In this article two pharmacists discuss what 340B means, providing perspectives and insights on this special program.
A discussion between Joe Osborne, Pharm.D. & Christina Rivera, PharmD, BCPS, AAHIV-M
Article Posted 25 April 2021
The 340B program often prompts confusion in healthcare professionals given the labyrinth of terminology and the convoluted movement of medications and money between the manufacturer and the patient. A basic understanding of the 340B program is advantageous to infectious disease (ID) clinicians as sexually transmitted disease clinics, tuberculosis clinics, and Ryan White HIV/AIDS clinics can all qualify for 340B status.
As a pharmacist that cares for people living with HIV, I set out to talk with our pharmacy administration resident, Joe Osborne, about 340B and what it can mean for my practice.
Dr. Rivera: Hi, Joe. Thanks for speaking with me today about this important but also intimidating topic for many clinicians. So, tell me, what exactly is a 340B program?
Dr. Osborne: Hey Christina! Section 340B of the Public Health Service Act, which I will call “340B”, is a Federal government program enacted by Congress in 1992 with the goal of providing affordable medications to uninsured and low-income patients. The premise of 340B is straightforward: pharmaceutical manufacturers must partner with Secretary of the Health Resources and Services Administration (HRSA) to have their drug covered under Medicare and Medicaid Part B. This partnership, termed pharmaceutical pricing agreement (PPA), requires that manufactures provide front-end discounts, to qualifying healthcare providers, called “covered entities”. Savings enjoyed by covered entities enable these providers to care for low-income patients and other medically vulnerable populations.
Dr. Rivera: OK, so “covered entities” under 340B get discounts on drug purchases and can use the funds from the discount towards the practice. You’ve got my interest! How would I know if my clinic and our patients qualify as a “covered entity?”
Dr. Osborne: Good question – Ryan White HIV/AIDS Program Grantees, Sexually Transmitted Disease Clinics, and Tuberculosis Clinics are included as covered entities. Also, six different types of inpatient hospitals:
- Children’s hospitals
- Critical access hospitals
- Disproportionate share hospitals
- Free standing cancer hospitals
- Rural referral centers
- Sole community hospitals
Dr. Rivera: Great! My practice is at a Ryan White program grantee, so will all my patients qualify?
Dr. Osborne: Patients receiving 340B medications must meet three requirements:
- Have an established relationship with the prescriber of the 340B drug
- Receive care from a professional employed by the covered entity
- Receive care service or range of services consistent with the services for which grant funding is typically assigned
I think it’s also important to know that an individual is NOT considered a patient of a covered entity if they only fill their prescription for self-administration and have no established relationship with the center they receive care from.
Dr. Rivera: Good to hear. So how does a clinic or pharmacy enroll with 340B anyway?
Dr. Osborne: To participate in the 340B Program an entity must register with OPA and meet all program requirements. After acceptance into the 340B program, a covered entity is given an assigned number that vendors verify before they may purchase medications at the 340B ceiling price.
Dr. Rivera: Are there any special exceptions to keep in mind? Like with Medicare or Medicaid patients?
Dr. Osborne: If you have Medicaid fee-for-service patients there is the need to pick a “carve-in” or “carve-out” approach. If you “carve in” for Medicaid patients, then you can use 340B but there needs to be a system in place to prevent duplicate discounting of medications and OPA must be informed of this agreement. If you “carve out” then your Medicaid covered patients purchase their outpatient drugs outside of the 340B program to prevent double discounting.
Dr. Rivera: Joe, sounds like this could work for my clinic. Can you tell me more about how the 340B program is implemented?
Dr. Osborne: Absolutely! The exchange of monies between the manufacturer and the patient is complex but let me break it down for you. A covered entity purchases 340B outpatient medications directly from the manufacturer or indirectly through a wholesaler. Covered entities dispense 340Bdrugs onsite or through a contracted pharmacy that receives a negotiated fee. The drug is then sold at a ceiling price, which is the average manufacture price (AMP) reduced by the unit rebate amount (URA). The URA varies but will be no less than 23.1% for brand-name drugs and 13% for generic and over-the-counter drugs. Keep in mind that the cost for a covered entity may be higher than the ceiling price if the wholesaler charges a handling fee!
