By Victoria Aufiero and Karin Rives
Two years have passed since the Health Resources and Services Administration (HRSA) proposed to reduce red tape for 340B-covered healthcare providers that enter into multiple contract pharmacy arrangements. Today, they can only contract with one pharmacy unless they get approval from the government to form a so-called Alternative Method Demonstration Project, or AMDP – a cumbersome and often time-consuming proposition.
Supporters hailed the new guidelines as an opportunity to expand patient access to thousands of new pharmacies, resulting in improved compliance and better health outcomes. (SeeMonitor, Jan. 2007.) Hospitals, federally qualified health centers and other eligible organizations waited eagerly, but in vain, for the Bush administration to publish the final guidelines in 2008. The question now is whether President Obama will get the job done – and how soon.
“I do sense some frustration in the health center community,” said Jim Donnelly, director of 340B pharmacy services for Hudson Headwaters Health Network, a non-profit community health center system serving a mostly-rural region of upstate New York. “I know of some health centers that have been waiting to contract because they didn’t want to go through the process of applying [for an AMDP] with the regulations in limbo. They haven’t been able to maximize the program because of it.”
Donnelly is hopeful, however, that with a rural health expert now leading HRSA, Dr. Mary Wakefield, the plight of health centers and other 340B providers in non-metropolitan areas may get new attention in Washington. “It’s encouraging,” he said.
Patients Need Better Access
Gary Horne, pharmacy director at San Mateo Medical Center in northern California, isn’t so sure the Obama administration will place contract pharmacy arrangements higher up on the to-do list than President Bush did. But he’s watching any and all developments closely. The guidelines delay means that his patients, many of whom live dispersed in rural areas, continue to have limited pharmacy choices, Horne said.
“For many of our patients, transportation is an issue and if the contracted pharmacy is not conveniently located, their lack of transportation presents a barrier,” he said. “Also, since we have a pharmacy in this covered entity, the wait times for new prescriptions can be long.”
But contract pharmacies can also be a double-edged sword, Horne acknowledged. His hospital uses a “ship-to, bill-to” contract under which San Mateo Medical Center pays for drugs that are then shipped directly to the contract pharmacies that contract with the hospital’s satellite clinics.
“If we added more contract pharmacies, we would be taking business away from valuable partners who know and understand our situation,” he said. “We would also incur additional expenses, including increased administrative oversight, inventory, and accounting costs.”
Background: The Birth of Contract Pharmacies
In the first few years following the passage and implementation of the federal 340B drug discount program, covered entities looked for ways to take advantage of the savings offered by the law. They soon discovered that the costs and expertise required for setting up in-house pharmacies often offset those savings. They began looking for ways to participate fully in the 340B program without having to incur that pharmacy overhead. Contracting with an outside pharmacy – and better, multiple outside pharmacies – seemed like the way to go.
HRSA responded by creating a contract pharmacy program, limiting the program to covered entities that lack in-house pharmacies and only allowing one contract pharmacy per entity site. Multiple contract pharmacy arrangements could only be established on a demonstration basis and required that the applicant show adequate controls to protect against drug diversion and duplicate discounts.
The agency launched the program in 2001, calling the approved contract pharmacy arrangement Alternative Method Demonstration Projects. Today, there are 26 such AMDP projects, 22 of which use the model for multiple contract pharmacies.
Then in early 2007, HRSA finally issued the proposed guidelines that would allow 340B-covered entities to contract with multiple pharmacies without an AMDP.
Providers and Industry React
Most covered entities and their advocacy groups support HRSA’s proposed guidelines, although some 340B entities wonder why HRSA wouldn’t let them form networks without prior governmental approval. The network model, a common AMDP, allows patients of one covered entity to receive 340B discounted drugs from another entity within the network.
According to the Office of Pharmacy Affairs (OPA), the network model was initially included in HRSA’s guidelines, but HRSA removed it to speed up the U.S. Department of Health and Human Services’ internal review and approval process.
While 340B providers and pharmacist groups welcomed the proposed guidelines, pharmaceutical manufacturers fear an expansion of the 340B program under the guidelines. They also voice concern over diversion and duplicate discounts, arguing that HRSA had not proposed adequate safeguards.
The drug industry has called for increased government supervision of the arrangements between 340B entities and contract pharmacies, and for HRSA to apply its current AMDP auditing requirements to all multiple contract pharmacy arrangements.
| HRSA’s Proposed Multiple Contract Pharmacy Guidelines Allow 340B entities to contract with multiple pharmacies without having to seek prior approval from HRSA. Require entities and their contract pharmacies to maintain auditable records and to sign agreements that meet HRSA requirements. Require contract pharmacies to establish and maintain a tracing system for 340B drug dispensation and to reconcile those with the 340B entity’s prescription records. Spell out how to purchase bill, ship, and dispense drugs. Describe how to avoid fraud and abuse violations, including arrangements that induce patient referrals in exchange for payments from the contract pharmacy. |
“Under the proposed notice, any covered entity could contract with an unlimited number of pharmacies without ever seeking HRSA approval. HRSA has not explained why such a significant expansion in the use of contract pharmacies would be necessary,” Pharmaceutical Research and Manufacturers of America, the trade group representing the nation’s largest brand-name manufacturers, said in its comments. “Consequently, PhRMA recommends that HRSA continue to require that covered entities apply to HRSA and demonstrate their need…on a case-by-case basis.”
The Biotechnology Industry Organization, representing biotech firms, warned that without additional guidance from HRSA, manufacturers would have difficulty confirming through OPA’s database that a contract pharmacy is eligible for 340B pricing and that it’s linked to a covered entity.
But Donnelly believes that the experiment with AMDPs has shown that multiple contract arrangements can work. Some health centers have grown tired of waiting for the new guidelines and submitted applications to form an AMDP, only to remain in limbo as their paperwork crawls through OPA approval channels. “The best solution would be to just go ahead and approve multiple contract pharmacies,” Donnelly said.