Health System Pharmacy Strategies for Managing Current 340B Challenges

Legislation

Seven important strategies that 340B-eligible hospitals and health systems should consider to counteract the impact of manufacturer actions

Sep 07, 2023

James G. Stevenson, PharmD, FASHP, FFIP

The federal 340B Drug Pricing Program, created in 1992, allows qualifying hospitals and clinics that treat low-income and uninsured patients to buy outpatient prescription drugs at a discount. It has been a critical program for many hospitals and health systems, providing significant savings and the ability to offset a fraction of their uncompensated care.

Drug manufacturers have expressed concern about the program’s expansion, especially since multiple contract pharmacy relationships were permitted. Purchases under the 340B program were $44 billion in 2021, about 16 percent more than in 2020. Manufacturers have argued that the statute creating the 340B program does not expressly permit multiple contract pharmacy arrangements. They also assert that the program lacks transparency and oversight, and question whether the savings are being used to lower costs and improve care for vulnerable patients.

Hospitals and other covered entities dispute that the 340B program’s growth is unwarranted, given that a significant amount of the care provided to America’s under- or uninsured population is provided by 340B entities, and policymakers intentionally expanded the program to address this. Furthermore, the cost of the discounts that drug manufacturers provide remains a small percentage of their total U.S. sales (approximately 7% of total drug expenditures) in 2020. They argue that manufacturers are attempting to limit use of the discount drug program only to maximize their profits, and that any effort to limit use of contract pharmacies is a violation of the 340B statute as well as HHS guidance.

Over 20 manufacturers now have placed restrictions on providing discounts to prescriptions filled through contract pharmacy arrangements. Most are requiring covered entities to submit patient drug claims data through a program called 340B ESP to receive the discounted price, or they have severely limited the number of contract pharmacies permitted by a covered entity. They argue these steps are needed to ensure that duplicate discounts are not being applied and to ensure that providers are adhering to the program’s intent.

These restrictions have created a significant loss (approximately 50% in many cases) in savings from the program for eligible hospitals and health systems. Many hospitals and health systems have a high reliance on 340B savings to achieve a positive operating margin. To counteract the impact of these manufacturer actions, there are several important strategies that 340B-eligible hospitals and health systems should consider:

Participation in the 340B ESP program: Some manufacturers have offered to restore pricing if claims data is submitted through the 340B ESP platform, but the process differs by manufacturer. Although many health systems were initially reluctant to share data with manufacturers, it is now necessary to regain contract pharmacy savings. The steps and time involved in obtaining price recovery are difficult and time-consuming, and many covered entities find themselves either adding FTE’s to dedicate to this important function, or partnering with consultants to obtain the maximum return.
Develop or enhance the health system’s specialty pharmacy and mail programs: To retain savings, efforts should be made to increase the fulfillment of eligible prescriptions through the health system’s own outpatient/specialty pharmacy rather than contract pharmacies. Health system specialty pharmacy programs should be developed or enhanced/expanded to achieve this goal. Mail capabilities for employee prescriptions and for non-specialty prescription fulfillment should also be enhanced. Prescription capture strategies such as “meds to beds” or placing staff in key specialty clinics to offer the health systems’ prescription services to patients can also be effective. It is important to consider contracting when expanding health system owned pharmacies, as the larger the coverage of the pharmacy’s network, the greater the chance that the pharmacy will be able to retain patients within the health system.
Assure program integrity: Since compliance issues are purportedly the basis of manufacturer’s restrictions, covered entities should conduct regular audits of compliance, paying special attention to patient definition and duplicate discount components. A high level of compliance will mitigate the manufacturer’s arguments related to the integrity of the program.
Develop documentation to show how savings are being used: Since one of the concerns is whether the 340B savings are being used to extend care as outlined in the initial legislation, health systems should retain strong documentation to demonstrate how the generated savings are being utilized.

Use the formulary process: The formulary status of drugs provided by manufacturers who are restricting pricing to contract pharmacy claims should be reconsidered. Shifting to alternative drugs, where clinically appropriate, could reduce the amount of lost savings and provide the ability to support more unfunded and under-funded patients.
Increase efforts to gain access to limited distribution drugs: While difficult to accomplish, this strategy will allow more eligible prescriptions to be filled within the covered entities’ own pharmacies, rather than by contract pharmacies.
Engage in advocacy efforts: Court cases challenging the manufacturer restrictions have yielded conflicting decisions. It is likely that these disputes will only be resolved through legislative action. Communicate with state and federal legislators, engage with health system government affairs representatives, as well as pharmacy and hospital association organizations, to advocate for legislation that prohibits manufacturers from implementing restrictions. Furthermore, advocacy is needed related to discriminatory reimbursement practices that are currently being implemented by some PBMs that are attempting to diminish 340B covered entities savings.