Understanding The Requirements Of The 340B Drug Program

What Is The 340B Drug Pricing Program?

The United States Congress created the 340B drug pricing program in 1992 to help nonprofit healthcare providers (which operate on very low, or negative, margins) fill in their revenue gaps, by providing them with access to prescription drugs at significant discounts.

As The American Hospital Association (AHA.org) noted in a March 2023 Fact Sheet, “The program allows 340B hospitals to stretch limited federal resources to reduce the price of outpatient pharmaceuticals for patients and expand health services to the patients and communities they serve.”

Properly designed and administered, a 340B program can generate millions of dollars in annual savings and revenue on retail and specialty prescriptions. For many of the hospitals ProxsysRx serves, 340B savings and revenue are the lifeline enabling them to pursue their missions of serving patients who lack the financial resources to pay for healthcare. To read the experience of two Pharmacists In Charge of health systems served by ProxsysRx, visit our blog post.

How does the 340B program work for covered entities?

When a patient receives a 340B-eligible prescription from a covered entity, the health system is entitled to be reimbursed for the full market price of the prescription, but — by purchasing the drugs on the 340B catalog — pays only a small portion of the drugs’ costs.

340B covered entities are legally entitled to determine how they use their 340B savings. Many of the health systems we serve use the revenue generated by their 340B programs to provide a variety of healthcare services they would be otherwise unable to afford to offer.

How much revenue can your health system expect from the 340B program?

The answer depends upon a number of factors. Since ProxsysRx launched its 340B Support Services division in 2019, we’ve generated more than $500 million in 340B drug program savings for the covered entities we serve. It’s important to note that we’ve generated this revenue despite the manufacturer restrictions that have devastated so many health systems’ 340B programs. In fact, while the average eligible hospital’s 340B program revenues have decreased significantly since 2020, the 340B revenue of every hospital ProxsysRx serves has increased.

What is the legal definition of a 340B Covered Entity?

The Health Resources and Services Administration (HRSA) considers includes six categories of healthcare providers as “covered entities” under the 340B Drug Pricing Program.

• Critical access hospitals
• Rural referral centers
• Children's hospitals & cancer hospitals exempt from the Medicare prospective payment system
• Sole community hospitals
• Disproportionate share hospitals (DSH)

Healthcare facilities included in the 340B program.

Covered Entity Hospital Facilities include:

• Rural Health Clinics
• Federally Qualified Health Centers
• Community-based rehabilitation programs
• Psychiatric hospitals
• Long-term/continuing-care nursing homes
• Home infusion therapy centers
• Hospices
• Freestanding acute care general hospitals
• State mental institutions
• Indian Health Service facilities

A 2018 study by the U.S. Government Accountability Office (GAO), offers the following estimates, concerning 340B covered entities: 62% are rural and 38% are urban. Forty-five percent are general acute care hospitals and forty-five percent are critical access hospitals.

Understanding the 340B program’s eligibility requirements for hospitals.

To qualify for Covered Entity status under the 340B program, most hospitals must meet all of the following requirements. That said, Rural Hospitals are required to meet only the first two.

1)      Government-controlled or government-owned hospitals

2)     Disproportionate Share Hospitals

3)     DSH hospitals, children’s hospitals, and free-standing cancer hospitals meet the first two criteria.

 

Understanding requirements for eligible drugs in the 340B program.

Which drugs are eligible for 340B price discounts?

The drugs available for discounted 340B prices are typically offered through a 340B hospital’s wholesaler unless, in the case of a specialty drug distributor, a particular manufacturer requires that certain medications be purchased through other channels. ProxsysRx has developed a proprietary software system that tracks every prescription drug eligible for 340B savings.

How do manufacturer restrictions affect 340B program savings?

The 340B ESP website, which launched in June 2020, has inspired unlawful manufacturer restrictions on numerous 340B-eligible prescriptions — leading many 340B-eligible health systems to abandon their right to participate in the 340B drug program altogether.

