1. 340Best Practices Kenneth Bain, R.Ph Consultant

2. 340Best Practices Kenneth Bain, R.Ph. Pharmacist licensed in Texas and Louisiana. Pharmacist licensed in Texas and Louisiana. Graduated from University of Louisiana at Monroe School of Pharmacy in 1992. Graduated from University of Louisiana at Monroe School of Pharmacy in 1992. Began work in 340B Pharmacy in 2005. Began work in 340B Pharmacy in 2005. Presently lives in Marshall, TX, working both in a Class A Pharmacy and as a consultant for various Community Health Centers. Presently lives in Marshall, TX, working both in a Class A Pharmacy and as a consultant for various Community Health Centers. Currently on the TACHC P&T Committee. Currently on the TACHC P&T Committee.

3. About this presentation Needs to be relevant for any organization, whether it is a small, medium-sized, or a large one. Needs to be relevant for any organization, whether it is a small, medium-sized, or a large one. Needs to be relevant for any organization, whether pharmacy services exist or not. Needs to be relevant for any organization, whether pharmacy services exist or not. It turns out this is a very tall order!

4. Where to start? How big is your organization? How big is your organization? Small-sized organizations (one or two sites, fewer than 10 practitioners). Small-sized organizations (one or two sites, fewer than 10 practitioners). Medium-sized organizations (two to six sites, or up to 30-40 practitioners). Medium-sized organizations (two to six sites, or up to 30-40 practitioners). Large-sized organizations (more than six sites, or up to 40 or more practitioners). Large-sized organizations (more than six sites, or up to 40 or more practitioners).

5. Where to start? Current rules now allow contracts to exist with multiple pharmacies for each site of a Covered Entity (CE). Current rules now allow contracts to exist with multiple pharmacies for each site of a Covered Entity (CE). The rules also state than CEs may have both in-house and multiple contract pharmacies at each of their locations. The rules also state than CEs may have both in-house and multiple contract pharmacies at each of their locations. As a best practice, it is recommended that you minimize the number of contract pharmacies. As a best practice, it is recommended that you minimize the number of contract pharmacies.

6. Smaller Organizations Typically the best approach is to seek out a contract pharmacy. Typically the best approach is to seek out a contract pharmacy. Independent vs. Chain: There are pro’s and con’s for using both. Most of the chain pharmacies now have turn-key 340B programs. Many of the chain pharmacies also have 24-hour pharmacy service. However, a relationship with an independent may be more beneficial for your patients, especially if the independent provides services that the chains usually do not, such as home delivery, DME, medical supplies, compounding, etc… Independent vs. Chain: There are pro’s and con’s for using both. Most of the chain pharmacies now have turn-key 340B programs. Many of the chain pharmacies also have 24-hour pharmacy service. However, a relationship with an independent may be more beneficial for your patients, especially if the independent provides services that the chains usually do not, such as home delivery, DME, medical supplies, compounding, etc… The organization should consider all of the costs and fees in the contract and structure it in a manner that does not create a financial burden on the organization. Ideally, a good contract will provide affordable medications to our patients, without creating a financial loss for the organization. The organization should consider all of the costs and fees in the contract and structure it in a manner that does not create a financial burden on the organization. Ideally, a good contract will provide affordable medications to our patients, without creating a financial loss for the organization.

7. Smaller Organizations Auditing the contract pharmacy is ultimately the most important aspect. Regardless of which type of pharmacy is utilized (independent or chain), this is the most important aspect. Auditing the contract pharmacy is ultimately the most important aspect. Regardless of which type of pharmacy is utilized (independent or chain), this is the most important aspect. From HRSA: “Covered entities are responsible for ensuring compliance of their contract pharmacy arrangement(s) with all 340B Program requirements to prevent diversion and duplicate discounts as outlined in the contract pharmacy guidelines.” From HRSA: “Covered entities are responsible for ensuring compliance of their contract pharmacy arrangement(s) with all 340B Program requirements to prevent diversion and duplicate discounts as outlined in the contract pharmacy guidelines.”

