Susanne Somerville, CEO of life sciences information sharing consulting firm Chronicled, thinks blockchain technology could be the solution to 340B duplicate discounts.

Tech Firm Convening Working Group to Address 340B Duplicate Discounts

A Bay Area health care tech firm is convening a work group to try to solve the problem of duplicate 340B discounts and Medicaid rebates on the same drugs.

San Francisco-based Chronicled said in a statement issued on Tuesday its goal is to “bring together pharmaceutical manufacturers, 340B covered entities, and state/federal agencies, to establish the business requirements, conceptual design, and proof of concept for an industrywide solution to Medicaid duplicate discounts.”

Although Chronicled’s work group is slated to launch next month, its actual composition has yet to be determined, said company CEO Susanne Somerville in an interview with 340B Report. “I hope to get a real diverse group together,” she said. Somerville added that Chronicled is in discussions with covered entities, state-level Medicaid agencies, and other parties, although she declined to disclose names.

Drug manufacturers say the federal and state governments don’t do enough to protect them from paying duplicate 340B discounts and Medicaid rebates on the same drugs, which federal law says they should not have to pay. In a January 2020 report, the U.S. Government Accountability Office agreed, concluding that limited federal oversight of the 340B and Medicaid drug rebate programs “may increase the risk that duplicate discounts occur.”

Duplicate 340B discounts and Medicare Part D and commercial rebates are not illegal. But stacked on top of 340B/Medicaid duplicates, they can cause companies to lose money on some product sales, manufacturers say.

Matters came to a head last year, when six drug makers announced they were stopping or restricting 340B pricing on drugs dispensed by contract pharmacies. They said they did so, in part, because 340B contract pharmacy growth is making the duplicate discount problem worse. The federal government and 340B covered entities say that what the manufacturers are doing is illegal.

Two drug industry vendors, Kalderos and 340B ESP, are the current leaders in the market for services to help manufacturers root out duplicate discounts.

Before becoming the top executive at Chronicled in January 2019, Somerville had a long career in biotechnology and pharma. She served three stints with Genentech between 1997 and 2015, including as vice president of its supply chain in North America, and also was Roche’s global head of technical development planning.

Chronicled has convened work groups for other issues, such as supply chain and revenue management. The participants are primarily drug manufacturers, including Bayer, Amgen, Pfizer and Gilead, but also include group purchasing organizations such as Premier, wholesalers such as Cardinal Health, and specialty drug distributors such as FFF Enterprises.

Chronicled offers blockchain-based services to drug manufacturers, wholesalers, and group purchasing organizations to reduce errors and chargebacks. Blockchain uses what is known as a distributed ledger that functions in real-time: If one person makes a change to the information, every organization participating in the blockchain—known as nodes—is notified simultaneously.

Somerville believes that a solution to Medicaid duplicate discounts can be had in a blockchain-based product, particularly given the interoperable system currently being created to monitor potentially counterfeited or stolen drugs under the federal Drug Quality and Security Act.

Once the working group is convened, Somerville believes it will take six to nine months to develop a prototype. A finished product could be available sometime in 2022, she added.

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