How and When Must Drug Companies Participate in the 340B Program?
The federal government’s 340B Drug Discount Program has been lauded as an enormous success in its 30+ years of existence. It is a program that combines the efforts of drug manufacturers and healthcare providers to give patients access to cheaper prescription medications and improve their overall access to affordable healthcare. But the conditions for participation among drug companies differ compared to healthcare providers.
Healthcare providers, known as covered entities (CEs), must meet a strict set of eligibility requirements to participate in the program. For starters, they have to offer healthcare services to uninsured and low-income individuals who are otherwise eligible for Medicaid or Medicare services.
As for drug manufacturers, there are no special requirements to participate. Furthermore, participation is voluntary. The catch for drug makers is that it is an all-or-nothing deal. Those that choose to participate must abide by all the rules. If they do not want to follow rules, or fail to do so, they don’t participate.
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What Is Expected of Manufacturers
The expectations for pharmaceutical companies are pretty straightforward. A manufacturer wanting to participate in the 340B program must “offer all covered outpatient drugs at no more than the 340B ceiling price to a covered entity listed on HRSA’s public 340B database if such drug is made available to any other purchaser at any price,” according to the Health Resources and Services Administration (HRSA).
In recent years, a few manufacturers have attempted to get around program requirements by limiting the drugs they offer at discounted prices or refusing discounts to CEs that choose to purchase the drugs through contracted pharmacies. As you might expect, a flurry of litigation has been initiated due to such practices.
Manufactures Can Be Audited
Although the requirements are different for manufacturers and CEs, both are expected to comply with the rules. Both can be audited as well. In fact, the HRSA conducts routine audits on- and off-site.
Ravin Consultants explains that manufacturers subject to an HRSA 340B audit are sent a pre-audit letter informing them they have been chosen for examination. The letter is followed by a pre-audit meeting between auditors and manufacturer representatives. The point of this initial meeting is to gather documentation auditors plan to review.
During the actual audit process, auditors go through documents with manufacturer representatives. At minimum, auditors are expected to:
- Review manufacturer policies, procedures, and operations.
- Verify internal controls that guarantee manufacturer compliance.
- Test 340B sales transactions through documentation provided by manufacturers.
Manufacturer audits can take place either on-site or remotely. At the conclusion of the audit, auditors prepare preliminary report for submission. The HRSA’s Office of Pharmacy Affairs (OPA) reviews the preliminary report, prepares a draft of the final report, and makes recommendations for corrective action as needed.
When Manufacturers Are Out Of Compliance
When an audit reveals that a manufacturer is out of compliance, several consequences could be forthcoming. First and foremost, manufacturers might no longer be allowed to participate in the 340B program. That may not be a bad thing if you take the position that 340B is unfair to drug makers.
A second possible consequence is having to reimburse CEs for discounts they were owed but never granted. Having to send cash payments to CEs could get quite expensive for a manufacturer.
Pharmaceutical companies are not required to participate in the 340B program. But if they choose to do so, they must go all-in. They are not allowed to pick and choose the drugs they want to sell at a discount or to whom they want to sell them. Compliance is insured through regular manufacturer audits.
