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OIG Report Finds Contract Pharmacy Arrangements “Create Complications” in the Administration of the 340B Program

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On Feb. 4, the Office of the Inspector General (OIG) released a report describing select covered entities' contract pharmacy arrangements and their oversight to prevent diversion of 340B purchased drugs to ineligible patients, and to prevent duplicate discounts through Medicaid.

The OIG found that:

Contract pharmacy arrangements create complications in preventing diversion, and covered entities are mitigating this issue in different ways:

Contract pharmacy arrangements also create complications in preventing duplicate Medicaid-based discounts; however, most covered entities have processes in place to avoid duplicate discounts.

Some covered entities do not offer the discounted 340B price to uninsured patients at their contract pharmacies.

    There is no standardized method across covered entities to identify 340B-eligible prescriptions.
    Entities may identify 340B-eligible prescriptions when the prescription is written.
    Entities may include in their contract pharmacy arrangements that the administrator identify 340B-eligible prescriptions after the prescription is written.
    The vast majority of covered entities analyzed reported that they do not dispense 340B-purchased drugs to Medicaid beneficiaries.
    Some covered entities said it is difficult to identify prescriptions for Medicaid MCO beneficiaries.
    Eight of 30 covered entities reported that their contract pharmacies do dispense 340B-purchased drugs to Medicaid beneficiaries, but only five alert their state Medicaid agency.

Most covered entities do not perform all HRSA-recommended oversight.

The rapid expansion of the 340B Program has been a major stakeholder issue, particularly in the pharmaceutical industry, as their 340B discount exposure increased significantly in recent years. Stakeholders are troubled by the rapid expansion of contract pharmacy arrangements, as the number of contract pharmacies grew by 1,245 percent between March 2010 and April 2013. The OIG’s findings support stakeholders’ arguments that contract pharmacy arrangements must be scaled back and more closely monitored.

HRSA received $6M for 340B program oversight in the FY15 HHS Budget. Historically, limited funding contributed to a lack in proper monitoring of the Program. This funding will allow HRSA to more closely monitor covered entities and their contract pharmacy arrangements. The comprehensive 340B Rule, scheduled for June, will likely discuss contract pharmacy arrangements.

To read the OIG’s full report, click here.

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