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Calling all Disproportionate Share Hospitals:

Are you maximizing 340B pharmacy savings? 

That’s precisely why it’s so important that more disproportionate share hospitals fully participate in programs like the Federal 340B Drug Pricing Program, which can help them reduce outpatient pharmacy spending by 30-50 percent.  

The 340B Drug Pricing Program was created to help eligible hospitals and healthcare entities more cost efficiently extend care to their communities by providing them with access to the best available drug discounts from drug manufacturers. What’s more – eligible entities can access these deep drug discounts for all patients served on an outpatient basis – not just for medications prescribed to indigent patients. As a result, 340B-eligible entities can access discounts between 30 and 50 percent off what they would normally pay through their existing contracts. 

Unfortunately, because of limited awareness and confusion regarding eligibility, as well as challenges in staffing and compliance, only a fraction of the 12,000 eligible healthcare entities maximize the benefits of the 340B program. Many do not participate, and others participate, but leave savings on the table and in many cases, inadvertently fail to meet the program’s compliance requirements, creating significant auditing risks. However, by learning more about the Federal 340B Drug Pricing Program, using available technology and implementing 340B best practices, eligible hospitals can reap dramatic pharmacy savings while extending quality care to their neediest patients. 

A program that helps eligible entities save 30-50 percent in pharmacy costs: At first glance, participation in such a program seems like a no-brainer. But, as with many government programs, the devil is often in the details. 

Despite the cost savings and other benefits the program offers, compliance and staffing challenges make it difficult to fully participate. To understand the challenges, first it’s important to understand the rules. First, only patients of covered entities can receive 340B medications. Second, in the disproportionate share hospital setting, 340B discounts can only be secured for medications dispensed or prescribed in relation to outpatient activity. Third, recipients of 340B medications must meet the definition of a patient – meaning the covered entity must maintain a medical record for the patient and the treating physician must be an employee or contractor of the covered entity. Fourth (and this is the rule that seems to create the most challenges), covered entities must purchase all outpatient medications at 340B prices – and are not permitted to purchase any outpatient drugs through their GPO contracts. Finally, the covered entity must also establish and maintain policies and procedures regarding its use of the 340B Program. 

Now that we understand the ground rules, let’s take a look at the main reasons why eligible entities tend to participate only partially, or non-compliantly. 

• Lack of understanding of eligibility requirements. The 340B Program was created for disproportionate share hospitals and other entities, including federally qualified health centers, state-operated drug assistance programs and public housing primary care and homeless clinics. However, participation requirements have changed over the years – so many entities aren’t aware that they qualify to participate. The Office of Pharmacy Affairs (OPA) Web site (http://www.hrsa.gov/opa/) contains a complete list of eligible entities.

• The 340B Drug Pricing Program is complicated. The OPA has established, and continually updates, extensive rules for 340B. For example, the 340B program only applies to purchases of outpatient drugs and requires that every pharmacy in the program keep separate records of purchases and dispensations. The OPA also specifies that participating hospitals must apply 340B pricing to all outpatient drug purchases – not just the areas where it’s easy to track outpatient prescriptions. Many hospitals don’t currently have systems in place to comply with these rules (and dozens of others that govern 340B use), and have incorrectly assumed that getting involved with the program would deliver a greater burden than it would be worth.

• They assume additional staff is needed to implement 340B. Many facilities erroneously evaluate the feasibility of participating in the 340B program by estimating the resources needed to manage the program manually. They don’t realize that technology solutions can help manage compliance, tracking and program updates – all without having to add staffing resources and without having to use valuable FTEs from existing staff.

• They don’t know enough about the program and don’t know how to implement it.  Many hospital decision makers may have taken a cursory look at the 340B Program, but don’t understand that in most cases, the financial savings greatly outweigh the costs needed to implement it. Many eligible entities are also unfamiliar with the contract pharmacy model for the 340B program, which can help them to further extend 340B drug pricing into their community by partnering with local retail pharmacies – without additional infrastructure.

• They only partially implement the program. Because it can be difficult to manually track medication dispensations as patients move from outpatient to inpatient status, some entities only use the 340B Program in easily identifiable outpatient areas, like a cancer clinic, and continue to purchase medications from their GPO contract for other outpatient medication needs. This practice violates the 340B rule that prohibits participating hospitals from purchasing any outpatient medications at GPO prices, and puts hospitals in danger of facing penalties for non-compliance.

• They don’t have the staffing resources to manually determine when manufacturers bill improperly for 340B drugs – so they leave substantial drug savings on the table.

For hospitals that want to fully participate in the Federal 340B Drug Pricing Program while minimizing staffing challenges and compliance risks – there is a two-pronged solution: implement automated 340B technology and incorporate 340B best practices. 

Several 340B technology solutions are currently on the market. To ensure maximum savings and compliance, it’s important to seek out the most comprehensive products. Hospitals should also look to their 340B technology vendors to help them identify, implement and constantly update 340B best practices. 

Here are some quick questions hospitals can ask when evaluating different 340B technologies. 

1) How does the 340B solution ensure that 340B dispensations aren’t left on the table? Here, hospitals should look for solutions that help them overcome the challenges posed by mixed use settings.

2) How does the 340B solution help minimize the amount of staff time spent on implementing the 340B program?