Expert Perspectives

Indigent care: how to cost-effectively manage important safety net programs

Andrew J. Wilson, Vice President, McKesson 340B Consulting

March 18, 2014

Although uninsured rates continue to trend downward, even with the advent of the Affordable Care Act a significant number of patients will remain uninsured. In light of this, many hospitals and health systems will continue to rely upon indigent care programs designed to alleviate financial burden, including the 340B drug discount program and manufacturer patient-assistance recovery, However, as many will attest, participation and can be time consuming and requires staying current with ever-changing regulations. As pharmacies continue to serve as a strong partner in the assistance of indigent care management, it is important to know the facts, be prepared and maximize program opportunities in order to realize the benefits of these important safety net programs.

What’s New in 340B

Since inception of the 340B program in 1992, the Office of Pharmacy Affairs (“OPA”) of the Health Resources and Services Administration (“HRSA”) in Health and Human Services has administered the 340B program. The past 21 years have inspired debate concerning 340B program management and compliance. HRSA has governed the program through policy notices, letters and guidelines addressing elements of program compliance and implementation rather than issuing comprehensive regulations. HRSA does not specify, in any detail, how participants are to implement the 340B Program. However, OPA has recently begun annual recertification of 340B program participants and started on-site audits. OPA has also announced that they will disseminate comprehensive regulations to guide program participants.

Pharmacists and others leading hospital 340B programs are presently focused on three areas of performance:

  1. Meeting 340B rules, regulations and guidelines,
  2. Effectively capturing the full benefit of 340B, and
  3. Stretching 340B savings to provide healthcare services for the underserved

The 340B program is dynamic and complex. It requires cooperation among hospital departments to ensure savings are optimized while meeting requirements for program compliance. In light of the recent changes, anticipated new regulations and OPA guidance for the 340B program, all hospitals – even well-established, successful hospitals and pharmacies, should undertake a thoughtful and objective “best practices” assessment that focus on these specific areas of risk and opportunities for improvement.

  • Audit preparedness
  • Eligible patient identification
  • 340B program policy & procedures
  • 340B Program Executive oversight
  •  “Mixed-use” area dispensing and replenishment processes
  • Medicaid duplicate discount avoidance
  • Multiple contract pharmacy arrangements
  • GPO exclusion provisions
  • 340B operating and financial performance

Preparing for a 340B Audit

Audit preparation is the best starting point to cover all compliance-related areas of the 340B program and to gain insight into areas where program financial performance and efficiency can be improved. Consultant experts in 340B, including McKesson’s Pharmacy Optimization, often provide a structured and independent review process.

A specific and detailed focus on 340B policies and procedures for completeness and consistency with actual practices is critical. Apexus, the 340B Prime Vendor ( ) and the Safety Net Hospitals for Pharmaceutical Access ( ) provide template policy guides and resources. Key elements of the policies should include registration information on the HRSA web site. A comparison to actual 340B program implementation and details regarding the accumulation of 340B information and the related purchasing and inventory management practices is critical. In all cases, this should include an assessment of the 340B software vendor’s implementation in the hospital and a gap analysis with plans for improvement. Hospitals using legacy software or internally developed programs should consider upgrading to a more current program, such as Macro Helix 340B Architect, based on the needs and gap assessment.

Other best practices include:

  • Identification of personnel with content expertise for each audit segment
  • Formalization of  a 340B audit response team with identified executive leadership
  • Recommendations for policy or operational changes to promote 340B program compliance
  • Development of a 340B compliance plan and oversight committee
  • A review of staffing and resources supporting the 340B program. This should include non-pharmacy staff in purchasing, finance, patient accounting, IT and compliance
  • Hospitals engaged in 340B contract pharmacy should have a regular independent audit of compliance and financial elements of the contract pharmacy relationship, looking for gaps or areas where 340B patients may be missed or incorrectly included in the 340B program.

Staff involved in 340B program management should attend a “340B University” program run by Apexus, or a 340B introductory program run by SNHPA.  In this time of change in the program staff stay current.

