Since its introduction in 1992, the 340B Program has vastly altered the pharmacy landscape. In these very uncertain times, as we continue to grasp COVID-19’s longevity and struggle to predict a tumultuous 340B environment, we see considerable talk about 340B optimization. From expanding contract pharmacy networks to engaging specialty pharmacy strategies to the latest “hot button” around improving 340B referral capture, the 340B Program’s benefits are firmly on everyone’s radar.
Here are a few guiding principles for a compliance-first approach as covered entities consider 340B expansion and optimization.
1. Keeping Your Eyes on the Prize
As consultants, we work with many provider types who have varying methods of 340B management. Some covered entities lean on a multi-disciplinary, interdepartmental committee approach whereas others utilize a smaller, dedicated team of 340B specialists to maintain compliance and pursue targeted avenues for 340B growth. Unfortunately, occasionally we also run into providers that have inadvertently lost sight of 340B’s value to the organization or taken it for granted. How could that happen? Sometimes this is a result of a provider’s makeup, with the majority of 340B savings being generated from specialty outpatient areas (clean areas). In other instances, covered entities may get a false sense of security and let down their guard after a successful HRSA audit. Regardless of the reason, a covered entity’s primary goals should be protecting 340B savings and communicating the benefit of the program regularly across the organization.
2. 340B Resources Pay for Themselves
We often get the question “How many dedicated 340B full-time employees does our institution need to manage our 340B Program?” and while our answers vary based on organizational complexity, if a 340B covered entity doesn’t have a dedicated resource, they need one! Committing resources to 340B oversight and management will yield a very high return on investment. However, we also feel that the 340B Coordinator and supporting team require the RIGHT skillsets. 340B is a health system program, not just a pharmacy program, and 340B management is highly nuanced and data intensive, reaching into all areas of the healthcare spectrum. In today’s turbulent environment, leveraging strong operational understanding along with analytics is the key to detecting non-compliance or opportunities for growth. We also stress that when optimizing a 340B program, a careful return on investment evaluation should be conducted to determine if the value of the program’s expansion exceeds the time and effort necessary to manage those areas of optimization.
3. Using a Sound Business Approach is Key
We’ve harped on the importance of having the right 340B management team and process in place to ensure compliance, especially as covered entities contemplate 340B expansion. At Alinea, we also believe that 340B optimization is within every entity’s right if the compliance pieces are in place and opportunities are appropriately vetted. Having said that, we all feel the impact of Medicare Part B cuts, along with the actions of manufacturers, PBMs and payors with intent to prohibit 340B usage or reduce drug reimbursement to 340B entities. Likewise, we believe that when expanding your 340B Program to offset these losses, risk should be weighed carefully and align with your organization’s care mission. If a 340B Program already yields millions in 340B savings in the hospital-based setting, it doesn’t necessarily make sense to go after a new 340B referral capture process or questionable use of telehealth that may expose the entity to more risk for limited reward.
4. Areas for 340B Optimization that Don’t Always Make the Headlines
Once a covered entity has the right 340B management team and compliance measures in place, after the lower-hanging fruit for 340B optimization has been evaluated and addressed, here are some areas that may yield some additional margin.
- Pricing Parity: Getting with the spirit of President Biden’s July 9th Executive Order on Promoting Competition in the American Economy, 340B providers should take a critical look at their spend metrics across all classes of trade to implement measures for improved cost reduction, contract pricing integrity, or competitive market dynamics to support opportunities such as sub-ceiling price negotiation and direct manufacturer contracts.
- Biosimilar Optimization: The advantages of biosimilars from a cost and Medicare FFS “pass-through” reimbursement standpoint is no secret (ASP+6 > ASP-22.5). Many hospitals have committees devoted to biosimilar use and uptake improvement. However, as the Biosimilar pipeline continues to grow, 340B covered entities should continue to heighten their focus on Biosimilar net revenue (reimbursement – cost) opportunities across your patient population.
- 340B Grantee Optimization – Similar to 340B hospitals, 340B grantees can optimize medication management for improved patient care and 340B capture. Based on unique patient populations and therapeutic categories, grantees can utilize data-driven analytics to build on market synergies and identify key insights and strategies for improved pharmacy performance, health plan collaboration, and therapeutic outcomes.
- Attacking WAC Spend: It isn’t the most thrilling 340B optimization area, but closely monitoring WAC spend in the mixed-use setting and utilizing tools, analytics (e.g., Medicaid carve-in vs. carve-out), or processes either to operationalize procurement changes or recover lost opportunities may add up to considerable savings for covered entities willing to utilize a disciplined approach.
The author Tim Olmstead is a Managing Partner with the Alinea Group and can be reached at firstname.lastname@example.org