8. Smaller Organizations HRSA recommends that the contract pharmacy, with assistance from the covered entity, establish a tracking system to prevent diversion and verify patient eligibility. HRSA recommends that the contract pharmacy, with assistance from the covered entity, establish a tracking system to prevent diversion and verify patient eligibility. Both parties must agree that 340B drugs will be sold to eligible patients only. Both parties must agree that 340B drugs will be sold to eligible patients only.

9. Medium-sized Organizations A small organization that has grown into a medium-sized organization should consider the addition of in-house pharmacy services. A small organization that has grown into a medium-sized organization should consider the addition of in-house pharmacy services. There is nothing that should preclude an organization from considering having both in-house and contract pharmac(ies). There is nothing that should preclude an organization from considering having both in-house and contract pharmac(ies).

10. Large-sized Organizations Likely to have multiple in-house pharmacies at various sites. Likely to have multiple in-house pharmacies at various sites. Likely to have multiple contract pharmacies at each site. Likely to have multiple contract pharmacies at each site.

11. Contracting with a Pharmacy Step 1: Once a contractual relationship has begun between a CE and a pharmacy, the Authorizing Official at the CE must register the contract pharmacy. Step 1: Once a contractual relationship has begun between a CE and a pharmacy, the Authorizing Official at the CE must register the contract pharmacy. There are 4 date ranges when this may be done: January 1- 15; April 1-15; July 1-15; and October 1-15. Once registered, the start date goes into effect at the beginning of the next date range (registered by October 15, goes into effect January 1). There are 4 date ranges when this may be done: January 1- 15; April 1-15; July 1-15; and October 1-15. Once registered, the start date goes into effect at the beginning of the next date range (registered by October 15, goes into effect January 1). The Authorizing Official should check that the contract pharmacy registration request is certified online within 15 days from the date the online registration was completed. The Authorizing Official should check that the contract pharmacy registration request is certified online within 15 days from the date the online registration was completed.

12. Contracting with a Pharmacy Step 2: Once registration is complete and while the organizations are waiting for the program to become effective there are several things that need to happen: Step 2: Once registration is complete and while the organizations are waiting for the program to become effective there are several things that need to happen: Most important, an audit process should be developed and refined to ensure compliance with 340B guidelines. Most important, an audit process should be developed and refined to ensure compliance with 340B guidelines. Policies and Procedures should be drawn up and put in place. Policies and Procedures should be drawn up and put in place. Work should begin on a formulary. Work should begin on a formulary. The pharmacy wholesaler should be notified so that they can begin getting things ready on their end. The pharmacy wholesaler should be notified so that they can begin getting things ready on their end.

13. Contract Considerations When an organization only uses a contract pharmacy, there are no third party contracts that have to be setup. Those contracts exist between the pharmacy and the insurance. When an organization only uses a contract pharmacy, there are no third party contracts that have to be setup. Those contracts exist between the pharmacy and the insurance. 340B Pharmacy Services should never operate at a loss for an organization. 340B Pharmacy Services should never operate at a loss for an organization. The contract pharmacy is usually going to expect income in two ways - The contract pharmacy is usually going to expect income in two ways - Dispensing fee: this is always negotiable. Dispensing fee: this is always negotiable. Percentage of the “spread”. This is also negotiable. Percentage of the “spread”. This is also negotiable.

14. Definition The “spread” is the difference between the 340B acquisition price and the amount that is paid by a patient’s third party plan. The “spread” is the difference between the 340B acquisition price and the amount that is paid by a patient’s third party plan. Third party plans include private insurance, Medicare Part D, and in some states Medicaid. Third party plans include private insurance, Medicare Part D, and in some states Medicaid. Texas does not allow 340B meds to be used in filling Medicaid prescriptions. Texas does not allow 340B meds to be used in filling Medicaid prescriptions. Some other states do allow 340B meds to be used for Medicaid prescriptions - therefore check before you bill! Some other states do allow 340B meds to be used for Medicaid prescriptions - therefore check before you bill!

