The 340B Program, administered by Health Resources and Services Administration (“HRSA”), requires drug manufacturers participating in Medicaid to provide outpatient drugs to “covered entities” at significantly reduced prices. Generally, covered entities are facilities whose patients are from the most vulnerable populations, live in low-income households, are frequently uninsured and they include certain nonprofit hospitals and federal grantees/clinics. Some examples include but are not limited to federally qualified health centers (“FQHC”) or FQHC look-alikes, state-operated AIDS drug assistance programs, Ryan White Comprehensive AIDS Resources Emergency (CARE) Act clinics and programs, tuberculosis clinics, black lung clinics, Title X family planning clinics, sexually transmitted disease clinics, hemophilia treatment centers, urban Indian clinics and native Hawaiian health centers.
Under the 340B program, covered entities can purchase outpatient medications from manufacturers at a discounted rate (between 20% to 50%) that is predetermined through an agreement between the manufacturer and the secretary of Health & Human Services. The covered entity will then administer or dispense discounted medications through entity-owned or contracted pharmacies. Said differently, independent pharmacies are able to contract with 340B-covered entities to dispense prescription medication to the covered entities’ qualified patients. Such a relationship provides a community pharmacy with the opportunity to provide real value to a patient seeking access to prescription medication while also adding an additional income stream to its existing business model. Covered Entities may establish agreements either through multiple contracts with individual pharmacies or through a single contract with a chain pharmacy that identifies the specific pharmacy locations that will support the Covered Entity’s 340B program. Based on the regulatory and legislative requirements necessary to minimize fraud and abuse within the program, contract pharmacies may be compensated at a higher dispensing rate to meet such standards and provide indigent care. In the above scenario, if the patient has insurance, the pharmacy will bill the insurance and receive reimbursement for the medication at standard rates. But because the medication was purchased at a discount, this results in an increased reimbursement amount, otherwise referred to as “340B savings”.
The 340B program has had a great impact on access to HIV treatment and prevention services in the United States and stands to benefit many other vulnerable populations as well. If you operate a pharmacy and are interested in learning more about contracting with a covered entity in your community, please reach out to the Florida Healthcare Law Firm, we’d be happy to help.
