SpendMend Pharmacy 340B Legislative Update 2023

SpendMend Team

By Rob Nahoopie, PharmD, MS, ACE

Greetings, 340B community! It’s been a while since my last blog article. For those who have been with us for many years, you may recall that prior to joining SpendMend and even before the inception of Turnkey Pharmacy Solutions, we had “The 340B Program Blog.” You’ll note, we borrowed theThe from The Ohio State University – it added an air of authority.  This blog was our beacon to the 340B Community.

Nowadays, I’m proud to say we’ve expanded our outreach beyond our blog and into webinars, newsletters, speaking at shows, and of course the 340B Unscripted podcast, which I have the pleasure of co-hosting with the world’s best moderator (and coolest dude), Greg Wilson.  Add to all of that, we’ve continued to assemble a growing team of experts who have a great deal of experience and a lot to share. As a result, I really only get around to writing one, or maybe two of these blogs per year.

Before diving too deeply into my analysis of current and potential legislation, I want to acknowledge, that as a community, we are very fortunate to have such reliable journalists to serve as our advocates in this increasingly complex (and contentious) space.  340B Health, a membership-based 340B advocacy organization, keeps their finger consistently on the pulse of all things 340B advocacy and legislative. We also have the 340B Report, which always looks out for breaking news and reports to the 340B community. At SpendMend Pharmacy, we see our role as complementing these outlets and sharing our experience, in the trenches, with the covered entities we support.

Although I will be summarizing current legislation, my hope is to add my personal commentary and, where possible, prognostication of where things might go and how that could impact covered entities.

While we are still early in 2023, we have already seen an unfavorable 340B bill introduced. Senator Rosendale (R-MT) introduced H.R. 198  – Drug Pricing Transparency and Accountability Act. It has not made it past introduction and sits in two committees, likely due to it having impact in both the Energy and Commerce and Ways and Means. This bill has a few main goals; 1) to have a 2-year moratorium on non-rural hospital and child site registration, 2) transparency with 340B savings, and 3) modifiers for all Medicaid (FFS and MCO) and Medicare (traditional and managed) claims. This bill has not made it very far, and due to its one-sided nature, likely will not make it through both the House and Senate. With this said, it does create some interesting negotiation points. In fact, if you take a step back, you can see the chess match starting. Move one, introduce a fairly one-sided unfavorable bill to set the negotiation table without offering much in favor of 340B covered entities. Next, we may see a favorable 340B bill that tries to address contract pharmacy restrictions, PBM discrimination, or maybe even Orphan drug exclusion clarifications. It is also possible this step is skipped entirely, and we go right to a mixed bill; one with appropriate give and take for both covered entities and drug manufacturers.

What do we know? On March 2nd, 2023 we heard reports related to the Senate hearing on community health centers (CHCs), and also reported by our 340B outlets noted above, that the National Association of Community Health Centers (NACHC) and the Pharmaceutical Research and Manufacturers of America (PhRMA) may be teaming up to make some combined recommendations to congress that will have both pros and cons for 340B covered entities. Some potential areas in play were announced on March 7th by NACHC as part of their NACHC Capitol Hill Day and a 2-page flyer that was planned for use on March 9th with congress. They outlined five key principles for reform:

  • Preserving: Focuses on making sure the 340B program is stable so that it can fulfill its mission. [No specifics here, but good to clarify and confirm]
  • Reforming: Essentially stating that covered entities who do not provide significant amounts of care to safety-net patients should be removed from the program. [Hmm, seems to be targeting hospitals or at least some of the recent bad press that has occurred]
  • Incorporating: This is targeting contract pharmacy, but in both a manner to allow for contract pharmacy without restrictions and to protect against abuse. [Our CHCs have had significant 340B savings losses due to contract pharmacy restrictions and if they worsen, it could cripple CHCs’ ability to provide the level of charity care they currently provide]
  • Establishing: Here is where we get to transparency and accountability and reporting of 340B information. [CHCs are already required to be transparent, so this seems to be another balancing item that will impact hospitals even more]
  • Create: This focuses on PBM/Payor 340B discrimination. [Both CEs and PhRMA can get behind this one, sorry PBMs and Payors, this one seems inevitable]

