Is the 340B Program the Cause of Drug Shortages?

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Is the 340B Program the Cause of Drug Shortages?

Are you serious???

I don’t usually get fired up about stuff that goes on in our legislature, but when you hear crazy statements that are clearly aimed at finding a loop hole in the 340b legislation, it makes me mad! Here’s the skinny:

A few weeks ago, President Obama made an executive order on drug shortages. One of the reasons for the shortage that was given by pharmaceutical manufacturers was the 340b program. There were some other more valid reasons including “low reimbursement for mature generic injectable drugs reduces the incentive to manufacture them.” This week, we found out that a Utah Senator, Orrin Hatch, (along with Senators Grassley and Upton) is drafting legislation that would halt 340b pricing for drugs that are in short supply for up to three years.

First, as a hospital pharmacy director (with responsibility for a retail pharmacy as well) the majority of drug shortages are for inpatient drugs. Most are critical care injectables and items we need to make TPNs. Since the 340b program primarily applies to outpatient drugs or drug administered to treat outpatients, I do not see how the 340b program has contributed to these inpatient drug shortages.

Second, for the outpatient drugs that are short, it is possible that the 340B program decreased profitability, which would cause manufacturers to stop making the drug. However, 340b purchases are still a very small percent of the market and this alone would not be enough to stop a manufacturer from making a drug. My system pharmacy contract manager made the point that the reimbursement structure is what contributes to this. GPO and IDNs have driven the price down so low (in an effort to keep costs down to consumers) that it is not profitable to continue making the product. If we could change the model to take into account expected manufacturing cost plus a margin to guarantee drug companies some profit in the generic market, we may see more stay in the market.

Third, and most scary. If you are a publicly owned pharmaceutical company and you need to increase profits. What is to stop you from artificially causing your drug product to go into shortage, which would place a hold on 340B pricing (and Medicaid rebates) for up to three years. Ultimately resulting in a nice profit increase for your shareholders, a bonus for you, and completely skirting around legislation created to help hospitals and clinics taking care of our citizens with the most need.

To summarize all of this, to create legislation to place a hold on the 340b program and Medicaid rebates based on the premise that it will help with drug shortages is off target at minimum and potentially disastrous for hospitals and clinics relying on 340b help to stay solvent. If this legislation goes through, I have no reason to believe that drug companies are going to do everything they can to prevent a shortage, rather they will potentially allow shortages to happen as the result will be more profit. Senator Hatch, don’t do it. If the statements above are not enough, then you have to know that this will be seen as a Big PhRMA pocket lining, that will be pointed out by any of your opponents (I am sure it will not escape the watchful eyes of the Tea Party).

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340B Audits are Coming

HRSA has announced that 340B audits are coming

We all knew it was coming. First, the legislation was approved to fund OPA with a 0.1% user fee on all340B drug purchases. Then some of the GOP were calling for more oversight (eg, Grassley, Hatch, Upton). Well, here it is. In a letter from HRSA dated October 21st and made public on November 9th, it states that audits will begin February 6th, 2012. The letter also addresses various other 340B topics which are of value, but the audit stands out the most. It appears that the audits will be mostly around covered entities that have been reported as possible compliance or diversion risks.

The take home message: Know the rules and be conservative. As I have learned more about the program, I have quickly ascertained that many vendors and covered entities are operating in the gray zone. Now, this is likely due to the fact that there is a gray zone. The legislation is not specific and very little specific instruction has been given. In many cases, some language is give and then left up to interpretation. Our colleagues at SNHPA, PSSC, OPA are all doing their best to clarify, but in the end it often ends with “it’s an interpretation issue.” As a pharmacist (and even worse, a pharmacy director), this kills me. I see things very black and white, and struggle with gray. My hope, and I think we have reason to think it may happen, is that the extra funding for HRSA-OPA will result in clarification of these “interpretation” issues. That we will all have clear guidance on what is okay and what is not okay. Dare to Dream!!!

One other thing to think about. We are not perfect. As hard as you try, you might end up causing a double dip on Medicaid or using a 340B drug on a non-340b patient. Place some internal audits in place and do your best to identify these issues. When you find them, correct the error and then correct the process that caused the error. I would also say to share the information so we can all learn from it. I have a good one to share, but I will make it the next post. Best of luck in your 340B journey!

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ASHP Midyear 2011 – 340B Program Update

Are you going to ASHP Midyear? Then you may want to attend the 340B Update

I was recently sent an invitation from Apexus (the Prime Vendor for the 340B program). On Saturday, December 4th from 8 am to 4 pm (I know, it is all day), there is a 340B program update. Here is a link to the flier. If you are like me, you are going for your hospital and have other assignments. As the pharmacy director, I need to be available for interviews at our PPS booth (we have pharmacy residents and we are recruiting for an ID pharmacist). I am planning on attending this educational 340B program, it is free, provides CE, and pre-registration is required (so it will not be packed tight at the last minute as can happen for hot topics during the other sessions). The flier above has the pre-registration link. Here are a list of the topics:

      HRSA’s key priorities to improve program integrity over the coming months
      OPA’s plans for implementing the new integrity provisions of the PPACA and recommendations made by the GAO in its final report
      The roles the PSSC and Prime Vendor Program are playing to support OPA integrity initiatives
      Hearing from representatives of covered entities and the pharmaceutical manufacturers regarding their perspective on new integrity provisions and compliance issues

I’ll see you there!

