SpendMend Pharmacy 340B Legislative Update 2023

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.

Why We Created the “340B Unscripted” Podcast

By Robert Nahoopii, PharmD, MS, ACE, Senior Vice President of Pharmacy Services at SpendMend

You may have heard… and if you haven’t then you soon will.  We are launching the “340B Unscripted” Podcast.  Look for a much wider public announcement in a couple weeks!

As we have been sharing the news with clients and recruiting for guest speakers, we have encounter one very common question and I wanted to take a moment to address that in a blog.  The question is: Why did you created the “340B Unscripted” Podcast?

To properly answer this question, let me provide a little context.

Based on a recent report by the Center for Healthcare Quality and Payment Reform – a national policy center focused on designing and implementing payment systems that support affordable, patient-centered health care, hundreds of hospitals across the nation are considered to be “at risk.”

These hospitals are just barely solvent and are on the brink of going out of business.  What’s worse than this already troubling fact is that millions of people who live in the areas served by these “at risk” hospitals will be directly affected – and lose access to healthcare – if the hospitals were to close.

Sadly, this is nothing new.  Agencies and organizations have been trying to make healthcare more affordable for decades.  In 1992, Congress passed bipartisan legislation which established the drug pricing program that granted select hospitals and clinics – specifically those serving vulnerable patient populations – access to discounted medications to combat rising healthcare costs.

This law (which is outlined in Section 340B of the Public Health Service Act) serves as the genesis of what we know today as the 340B drug pricing program. Our entire team at SpendMend Pharmacy is passionate about the 340B Program and the positive impact that the Program has had on delivering affordable medications to underrepresented patient communities.

At present we serve over 300 pharmacies and health systems across the country and dozens of those hospitals would confess that without the 340B Program they may not be able to stay open.

Unfortunately, as the healthcare delivery has grown in complexity over the last 30 years, so has participation in the 340 B program. The increase complexity often challenges a hospital’s ability to take part in the Program and that leads to an overall decrease in the widespread positive impact of the Program.

We are bringing a new podcast to you called “340B Unscripted” where we dive into the complicated and sometimes contentious aspects of the 340B Program, as well as other hot topics in the pharmacy and healthcare space. Our goal with this podcast is to help inspire and educate pharmacy professionals so they may take full advantage of everything the 340B Program has to offer, and in so doing they can better serve patients.

Tune in to hear from our experts as they share insights from the field. We will cover a wide range of topics from HRSA audit readiness; to innovative strategies for managing pharmacy operations; to developments in the healthcare landscape that may impact covered entities.

We will also welcome special guests and industry experts from time to time so that you can hear thoughts and perspectives from all sides of the discussion. For more information check out our website at SpendMend.com or follow us on Instagram, Facebook, LinkedIn, Twitter and YouTube.

You can catch the “340B Unscripted” Podcast on Apple Podcasts, Google Play, Spotify, and Amazon Music.

Managing Procurement for Ineligible Locations

By Chelsea Violette and Rich Bucher

A question we’ve received a number of times, in a few different ways is how to manage drug inventory across multiple locations, when you have a mix of 340B eligible and ineligible locations you need to provide drugs to but are subject to the Group Purchasing Organization (GPO) Prohibition and are trying to minimize the impact that “bad WAC” (wholesale acquisition cost) has on your overall drug budget. Unfortunately, like so many areas of the 340B Program, there is no single right answer or a one-size-fits all solution. While we don’t have a magic wand to make this frustrating scenario disappear, we’ve tried to consolidate the considerations you may need to take into account while determining what the best solution for your program is and are happy to help you navigate the nuances of processes within your own organization.

If you’ve gotten this far and feel completely lost, there is a good chance that your organization is not subject to the GPO Prohibition. To summarize, there are three types of 340B covered entity (CE) hospitals that are not permitted to purchase covered outpatient drugs on a GPO or GPO-like account. This means that in addition to accumulating 340B eligible administrations to bolster future purchases on a 340B account, disproportionate share hospitals (DSH), children’s hospitals (PED), and free-standing cancer hospitals (CAN), must accumulate GPO eligible inpatient administrations to bolster future purchases on a GPO account. Any inventory needs that cannot be supported by accumulations available on the 340B and GPO accounts must be made on the WAC account, which is typically a higher cost.

