340B is a Federal drug-pricing program intended to provide relief to facilities that care for the poor and medically underserved. It is operated by the Office of Pharmacy Affairs (OPPA) in the Health Resources and Services Administration (HRSA). 340B requires that drug manufacturers provide significant discounts to participating Covered Entities for covered outpatient drugs. Manufacturers that participate in Medicaid must also participate in the 340B program.

Manufacturers must provide front-end discounts on covered outpatient drugs, purchased by a participating, government-supported facility (Covered Entity). The 340B drugs may be billed to end-users at the retail price, with the Covered Entity pocketing the difference. However, the Drug Manufacturing Lobby is now pushing back, and Congress is studying the situation for possible change.

Covered Entities include:

So, a regular short-term acute hospital is not eligible for 340B unless it surpasses the special DSH threshold (11.75%). However, a non-340B hospital or hospital network may incorporate a special clinic that meets 340B criteria, and thus benefit from the program under certain guidelines. For example, 340B drugs may only be purchased for patients of the 340B clinic. So the Parent Hospital or Network should establish separate purchasing accounts and dispensing records.

Recent Development and ACA Impact on 340B Programs.

As mentioned earlier, the entire 340B enterprise is under a great deal of scrutiny today. Historically, the program relied on self-policing, and was perhaps subject to random audits by HRSA or by manufacturers. But the manufacturers are rejecting their role as subsidizers of the health care system. And Congress is re-visiting the original charter of 340B. That being, to help those organizations that serve the poor and underserved – not necessarily to provide a revenue stream to health care providers.

The Affordable Care Act (ACA) amended the 340B statute, requiring Health Resources and Services Administration (HRSA) to develop procedures that would require Covered Entities to regularly update information. In Spring 2012, HRSA began requiring Covered Entities to update information in HRSA’s Covered Entity database and to recertify compliance with 340B program rules.

Conclusions and Recommendations.

In this era of fiscal “belt tightening,” perhaps no other health care program will feel the “screws tightening” like 340B. For years, Congress looked at 340B as a way to help hospitals make ends meet, without tapping Federal or State budgets. But the drug companies have decided, “enough is enough,” and their lobby is sure to impact a Congress that already needs to find cuts in the Medicare budget. However, for at least the foreseeable future, there are several things 340B hospitals can do to protect their interests:

Certainly, a 340B program can be an administrative nightmare. And many organizations are reluctant to enroll in 340B, and operate under this kind of intense oversight. If this were the only reason for NOT taking advantage of the opportunity, perhaps outsourcing the administrative/legal/compliance issues, would prove to be an acceptable recourse. And if you select a consult that works on a contingency basis, to manage your 340B program, you certainly don’t risk losing revenue on the program.

Quality Reimbursement Services, Inc. has been consulting hospitals on matters dealing with Medicare and Medicaid reimbursements since 1994. We work primarily on a contingency basis, requiring no up-front or maintenance charges for our services. We would be happy to meet with you, and review your circumstances to see if we may be of service.