340B Aware and Beware

Being aware of the complex and ever-changing 340B Drug Pricing Program rules helps covered entities maintain integrity and drive program value. Successful 340B programs focus on three fundamental objectives; ensuring compliance, optimizing savings and controlling skyrocketing costs of pharmaceuticals. It’s a three-legged stool analogy, where all of the legs must be in balance in order to stand solidly over time. To effectively navigate the complex dynamics of the 340B Program and address challenges as they arise, it is important to select the right partner — a partner who truly understands all of the nuances of this complicated program.


Controlling Costs

Covered entities that own a pharmacy(s) which serves both inpatients and outpatients, bear the important burden of ensuring that drugs are purchased
on the correct account – wholesale acquisition cost (“WAC”), group purchasing organization (“GPO”) and 340B. And, importantly, that they must ensure that
HRSA’s “GPO Exclusion” rule is not violated. To assist in this important cost and
compliance issue, many covered entities turn to split-billing vendors to assist
them. Most split-billing vendors will boast that they can also easily manage a
contract pharmacy network, and often seek the exclusive right to do so. Nothing
could be further from the truth. It is important for a covered entity to be aware
of the distinctions between these two essential, but very different lines of

Split-billing solutions allow the covered entity to separate 340B eligible
prescriptions from non-340B eligible prescriptions after the prescriptions are
dispensed. The split-billing solution attempts to do this by gathering
information on all patient charges from the covered entity’s information
systems. It uses this information to ensure that inventory for the internal
pharmacy(s) is purchased on the appropriate account. The ability to lower the
overall cost of pharmaceutical purchases while remaining compliant is the goal,
and the program performance is only as good as the quality and accuracy of the
data. This means the split- billing solution must work seamlessly in the covered
entity’s information environment.

Choosing a split-billing vendor is not a decision to be taken lightly. By choosing
the right split- billing solution, a covered entity can be reassured that the overall
cost of pharmaceuticals it purchases is being optimized, 340B Program integrity
is being maintained and diversion prevented. In addition, pharmacy personnel
are freed to focus on patient care.ct. Current industry estimates indicate that
$10-$12 billion worth of drugs were purchased from drug manufacturers at
340B prices in 2015. That is $10-$12 billion of cash paid to the drug
manufacturers by Covered Entities. Assuming a 340B discount was not
available, Covered Entities would have paid $12 to $15 billion for these same
drugs. The net cost to the drug manufacturers, therefore, ranges somewhere
between $2-$5 billion. This represents a very small percentage of the HHS’
estimated $457 billion spent on drugs in 2015.


Optimizing Program Savings

Optimizing 340B Program savings through a contract pharmacy network is a win-win-win strategy for the covered entity, its patients and the pharmacies. For
the covered entity, a contract pharmacy network enables it to capture an
increased number of prescriptions written by its providers to its outpatients —
thus generating increased 340B savings. Patients receive increased access to
pharmacy care, and pharmacies enjoy a closer relationship with the covered
entity and higher dispensing fees. In addition, a contract pharmacy network
enables covered entities to construct a more efficient program for its uninsured
patients. Contract pharmacy networks provide the opportunity for covered
entities to achieve HRSA’s stated intent for the 340B Program — to stretch
scarce Federal resources as far as possible, reaching more eligible patients and
providing more comprehensive services.

For covered entities, the 340B Drug Pricing Program
facilitates the extension and expansion of services
to the most vulnerable and needy patients, thereby
improving patient health and ultimately lowering
healthcare expenditures.

Establishing an optimized contract pharmacy network, requires a 340B administrator
focused on all aspects of the program. An administrator who
understands that each covered entity is unique and requires a custom solution.
The 340B administrator must start with ensuring the proper registration of all
clinics and pharmacies. From there it must obtain all data feeds in whatever
format the covered entity can provide. Next it must analyze the data to identify
the key community retail pharmacies and specialty pharmacies, where patients
are filling their prescriptions. Then it must build the contract pharmacy network
that optimizes the capture rate of 340B eligible prescriptions. Finally, it must
continually work with the covered entity to ensure that every aspect of the
program is being optimized. A successful contract pharmacy network should
provide the following.

