340B Program and its Impact on Health Plans

The 2017 AMCP Annual meeting included the usual core presentation surrounding drugs and therapy, but one new perspective was the increased focus on the financing of drug therapy.  The second day included many presentations with different variants of finance flavors.  One session that I had the pleasure of attending was “340B Program Evolution: Understanding the Impact on Payors” which was presented by Jason Hardaway (CiiTA), Neil Minkoff, MD (EmpiraMed), and Krishna Patel, PharmD (MediMedia Managed Markets).  The program was extremely informative and contentious at times, due to the sensitivity on both the good and bad of the 340B program.  In summary,

  1. The 340B program was first enacted in 1992 under the Veterans Health Care Act with the primary focus of providing a mechanism to broadly support programs and services for indigent patients.
  2. Manufacturers provide covered entities drugs at a discounted 340B price, but payors reimburse the covered entities at contracted rates.
  3. The number of organizations that are considered covered entities has increased substantially since the inception of the program. The greatest explosion in covered entity participation occurred after the passage of the Accountable Care Act (ACA).  This change resulted in an increase from approximately 15,000 covered entities to 40,000.
  4. With the explosion in covered entities there is obviously a growth in dollars flowing through the program.  In 1997 there was $1 billion in discounted purchases, which increased to $12 billion in 2015.
  5. The implications of the 340B program are pervasive across the whole healthcare system impacting the patients, pharmacies, manufacturers, covered entities, and payors.
  6. The impact to healthcare system from the 340B program include: Disruption to the pharmacy network and exclusive pharmacy contracts.  Many of 340B transactions occur post adjudication of claim, therefore it is not always clear to the payor whether that the claim was a 340B claim.  An exception to this occurs if the claims include the NCPDP modifier indicators.
    • Impact to rebate programs.  Since 340B drugs are excluded from rebates, payors will seek a rebate on a contracted drug, only to find out later that the it was excluded due to 340B (Note: Manufacturers utilize various analytical methods to deduce whether a claim was a 340B claim).
    • Lack of transparency on which drug claims are being utilized within the 340B program. The system is intentionally designed to hide which drugs or claims fall under 340B.
    • There is also a lack of transparency on whether funds accrued through participation in the program are truly being utilized to support programs and services for indigent patients.
  7. Unwittingly, the 340B program causes adverse selection towards the use of non-generic drugs, therefore increasing overall health care costs.  It was presented that 340B covered entities dispense brands at a rate of 46%, where the rate across all dispensing sites comes in at 18%.  This holds true for specialty drugs, where dispensing for covered entities was 9%, where the general dispensing rate across all sites for specialty dispensing was 0.4%.
  8. The 340B program has also contributed to the increase in specialty clinical acquisitions and the  increase in drug costs (through increased usage of 340B discounted drugs, which causes the manufacturer to increase prices to offset lost revenue).
  9. Some actions payors can take to better manage the 340B program include:
    • Increase the auditing of pharmacies
    • Narrow the network of participating pharmacies, thereby increasing control.
    • Create unique contracts and rates for pharmacies that participate in the 340B program, thereby sharing the savings.
    • Mandate the submission of NCPDP claim modifiers that identify a claim as being 340B

The 340B program is both important and challenging, providing financial support for indigent services, but at the same time contributing to the decrease in healthcare affordability.  There are proposed changes to the
program that are currently being debated and are expected to be released in a final format in 2017.