Why 340B vendors charging Percentage Of Revenue is wrong.
From time to time, 340B hospitals are required to purchase non-eligible prescriptions at the Wholesale Acquisition Cost. When that happens, the costs of those medications often exceed reimbursement. Most 340B hospitals already operate on a loss-basis. Which is why, we believe, it’s so wrong for 340B vendors to charge Percentage Of Revenue (let’s call it POOR for short) on every retail and specialty drug purchased — 340B or otherwise.
Here’s what that model looks like for 340B hospital clients
These vendors typically charge a fee of around 10%-15% on every prescription filled in the hospital-owned pharmacy they manage. Their general sales pitch to 340B health systems goes something like this: “We’ll take care of prescriptions for all your specialty pharmacy patients — 340B and otherwise — and you’ll make money in the process.”
So let’s apply their business model (splitting the difference between 10% and 15% with a 12.5% fee) to WAC purchases for which a 340B hospital is lucky enough to receive reimbursement that covers 100% of its costs — and efficient enough to earn a small percentage (in our model 2.86%) in the bargain. According to an article by Wellmark, “the average annual cost for a specialty drug is $84,000” That means a 340B hospital paying a 12.5% POOR is losing $8100 on that one prescription alone.
Now, imagine the potential losses for a 340B hospital paying an average 12.5% POOR on dozens, if not hundreds, of specialty pharmacy prescriptions every year.
Should a profitable 340B vendor share none of its clients’ risk?
Why should a vendor profit from WAC purchases at the expense of its non-profit clients, especially when the 340B program’s sole intent is to benefit the hospitals and their patients — not to pad vendors’ bottom lines?
340B hospitals can, and should, pay only a percentage of net cost
ProxsysRx built its 340B Support Program on two pillars that stand today: 1) We never earn more on any prescription drug than the 340B health systems we serve, and 2) We only get paid when a prescription drug’s cost generates a positive margin for a hospital.
Integrating all of the services connected to your 340B program
No 340B health system can ever reach its full potential without full integration of all the related services it touches. A fully-integrated 340B program includes the following components:
- An experienced, full-time 340B team
- Specialized 340B software
- A comprehensive network of compatible contract pharmacies
- TPAs aligned with your health system’s mission
- An onsite 340B outpatient pharmacy
- A robust Meds To Beds program
- An onsite 340B specialty pharmacy
To learn more about ProxsysRx’s process for fully-integrating its client health systems’ 340B programs into the continuum of care, please refer to our previous post on the topic.
Have you really evaluated your 340B vendor’s business practices?
If they take a percentage of revenue from every purchase they make on your behalf, not only aren’t they aligned with your best interests, there is a distinct possibility that they are making more from your 340B program than you are.
Choose A Partner Who’s Committed To Your Mission
To learn more, schedule a preliminary conversation today. Contact Howard Hall C: 214.808.2700 | howard.hall@proxsysrx.com
