340B: An Overview340B: An Overview

Overview

340B and Drug PricingDSH Hospital Inpatient Drug DiscountsMedicaid & 340BApplication of Patient Definition to 340B

HospitalsContract PharmaciesSupply Chain DynamicsAdditional 340B Resources

Creation of the 340B Program

DRUG PRICING PROGRAM

340B

$Outpatient

DrugsDrug

Manufacturers

Source: HRSA Presentation on 340B

Intent of the 340B Program

Patients340B Eligible Entities

Safety net providers

SAVINGS

Improve financial stability

Stretch dollars to

serve vulnerable patients

The 340B Price

Drug Manufacturers

The 340B price is actually a “ceiling” price

25-50% of the average wholesale price

DRUG PRICING PROGRAM

340B

Can offer sub-ceiling prices

Source: HRSA Presentation on 340B

The 340B Price

Centers for Medicare and Medicaid Services

Drug Manufacturers

The 340B price is actually a “ceiling” price

25-50% of the average wholesale price

DRUG PRICING PROGRAM

340B

OFFICE OFPHARMACY AFFAIRS

Source: HRSA Presentation on 340B

340B Overview – What is it?340B Overview – What is it?

Program established by Congress in 1992Program established by Congress in 1992

Requires pharmaceutical manufacturers that Requires pharmaceutical manufacturers that contract with the Medicaid program to contract with the Medicaid program to provide discounts on outpatient drugs provide discounts on outpatient drugs purchased by “covered entities,” purchased by “covered entities,” Generally, designated safety net providers that Generally, designated safety net providers that

receive government fundsreceive government funds

Program “named” by section of the Public Program “named” by section of the Public Health Service ActHealth Service ActOriginal statute also amended the Medicaid Original statute also amended the Medicaid

statute, Section 1927 of the Social Security Actstatute, Section 1927 of the Social Security Act

340B Overview 340B Overview

““Covered entities” include Covered entities” include Federally-qualified health centers (FQHCs) and Federally-qualified health centers (FQHCs) and

“look-alikes” “look-alikes” Public and non-profit DSH hospitals that have Public and non-profit DSH hospitals that have

indigent care contracts with state/local indigent care contracts with state/local governmentsgovernmentsDRA added Children’s HospitalsDRA added Children’s Hospitals

Ryan White CARE Act granteesRyan White CARE Act granteesTitle X Family Planning/STD clinicsTitle X Family Planning/STD clinicsTB and Black Lung ClinicsTB and Black Lung ClinicsUrban Indian clinicsUrban Indian clinicsHomeless clinics Homeless clinics OthersOthers

340B Overview340B Overview

340B Program administered by the Office 340B Program administered by the Office of Pharmacy Affairs (OPA) in the Health of Pharmacy Affairs (OPA) in the Health Resources and Services Administration Resources and Services Administration (HRSA)(HRSA)

Qualified providers must apply for 340B Qualified providers must apply for 340B status.status.

Providers are expected to purchase all of Providers are expected to purchase all of their outpatient drugs through a 340B their outpatient drugs through a 340B program, but can ‘carve out’ Medicaid.program, but can ‘carve out’ Medicaid.

340B Discounts and Pricing340B Discounts and Pricing

340B “ceiling” price = rough Medicaid “net” price 340B “ceiling” price = rough Medicaid “net” price (or AMP – mandatory rebate amount under SSA (or AMP – mandatory rebate amount under SSA §1927(c)§1927(c))) Impact of Medicare Part D best price exemptionImpact of Medicare Part D best price exemption Impact of DRA Medicaid pricing changesImpact of DRA Medicaid pricing changes

Covered entities can negotiate prices lower than Covered entities can negotiate prices lower than the “ceiling” price on their own or through a the “ceiling” price on their own or through a statutorily-chartered “Prime Vendor” programstatutorily-chartered “Prime Vendor” programActual 340B prices may be significantly lower than Actual 340B prices may be significantly lower than

Medicaid “net” priceMedicaid “net” price

340B Offers Savings/Revenues 340B Offers Savings/Revenues for Safety Net Providersfor Safety Net Providers

340B law does not require covered entities to 340B law does not require covered entities to provide their discounts to patients or 3provide their discounts to patients or 3 rdrd party party purchaserspurchasers

Covered entities that provide free or reduced Covered entities that provide free or reduced price/sliding scale drugs to indigent or low-price/sliding scale drugs to indigent or low-income patients can income patients can savesave money by using 340B money by using 340B drugsdrugs

Covered entities that bill patients, commercial Covered entities that bill patients, commercial insurance,or government payers for patients’ insurance,or government payers for patients’ drugs can drugs can makemake money by using 340B drugs money by using 340B drugsMedicaid reimbursement is a challenge, howeverMedicaid reimbursement is a challenge, however

DSH Inpatient Drug Prices 340B only covers outpatient drugs. Thus, inpatient and

outpatient drugs must be segregated within the covered entities. As you will see Medicaid drugs need to identified also in DSH hospitals.

