Top 3 Things You’ll Learn
- Where 340B came from
- What are 340B duplicate discounts?
- Why are 340B and commercial clients colliding now?
There is no question that 340B has become a significant market force in the world of self-funded drug plans. At the end of 2020, 340B sales accounted for $80B (13%) of the overall U.S. pharmaceutical sales volume. A year ago, most commercial clients were likely unaware of 340B. But with a rapidly changing landscape, many clients are starting to see their rebates begin to be impacted by 340B and understandably have a lot of questions. This blog will help you answer their questions and understand the impact on their plans.
Building a safety net for hospitals and health centers
It’s likely that 340B funding is providing an essential source of financial support for safety net hospitals and community health centers in your community. The federal 340B Drug Pricing Program was enacted in 1992 in a bipartisan effort to provide safety-net providers with resources to serve more patients in need and provide comprehensive services they otherwise would not be able to offer. The law requires drug manufacturers to offer discounted prices to eligible safety-net providers on certain outpatient drugs. In return, Congress approved having Medicaid and Medicare Part B cover the participating manufacturers’ product, a deal that has been highly profitable for drug manufacturers.
Exponential growth for 340B
Over the past decade the 340B program has experienced exponential growth. There are multiple factors which have contributed to this growth, and we’ll report on those in a future blog. But there is no question that 340B has steadily taken over a sizable chunk of the U.S. drug market sales. “The 340B program’s size now exceeds the Medicaid program’s outpatient drug sales- and accounts for nearly 20% of the total rebates and discounts that manufacturers provide for brand name drugs.
Over the past seven years, pharma has watched the total spend on 340B purchases grow from $12.2 billion in discounted 340B prices in 2015 to $43.9 billion in discounted 340B prices in 2021. As the 340B program has grown pharma has become increasingly hostile about being forced to shell out billions and billions of dollars in 340B discounts. To make matter worse, due to the design of the 340B program and the timing of how most 340B claims are identified as qualifying for 340B post-adjudication, the setup has been ripe for duplicate discounts taking place. In this scenario, duplicate discounts refers to the occurrence where pharma is unknowingly paying out a rebate and a 340B discount on the same claim.
How inadvertent 340B commercial double dipping happens
When it comes to the world of duplicate discounts, or double dipping, most people are familiar with the fact that it’s prohibited to receive both a Medicaid rebate and 340B savings on the same claim. But another type of double dipping can take place when 340B savings are paid out on a commercial claim that also received a PBM manufacturer rebate.
This latter scenario is a violation of the contractual agreement between the PBM and the manufacturer in which the PBM agrees to not receive or pass on any rebates on any 340B qualified claims. Historically, this form of double dipping happened all the time as the PBMs seldom knew which claims qualified for 340B at the point of sale, and by the time the claim ended up qualifying for 340B, the claim had already adjudicated with no identifier on the claim file to indicate that the claim was a 340B claim.
Here is a real-life scenario showing how this type of double dipping can easily take place:
- John Smith, an employee of Acme Manufacturing company, is seen by a provider at his county hospital, which happens to be a 340B covered entity.
- John’s doctor writes him a prescription, which he fills at the hospital pharmacy.
- The hospital is able to order the replenishment of the script they filled for John at a dramatically discounted 340B price, as John’s script qualified for 340B.
- The county hospital that qualified John’s script and received 340B savings on his claim doesn’t notify the PBM that John’s prescription qualified for 340B — because at the point of sale, the hospital didn’t know that this claim would qualify for 340B.
- A few months later, the PBM pays out a rebate on John’s claim to his employer.
Historically, this scenario would happen all the time, where a PBM would have no knowledge that a claim had qualified for 340B and would submit that claim for rebate, and the manufacturer would ultimately end up extending the 340B discounted price on the drug and the PBM rebate on the same claim. The sum of both the 340B savings and the rebate would often exceed the total value of the claim, putting the manufacturer underwater.
Why is this impacting my commercial clients now?
As 340B has grown and become a greater financial burden to manufacturers, manufacturers have developed new tactics to identify which claims have qualified for 340B. Here are a few examples of new tactics manufacturers are using to identify 340B claims:
- Requiring covered entities to upload 340B-qualified claims data to a manufacturer-owned online platform called 340B ESP in exchange for granting those entities access to 340B contract pharmacy savings access
- Using 340B wholesaler chargeback data to determine what percentage of a pharmacy’s claims are qualifying for 340B
- Using proprietary sales ratio data to determine which heavy prescribers are employed by a 340B covered entity, manufacturers have been known to remove all claims from these providers from PBM rebate submission
In the past year, RxBenefits has witnessed manufacturers taking a more aggressive stance on identifying 340B claims and pulling back rebates related to commercial duplicate discounts. These aggressive measures on behalf of pharma have led commercial plans to assess the impact of the loss of rebates and led to some plans taking measures to prevent 340B from being processed on their claims (CVS and Blue Cross Blue Shield among them). The chain effect of the loss of rebates is just starting to be seen, and we can expect further actions and strategies by commercial plans to overcome the loss of rebates to 340B programs. RxBenefits continues to implement strategies to combat this ever-changing 340B environment. We are reviewing all available resources and working on developing proprietary databases, which will further enhance our ability to predict 340B claim eligibility and rebate impact moving forward.