Minimizing WAC Exposure to Decrease Drug Expense in the Virtual Inventory Setting
As drug prices continue to increase, affecting all areas of patient care in which medications are administered or dispensed, identifying avenues for reducing costs has become even more paramount. Entities covered by 340B, the federal drug discount program that serve a disproportionate share of underinsured and uninsured patients shoulder even more of this financial burden, which escalates the necessity to control drug expenses. The costs of medications paid by these entities, along with the potential costs associated with drug preparation, administration, and/or dispensing of the medications, often exceed reimbursement. Many 340B hospitals have worked to control their drug expenses through optimization of procurement practices, including examining purchases on wholesale acquisition cost (WAC) accounts to identify unnecessary spending. Although some WAC account purchases are necessary to maintain 340B program compliance, other purchases may end up on this account because of program maintenance issues, such as infrequent split billing maintenance, lost charges, and policies that do not clearly articulate products that fall outside the 340B program (ie, noncovered outpatient drugs).
340B hospitals subject to the group purchasing organization (GPO) prohibition typically have 3 separate accounts on which to purchase medications: 340B, GPO, and WAC. When using WAC as the comparator, 340B-priced drugs are typically discounted about 25% to 50% (Figure), and GPO-priced drugs are typically discounted about 15% to 20%. In many cases, the difference between the WAC price and the other price points is minimized by Apexus Prime Vendor Program (PVP) sub-WAC contracts. For this reason, a good strategy for a covered entity to use to review the impact of WAC purchasing may be to focus on the items with no PVP contract or on those in which there are unfavorable pricing differences between what is loaded to their GPO and their WAC accounts. This calculation (WAC account price minus GPO account price) is often referred to as the WAC premium. If operational considerations (mentioned below) are addressed, hospitals may begin to see their total WAC premiums decrease from baseline.
Figure.Pricing Comparison Chart
Covered entities using a virtual inventory or replenishment model are required to make their first purchases at WAC pricing to establish a neutral inventory before replenishment using non-WAC pricing can take place. These WAC-priced purchases are then dispensed to patients who are determined to be either 340B- or GPO-eligible. Once eligibility is determined, that dispensation is accumulated to a split billing software that will allow future replenishment purchases. Because of this requirement, a certain level of WAC exposure is expected to ensure compliance. However, a lack of proper management regarding this accumulation process can result in unnecessary WAC spending that would have otherwise resulted in 340B or GPO purchases.
A comprehensive approach to addressing and minimizing WAC exposure is through establishing a regularly convening WAC minimization work group. This group can include stakeholders from contracting, information technology, pharmacy, procurement, and the organization’s split billing vendor. The next step should be to determine which metrics to use for tracking progress. Although minimizing the WAC percentage is often mistakenly chosen as the defining measurement, it is even more valuable to focus on minimizing exposure to the WAC premium and its related missed 340B or GPO savings opportunity. Once the items with the greatest opportunities are identified, this work group will then focus on the operational causes of the WAC account spending.
Common causes of unnecessary WAC spending can include deficiencies in technology that support the virtual inventory model; lost charges; and unclear policies and procedures. Nearly all these causes are complicated and could require involvement from multiple departments to resolve. The Table illustrates examples of causes that could be identified and the departments that may be involved in implementing a resolution. For example, if a covered entity only accumulates what is administered to its patients, any drug waste will subsequently result in WAC exposure. Rectifying this issue could mean collaboration between nursing and pharmacy to implement initiatives to reduce drug waste. At 340Bpvp.com, Apexus offers a free tool that hospitals can use as a template to minimize WAC exposure.
A focused effort on minimizing WAC exposure while maintaining 340B program compliance is a strategic approach to mitigating the impact of increasing drug costs in this environment of decreasing reimbursements.
Grayson K. Peek, PharmD, MS, BCPS, is the manager of business development and integrity at Duke University Hospital Department of Pharmacy in Durham, NC. Halena Leah Marcelin, PharmD, MS, BCPS, is the 340B program manager for Memorial Healthcare System in Hollywood, FL.