4.158254259 - RAND Report clarifies 340B Program impact and  provides insights into preserving long-term viability

RAND Report clarifies 340B Program impact and provides insights into preserving long-term viability

Last year, Sentry provided support for a recently-published RAND report intended to clarify the 340B Program’s purpose, value and extent. The report provides an insightful perspective on current utilization of the program and speculates on potential changes that may help shape the program’s future.

To understand the present, you need to know the history

The report notes that, since 1992, the 340B Program has played an important role in helping America’s most vital hospitals save on outpatient drug spending, allowing them to stretch their scarce resources to serve more patients and provide more services in their communities. At the time the program was enacted, drug manufacturers were fighting back against the 1990 Medicaid Drug Rebate Program, which required them to offer Medicaid discounts to match the “best price” they offered to any other buyer. By limiting discounts to large buyers (specifically, to safety-net providers and the VA), drug manufacturers kept their “best prices” higher and reduced the impact of Medicaid discounts. However, for the affected providers, prices for prescription drugs increased. The introduction of the 340B Program as part of the Veterans Health Care Act helped to ensure that the VA, safety-net providers and other public health care systems continued to receive discounts equal to Medicaid rebates.

Clarifying the intent and impact of the 340B Program

One area of confusion that the report seeks to clarify is the intent and purpose of the 340B Program. While 340B is often compared to direct patient prescription assistance programs, the RAND report points out that the 340B Program was designed to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services” and is a budget-neutral government program aimed at providing general financial assistance to safety-net providers. When compared to other government programs, 340B equals only about four percent of the total funding that hospitals receive from Medicare and Medicaid DSH payments and HRSA Section 330 grants – and that funding comes at no direct taxpayer expense.

The report cites these additional statistics to help put the impact of the program into perspective:

  • Total spending on 340B drug purchasing equates to $6 billion, or less than two percent of total US drug spending.
  • Savings from 340B drug purchases are estimated at $1.6 billion
  • Estimated drug-cost savings from the 340B Program equal about four percent of other federal and state funding earmarked for safety-net providers.
  • While the 340B program establishes a ceiling price for drugs purchased as part of the program, 340B pricing is not always the lowest cost. Clinics, hospitals and other institutional purchasers that do not participate in 340B may negotiate lower prices directly with manufacturers or as part of a group purchasing organization (GPO).

Taking steps to ensure the longevity of the 340B Program

While noting the importance of the 340B Program for covered entities, the RAND report also points out that a perceived lack of clarity regarding some program parameters creates grey areas that complicate compliance and leave the program vulnerable to criticism. The report concludes that the 340B Program must continue to evolve and will need to shore up oversight efforts to withstand a growing barrage of criticism from the pharmaceutical industry.

As a leader in 340B compliance solutions, Sentry fully supports efforts by the Health Resources and Services Administration’s (HRSA’s) Office of Pharmacy Affairs (OPA) to expand their program integrity efforts using $6 million in new funding appropriated by the 2014 Omnibus spending bill (HR 3547) earlier this year.

“Sentry’s 340B solutions were specifically designed as a platform for helping organizations adhere to their policies and procedures through technology logic and configurations while maintaining an audit trail and other compliance obligations of the 340B Program,” says Sentry’s founder and CEO, Travis Leonardi, RPh, CP. “To date, Sentry’s dedicated 340B Compliance and Audit Team has assisted more than 25 customers through their HRSA audits, and we use these learnings to help our customers understand the nuances of program definitions and requirements, refine their own internal compliance efforts, and implement ongoing self-auditing measures.”

In addition, Sentry’s solutions allow covered entities control over the configuration options that drive the software’s rules-based engine, ensuring that the software operates in accordance with parameters each organization has defined to govern their own 340B program.

Vital to the future of America’s safety net hospitals

While the effects of state Medicaid expansion, the health insurance marketplace and the individual insurance mandate remain unclear, the 340B Program is a source of continuing support for struggling hospitals. Safety Net Hospitals for Pharmaceutical Access (SNHPA) highlights the impact of the 340B Program through case studies on organizations and individual patients who have benefitted.

“Unlike the other safety-net programs noted in the RAND Report, the 340B Program is the only one providing benefits from a source other than taxpayer dollars,” notes Leonardi. “Without these funds, many of our customers would be unable to provide vital services and programs in their communities, so we remain committed to continually adapting our solutions and support teams to ensure the continued success of the program.”

The report, “The 340B Prescription Drug Discount Program: Origins, Implementation, and Post-Reform Future,” is available at www.rand.org.