The DFW Hospital Council is posting blogs submitted by our Associate Members. The following was provided by ELEVATE340B. For guidelines, please contact Chris Wilson at chrisw@dfwhc.org.

The 340B Drug Pricing Program was established in the Veterans Health Care Act of 1992. It provides discounted prices on covered outpatient drugs to eligible covered entities. The intention of the program is to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” The law insulates covered entities from drug-price increases by giving them access to drugs at a discounted price.

Pharmaceutical manufacturers who participate in the Medicaid program are required to offer discounts on covered outpatient drugs to covered entities. Discounts typically range from 30% – 50% below the average wholesale price.

Qualified Covered Entities
Only state/governmental and nonprofit hospitals are eligible for the 340B program. In order to qualify for the 340B program, the hospital must meet one of the following qualification thresholds:

• Disproportionate Share Hospitals (DSH) – Medicare DSH adjustment percentage > 11.75%;
• Children’s Hospitals (PED) – Medicare DSH adjustment percentage > 11.75%;
• Freestanding Cancer Hospitals (CAN) – Medicare DSH adjustment percentage > 11.75%;
• Sole Community Hospitals (SCH) – Medicare DSH adjustment percentage ≥ 8%;
• Rural Referral Centers (RRC) – Medicare DSH adjustment percentage ≥ 8%;
• Critical Access Hospitals (CAH) – No DSH adjustment percentage requirement.

Hospitals that initially qualify for the program must register with the Health Resources and Services Administration (HRSA). Upon approval from HRSA, covered entities will be entered into the program on calendar year quarterly increments. Participating covered entities that fall below the qualification threshold must inform HRSA in order to be terminated from the program.

In addition to the hospital-covered entities, there are also numerous HRSA grantee qualified covered entities (e.g., FQHC and look-alikes, Ryan White, Family Planning clinics, STD clinics, TB clinics, Hemophilia Treatment Centers, Black Lung, Native Hawaiian Health Centers, Urban Indian Health Centers).

Orphan Drugs
Drugs designated as “orphan drugs” for a rare disease/condition by the Food and Drug Administration are not classified as covered outpatient drugs; thus manufacturers are not required to offer 340B pricing. However, manufacturers do have the discretion to offer 340B pricing on their classified orphan drugs (i.e., 340B-like pricing). This exclusion applies to CAH, RRC, SCH and CAN hospital types.

GPO Prohibition
Covered entities may not purchase “covered outpatient drugs” through a group purchasing organization (GPO) for outpatients, unless the patient is an inpatient or meets a qualified exclusion. This applies to all 340B eligible outpatient locations of the “parent” and all registered “child sites.” The GPO prohibition applies to DSH, PED and CAN hospital covered entity types.

Accumulations – Purchasing
Covered entities are responsible for maintaining auditable records of their 340B activity to ensure compliance with the program rules. Most hospitals implement a replenishment model, using split-bill software vendor, to track drug dispensing characteristics. The split-bill system identifies a combination of qualifying drugs, locations, providers and/or payers in order to categorize the drug dispense in the appropriate accumulation group (340B, GPO or WAC).

The pharmacy then replenishes/purchases the drug based on the available accumulation volume available. It is during this complicated process where problems often occur, which can result in missed savings opportunities and potential compliance risk.

ELEVATE340B
ELEVATE340B offers consulting services for covered entities currently participating in the 340B program with a pricing structure that doesn’t burden you with budget heavy fees, but instead, incentivizes success under a contingency-based structure because there are no upfront costs. Our service reviews historical purchases, accumulations and medical record data in order to identify savings opportunities the covered entity is legally entitled to, but is currently missing.

The covered entity implements our detailed corrective action plan and begins to realize the additional savings on a go-forward basis. Our role is to be an additional tool in your 340B toolbox. We act as another set of eyes monitoring your program. Our goal throughout your engagement is to work in the background, out of sight, until a savings opportunity arises, so you can focus on patient care.

For more information on how ELEVATE340B can be an additional tool for your 340B program, please contact Jeff Norman at jeff@elevate340b.com or visit www.elevate340b.com.