Federal 340B drug discount program stirs interest and fear

COMMUNITY PRACTICE

Federal 340B drug discount program stirs interest and fear

Community pharmacy participation in the federal government's 340B discount drug program will take a big leap forward this summer when a New York State health clinic announces the first-ever participation by a chain pharmacy. Hudson Headwaters Health Network, which runs 11 clinics in the the state's Adirondack area, will sign an agreement with a chain that owns 120 stores in 19 states. John Rugge, CEO of Hudson, declined to identify the chain at the 340B Coalition conference in Washington, D.C., last month.

In an exclusive interview after the conference, Jimmy Mitchell, the director of the office of pharmacy affairs at the Health Resources and Services Administration (HRSA), said, "This is a tremendous opportunity for community pharmacy to step up to the plate and not view these 340B clinics as competitors, or some government-controlled operation."

Chains have ignored the 340B program because HRSA guidelines specify that a clinic with a 340B program can contract—hence the term contract pharmacy—with only one retail pharmacy. The director of pharmacies for one of the top five drug chains, who did not wish to be identified, said he would love to have access to the 340B program. His company already has a pharmacy in an AIDS clinic in the Midwest, which is a 340B participant (the chain doesn't supply 340B drugs to the clinic, however). "We would love to have access to 340B," he said. "But we have to be able to build market share in that area."

Hudson was given the OK to negotiate with a chain when it was accepted as one of the four participants in the "alternative methods demonstration" program, which Health & Human Services secretary Tommy Thompson green-lighted in June 2001. Only Hudson is experimenting with multiple contract pharmacies for its clinic sites. The expectation is that any of the Hudson clinic patients eligible for 340B drugs could get their prescriptions filled at any of the chain's pharmacies.

The 340B discount drug program, administered by HRSA, provides drugs at an average discount of about 50% of average wholesale price to 9,193 community health clinics, AIDS clinics, health centers for the homeless, family planning clinics, and outpatient clinics run by disproportionate-share hospitals (DSH) nationwide.

When it began in 1992, the 340B program allowed distribution of these cut-price drugs only through in-house pharmacies. Contract pharmacies were allowed in 1999 in order to improve access for patients at small, rural clinics, which could not afford to set up their own in-house pharmacy—or didn't have room for them. That year, clinics signed up with 70 contract pharmacies.

Currently, there are 225 contract pharmacies, some of which have witnessed a marked growth in their business as a result. Mitchell cited Jerry Sveum, who owns a pharmacy in Beloit, Wis., whom Mitchell called "an evangelist" for community pharmacy participation in the 340B program. But Mitchell also acknowledged that the relationship is an unusual one for pharmacies, since they do not own the 340B drug inventory nor can they take a mark-up on the 340B drugs. "It is an atypical model," he noted, "but the model of the future, I think."

Though the number of community pharmacies in the program is growing rapidly, other nonparticipating community pharmacies are threatened by the program. As part of President Bush's drive to provide health care to the "uninsured," HRSA is greatly expanding the number of its community health centers (CHCs). There will be 1,200 new or expanded CHC sites added to the current 3,000 sites over the next five years. Linda Evans Parlette, a state senator from Washington State, got up at the 340B meeting and complained that HRSA was situating one of these new clinics in a small town in her district. She argued that the town did not need the new HRSA clinic because the physicians and pharmacy already there had been doing a good job providing care to that "underserved" population for many years.

In Christopher, Ill., the Rea Clinic, in existence for 20 years, opened an in-house clinic to serve its 340B eligibles a year ago. There were two community pharmacies in town at the time. David Grear, pharmacist/ owner of one of the pharmacies for 25 years, closed up shop and took a job with the new Rea in-house pharmacy. A second independent pharmacy still operates in Christopher. But given the "tremendous price breaks" the Rea 340B pharmacy gets, Grear thinks it is only a matter of time before the other pharmacy has to close its doors, too.

Stephen Barlas

The author is a writer based in the Washington, D.C., area.

Stephen Barlas. Federal 340B drug discount program stirs interest and fear.

Drug Topics

2002;16:18.