Section 340B program gaining interest
In Beloit, Wis., a community health clinic is paying as little as 10 cents on the dollar for drugs dispensed by community pharmacist Jerry Sveum. In Chapel Hill, N.C., the University of North Carolina Hospital & Clinics is saving $2.5 million annually on outpatient drug purchases. Both are reaping the rewards of a federal program called 340B.
"For most of my career, I didn't appreciate what 340B could do for a disproportionate-share hospital," said UNC director of pharmacy services Jim McAllister. "Then I moved to one. We couldn't survive without that program." Purchases made through Section 340B of the Veterans Health Care Act of 1992 have cut UNC's outpatient pharmacy losses from $9 million annually to $6.5 million, he said. That comes on top of an estimated $1 million savings from pharmaceutical manufacturer patient-assistance programs that provide free drugs to some patients. He predicted his outpatient savings will soar once the hospital creates its own pharmacy benefit network to dispense 340B drugs to UNC patients through community pharmacies statewide. He hopes to begin a demonstration project in 2002.
Sveum already dispenses 340B products under contract to a community health clinic in Beloit. The clinic provides full medical services and gets heavily discounted 340B prices on its entire list of formulary products. But instead of running its own outpatient pharmacy, the clinic contracts pharmacy services out to Sveum. His Grand Avenue Pharmacy collects a $4.99 dispensing fee on every clinic script. "I order the drugs through my own wholesaler," he said, "but the bill goes to the health clinic. It doesn't have to pay the overhead associated with running a pharmacy, I don't have to invest in additional inventory, and patients get their scripts filled. It's a smooth deal for everyone."
The deal dates back to 1992. Sec. 340B requires drugmakers participating in Medicaid programs to offer separate discounts to certain government-supported healthcare facilities, said Bill von Oehsen, general counsel of the Public Hospital Pharmacy Coalition in Washington, D.C. These "covered entities" spend about $1.7 billion annually on 340B drug purchases, he added. Discounts under 340B average 54% of AWP, and the average hospital saves $2 million annually on outpatient drug purchases.
A group of about 130 public hospitals account for half of the 340B volume, according to von Oehsen, but almost any publicly supported hospital, health system, or clinic can qualify. That would include Public Health Service-funded hospitals; federally qualified health centers (FQHCs); state-operated AIDS drug assistance programs (ADAPs); Ryan White CARE Act Title I, II, and III programs; tuberculosis, black lung, family planning, and STD clinics; hemophilia treatment centers; public housing primary care clinics; homeless clinics; Urban Indian clinics; and Native Hawaiian health centers.
"Virtually any community-based healthcare center can become a covered entity," said Lucinda Maine, senior v.p., policy planning and communications, for the American Pharmaceutical Association. A hospital might be covered based on its disproportionate-share status, but its 340B eligibility includes the entire hospital: outpatient care, ambulatory care surgical centers, outpatient chemotherapy, emergency room care, and almost any other service not delivered on an inpatient basis.
OPA, the Department of Health Resources & Service Administration's Office of Pharmacy Affairs, estimates that about 8,000 facilities nationwide could qualify to obtain Sec. 340B discounts on brand-name, generic, and over-the-counter products. But only around 1,200 institutions are actually participating in 340B, APhA's Maine said. "The 340B opportunity has not been described well enough to health centers that could take advantage of it," she added. "But we are starting to see a lot more interest."
While 340B is traditionally associated with indigent care, Maine said the program can be applied much more widely. While covered entities cannot use 340B to buy drugs for Medicaid patients, 340B drugs can be used to treat almost anyone else.
The basic requirement is that the patient who is getting 340B drugs already be a patient of a facility that is a covered entity. Obtain covered-entity status, Maine said, and 340B can reduce drug costs for seniors, children, and other patients who may lack insurance coverage or the means to pay full retail prices for pharmaceutical care.
Sveum said that while he serves a significant number of indigent patients under 340B, many of his patients are employed and may even have health insurance, but no drug benefit. "This program helps them fill the gap," he concluded.
Fred Gebhart. Indigent drug program, Section 340B, helps more than the poor.