The 340B Program continues to be a crucial lifeline for safety net hospitals and federal grantee sites. 340B drug cost savings and contract pharmacy revenue serve as valuable sources of funding for at-risk patient populations around the country. However, the Program has recently come under increased scrutiny from manufacturers. As important as ever participating entities must ensure program compliance with Program Requirements; it’s the only way to identify creative opportunities to maximize available 340B savings.
340B Program growth has been accompanied by a signiﬁcant increase in manufacturer scrutiny. Many manufacturers are increasing internal staffing and committing more resources to 340B monitoring. Additionally, some manufacturers are also contracting with specialized third-party groups to conduct and manage outreach on their behalf. Manufacturers are looking to ensure that Covered Entities are complying with 340B regulations and not over-purchasing pharmaceuticals at cheaper 340B prices. Manufacturers and third-party groups have recently become more aggressive and sophisticated with their tactics, including (1) using proprietary algorithms to identify “high risk” purchases, and (2) increasing the overall scope of inquiries, which can overwhelm a Covered Entity.
Additionally, seven manufacturers (Eli Lilly, Astra Zeneca, Novartis, Novo Nordisk, Sanoﬁ, United Therapeutics, and Boehringer Ingelheim) have begun limiting and/or completely barring 340B pricing available through most 340B contract pharmacy relationships. Importantly, in May HRSA formally notiﬁed the manufacturers that their behavior is in direct contradiction of the 340B statute. Moreover, HRSA instructed the manufacturers to make 340B pricing at all contract pharmacies immediately available as well as repay 340B entities for historical amounts owed. However, the manufacturers are ﬁghting these formal notiﬁcations with ongoing lawsuits that are unlikely to be resolved quickly.
Despite these recent challenges, however, 340B entities can pursue several strategies to preserve 340B savings already accrued, mitigate 340B savings loss, and to optimize 340B Program performance.
ENSURE READINESS FOR MANUFACTURER INQUIRIES AND AUDITS
First and foremost, 340B entities should ensure that appropriate compliance safeguards are in place to avoid 340B diversions and Medicaid duplicate discounts that could trigger repayments to a manufacturer in the event of an audit. This involves frequently checking split billing conﬁgurations and excluded payer lists, as well as conﬁrming that your entity meets all HRSA and state-speciﬁc Medicaid billing requirements to avoid duplicate discounts.
If approached by a manufacturer, ensuring that their request is reasonable and within the scope of a 340B entity’s obligations under 340B Program regulations is important. Covered Entities are only obligated to proactively avoid 340B diversion and Medicaid duplicate discounts; they are not required to assist manufacturers with avoiding Medicare and commercial rebates for 340B purchases. Finally, if any risk of non-compliance is identiﬁed during a manufacturer inquiry or audit, make sure that a 340B violation actually occurred prior to any repayment—340B entities are only required to mitigate actual non-compliance, not mitigate a situation that only caused the risk of non-compliance.
EXPLORE EXEMPTION OPTIONS FOR CONTRACT PHARMACY PRICING LIMITATION POLICIES
Several manufacturers are offering limited exemptions that allow a single contract pharmacy location to continue receiving 340B pricing per 340B Covered Entity. Some manufacturers are also offering exemptions for contract pharmacies that share “common ownership” with the 340B Covered Entity (i.e., owned by legal entities under the same larger health system umbrella). Advis encourages entities to review these exemption options and determine potential applicability. Please note that some of these exemption options require agreeing to potentially objectionable language; they should be vetted by legal counsel. Advis also recommends ensuring that any exemption submission is accompanied by a cover email or attachment explicitly indicating that the entity disagrees with the overarching pricing limitation policy and is not waiving appeal rights for historical amounts owed at all contract pharmacy relationships.
IMPLEMENT ADDITIONAL STRATEGIES TO INCREASE AVAILABLE 340B BENEFITS
Finally, there are several innovative strategies available to 340B entities that can be utilized to maximize available 340B beneﬁt even as current manufacturer limitations are in place. Two potential strategies are (1) 340B medication management clinics, and (2) leveraging entity-owned retail pharmacy operations.
- 340B Medication Management Clinic (MMC): One of the most effective non-traditional methods for realizing signiﬁcantly greater 340B savings is through a 340B Medication Management Clinic (MMC). Many entities who operate MMCs signiﬁcantly improve patient health outcomes while simultaneously realizing hundreds of thousands to millions of additional annual 340B revenue by capturing 340B prescription revenue from patients that wouldn’t otherwise qualify for the Program. MMCs work best for hospitals that have closely affiliated freestanding physician offices that are willing to refer patients to the MMC for a 340B-qualifying visit.
- Entity-Owned Pharmacy Operations: Establishing an entity-owned retail pharmacy to ﬁll patients’ discharge prescriptions carries various 340B beneﬁts, including (1) immediate 340B-eligibility, with no need for an underlying 340B pharmacy services agreement, (2) ability to carve in Medicaid FFS patients as 340B-eligible, (3) receiving all associated 340B drug cost savings without having to pay a dispensing fee to a third party pharmacy, and (4) ease of operations if maintaining an MMC or med-to-bed program. Importantly, entity-owned pharmacies are also exempt from current manufacturer 304B pricing limitations.