To 340B or Not To 340B
340B, Is It For Me?
There’s been a lot of hype about Public Health Service Act, Section 340B. The purpose of this program is to enable covered groups to provide more comprehensive services and allocate scarce Federal resources to eligible patients I need of expensive medication. The 340B RX Program “requires manufacturers to provide outpatient drugs to eligible health care organizations/covered entities at significantly reduced prices” (HRSA.gov).
Medications that are dispersed via 340B are preferred drugs that are priced lower than the typical retail value for patients that quality to be recipients by using a 340B-approved physician or group. A patient’s eligibility is not income-based, unlike many other programs out there In order for the patient to receive the lower pricing, they must go to a pharmacy that has a contract with a 340B-approved facility (arpharmacists.org). The two scenarios that a patient can receive their medications this way are seen in the excerpt below:
An uninsured patient sees 340-B physician and takes their prescription from this physician to a retail pharmacy. If the pharmacy has an agreement with a 340B-approved group, the pharmacist gives the patient the medication at the discounted price based on the 34B price.
All of the circumstances of the above apply, except this patient has some type of insurance coverage. This category of patients is where a lot of money can be made. This pricing process is a little more complex and can be better understood through an example (arpharmacist.org).
The pharmacy adjudicates a prescription in accordance with contract pricing (i.e. AWP-15% + $2.00) and is paid based on this contractual amount. Assuming the AWP of the drug is $200.00 then the pharmacy would be paid:
AWP -15% + $2.00 =
$200.00 – $30.00 +$2.00 = $172.00 total approved for the prescription
If the patient pays a $30.00 copay, then the pharmacy would receive $142.00 in payment from the third party payer (i.e. $30.00 + $142.00 = $172.00 total payment to the pharmacy).
Assume that the 340B price for the drug is $20.00. The pharmacy would receive the 340B drug in replacement for the dispensed drug. The pharmacy would agree to pay the $172.00 back to the 340B entity less an agreed upon dispensing fee (for purposes of this example, assume an $18.00 dispensing fee).
$172.00 – $18.00 = $154.00 would go back to the 340B entity
$154.00 – $20.00 (340B cost of the drug) = $134.00 profit or “spread” to the 340B entity.
The one unknown in this process is how much the “middleman,” the 340B PBM, makes in the equation. Whatever amount that is will reduce the “spread” to the 340B entity by that amount. If that amount were $15.00 per claim then:
$134.00 – $15.00 = $119.00 final profit or “spread” to the 340B entity (arpharmacists.org).
With this program, it encourages providers and insurance companies to work with community pharmacies more. This system can cause an increase in business for a lot of pharmacies and can improve access to care for many patients.
On The flip side, billing with insurance companies can be more complex, time consuming, and result in an inventory overhead cost. This can also cause issues with existing contracts with wholesalers. Big Pharma is concerned that if a lot of pharmacies participate in this program and get paid by PBM’s at this lower price, that people will start to question the PBM’s originally inflated prices (arpharmcists.org).
Eligible groups of healthcare organizations can include; HRSA-supported health centers, Ryan White Clinics, Medicaid and Medicare Disproportionate Share Hospitals, Children’s Hospitals, State AIDS Drug Assistance Programs, and other safety net providers. (See the full list of eligible organizations/covered entities.) To get enrolled with this program, healthcare organizations must register with the 340B Program and comply with all regulations. Registration for this program can be done at the beginning of each Quarter; October 1-15, January 1-15, April 1-15, and July 1-15.
We know that all providers and pharmacies want to help their patients the best they can and increase the quality and access of care, but sometimes this can cause added stress and challenges on pharmacists and other healthcare organizations. The 340B Drug Pricing Program is no exception to the rule. Do you think that this is a good or bad thing for the pharmaceutical industry? Is this the direction independent pharmacies should go in? “The cause is incredibly worthwhile, but the reality of what’s required of health systems to make such a program happen is infinitely complex. Policy rules, emerging requirements, inventory management, and billing can be overwhelming, even for the most experienced pharmacy director” (psgconsults.com). Proposed guidelines for this program can be found through HRSA of the U.S. Department of Health and Human Services.