Your health system can, and should, defeat 340B manufacturer restrictions.

As we mentioned earlier, ProxsysRx continues to generate significant savings and revenues for the health systems we serve — despite the presence of unlawful 340B manufacturer restrictions. To see an outline of our process for overcoming manufacturer restrictions, Click Here.

What patients are eligible for 340B program discounts?

Covered entities can dispense 340B-eligible prescriptions to Patients who meet the following qualifications: 1) They have an established relationship with the covered entity. IE: The entity maintains records of the individual's care by the health system; 2) They receive healthcare from a provider who is either employed by the 340B health system or is under contract or some other arrangement (For instance: Through referrals for consultation) with the 340B health system. In all cases, responsibility for the care remains with the covered entity; and 3) They receive health services for which grant funding has been provided to the covered entity.

Can you trust your TPAs to optimize 340B discounts on your behalf?

Not always. Every TPA has its own methodologies and capabilities, and all are subject to occasional User Errors. When Covered Entities use multiple TPAs to gain access to contract pharmacies used by their patients, the problem is compounded.

Again, it’s important to note that ProxsysRx is not a TPA. That said, we carefully monitor the activities of TPAs serving our 340B-eligible health system clients — to ensure they uphold the same 340B compliance standards that we do.

Always be cognizant of common TPA 340B data mismatches.

There are so many factors causing TPA 340B data mismatches. One of the most common causes is the Patient's Date Of Birth being recorded differently from one entry to the next. Moreover, the more complex your 340B program is, the likelier you’ll have flawed data submissions — which can lead to a significant number of 340B savings opportunities being missed.

340B Best Practices Every Health System Should Know

How to ensure 340B program compliance.

Below is an abbreviated checklist of tips for ensuring compliance with 340B program requirements. For the complete list, please refer to our blog post on the topic.

• You should have detailed 340B policies and procedures in writing, and they should be consistent with your health system’s existing policies and procedures.
• You should ensure that your provider files are accurate at all times. This includes National Drug Code crosswalks and location maps for all of the 340B contract pharmacies in your network.
• You should use software that’s been specifically developed to manage your 340B program.
• You should conduct regular checks on your inventory management and tracking procedures, to ensure that you’re always in compliance.
• You should also conduct internal audits of your health system’s 340B program regularly.

You should optimize your 340B program savings, but not maximize them.

ProxsysRx maintains a policy of aggressively pursuing 340B savings for every prescription that’s worth pursuing. In other words, the market price of many prescriptions is simply too low to justify the effort needed to generate the eligible savings.

A 340B program that is optimized generates net savings from every 340B-eligible prescription claimed.

Maintain an active Meds-To-Beds prescription delivery program.

In our experience, 340B health systems that don’t offer Meds To Beds patient support believe that the service is simply too expensive to staff and administer. Nothing could be further from the truth. Here’s one example: ProxsysRx implemented a Meds To Beds program in a single Mississippi hospital, and — in its first 12 months of operation — our team filled over 18,000 discharge prescriptions. As a result, the hospital’s pharmacy revenues increased by 125%, and its readmissions were reduced by seventy-nine percent.

Build and own an onsite 340B specialty pharmacy.

As we’ve detailed, in depth, in one of our blog posts, every 340B health system should have its own on-campus specialty pharmacy. To learn how ProxsysRx can help you build, fund, and prepare a successful specialty pharmacy for accreditation, visit the specialty pharmacy page on our website.

Make every effort to improve your 340B contract pharmacy network.

Since 2019, ProxsysRx has managed the 340B programs of 18 health systems, and we have never served (or seen) a 340B health system with adequate in-house resources to optimize the quality or the number of contract pharmacies in its network. To learn more, visit our blog post on the topic.

Contact us for more guidance on 340B best practices.

Howard Hall. C: 214.808.2700 | howard.hall@proxsysrx.com