I feel like they missed the boat on a great acronym. If they switch 4 and 5 it is PRICE versus PRIEC. And the tag line could be, “If we don’t act now to reform 340B, the PRICE of lost 340B savings will be felt by  patients of our safety net hospitals and clinics.” Also, they should consider changing Create to Creating, my OCD is flaring over here. Just unsolicited advice in case they read this.

Now, I am not sure if this was part of the NACHC and PhRMA joint development, but the pros for covered entities and cons that are more hospital specific are interesting, don’t you think? Regardless, I think it is very possible we see a bill that is in line with these key principles. Think about this: the House is GOP, which is more likely to be in line with something that has a little give and take as outlined above. Then, we have the Senate HELP committee, although Chaired by Bernie Sanders (I-VT), whose Ranking member is Bill Cassidy (R-LA), and Cassidy has been critical of hospitals in the 340B program. So, I am saying there’s a chance!

I initially thought that 340B legislation was a long shot with a GOP House and Democratic Senate; however, there appears to be a deal that can be made here. Currently, the hospitals may be on the outside looking in. It is time for all hands on deck. I am looking at the Senate HELP committee membership right now and I can see I have work to do. Mitt Romney (R-UT) is on the list, so I will be reaching out personally to share how important the 340B program is to our community. Although, I think hospitals need to plan on transparency as the olive branch here. The question is if it is just transparency or use of savings as well.

The fun part about writing a blog article like this is that you get to see if your crystal ball is broken or not. However, this story is not over, you can still make an impact. Don’t just watch things unfold like you are reading a John Grisham novel. Work with your advocacy staff, if you are lucky enough to have one, and if not, then make it happen yourself. Our senators and representatives will only know how important the 340B program is if you help educate them.

Hopefully we get to see many of you at 340B Coalition in San Diego. We have booth 319, SpendMend Pharmacy, back middle-left; come say hello and talk some 340B shop with us. Aloha everyone!

 

Hold the phone! We were about to hit the publish button and just saw the 340B Health update on the NACHC/PhRMA “potential” recommended changes they may make to congress. And all I can say is “Wow” and not in a good way. On March 9th, this group has come forward with a new name and a 10 point Principles list for ensuring the 340B Program benefits patients and “true” safety-net providers (I added the quotes on “true” as it seems to be an intentional word). The new group is named the Alliance to Save America’s 340B Program (ASAP 340B) and includes NACHC, PhRMA, and ten other organizations. I won’t turn this into a dissertation, and this will be a hot topic as we move forward. So, everyone go and read the 10 principles at asap340b.org.  As we are now accustomed to, the main constant with the 340B program is change.

Recent HRSA Audit Trends: Supporting Documentation for Eligible Providers

SpendMend Team

Written By: Chelsea Violette and Heidi Larson

Historically, HRSA auditors have requested a list of eligible providers from covered entities during HRSA audits. Recently, however, HRSA auditors have been requesting that covered entities upload documents demonstrating that, for each audited utilization record, the prescriber was (at the time the medication was administered or prescription written) employed by, under contract with, or had some other type of arrangement/relationship with the hospital such that responsibility for the clinical care provided to the patient remained with the covered entity. HRSA FAQ 1442 further explains that non-covered entity providers solely with admitting privileges at a covered entity hospital are insufficient to demonstrate that any person treated by that provider is a patient of the covered entity, for 340B Program purposes.

