claims, you will be aware of which physicians, even if they are not affiliated with the covered organization, are writing prescriptions for drugs to your patients. Covered businesses are required to keep extremely detailed records, which must include medical notes outlining a distinct patient-provider relationship for each particular ailment.
Having the software created particularly by professionals for 340B features is the most important step in the capture process. This encompasses both the administration of records and the health of the people. Professionals who use the software provided by Caravan have the assurance that each claim is precisely matched with audit criteria; in the event that this does not occur, the claims are found and the user is barred from moving further in the system.
It is essential that the system be intuitive and easy to use in order to guarantee that claims are processed accurately. Caravan Health, the same company that developed the award-winning technologies Coach and Wellpepper, has also developed 340B software that is able to validate referral claims for Medicare, MA, and Commercial claims.
340B enhances health care and patient safety
The 340B discount program enables insured entities to deliver essential community services while while stretching their limited resources.
Higher rates of heart disease, diabetes, and other dangerous illnesses are seen among rural areas, which are the same groups who make up the majority of Caravan Health’s patient base. Covered entities are permitted to use 340B funding for a wide variety of purposes, including but not limited to the provision of free or discounted medical services, transportation services to medical appointments, financial assistance programs, educational opportunities in the medical field, and more.
The 340B program helps community-based health care providers contact more patients and improves patient care in a direct way. Improved patient safety is another benefit of well managed 340B programs. When clinicians have more information regarding prescribing and filling trends, they have a clearer insight into the drugs their patients are taking (or not taking), as well as where those patients are getting their prescriptions filled.
All of this vital information, which may avoid potentially harmful medication interactions or over-prescribing, is included into complete systems like Caravan Coach.
Utilizing a contract pharmacy management service broadens your scope of influence.
A growing number of patients are opting to have their medications filled at a pharmacy that is located close to their residence, which may or may not be the same pharmacy that is located on-site at the covered business.
This is especially essential in rural areas, where patients frequently have to travel a great distance to the nearest clinic, and it may make a considerable difference in the percentage of patients who comply with their prescription regimen.
Because Caravan Health is able to assist covered entities in determining the pharmacies at which patients are filling prescriptions, we are able to assist in ensuring that those pharmacies are in compliance with the terms of the contract. Following an exhaustive investigation that we carried out on a major national pharmacy chain, we discovered that covered entities were failing to take advantage of sixty percent of the 340B discount opportunities and ninety percent of the qualified contract pharmacies that were available within that single chain.
This loss is equivalent to a minimum of $35 million in 340B discounts that will not be received. No covered entity could possibly have the financial means to allow those discounts to go unclaimed.
340B and contract pharmacies have the endorsement of HHS.
The 340B Act makes it very clear that medication makers are required to pay 340B fees whenever their products are sold through the contracted pharmacies of covered organizations.
Because of the unwillingness of certain manufacturers to provide these necessary reductions, the Health Resources and Services Administration (HRSA), which is a branch of the Department of Health and Human Services, has publicly supported discounts for contract pharmacy agreements.
- The 340B discounts are “not qualified, restricted, or reliant on how the covered organization decides to distribute the covered outpatient medications,” according to letters that the HRSA delivered to six manufacturers in the month of May;
There are currently cases pending that challenge this viewpoint, therefore the task is not yet over. Although there is worry among certain medication makers over the program’s integrity and the possibility of duplicate discounts, HRSA and HHS are unwavering in their support of 340B and contract pharmacies.
Your establishment has to be able to pass an HRSA inspection.
Federal auditors will be looking at your 340B plan, and it ought to be able to hold up under their inspection.
Audits of covered entities and the 340B programs they run are carried out in a random fashion by HRSA. The stakes are high, and any poor claims paperwork might result in the demand for the return of cash already received, in addition to additional penalties.
No facility that provides social safety nets wants to run the danger of being in a situation where they have to give money back to drug producers and withdraw essential resources from the community. It would appear that HRSA has quickened the rate at which audits are being conducted in recent months.
Do not put yourself in a position where you may be caught without a sound strategy that correctly documents the relevant data components. During a recent webinar, Caravan’s Founder and Executive Chair, Lynn Barr, and Chief Pharmacy Officer, Dr.
LeeAnn Scheer, discussed Caravan’s 340B services, as well as how to establish trust in your organization’s 340B program. You can learn more about these topics here. You may watch the webinar whenever you like.
What is a 340B patient?
HRSA, which is in charge of managing the 340B Drug Pricing Program, is the organization that is responsible for awarding contracts under the 340B Prime Vendor Program (PVP). The Prime Vendor is responsible for negotiating price reductions with other manufacturers that are taking part in the program, offering educational opportunities and resources such as 340B University, and providing technical support via Apexus Answers.
Why is 340B bad?
In the 340B program, dishonest participants have realized that they can make substantial profits by purchasing cancer drugs at steep discounts, which are then reimbursed by Medicare and private insurers at full cost. This gives hospitals the opportunity to make profit margins of up to one hundred percent on these expensive drugs.
HOW DO 340B contract pharmacies make money?
As the 340B Drug Pricing Program continues its meteoric rise, pharmacies continue to benefit from it. According to the findings of our most recent and most comprehensive investigation, there are currently approximately 20,000 pharmacy sites that serve as contract pharmacies for the hospitals and other healthcare providers who take part in the 340B Program.
In 2010, participation in the program was comprised of less than 3,000 different drugstore outlets. The quick development of large retail pharmacy chains into 340B, as seen in the fourth figure below, is likely indicative of improved earnings.
There are six significant chains that make up two out of every three 340B contract pharmacy sites in the year 2017.