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340B Program Blog Adds a New Team Member

Rich B and I are pleased to announce the addition of Rich I to our 340B Program Blog team

For starters, Rich I has been a coworker of ours for many years. He is a project manager with a finance background. When it comes to 340B program implementation in our health-system, Rich I is our go to expert. With our team’s different backgrounds and roles in 340B management, we feel that it is time to take this site to the next level. As we actively engage in contract pharmacy negotiations with vendors and retail chains with in house software, we will share what we learn with you. We are getting closer to contract approval on both sides and are excited to implement a voucher program to increase our charity care for our patients.

Rich I and I recently participated in a conference call with one potential contract pharmacy 340B vendor. We learned a lot about different ways vendors are approaching how they determine if a covered entity patient is eligible for a 340B drug at the contract retail pharmacy. Two very distinct ways are: 1) Purchasing prescription pads for your hospital and hospital based clinic use only, and have a unique identifier on the pads that lets the retail pharmacy know they are a 340B eligible script. 2) Have HL7 messages go from your health system to the vendor software to let it know which patients qualify. If the patient shows up at the pharmacy in a specified time from the hospital encounter with an eligible physician, then it would count as a 340B eligible prescription. There are good and bad with both, and we are considering these options. I am leaning toward, simple is sometimes better. We will let you know when we get off the fence and move forward.

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340B Coalition Winter Conference 2012

The Winter 2012 340B Coalition Conference

Just in case you didn’t get the message, the Winter Conference for the 340B Coalition will be in San Diego at Del Coronado on February 29th to March 2nd. This is where I received my first major eduction on 340B and I strongly recommend it to all who are qualified to be a 340B covered entity and want to get a crash course on 340B. Not to mention Del Coronado in February is a great place to be. The Rich’s and I went last year and found some great places to eat. We are hoping to go, but I have this thing you may have heard of . . . The Joint Commission potentially coming in that time frame. They should be done by then , but who knows right. If you happen to work for The Joint Commission, please notice my proper use of your name and kindly drop me a line if I am okay to go. 🙂 The website to see the conference details is If you are going, let us know and we can do a meet up at the Irish Pub we found with some great food, I had a Philly cheesesteak with au ju dipping sauce (I think I just made my mouth water). Hey Rich’s, we have to go back!!!

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340B Contract Pharmacies

The big thing right now in the 340B program is contract pharmacies, this article will discuss what we have been doing with 340B contract pharmacies.

First things first, an update: we have been looking for a regional pharmacy director for my region (my 400 bed hospital, and two additional smaller hospitals) for about 12 months. We did not find a match and they settled on me. Haha, I hope it was not settling and that I have proven my self over the last 10 months helping manage the pharmacy without a director. Of course, I had lots of help, but that is one of my reasons why we have been less active on this website. Rich and I talk regularly, and we almost always say stuff like, “that would be a great article” or “we have to talk about that.” Well, I am pretty close to back-filling my manager position and decided to get back to 340B. Another reason is that we have residents at my site, and I project pitched a 340B project and one of them accepted. I am very excited about the opportunity to mentor and work with a pharmacy resident with motivation and time to complete a thorough project. I will share the fruits of this labor here.

The project: To identify community/outpatient pharmacies near our hospital for 340B pharmacy contracting opportunity. Create a contract template to be used with each community pharmacy. Evaluate and choose a software vendor that will meet our needs for efficiently and effectively working with community pharmacies to provide split billing opportunity, data collection, and reporting. Enter into contract pharmacy agreements and measure net output as offset to expense (we are not for profit, so we do not call this profit). Once we have some dollars coming back to us from these contract pharmacy agreements, create a model for taking a percentage of the dollars and providing increased and expanded charity care through a voucher program. Finally, measure the net impact of charity care provided to the community and potential increased health (potentially resulting in overall lower healthcare cost).

Rich and I have also been talking about using some of the knowledge gained through this experience and creating a turnkey operation for our rural facilities (critical-access hospitals). We are in our contract negotiation phase with a retail pharmacy. Until it is over, I will withhold comment. I will share what I can, when we are through contracting and we turn it on for our facility. I am excited about increasing the charity care to our community, because we need it really bad. I know we are not the only ones. I brought this up with our Community Outreach Director and she was thoroughly excited over the prospect of having more dollars she can provide to those in need.

Stay tuned for updates on our first contract pharmacy (technically our second, since my hospital outpatient pharmacy has been doing this for a couple of years now). If we can share some of our experience through this process and it makes your implementation easier, then I will consider this a win. As a side note, I will be at ASHP Midyear (mostly recruiting for our residency program), but if you have some experience to share or want to learn more about what we are doing, use the “contact us” page to send me your email and let’s set something up. As always, thanks for visiting. -Rob

Click here to see the Federal Register update in May 2010 on multiple contract pharmacies

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Who Qualifies for 340B

Next to “What is 340B?” the question I frequently receive is, “Who qualifies for 340B?”

