Administering a Successful Hospital 340B Drug Pricing Program

One of the most misunderstood and most asked about programs in the hospital segment is 340B. The 340B Drug Discount program was created by the Federal government in 1992 to support healthcare providers that serve low-income, Medicaid, uninsured, and underinsured populations. The 340B program helps these facilities continue to provide care to all patients, regardless of their ability to pay.

Under the 340B program, drug manufacturers provide outpatient drugs at reduced prices to eligible hospitals and other health care facilities, which are referred to as covered entities. Disproportionate share hospitals typically see 340B drug discount savings in the range of 20% to 45% below their typical group purchasing (GPO) prices. In today’s tough economic market, being able to take advantage of such a drug savings program could mean the difference in whether a critical access hospital keeps its doors open or not. With the nation still riddled by the COVID-19 pandemic, that last thing communities need is for their hospital to close.

Disproportionate share hospitals typically see 340B drug discount savings in the range of 20% to 45% below their typical group purchasing (GPO) prices. Given today’s healthcare climate, hospitals should give the program a first or second look.

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Applying the 340B Program to Employee Benefits

Being able to purchase prescription drugs for a significantly lower price means that covered entities have more dollars available – and can stretch their limited resources further – to reach more patients with more comprehensive services. The covered entities’ services and discounts can apply to eligible employees, meaning that your clients can leverage the 340B drug discounts to help lower their employee pharmacy benefit costs as well.

Three Steps to Establishing & Administering A Successful 340B Program

•  Select a 340B Program Administrator

If the hospital system is not resourced to manage 340B, a third-party administrator can be contracted to work with the hospital staff to execute key parts of the program. Because some 340B program rules are open for interpretation, it’s important that structured policies and procedures are set-up and followed when working with a 340B vendor. You’ll want to consider the vendor’s reporting capabilities, how they integrate with drug wholesalers, their compliance with national drug code (NDC) mapping, tracking and reconciliation to support federal audits and manufacturer audits, and if they have configuration options that reflect your business-specific processes. While each party plays in an important role in administering the 340B program, it’s the covered entity who is liable for program compliance.

• Contract a Pharmacy Network

Contract pharmacies work with a covered entity to dispense 340B drugs, allowing that covered entity to increase the number of patients for whom it can capture 340B savings. The network of contract pharmacies helps hospitals that don’t have an in-house pharmacy – or those that want to expand their 340B footprint and take advantage of the 340B program for their employees and discharge patients who may be spread across geographic regions.

• Conduct Regular Compliance Audits

Compliance should be the cornerstone of any 340B program. When setting up and establishing a 340B relationship, there are five key areas to focus on to ensure compliance with established program rules and requirements:

• Duplicate discounts applied to 340B drug
• Diversion of drugs to a non-340B-eligible patient
• GPO exclusions when 340B is in place
• Policies and procedures mirror federal program rules
• OPA database information alignment with hospital information

Regular auditing of the main program components are recommended to identify and address any internal or external 340B-related issues before they become a compliance concern. Claims audits should be completed monthly by the 340B Coordinator, mock federal program audits should be completed annually by the employer’s Compliance or Finance Department, and external audits should be completed annually by the vendor. There are costs involved with ensuring compliance and running these audits, but the benefits of 340B drug discounts make these compliance steps worthwhile for the covered entities that choose to take advantage of the savings opportunity.

With the opportunity to achieve significant savings through the 340B program, it always makes sense for a hospital to explore its options as a covered entity and consider how it can maximize savings for eligible prescriptions and patients – including the hospital employees.

Check out our on-demand webinar to hear how 340B helped a health system lower its pharmacy costs.