We often hear; the provider is credentialed or has privileges, but what does that really mean? Credentialing is the process of obtaining, verifying, and assessing the qualification of a provider to provide care or services for a health care organization. Credentialing documents include evidence of licensure, education, training, and experience. A privilege is defined as an advantage, right, or benefit that is not available to everyone. For providers, the act of being privileged is the process whereby a specific scope and clinical service of patient care is authorized for a healthcare practitioner by a health care organization, based on evaluation of the individual’s credentials and performance.

Back to the question at hand, what have HRSA auditors been requesting to demonstrate provider eligibility? The answer may depend on the type of provider.

Employed or Contracted Providers – Hospital or Clinic Administered and Retail Prescriptions

  • If the provider is employed by the covered entity, an auditor would expect to see confirmation of employment of the provider by the covered entity. This could be the cover or signed page of a provider contract, a checklist of privileges granted to the provider, a screenshot of the internal Medical Staffing Office platform, or other such document.
  • For residents (often an area of challenge for entities and focus for auditors), requested documentation may include a signed contract between the covered entity and the resident, or with a college/educational institution that allows residents to practice at the covered entity and is accompanied by a list of past and current residents.
  • For health care providers who may not be directly employed with the hospital to provide services, an auditor may expect to see a signed collaborative practice agreement to provide services to patients whereby the care of the patient remains with the hospital. For contracted services, such as for the emergency department, a HRSA auditor may request a signed document with the contracted entity to provide services and a list of providers that fall under the contracted services agreement.
  • For providers with “privileges,” HRSA will expect to see a signed agreement that shows the scope of privileges and preferably documentation or confirmation from the covered entity that the responsibility for care of the patient remains with the covered entity and the providers privileges are not merely admitting privileges.

For each of these supporting documents, auditors have requested that they indicate start dates and, when possible or appropriate, duration of the agreement or granted privileges. Eligible provider lists are also requested to indicate start and term dates for providers.

Healthcare Professionals – Hospital and Clinic Administered Drugs

While supporting documentation to demonstrate responsibility of care may seem more straight forward for providers employed by or contracted with the covered entity, it can leave a bit of gray area for orders written by outside providers. For hospital or clinic administered drugs that are administered as a result of an order from an outside provider, most often observed in the infusion setting, many entities qualify drugs as 340B eligible under their healthcare professional definition. In doing so, they assert their responsibility of care through patient assessment and care related to the administration delivered by members of the entity healthcare team, such as nurses. As HRSA auditors have become more familiar with this practice, they have begun requesting documentation in the medical record to substantiate care beyond the simple administration of the drug, such  as vital signs or clinic notes stating the patient was evaluated for appropriateness of receiving the drug and that it was well tolerated (or that the patient had a reaction and was treated accordingly). In these instances, HRSA auditors have further validated the inclusion of this definition in the entity’s policy and requested documentation that the healthcare professional providing patient care is employed by the entity and was working that day. This may include a contract, privileging documentation, and/or a timecard.

Referrals – Retail Prescriptions

In scenarios in which covered entities have captured retail prescriptions as a result of a referral arrangement, HRSA auditors have requested copies or screen shots of the referrals in the course of the audit and for them to be uploaded to the NIH portal subsequent to the audit. While obtaining documentation back from the referral provider remains a best practice to demonstrate continued responsibility of care, this has not been requested in recent audits, and documentation of the medication in the patient’s medication list with the covered entity has been sufficient.

Preparing for HRSA Audit Success

The key to supporting documents is that they demonstrate that care for the patient by the provider remains with the covered entity at the time the medication was administered, or the prescription was written. Covered entities should consider all aspects of patient definition to use 340B drugs. It is also important to include entity management of provider privileges in policies and procedures.

Unfortunately, these documents are not always found in one location, with one person, or even within the same department. Start checking for these documents during your monthly self-audits, understand each provider type and the documents needed, and lastly, know who would be your point person for each type of provider to obtain the necessary documents and establish a working relationship with them so that you’re both prepared when your number is up for a HRSA audit.