Here is the quick answer for the more common options (a more detailed list can be found at the OPA website):

  1. Disproportionate share hospitals (DSH)
  2. Children’s hospitals
  3. Critical access hospitals
  4. Free standing cancer hospitals
  5. Sole Community Hospitals
  6. Ryan White Clinics
  7. State-operated AIDS Drug Assistance Programs (ADAP)
  8. Black lung clinics
  9. Comprehensive hemophilia diagnostic treatment centers
  10. Native Hawaiian Health Centers
  11. Urban Indian organizations

For DSH hospitals, you do need to meet the minimum level of 11.75% DSH percent. I’ll need to create a separate article to thoroughly cover what goes into this number (hmm, I might have to do that next), but it is roughly a combination of Medicare with supplemental social security over total medicare days and Medicaid (non Medicare) over total patient days. If this sounds confusing, well . . .

If you are one of the entities above, you can find the forms you need to register at the OPA 340B forms site.

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340B Resources – Government

The Government Resources for the 340B Program



If you are a 340B entity, then you know resources are scarce for the 340B program. The primary government resource for the 340B program is the Office of Pharmacy Affairs (OPA). The OPA is part of the Health Resources and Services Administration (HRSA), which is an agency of the US Department of Health and Human Services (HHS). The OPA is responsible for managing the 340B program implementation with covered entities according to section 340B of the Public Health Service Act. They also have some good information on their site regarding the 340B program. When I need to know specifics about the program, I start with the OPA since they are they manage the program. As a side note, the OPA used to be purely funded through HRSA’s budget (which means it didn’t get too much since their budget for 2011 was decreased from 2010), but in 2011 there was some legislation (starts in 2012) that requires a 340B program user fee of 0.1% of drug cost to be paid by covered entities (the hospital or clinic) to HRSA. To be honest, I think this is a good thing for the program and helping to ensure it will stay around.

The next 340B program resource that is provided by our government is the Pharmacy Services Support Center (PSSC). The PSSC is a joint venture of HRSA/OPA and the American Pharmacist’s Association (APhA). I find this fascinating (a professional organization working with a government organization), but am very proud of APhA for partnering this way. The PSSC serves as the primary access resource for the 340B program. This is probably the third place I go to for 340B information, and the website does provide a lot of good information.

There is another resource that I consider my number two place to go for 340B information (and often number one). It isn’t part of the government, and they do provide some free information; however, the more detailed information is for members. I will provide a separate more detailed post soon on the benefits of Safety Net Hospitals for Pharmaceutical Access (SNHPA). I will say now, that SNHPA is a non-profit organization that plays a critical role in helping the 340B program stay around to benefit the covered entities who rely on the 340B program’s benefits for staying afloat in these difficult times.

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340B Use in a Hopsital Based Synagis Clinic

My 340B hospital has a young demographic and therefore a lot of babies (we are a not for profit 340B DSH hospital). For instance, our average census in our newborn ICU is 42 (and we have seen our census peak at over 60 infants in the last few months). This correlates with a lot of need for Synagis®. Although we usually provide the first dose in the hospital (which does not qualify for 340B pricing), many infants are discharged and need to receive future doses as an outpatient. Many pediatricians do not want to or will not buy and administer Synagis due to high drug cost, marginal reimbursement from Medicaid, and a time consuming prior authorization process. I know, so why in the world would a hospital do it, NOT because we love to create challenging situations where the chance of successful reimbursement requires a lot of staff time. We do it for the babies. These babies could have added protection from a life threatening RSV infection, and so it goes without saying that it is the right thing to do (which is the reason we do a lot of things in healthcare, and the right reason).

What does the 340B program have to do with a Synagis clinic? A lot really. It is difficult to obtain buy-off from administration on a new service if it will lose money (trust me, I have tried). Sure, the insurance companies will cover the cost of the medicine (well, most if the time), but what about physician time, nurse administration, staff time for prior authorization, and everything else that involves getting a medication from the pharmacy to the patient. Not to mention opportunity cost, could we have seen patients that would have had better reimbursement for cost? This is where 340B comes in. With 340B pricing, we can create a win-win for everyone, which ultimately results in better RSV protection for a vulnerable, high-risk group of babies.

Please remember, this is what 340B is supposed to do. . . Help Our Patients! Yes, it helps offset costs for hospitals and clinics who take on a disproportionate share of CMS and indigent patients, but we ultimately need to help our patients.

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Welcome to the 340B Program Blog


We endeavor to share our 340B program experience, including our current trials and tribulations with implementation of the 340B program within our DSH and critical access hospitals.

Our hope is that you will learn with us as we maneuver this will intentioned, but difficult to implement cost savings 340B legislation.

If you are new to 340B and want to learn the basics, then go to our 340B Basics page for more information.