POST OUTLINE
1) Why do hospitals use 340B contract pharmacies?
- Outpatient convenience
- Increased community access
- Increased 340B revenue opportunities
- Reduced administrative burden for onsite pharmacies
2) The problem with some contract pharmacies
- Fees exceed 340B savings generated
- Low rates of 340B prescriptions qualified
- Inconvenient locations
3) Benefits from strong 340B contract pharmacy relationships
- Reduced Readmissions (IE: When 340B entity can pass-along savings to indigent patients)
- Improved Continuity Of Care (IE: When hospitals have more control over pharmacy services)
- Increased Patient Satisfaction
4) Factors to consider for your 340B contract pharmacy network
- Pharmacy fees
- TPA fees | TPA compatibility with your 340B contract pharmacies
- 340B Manufacturer restrictions
- Negotiated pricing for specialty drugs
- PBM relationships. One example
5) Overcoming 340B restrictions on specialty pharmacy prescriptions
- Why manufacturers restrict so many specialty pharmacy drugs.
- A workaround, legal in many states, for the Single Pharmacy restriction.
- Specialty Pharmacy resource links for 340B hospitals.
6) Optimizing vs. Maximizing 340B savings: An important distinction
- VytlOne’s 100% compliance record serving 340B health systems
- Optimizing = qualifying only medications worth the time and effort
7) What should you avoid in your 340B contracts?
- Processors who charge on a per-claim basis
- Contract pharmacies with low rates in allowing replenishments
- Remotely-located pharmacies offering little proximity convenience for patients
8) How hospitals compromise their own 340B savings
- Setting Dispensing fees too low
- Decreasing contract pharmacies’ incentive to participate
FULL POST
Contract pharmacies play a critical role in optimizing the potential savings and revenue that eligible hospitals can generate with a well-managed 340B program. They’re also an important extension of a 340B hospital’s overall care of, and for, its outpatients. Increasing the number of independent pharmacies serving as contract pharmacies enhances a hospital’s ability to offer outpatients options and convenience in filing their prescriptions.
While hospitals can’t steer patients toward specific pharmacies, they can certainly make their patients aware of their options. Which is why, in theory, maximizing the number of 340B contract pharmacies in a network should also maximize prescription-replenishment savings and revenue for eligible hospitals. In practice, we’ve found that to be far from the case.
Why do hospitals use 340B contract pharmacies?
In addition to the locational convenience multiple off-site pharmacies affords its outpatients, many hospitals prefer their in-house or on-campus retail pharmacies to be owned and operated separately from the hospital’s administration.
That said, community pharmacies need incentives to serve as contract pharmacies — and that’s where the problem lies with some of the relationships we’ve seen in supporting and managing health systems’ 340B programs.
The problem with some contract pharmacies is, they cost hospitals more in fees than they generate in 340B savings and revenue — and it’s typically not for lack of prescription volume, but rather because those pharmacies simply won’t qualify a significant percentage of 340B-eligible medications. That and/or the pharmacies are located too far from patients to offer them real convenience in refilling their prescriptions.
Granted, the goal of serving its community’s needs (even at a loss) often outweighs a hospital’s objective of maintaining only net-positive 340B contract pharmacy relationships. At the same time, we’ve helped many health systems replace pharmacies with low 340B match rates, with nearby pharmacies that have much higher match rates — delivering far better 340B savings back to the hospitals.
Benefits from strong 340B contract pharmacy relationships
Reduced Readmissions
This benefit particularly applies when patients can’t afford the “market rate” costs of medications, and the entity uses 340B savings to offer those medications at reduced costs — or even, in some instances, at no cost. Statistical evidence indicates that up to 70% of all preventable readmissions are due to patient prescription non-compliance. What’s more, based on the analytics generated by VytlOne’s proprietary software, readmissions from prescription non-compliance are often significantly more expensive than other readmissions.
Continuity Of Care
Continuity of Care may also be improved, when hospitals extend pharmacy services to patients who have no other access to affordable medications.