15. Contract Considerations If a PBA is going to be utilized, then they will also expect a processing fee as well as another percentage of the slide. If a PBA is going to be utilized, then they will also expect a processing fee as well as another percentage of the slide. Benefits of a PBA Benefits of a PBA They usually give patients of a CE an ID card that works like an insurance card. They usually give patients of a CE an ID card that works like an insurance card. They handle all of the checks and balances to ensure the prescription is eligible for 340B. They handle all of the checks and balances to ensure the prescription is eligible for 340B. They handle all of the financial matters (pricing to the patient and split of the “spread”). They handle all of the financial matters (pricing to the patient and split of the “spread”). They transparently provide information to the CE instantly (for audit purposes). They transparently provide information to the CE instantly (for audit purposes).

16. Contract Considerations All of the services provided by a PBA come at a cost! Carefully weigh the costs and fees in consideration with the services you receive. All of the services provided by a PBA come at a cost! Carefully weigh the costs and fees in consideration with the services you receive. The ideal arrangement with a PBA should keep everything as simple as possible. The ideal arrangement with a PBA should keep everything as simple as possible.

17. Back to the “Spread” Now that the “spread” has been mentioned, and we know all about it, how do we set prices billed out to third party plans? Now that the “spread” has been mentioned, and we know all about it, how do we set prices billed out to third party plans? For an in-house pharmacy, one of the best places to start in contracting with most of the various third party plans is to seek out the services of a PSAO. For an in-house pharmacy, one of the best places to start in contracting with most of the various third party plans is to seek out the services of a PSAO.

18. PSAO Definition: Pharmacy Services Administrative Organizations Definition: Pharmacy Services Administrative Organizations They review and execute almost all of your contracts. They review and execute almost all of your contracts. They negotiate rates of reimbursement. They negotiate rates of reimbursement. They usually have add-on services to automatically keep up with is paid and unpaid on your remittances. They usually have add-on services to automatically keep up with is paid and unpaid on your remittances. Examples are LeaderNet (by Cardinal) and Family Care (by QS/1). Examples are LeaderNet (by Cardinal) and Family Care (by QS/1).

19. PSAO During the enrollment process, be sure the PSAO knows that you are a 340B pharmacy. Most, if not all, ask this in the enrollment paperwork. A few third party plans have 340B specific contracts. During the enrollment process, be sure the PSAO knows that you are a 340B pharmacy. Most, if not all, ask this in the enrollment paperwork. A few third party plans have 340B specific contracts.

20. Now what? Now that we have our contracts in place with third party plans, what is the right way to bill them? Now that we have our contracts in place with third party plans, what is the right way to bill them? Before we tackle insured patients, let’s look at our uninsured patients - how will we set fees and prices for them? Before we tackle insured patients, let’s look at our uninsured patients - how will we set fees and prices for them? Option 1: Let everyone under a certain FPL% qualify for a discounted price. This is certainly the simplest route. Some organizations even let every patient qualify for reduced prices, regardless of their FPL status. Option 1: Let everyone under a certain FPL% qualify for a discounted price. This is certainly the simplest route. Some organizations even let every patient qualify for reduced prices, regardless of their FPL status. Option 2: Have a different sliding fee or rate for various groups at different levels on the FPL scales. This is a little more complicated, but very easy to manage with most of the modern pharmacy management systems. Option 2: Have a different sliding fee or rate for various groups at different levels on the FPL scales. This is a little more complicated, but very easy to manage with most of the modern pharmacy management systems.

21. Setting Fees and Prices This brings us back to the question of where to set fees for our third parties: This brings us back to the question of where to set fees for our third parties: Each contract usually has a formula that states they will pay you based upon a formula. The formula usually starts at Average Acquisition Cost (AAC) or sometimes Average Wholesale Price (AWP). Then, there is usually a percentage deducted, and finally there is a small fee added on. Each contract usually has a formula that states they will pay you based upon a formula. The formula usually starts at Average Acquisition Cost (AAC) or sometimes Average Wholesale Price (AWP). Then, there is usually a percentage deducted, and finally there is a small fee added on. Or, you bill them your Usual and Customary Price (U&C) - whichever is the least. Or, you bill them your Usual and Customary Price (U&C) - whichever is the least.

