Navigating tumultuous & litigious requirements of 340B

Chris Yoder, MHA

Section 340B of the Public Health Service Act is essentially a drug pricing program that, according to the American Hospital Association (AHA), “requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to healthcare organizations that care for many uninsured and low-income patients.”

Many aspects of the 340B program are complex. And, with drug manufacturers now restricting or cutting access and lawsuits making their way through the courts, things have gotten even more complicated. To assist members in navigating the program and its impact on pharmacy operations, HealthTrust has a new staff resource who specializes in this area: Chris Yoder, MHA, Director of 340B Member Support & Pharmacy Solutions.

The continuing impact of COVID

COVID has been especially challenging for 340B participants, Yoder shares. Due to COVID-related limitations in outpatient services over the past couple of years, hospitals have seen a change in their patient case mix and a lowering of their Medicare disproportionate share (DSH) adjustment percentage. For some covered entities whose 340B eligibility is based on a specific payor mix threshold, that has resulted in a loss of eligibility.

However, Yoder says that some relief is on the way. The recently signed omnibus spending bill provides protection to eligible hospitals. The Department of Health and Human Services (HHS) is working to ensure these hospitals have their eligibility reinstated. To help accomplish this, the Health Resources and Services Administration (HRSA) has posted guidelines and a template for hospitals to submit an attestation of how COVID has impacted their operations and resulted in 340B ineligibility due to a decrease in DSH percentage.

Drug manufacturers restricting access

In the summer of 2020, drug manufacturers began cutting off the sale of products and implementing new policies that curtailed the ability of 340B participants to use contract pharmacies. “This action is in direct violation of federal law and completely undermines the foundation of the 340B program, which is access to discounted pricing on drugs,” Yoder explains.

As of April 16, several drug manufacturers have imposed or have announced their plans to impose restrictions on contract pharmacy relationships.

Drug manufacturers say they are limiting 340B access to ensure program transparency and compliance and to limit duplicate discounts. They also point out that covered entities still have access to 340B products and pricing—just not through an unlimited number of commercial contract pharmacies. And, says Yoder, “They are now requiring that covered entities comply with onerous and concerning requests. The data they are requesting exceeds the justification and will undoubtedly be used to undermine the integrity of the 340B program.”

340B Health, a membership organization of nonprofit hospitals and health systems participating in the 340B program, estimates that 62% of hospitals expect to lose 15% or more of their 340B savings under the cuts, Yoder shares. The ripple effects of the cuts and restrictions imposed by these drug manufacturers mean that millions of patients are at risk of losing access to a wide range of services. “For example,” Yoder says, “covered entities are reporting their inability to provide high-cost insulin to their uninsured or underinsured patients. Before the restrictions, through 340B community pharmacy partnerships, patients in need could access medications that would otherwise be unaffordable. Patients are now going without therapy or are being treated with less-ideal options.”

Navigating The bumpy legal landscape

The HRSA has not stood idly by. The agency has notified drug manufacturers that their actions are unlawful and ordered them to restore access to 340B pricing. The HRSA has also referred cases to the HHS to consider penalties.

Various lawsuits between the federal government and drug manufacturers have been filed, resulting in rulings for both sides, as well as appeals. This drawn-out legal process could ultimately require Congress to make changes and clarifications to the program. In fact, judges who have weighed in on the cases going through the legal system have expressed that they believe Congressional clarification will be necessary.

While this issue makes its way along various legal paths, covered entities do have some options to gain access to 340B pricing, Yoder explains, but nothing is simple. Each drug manufacturer has provided policies associated with the restrictions, including detailed special requirements for covered entities to gain access to 340B discounts. These policies range from limiting 340B access to a single contract pharmacy to submitting all claims through a third party.

“One third-party platform that drug manufacturers have partnered with is 340B ESP, which manufacturers use as a gateway to access 340B pricing,” Yoder shares. “Each manufacturer has its own set of unique requirements that must be met to access the pricing, and the 340B ESP platform tailors the process to those unique requirements.”

Some of the data drug manufacturers are requiring makes covered entities uneasy. “Providing sensitive information is a major concern within the healthcare industry,” Yoder explains, “which makes the decision to comply to the manufacturer’s request extremely troublesome, especially when it’s not clear how the data will be used.”

The drug manufacturers have said that claims data that is collected will be used to ensure program compliance, reduce duplicate discounts, and to ensure overall transparency. However, says Yoder, the information can also be used to negatively impact the program through reimbursement reductions. If such a thing were to occur, the covered entity’s ability to maintain and expand on current patient services would be reduced, and the integrity of the 340B program would be completely undermined.

“It’s important to understand that the drug manufacturers who have decided to impose restrictions are ultimately holding covered entities hostage,” Yoder adds. “For years, drug manufacturers have battled to gain access to covered entity claims data. They are now attempting to leverage the restrictions by demanding access to patients’ drug claims and will likely then use such data to minimize their rebate liability. Ultimately, hospitals are left with the decision to either reduce their patient services or to submit to the unlawful requests.”

Working with third-party administrators

If covered entities work with third-party administrators (TPAs) either from their own choice or to comply with policies being enforced by drug manufacturers, it is extremely important to partner with a TPA that is firmly established in the 340B market, Yoder says.

There are dozens of TPAs within the 340B market, and each offers a unique product and approach to managing eligibility and compliance. Yoder recommends that covered entities outline their unique requirements based on their level of 340B participation and then walk through each aspect with the TPAs they’re considering before signing a contract. “Whether the covered entity’s needs are report-heavy, or they are looking for a partner to completely manage the program from start to finish, it is important to understand the TPA’s limitations and ability to meet the client’s needs,” he adds.

HealthTrust can offer education and support as members work through their options. HealthTrust has a contract with Verity Solutions, a 340B TPA. Through this partnership, members may receive discounted services and rates. HealthTrust can help facilitate a demo of offerings and can assist members with navigating contract pharmacy options and working through 340B ESP submission requirements.


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To learn more about navigating 340B programs, HTU attendees are encouraged to join Chris Yoder for a live 340B education session on Monday, July 25 at 3 p.m. Visit the HealthTrust public education site after HTU for a link to the session.

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