Editor's Note: This is part one of a two-part series. Read part two here.
1. Health Centers Have Mastered The Art of the Pivot
2020 meant that everyone had to dust off and polish up pivoting skills. Whether that meant learning how to work from home (by yourself or while trying to entertain and/or encourage virtual learning with children), unemployment, or how to exist in a socially distant world, the universal call to master the art of the pivot was answered by all. Especially those in health care.
par8o remained in close contact with our 340B clients throughout 2020—namely federally-funded health centers and a few hospitals—not just as their preferred solution for capturing referral scripts for 340B programs, but because we wanted to support them however we could.
We found ourselves continually impressed by the health center gumption, ingenuity, and willpower. We heard first-hand accounts of innovative ways health centers pivoted to continue to treat the nation’s most vulnerable - from starting a home medication delivery or monitoring service in order to get patients much-needed care or prescriptions, to creating ventilators out of on-hand medical materials, to launching system-wide telehealth programs in a matter of days (often in locations with inadequate internet). We saw our clients continually finding ways to care for their most at-risk patients in some of the most trying times. Having worked with large health systems prior to entering the 340B space, par8o is familiar with the timing, logistics, and change management typically required to implement any type of operational change across a healthcare organization - something health centers can do quickly and efficiently, maybe in part by size, but also due to the fortitude of its staff and an unwavering commitment to serve their patients regardless of ability to pay, which brings me to my next point.
2. General Awareness of Health Center Function, Funding, And Patient Population Is Still Low
Speaking of health centers—much of America is still unaware of what health centers are, how they operate, who they serve, and how vital every dollar is to program operations. The general consensus is that healthcare is expensive, but much less is known about how healthcare currently works for the uninsured, poor or homeless, or those with substance use disorders or mental illness.
Federally-funded health centers offer primary care, mental health care, dentistry, vision care, substance abuse programs and chronic disease care for the uninsured, underinsured, homeless, and poor. Much of the funding for these organizations is not from tax dollars—it’s from discounts pharmaceutical companies are mandated to offer to 340B program grantees if they would like the same drugs to be covered under Medicare.
Some quick facts about health centers from the National Association of Community Health Centers (NACHC’s) 2020 Chart Book:
- There are 1,362 federally-funded health center organizations across the nation.
- Health centers serve 29 million Americans annually.
- Health centers primarily serve underinsured, uninsured, Medicare recipients, those in public housing, and agricultural workers.
- 22% of health center patients are uninsured.
- 91% of health center patients are at or under the federal poverty line.
- 63% of health center patients are racial/ethnic minorities, although they comprise 40% of the general population.
- Health centers report 24% lower spending per Medicaid patient compared to non-health centers.
- Health centers account for 2.1% of Medicaid expenditures but serve 19% of all Medicaid beneficiaries.
- While health center per-patient cost was $990 in 2018, funding averaged at $735 per patient.
- 75% of health centers reported funding gaps for planned projects that would support operations and patient health, such as building space, hiring new providers, and projected patient count.
The last few figures highlight the importance of the 340B Drug Pricing Program, which provides vital funding to health centers.
2. Trying to Limit 340B Drug Pricing Discounts By Disallowing Drug Distribution at Pharmacies Hurts Patients and Health Centers
Critical parts of the 340B program were threatened in 2020 when pharmaceutical manufacturers saw room for interpretation in 340B Drug Pricing Program regulations. While the regulation makes it clear that covered entities are eligible for discounted pricing on drugs dispensed to 340B-eligible patients, it doesn’t specify how that discount should occur, or where.
In order to allow patients to access drugs where possible and/or most convenient, health centers enter contracts with local pharmacies such as Walgreens, CVS, or the pharmacy in the local supermarket or superstore to dispense 340B drugs on the health center’s behalf. By contracting with a pharmacy location, dispensed drugs can be matched with health center patients and tracked for 340B purposes. While hospitals dispense drugs primarily with in-house pharmacies—and patients typically use these pharmacies as they are convenient and on-site—health centers typically rely on partnerships with local pharmacies as they do not have in-house pharmacies. As you can imagine, processing pharmacy claims at a single site is more straightforward than at multiple locations. And while HRSA performs 150+ audits per year to ensure program adherence, a small percentage of the time duplicate discounts (e.g. Medicare and 340B Pricing) are found, and repayment must be made to manufacturers.
In an attempt to quell duplicate discounts before they happen, Merck, AstraZeneca, Eli Lilly, Sanofi, and Novartis, decided to disallow 340B pricing on drugs dispensed at contract pharmacies in the fall of 2020. Some of these drug manufacturers allowed a health center to designate a single pharmacy if an on-site pharmacy didn’t exist. However, claims processing technology by third-party administrators isn’t optimized to suddenly limit processing to a single location, making this exception nearly impossible. Some manufacturers opened a portal where 340B Program Grantees could submit claims for review to ensure they weren’t also processed as Medicaid in order to get 340B pricing. But the operational burden in the midst of a pandemic that caused massive health issues and funding shortages for health centers meant the use of several new portals in an attempt to recoup funding was not in the realm of possibility for most.
Normally, discounts are computed at dispense (or after, when it comes to referral capture claims), and the discount is either passed to the patient at the point of sale or, more commonly, used by the health center to support its critically important programs.
While pharma believed this change wouldn’t affect patients, in short: It did. This change, for example, reduced point-of-sale discounted pricing for vital drugs such as insulin at many patient-preferred pharmacies.
Daniel Duck, the owner of the Corner Drug Store in Springhill, La., described a patient who paid $17.30 a month for insulin as part of the store’s “cash savings program” for customers who qualified for 340B prices.
But the cost went up to more than $1,300 after the drug’s maker, Sanofi, “no longer allowed the drug to be purchased with 340B discounts.” Eventually, the patient figured out a way to get the insulin through Medicare for a $300 co-payment, which she said she would not be able to pay the next month.
A lawyer for Equitas Health, which serves as a contract pharmacy for a federally qualified health center in Columbus, Ohio, described a similar experience involving four patients who would ordinarily pay four cents for an insulin drug made by Sanofi.
“The retail cost of the prescription is $400,” the lawyer, Trent Stechschulte, wrote in an email. Combined with a dispensing fee of $15, he said, that is a cost that patients cannot afford and a level that harms the finances of hospitals serving the poor.
This is part one of a two-part series. Read part two here.