Are you getting the most out of the 340B program?


Highlights of 340B drug discount program meeting



Are you getting the most out of the 340B program?

On July 1, after three years of blood, sweat, and maybe even some tears, Dick Severson, the director of the department of pharmacy at the University Health Care System in Augusta, Ga., breathed a sigh of relief. The Health Resources & Services Administration (HRSA) had finally approved the entry of his indigent healthcare clinic into the 340B discount drug program.

The program allows a variety of federally qualified outpatient clinics, including those at disproportionate-share hospitals (DSH), to buy drugs for some of their patients at 50% of average wholesale price (AWP).

The paperwork involved in the qualification process had been daunting. It was only after Severson engaged a consultant after more than two years of trying that things began to move forward. But the wait was worth it. "We expect to save about $400,000 a year on the $1.2 million annually we have been spending for drugs," said Severson, whose clinic has been subsidized by University Hospital.

Severson was one of those attending the 340B Coalition conference in Washington, D.C., last month. And his testimony on the savings offered by the 340B program explains both why attendance has grown from about 60 people six years ago to 400 this summer and why the 340B program is growing by leaps and bounds.

Given the golden opportunity the 340B program offers DSH outpatient clinics to cut drug costs, the Public Hospital Pharmacy Coalition is seeking to open the program to some hospital inpatient departments by convincing Congress to reinterpret the "best price" exemption in the 1992 law creating the 340B program.

That would allow DSHs and 340B vendors to at least negotiate about extending 340B prices to a hospital's entire inpatient population, instead of just those visiting the outpatient clinic. This is important because the hospitals in the 340B program are currently paying 20%-25% more for inpatient drugs than for outpatient.

"We believe that Congress intended that the inpatient prices be exempt from the Medicaid best price calculations," said Ted Slafsky, director of the Public Hospital Pharmacy Coalition. "We are not asking for a mandatory extension of 340B prices to the inpatient side, just the removal of a regulatory obstacle that is preventing free-market negotiations."

Jimmy Mitchell, director of the Office of Pharmacy Affairs, which runs the 340B program, noted that the Centers for Medicare & Medicaid Services (CMS) sent a letter to Congress "that somewhat opposes" a reinterpretation of the law. He added that the drug manufacturers seemed to be opposed to the change, too.

Also discussed at the meeting were the plans of AmerisourceBergen, the 340B prime vendor, to set up agreements with Premier and Novation to enable hospitals participating in 340B to carve out their Medicaid population from the 340B program. With such a "carve out," the hospital could enjoy higher reimbursement from the state by using their group purchasing organization for those Medicaid outpatients. Up to now, they have not pursued this option because they would have to purchase those drugs at wholesale acquisition cost (WAC).

Some drug companies have raised legal concerns about providing drugs at GPO prices to 340B hospitals, but representatives from Public Hospital Pharmacy Coalition and the Office of Pharmacy Affairs underscored that this practice is legal as long as Medicaid drugs are not bought under 340B contracts.

To take advantage of that carve out, if and when it is offered by Amerisource, a DSH would have to sign a contract with Amerisource. That might be a problem for some hospitals, which are receiving their 340B drugs from one of Amerisource's two competitors, Cardinal Health and McKesson Corp. Most hospitals are extremely loyal to their longtime distributors, which provide them with everything from aspirin to wheelchairs. The extent of that loyalty is obvious given the refusal of hospitals to desert Cardinal for McKesson, even though only Amerisource, as the prime vendor, offers "sub-340B" prices, discounts averaging 17% below 340B prices on 2,500 of the 13,000 drugs on its price sheet.

"These hospitals establish long-term marriage contracts, which I think is a good metaphor, and do not enter into divorce lightly," said Mitchell. Moreover, Cardinal and McKesson, which probably could make it possible for their hospitals to enjoy sub-340B prices, are unwilling to do so because they would have to share their DSH utilization data with Amerisource, a position Mitchell finds "understandable." He added that HRSA is considering some remedies but declined to discuss them.

The 340B program had 9,193 "covered entities" as of July 1. These run the gamut from HRSA-established community health centers (CHCs) to AIDS clinics to health centers for the homeless to family planning clinics to DSH clinics. Elizabeth Duke, HRSA administrator, noted that the total was 588 higher than when she addressed the 340B Coalition the previous year.

There are 150 DSHs (some represented by more than one clinic) in the 340B program, out of a total of 823 DSHs nationally. Of those not in 340B, some do not realize they are eligible, others are billing Medicaid for outpatient clinics above acquisition cost (thereby making money from Medicaid), and others are not eligible because they don't meet program qualification demands, according to Slafsky.

Duke wants the 340B program's growth to continue because of the key role President Bush has given HRSA in the drive to provide primary care to the uninsured. The leading edge of that drive is the Administration's plan to add 1,200 new or expanded CHC sites over the next five years, extending medical care, and potentially 340B discounts, to another six million people.

It was in the context of this political goal that Duke explained two 340B initiatives. Clinical pharmacy service grants of $8.4 million have already gone to 28 clinic center networks for use in improving the quality of care they provide to patients.

Marilyn Disco, a pharmacist at one of the seven sites affiliated with Piedmont Health Services in North Carolina, explained how her grant has allowed her to expand the care she provides to diabetes patients by giving her the time to conduct follow-up phone calls and provide diabetes education and anticoagulation therapy. "Not only can I give doctors more timely information on patients, information they couldn't otherwise get until their next appointment with the patient, but the patients love it too," she explained. "I helped one woman get off insulin. She was ecstatic."

The alternative methods demonstration program, which HHS secretary Tommy Thompson green-lighted in June 2001, is HRSA's second 340B initiative. There are no grants involved here. Rather, HRSA gives existing grantees extra leeway to develop distribution networks. One of the four demonstrations involves Hudson Headwaters Health Network in the Adirondack area of New York State. It is negotiating with a chain pharmacy to allow all of its 11 clinics to send patients to any of the chain's stores, which would be located, for the first time, in Hudson's geographic area.

Currently, HRSA guidelines say that a clinic can have a contract relationship with only one pharmacy. Hudson uses "contract" pharmacies, which are small independents. The "one site, one retail pharmacy" contract guidelines have kept chains out of the program.

A second demonstration allows a pharmacist at the Community Health Association of Spokane (CHAS) to teleconference with a pharmacy technician located at each of four remote health clinics, all of which will have a remote pharmaceutical dispensing machine at the clinic. The pharmacist in Spokane approves dispensing of drugs via computer and does some patient education via the video hookups.

Stephen Barlas


Stephen Barlas. Are you getting the most out of the 340B program?. Drug Topics 2002;16:HSE1.

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