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04/07/2016

Lowering Drug Costs and the 340b Drug Pricing Program

In order to protect patients from high drug costs, the Centers for Medicare and Medicaid Services (CMS) offers several plans qualifying patients can sign up for (more information available here). There are patients however, who are in need of federal assistance on drug costs but do not qualify for one of these plans. In order to reach some of these patients, the congress created a policy under section 340B of the Public Health Services Act. This policy is managed by the Health Resources and Services Administration (HRSA) and is known today simply as the 340b drug pricing program.

This program is aimed at the hospitals and medical centers who likely treat these underserved patients populations. These organizations are known as , covered entities.   Examples of covered entities include, but are not limited to Federally Qualified Health Centers, Ryan White HIV/AIDS program grantees, children’s hospitals and sexually transmitted disease clinics (full list found here). Patients at these facilities who qualify benefit from access to 340b covered drugs because their drug costs will be significantly less than patients not eligible for 340b drugs. These facilities will benefit because the manufacturer and wholesaler are obligated to sell these drugs at the low 340b price. These savings are typically 23.1% for brand products and 13% for generic products. Covered entities also have the ability to negotiate lower prices from those discounts which would result in further savings. These entities are then reimbursed by Medicaid at slightly higher prices which fall somewhere above the actual acquisition cost or AAC. AAC is what the pharmacy pays for drugs. It therefore factors in all sales and discounts the pharmacy may receive from a wholesaler. Medicaid may pay pharmacies at slightly higher than AAC in order to incentivize pharmacies to participate in the 340b drug pricing program.

The 340b pricing program is still a work in progress. One of the principle issues has been compliance with the program. It can be difficult for covered entities to follow the rules HRSA has established for the 340b program. Imagine that there is a pharmacy with 10 stock bottles of a maintenance drug. One of those bottle was purchased for a 340b patient at a 340b price. The challenge is ensuring that only the 340b patient receives medication from the 340b stock bottle. This becomes incredibly difficult when you factor in many 340b patients on multiple medications. If patients who are covered by Medicare or Medicaid received 340b drugs at typical prices (AWP minus a negotiated percentage) then federal resources would be spread too thin to help the underprivileged.

Fortunately, more changes are expected to occur. One change is in regard to better defining qualifying patients. With new changes, patients must have in-person medical visits with a 340b covered entity to qualify. Another example of a potential change is with manufacturers. Before any changes, the HRSA did not have the power to audit manufacturers and ensure they were proving drugs to covered entities at a discounted price. With the changes, the HRSA would be given the power to both audit manufacturers as well as impose penalties on those who do not comply with 340b regulations. These changes, when implemented, will improve 340b but more is needed for 340b to achieve its original goal of spreading federal resources to the underprivileged.

Robert Bond, PharmD '18

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