Lisa Scholz, PharmD

Passed by the US Congress in 1992, the 340B drug pricing program allows eligible health care organizations, known as covered entities (CEs), to receive discounts on outpatient drugs.

The program was designed to ease the financial burden on safety net institutions with disproportionate indigent, Medicaid, or Medicare populations. With drug prices and 340B compliance and regulation under scrutiny, CEs need experts who understand the program and advanced software solutions to remain compliant.

However, many CEs use tools designed for other uses, such as electronic health records or pharmacy benefits, to manage their 340B programs. Making it more complicated, many companies that provide 340B software are not 340B specialists—some do not even focus on community health centers or health centers—and therefore miss the evolving, specific needs of CEs. As the drug pricing program has grown, confusion and misinformation have spread.

Whereas technology is essential for 340B tracking, not all solutions align with every CE's goals or deliver the same capabilities. Defining needs is key before deciding how to participate.

The program's benefits are significant to both providers and the communities they serve, but compliance helps protect a program's integrity.

Each type of tech solution is only as strong as the holistic understanding of it. Solutions developed by individual CEs in the early days, before commercial options were available, are rarely deployed today.

Split billing is the process of separating inpatient and outpatient hospital charges from 340B-eligible areas to identify all outpatient charge codes for drug replenishment opportunities at 340B pricing. The process generates a billing feed or report from the hospital information technology system to the split-billing consultant (for manual solutions) or split-billing vendor (for software solutions).

Usually called "software," these solutions are more accurately described as manual aggregation of files sent to a consultant or other group. Because they depend on the subjective interpretation of outside parties, they are inherently risky. Although they can be operationalized quickly, they are not scalable; they miss eligible dispensations from mixed-use areas, such as the catheterization laboratory or emergency department; and they provide limited reporting; among other drawbacks.

Most split-billing software solutions started as or still are a foundation of hospital pharmacy inventory management, which uses charge codes or charge descriptor masters (CDMs). This is a problem because CDMs are not associated with a specific National Drug Code (NDC), which, for 340B replenishment, requires a 9- or, preferably, 11-digit match. Instead, CDMs are associated with multiple brands, formulations, and strengths. Knowing the specific NDC is critical to managing a compliant program, so hospitals must actively establish them from CDMs. It also carried added costs for compliance consulting fees and lost capture opportunities. Still, some find split-billing software suitable for their needs.

The newest and most advanced type of 340B software incorporates a rules-based compliance engine based on the CE's policies and procedures. It automates those processes to execute exactly the same way every day, regardless of who places orders.

This solution, which uses NDC data, was built specifically for 340B compliance and maximum capture opportunity. It has become a necessity to be compliance and prepared for audits from the Health Resources Services Administration (HRSA) and, increasingly, manufacturers. It also offers robust reporting to support transparency, but it is more expensive and takes more time for installation and training than other solutions.

An ideal 340B software solution helps uses understand and optimize their programs, provides robust training, and offers account management. Hospitals must compare rules-based engines with split-billing software in 3 areas. These are:

Most hospitals with a split-billing solution take 1 of 2 approaches to capturing 340B eligibility in mixed-use areas. Some simply assume it is impossible and exclude it from their programs altogether, missing out on eligible outpatients. Others consider the entire mixed-use area eligible, including ineligible inpatients, violating 340B regulations. More recent solutions to capture, verify, and report referrals allow for further optimization.

Incorporating successful compliance policies is critical, given the increased focus on audits. Split-billing software emerged before audits became a concern and was not designed to incorporate an entity's policies and procedures, a key for compliance. A rules-based engine, however, should provide 100% compliance with policies and procedures and allow users to meet all 340B requirements autonomously. It provides a consistent, replicable approach to audit and compliance reporting. Also, a rules-based engine that includes audit-preparation tools should instill confidence. Ideally, the software features integrated tools built for a hospital pharmacy and designed specifically for auditing.

The price of software is directly related to the amount of work and manual intervention required after installation. Although a rules-based engine requires some initial oversight and preparation, the payoff is reduced ongoing workflow. Proactive alerts, reporting, and integration with manufacturers, wholesalers, and other third parties also help save time.

The return on investment in 340B program solutions is a function of the whole picture: compliance, fixed costs, lost savings, and risk. With HRSA/Office of Pharmacy Affairs audits managed by Congress, compliance is critical for any successful CE.

Articles

Technology is essential, but not all solutions meet every goal or offer the same capabilities.

340B Program Compliance Tools Vary in Ability, Accuracy

There is a lot going on in health care, with the industry changing more rapidly than it has in decades, and every change has a ripple effect.

For the 340B program, those changes have led to an increased call for transparency that often puts a burden on covered entities and compromises their ability to serve vulnerable populations.

This is part 2 of a 2-part article on this topic. Part 1, in the January issue provided an overview of the economic, political, social, and technological trends shaping health care and illustrated how the 340B program fits into that landscape.

