340B Program Considerations and How Technology Can Help

The 340B Drug Pricing Program (“the Program” or “340B”) is a federal program that allows Federally Qualified Health Centers (“FQHCs” or “Covered Entities”) to purchase drugs at significant discounts from manufacturers. The Program has received considerable scrutiny from drug manufacturers and lawmakers alike due to the size of the discounts. This scrutiny has increased regulation and the seriousness with which regulations are enforced, increasing the compliance required of a FQHC.

Program Background

Section 340B of the Public Health Service Act (42 U.S.C. § 256b) was implemented by Congress in 1992 through the enactment of Public Law 102-585, Section 602. The 340B statute requires pharmaceutical manufacturers to enter into an agreement with the Department of Health and Human Services (HHS) to provide discounts on “covered outpatient drugs” purchased by certain providers called “covered entities” that serve the nation’s vulnerable patient populations as a condition of their drugs being reimbursable by Medicaid and Medicare Part B. HHS is responsible for administration and oversight of the 340B program through the Office of Pharmacy Affairs (“OPA”) within the Health Resources and Services Administration (“HRSA”).

By enrolling in the 340B program, FQHCs can obtain substantial savings on prescription drugs provided to patients in the office and through third-party retail pharmacies. Participation in the 340B program is elective, and the covered entities are required to attest to 340B program compliance on an annual basis. 340B covered entity status does not encompass all of a participating provider’s operations; instead, a covered entity is only permitted to dispense covered outpatient drugs to eligible patients. Dispensing or transferring a 340B program-purchased drug to any other person or entity is considered diversion, which can lead to significant penalties for the FQHC.

Why Is It Important?

340B is vital to FQHCs in low-income and rural communities. These providers often survive on extremely low operating margins. The difference between providing adequate care to the most vulnerable populations partially depends on the ability to procure drugs at discounted prices. Executive leadership of these organizations has often said the 340B program is the only thing that allows them to continue to operate.

Program Considerations

Patient Definition

An individual must be a patient of a covered entity in order to qualify to receive 340B discounted drugs. Covered entities should establish a well-defined patient definition that has been reviewed by compliance and legal counsel. The patient definition becomes the central tenet when determining which patients will qualify for 340B and should outline the provider-patient relationship required to qualify a patient, how records of care are maintained by the entity and document qualifying providers. The patient definition should also look to address some of the grey areas that can lead to future issues with the 340B program, including patient referrals, consultations and telehealth considerations.

Mixed Use

340B drugs are designated only for outpatient visits, requiring virtual inventory accounting for 340B qualified and non-qualified patients. Understanding the procurement process and how it impacts the tracking of 340B inventory is crucial to running a compliant program. Minor glitches in the procurement process can lead to negative financial consequences, whether through penalties from a non-compliant program or lost drug savings.

Contract Pharmacy

HRSA permits FQHCs to dispense its own 340B covered drugs through a separately licensed pharmacy owned by another entity, including both pharmacies located within the four walls of the FQHC and for-profit retail pharmacies located outside of the FQHC. The FQHC must document the relationship between the covered entity and the contract pharmacy, and the covered entity records the relationship in the HRSA 340B database.

It is not unusual for a retail pharmacy to have a 340B contract pharmacy relationship with several 340B covered entities. When this occurs, a single patient will qualify as a patient of more than one 340B covered entity. Complications can occur regarding which entity’s virtual stock is used to supply the patient with their prescription.

Employee Prescriptions

Often, an efficient way for a hospital to reduce the cost of their self-funded drug plans is to provide that care themselves. Finding convenient ways to service your employee base that are also hospital patients is a convenient way to reduce spend on your health plan.

How Withum’s Unique Technology Can Help

Integrated health systems are sold packaged software that is designed to meet standardized functions, siloed in disparate databases. New tools further fragment the data landscape, and the prominent players have no incentive to share data across platforms. Withum’s unique software integrates data from all aspects of the program, linking EMRs, e-prescribing systems, contract pharmacies, TPAs and wholesalers as a “one-stop-shop” for all 340B concerns.

Our professionals will optimize your program to ensure you have access to drug savings the Program was intended to provide without increasing unnecessary risk. We will assess your patient definition, WAC spend and retail or contract pharmacy network and provide strategic options to improve a compliant program.

Learn how our team helped a southwestern academic medical center achieve sustainable growth with its 340b program.

Contact Us

For more information on this topic, please contact a member of Withum’s Healthcare Services team.