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Medical expenses,Medicine cost

Reduce revenue loss by adjusting to changes with the 340B program

by Jesse Mendelsohn , VP, Model N December 2, 2020

In 1992, the Public Health Service Act (PHSA) 340B Drug Pricing Program was introduced to reduce the cost of outpatient prescription drugs, clinic-administered drugs, and over-the-counter drugs that are accompanied by a prescription for vulnerable patient populations.

By participating in the 340B program, covered entities (CEs) typically save 25-50% on these drugs with some discounts as high as 99.9%. With these savings providers are able to reduce prices for patients, expand services, and improve patient care.

Over the last three decades, the program has seen significant changes, including an expanded definition of CEs and stringent financial and legal implications for price errors. As a result, pharmaceutical manufacturers that participate in the 340B program often struggle with adjusting their processes to improve compliance and protect their revenue.

Manufacturers may not charge more than the 340B ceiling price to a CE, and they are discouraged from offering their drugs at or below the 340B ceiling price to non-CEs. Every year, thousands of new CEs enter or leave the 340B program, making it critical that manufacturers have real-time visibility into providers’ program eligibility.

Adding additional complexity, CEs may choose to contract with pharmacies to dispense 340B drugs to patients, as this helps them reduce costs associated with having an in-house pharmacy and broaden access to patients through additional locations and extended hours. Because CEs can leverage multiple contract pharmacies (CPs) to serve their patients, reconciling who is using what product for what facility under what price creates a process nightmare.

Now manufacturers must manage many-to-many relationships and efficiently track who is buying what for whom and when. And unfortunately, the potential for fraud and revenue leakage is high.

Reducing this risk requires that pharmaceutical manufacturers better manage their 340B programs. Some of the steps they can take include:

  • Establishing an efficient rebating process to not only calculate accurate refunds but also effectively process those refunds.
  • Creating a direct line of sight, complete with real-time data, into chargeback claims so they can avoid significant revenue loss resulting from duplicate discounts.
  • Automating commercial and government pricing for accurate calculation of the 340B prices.
  • Addressing the skyrocketing volume of chargeback transactions by streamlining chargeback submission and reconciliation.
  • Gaining complete transparency into contracting, pricing, rebating, and chargebacks to create a traceable, reproducible audit trail.

In the white paper, “Best practices for complying with 340B,” Model N identifies operational best practices and practical approaches for streamlining 340B program management. Download the white paper to learn how you can improve processes to reduce revenue leakage and ensure compliance with 340B.

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