A Patient’s Guide to 340B: Why the Middlemen Matters to You

Written By Jen Laws, President & CEO

***This is the fifth report in a six-part series to educate patients about the 340B Drug Pricing Program***

When the 340B Drug Pricing Program was enacted in 1992, there were a few “gaps” between the law’s statutory language and the program’s practical application. Among them was the realization that some covered entities that couldn’t afford to operate their own pharmacy. The Health Resources and Services Administration (HRSA) issued guidance to address the gap. After all, what’s the use of a discount drug program if providers can’t realize those discounts simply because they don’t have a pharmacy?

In 1996, after the urging of some covered entities, HRSA issued guidance telling covered entities and manufacturers that covered entities could contract with a single, independent pharmacy to provide pharmacy services necessary to engage the discount program. The idea was simple: create an access pipeline to the program, so it could be accessed by small providers, but not abused. In 2001, HRSA began to allow a few pilot projects, for lack of a better term, wherein covered entities would have more than one contract pharmacy. In theory, it isn’t a bad idea. Different pharmacies have different distributors, and as such supply can sometimes be an issue (i.e., natural disasters).

Additionally, it allows industrious covered entities to open the door for competition on “value added” services from contract pharmacies – such as programmatic record keeping for the purposes of 340B and/or financial reporting for federal grantees. And since the pharmacy was the one handling the purchasing and distribution of the medications to patients, that’s one less labor task for smaller covered entities to fund. In 2010, HRSA would later expand these pilot project allowance for multiple contract pharmacies per covered entity.

Sounds great, right? More patients have access to discounted outpatient medications, right?

Right? Not exactly!

Under the 340B program, patients don’t always get their share of the savings from the rebates and discounts. Arguably, it would appear everyone is directly benefiting one way or another from the program and its lucrative revenue stream, except for patients.

Contract pharmacies all want their piece of this pie, too. For example, take the dispensing fees that a pharmacy charges to fill a prescription medication. Indeed, dispensing fees for 340B contact pharmacies are so wildly non-standard a Government Accountability Office (GAO) report from 2018 found dispensing fees ranging from $0 to almost $2000 per fill on 340B eligible drugs. Those fees come out of 340B revenue, which could be supporting a patient’s ability to pay copays or the cost of a drug and instead.

Can you imagine, if you will, you’re a person living with HIV or Hepatitis C, living at about 200% of the Federal Poverty Level (FPL; 200% in 2021 is approximately $25,760 per year for a single person), but thankfully receiving insurance coverage for your medical care. Yet, co-pays and deductibles drain your finances when you could be getting your medications at no cost if the pharmacy or covered entity was applying 340B dollars to your bill? How many Rx fills would that be?

If the payer wasn’t applying a co-pay accumulator or co-pay maximizer program, the dispensing fee of two fills could mean extending your ability to access care for an entire coverage year – not just for medications, but for all health care. If the intent behind the 340B program is to extend limited federal resources, ensuring those exorbitant dispensing fees weren’t so exorbitant would certainly be one way to do it. Ultimately, 340B is a pie – when there’s more taken out, hacked at along the payment pipeline of getting medications to patients, there’s fewer resources left for patients to benefit from.

What’s more concerning about the explosive growth in the number of contract pharmacies with their hands in the 340B cookie jar, is HRSA knew when the 2010 guidance was issued that diversion and duplicate discount increases, abuses of the program, would most certainly follow. In part, because the program would grow and at such a pace that HRSA couldn’t keep up. In fact, GAO included that warning in a 2011 report, stating “…increased use of the 340B Program by contract pharmacies and hospitals may result in a greater risk of drug diversion, further heightening concerns about HRSA’s reliance on participants’ self-policing to oversee the program.”

The best part? By the “best”, I mean the worst: contract pharmacies, like non-grantee hospital entities, don’t have to show any benefit to patients for any of the dollars. Clearly, it raises questions over the legislative intent of the program and whether it is being met?

Now, contract pharmacies, like hospitals, like to massage and carefully select data to pitch answers to these concerns (there are a great number of “concerns”) by saying “we served X many 340B eligible patients”. They get around having to say if those patients realized any of those savings and benefitted from the program, without defining what they mean by “eligible”, and without defining “patient”. Contract pharmacies and hospitals get away with not having to provide meaningful information because statutory language doesn’t define “low-income” or “eligible” and regulatory guidance has an outdated definition of “patient”. Regardless of the existing language in regulation, a bona fide relationship should exist in order to call a consumer a “patient”, otherwise this is all just pocketing dollars meant for extending medication access to needy people.

