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Top 10 pitfalls of participating in the 340B Drug Pricing Program

Jan 17, 2017

Congress created 340B to reduce outpatient drug costs for healthcare facilities that serve large numbers of uninsured indigent patients. The program helps providers stretch their federal resources as far as possible, reach more eligible patients and deliver more comprehensive services.

As a requirement of the program, drug manufacturers that participate in the Medicaid drug rebate program must sell outpatient drugs to enrolled “covered entities” at or below a predetermined price. Most hospitals expect to save 30–40% on drugs used for outpatients — and could save even more on high-cost, brand-name drugs.

The downsides of 340B administration

As the program grows, so does regulatory scrutiny. Almost 300 entities were ejected from the program in 2016. With new Health Resources and Services Administration (HRSA) regulations and penalties on the horizon, that number will surely increase.

Take time to understand the compliance risks and common program challenges before you enroll. With due diligence and planning, you can avoid these 10 common pitfalls:

  1. Poor tracking: Tracking is essential to compliance. Hospitals must be able to prove that drugs purchased on a 340B account were administered in an outpatient setting, at an eligible point of service. Hospital pharmacies that purchase drugs for both inpatient and outpatient use have additional tracking responsibilities. For example, they need safeguards to prevent 340B drugs from being diverted to inpatient units, and they need to carefully track dispensing in mixed-use settings (e.g., a surgery department where both inpatients and outpatients are treated). Hospitals also need to track contract pharmacies’ work to prevent diversion and duplicate discounts.

  2. Incomplete, inaccurate records: Hospital databases must include active provider listings. Without an accurate database, pharmacies don’t know who’s eligible for 340B drugs.

  3. Ineligible drug usage: Diverting drugs to patients who are not 340B-eligible is strictly prohibited. But sometimes eligibility is confusing. For instance, many providers erroneously assume that nursing home patients are “outpatients” who are eligible for 340B drugs. While nursing home patients are considered outpatients in the general industry sense, they are inpatients under 340B and, therefore, do not qualify.

    According to HRSA, to be eligible, a patient must have an established relationship with a covered entity and must receive healthcare services from a healthcare professional who is employed by the covered entity (or contracted by the covered entity to provide care). Individuals who only use your facility as a dispensary are not considered patients under 340B.

  4. Lack of contract pharmacy oversight: You may use a contract pharmacy to dispense 340B drugs, but it comes with additional compliance challenges. Ultimately, covered entities are responsible for compliance.

  5. Having too many contract pharmacies: Having more than five contract pharmacies can raise a red flag with regulators. They know it’s hard to effectively oversee too many pharmacies.

  6. Poor record-keeping: You must maintain auditable records for all 340B purchases and be prepared for inquiries from pharmaceutical manufacturers or the Office of Population. HRSA expects participants to conduct independent audits as part of their ongoing compliance efforts.

  7. Using a third-party administrator: Hospitals can hire out some aspects of 340b administration, but they cannot outsource their 340B compliance responsibilities. Enrolled entities must take full accountability, regardless of any outsourcing arrangements. If you choose to outsource, create oversight plans, policies and procedures to ensure compliance.

  8. Failure to register “child” sites: You must register every site that will purchase or provide 340B drugs. If a child site falls within the “four walls” of a facility, register it anyway. That way, should the site ever move, you won’t have to repeat the registration process. Registration can take six months to a year, during which time you’re losing revenue.

  9. Poor maintenance: The 340B program must be mindfully managed. Program administration requires additional resources and staff time, plus its own written policies and procedures. Integrate 340B management into your operations so program maintenance becomes a regular business practice.

  10. Overlooked opportunities: Several 340B savings opportunities are often overlooked, like direct purchases. As 340B entities, providers are entitled to 340B pricing regardless of vendor. Another is nonpharmacy purchases, like those made through blood banks, central supply and radiology. Other opportunities include take-home or indigent drugs, and drugs administered in offsite provider-based settings (e.g., seasonal clinics and ambulances).

The HRSA horizon

HRSA is drafting new regulations and will release them for public comment this summer. The definition of “eligible patient” and compliance requirements for contract pharmacy arrangements are expected to be addressed, among other issues.

How Wipfli can help

Take some heat off the 340B scrutiny. Wipfli’s experienced healthcare team can help you shore up tracking systems, tighten audit trails and update policies and procedures. Not sure what you need? We can assess your 340B program for these common pitfalls — and other compliance risks. We want you to hold onto significant cost savings. Reach out to us today.

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Wipfli Editorial Team