Now that we’re up to speed on the background, the problem at hand is when one of these types of CEs has an offsite outpatient clinic that does not qualify as a 340B eligible location (e.g., is not listed on the CE’s most recently filed Medicare cost report (MCR), and will not be on the next filed MCR, between Lines 50-118 with outpatient expenses and revenue), that has requested the CE supply the drug inventory for in-clinic administration. While sourcing these products from the hospital’s main inventory would streamline system procurement processes and inventory management, the administration of drugs in this clinic would not result in either 340B (ineligible location) or GPO (outpatient) eligible accumulations, and thus result in an increase of WAC purchases and associated costs. While a CE may not permissibly obtain covered outpatient drugs through a GPO or GPO-like account, there are a few strategies CEs may consider to support both operational and financial interests.

  • Non-340B/GPO: Purchase the requested drugs through a non-340B, non-GPO (e.g., WAC) purchasing account and provide them to the clinic.
    • Clinic’s Own Account: Inform the clinic that the CE’s buyer(s) can assist the clinic in purchasing its own drugs on a drug purchasing account that belongs to the clinic and not to the CE. In this way, the CE is not obtaining the drugs but rather helping the clinic to obtain its own drugs.
    • For example, the CE’s Pharmacy buyer may receive requisitions from the clinic and then provide the Clinic assistance by ordering the requested drug(s) for the clinic on the clinic’s own account (that may be a GPO account). The drugs may be shipped to the clinic first, or to the CE first. If they are shipped to the CE first, the CE must be sure not to intermingle any of the clinic’s drugs purchased on the clinic’s account with any of the CE’s own drug inventory and keep auditable records of each purchase and delivery.
  • First: To meet this exception, the clinic must first be an “off-site outpatient facility” of the CE. Some CEs have determined that since the Clinic is an outpatient clinic listed on the CE’s MCR (even outside of Lines 50-118) and/or a medical group clinic commonly owned by an entity that owns the CE, it can be reasonably defended as an “off-site outpatient facility of the hospital”.
    • Next: If the Clinic is an off-site outpatient facility of the CE, confirm that the remaining  4 criteria for the exception set forth in the HRSA 2013 Guidance can be met: https://www.hrsa.gov/sites/default/files/opa/programrequirements/policyreleases/prohibitionongpoparticipation020713.pdfTurnkey is available for further consultation if necessary.
      • NCOD: In some circumstances, a requested drug may be a drug that is defined by the CE as not being a “covered outpatient drug” under Section 1927(k) of the Social Security Act (SSA). In other words, the CE may already define/interpret a drug requested by the Clinic as a non-covered outpatient drug (NCOD). In such circumstances, some CEs have determined that since they are not prohibited from obtaining an NCOD under a GPO or other group purchasing arrangement, they can compliantly purchase the NCOD for the Clinic on the CE’s own GPO account. While this may be a compliant approach, it should be taken with extreme caution since the CE may be required to defend its definition/interpretation to demonstrate it is consistently followed. We recommend working closely with the CE’s compliance/legal to confirm that all these criteria are satisfied. SpendMend Pharmacy (Turnkey) is available for further consultation if necessary.

Build Back Better Act and 340B Impact

By Rob Nahoopii

If you are like me, it feels like I have been on a roller coaster ride as I watch what is and what is not going to be included in the Social Reform Bill titled “Build Back Better Act” (BBBA) or H.R. 5376. I have also been having a hard time tracking which provisions are part of the Build Back Better Act ($1.75 trillion) or the Infrastructure Investment and Jobs Act ($1.2 trillion). Wasn’t it just one bill, why do we have 2 bills, is it so the price tag for each is under $2 trillion, how do you even abbreviate trillion, is it just a T? My apologies, that is what runs through my brain nearly every time I think about these Acts. By the way, the writingexplained.org website says you can abbreviate trillion as T or tn, who knew! Back to the topic of this article though, the BBBA’s latest version that is being voted on the week of November 15th has included some drug pricing language, albeit paired down from previous versions that were removed. This language is not specific to 340B of course but could have an effect on 340B pricing as a side effect. Bear with me, we’ll get there by the end of this article.