  • High performing retail and specialty pharmacies
  • A customized strategy to contract with limited and exclusive specialty pharmacy
    • This will help ensure that specialty prescriptions previously locked out of a
      340B program by health plan’s PBMs and their captive specialty
      pharmacies can be captured in the program
  • Dedicated and engaged customer service, focused on optimizing the programs
  • Completely transparent, real-time program reporting and analysis
    • Including the ability to monitor and self-audit every prescription
  • Pricing that is both transparent and completely aligned with the covered entity

There is lot of confusion in the market regarding program cost versus program
value. Many 340B administrators will promote a ‘per claim’, ‘per click’ or ‘per
pharmacy’ program fee structure. Be aware of the many hidden fixed fees
associated with these approaches. In many of these arrangements the program
savings may not exceed the fixed fee requirements, leaving the covered entities
340B program at a financial loss. A successful 340B administrator should be
willing to provide a pricing methodology that aligns with the success of the
program and puts the 340B administrator’s fees at risk, based on overall
program performance. It’s a simple, transparent and aligned approach if you
think about it.

So while many if not all of the split-billing software companies offer to provide a
contract pharmacy component as an “add-on” to their primary offering, keep in
mind that these are two very important albeit very distinct program offerings.
Each with different requirements which provide different value propositions for
the covered entity that should never be part of a single buying decision.
Covered entities need to maximize cost reduction and optimize revenue opportunities.



What does a covered entity need to be aware of when it comes to HRSA audits?
Since 2012, the number of covered entities audited by HRSA has increased each
year. Covered entities that have never been audited before may receive notice
in the near future notifying them of an impending audit. Legal experts have
warned it is not a matter of “if” but “when” a covered entity may be chosen to
undergo an audit.

Prioritizing the 3 fundamental 340B elements will
lead you towards a 340B program manager that
offers the most comprehensive services available.
Ensuring the highest level of program integrity and
optimizing the amount of 340B savings generated.

Over 75% of the audits conducted by HRSA have resulted in negative findings,
with over 43% identifying two or more discoveries. Over half HRSA’s audits
have resulted in the Covered Entity incurring penalties, potentially requiring
repayment to manufacturers. So far this year, 28 covered entities have
undergone HRSA audits, with seven entities required to repay manufacturers
due to diversion or duplicate discounts. Four entities were terminated from the
program for working with contract pharmacies without written contracts in
place. This is why it’s imperative for a Covered Entity to choose a 340B
administrator who surpasses the current industry standards in the ability to
ensure program integrity and compliance. Subject to the rules of participation,
Covered Entities are allowed to provide 340B drugs only to those individuals
who are ‘patients’ of the Covered Entity. Currently, with the lack of specificity in
regards to the criteria defining eligibility, Covered Entities must be aware of and
beware of providing 340B prescriptions to individuals who do not meet the
program’s requirements. 340B administrators who are capable of providing
Covered Entities with the tools needed to have real-time access to eligible
prescriptions as well as potentially eligible prescriptions offer program
optimization as well as self-auditing capabilities in today’s environment.

According to the statute, when an eligible entity voluntarily decides to enroll in
the 340B program, it accepts responsibility for ensuring compliance with all
provisions of the 340B program, including all associated costs. Beware of 340B
administrators that guarantee 100% compliance: check their history of audit
occurrences and outcomes. Only a skilled 340B administrator, with a successful
track record in navigating the ever-changing challenges of the 340B program can
successfully guide you through the complex and highly regulated, evolving federal
drug discount program. Prioritizing the three fundamental 340B elements will lead
you towards a 340B administrator that offers the most comprehensive services
available ensuring the highest level of program integrity and optimizing
the amount of 340B savings generated.

When it comes to participation in the 340B Drug
Program some words of advice. Be aware and