Deliver Financial Leadership with 340B

July 2011 - Vol.8 No. 7 - Page #14
Category: 340B Software

Pharmacy leaders are tasked with myriad divergent responsibilities: managing staff, readying the pharmacy for technology implementations, keeping aware of TJC developments, and ensuring medication safety take up most hours. Medication purchasing decisions is one of the most noticeable areas in which a pharmacy leader can make an impact. However, if poorly managed, purchasing issues can easily become the reason management notices pharmacy, albeit for the wrong reasons.

Exhibiting effective financial leadership in drug purchasing when taking advantage of discounted 340B pricing can elevate the perception of the pharmacy from a department that drains resources from the hospital budget to a department that identifies and creates opportunities for drug savings. Shrewd financial management, then, is one of the pharmacist’s requisite responsibilities.

Identifying Opportunities for Savings
The value of the 340B program to eligible facilities cannot be overstated; typically, the program saves between 25% and 50% on drug purchases for its population served. These discounts can then be passed on to patients and the hospital, ensuring that needy patients receive the drugs they require and that the facility maintains a fiscally sound bottom line.

For institutions without a 340B program, a first step is to identify what opportunities exist in the hospital. Eligible patients will vary based on hospital type and patient demographics, and may exist in the ER, OR, and day surgery units. The area with the largest opportunity for 340B savings often is outpatient oncology, where patients use specific, expensive drugs. Also, be sure to include employee discharged patient prescriptions. After these settings have been explored, most facilities uncover additional opportunities for 340B savings in the home health care infusion department and in other infusion services areas.

Technology Drives a Well-run Program
Whether a facility purchases a commercial software product or builds its own, such technology is useful as it streamlines and facilitates the 340B organization process. Commercial software programs are especially helpful because they provide options for identifying eligible patients and drugs. Building your own software is an option that allows a facility to customize the program to its unique needs. Facilities without technology options must keep two separate inventory lists—one for 340B drugs and one for non-340B drugs. In the absence of technological solutions, this bookkeeping can become quite cumbersome, and it is imperative to maintain the accuracy of these records to reap the full benefits of 340B pricing.

At the SwedishAmerican Hospital System, we decided to create our own 340B software program. Looking back, this choice was not best suited to our needs. Because it took almost four months to develop and troubleshoot the software, we missed out on significant 340B savings during that time. So, when deciding whether to buy technology or create your own, take into account the time necessary for software creation and the lost savings that will be incurred over this period. Your facility may find that it is actually easier and more economical to purchase software (see Table 1).

HRSA Guideline Revisions
In March 2010, Human Resources and Services Administration’s (HRSA’s) office of pharmacy affairs revised the 340B contract pharmacy guidelines to allow facilities to contract with more than one licensed commercial pharmacy to serve its delivery sites, including sites with in-house pharmacies. Simultaneously, a health care facility can have a single contract with a pharmacy to cover all of its delivery sites, provided each location is identified in the contract and listed in the office of pharmacy affairs database. Prior to this change, multiple contract pharmacies only were allowed through the Alternative Methods Demonstration Project. This decision permitting a health facility to contract with multiple pharmacies provides additional flexibility, thus creating a more efficient medication delivery system and delivering the lowest possible price, while ensuring medication access for needy patients.

The contract pharmacy changes carry over certain features of the old guidelines, namely the requirement of a written contract, a tracking system to prevent diversion and duplicate discounts, verification of patient eligibility, and documentation of compliance.

Newly introduced guidelines include the maintenance of auditable records of 340B drug transactions and the requirement that covered entities have annual, independent compliance audits. In addition, situations involving noncompliance and the resultant remedial actions taken are to be reported to the office of pharmacy affairs. Furthermore, covered entities must submit written certification that they have a plan to meet compliance requirements. HRSA also indicated that an annual certification process might be created in the future to ensure that contract pharmacies meet compliance requirements.

Maintaining 340B Classification
To qualify for the 340B program, hospitals must be classified as having a disproportionate share⎯—at least 11.75%—⎯of indigent patients. It is important that this rating is maintained quarterly, or the hospital will not receive 340B benefits for the entire quarter. Consequently, it behooves directors and other pharmacy leaders to maintain communication with administration on 340B issues. For those facilities on the cusp of eligibility, there is a risk that if other cost-saving programs are used in addition to 340B, the hospital may fall below the threshold and lose eligibility. Because 340B benefits are so significant, it is unlikely that other programs will save enough money to justify falling below 11.75% and losing eligibility.

