Documenting 340B Value Is Key to Success

The 340b program allows covered entities to serve their vulnerable patients by providing access to deeply discounted outpatient medications at the 340B ceiling price.¹ The savings generated from participation in the program are to be reinvested to provide better quality care and enhanced services for patients, according to the Health Resources and Services Administration’s (HRSA) program intent.

To ensure that covered entities are meeting program intent, they first need to understand what their total savings will be as a result of participation in the program. Total program savings can include, but are not limited to, the savings generated from the following services provided by a covered entity: ambulatory and mixed-use services, contract pharmacy services, in-house retail pharmacy services, and physician-administered clinics/off-site facility services.

There are various resources for entities to use to calculate their program savings. Listed below is an example calculation provided by Apexus, HRSA’s 340B program prime vendor.²

340B Net Impact

For hospitals and entity-owned retail pharmacies subject to the group purchasing organization (GPO) prohibition:

Step 1: Calculate 340B savings by reviewing a purchase history report from the 340B account and identify the unit price for each product in the National Drug Code (NDC) when purchasing those drugs at the GPO and 340B prices. 340B savings will be equal to the GPO total minus the 340B total.

Step 2: Calculate the wholesale acquisition cost (WAC) variance by identifying the purchase history in the non-GPO/WAC account and what those purchases would have cost at GPO pricing. WAC variance will be equal to the non-GPO/WAC total minus the GPO total.

Step 3: Calculate net savings. This total is equal to 340B savings calculated in Step 1 minus the WAC variance calculated in Step 2.

For all other entities and entity-owned retail pharmacies not subject to the GPO prohibition, 340B savings may be calculated by looking at the difference between 340B pricing and customary pricing for all outpatient purchases.

Contract pharmacy revenue: Reimbursement received—(drug actual acquisition cost, plus dispensing fees to contract pharmacies, plus administrative fees to vendor, plus direct and indirect remuneration fees charged by pharmacy benefits managers, plus entity costs of sliding fee subsidization).

340B compliance maintenance costs:

Summation of all costs incurred to support program compliance:

• External resources: consultant, external-auditor, legal, and split-billing software fees Internal resources: dedicated full-time equivalent (FTE) time (whole or partial FTE) and education
• Internal resources: dedicated full-time equivalent (FTE) time (whole or partial FTE) and education
• Lost revenue: net revenue lost from receiving decreased reimbursement due to 340B status (eg, Medicaid managed care organizations, Medicare outpatient prospective payment systems, private payers identifying 340B claims). Lost revenue should be the difference between what was net revenue as a 340B entity versus what would have been net revenue as a non-340B entity. This would include non-340B reimbursement and non-340B drug cost. Many sites find this very difficult, if not impossible, to calculate.

The table contains information for how to align with HRSA policy and is provided only as an example to encourage 340B program integrity. This information has not been endorsed by HRSA and is not meant to help determine compliance with or participatory status in the 340B Drug Pricing Program. 340B stakeholders are ultimately responsible for program compliance and compliance with all other applicable laws and regulations. Apexus encourages all stakeholders to include legal counsel as part of their program integrity efforts.

Documenting Use of Program Savings

As a best practice, entities should create a “340B savings story,” which describes their total program savings and how they meet HRSA’s program intent.3 Certain covered entities, such as grantees, often complete line-item—based financial reporting, in which they track their total program savings to specific patient care services. Other covered entities, such as hospitals, do not maintain a line itemization on their financial reports specific to 340B program savings because of requirements from other agencies. In this case, there often is no clear link between savings and services offered. As a result, hospitals can use other means to demonstrate the ways in which they meet program intent, such as using the Medicare cost report to identify the disproportionate share adjustment percentage, total charity care, and total uncompensated care.

The 340B savings story is more than dollars and cents. It is important to be able to articulate how 340B program savings increase access to care for patients. An example is identifying a primary-care practice site that has free clinics in an area with an indigent population and describing how it positively affects the members of the community. Another example is a patient transportation program that provides rides for patients to and from their appointments. Specific stories on how patient lives benefit are powerful, such as a cancer survivor who was able to afford treatments or received them at no cost because of 340B savings. Associating the 340B program savings to patients and services is key for humanizing the 340B program for external stakeholders.

Calculating the 340B program savings and documenting the value of the program is important to ensure that participation results in benefits that are used to increase access.

Alexandra M. Williams, 340B ACE, is a 340B education and compliance specialist at Apexus in Irving, Texas.Halena Leah Marcelin, PharmD, MS, BCPS, is the director of pharmacy business affairs at Baptist Health South Florida in South Miami.

References

• 340B drug pricing program. HRSA website. hrsa.gov/opa/index.html. Updated November 2018. Accessed December 12, 2018.
• 340B university tools: use of 340B savings tool. Apexus website.docs.340bpvp.com/documents/public/resourcecenter/use-of-340B-savings.docx. Accessed December 12, 2018.
• Impact profile guide. 340B Health website. 340bhealth.org/files/340B_ImpactProfileGuidebook_.pdf. Accessed December 12, 2018.