Observing Key 340B Program Savings Trends Based on Drug Spend

SpendMend Team

Written by: Jake Thompson, PharmD, MS, SpendMend VP of Pharmacy Services, Growth and Optimization

Industry Observations

In the past two years, my team and I have worked with over 50 distinct hospitals on drug spend optimization projects ranging in size from $300K up to $75M. We partner with these organizations to ensure that they are maximizing the savings opportunities in their drug spend with specific emphasis on their 340B program.

Over the course of this work, patterns have begun to emerge, and although I suspect the sample set is still a little too small to draw final conclusions on the matter, the data has revealed the first signs of some noteworthy trends that are worth discussing.

The chart below demonstrates a sample of the data we are tracking and highlights a cross section of the different Covered Entity types with which we work. We measured the total savings the partnership delivered compared to the total drug spend during that same period. It is important to note a few key definitions:

  • Total Savings: This is realized savings that the hospital captured after our team identified an opportunity and closed the gap, resulting in direct savings measured down to the exact NDC impacted.
  • Drug Purchasing: This is the total drug spend over the same time period the “Total Savings” was measured.
  • Savings/Spend: This is the percentage of savings our team delivered when comparing “Total Savings” divided by “Drug Purchasing”.
  • Client Names:
    • DSH = Disproportionate Share Hospital
    • SCH = Sole Community Hospital
    • CAH = Critical Access Hospital

 

CLIENT NAME                               Total Savings            Drug Spend       Savings %

DSH – Large Health System               $2,509,477               $75,424,689        3.33%

DSH – Academic Health System        $1,920,691                $32,523,751       5.91%

SCH – Stand Alone                             $423,056                  $18,868,569        2.24%

DSH – Stand Alone                             $79,989                    $2,677,901          2.99%

CAH – Stand Alone                             $384,302                  $1,216,320          31.6%

When looking across all our engagements, the results are profound. Our clients realized savings ranged from $11K to $2.5M, which equates to 0.49% to 31.6% Savings/Spend. To dive deeper, we broke up the engagement results into four groups (Small, Medium, Medium-High, High) based on the Covered Entity’s total annual drug spend. This helps break down the average savings based on the size of the hospital’s drug spend. Reflecting on these categories, the patterns begin to emerge, as evidenced in the analysis below:

Range                              Annual Drug Spend             Average Savings

Small                                $0 – $2.5M                                   13.3%

Medium                           $2.5 – $10M                                    4.1%

Medium-High                  $10M – $20M                                  1.9%

High                                 >$20M                                           2.7%

As stated above, we are still likely too early in the data gathering to draw conclusions, however it is evident there are a few interesting trends worth exploring. Most apparent is the trend that savings opportunity as a percentage of drug spend is inversely proportional to annual Drug Spend. Meaning, the more you spend the smaller percentage of opportunity you are leaving on the table. And vice versa – the less you spend the more percentage of opportunity you are leaving on the table. In all cases though, the average savings realized has been significant. In my previous roles, reducing your drug budget 2-4% would gain positive recognition of the executive leadership team.

So why the trend?  And what does it mean for your covered entity?

It’s a great question that you may be asking, “Why would the percentage of savings opportunity be inversely proportional to the drug spend?” My experience as a pharmacy leader and a consultant can help to shed some light on why the opportunity reshapes at each level.

Small

Foremost, I observe that companies with a small drug spend simply have a much higher savings opportunity as a percentage than companies with a large drug spend. To be honest I suspected that the opportunity as a percentage would be higher than in the larger hospitals, but I did not expect the difference to be so pronounced.

Without proper research, it is difficult to say exactly why this difference would be so stark, but at this point, with over 18 years in the market I can offer a few theories as to why this would be. I have observed in my career that most covered entities with a smaller drug spend are only budgeted a single person to manage their drug spend and in these instances this person is typically wearing multiple “hats” and only maintaining the process amongst many other pressing issues.  Hence the large impact when someone from our team solely focuses on drug spend.