Although the government and pharmaceutical manufacturers are calling for increased transparency and reporting from covered entities, we have seen very little transparency on the part of manufacturers. This is where “fair” comes into play.

For example, consider the Civil Monetary Penalties ruling, in which the online posting of 340B ceiling prices was delayed 5 times over the course of 10 years before the information was made public.

After a very long road, on April 1, 2019, the Health Resources and Services Administration (HRSA) made available online a way for covered entities to view the ceiling prices, or maximum amount drug manufacturers are allowed to charge, for drugs under the 340B program.

 The requirement for such a website was enacted into law in 2010 under the Obama administration, and the final regulation implementing the changes was issued in January 2017, but it encountered many delays since then.

This is just 1 example in which stakeholders are not exercising “transfairency” or the open sharing of information on all sides. Some additional information that would be beneficial to covered entities in the interest of “transfairency” include the following:

Manufacturers often contact covered entities to inquire why purchasing on certain drugs in the 340B space may have gone up. The HRSA encourages covered entities to respond to these “good faith” inquiries, yet may have no idea how often they are occurring among their peers. Are there certain manufacturers who look for this information more than others? Do they send out 200 such inquiries a year or 2000?

 Covered entities have no insight into how often manufacturer audits occur. Although manufacturers must notify the Office of Pharmacy Affairs when they conduct an audit, covered entities have no way to know how their frequency of audits compares with their peers or which manufacturers tend to conduct such audits more frequently.

Whenever a manufacturer increases the price of a 340B drug more quickly than the rate of inflation, it is subject to a “penny pricing” penalty—that is, it is then required to sell that drug to covered entities the following quarter at a price of 1 penny. Manufacturers claim this happens frequently, which is a reason they say that the 340B program is costing them money, yet we have no way to know how often this really occurs, as there are limitations in the recently developed online reporting tool from the HRSA. There is no publicly available report to demonstrate the frequency of this penalty.

On July 1, 2019, the Office of Inspector General released a report in which it found that in 2014, pharmacy benefit managers (PBMs) missed out on potential rebates of up to $74.7 million on Medicare Part D prescriptions, because those drugs were filled through the 340B program.

 PBMs, or “sponsors,” typically receive rebates from drug manufacturers in exchange for offering those drugs on their formularies and playing middleman between insurance companies and manufacturers. However, when Medicare Part D drugs are filled through the 340B program, manufacturers are required to sell those 340B drugs to covered entities at a deep discount and, in an effort to avoid paying out double or stacked rebates, the manufacturers therefore do not offer rebates on those 340B drugs to the PBMs. Yet covered entities cannot know for certain how many rebates manufacturers are refusing to pay out in circumstances like these, because, again, no reporting requirements or transparency exist on the manufacturer side.

Many manufacturers have been limiting access to certain drugs by distributing them only through specialty pharmacies. When this happens, it becomes more difficult for covered entities to access these drugs, and when they do access them, it may not be at the 340B price. We know that the number of drugs being put into this limited-distribution, specialty-pharmacy category has been increasing over the years, as noted by the Office of Pharmacy Affairs’ online posting of letters from manufacturers. What we do not know is how many drugs actually fall into that category at any given time. There is no requirement for pharmaceutical manufacturers to provide a list.

These examples illustrate that transparency can and should go both ways. When calling for more reporting and transparency, government entities, pharmaceutical manufacturers, and other stakeholders must think about the limits of what is fair, not a burden, and practical.

As the push for transparency around 340B continues, covered entities must be prepared. It will be imperative to keep track of 340B savings, how they are being used whether to build oncology clinics or provide prescriptions at discounts, and how they can prove compliance. To execute these responsibilities with confidence, covered entities should engage with partners that have not only the right technology but also the right level of 340B program expertise.

As hospital leaders think about the future of the 340B program and what reporting will look like, the role of the 340B vendor is 3-fold: to develop a reporting infrastructure to match the needs of the future; to integrate and centralize information to create efficiencies and protect sensitive data; and to engage with stakeholders on the health system’s behalf to help the covered entity understand the elements of the 340B program that are most important for empowering it to meet the community needs.

With the right partners in one’s corner, maintaining 340B program compliance and integrity is possible, regardless of the changes faced. Transparency is a team effort.

, is head of industry relations at Sentry Data Systems in Deerfield Beach, Florida, a 340B management and compliance company.

340B Office of Pharmacy Affairs information system. Health Resources & Services Administration website. hrsa.gov/opa/340b-opais/index.html. Updated March 2019. Accessed January 31, 2020.

US Department of Health and Human Services. Medicare Part D rebates for prescriptions filled at 340B contract pharmacies. Office of Inspector General website. oig.hhs.gov/oas/reports/region3/31600002.asp. Published July 1, 2019. Accessed February 3, 2020.

What should covered entities do to prepare for increased reporting requirements?

340B Program Transparency: Is It "Transfairency"?

The health care industry is changing more rapidly than it has in decades, and every change has a ripple effect. To best understand the nuances of what has been happening in the 340B program in recent years and the rationale behind the increased call for transparency, we must first examine the backdrop of health care’s overall big picture.