Patient Satisfaction
Patient Satisfaction increases when contract pharmacy programs increase patient convenience and/or access to affordable discharge prescriptions.
Factors to consider for your 340B contract pharmacy network
Pharmacy fees
As we noted in another article, 340B health systems can, and should, pay contract pharmacies only a percentage of net cost. Never a Percentage Of Revenue.
Pharmacy fee structures can vary wildly. Even among different locations within the same pharmacy chain. One health system we serve had 15 CVS stores in its local market — and we determined that only six of those pharmacies make good 340B contract pharmacy matches with the hospital’s dispensing patterns.
TPA fees | TPA compatibility with your 340B contract pharmacies
Some TPAs charge for simply attempting to process 340B prescriptions. One TPA we know charges 30¢ for every attempt. If a TPA like that uses processing procedures badly mismatched for pharmacies in your network, and thousands of otherwise-eligible 340B prescriptions aren’t being allowed every month, that 30¢ fee can add-up quickly — let alone the significantly greater losses you incur, due to the missed savings opportunities.
340B Manufacturer restrictions
Given manufacturer restrictions on limiting replenishmnents to certain pharmacies, using the wrong pharmacy for a costly 340B drug that your providers routinely prescribe can result in catastrophic losses.
Negotiated pricing for specialty drugs
Fees from specialty pharmacies also vary for 340B prescriptions. If your health system has a strong buying history with a specialty pharmacy, you may be able to negotiate with them for better pricing.
VytlOne added a specialty pharmacy to the 340B network of a health system we support in South Carolina. Given our existing relationship with the pharmacy, we were able to negotiate a flat rate (rather than a percentage) for their pricing. Which saved the health system roughly $400,000 in the first year alone.
PBM relationships. One example.
Most specialty pharmacies are owned and operated by PBMs. If Caremark is your PBM, you have to use a CVS specialty pharmacy to receive 340B savings on specialty drugs. A lot of hospitals don’t realize that, because they simply don’t have access to the data we’ve collected.
Optimizing vs. Maximizing 340B savings: An important distinction.
The number one reason eligible hospitals don’t take advantage of their legal right to participate in the 340B program is lack of administrative bandwidth to ensure full 340B compliance — and to quote an old cliché, there is no second, third or fourth reason. We understand: 340B is complicated.
That said, please note: Since 2013, VytlOne has served 24 health systems, and not once has a client of ours ever been fined for a 340B violation. Why? First and most importantly, we know 340B regulations inside & out — and our proprietary software system maintains meticulously-detailed records for every prescription applied for 340B reimbursement.
But second, and just as important to a health system’s net savings and revenue, we implement programs that optimize, rather than maximize, 340B savings and revenue. In other words, we recommend qualifying only medications worth the time and effort of applying for savings. After all, what’s the point of utilizing 340B, if the time-and-effort cost exceeds the savings generated?
What should you avoid in your 340B contracts?
The answer to that question is complicated, and generally applies on a market-by-market basis. However, in our experience, here are three key situations you should avoid:
- Processors who charge on a per-claim basis, coupled with high-volume pharmacies — which will lead to excessive transaction fees for your health system.
- Contract pharmacies with low participation rates in allowing replenishments — picking and choosing which medications you’ve already approved.
- Remotely-located pharmacies offering very few of your patients proximity convenience.
At the same time, hospitals can compromise the potential of their 340B programs by setting Dispensing fees set too low — decreasing prospective contract pharmacies’ incentive to participate actively. Applying simple business common sense: In order for a contract pharmacy relationship to reach its full potential, the agreement between pharmacy and hospital has to be a Win Win for both parties.
VytlOne is here to help, if you have questions.
There are so many ways to optimize your 340B drug program savings & benefits, and overcome manufacturer restrictions while still minimizing the likelihood of noncompliance. For more information, contact Howard Hall. C: 214.808.2700 | howard.hall@vytlone.com