As pharmacy leaders, we are responsible for informing other decision makers of the benefits of the program and keeping them up to date on the hospital’s requirements for maintaining disproportionate share status. In most cases, 340B benefits outweigh other short-term or single-item savings, and so the requirements for staying in the program must be prioritized above any short-term gains. It is also important to note that in order to be eligible for 340B pricing, hospitals cannot also take advantage of GPO pricing. While 340B typically provides a better discount, there will be occasions when the GPO price will be lower but taking advantage of this savings will not be in your best interest.

Because shifting eligibility with 340B each quarter will cause administrative challenges, it makes sense to postpone enrollment until the hospital’s rating is slightly higher than 11.75%. By ensuring consistent eligibility, you can avoid the red tape that is attendant to facilities skirting the threshold of this requirement.

Delivering Financial Leadership
It is not uncommon for pharmacy leaders to experience difficulty when quantifying the results of their money-saving efforts to administration. This is vexing, considering that pharmacy is usually viewed as a cost center in terms of the hospital budget rather than a contributor to the facility’s financial bottom line. Becoming a financial leader involves accurately portraying pharmacy’s accomplishments to all internal stakeholders. At SwedishAmerican, we calculate our 340B savings and report these statistics to administration quarterly. In addition, it makes sense to send out occasional notifications between communications, especially when a particularly high cost savings has been achieved as a result of pharmacy’s efforts.

At our facility there are approximately 20 staff members involved in organizing and running the 340B program. With so many people involved, it is easy to imagine that someone else will take the reins and report successes to hospital administration. However, as pharmacy leaders, we are ultimately responsible for the success of all pharmacy-related projects, and 340B is no different. In fact, because 340B offers such substantial savings, this is one of the most important programs to be reporting to administration regularly.

E. Thomas Carey, PharmD, received his doctorate in pharmacy from Creighton University in 1996. He has been the director of pharmacy services at SwedishAmerican Hospital in Rockford, Illinois, since 2000. Thomas instituted the 340B program at SwedishAmerican, resulting in annual savings of $2.4 million dollars. His professional interests include infectious disease, cardiology, medication error prevention, hazardous medication exposure prevention, and pharmacy management.

Establish Effective Management Controls


By Marianne Ivey, PharmD, MPH
Associate Professor, Pharmacy Practice,
University of Cincinnati

Organizations with effective management controls in place are in an ideal position to institute a 340B purchasing program. These programs are available for outpatients in hospitals, children’s hospitals, and freestanding cancer hospitals with a disproportionate share adjustment greater than 11.75%. Rural referral hospitals and sole community hospitals qualify for 340B pricing programs if they have 8% or greater disproportionate share of indigent patients and critical access hospitals qualify with no disproportionate share percentage required. Created in 1992 by the enactment of public law of the Veterans Care Act, the program is administered by the federal office of pharmacy affairs of the Health Resources and Services Administration.

By developing and communicating clear policies and procedures and providing ongoing staff training, pharmacy leadership will ensure a tightly run, effective, and compliant 340B program that helps the hospital continue serving patients that cannot pay for their medications. Following a few simple practices can ensure an efficient and effective program.

Purchase 340B drugs daily. Because 340B medication prices are adjusted on a regular basis, submitting orders daily or weekly based on use by eligible patients ensures that the hospital will receive the most appropriate prices.

Reevaluate the formulary regularly, including after every P&T committee meeting where medication additions or deletions are approved. Assess each medication addition or deletion for its use in outpatient areas, and thus, its 340B eligibility.

Dedicate a specific employee to inventory reconciliation. All staff involved in the hospital’s 340B program should have a single go-to person for 340B questions. Designating one manager will go a long way in optimizing 340B purchasing and future budget projections. Often a detail-oriented pharmacy technician is in charge of tracking the use of eligible medications and the day-to-day medication ordering. This technician should report to a pharmacy manager with knowledge of the 340B program.

Maintain detailed records. On a regular basis, the responsible manager should audit the use and purchase of 340B price-eligible medications, both to ensure that all eligible outpatient medications are purchased at the most advantageous price, as well as to ensure that only eligible use of these prices is occurring. If inventories are sufficiently separate, such that outpatient medication use is clearly identified, 340B purchases are relatively clear-cut. If separate purchasing accounts are not used, hospitals may find value in software programs that split inpatient medication use from outpatient medication use and identify those medications that can be bought using 340B pricing.

Track changes in the 340B program. All eligible organizations should follow the frequent changes in this federal program, as compliance depends on understanding the current restrictions. Valuable resources include ASHP’s 340B information at, the office of pharmacy affairs Web site at, and the Safety Net Hospitals for Pharmaceutical Access Web site at In addition, the Prime Vendor Program identifies medications that have subceiling prices below the 340B prices. The annual meeting of the Safety Net Hospitals for Pharmaceutical Access, which usually occurs in July and is held in Washington DC, is another informative source.


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