340B Contract-Pharmacy Ruling and What It Means for Discounts | Simplefill
For decades, hospitals and other eligible entities have been able to purchase outpatient medications at significantly lower rates directly from pharmaceutical companies via the 340B program. This made it possible for facilities and providers to offer care to uninsured and underinsured populations.
Recently, numerous courts have ruled that covered entities can use contract pharmacies to dispense the discounted drugs, while others have sided with manufacturers to prevent this step. Learn more about what this could mean for prices.
What Is the 340B Program?
The Public Health Service Act began this program, which allows certain eligible hospitals and other healthcare providers the chance to offer significantly discounted outpatient medications to people struggling with conditions such as cancer, diabetes, and hypertension, among many others.
Who Is Required to Provide 340B Discounts?
The pharmaceutical companies that participate in the Medicaid rebate program must offer these discounts. Patients have to meet specific criteria to receive the benefits, including having an ongoing relationship with the covered entity beyond just receiving discounted medications.
Why Do Some Groups Object to the 340B Program?
Despite the transparency of the 340B program and the oversight that the Health Resources and Services Administration offers to ensure the discounts are used correctly, there are still those who would prefer that these programs didn’t exist. A recent issue that has poured fuel on the fire is the contract pharmacy problem.
What Is the Contract Pharmacy Issue?
A contract pharmacy is a third-party pharmacy that enters into an arrangement with a covered entity as defined by the 340B program. This allows the pharmacy to offer drugs at the discounted rates the eligible entity gets.
Many hospitals and other facilities don’t have their own in-house pharmacies, making it necessary to turn to contract pharmacies. This is particularly the case in rural areas and in very low-income communities.
Pharmaceutical companies have refused or restricted access to 340B program pricing for some of these pharmacies because they state it allows for duplicate discounts. The pharmacy would be getting a Medicaid rebate and a discount for the same medication.
How Has This Disagreement Led to Legal Conflict?
For many covered entities, the only way for them to offer the medications their patients need is to work with a contract pharmacy. This has led to an impasse that has resulted in court battles.
There have been inconsistent court rulings regarding this issue. Some have allowed the discounts to proceed, while others have upheld the right of pharmaceutical companies to restrict the discounts. It has come down to the states.
Certain states have passed laws to protect the rights of providers to rely on contract pharmacies, but these are already facing legal challenges.
How Could Ongoing Disputes Affect Covered Entities?
Because of this lack of unification on rulings, pharmaceutical companies will likely continue to deny or restrict access to discounted rates for contract pharmacies and the entities connected to them.
Who Will Be Most Affected by These Restrictions?
This would affect many of the poorest demographics, since community healthcare facilities are the ones that are most likely to require a third-party pharmacy.
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Frequently Asked Questions
Is the 340B Program a Rebate Program?
No, the 340B program is not a rebate program. Many pharmaceutical companies are attempting to change how covered entities receive the discounted rates.
Instead of offering an upfront discount, they are trying to provide a rebate after the medication has been purchased. This goes against federal law and puts significant strain on entities that don’t have upfront funds.
What Entities Qualify to Participate in the 340B Program?
To participate in this program, healthcare organizations must demonstrate that they are a disproportionate share hospital. This means it must offer care to a significant percentage of uninsured or underinsured patients. Typically, the number must be greater than 11.75%.
Facilities in rural locations are usually eligible because of the recent closures that have made costs skyrocket for patients. Children’s hospitals and freestanding cancer hospitals typically qualify as well.
Eligible hospitals generally need to be nonprofit entities or be government-owned. Additionally, Ryan White HIV/AIDS centers are eligible, along with Federally Qualified Health Centers.
Will the Supreme Court Rule on the 340B Program Problem?
So far, the Supreme Court has been silent on whether pharmaceutical companies must still provide discounted rates for covered entities that rely on contract pharmacies. The court has left it to the states to address.
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