Getting started with the 340B Program

The first step in preparing your health system for enrollment in the 340B program is to ensure that you’re eligible to participate. If your hospital isn’t already registered, you might want to refer to our previous blog post, Are you ready to enroll in the 340B program?

Maintaining 340B Program Compliance

As we noted in a previous post, 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 compliance — and to quote an old cliché, there is no second, third or fourth reason.

We understand: 340B is complicated. Which is why many covered entities now have full-time employees monitoring their 340B program integrity. At the same time, ProxsysRx performs all the duties of a dedicated full-time employee for the clients whose 340B programs we manage.

That said, here is a checklist of safeguards for ensuring a successful, compliant 340B program:

  1. Develop detailed written policies and procedures which document your 340B-related decisions.
  2. Ensuring that your 340B-related program’s policies match your health system’s policies and procedures.
  3. Keep current on the information published on the HRSA 340B database.
  4. Ensure the accuracy of your provider files, as well as National Drug Code crosswalks and location maps for all pharmacies in your network.
  5. Establish a regular schedule for reviewing and updating your 340B policies and procedures.
  6. Install and maintain specialized 340B software — ensuring that information regarding your billing units and other mapping functions is kept up-to-date at all times.
  7. Educate your providers and support staff members on 340B program regulations, as well as your hospital’s policies and procedures.
  8. Conduct regular inventory checks to ensure the compliance of your inventory management and tracking procedures.
  9. Conduct regular chart audits to prevent diversions or duplicate discounts. 340B prescriptions are not eligible for additional Medicaid pricing discounts.
  10. Ensure that your program is compliant with HRSA’s 340B GPO (Group Purchasing Organization) prohibition.
  11. Make sure all patients given prescriptions for 340B drugs are eligible. For more information on patient eligibility, click here.
  12. Thoroughly document the value of your 340B program, both to your health system and the community you serve.
  13. Maintain a 340B Governance Committee, with regularly-scheduled meetings to review your program.
  14. Routinely conduct internal audits of your 340B program.

This final point is worth repeating: Routine self-audits are critical to ensuring your program’s compliance. Those audits should include all contract pharmacies in your program — as well as your in-house retail pharmacy. You should also review your 340B database quarterly, and consider conducting mock HRSA audits annually.

Carve-in or Carve-out?

If you haven’t already registered your entity for the 340B program, you’ll be asked to choose to Carve-In or Carve-Out for Medicaid fee-for-service (FFS) — a decision which will apply to all of your Medicaid FFS patients. Choosing Carve-In means you will use 340B-priced medications with your Medicaid FFS patients. Carve-Out means you won’t use 340B-priced medications with your Medicaid FFS patients.

340B Audits: Overview. Consequences of non-compliance.

On average, roughly 200 HRSA 340B audits are conducted annually. Manufacturers are also legally entitled to audit covered entities, to verify their compliance with 1) patient definitions, and 2) preventing duplicate discounts. However, those audits require HRSA approval, which is why they are extremely rare.

According to a 2019 study conducted by consulting firm StoneBridge Business Partners, covered entities which have been audited share several common characteristics:

Approximately 80% had Child Sites, and 81% had Contract Pharmacies. However, the audits involving DSH hospitals and CHCs showed even higher proportions of Child Sites and Contract Pharmacies, while Critical Access Hospitals appeared in line with the overall trend.

Of the 1,058 audits completed from 2012 – 2019, 29% (306) were found to have no adverse findings. 33% were found to have one adverse finding, with the remaining 38% having two or more adverse findings.

The most common findings were product diversion, an incorrect 340B database and the payment of duplicate discounts.

In instances of Diversion and Duplicate Discounts, repayment to manufacturers was the most common sanction imposed on Covered Entities. Other significant sanctions included the removal of contract pharmacies and/or child sites from the 340B program.

The most common issues leading to the termination of a contract pharmacy related to a lack of oversight, and/or a lack of a contractual relationship between the Covered Entity and the pharmacy. The removal of child sites from the 340B program is typically the result of a hospital outpatient clinic not meeting the requirements for inclusion.

What to do if your internal 340B audit uncovers instances of non-compliance

You’ll need to notify any impacted manufacturers, offering to resolve issues directly with them and their wholesalers. You’ll also need to send the HRSA Office of Pharmacy Affairs a written report of your compliance issue — and include the following:

  • Your 340B ID
  • The violation(s) you uncovered, and an overview of the underlying problem
  • A detailed corrective action plan (CAP) for addressing the problem, and preventing its recurrence moving forward
  • Your plan for informing affected manufactures, including proposed financial remedies.

The good news for 340B entities

While non-compliance findings are common among entities subjected to HRSA 340B Audits, complete removal of those entities from the 340B program are rare. Moreover, since 2013, ProxsysRx has served dozens of health systems, and not once has a client of ours ever been fined for a 340B violation.

ProxsysRx 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 |