The developments and debates surrounding the 340B program read like a microcosm of the larger health care landscape. Economics, politics, social factors, and technology are all at play within 340B, and the program can sometimes serve as a scapegoat for other issues, such as drug prices, political polarization, and social discontent with health care delivery.

More new bills aimed at curtailing and regulating the 340B program have been introduced in the past 2 years than at any other time in the program’s 27-year history.

For a while, it seemed that the Trump administration was focusing on the 340B program as a way to reduce drug prices, despite the fact that the program accounts for only about 1% of total drug spending in the United States each year.

In addition to the administration’s focus on drug prices, some other factors that contribute to the volatility of the 340B program are as follows:

Broadening consulting and technology options.

As companies see the program’s complexity increase, more consultants and more technology choices become available, and the cost of those services and technologies must be factored into the overall cost of managing the 340B program.

Federally qualified health centers (FQHCs) are community-based health care providers that receive funds from the Health Resources and Services Administration’s (HRSA’s) Health Center Program to provide primary care services in underserved areas. As more FQHCs are created nationally, use of the 340B program is increasing.

Mentions of the 340B program in congressional hearings and committee meetings in both the House and the Senate have increased in the past few years.

Increased government and manufacturer oversight. 

Audits of 340B-covered entities by both HRSA and pharmaceutical companies have increased in recent years, aligning with the administration’s call for increased transparency and reduced health care costs.

Merger and acquisition activity and vertical integration. 

As health systems continue to acquire independent hospitals and practices, retail pharmacy giants acquire payers, and tech companies and retailers from Amazon to Google to Uber begin growing roots in the health care industry, the 340B program will inevitably be affected.

Multiple contract pharmacy arrangements. 

Covered entities can have relationships with multiple contract pharmacies, which complicates the nature of tracking and reporting program savings yet can improve patient access through online accessibility and specialty pharmacy.

Pharmacy benefit manager (PBM) reimbursement changes.

PBMs are increasingly changing the way they reimburse pharmacies. Recently, PBMs have tried to deny rebates for drugs in the 340B program to pharmacies that contract with 340B providers.

Hospital margins are getting slimmer, and resources are getting scarcer. Yet as complexity around 340B compliance and reporting increases, covered entities will need more, not fewer, resources to effectively optimize and manage the program.

With all this volatility, it is no surprise that 340B seems to have reached a boiling point. It is therefore more important than ever for covered entities to be aware of the health care landscape and to work with partners that can offer both cutting-edge technology and industry expertise to help optimize 340B program participation. It is too easy for conflicts of interest and potential channel partners to go unnoticed against this backdrop, as the lines between private and public sector involvement continue to blur.

An overarching call for transparency has gone hand in hand with the government’s focus on drug prices. On the surface, this seems advisable. Covered entities, federal governing bodies, and pharmaceutical manufacturers should all be able to see with ease how and why the 340B program is working and identify areas that need improvement. However, in practice, some of the demands for transparency, including new bills aimed at curtailing the program and reimbursement cuts that have since been ruled unlawful, have crossed the line from practical to burdensome and, in some cases, even harmful to the patients for whom the program was intended.

Yet transparency is possible without undoing all the good that the program has achieved over the past 27 years.

Here are some practical standards for transparency that covered entities could deliver while still maintaining the integrity of the program and serving vulnerable populations:

Equal reporting by other involved parties including manufacturers

Protection of confidential and proprietary information

Review of all appropriate data points that reflect the covered entities’ true cost burden and benefit received

With a little common sense and a dash of empathy for vulnerable patients, covered entities, the government, and pharmaceutical companies could potentially reach a compromise around transparency in which no stakeholder would be made to feel like the “losing” side.

The second and final part of this series in the March issue will look at how transparency should go both ways and what covered entities can do to prepare for increased reporting requirements.

Dobson A, Murray K, DaVanzo JE. Assessing the financial impact of the 340B Drug Pricing Program on drug manufacturers. 340B Health website. 340bhealth.org/files/340B_Financial_Impact_7_17.pdf. Published July 2017. Accessed December 4, 2019.

Federally qualified health centers. Health Resources & Services Administration website. hrsa.gov/opa/eligibility-and-registration/health-centers/fqhc/index.html. Updated May 2018. Accessed December 4, 2019.

Scholz L. February 340Buzz — industry comes together at 340B winter conference. Sentry Data Systems website. sentryds.com/february-340buzz-industry-comes-together-at-340b-winter-conference/. Published February 19, 2019. Accessed December 4, 2019.

Scholz L. August 340Buzz — HHS continues to pursue Medicare Part B cuts. Sentry Data Systems website. sentryds.com/august-340buzz-hhs-continues-topursue-medicare-part-b-cuts/. Published August 21, 2019. Accessed December 4, 2019.

Covered entities, government, and pharma companies could reach a compromise to benefit stakeholders. 