What does it mean to these hospitals? Access to experts: By partnering with expert consultants in 340B drug procurement, you can achieve significant savings (or at minimum validate current purchasing optimization). By partnering with 340B optimization experts, you get access to the country’s most advanced 340B experts without funding a full time FTE and recruiting the expertise to your geographical area.

Medium

As we move further up to Medium spend, you will start to see where the program has grown to such a point that a full-time resource becomes necessary. In these facilities, the person leading the 340B program typically is a superstar technician or previous buyer. These individuals are experts in the hospitals’ individual 340B program and positioned perfectly to collaborate with outside consultants. This person often is self-taught 340B through their own organization’s 340B program setup and often is not as well versed on what other organizations are doing. As such, the percentage of opportunity is still significant, but is a lesser percentage than groups with a small spend.

What does it mean to these hospitals? Access to education: By partnering with experts in 340B drug procurement, your dedicated 340B team members are able to learn directly from our consultant team who will share their experience supporting hospitals across the country, in a wide variety of settings. This education helps teach your staff how to prioritize compliance and optimization opportunities. By partnering with a consultant, your internal 340B expert can learn how to identify savings opportunities, but most importantly, provide them with the skillset to help fix financial leakage in the process.

Medium-High

As we climb to the Medium-High drug spend levels between $10M-$20M, these hospitals often have a second 340B team member and the group has invested in additional training on best practices. With the additional resources invested, the internal 340B team has been able to dedicate more time to unearthing savings opportunities and addressed the areas of low hanging fruit. This paves the way for the optimization opportunities of higher complexity to be addressed. As a result, a partnership with our optimization services is still able to drive hundreds of thousands of dollars in savings, albeit a slightly lower percentage than would be seen with the medium-spend level.

What does it mean to these hospitals? Strategic Growth: By partnering with expert consultants in 340B drug procurement, your dedicated 340B team will learn techniques to help maximize and grow your 340B program. These strategies will propel your 340B value and drive practice changes that result in significant financial gains. Through your partnership, you gain insight into opportunity analytics, skilled project facilitation and management, and insightful strategy execution. Because you have partnered with consultants “who have been there, done that” you get strategies implemented much faster than doing it on your own, resulting is more savings faster.

High

Groups with the highest levels of drug spend experience a modest increase in opportunity percentage similar to the Medium-High group. Although conventional wisdom would suggest that groups at these levels would offer a small savings opportunity percentage, the reality is that the dollars are still very large and impactful to the covered entity. These larger facilities are often a lot more complex and thus need much more organization and structure to their 340B team. Even though organizations with drug spend of over $20M will usually have a whole team to support it, they will still miss many of the more nuanced opportunities.

What does it mean to these hospitals? Solutions to complex problems: By partnering with experts in 340B drug procurement, we will collaborate to mitigate the complex and costly challenges your team has identified, but not yet been able to resolve. By engaging with specialized consultants who focus on generating solutions to close financial gaps, you gain insight into industry techniques that have aided other institutions in resolving similar complexities.

Conclusion

Even though it is easy to get caught up in the decreased percentage of savings, proportionate to drug spend, all of the covered entities we have partnered with have realized significant reductions in drug spend that have had tremendous impact on the organization’s bottom line. No matter the size of organization, there are always opportunities.

Reflecting on past optimization partnerships, the key determinant to covered entity success in realizing meaningful savings has stemmed from our team’s ability to break down complex 340B initiatives into actionable steps. Instead of passing a list of possible action items along, our team synthesizes your comprehensive program data to identify realistic and meaningful opportunities, vetted by our experts.

SpendMend Pharmacy leverages Turnkey Pharmacy Optimization by only hiring experts that have successfully implemented 340B opportunities and strategies within their own covered entities. Our no-risk approach means we only get paid when you realize savings (100% contingency model). If you would like to learn more about the potential savings opportunities at your institution, visit the SpendMend website and schedule a free consultation with one of our team members.

