Insights

New manufacturer restrictions are jeopardizing the future of 340B. What’s the path forward?

In recent months, manufacturers including Johnson & Johnson, Amgen, Abbvie, Pfizer, Glaxo-Smith
Kline, and Novartis have introduced some of the most restrictive 340B* policies the industry has seen to
date. And that’s quite a feat, as the last few years have already brought a host of new manufacturer
restrictions for 340B.

The result is that Covered Entities (CEs) continue to face significant pharmacy revenue declines. So
what’s ahead for the 340B program, and what can CEs do to mitigate the impact to patients and manage
the financial losses? We believe that C-suite leaders will be pivotal in driving the future direction for 340B.
*340B is the 340B section of the Public Health Service Act, enacted in 1992. It requires pharmaceutical
companies to sell their products at a discounted rate to healthcare systems that serve a large number of
low-income and uninsured patients. Those who participate do not experience formulary restrictions by
Medicaid, which allows the promulgation of their products and many times leads to the discovery of new
therapeutic use and benefits.

What are the new manufacturer restrictions?
Many of the new manufacturer policies state that hospitals can now receive 340B pricing at only one
pharmacy location within 40 miles of the hospital, with some placing additional restrictions on the type of
pharmacy selected. This means that many mail order or specialty pharmacies may no longer be an
option. The move sets a disturbing precedent in which profit-focused manufacturers are increasingly
driving decisions that directly impact medication access for our most vulnerable communities. And while
CEs know that expanding contract pharmacy is a key driver for medication access, these restrictions are
putting contract pharmacy programs in jeopardy.

“The manufacturers are driving the bus,” said Maria Kossilos, Associate Chief Pharmacy Officer at
Cambridge Health Alliance, a large health system serving north metro Boston. “They are the decision-
makers and enforcers, with no oversight by the federal government. The threat that we will not have
access to 340B pricing for our contract pharmacy program is now becoming reality. The manufacturers
keep pushing the envelope to see how far they can go, and so far, there has been no push-back.”

How are CEs and patients impacted?
Visante works with many critical-access community hospitals that have sizable contract pharmacy
networks, designed to allow patients the ability to partner with a pharmacy that is in network or that best
suits their needs. These clients have seen their revenue decrease by 50-75% over the past two years.

“We’ve had clients tell us they don’t know if they will be able to make payroll,” says Kristin Fox-Smith,
Visante Managing Director and 340B ACE. “And if they can’t make payroll, there’s nowhere for patients to
go for urgent care, or to receive maintenance and primary care to stay healthy and maintain medication
adherence, which costs the entire health care system more. There’s impact in every direction you look for
every type of CE that’s serving 340B patients today.”

At Cambridge Health Alliance, increased 340B restrictions have resulted in a 50% drop in pharmacy
revenue over the past two years. The organization relies on that funding to take care of its patients, so the
team knew they had to take action. With help from Visante, Cambridge began taking steps to comply with
the policy changes and restore 340B pricing. After 18 months, they have managed to stabilize revenue.
But adherence has also come with expenses, including permanent staff in addition to the Visante
consultants that provided the expertise needed to address and manage the changes.

“Overall, everything’s become very complex,” said Kossilos. “We don’t know what we don’t know. The
ability for us to comply is becoming very expensive. I think most 340B organizations will agree that
regulatory compliance requires a huge investment in full-time employment and consulting fees to be
current and to maintain the program.”

And while compliance continues to be a challenge, Kossilos says the latest manufacturer restrictions are
making it a non-issue for contract pharmacies, because they’re virtually eliminating 340B pricing as an
option. Moreover, even for CEs with robust outpatient pharmacies of their own, challenges with limited-
distribution products or items that can be provided only by specific pharmacies or payer limitations
continue to exist. So, for Cambridge Health Alliance, offsetting losses has become a losing proposition
because the channels they’ve relied on to do so are continually getting chipped away.

Who will fund indigent care?
At the heart of the matter is the fact that 340B is intended to subsidize indigent care. Yet the program
restrictions are limiting public health systems’ ability to do just that. As an example, about 40% of the
patients at Cambridge Health Alliance are on Medicaid, so they rely on 340B as an avenue for affordable
medication.

“There’s no solution in sight for once we lose this revenue,” said Kossilos. “How will we bring it back into
these systems in order to do what we do on a daily basis, to help underserved and vulnerable
populations? If 340B goes away, who will fund indigent care?”

It’s a question that Kossilos has often asked government and industry advocacy leaders. But no one has
been able to provide an answer. She and Fox-Smith believe the path forward for 340B lies in modernizing
the program rather than dismantling it. And they insist that C-suite leaders need to play a key role in
making this happen.

“C-suite leaders at Disproportionate Share Hospitals and all types of Covered Entities need to begin a
coordinated effort to drive improvements in the 340B health program,” said Fox-Smith. “Together, these
facilities equal tens of thousands of contract pharmacies, hundreds of millions of dollars. We have
strength in numbers.”

She believes that if enough leaders begin pushing for answers to these critical questions, then CEs can
gain some much-needed traction against manufacturer overreach when it comes to 340B.

“It really comes down to this: If we don’t have access to these services, where is this care going to come
from?” Fox-Smith says. “Where do patients pick up their prescriptions next month? We need to bring it
back to the patient. Our leaders need to help us tell that story.”

Read our practical tips for navigating 340B and optimizing your program.

At Visante, we can help you remove the guesswork and the administrative burden behind managing this
critical avenue to revenue restoration. Our 340B ACE certified consultants are experts on 340B ESP™
processes, and we can help you make the most of 340B to optimize your savings. Contact us to learn
more about how we can support all aspects of your 340B program. Email solutions@visanteinc.com or
call (866) 388-7583 to speak to one of our team members.