Understanding and Navigating Specialty and Orphan Drug Challenges in the 340B Program

Offering significant clinical and economic benefits, specialty pharmacy is a key component of hospital and health-system pharmacy operations. Nearly 10% of all specialty prescriptions are dispensed by 340B contract pharmacies, which makes this channel one of the fastest-growing components within the 340B program.¹ According to the American Society of Health-System Pharmacists, nearly 50% of hospitals with more than 600 beds operate a specialty pharmacy, and purchasing specialty drugs through the 340B program is a key element.²

This makes complete sense, as hospitals participating in the 340B program can access discounts on drug acquisition costs. These discounts provide significant economic benefits to the health system in terms of reducing drug spend and improving margins, while supporting outreach and care for uninsured and underinsured patients. However, the complexities of the ambulatory pharmacy environment require thoughtful planning to ensure successful participation in the 340B program while meeting patient care and hospital business goals.

Although there is ongoing debate over the 340B program, pharmaceutical manufacturers generally participate in the program’s pricing structure.However, manufacturers could be negatively affected if the program does not operation properly. This is why manufacturers establish specific access requirements to ensure that a drug is not sold at a 340B price unless it follows the rules and guidance promulgated by the Health Resources and Services Administration (HRSA).

Failure to recognize the interests of manufacturers to ensure proper use of 340B pricing may result in 340B hospitals missing the opportunity to secure and retain discounts on key orphan and specialty drugs or may render them unable to access the drugs at all. In this article, we outline regulatory and eligibility hurdles and provide guidance to secure patient care access at discounted prices.

What is a Specialty Drug, and Who Has Access?

Although portrayed as well understood, current FDA and HRSA guidance leaves significant gaps and offers many options to participants that can lead to unnecessary costs and treatment delays.

Not all specialty drugs can be purchased by a covered entity at 340B prices or at all in some instances. Payers can and do limit availability and add processes that control access to specialty drugs through limited-distribution models, narrow-network agreements, and risk evaluation and mitigation strategy protocols. Traditional open-market drugs are typically included in standard agreements, while drugs classified as specialty by the payer may be managed via a separate, narrow network. These networks are supported by HRSA, in which no discrimination exists against covered entity participation.³

Reconciling 340B Eligibility and Procurement

The apex of 340B supply chain complexity is associated with specialty and orphan drugs. The challenge for hospital and health-system pharmacies is that although they have a patient waiting for treatment who meets the clinical qualifications for a specialty drug, they may not have access to make the purchase via 340B. To avoid treatment delays or higher acquisition costs, health-system pharmacy buyers and business managers must understand that 340B has additional rules or steps that may add to, or conflict with, traditional payment and procurement streams. Many specialty drugs also have an additional set of provider qualifications and patient and clinic qualifications.

In order to secure access to these products, covered entities must navigate the additional qualifications and procurement steps with 340B split-billing software and manufacturer registration programs or use phone/fax/email orders to specialty distributors to secure a discounted purchase price while respecting 340B program integrity.

In addition to technology to support the proficient use of electronic medical records and pharmacy and medical claims systems, the pharmacy may require a separate 340B software solution to qualify patients and prescriptions and facilitate purchasing and inventory tracking, as well as case management software to monitor specialty pharmacy patients.

Although we cannot cover detailed qualifications for every specialty drug or manufacturer, the following discussion outlines common barriers or 340B purchasing requirements and provides practical solutions for pharmacy personnel managing the procurement of specialty and orphan drugs in mixed use and ambulatory settings.

Drugs That Will Not Properly “Split” With 340B Software

Covered entities must split drug purchases across multiple accounts and may manage multiple inventories to optimize savings and maintain 340B program compliance. Software programs for 340B can often facilitate this process; however, manufacturers often list drugs differently in 340B catalogs, which may cause the standard 340B software split to fail. These exceptions may require phone, fax, or email orders to be placed during procurement and manual tracking of 340B purchases to make sure you don’t buy too much at 340B pricing:

PEGFILGRASTIM (NEULASTA)

Amgen limits 340B pegfilgrastim purchases to the specialty distribution channel. Group purchasing organization (GPO) inpatient and wholesale acquisition cost (WAC) purchases are only available through standard retail distribution. Different product codes across the 2 channels prevent the split-billing process from functioning properly. To resolve this, pegfilgrastim orders should be placed via phone, fax, or email, unless using an account not integrated with 340B software, with purchases tracked manually.

