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Saving 340B will require diligence from covered entities

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Leslie Lotano-Saba

For several decades, low-income patients, providers and pharmacies alike have been realizing the cost-saving benefits of the 340B drug-pricing program. The program helps a range of health care providers (covered entities) such as disproportionate share hospitals, rural hospitals, children’s hospitals, FQHCs and other providers that serve vulnerable communities, by lowering the cost of outpatient prescription drugs. The program is mostly funded by discounts from pharmaceutical companies, so it makes an enormous difference to vulnerable populations without costing the government significant money.

340B under pressure

Duane Harrington

Yet the past few years have seen the program come under intense pressure as both Congress and the executive branch have attempted to reshape it as part of the larger debate around prescription drug pricing. This is happening despite the fact that 340B discounts apply to less than 3% of total drug sales. And now, like almost every other aspect of the American health care system, covered entities face new challenges due to the COVID-19 pandemic, including significant increases in the number of telehealth visits. The growth of telehealth puts pressure on covered entities to establish proper protocols for maintenance of patient records related to these visits and leverage their partnerships with contract pharmacies to realize all possible discounts, as every dollar is critical.

Program requirements challenging record keeping

As with an in-person doctor’s appointment, any prescription written for an eligible patient following a telehealth visit can be filled under the terms of the 340B program so long as all three requirements of the Health Resources and Services Administration (HRSA) patient definition guidelines are satisfied: the prescriber must be employed by, under contract with or have some other relationship with a covered entity; a record of care from the telehealth visit must be kept by the covered entity; and the telehealth visit must be for a service within the scope of the covered entity’s grant. Records for all telehealth visits should be preserved in the same manner as traditional appointments at the covered entity would be. For some covered entities, record keeping and maintenance continue to be a challenge. While many providers are using electronic health records (EHRs), a significant minority are not, due to the expense of transitioning over to these systems. And in many instances where covered entities have an EHR system, data is entered manually into these systems after patients and clinicians fill out forms and notes by hand, which introduces errors at a distressing rate. Telehealth visits, which do not include traditional verification processes like patient sign-in forms and histories, add further ­complexity.

A focus on COVID-19

These problems have been present for years, but they have been exacerbated by the pandemic. Additionally, the combination of increased health care system utilization during the pandemic by heavily hit vulnerable patients and increases in people who have lost their income and job-based health insurance who will now be relying on low-cost clinics, increases the challenge of keeping accurate records. Clean records around a telehealth visit and associated medications dispensed require tracking of the services provided to patients; verification that these visits actually occurred and qualify for 340B inclusion; and documentation that the prescriptions were properly filled by the covered entity’s in-house pharmacy or a contract pharmacy.

With the COVID-19-related increase in Medicaid recipients in both fee-for-service and managed care Medicaid programs, it is also essential that covered entities track and manage their Medicaid exclusion files to avoid risks of duplicate discounts and fully leverage their partnerships with contract pharmacies. The savings associated with using contract pharmacies helps them reach more patients and provide a broader spectrum of services. (It is important to note that the number of contract pharmacies should be balanced with the need for patient access and administrative oversight. Too many contract pharmacies can significantly increase program risk and drive higher oversight costs.)

Facing audits

The stakes are high, as the HRSA literally conducts hundreds of new and repeat audits of 340B providers each year — pandemic or no pandemic. Drug manufacturers have also ramped up the frequency and intensity of their own audits of pharmacy benefit managers’ claims, in search of duplicate discounts. Auditors look at both covered entities and their associated contract pharmacies. Those that fare poorly in an audit may be required to pay refunds to drug manufacturers and implement corrective action plans. In the worst cases, they can even lose their 340B eligibility entirely. Therefore, accurate, easily auditable records are critical to the continued success of this vital program.

The savings that covered entities realize through the 340B program are helping them to continue their mission of serving vulnerable populations, providing charity care, adding clinicians and support personnel in underserved areas, and to provide or expand services that they would not otherwise be able to afford to offer. Savings from this program are used for a wide range of services that benefit the community, including health screenings, wellness programs, medication discounts, free drug programs, service area expansions and transportation services. Program compliance introduces some costs, but these costs are just a fraction of the total dollar amounts that participants have been saving.

For the 340B program’s continued success, covered entities must remain diligent around all aspects of the program — even in a health care environment that has seen great change due to the pandemic. Proper, “audit-proof” record keeping and maximum utilization of contract pharmacies are two major keys for these providers’ ongoing ability to serve their critical ­mission.

Leslie Lotano-Saba is a pharmacy expert and serves as an adviser for AArete, a global consultancy specializing in data-informed performance improvement. Duane Harrington is a senior managing director and practice lead in the Healthcare Payer practice of AArete. They can be reached, respectively, at [email protected] and [email protected].


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