To understand how 340B can be affected, we must first understand how the drug pricing component would work. The BBBA was released on November 3rd and amended on November 4th, and is 2135 pages long, with drug pricing starting on page 1977. Here is a summary of the drug pricing section in the BBBA.

The Secretary is to establish a Drug Price Negotiation Program.
Price negotiation to begin in 2023, with a start date of 2025.
The initial selection is no more than 10 drugs for 2025, 15 for 2026, 20 for 2028.
Drugs are selected based on Medicare expenditure for the previous 12 months for both Part B and D (some clarification is needed on Part B being included in initial selection).
The list will include the top 50 single source drugs that have been on the market for at least 7 years, biologics are 10 years, and any insulin. There are some exclusions as well (e.g., certain orphan drugs, low spend drugs).
Pricing (i.e., maximum fair price) is based on non-Federal average manufacturer price (AMP). The BBBA uses 3 categories for price calculation: Short Monopoly Drugs are 75% of Non-Fed AMP, Post-Exclusivity Drugs are 65%, and Long-Monopoly Drugs are 40%. Post-Exclusivity drugs are defined as at least 12 years but fewer than 16 years have passed since drug approval. Long-Monopoly Drugs are defined as 16 years have lapsed since drug approval. Oddly enough, the BBBA does not define Short Monopoly Drugs, but since I think linearly the default seems to be for drugs where fewer than 12 years have elapsed since approval (of course they would have to be past 7 years of approval unless it is insulin as noted above).
Page 2033 also starts Part-2 Prescription Drug Inflation Rebates. This is similar to the 340B penny pricing penalty. This is set to start July 1, 2023, and is a rebate based on pricing inflation exceeding the consumer price index urban (CPI-U) rate.
I should add that there are also other pharmacy-related items such as maximum copays for insulin capped at $35, and this is not just for Medicare (starting in 2023). There is also a maximum out-of-pocket limit on prescription drugs that will cap at $2,000 for Medicare beneficiaries. Both of these are great for patients.

Okay, back to 340B. There is literally only one mention of 340B in the whole BBBA, and it is around Duplicate Discount clarification and the Children’s Health Insurance Program (CHIP). It appears to just be stating that there will not be a duplication of rebates. So, the real potential impact comes with the drug price negotiation and inflation rebates. However, since exemptions for 340B (yes, that was on the table at one point) are not in the language, the impact is really based on the 340B pricing calculation and drug pricing.

As a reminder, the 340B ceiling price is AMP minus the unit rebate amount (URA). The URA is calculated by CMS for the Medicaid Drug Program and includes a percent of AMP or AMP minus best price with an inflation adjustment, whichever is greater. This latter calculation is what drives drugs to a penny per unit if the manufacturer raises the AMP faster than inflation (also CPI-U) as the URA can be equal or more than AMP, which triggers the penny per unit 340B ceiling price (since a negative value would cause the manufacturer to have to pay a 340B CE to obtain the drug, which does not make sense).

So, as best as I can see it, as the inflation rebates start, manufacturers could change their pricing to lessen the impact. As they change their pricing strategy, the same calculations that affect BBBA components will affect the 340B ceiling price. For instance, the inflation rebate may be such a disadvantage that a manufacturer may choose to not exceed the CPI-U rate of increase, which would also result in not being subjected to 340B penny pricing. For patients with Medicare and being treated with drugs on the maximum fair pricing list, there will likely be a decrease in reimbursement that could blunt the 340B savings as the actual Medicare maximum fair price for the drug would lower the drug price delta with 340B pricing. What I didn’t see is how they intend to roll this out. Will it be a rebate, or something akin to 340B, where you have a different account type with the maximum fare prices in it? Since this does not roll out until 2025, I am sure we will receive lots of information on how it will be operationalized. I know this was a lot, please feel free to reach out to me with any questions you have, and or comments.