As a result of Section 1002 of the Medicare Modernization Act (MMA), manufacturers may offer 340B hospitals deep discounts on inpatient drugs without adversely affecting the companies’ “best price” used to calculate their Medicaid rebates and 340B prices

Medicaid Billing Requirements

Covered entities must change how they bill 340B drugs to Medicaid to avoid duplication. This is a big problem.

The rationale for covered entities adjusting their Medicaid billing practices is the need to protect manufacturers from a ‘double dipping’ problem. They must bill at invoice price to avoid duplication.

Medicaid billing procedures do not have to be followed if the 340B drugs are billed to a Medicaid managed care organization or are billed and paid by Medicaid as part of a capitated or bundled rate.

340B and Medicaid340B and Medicaid

State may elect to forgo Medicaid rebate and reimburse State may elect to forgo Medicaid rebate and reimburse for 340B drug at 340B acquisition cost plus, dispensing for 340B drug at 340B acquisition cost plus, dispensing fee/admin feefee/admin feeState must evaluate potential for budget savingsState must evaluate potential for budget savingsWeigh difficulty of pursuing rebates on the back end; Weigh difficulty of pursuing rebates on the back end;

value of supplemental rebates; state’s up-front value of supplemental rebates; state’s up-front reimbursement rate, etc.reimbursement rate, etc.

E.g., MassachusettsE.g., Massachusetts States may also treat 340B rules differently from what is States may also treat 340B rules differently from what is

expected under national statutes. This has caused expected under national statutes. This has caused confusion all across the nation.confusion all across the nation.

HRSA’s Definition Of A Patient

1. The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual’s health care; and

2. The individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g. referral for consultation) such that responsibility for the care provided remains with the covered entity; and

3. The individual receives a health care service or range of services from the covered entity which is consistent with the service or range of services for which grant funding or federally-qualified health center look-alike status has been provided to the entity.

Application to 340B Hospitals This is vague and hard to understand. It can be interpreted

a number of ways. Receipt of care outside the hospital does not disqualify the

patient if the individual’s care is initiated at the hospital and there is a proximate relationship between the off-site care and the care provided by the hospital.

BUT, transfer of discounted drugs to non-patients may violate both the 340B definition of patient and the Prescription Drug Marketing Act

Contract PharmaciesHRSA recognized the difficulties facing 340B

covered entities that lack in-house pharmaciesIn 1996, HRSA issued guidelines approving the use

of contract pharmacies to dispense 340B drugs and requiring manufacturers to offer 340B pricing on drugs dispensed by contract pharmacies

Patients may choose to obtain drugs from any pharmacy, not just the contract pharmacy

The covered entity must use a “ship to/bill to” arrangement so that drugs are purchased by the covered entity but sent to the contract pharmacy

The covered entity is responsible for the contract pharmacy’s compliance with 340B requirements

340B and Medicare HOPPS ReimbursementDoes 340B influence HOPPS payment for

drugs?Not part of the calculation of ASP.Is part of the claims data used to check the

reality of ASP plus or minus in hospital outpatient departments.

CMS wants to pay 340B hospitals less for drugs than other hospitals.

ACCC opposes this.

Issues to PonderIssues to Ponder

Regulation to stop differing state interpretations of the laws.Regulation to stop differing state interpretations of the laws. Enforcement of anti-diversion rules in terms of the patient definition.Enforcement of anti-diversion rules in terms of the patient definition. More Medicare hospital outpatient rate debates.More Medicare hospital outpatient rate debates. Better definition of “patient”?Better definition of “patient”? Guidance on use of contract pharmacies?Guidance on use of contract pharmacies? Inpatient 340B?Inpatient 340B? OVERALL: Tensions between program expansion and heightened OVERALL: Tensions between program expansion and heightened

attention to program integrity issues and causes friction between attention to program integrity issues and causes friction between ProvidersProviders ManufacturersManufacturers RegulatorsRegulators

Additional 340B Resources

OPA Website ww.hrsa.gov/opa

340B Prime Vendor Program(888) 340-BPVP or (888) 340-2787

www.340bpvp.com

Pharmacy Services Support Center1-800-628-6297 or www.pssc.aphanet.org