Featured Articles: Pharmacy and 340B

Cost-Savings Per-Patient Strategy with 340B

Friday, November 16, 2012   (0 Comments)
Posted by: Joy Ingram
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by Stuart A. Seal, Marketing Director, CaptureRx

Clinics and community health centers walk the fine line between providing appropriate service levels and remaining fiscally viable. Engaging cost-saving strategies enables them to better live their mission of care. For eligible covered entities, the Public Health Service 340B Drug Program is key to provider and patient successes.

Through 340B participation, covered entities (clinics and community health centers) establish savings on pharmaceutical costs that positively impact their bottom line as well as offering much-needed prescription and OTC medicine to patients at no- or reduced-cost. The 340B drug program is mission-based to provide access to medicine for patients in need; the far-reaching effects include adherence, possible reduced co-morbidity and other affirmative clinical outcomes.

Two Case Studies

In two examples, a clinic 340B program analysis illustrates the savings with 340B participation:


Clinic Sample 1 Utilizing 5 Contract Pharmacies

Number of Claims in a 90-day period: 28,391

Number of Claims Approved for 340B: 2,600

Total Pharmacy Collections (3rd Party + Out of Pocket): $703,438.98

340B Cost of Goods: $228,937.52

Clinic Net after Dispense and Administrative Fees: $366,114.46

Clinic Net per Month: $120,697.08

Clinic Net Annualized, Approximated: $1,448,364.96

The Clinic Net enables the clinic to reach more eligible patients and provide more comprehensive services.


Clinic Sample 2 Utilizing 4 Contract Pharmacies

Number of Claims in a 90-day period: 1,497

Number of Claims Approved for 340B: 99

Total Pharmacy Collections (3rd Party + Out of Pocket): $19,326.51

340B Cost of Goods: $4,457.50

Clinic Net after Dispense and Administrative Fees: $7,967.01

Clinic Net per Month: $2,655.67

Clinic Net Annualized, Approximated: $31,868.04

The Clinic Net enables the clinic to reach more eligible patients and provide more comprehensive services.


340B Background

The intent of the PHS 340B drug program is to allow covered entities “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” H.R. Rep. No. 102-384(II), at 12 (1992)

Participation through contract relationships between safety-net providers and pharmacies through the Office of Pharmacy Affairs (OPA) and Health Resources and Services Administration (HRSA) requires manufacturers to sell “covered outpatient drugs” to certain “covered entities” at a price determined using a statutory formula. Eligible covered entities include community health centers, clinics, Ryan White, Black Lung, Tribal and other providers.

Manufacturers must participate in 340B as a condition of Medicaid participation; 340B price is derived from Medicaid pricing information. Covered outpatient drugs include prescription drugs and prescribed over-the-counter drugs; the 340B program excludes vaccines and inpatient drugs.

A “patient” of a covered entity is one who receives a range of health care services from a practitioner employed, contracted or under arrangement with the entity, and whose health records are maintained by the entity.

340B program compliance specifies noteworthy exclusions that are expressly not allowed: drug diversion and duplicate discounts.


Drug diversion comprises drugs provided to individuals who are not patients of the covered entity. If three requirements are not met, the person is not eligible for 340B drugs: 1) entity has established relationship & maintains record of care; 2) patient receives health care services from health care professional employed/contracted with entity; 3) the patient receives health care services consistent with the range of services offered by the covered entity.

Duplicate Discount

Duplicate discounts occur when a manufacturer gives both a Medicaid rebate and 340B discount on the same drug. The use of 340B drugs for Medicaid patients falls to the State in which the covered entity is located: “a State-specific decision/process, since States must ensure that there is no double dipping,” meaning that if 340B drugs are being used, the State Medicaid agency is not also getting rebates.

How It Works

The covered entity saves money on outpatient drug purchases, as seen in the examples above, when medications are administered in outpatient settings and eligible patient prescriptions are filled at the contract pharmacy(ies).

With the savings, the covered entity may better serve disenfranchised patients and provide access and discounted pricing at the contracted pharmacy(ies). Savings may be used to: reduce price of pharmaceuticals for patients, expand services offered to patients, and provide services to more patients, while lowering the cost-per-patient for the entity.

340B Contract Choices

A covered entity may use one or a combination of mechanisms:

  • In-house outpatient pharmacy
  • Contract retail pharmacies
  • Mail order/Specialty Mail Order
  • Physician dispensing
  • Combination of pharmacy offerings


The Contract Pharmacy Relationship

On March 5, 2010, HRSA issued a final notice, effective April 5, 2010, that allows covered entities participating in the 340B Drug Pricing Program to contract with multiple contract pharmacies to provide discounted drugs.

This defined “one-to-many” contract relationship is best accomplished through a knowledgeable, compliant 340B administrator with a robust pharmacy network that removes the guesswork and submits/tracks the contracts and implementation for covered entities. For those in the 340B program, the best approach has been to select the highest percentage claim pharmacies filling patient prescriptions for contract relationships and not all pharmacies. Note this pitfall that “one-to-many” does not mean “one-to-all,” as typical minimum claim dollar amounts apply to validate a contract pharmacy relationship while serving the greatest number of patients in need.


HRSA has stated it will develop a 340B-specific protocol involving a more in-depth review of 340B compliance, and is auditing covered entities based upon risk and targeted approaches.

High Risk: HRSA defines “high risk” entities based upon “volume of purchases, increased complexity of program administration, and use of contract pharmacies.”

Lesser Risk: HRSA will audit covered entities chosen at random from program types that are considered a lesser risk.

Targeted: Targeted audits may be triggered by allegations of 340B non-compliance, which are not limited to whistleblowers, manufacturers or covered entities themselves.

NWRPCA welcomes and regularly publishes white papers and articles submitted by members, partners and associates with subject matter expertise. The appearance of any guest publication in our Health Center News database represents the views of the author and does not constitute endorsement by NWRPCA of the stated opinions or perspectives, nor does it suggest endorsement of the contributor's products or services.

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