Transcript Slide 1

340B: An Overview
Overview
340B and Drug Pricing
DSH Hospital Inpatient Drug Discounts
Medicaid & 340B
Application of Patient Definition to 340B
Hospitals
Contract Pharmacies
Supply Chain Dynamics
Additional 340B Resources
Creation of the 340B Program
340B
DRUG PRICING
PROGRAM
$
Drug
Manufacturers
Outpatient
Drugs
Source: HRSA Presentation on 340B
Intent of the 340B Program
Safety net
providers
340B Eligible
Entities
SAVINGS
Improve
financial
stability
Stretch dollars
to serve
vulnerable
patients
Patients
The 340B Price
340B
DRUG PRICING
PROGRAM
25-50%
of the average wholesale price
The 340B price is actually a “ceiling” price
Can offer sub-ceiling prices
Drug
Manufacturers
Source: HRSA Presentation on 340B
The 340B Price
340B
DRUG PRICING
PROGRAM
25-50%
of the average wholesale price
The 340B price is actually a “ceiling” price
OFFICE OF
PHARMACY AFFAIRS
Drug
Manufacturers
Centers for Medicare
and Medicaid Services
Source: HRSA Presentation on 340B
340B Overview – What is it?
 Program established by Congress in 1992
 Requires pharmaceutical manufacturers
that contract with the Medicaid program to
provide discounts on outpatient drugs
purchased by “covered entities,”
Generally, designated safety net providers
that receive government funds
 Program “named” by section of the Public
Health Service Act
Original statute also amended the Medicaid
statute, Section 1927 of the Social Security
Act
340B Overview
 “Covered entities” include
Federally-qualified health centers (FQHCs) and
“look-alikes”
Public and non-profit DSH hospitals that have
indigent care contracts with state/local
governments
 DRA added Children’s Hospitals
Ryan White CARE Act grantees
Title X Family Planning/STD clinics
TB and Black Lung Clinics
Urban Indian clinics
Homeless clinics
Others
340B Overview
 340B Program administered by the Office
of Pharmacy Affairs (OPA) in the Health
Resources and Services Administration
(HRSA)
 Qualified providers must apply for 340B
status.
 Providers are expected to purchase all of
their outpatient drugs through a 340B
program, but can ‘carve out’ Medicaid.
340B Discounts and Pricing
 340B “ceiling” price = rough Medicaid “net” price
(or AMP – mandatory rebate amount under SSA
§1927(c))
Impact of Medicare Part D best price exemption
Impact of DRA Medicaid pricing changes
 Covered entities can negotiate prices lower than
the “ceiling” price on their own or through a
statutorily-chartered “Prime Vendor” program
Actual 340B prices may be significantly lower than
Medicaid “net” price
340B Offers Savings/Revenues
for Safety Net Providers
 340B law does not require covered entities to
provide their discounts to patients or 3rd party
purchasers
 Covered entities that provide free or reduced
price/sliding scale drugs to indigent or lowincome patients can save money by using 340B
drugs
 Covered entities that bill patients, commercial
insurance,or government payers for patients’
drugs can make money by using 340B drugs
Medicaid reimbursement is a challenge, however
DSH Inpatient Drug Prices
 340B only covers outpatient drugs. Thus, inpatient and
outpatient drugs must be segregated within the covered
entities. As you will see Medicaid drugs need to identified
also in DSH hospitals.
 As a result of Section 1002 of the Medicare Modernization
Act (MMA), manufacturers may offer 340B hospitals deep
discounts on inpatient drugs without adversely affecting the
companies’ “best price” used to calculate their Medicaid
rebates and 340B prices
Medicaid Billing Requirements
 Covered entities must change how they bill 340B drugs
to Medicaid to avoid duplication. This is a big problem.
 The rationale for covered entities adjusting their
Medicaid billing practices is the need to protect
manufacturers from a ‘double dipping’ problem. They
must bill at invoice price to avoid duplication.
 Medicaid billing procedures do not have to be followed if
the 340B drugs are billed to a Medicaid managed care
organization or are billed and paid by Medicaid as part of
a capitated or bundled rate.
340B and Medicaid
 State may elect to forgo Medicaid rebate and reimburse
for 340B drug at 340B acquisition cost plus, dispensing
fee/admin fee
State must evaluate potential for budget savings
Weigh difficulty of pursuing rebates on the back end;
value of supplemental rebates; state’s up-front
reimbursement rate, etc.
E.g., Massachusetts
 States may also treat 340B rules differently from what is
expected under national statutes. This has caused
confusion all across the nation.
HRSA’s Definition Of A Patient
1.
2.
3.
The covered entity has established a relationship with
the individual, such that the covered entity maintains
records of the individual’s health care; and
The individual receives health care services from a
health care professional who is either employed by the
covered entity or provides health care under
contractual or other arrangements (e.g. referral for
consultation) such that responsibility for the care
provided remains with the covered entity; and
The individual receives a health care service or range
of services from the covered entity which is consistent
with the service or range of services for which grant
funding or federally-qualified health center look-alike
status has been provided to the entity.
Application to 340B Hospitals
 This is vague and hard to understand. It can be interpreted
a number of ways.
 Receipt of care outside the hospital does not disqualify the
patient if the individual’s care is initiated at the hospital and
there is a proximate relationship between the off-site care
and the care provided by the hospital.
 BUT, transfer of discounted drugs to non-patients may
violate both the 340B definition of patient and the
Prescription Drug Marketing Act
Contract Pharmacies
 HRSA recognized the difficulties facing 340B
covered entities that lack in-house pharmacies
 In 1996, HRSA issued guidelines approving the use
of contract pharmacies to dispense 340B drugs and
requiring manufacturers to offer 340B pricing on
drugs dispensed by contract pharmacies
 Patients may choose to obtain drugs from any
pharmacy, not just the contract pharmacy
 The covered entity must use a “ship to/bill to”
arrangement so that drugs are purchased by the
covered entity but sent to the contract pharmacy
 The covered entity is responsible for the contract
pharmacy’s compliance with 340B requirements
340B and Medicare HOPPS
Reimbursement
Does 340B influence HOPPS payment for
drugs?
Not part of the calculation of ASP.
Is part of the claims data used to check the
reality of ASP plus or minus in hospital
outpatient departments.
CMS wants to pay 340B hospitals less for drugs
than other hospitals.
ACCC opposes this.
Issues to Ponder
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Regulation to stop differing state interpretations of the laws.
Enforcement of anti-diversion rules in terms of the patient definition.
More Medicare hospital outpatient rate debates.
Better definition of “patient”?
Guidance on use of contract pharmacies?
Inpatient 340B?
OVERALL: Tensions between program expansion and heightened
attention to program integrity issues and causes friction between
 Providers
 Manufacturers
 Regulators
Additional 340B Resources
OPA Website
ww.hrsa.gov/opa
340B Prime Vendor Program
(888) 340-BPVP or (888) 340-2787
www.340bpvp.com
Pharmacy Services Support Center
1-800-628-6297 or www.pssc.aphanet.org