Visante 
Understanding the unique role of a 340B program pharmacy buyer and inventory specialist
By Kristin Fox-Smith (MPA), Senior Vice President, Hospital & Health System Services and Eduardo Mendez, Senior Consultant
Inventory support and supply chain management are important areas for the success of hospitals and health systems. This is especially true in the case of a 340B covered entity. As such, the pharmacy buyer plays a critical role in a well-run program. In Visante’s experience, however, we see that there is often confusion concerning the role of the pharmacy buyer. This can negatively impact the program overall and so we thought it would be helpful to explain the difference in being a pharmacy buyer at a non-340B covered entity and a pharmacy buyer at a 340B covered entity.
The general role of a pharmacy buyer and inventory specialist at a non-340B covered entity is to procure, receive and maintain the appropriate inventory levels of medications utilized within their hospital and health care organization. Many people think of a pharmacy buyer and inventory specialist as a pharmacy staff member that enters orders on a wholesaler website and serves the basic function of transmitting orders. A pharmacy buyer has the challenge of keeping the right balance of an on-hand inventory to meet the patients and prescribers need, while also staying within a pre-determined medication budget. Having the analytical skills to keep the right balance is challenging, given that this role must also take into consideration the operational workflow of the pharmacy, external customers, along with other stakeholders, within and outside of the pharmacy.
A pharmacy buyer at a 340B covered entity has another layer of analytics to perform even in advance of procurement. A pharmacy buyer at a 340B covered entity must take into consideration the compliance and optimization skills necessary to support their covered entity type, along with being mindful of inventory spend and appropriate wholesaler account utilization. Critical to the success of a pharmacy buyer and inventory specialist is the understanding of 340B compliance and strategies around account set-up and maintenance, pharmacy agreements, loan and borrow, short dated drugs, and medication shortage management strategies to ensure appropriate 11-digit NDC ordering, when possible.
Given the considerations of each covered entity, 340B split billing vendor is also important, given that the management of secondary wholesalers and direct orders, along with excluded drugs and carve outs may require separate handling and audit oversight. With the complexity of moving parts within a hospital and health system’s supply chain management, it is important to provide the necessary education and training to assist pharmacy buyers and inventory specialists in being successful. Many split billing TPA’s provide specific training for a buyer and inventory management role, but many hospitals and health systems fail to create proper operational processes to document the components of the role that have an impact on overall 340B health. Visante has extensive experience supporting all types of resources within a 340B program and can provide the expertise necessary to aide inventory and supply chain staff in the areas specific to compliant inventory management.
Congress Acts to Close 340B Orphan Drug Loophole
The Closing Loopholes for Orphan Drugs Act was originally introduced by Representative Peter Welch (D) Vermont, on June 13, 2017, in a previous session of Congress, but was not enacted. The legislation was reintroduced on September 27, 2019, by Representative Welch and Representative David McKinley (R) West Virginia as HR 4538. This is a very important bill for sole community hospitals, critical access hospitals, rural referral centers, and freestanding cancer clinics to correct the situation created under the Affordable Care Act which prohibited these covered entities from purchasing orphan drugs at 340B prices. The proposed legislation is receiving support from key industry groups such as AHA and ASHP.
The Affordable Care Act (ACA) allowed for the addition of critical access hospitals, sole community hospitals, rural referral centers, and freestanding cancer centers as covered entities eligible to participate in the 340B Program. However, the ACA also prohibited the newly added covered entities from purchasing orphan drugs at 340B prices. FDA orphan drug designation is given for a specific indication related to the treatment of a rare disease in patient populations under 200,000 and orphan drug status provides incentive benefits for pharmaceutical manufacturers such as fee waivers, market exclusivity, and tax credits. The majority of drugs with orphan status are also approved and marketed for other indications outside of the orphan indication. However, under the current ACA provision no matter what the indication for the drug, if it has orphan status it cannot be purchased at 340B prices by the above referenced covered entities.
The Closing Loopholes for Orphan Drugs Act is designed to correct this situation and will allow critical access hospitals, sole community hospitals, rural referral centers, and freestanding cancer centers to purchase orphan drugs at 340B prices to treat an indication other than the orphan indication. This change will allow covered entities to use these drugs to support the intent of the 340B Program for non-orphan indications just like any other drug in the 340B Program while also preserving the benefits for manufacturers for the orphan indications.
The challenge for Covered Entities in this approach will be how to differentiate drug use and 340B purchases “by indication.” Will split-billing systems and EHRs be able to address this issue through the application of modifiers to capture eligible indications? Will this create the need for Covered Entities to include this as another element of their 340B audit process to validate compliance? Closing the orphan drug loophole certainly presents an additional opportunity for sole community hospitals, critical access hospitals, rural referral centers, and freestanding cancer clinics but it will also come with compliance challenges.
CMS Not Giving Up on 340B Based Payment Cuts
The Centers for Medicare and Medicaid Services (CMS) has not given up on attempting to take a piece of hospital 340B Program savings via reimbursement cuts. Prior to 2018, the department of Health and Human Services (HHS) determined reimbursement based on the Outpatient Prospective Payment System (OPPS) formula of average sales price plus six percent. But HHS moved to reduce payments to hospitals using 340B pricing in 2018 when it altered the OPPS formula for 340B covered entity reimbursement to average sales price minus 22.5%. This resulted in a very significant 30 percent cut for 340B hospitals.
Several hospital groups elected to sue HHS over the cuts last year. The hospital groups opined that HHS overstepped its authority when it reduced 340B reimbursements and there is no basis in law for paying 340B hospitals less than the full statutory rate. A federal judge last December sided with the hospitals and reversed the cuts because the HHS had based the new rates on agency estimates of 340B hospital drug acquisition costs and not the drugs’ average sales prices. However, hospitals were not eligible to go back and recoup their losses on the cuts to date under that ruling. 340B Health has noted that Medicare officials “can implement a remedy that is easily administered, not disruptive to the Medicare program or its beneficiaries, does not require new rulemaking, and fully compensates 340B hospitals for the amount lost due to the unlawful payment reduction,” and has called on the administration to implement a remedy that recalculates 2018 and 2019 pay rates at the full statutory rate and retroactively pays back affected hospitals with interest.
Despite the December ruling against CMS’s 340B reimbursement cuts, the agency has appealed and has plans to move ahead with the changes if successful on the appeal. If the appeal is successful, the CMS will require data on the actual prices that hospitals pay for drugs under the 340B program to calculate average sales prices and make the cuts. To reinforce this, the CMS issued a notice that it will collect this 340B pricing information. CMS indicated in it’s notice: “This will ensure that the Medicare program uses taxpayer dollars prudently while maintaining beneficiary access to these drugs and allowing beneficiary cost-sharing to be based on the amounts hospitals actually pay to acquire the drugs.”
Join Kristin Fox-Smith, MPA, as she discusses how Visante helps hospitals and 340B Covered Entities improve their revenue cycle performance within the outpatient and ambulatory services and retail services.
Join Kristin Fox-Smith, MPA, as she discusses the best practices for routine auditing to stay compliant and remain up to date in the 340B Program.
Join Kristin Fox-Smith, MPA, as she discusses best practices for 340B Covered Entities new to contract pharmacy.
Join Jim Jorgenson, MS, RPh, FASHP, CEO, as he discusses how Visante supports all aspects of the 340B program, from initiation to audit and compliance.