22. Setting Fees and Prices U&C Prices - do we even have these? U&C Prices - do we even have these? The answer is “NO!”. In community health, we typically set prices in every area of practice (including pharmacy) at a rate that is based upon the patient’s ability to pay. The answer is “NO!”. In community health, we typically set prices in every area of practice (including pharmacy) at a rate that is based upon the patient’s ability to pay. For third party purposes, we therefore accept the rate of reimbursement in the contract. For third party purposes, we therefore accept the rate of reimbursement in the contract.

23. Reimbursement Examples A patient needs Nexium 40mg, qty 30 (30 day supply). They have a Medicare D plan that pays (AAC - 12%) + $1.50 dispensing fee. The drug is on the formulary and the average retail price is $247. A patient needs Nexium 40mg, qty 30 (30 day supply). They have a Medicare D plan that pays (AAC - 12%) + $1.50 dispensing fee. The drug is on the formulary and the average retail price is $247. First, in our software we define that our U&C (we don’t really have this!) is something like (AWP + 15%) + $10 dispensing fee. We want our formulas to be higher than the average retail price. First, in our software we define that our U&C (we don’t really have this!) is something like (AWP + 15%) + $10 dispensing fee. We want our formulas to be higher than the average retail price. That is transmitted to the third party and they mark everything down based upon our contractual agreement. That is transmitted to the third party and they mark everything down based upon our contractual agreement.

24. Reimbursement Examples How does the contractual agreement affect our bottom line? How does the contractual agreement affect our bottom line? We billed them $252 for the cost of the drug, plus a $10 dispensing fee. We billed them $252 for the cost of the drug, plus a $10 dispensing fee. They looked at the contract and said we will pay you $238 + $1.50 dispensing fee - therefore $239.50. They looked at the contract and said we will pay you $238 + $1.50 dispensing fee - therefore $239.50.

25. Reimbursement Examples We only paid $0.30 for the bottle of Nexium that we dispensed, therefore the “spread” was $239.20! There are several examples like this, but most of the time the spread is much less. This is where formulary maintenance is important. Not only do we want to keep medications that are safe and effective, but also those whose cost benefits us (and out patients).

26. Uninsured Fee Structures Going back to our patient without insurance, how much will he pay for this same prescription of Nexium? Going back to our patient without insurance, how much will he pay for this same prescription of Nexium? First, we should always set our fees at a point that covers expenses in the pharmacy. First, we should always set our fees at a point that covers expenses in the pharmacy. Fees can vary for all of the various drugs. Fees can vary for all of the various drugs. Fees can vary for patients in different FPL% groups. Fees can vary for patients in different FPL% groups.

27. Fees based on FPL% Example 0% FPLACQ * 1.15 + $5 - Nexium = $5.35 20% FPLACQ * 1.15 + $8 - Nexium = $8.35 40% FPLACQ * 1.15 + $10 - Nexium = $10.35 60% FPLACQ * 1.15 + $13 - Nexium = $13.35 80% FPLACQ * 1.15 + $15 - Nexium = $14.35 100% FPLACQ * 1.15 + $20 - Nexium = $20.35

28. Other things to consider Use of technology to promote patient safety. Use of technology to promote patient safety. E-scripts eliminate many transcription errors. E-scripts eliminate many transcription errors. Scanning faxes and written prescriptions allows the pharmacist to review the written order at each refill. Scanning faxes and written prescriptions allows the pharmacist to review the written order at each refill. Barcode scanning for NDC checks. Barcode scanning for NDC checks. Scanning driver's license to verify correct patient. Scanning driver's license to verify correct patient.

29. In Conclusion Whether large or small, providing pharmacy services to our patients should not be an issue. Whether large or small, providing pharmacy services to our patients should not be an issue. In addition to providing a needed service to our patients, the fee structure can be setup in a manner that will generate an additional source of income for an organization - as well as saving money for our patients. In addition to providing a needed service to our patients, the fee structure can be setup in a manner that will generate an additional source of income for an organization - as well as saving money for our patients.

30. Contact Kenneth Bain kennybain@gmail.com903-702-5050