The 340B Drug Pricing Program

Pharmacy Leaders Face Reimbursement and Compliance Challenges

The 340B Drug Pricing Program requires drug manufacturers participating in Medicaid to provide outpatient drugs at significantly reduced prices to eligible healthcare organizations or covered entities, such as safety-net hospitals. This program was originally set up in 1992 to provide support to safety-net hospitals that take care of a large number of the poor and indigent in their communities to stretch scarce dollars to help take care of those patients. The 340B program was expanded under the Affordable Care Act (ACA), adding eligibility for critical access hospitals, sole community hospitals, rural referral centers and freestanding cancer hospitals, explains Vincent Jackson, PharmD, vice president of HealthTrust’s pharmacy services group.

In early January, the U.S. Health Resources and Services Administration (HRSA) published a final rule updating the price structure for the 340B Drug Pricing Program. The rule, known as “340B Mega Guidance,” was set to become effective in March. However, on Jan. 30, President Trump instituted an executive order banning new government regulations and 340B Mega Guidance was withdrawn.

The rule would have provided clarifications regarding enrolled cover entities, patient and physician eligibility, drug manufacturer participation and participating contract pharmacies, Jackson says. Since it has been withdrawn, further guidance could potentially be issued through Apexus (HRSA-designated vendor for the program), HRSA Office of Pharmacy Affairs or HRSA audit findings.

While the Mega Guidance rule was under review, some hospitals raised concerns about the proposal, and the American Hospital Association argued that redefining patient eligibility for the 340B program would have inappropriately narrowed the number of drugs that qualify for 340B pricing. “It’s anybody’s guess whether [the Mega Guidance rule] will ever come out, and if it does, it could be totally different from what we thought it might be,” says Michael Bonck, R.Ph., pharmacy manager at CHI Franciscan Health’s St. Joseph Medical Center in Tacoma, Washington.

For now, the rule is off the table, but with the new administration’s call to repeal and replace the ACA, the future shape of 340B could still be in question. In the meantime, covered entities are focused on maintaining compliance and communicating the value of the program to decision-makers.

Maintaining Compliance

In recent years, the 340B program has been the subject of increased scrutiny, with the Office of Pharmacy Affairs (OPA) undertaking over 500 audits of covered entities since 2013, Bonck says. More compliance audits are planned.

Participating in the program offers hospitals deep discounts on drugs for qualifying patients, but it also requires multiple levels of reporting and compliance. For instance, on a regular basis, covered entities must undertake internal audits to ensure that their data clearly separates medications used for eligible patients of GPO hospitals from eligible 340B patients of non-GPO hospitals, Bonck says.

The program originally permitted covered entities to use one contract pharmacy, but in 2010 that expanded to as many as needed to best serve their patient population. “Some have over 100 contract pharmacies, which can increase their risk if they’re not auditing each of those,” Bonck says. “If 340B contract pharmacy buy-backs are purchased incorrectly through the 340B entity’s TPA administrator, the contract pharmacy or the TPA administrator is not at risk; the covered entity is at risk since it’s ultimately responsible for any errors.”

In addition, every new clinic operating under a 340B-eligible entity must be registered with OPA, a process that can take up to 18 months. If a “child site” (e.g., outpatient center or clinic operating under a parent hospital) is not properly registered and is using 340B, the parent site will be in breach of regulations.

With all the ongoing audits, covered entities are wise to participate in regular internal audits to ensure their processes are compliant with 340B regulations. For instance, at CHI Franciscan, one full-time employee is focused solely on 340B compliance, doing spot audits throughout the system.

Communicating Value

Although the 340B program requires rigorous reporting and compliance, it is highly valued by qualifying hospitals, and many are working to educate legislators about its importance. Bonck visited Capitol Hill in July 2016 following the 340B coalition meeting to share with lawmakers how the program supports poor and underserved patients.

“If the ACA were repealed without a replacement for 340B, rural hospitals would no longer be eligible for the program and that would translate into several million dollars of increased costs for many hospitals,” Bonck says. “In Oregon, CHI Franciscan would incur about $1 million to $1.5 million in increased costs.”

While a potential replacement plan for the ACA is still being debated, Bonck predicts a “huge backlash” if 340B isn’t included. For instance, when the 21st Century Cures Act originally included anti-340B legislation, tremendous support for 340B from over 400 hospital administrators resulted in that language being stripped from the bill.

In addition to educating lawmakers about the number of patients who benefit from discounted drugs through 340B, Bonck also communicates about the program’s lack of cost to taxpayers. “These costs are not to the government; they are costs to the pharmaceutical industry,” he says.