All this lack of transparency fees assessed against the program could easily be solved with merely requiring contract pharmacies to establish a “flat”, reasonable dispensing fee and to describe what those fees actually cover. If the contract pharmacy is providing an additional navigation benefit to patients or an in-house location for a federally qualified health center, reasonable people can see fees being slightly elevated to cover additional costs. However, those costs should be outlined like any other contractor would be expected to do in any other contract for service. Most hospitals already have their own in-house pharmacy, they shouldn’t be contracting that service out and thus giving room for inappropriate 340B related rebate claims. And if HRSA just does not have the capacity to meaningfully audit 340B claims and the use of these dollars, they could at the very least make more room for the other mechanism in the statute for audit: manufacturer-originated audits. That’s right. The statutory language of 340B anticipated HRSA wouldn’t be able to keep up if the program was successful or even particularly abused. So, legislators reasoned if manufacturers were taking a cut of their potential profits through discounts and rebates, manufacturers should be able to audit the claims seeking those discounts and rebates to make sure everything was in line. When a retailer offers a discount to veterans, they typically require proof of veteran status. Why would medication discounts be any different?

In the end, if contract pharmacies don’t have anything to hide, then they need to stop hiding so very much. There are enough hands in the 340B cookie jar that patients are being squeezed out and left with crumbs. When legislators ask “is the intent of the program being met?”, these are the questions on their minds. Patients should have them on their minds as well.

For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here.

Sources:

Jen Laws, President & CEO

Jen Laws (Pronouns: He/Him/His) is the President & Founder of Policy Candy, LLC, which is a non-partisan health policy analysis firm specializing in various aspects of health care and public health policy, focusing on the needs of the HIV-affected and Transgender communities. In that capacity, Jen has served as the President & CEO of the Community Access National Network (CANN), beginning in January 2022. He previously served as the Project Director of CANN's HIV/HCV Co-Infection Watch, as well as 340B Policy Consultant.

Jen began his advocacy efforts in Philadelphia in 2005, at the age of 19, coordinating team efforts for a corporation participating in the AIDS Walk. His connection to HIV advocacy grew when partnering with Mr. Friendly, a leading anti-HIV-stigma campaign.

He began working in public health policy in 2013, as a subcontractor for Broward Regional Planning Council evaluating Marketplace plans for plan year 2014, advising and educating constituents on plan selection. Jen was a member of South Florida AIDS Network and has worked with Florida Department of Health, Broward and Miami-Dade County Health Departments, Pride Center South Florida, and other local organizations to South Florida in addressing the concerns and needs of these intersecting communities. During this time, Jen was seated on the board of directors for the ADAP Advocacy Association.

Having moved to the New Orleans area in 2019, Jen resumed his community-based advocacy as the chair of Louisiana's Ending the HIV Epidemic planning subcommittee for Data-based Policy and Advocacy, regular participation as a community member and "do-gooder" with other governmental and non-governmental planning bodies across the Louisiana, and engages with other southern state planning bodies. He continues his advocacy in governmental health care policy evaluation, which has been utilized to expand access to quality healthcare by working with RAD Remedy to deliver the nation's foremost database of trans* competent health care providers. Lending his expertise on policy matters ranging from 340B impact on RW providers and patients to strategic communications and data analysis, Jen's approach to community engagement is focused on being accessible across all stakeholder groups and centering the perspectives of PLWHA and Transgender people. He is a community ambassador alumni of the CDC's Let's Stop HIV Together campaign.

In his personal life, Jen enjoys spending his time being "ridiculously wholesome" with his partner, Aisha, and her two amazing daughters. In their personal time, when not immersed in crafts or house projects, they can be found seeking opportunities to help their neighbors, friends, and community members (who have come to rightfully expect exquisite gift baskets of Aisha's homemade jams and jellies from time to time). Jen strives to set a good example both in his personal professional life of integrating values into action and extending the kindness and care that have led him to a life he calls "extraordinarily lucky".

https://tiicann.org
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