Dr. Rivera: Wow, how many different steps are involved in getting a drug to a patient?
Dr. Osborne: Let me try and summarize from all the different perspectives: manufacturers provide discounted 340B drugs to covered entities or wholesalers. Wholesalers then sell 340B medications at a ceiling price directly covered entities or to contract pharmacies with a likely added wholesaler handling fee to make profit. Covered entities receive discounted 340B medication prices, which they can then use the savings in various manners to improve healthcare services. A contract pharmacy may enter the picture to sell 340B medications on behalf of a covered entity to a 340B patient and they would make profit again via pharmacy handling fees. 340B isn’t necessarily about the medications itself, it’s more of the discount on a needed item that gives a capital jolt to hospitals and clinics.
Dr. Rivera: Sounds like an involved process! Can you speak to how patients are directly benefited by 340B program?
Dr. Osborne: Of course, the patient-specific savings depends on a variety of factors including which 340B drug they are receiving, what the patient’s insurance status is, the total acquisition cost of the medication, copayment amount, etc. This said, it was estimated that in 2015 by the Government Accountability Office that 340B participants save anywhere between 20-50% off of drug costs, making it much more affordable for low-income patients.
I think it also is worth mentioning that the 340B results in cost savings directly to the covered-entity through lower pharmaceutical pricing. Covered entities may allocate these funds in means that they deem appropriate, under annual OPA audit, and typically use these savings to:
- Provide free care to low-income patients
- Provide discounted or free medications to low-income patients
- Offset losses from low Medicaid drug reimbursements
This all said, patients feel the direct impact of 340B savings typically in the form of discounted or free care.
Dr. Rivera: This has all been so helpful, Joe. Is there anything else you’d want to share with my colleagues about how 340B is impactful to infectious diseases clinicians and our patients?
Dr. Osborne: Through 340B, health-systems provide needed medications for diseases including HIV/AIDS and tuberculosis to uninsured and low-income patients through direct discounting of medications. The lower 340B acquisition cost of medications is not subsidized by taxpayer dollars. The savings enjoyed by health-systems enable them to provide free or discounted care to patients who are unable to pay for their medications, which in turn increases patient adherence and helps decrease the spread of infectious diseases. The savings also enable health-systems to employ vaccine programs and mental health services among other community health initiatives. 340B programs serve as a safety-net for patients in need and serve to better public health, reducing healthcare costs associated with expensive medications for patient populations that do not have insurance coverage or are unable to pay for their medications.
Dr. Rivera: Thanks again for taking the time and chatting with me about 340B, Joe. There’s so much as clinical pharmacists we can learn from pharmacy administration residents such as yourself.
Dr. Osborne: Happy to do so!
1. Health Resources and Service Administration. Sec. 340B PUBLIC HEALTH SERVICE ACT LIMITATION ON PRICES OF DRUGS PURCHASED BY COVERED ENTITIES.; 1992. Accessed April 10, 2021.
2. 340B Health. Detailed Overview – 340B. Published 2018. Accessed April 10, 2021.
3. American Hospital Association. Fact Sheet: The 340B Drug Pricing Program.; 2021. Accessed April 10, 2021. www.aha.org
ABOUT THE AUTHOR
Joe Osborne, Pharm.D., graduated with his Doctor of Pharmacy from Ferris State University in 2020. He currently pursues a PGY-1 and PGY-2 Health-System Pharmacy Administration and Leadership residency at Mayo Clinic in Rochester, Minnesota and a Master of Healthcare Administration at the University of Wisconsin-Milwaukee. Dr. Osborne’s interests include pharmacy technician practice advancement, pharmacy service expansion and justification, and national pharmacy organization involvement. His clinical interests including psychiatry, emergency medicine, and cardiology. Following residency, he plans on becoming involved in his local state board of pharmacy and advocating for pharmacy practice advancement.
You can follow him on Twitter @JOzempic