Hospitals subject to the GPO prohibition or the Orphan Drug Exclusion should also pay close attention to the financial implications of maintaining a compliant program. Hospitals running a compliant program may see substantial increases in cost through purchasing of 340B excluded drugs at WAC or other non-340B price.

Expected Change on the 340B Horizon

As the 340B program has grown, it has come to the attention of drug manufacturers, congress, regulators and others who are seeking to ensure that the appropriate safeguards are in place to manage it effectively. Over the next 1-2 years, the 340B program will see a combination of increased regulation, growing oversight by HRSA through audits, and increasing penalties for hospitals whose programs are run outside of the new, tighter boundaries. Watch for the following from HRSA in the near future:

  • A “Mega-Regulation” outlining key requirements for program management and addressing “grey areas” such as 340B Patient Definition, contract pharmacy compliance requirements, hospital eligibility criteria and the eligibility of off-site facilities
  • Three administrative enforcement regulations. The first would create a mandatory administrative dispute resolution process for 340B. A second would impose fines on manufacturers for knowing and intentional overcharges.  A third regulation would impose fines on safety-net providers for knowingly or intentionally violating the 340B statute and remove them from 340B for “systematic and egregious misconduct.”
  • Deeper, more focused and more frequent audits with penalties as outlined in the regulations, in addition to the current requirements for payback of unearned discount and remedy of the audit findings.

Manufacturers and others with an active economic interest in the 340B program will continue to challenge hospital participation and the effectiveness of 340B. Hospitals should be prepared to meet the continuing challenge with a well-run 340B program supported by adequate resources, regularly reviewed for compliance and performance.

Maximizing Patient Assistance Programs

Over 50 pharmaceutical manufacturers offer pharmaceutical assistance programs (PAPs), which apply to over 2,000 branded drugs and vial strengths. Hospitals dispensing drugs to eligible patients are in a position to seek recovery of these drugs, thus recovering significant dollars. If hospitals seek reimbursement of PAPs for all 2,000 of the products where PAPs exist, hospitals can potentially recoup between 2% and 3% of their annual drug spend — a recovery that may measure into the millions of dollars for larger organizations.

A number of hospitals have found it challenging to stay abreast of the shifts in PAP recovery:

  • Hospitals must proactively monitor when manufacturers add or discontinue a PAP
  • The thresholds and patient qualifying criteria differ from program to program
  • Every program has a different application form and all require a variety of supporting documentation, such as proof of patient income
  • Hospitals must find, qualify, enroll and track patients
  • If a manufacturer denies a claim, follow-up may be necessary

Healthcare organizations seeking to recover PAP medications may pursue one of the following options:

  • Dedicate an in-house resource to manage. This may require one or more staff members to learn and stay current with the intricacies of the numerous PAP programs. Depending on the program, eligibility forms and related paperwork may need to be filed in order to recover the drugs.
  • Implement PAP software. Most PAP software packages pre-populate application forms, but these software packages may not maximize cost recovery. Therefore, the onus still lies on hospital staff to help find, qualify and enroll patients.
  • Partner with a PAP expert. Choose an external partner that has PAP expertise, which can help result in the greatest economic value for hospitals. Look for a partner that has the expertise and ability to manage the entire PAP process – from patient paperwork through reconciliation of drug packaging information and application forms.

Hospitals using legacy software combined with internally developed programs managed by should consider upgrading to a more current program, such as McKesson Medsource®, based on needs and gap assessment.

While the tides of healthcare coverage are turning, caring for the indigent population will continue to have a significant financial impact on hospitals in the years to come. As pharmacies continue to serve as a strong partner in the assistance of indigent care management, it is important to be prepared in order to maximize program opportunities and realize the benefits of these important safety net programs.

Note: The information provided here is for reference use only and does not constitute the rendering of legal or other professional advice by McKesson. Readers should consult appropriate professionals for advice and assistance prior to making important decisions regarding their business. McKesson is not advocating any particular program or approach herein. McKesson is not responsible for, nor will it bear any liability for the content provided herein.