Go Ahead, Have Your Cake and Eat it Too!

Written By Chelsea Violette and Matt Parker

Compliance is the foundation of a successful 340B program and, rightfully so, is the primary focus for most 340B covered entities. Often, this focus consumes most available staff and resources, leaving terms like optimization and augmentation not only feeling nebulous and out of reach, but also as though focusing on optimization compromises or puts compliant processes at risk. What many don’t realize is that compliance and optimization are not opposing forces, but rather companions that work in a symbiotic relationship; you can indeed have a compliant 340B program and ensure you are capturing all potential savings available to you! When a 340B program is operating as it should, it is more likely to be operating compliantly and in a manner that optimizes savings to the organization. Conveniently, much of the information that is used to assess compliance of a 340B program can be used to identify missed opportunities, making it even easier to have your cake and eat it too. Commonly over-looked opportunities that may be buried in compliance analyses include improper wholesaler pricing, NDC and/or CDM mapping, drug waste management, and retail pharmacy prescription capture.

Let’s take a deeper dive into some of these areas; maybe you’ll find something new to investigate for your organization!

What is a Price Parity Analysis? An analysis of prices paid for a given pharmaceutical across multiple accounts of the same account type (GPO, 340B, even WAC) and within the same class of trade (COT), over a specified period of time. The intent of the analysis is to ensure that all invoices for a given pharmaceutical are the same when purchased on the same account type within the same class of trade. This can be helpful for both 340B covered entities and non-340B organizations.

What is a Price Spike Analysis? An analysis of prices paid for a given pharmaceutical within a single account type over a specified period of time. This is also helpful for both 340B covered entities and non-340B organizations.

What is a Utilization and Purchase Analysis? An analysis of 340B (and GPO when applicable) eligible drug administrations and corresponding purchases across 340B, GPO, and WAC accounts. Anomalies can represent opportunities such as un- or mis-mapped accumulator settings, inaccurate accumulator multipliers, missing utilization data, untapped orphan drug voluntary 340B-like pricing, incorrect contract loads, missing waste documentation, and improper manual purchasing practices.

Why are these analytical tools important? Due the complexity of pharmaceutical pricing and the size and process of data exchange between manufacturers and wholesalers pricing errors can occur. These errors may go unnoticed and impact the bottom-line performance of your pharmacy if internal controls are not in place to identify pricing discrepancies.

Who should be performing these analyses? We recommend that anyone who is purchasing pharmaceuticals from a wholesale distributor or third-party trading partner have a process in place to verify the prices paid on every invoice. If you have a network of pharmacies (ie Health System or IDN) with multiple accounts with the same account type and class of trade a Price Parity Analysis is the analytic of choice, otherwise, a Price Spike Analysis is appropriate when only a single account is available.

We also recommend that anyone managing a 340B program in a fashion where both 340B and non-340B drugs are purchased review their purchasing patterns, in light of their utilization records, to ensure they are not purchasing any 340B drugs without supporting utilization documentation and that they are not purchasing any drugs on a non-340B account unnecessarily.

When should these analyses be performed? Timing is key. For pricing analyses, our experience is that the older a pricing error is, the less likely you will be able to have the price corrected. In a perfect world every invoice would be verified in real time, however, that’s not really feasible for most pharmacies. We recommend that all prices paid be verified as part of a monthly review at minimum.

Analyses of utilizations and purchases are a little more entity-specific and are likely to look different depending on the type and size of the entity and the inventory mechanism used. A large DSH or RRC hospital using a TPA to manage a virtual inventory may need to conduct this analysis monthly, while a smaller CAH or a grantee site may only need to conduct an analysis quarterly to capture any opportunity from pricing or clinical practice changes.

Now go eat your cake and make sure you’re capturing all of the 340B savings you are entitled to! If you’d like help looking for these opportunities, let us know and one of our optimization strategists would be happy to take a deeper dive into your data. You can also join us for our next webinar, Road Map to HRSA Audit Readiness Series: Time for a Tune Up: Making the Most of Your 340B Program on December 14th from 3:00 – 4:00 EST. Click here to register!