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Contract Pharmacy Arrangements in the 340B Drug Discount Program

Adam Freeman, a program analyst for the Office of Evaluation and Inspections in Chicago, is interviewed by Ann Maxwell, Regional Inspector General for the Office of Evaluation and Inspections.


[Ann Maxwell] I'm Ann Maxwell, Regional Inspector General in Chicago for our Office of Evaluation and Inspections, speaking with program analyst Adam Freeman. Let's talk about your recently released report on contract pharmacy arrangements in the 340B Drug Discount Program. First, what is that program?

[Adam Freeman] The 340B Program allows certain health care providers, like community health centers and hospitals serving low income patients, to buy prescription drugs at about half price.

[Ann Maxwell] So what are contract pharmacies and what role do they play in the 340B Program?

[Adam Freeman] Some health care providers partner with retail pharmacies, which fill prescriptions using the discounted 340B drugs. These are called "contract" pharmacy arrangements.

[Ann Maxwell] What prompted you to do an evaluation on contract pharmacies?

[Adam Freeman] The use of contract pharmacies has increased rapidly in the past few years. Also, HRSA's audits have found that some contract pharmacy arrangements violated 340B Program rules.

[Ann Maxwell] So, there have been problems with contract pharmacies. How did you go about gathering more information about these pharmacies?

[Adam Freeman] We interviewed 30 health care providers-15 hospitals and 15 community health centers-to learn about how they oversee their contract pharmacy arrangements.

[Ann Maxwell] And what did these interviews reveal?

[Adam Freeman] We found that in some cases, providers make different decisions from one another about 340B eligibility. The result is inconsistency in the program as to which prescriptions are treated as 340B eligible at contract pharmacies.

[Ann Maxwell] Can you give me an example of that?

[Adam Freeman] Sure. A doctor might see a patient in a hospital that's part of the 340B Program. But, that doctor may see the same patient at her private practice. If the doctor prescribes a drug for the patient at the private practice-not the hospital-should the hospital's contract pharmacy use the discounted drugs to fill the prescription? One provider in our sample said its pharmacy would use the discounted drugs, another said its pharmacy would not use the discounted drugs, and yet another said its pharmacy would sometimes-but not always-use the discounted drugs.

[Ann Maxwell] So, similar types of prescriptions may be categorized differently. Why would they categorize them differently?

[Adam Freeman] Yeah, well health care providers seem to be interpreting the program rules differently, which suggests that the rules aren't entirely clear.

[Ann Maxwell] Ah, that leads to inconsistency in which prescriptions are considered 340B eligible. Ok, I get it. Did you find anything else?

[Adam Freeman] Yeah, some of the 30 health care providers didn't report a way to prevent duplicate discounts at their contract pharmacies.

[Ann Maxwell] Duplicate discounts-what are those?

[Adam Freeman] So states normally get rebates from manufacturers for drugs given to Medicaid patients. But only one type of discount is allowed for each drug-either the 340B discount or the State's Medicaid rebate. So HRSA says that contract pharmacies can't dispense drugs bought at the 340B discount to Medicaid patients, unless the provider makes a special arrangement with its State to avoid a second-or duplicate-discount.

[Ann Maxwell] And, some providers didn't have the special arrangement with the State?

[Adam Freeman] Yeah that's right-some providers who dispense 340B discounted drugs to Medicaid patients did not report having an arrangement with their State to prevent duplicate discounts at their contract pharmacies, meaning they haven't fulfilled HRSA's requirement.

[Ann Maxwell] Okay, so there are some issues with duplicate discounts. Anything else?

[Adam Freeman] Yeah, some health care providers reported that they don't offer the discounted 340B price to uninsured patients at contract pharmacies. Program rules don't address whether providers have to offer discounted prices to uninsured patients, but if they don't, uninsured patients pay full price for their prescriptions. That means uninsured patients don't get the direct benefit of the 340B discount.

[Ann Maxwell] And what about oversight-what are the health care providers you interviewed doing to make sure they don't violate program rules?

[Adam Freeman] Well, almost all of the 30 providers said they monitored their contract pharmacies for problems, which HRSA recommends. But HRSA also recommends hiring independent auditors to look at contract pharmacies, and few of the 30 providers reported having done so. Because these arrangements are so complex, it's really important that providers adequately oversee their contract pharmacies to ensure compliance.

[Ann Maxwell] Of course. What did you recommend HRSA do about these problems you uncovered?

[Adam Freeman] We didn't make recommendations in this report. HRSA has announced plans to propose new regulations for the 340B Program this year, so we're sharing our results to inform that effort. But we'll continue monitoring the issue.

[Ann Maxwell] Thank you, Adam, for sharing this important work on contract pharmacy arrangements in the 340B Program.

[Adam Freeman] Thank you, Ann.