A Bird’s Eye View of the 340B Program

SpendMend Team

Written By: Rob Nahoopii, PharmD, MS, 340B ACE, Senior Vice President of Pharmacy Services

The News

Earlier this week, we announced that both Turnkey Pharmacy Solutions and ELEVATE340B have joined SpendMend.  Read about it here.  We couldn’t be more excited by the announcement and we are confident that our ability to serve Hospitals, Clinics, Grantees, etc. will grow by a magnitude as a result of this news.

So… since the news with SpendMend went public, I’ve been meeting with a record number of people and new co-workers.  Every interaction leads to a great discussion, but I am realizing I may have been in a pharmacy bubble for the last several years.

I find that although most people have a general sense of the 340B program, there are still a lot of questions.  I thought it might be a good exercise to provide a high-level overview of the 340B program to help level set the discussion.

 

What is the 340B Program?

It’s no secret that healthcare is expensive, and many American’s can’t afford it. With costs continuing to rise, including the price of prescription drugs, policymakers in both parties have been working hard to create affordable solutions.

One positive solution, dating back to 1992, is the 340B drug pricing program. 340B helps hospitals, clinics, and health centers extend their resources to treat more patients and provide more services.

Simply put, the 340B program helps hospitals and clinics that provide care to the most vulnerable patients: the uninsured; the underinsured; people with HIV or AIDS; kids with cancer, and more, by requiring drug companies to offer medications at a discounted price.

 

How Does The Program Work?

340B requires drug makers participating in Medicaid to sell outpatient drugs at a discount to eligible hospitals and clinics. These savings are intended to go toward increasing and expanding healthcare services for millions of vulnerable patients.

To take part in the program, covered entities such as hospitals, clinics, health centers and the like must meet rigorous standards to be eligible to receive 340B discounts such as treating a high percentage of low-income patients or those living in rural communities.

 

Is This Unfair For Drug Companies?

This is a question I get all the time, and I am not sure there is a simple answer.

For drug companies, these discounts are a small percentage of the billions spent each year on medicine but for hospitals and their patients, these savings are essential as part of the healthcare safety net.  The truth is, hospitals work off razor thin margins and, in some cases, were it not for the savings from the 340B program some smaller rural facilities may be forced to shut down.

Although, it’s true that the 340B program can save a hospital lots of money, it should be noted that program participation comes with complex regulatory and audit requirements that must be managed carefully to maintain compliance.

So, it’s not really a free lunch for hospitals, they work for the savings, they take on a lot of compliance risk, and they pour a lot of their savings back into underserved communities.

 

What Are Some Ways That Hospitals Use 340B Savings?

340B hospitals provide sixty percent of all uncompensated care in rural America. 340B savings also help hospitals remain open and in communities hard-hit by chronic illness and epidemics like opioid use.

340B allows each community to decide how best to serve its patients’ needs. Many provide free or low-cost drugs while others use 340B to operate trauma centers and provide specialty HIV care.

As I mentioned in the intro, most people are familiar enough with 340B, but if you look closely, you’ll quickly realize how complicated the program has become and how easy it is to fall out of compliance.

Today’s blog is a simple overview of the process with a few of my own opinions thrown in for color.  Any covered entity contemplating how they fit into the program will likely need a much more in-depth overview and discussion… and I am happy to provide that for you.

Please feel free to reach out at anytime and I will make sure to get you the answers you need.

 

Meet Rob Nahoopii

Experienced as a Director of Pharmacy for a 400-bed DSH hospital, also served as a Regional Director of Pharmacy. Rob has presented at many 340B University sessions and on the topic of 340B at numerous other conferences around the country. He has provided many external 340B audits for various covered entity types and onsite support for multiple 340B HRSA audits. Rob is part of our 340B independent auditing team and also supports our maintenance clients and 340B implementation. His perspective is from front line pharmacy leadership and program compliance.