Beth Peery headshot
Beth Peery is the 340B Coordinator at Memorial Health Systems in Seward, Nebraska, a town of 6,000 in the southeastern part of the state.

Part 2: “There Have Been Challenges Up and Down the Supply Chain”: The View from the Field and Responses from Stakeholders

A Special Report From 340B Report:
A two-part series on the growing frustrations safety net providers face in restoring access to 340B pricing in the contract pharmacy setting. Part 1 provides important background on the challenges that covered entities face and looks at the origins of 340B ESP, the clearinghouse used by 16 of the 18 drug manufacturers restricting 340B pricing at contract pharmacies. Part 2 focuses on the perspective of 340B providers trying to jump through what appear to be, in many cases, endless hoops to try to restore 340B pricing.  We also reached out to other key players in the pharmaceutical supply chain and found many stakeholders were not eager to comment.

Memorial Health Systems, Seward, Neb.

Beth Peery is the 340B Coordinator at Memorial Health Systems in Seward, Nebraska, a town of about 6,000 in the southeastern part of the state. Memorial Health Systems is made up of a single critical access hospital in Seward with four contract pharmacies and one wholly owned pharmacy. The health system also offers a specialty clinic where visiting cardiologists, orthopedists, surgeons, and other specialists can provide care, and this draws patients from surrounding rural communities.

Peery says the 340B program has enabled Memorial to offer services that would otherwise be out of its reach, such as infusion services at its specialty clinics, imaging services such as four-dimensional mammography and MRIs, and to keep these facilities open for more hours. She says Memorial offers more surgeries in better facilities than other hospitals of comparable size, and has added some robotic surgeries to its capabilities, all thanks to 340B savings. This was especially important during COVID, Peery says, as hospitals in the Lincoln-metropolitan area shut down surgeries and some were then moved to Seward.

These expanded services allow people “to stay a little more local with their healthcare,” versus having to obtain it 35 miles away in Lincoln, Peery says. This can be particularly difficult for the many elderly residents of the community who are less mobile but tend to need care more frequently, she says. 

In order to preserve its 340B pricing, Memorial Health provides 340B data from its contract pharmacies to 340B ESP. Peery does not find data submission itself to be difficult or particularly time-consuming, but instead struggles with sudden and unexplained loss of 340B pricing from various manufacturers that occurs approximately once monthly. The last time this happened, the drug affected was Lantus, a popular and expensive insulin made by Sanofi. 

When this occurs, Perry says she will typically be notified by a contract pharmacy that they have received an invoice stating a certain product is “restricted” and has therefore not been shipped. This necessitates placement of a “buy now” order at full price, in order to quickly replenish the supply while the discrepancy is sorted out, she says.

In the past, Peery says she would contact 340B ESP and the wholesaler first, “but the usual reply was that the manufacturer did not have the pricing ‘turned on,’” she says. Peery says she now contacts the manufacturer first when pricing is lost, “because in my experiences, it has always been the manufacturer that has to make the correct adjustment,” she writes.

Peery says she will then have to jump through various hoops with the manufacturer to get pricing restored, though the contract pharmacy is listed as eligible on the 340B ESP site. She says the manufacturers are never able provide a reason for why pricing suddenly vanished. “I’m not ever going to get that answered,” she says, “and so, it might be a couple days, it might be 10 days, it might be two weeks, and we’re paying a price that we shouldn’t have to be paying.”

Peery says she lacks time to go through the lengthy process of getting reimbursed for 340B savings lost when “buy now” orders must be placed due to manufacturer error. “Honestly, it’s just me doing this job, there’s nobody else doing 340B here, I don’t have time to go back and chase after what should’ve been priced earlier,” she says.

Peery feels it is unfair that the sole responsibility for resolving errors occurring at other points in the supply chain seems to fall on covered entities.

A Sanofi spokesperson said, “Sanofi promptly investigates and resolves any errors uncovered. For example, the clerical error experienced by Memorial Hospital was resolved in under four days once Sanofi was notified.” They did not address the time investment needed to obtain reimbursement for the supply ordered at non-340B price.

Labette Health, Parsons, Kan.

Tracy Gilmore is the lone, part-time 340B Specialist at Labette Health, a small sole community hospital in Parsons, Kansas, a town of about 10,000 people situated in the southeastern corner of the state about two-and-a-half hours from Wichita. The hospital, though it is licensed for 99 beds, typically maintains a census of about 30 patients per day.

