The Process
After selection of the pharmacy, on October 1, 2000, a conference call with the Office of Pharmacy Affairs, PharmTA Consultant, and the CEO of the clinic set the stage for program development. The timeline was tight, since the clinic requested service delivery beginning by early 2001. With the consultant’s assistance, the clinic filed an application with OPA for listing as a covered entity.
The senior pharmacist initially performed an internal decision analysis, assessing Community Drugs’ goals and capabilities to determine if 340B program participation was desirable and achievable with available resources. Members of the pharmacy staff were polled for their opinions concerning implementation and task assumption. The staff concurred with the senior pharmacist’s opinion that program implementation would take a significant amount of administrative resources, but that such resources were available. An analysis of the percentage of business the clinic generated (approximately 10% vs. an estimated 40% of the clinic’s primary site–generated prescriptions) was one major factor considered. Additionally, the clinic was interested in the comprehensive nature of Community Drugs’ clinical services, which indicated an opportunity for expansion of such services, a long-term goal of the pharmacy.
Financial forecasting took into account the probable need to increase pharmacy staff by 1.0 FTE technician to accommodate an estimated 20% increase in business with the doubling of the current volume of clinic prescriptions. One barrier was that the pharmacy had no Spanish-speaking staff, a temporary situation but also an opportunity, since the community was experiencing an influx of Mexican immigrants.
Thus administrative, labor, and supply costs were the significant costs considered when negotiating the dispensing fee (revenue). Program implementation was viewed as incremental business, since minimal third-party billing was involved. Fee-for-service Medicaid and related state programs accounted for the majority of insurance for those clinic patients with insurance coverage.
116 The Bridge to 340B Comprehensive Pharmacy Services 116 The Bridge to 340B Comprehensive Pharmacy Services
A P P E N D I C E S
The clinic/community drugs inventory “flow” model
■ Inventory is acquired under a “ship to/bill to” arrangement. Title of physical inventory does not pass to the pharmacy. Community Drugs was appointed as agent to purchase on behalf of the clinic.
■ Inventory is based on a replenishment model. Adequate records are kept and available for inspection.
■ Nearly all inventory is dispensed from pharmacy stock, title passes to the clinic at the time of dispensing, and it is replenished by the clinic through its “ship to/bill to” arrangement with its wholesaler.
■ The clinic agreement allows Community Drugs to order one-month anticipatory supply, though in practice the pharmacy usually waits until a full unit is used before reordering.
■ When the generic drug available from the wholesaler at reasonable cost is not the usual brand stocked by Community Drugs, that drug is specially ordered in anticipation of use based on past experience and place in separate inventory.
Community Drugs does try its best to match generics to avoid this situation.
Unique generics represent a very small percentage of the actual dollar volume of 340b drugs, and separate inventory is likewise small. Such inventory is regularly audited and adjusted at the time of each wholesaler order. Returns are handled directly by the pharmacy with the 340b wholesaler.
■ 340b drugs are differentiated in the Community Drugs proprietary Pharmacy Management System by the addition of an “8” prefix. This tag allows the system to generate drug usage and patient usage reports. Within each such drug, the inventory system control has been activated with the wholesale order number entry for order generation. Additionally, the drug has been given a clinic drug category designation that allows third-party liability (TPL) reconciliation and audit by payer, thus providing a tool to limit the possibility of billing a Medicaid-related program, which is prohibited under Section 340b.
■ Although guidelines suggest quarterly reporting, Community Drugs submits monthly reports to the clinic. This provides the opportunity for the pharmacy to do a monthly internal audit; thus the pharmacist manager keeps on top of an otherwise large, accumulating data file.
■ Guidelines for discontinued medication or disposal of inventory in the event of the termination of the contract pharmacy agreement are addressed in the contract.
Baseline Service Delivery
The clinic currently has contract pharmacy agreements with Community Drugs to supply 340B medication to eligible patients who are clients at each of its sites.
In April 2002, an addendum to the contract provided access to 340B drugs to eligible patients who are clients at the clinic’s site in the neighbor community.
Access, however, is less than universal. The neighbor community site is approximately 12 miles away from Community Drugs. Many, if not most, clients of the site in the
neighbor community are challenged to obtain timely transportation services. No interested pharmacy has been identified in the neighbor community.
There are two additional sites slated for contracted pharmacy services in the next fiscal year. They too have no local access to 340B pharmaceutical services. One of these sites is located in a rural community and currently has no physician or pharmacy to serve its population. The intention is to add remote pharmacy capability to improve pharmacy service access to patients of each site as it becomes operational.
Impact on Pharmacy’s Financial Picture
12 months prior to 340B Months 24–36 after 340B
340B Rxs 0 10,635
Pre-340B Indigent Rxs Under a Subsidized Voucher Program
820 0
Total Clinic-Generated Rxs 4,442 11,883
Total Rxs 42,497 59,213
Non-340B (Third Party, Non-Form)
3,622 (82% CHC) 1,248 (11%)
Growth Over Period – 39% (13% avg./yr)
Clinic as % of Growth – 45%
% Clinic of Total 10% 20%
Gross Sales182 2,550,000 3,700,000
Cost of Goods (COG)182 2,100,000 2,900,000
Gross Margin182 470,000 800,000
Expenses182 380,000 580,000
Net Corporate Revenue182, 183 90,000 (4%) 220,000 (6%)
118 The Bridge to 340B Comprehensive Pharmacy Services 118 The Bridge to 340B Comprehensive Pharmacy Services
A P P E N D I C E S
Efficient Pharmacy Management
Overall administration of the pharmacy program is the clinic’s responsibility. This includes:
■ oversight of the contracted pharmacy
■ audit
■ order approval
■ report processing
■ program reporting
■ grant reporting
■ quality improvement
A sliding scale co-payment program, common to all sites to simplify administration, has been instituted.
The contract pharmacy agreement has been modified to (1) include all entities and sites, (2) to mandate separate patient prescription activity reporting capability for each site, and (3) to mandate separate 340B drug usage per entity. All 340B ordering, inventory system (replenishment), trigger points, reporting frequency, and format are uniform across sites.
A pharmacy & therapeutics (P&T) committee assumes responsibilities as an advisory committee on policy and procedure issues relating to collaborative drug therapy treatment plan and disease management protocol development. The medical director, a standing member of the P&T committee, is responsible for promoting multidisciplinary cooperation.
Keys to Success
■ Accommodate an accelerated learning curve concerning the 340b program.
■ Access information from OPA’s website; download, study, and review.
■ Enlist key pharmacy personnel in the process; additional input and analysis is critical.
■ Identify key employees within the covered entity and pursue relationship-building.
■ Access the PSSC PharmTA program; request access to a consultant.
■ Find a good attorney to assist in negotiating the contract; make sure the attorney becomes knowledgeable about 340b statute and regulation.
■ Become knowledgeable about the P&T committee and formulary-writing processes.
■ Establish solid lines of communication between the health center and the pharmacy.