340B Program

If your organization participates in the Medicaid Drug Rebate Program, you are required by law to offer drugs to certain covered entities at discounted prices through the 340B Program (also referred to as PHS pricing). Participation in the 340B Program carries its own unique data reporting requirements and internal administrative functions. At the most fundamental level, the 340B Program enables covered entities to purchase drugs at a price equal to the average manufacturer price (AMP) minus unit rebate amount (URA). The Health Services and Resources Administration (HRSA) within the Department of Health and Human Services is responsible for overseeing this Program and has designated its own Office of Pharmacy Affairs as responsible for administering it.

Several risk areas beleaguer the manufacturer with respect to the 340B Program. The most obvious risk to your organization is not properly calculating the AMP or the URA, resulting in pricing that is statutorily incorrect. Charging the wrong price comes with a heavy price, as several statutorily-defined fees and penalties are in place for doing so.

The identification and verification of a covered entity is the other major risk area. The government is required to inform you of which entities qualify for these prices and which do not, but that is where the onus on the government ends. Reviewing data provided by the government and ensuring that data matches your customer base and class-of-trade schema requires the efforts of several different departments within your organization, and any small error could have an enormous effect. If, for example, your organization permits an entity to purchase a drug at a 340B price, and at the time of purchase that entity was not a covered entity, the results could be disastrous: you might have set a new best price with that sale, affecting calculations related to other government programs; and, you might have reported false data (an incorrect best price) to the government.

CIS can assist you in developing or reviewing your policies and procedures to ensure compliance with 340B requirements.