The 340B program is “extremely important for us,” says Gilmore. 340B savings allow Labette Health to operate outreach clinics providing primary care in surrounding rural communities which would otherwise be “healthcare deserts,” she says. These funds also enabled Labette to build an outpatient facility in Independence, a town of roughly the same size about 35 miles away, after its hospital shut down. Labette Health is also able to host specialists from larger hospitals who visit periodically to provide care.

The critical importance of 340B savings for Labette Health means they have had no choice but to submit data to 340B ESP, Gilmore says. The hospital is Labette’s sole covered entity, she says, and they work with fifteen contract pharmacies, a number which has decreased significantly since manufacturers began placing restrictions. Contract pharmacies are vital to the operation of outreach clinics in isolated rural communities, Gilmore says.

Like most others, Gilmore has not experienced difficulties with the transfer of data to the 340B ESP platform, though she hopes its submission “doesn’t come back to bite us, in the future.” Rather, she’s had problems with communication between 340B ESP and the wholesalers or manufacturers. “Somewhere beyond 340B ESP there is either too many processes, or there’s not good communication. And it seems to be worse with some wholesalers than others,” Gilmore says.

Vandervelde says these communication issues are indicative of the sheer number of stakeholders in the pharmaceutical supply chain and its complexity.

Gilmore compares 340B eligibility information from the 340B ESP site to wholesaler reports to check for discrepancies in pricing, which she often finds. She found $11,000 in wholesaler overcharges for the first half of June, which occurred when the pharmacies in question were listed as eligible on the 340B ESP site. Gilmore emphasizes that although this amount may not be a substantial loss for larger health systems, “it’s substantial to us,” and these overcharges add up over time.

Gilmore says that in the beginning, 340B ESP would contact the manufacturer on her behalf to resolve any issues, however they are now referring her directly to the manufacturer so the latter can tell the wholesaler to green light pricing. This convoluted process can sometimes take months, she says, and necessitates regular follow up with all parties as well as time consuming “credit rebills” to get reimbursement for lost 340B savings.

Gilmore says she can think of two instances where she reversed a claim entirely, “out of fairness to our contract pharmacy” after “wrestling” with the wholesaler and manufacturer for two to three months over errors in pricing eligibility. She says these reversals resulted in $8,000 to $9,000 in lost revenue.

Gilmore says she is frustrated at the time she must spend to resolve errors occurring at other points in the supply chain, and the loss of 340B pricing and crucial revenue that occurs as a result.

“As a small hospital I recognize that probably there can be some working together to ensure there are no duplicate discounts, and I´m willing to do that, I´m willing to do our part to make sure that we´re compliant and we abide by the laws of 340B and make sure it´s a fair playing game. But that would be the question, is it a fair playing game? And I think most people think that it’s not on the other end,” Gilmore says.

Memorial Healthcare, Broward County, Fla.

Memorial Healthcare is a 2,000-bed public hospital system in Broward County, Fla., that has chosen not to submit its 340B claims data to the 340B ESP system, said 340B Program Supervisor Cherita Barrios. Four of Memorial’s six hospitals are enrolled in 340B, and the system has seven wholly owned pharmacies.  As it currently uses no other contract pharmacies, it is easier for Memorial to avoid data submission than it is for health systems that rely heavily on outside contract pharmacies.

Nonetheless, Memorial has been forced to largely forego 340B discounts from manufacturer Sanofi, as they do not allow exceptions for wholly owned pharmacies — CEs are permitted to designate a single contract pharmacy relationship.  Lilly allows wholly owned exceptions only if the entity agrees to pass 340B discounts on the company’s insulins to patients at the point of sale, which Memorial currently does. The South Florida system provided $902 million in uncompensated care in 2021, according to its annual report.

 “Sanofi will deliver 340B-priced drugs to an unlimited number of contract pharmacies, third-party and wholly-owned, if the covered entity submits minimal claims data,” said a Sanofi spokesperson. “We urge all covered entities, including Memorial Healthcare, to submit the minimal claims requested and receive 340B pricing at all their contract pharmacies.”

Lilly did not respond to multiple requests for comment from 340B Report.

Barrios has used the 340B ESP platform to designate Memorial’s seven wholly owned contract pharmacies for each of the 16 manufacturers utilizing the site. She says that although these designations are listed as approved in the ESP platform, 340B pricing is still not loaded months later for up to six contract pharmacy relationships per manufacturer. (With four covered entities and seven pharmacies, 28 total relationships must be logged with each manufacturer.)       

