How Covered Entities Can Successfully Navigate 340B Changes
In 1992, Section 340B of the Public Health Service Act was passed. This law requires pharmaceutical manufacturers participating in Medicaid to sell outpatient medications at discounted prices to health care organizations (also known as covered entities or CEs) that qualify.1 Because qualification is dependent on the number of uninsured or low-income patients served, the intent of the program is to help covered entities offset the cost of care. The program has grown since then. In 2021 alone, covered entities purchased $43.9 billion worth of discounted medication under the 340B program.2
The 340B program has not been without legal challenges which have changed the way the program operates. One very recent example is the United States Court of Appeals for the Third Circuit ruled in 2023 drug manufacturers can choose to not sell their drugs to pharmacies contracting with a covered entity to dispense prescriptions on their behalf.3 Known as “contract pharmacies”, some of these pharmacies are excluded from purchasing medications at 340B prices. Multiple drug manufacturers will stop selling medications at 340B prices to contract pharmacies if the covered entity already has an in-house outpatient pharmacy. If no in-house outpatient pharmacy, the manufacturers will limit covered entities to a single contract pharmacy.4
Because contract pharmacies now find themselves unable to fulfill multiple brands of medications, the covered entities with whom they contract ultimately pay a higher cost of care. But covered entities can still do something to navigate this change mentioned above, they can implement programs to incentivize employees and patients to use their in-house pharmacies instead of community-based pharmacies with which the CE has likely contracted. This article will focus on this dispensing practice, known as “insourcing”, and we will discuss things covered entities may wish to consider when insourcing your outpatient pharmacy services.
What is Insourcing?
Pharmacy insourcing is the practice of providing medication dispensing services in-house within a health system or organization. Unlike outsourcing, where dispensing is provided by community-based (“contract”) pharmacies, insourcing involves establishing or growing an in-house pharmacy that is responsible for providing employees and patients with prescribed medications.
Why should covered entities consider insourcing?
As described above, contract pharmacies access to drugs is becoming more limited. Because the covered entity itself is not excluded from access, they are able to provide the medications to their patients. In so doing, insourcing enables the covered entity to help maximize savings which in turn helps them meet the intent of the program and stretch scarce dollars further.5
Things to Consider when Insourcing1
- Start from the inside.
- Start by capturing the prescriptions of employees and families by offering lower copays when filling with your in-house pharmacy. A recent survey found nearly 75% of participants would switch pharmacies to save money on medications.6 Call your Pharmacy Benefit Manager (PBM) and negotiate better premiums and/or copays for employees when using your in-house pharmacy. In return, offer that the PBM reimburse your pharmacy at lower rates when filling employee’s prescriptions. If your health-system is self-insured, mandate chronic medications be internally filled. The increased 340B script volume can improve your overall gross profit.
- Deliver outpatient prescriptions to patients before being discharged from the hospital. Better known as meds-to-beds, this program not only increases the likelihood of dispensing 340B medications,7 but also benefits the medical staff and patients. Patients benefit from increased knowledge of medication8 and reduced stress of acquiring medication when home.9 Meds-to-beds has been shown to significantly reduce hospital readmissions.10
- Convenience is Key. Whether dispensing to employees or patients, convenience is paramount for retention. A 2012 Drug Store News survey found that 94% of patients choose their primary pharmacy based on convenience. Similar to all customer service, ease of use is directly related to customer retention.11 Below are some ways to improve customer convenience.
- Prescription Pick-Up Lockers. Most healthcare professionals know the mental and physical exhaustion after a 12-hour shift. The last thing you want to do is wait in line at a pharmacy. Prescription pick-up lockers are storage units that allow patients to bypass the will call line and obtain prescriptions at their convenience. Think Amazon or Home Depot Lockers, but in a pharmacy. Multiple health-systems and pharmacies around North America have already successfully installed these lockers. Depending on your state’s pharmacy regulations, the lockers can be attached to the pharmacy, placed in the waiting area, or even installed in a foyer or parking deck.
- Delivery/Mail-Order Service. Between Grubhub, Amazon, and the thousands of other retailers, what can’t be delivered? It’s no longer a perk or luxury, but an expectation. Not offering delivery services is a top 10 reason patients switch pharmacies.11 Also, mail order pharmacy has been shown to improve medication adherence and reduce visits to the emergency department (ED).12,13 With modern pharmacy software, starting mail-order service is easier than ever. Many already come with logistics modules. Call your pharmacy software provider to learn more. Also call your Group Purchasing Organization (GPO) and see if they have member discounts for delivery services.
- Offer Med sync. As said before, it’s a numbers game. The more adherent your patients, the more fills, and the greater the chance to take advantage of 340B savings. Medication synchronization (aka med sync) is the proactive assembly of all of a patient’s medications for a single, generally monthly, pickup or delivery.14 Med sync programs are associated with 2.29 times higher odds of adherence versus traditional pharmacy.15 Also, patients show higher rates of satisfaction versus traditional pharmacy.16 Many pharmacy software already have syncing capabilities. Work with your provider to start syncing medication regimens.
