Transparency in Drug Pricing Can Start With 340B

There are 3 key considerations in understanding 340B program results and benefits.

Rising drug prices, preferred formulary placement, confidential rebates, and confusing insurance coverage rules all result in a lack of transparency across the pharmacy marketplace. The disparity between drug list pricing and actual out-of-pocket costs not only creates confusion among patients but also among health care providers.

Health care providers supporting needy and indigent patients strive to be cost-effective managers of a patient's therapy, and transparency can help them achieve more. There are 3 key considerations in understanding 340B program results and benefits:

  • Transparency within the covered entity
  • Transparent use of 340B proceeds
  • Transparency with the community

In this article, we discuss how to build transparency into the broader system and support health systems’ ability to generate savings and revenue to support extending care to the uninsured and underinsured. Supporting these costs is key to extending pharmacy and patient care services.

Transparency within the covered entity

If visibility equates to transparency, health system leaders and pharmacy staff must first understand how 340B impacts the pharmacy’s operations and how it contributes to its costs and revenue. For health systems that operate pharmacies that serve both 340B patients and non-340B patients, it is critical to know their drug costs. In order to operate effectively, pharmacy leaders need to understand the input costs, which vary greatly, depending on whether drugs are purchased on wholesale acquisition cost (WAC), group purchasing organization (GPO), or 340B.

Whether managed by internal staff or by using a third-party 340B software solution, pharmacies need to monitor and track the multi-modal cost structure that comes with participating in the 340B program. This includes properly identifying 340B-eligible prescriptions, tracking virtual inventory accumulations, and managing financial reconciliation of drug costs and reimbursement. For example, understanding whether the pharmacy pays $10 or $20 for the medication being dispensed is as important as knowing the reimbursement.If the hospital is being reimbursed $20 for dispensing the medication, using the above input costs, one script is profitable, and one is not. Totaling the costs and revenue, then developing an understanding of the 340B contribution to the results is the first step; communicating the results internally is the next.

Transparent use of 340B proceeds

Without a granular and detailed understanding, health systems may not effectively deliver 340B savings to the programs that it intends to support. Although 340B hospitals are free to direct 340B-generated funds in any manner, responsible stewardship requires knowledge and insight. This may impact how much of the 340B program benefit they have to support the delivery of care to patients. Once pharmacies understand how to reliably manage participation in the 340B program, they need to communicate with administration, providers, and patients, so the entire organization is aligned. All parties need to understand how 340B enables the mission of providing care to uninsured and underinsured patients. This supports the thoughtful use of the 340B program to expand and improve patient care.

Transparency with the benefiting community

Although the patient care and foundational benefits of the 340B Drug Pricing Program are unmistakable, the objective of 340B is not always clearly understood. The 340B program has never been intended as a tool to provide no or low-cost medications to patients – that is the realm of patient assistance programs that health systems also actively utilize.

Rather, 340B was launched as a safety net program to enable providers to offer care for indigent patients who can't afford to pay. Each year, more than 2500 hospitals participate in the 340B program and more than 25,000 pharmacies are contracted with 340B-covered entities. According to the Health Resources and Services Administration, discounted 340B purchases in 2019 amounted to $29.9 billion. Those funds make a meaningful difference to hospitals struggling to provide quality care and effectively operate. But it’s up to hospital and pharmacy leaders to communicate how subsidies are being used to improve patient care in their communities.

Bringing us together

There is an opportunity to create a bridge between stakeholders to allow the safe transaction of data in both directions, enabling them to generate value on their own terms and in the process, facilitate transparency. If this problem was resolved, it would create greater efficiencies across the health care ecosystem and support the success of the 340B program to provide care to patients who need it.