BLOOD PRODUCTS

Some manufacturers charge blood in international units, while others charge as “eaches,” or packages. These variable package sizes can confuse software, resulting in a failed 340B order split. Orders should be placed via phone, fax, or email unless using an account not integrated with 340B software, with purchases tracked manually.

DRUGS AND BIOLOGICS UNDER CONSIGNMENT

Consignment products cannot be acquired with electronic ordering. Therefore, consignment products do not split properly with 340B software. Consignment is, by definition, invoiced as replacement inventory. This method allows buyers to manage the replenishment stock in a compliant manner while accessing 340B pricing. As part of the monthly reconciliation or prior to an urgent consignment replenishment request, the buyer should determine the available 340B and GPO accumulations for the requested product(s).

Specialty Distribution Only

DRUGS REQUIRING 1-TIME REGISTRATION

Many specialty products are accessible to 340B hospitals but require 1-time registration to provide additional demographic and clinical information before delivery and dispensation of the product. The registration can often be managed online. For example, Ofev (nintedanib) is easily accessible, but requires a 1-time registration.

DRUGS ONLY AVAILABLE DIRECTLY FROM THE MANUFACTURER AT 340B PRICING

Manufacturers may choose to segregate 340B purchases of their product by requiring direct shipments. Immune globulin injection (Gammagard SD) is available for 340B purchases, but not available through wholesale distribution. Customers must order directly from the manufacturer.

DRUGS WITH CLASS OF TRADE RESTRICTIONS

Several specialty drugs have manufacturer restrictions to 1 or more classes of trade (eg, hospital inpatient, retail pharmacy, specialty pharmacy). These access restrictions can be especially difficult for hospitals with multiple care settings to reconcile. For example, the hospital may have access to treat an admitted patient but be restricted from treating that same patient through its retail pharmacy. Handling exceptions on a customer- and product-specific basis, some manufacturers will consider selling to a hospital, for example, after going through an approval process. Teriflunomide (Aubagio) is only available through a limited-distribution network.

Orphan Drugs

Despite the fact that orphan drugs are specifically called out in the 340B statue, access is complex for expansion entities, such as freestanding cancer centers, critical access hospitals, rural referral centers, and sole community hospitals. Some manufacturers prohibit sales at 340B pricing while others have no formal policy, requiring 340B hospitals to explore access on a case-by-case basis. Finally, some suppliers may limit 340B purchases but extend favorable pricing to maintain access. Although discount pricing is generally available, many hospitals may not be aware of or know how to take advantage of that pricing. To resolve this, 340B hospitals should develop a complete list of orphan drugs and work with their wholesaler and 340B software provider to align purchasing practices in their 340B software.

Expertise in 340B Enables Positive Results

Access to 340B is complex and purchasing requirements for specialty drugs are fully at the discretion of the manufacturers and may change without notice. However, the program can be a significant enabler for positive results when used appropriately. For example, the pharmacy buyer at a specialty hospital in the mid-South routinely accessed specialty products and placed orders through 340B split software accordingly.

Several products had special requirements to access at 340B prices, and differing product identifiers drove soft- ware splits to fail for a product, causing purchases to be made manually at WAC. In a second instance, registration with the supplier to create wholesaler access was required. An understanding of the unique ordering and fulfillment requirements permitted proper access to the specialty items at the correct (340B/GPO/ WAC) price.

Although the use of limited or closed networks may prevent access to 100% of the specialty drugs on the market under the 340B program, this should not prevent a hospital and health-system pharmacy from providing specialty services. This becomes a delivery-of-care issue rather than inventory maintenance.

How do you streamline access under 340B constraints to treat patients and realize the full breadth of benefits? Ultimately, 340B hospitals must compete in the same market as any other specialty pharmacy. They must compete for access to as many specialty drug networks as possible and then collaborate or partner with other specialty pharmacies to maintain continuity of care. Thoughtful business planning, attention to access requirements, and diligent compliance tracking will help ensure successful participation in the 340B program, resulting in enhanced patient care and significant benefits to the health system.