- Automate where you can. Now that you have increased volume by attracting employees and patients, are you able to hire the staff to keep up? In the past, pharmacies would scale by hiring more technicians and pharmacists. Since the great resignation, many pharmacies have been struggling to attract employees.17 Per the US Chamber of Commerce, in June 2023, there were 3.9 million more open jobs than unemployed workers.18 Even if you can hire, retention is just as difficult. In that same month, four million workers quit their jobs.18 Use automation to offload tasks so your staff can stay engaged working on patient-centered services. Some options for automation include phone systems to automate refill reminders, customer facing web application to prevent phone calls and waiters, Health Insurance Portability and Accountability Act (HIPAA) compliant online forms for clinical services, packaging systems to navigate adherence programs, vial filling systems, or specific central fill solutions that streamline workflow.
This is a pivotal time in healthcare. With recent court rulings and labor shortages, pharmacies cannot be satisfied with the status quo. Pharmacy insourcing is a strategic evolution for covered entities. Meet with hospital and pharmacy leadership, discuss industry changes, and adjust accordingly. Your underserved patients need you, and you need 340B. Be proactive and DON’T WAIT.
- The following steps are related to insourcing and may or may not be permissible for your 340B drug discounting program. Work with your compliance officer while implementing new changes
- Fact Sheet: The 340B Drug Pricing Program. American Hospital Association. Accessed March 16, 2020. https://www.aha.org/fact-sheets/2020-01-28-fact-sheet-340b-drug-pricing-program
- 2021 340B Covered Entity Purchases (Health Resources and Administrative Services) (2022).
- Sanofi Aventis U.S. LLC v United States Department of Health and Human Services (Sanofi), (2023) (Third Circuit).
- Pierson B. Drugmakers prevail in dispute over U.S. discount drug program. Reuters. Reuters; 2023. January 30, 2023. https://www.reuters.com/legal/drugmakers-prevail-dispute-over-us-discount-drug-program-2023-01-30/#:~:text=The%20companies%20had%20sued%20the,were%20pleased%20with%20the%20decision.
- 340B Drug Pricing Program. Health Resources & Services Administration Office of Pharmacy Affairs. https://www.hrsa.gov/opa#:~:text=The%20340B%20Program%20enables%20covered,entities%20at%20significantly%20reduced%20prices.
- O’Brien J. Nearly 75% of Consumers Would Change Pharmacies For Savings. HealthLeaders. HealthLeaders, an HCPro brand; 2018. October 30, 2018. https://www.healthleadersmedia.com/finance/nearly-75-consumers-would-change-pharmacies-savings
- Jones V, Zelnicek T, Hines MT, Johnson EJ, O’Neal KS, Draugalis JR. Creation and implementation of a pharmacy-led meds-to-beds program at a large teaching hospital. Journal of the American Pharmacists Association. 2022;62(3):870-876. doi:10.1016/j.japh.2021.11.020
- Ross M. Meds to Beds Program Provides More Opportunities for Patient Counseling. Pharmacy Times. MJH Life Sciences; 2015. Oct 5, 2015. https://www.pharmacytimes.com/view/meds-to-beds-program-provides-more-opportunities-for-patient-counseling
- Findlater CK, Gerges S, Litynsky J, Robson K. Implementation of a Meds to Beds Medication Use Program and Parent Experience at the Time of Transition From a Neonatal Intensive Care Unit to Home. J Pediatr Pharmacol Ther. 2022;27(4):300-305. doi:10.5863/1551-6776-27.4.300
- Stedge B, Xu J, Kubes JN, et al. Meds to Beds at Hospital Discharge Improves Medication Adherence and Readmission Rates in Select Populations. South Med J. Mar 2023;116(3):247-254. doi:10.14423/smj.0000000000001532
- Here’s the Truth About Why People Aren’t Choosing Your Independent Pharmacy. Elements Magazine. PBA Health. October 26, 2017. https://www.pbahealth.com/elements/how-consumers-choose-pharmacies-and-how-to-market-to-them/
- Duru OK, Schmittdiel JA, Dyer WT, et al. Mail-order pharmacy use and adherence to diabetes-related medications. Am J Manag Care. Jan 2010;16(1):33-40.
- Schmittdiel JA, Karter AJ, Dyer WT, Chan J, Duru OK. Safety and effectiveness of mail order pharmacy use in diabetes. Am J Manag Care. Nov 2013;19(11):882-7.
- White ND. Pharmacy Medication Synchronization Service Works to Improve Medication Adherence. Am J Lifestyle Med. Nov-Dec 2016;10(6):385-387. doi:10.1177/1559827616660687
- Nsiah I, Imeri H, Jones AC, Bentley JP, Barnard M, Kang M. The impact of medication synchronization programs on medication adherence: A meta-analysis. Journal of the American Pharmacists Association. 2021/07/01/ 2021;61(4):e202-e211. doi:https://doi.org/10.1016/j.japh.2021.02.005
- Waghmare PH, Lindsey R, Reed JB, Gao S, Zillich AJ. Systematic review of the impact of medication synchronization on healthcare utilization, economic, clinical, and humanistic outcomes. JACCP: JOURNAL OF THE AMERICAN COLLEGE OF CLINICAL PHARMACY. 2023;6(6):597-614. doi:https://doi.org/10.1002/jac5.1815
- Haas CE. Where Have All the Workers Gone? Pharmacy Times. MJH Life Sciences; 2022. Jan 3, 2022. Accessed Aug 7, 2023. https://www.pharmacytimes.com/view/where-have-all-the-workers-gone-
- Ferguson S. Understanding America’s Labor Shortage. US Chamber of Commerce; 2023. July 12, 2023. https://www.uschamber.com/workforce/understanding-americas-labor-shortage