Walgreens continues to be the most prominent member in the 340B program, with roughly 6,400 outlets participating. CVS, Walmart, and Rite Aid have all increased their level of participation over the course of the previous four years. These three chains now have a combined total of 5,400 pharmacies that participate in the 340B program.
Every year, I find myself wondering how the staggering expansion could ever be sustained economically. How many prescriptions do contract pharmacies offer to patients who are uninsured, underinsured, or who have low incomes at costs that are reduced from the retail price? Are there any profit-sharing arrangements in place between 340B hospitals and the pharmacies? Are they receiving fees that significantly surpass the norms of the fair market value? Who exactly is profiting from the surge in the use of contract pharmacies? 340 BACKGROUND As part of the 340B program, pharmaceutical companies are required to offer considerable price reductions on outpatient pharmaceuticals they sell to specific healthcare organizations, which are referred to as qualified covered entities.
- A covered organization has the option of using either internal or external (contract) pharmacies in order to acquire and dispense 340B medications;
- The Health Resources and Services Administration (HRSA) in 2010 made it possible for qualifying companies, including organizations that operate their own in-house pharmacies, to have access to 340B pricing through a network of several contract pharmacies;
The procedure of contract pharmacy is intricate and sometimes leads to confusion. You are able to track the monetary amount for a typical 340B contract pharmacy arrangement between a hospital and a pharmacy by using the chart that is provided below. [Click here to make it bigger] In 2016, discounted sales made possible under the 340B program reached $16.2 billion.
(See The 340B Program Has Reached $16.2 Billion in 2016, and It Now Accounts for 5% of the Market in the United States of America) During the previous three years, the amount of money spent on purchases made via the program has increased by an average of thirty percent every year.
In point of fact, the 340B program was responsible for 5.0% of the entire drug market in the United States in 2016. See Section 10.4 of our 2017 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers for further information on the role pharmacies play in the 340B program and the profits they make from it.
- THE RECORDS Pembroke Consulting looked into the HRSA’s Contract Pharmacy Daily Report from July 1, 2017, when it was published, in order to create a profile of the 340B contract pharmacy market;
- We eliminated from consideration any contracts that had expired prior to the specified date;
Using our in-house database, we categorized all of the contract pharmacy sites according to their respective parent companies. The majority of chains are listed under a variety of different names. Locations of Walgreens, for instance, may be found in the database under a total of 72 different drugstore names.
CVS stores exist under 80 unique names. ALL ABOARD! There were 19,868 different pharmacies as of July 2017, a total of 19 pharmacies. Since we last did a study in July of 2016, the total number of 340B contract pharmacies has increased by 2,084 sites, which represents an increase of +12%.
The following graphic demonstrates that since the modification of HRSA’s guidelines in 2010, the number of contract pharmacies has significantly expanded. [Click here to make it bigger] The almost 20,000 venues have extensive and meaningful connections with a variety of suppliers.
As of the month of July in 2017, there are a total of 6,059 340B covered firms that have established 52,613 contract pharmacy connections. Since 2013, there has been a 66% rise in the number of pharmacies that participate in the 340B contract program.
THE 2017 340BIG CHAINS There are six different drugstore chains that are responsible for two out of every three 340B contract pharmacy sites. Since quite some time ago, these businesses have been at the forefront of the contract pharmacy industry. Walgreens continues to be the most prominent participant in the 340B pharmacy contract program.
Because more than 6,300 of Walgreens’ stores serve as 340B contract pharmacies, the company is responsible for more than one-third of all of these pharmacies. Additional 6,877 340B contract pharmacy sites are managed by large retail chains such as CVS, Walmart, Rite Aid, Kroger, and Albertsons.
In addition, thousands of local pharmacies not affiliated with any larger chain take part. [Click here to make it bigger] Since we did our initial research in 2013, the rise in 340B participation for the four major chains is depicted in the graphic that can be found below.
The larger chains have significantly boosted the number of sites that are serving as 340B contract pharmacies, which is consistent with the expansion of the program as a whole. This suggests that the profits have been sufficiently large to warrant the investment in this growth.
[Click here to make it bigger] WHAT’S GOING ON? When a pharmacy participates in the 340B program, the source of its profits moves from dispensing spreads to per-prescription fees paid by a 340B-qualified business. This allows the pharmacy to keep more of its revenue.
- There are certain instances in which 340B pharmacies receive a portion of the profits made from the sales of 340B prescriptions; this fact raises additional issues regarding who exactly benefits from the arrangement;
According to our estimates, the gross earnings that a pharmacy makes under the 340B program are significantly larger than the normal gross profit that a pharmacy makes from a third-party payer. A recent statement made by former Representative Henry A. Waxman asserted that the 340B program “functions just as intended.” However, the market for 340B contract pharmacies has evolved in ways that very few people predicted.
Several investigations commissioned by the government have shown significant issues with the program. For instance, according to the findings of a study conducted by the Office of Inspector General (OIG) of 340B contract pharmacies, two out of three hospitals do not provide the 340B discounted prescription pricing to uninsured patients who obtain their medication from these pharmacies.
See A Recently Released OIG Report Gives Validation to Our Worst Concerns Regarding Abuses Committed by 340B Contract Pharmacies Despite this increase, we continue to lack transparency into the actions taken by these 340B contract pharmacies. There is no information provided by any of the publicly traded corporations regarding their involvement in the 340B program. In the meantime, the locomotive of financial success will continue to chug along.
What makes a drug 340B eligible?
2, in order for a prescription to be eligible to be filled with 340B-purchased drugs, it must have resulted from a service that is consistent with the service or range of services for which Section 330 Health Center status has been provided to the entity (either as a grantee or as a look-alike designation).