In these instances, Barrios says she reaches out to 340B ESP, which refers her to the wholesaler, and the wholesaler then refers her to the manufacturer, and the latter informs her pricing is approved for the few “outlier” pharmacy relationships for which pricing is still turned off. Upon completion of this loop, Barrios says, pricing is still “off” despite what she has been told.

“Everybody is saying the right words, but we still don’t have the pricing. So that has been our major issue,” she says.

Barrios says that in some instances, when she has obtained written confirmation from 340B ESP that pricing was approved but pharmacies are still listed as ineligible, “the (ESP) staff has no explanation whatsoever” and will tell her to resubmit for eligibility. She says she “finally gave in” and recently resubmitted a few pharmacy relationships, with plans to follow-up once the 10 day waiting period is past.

Barrios estimates she spends at least five to six hours per week, “on a good week,” checking to make sure pricing is active and engaging with various stakeholders if it is not.

Barrios feels 340B ESP was “rushed” to get up and running, and the system consequently has flaws. Her belief was echoed by various other covered entity sources interviewed for this story. Some felt 340B ESP is currently overwhelmed by the volume of new registrations and service is suffering as a result.

Vandervelde acknowledges “there have been challenges up and down the supply chain, we’re aware of those challenges, we’ve been engaging with all of the different stakeholders in that supply chain to help identify and address those challenges. And we’re going to continue to do so, because we do recognize that it can be frustrating for a covered entity to provide the data…and then ultimately not have access to pricing as quickly as they would expect.”

BayCare Health System, Tampa, Fla.

BayCare Health System in the Tampa Bay area has 14 hospitals, six of which are in the 340B program, as well as a Ryan White clinic and hemophilia treatment center, says Kyle Brauer, BayCare’s Pharmacy Supply Chain Manager. BayCare transitioned its contract pharmacies from retail to specialty some time ago, Brauer says, because although a high volume of claims qualified for 340B pricing in the retail space, they felt the benefit was not worth the effort of auditing claims.

BayCare then decided to focus on one wholly owned specialty pharmacy and bypass any 340B benefit from contract pharmacy partners.  This decision also enabled them to avoid having to submit their data to 340B ESP, Brauer says.

“We really tried to go down the path of a smaller volume of claims but more value for claims,” says Brauer, noting that expensive rheumatoid arthritis and diabetes drugs are “major players” for BayCare’s specialty pharmacy. Still, BayCare’s intentionally limited participation in the 340B program—which Brauer attributes in part to concerns about the staff time needed to provide necessary data to 340B ESP—costs the health system about $1 million annually, he said which “could go to expanding our clinic to treat more disease states or hiring more staff to increase patient capacity.”

Like Barrios, Brauer complains of delays getting 340B pricing for BayCare’s single wholly-owned pharmacy. He began the process of requesting an exception around early March, and says that while manufacturer eligibility is typically approved by 340B ESP fairly quickly, it can take one to two months more for 340B pricing to be restored. Then, BayCare must do a “credit-rebill” to get refunded for 340B savings lost when it was unavailable — a time-consuming process with an additional lag time of about a month and a half, Brauer says.

He attributes these delays to slow or ineffective communication between 340B ESP, the wholesalers, and the manufacturers. Brauer notes that a cumulative three month wait “from the time to approval to the time where we’re really seeing the full 340B price effect” is far from ideal, “because of course we can’t stop filling prescriptions during that time, so it really kind of eats into what we’re able to do.”

“Gum Up the Gears”

Tim Mallett, Vice President of Pharmacy Services for the third party administrator 340Basics and the former long-time pharmacy director for a Michigan community health center, says the communication hiccups and 340B pricing errors that seem to be plaguing the supply chain since manufacturers began imposing restrictions are happening by design. “Any little things [manufacturers] can do to gum up the gears of this mean they keep more money,” he says.

Even if these restrictions are eventually halted by the courts, Mallett says, manufacturers will have made “hundreds of millions, if not more, in additional profits,” in the meantime, “because they haven’t shipped these products at 340B prices to contract pharmacies.” 

340B Report reached out several times to manufacturers referenced in this series and to the big three wholesalers AmerisourceBergen, McKesson and Cardinal. Of the manufacturers contacted, only Sanofi responded.  As for the wholesalers,  AmerisourceBergen was the only one to respond.   A company spokesperson said they have “nothing to share at this time.”

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