HomeMy WebLinkAboutMemorandum of Understanding w/ Mt. Sinai Medical Center of Florida, Inc.
MEMORANDUM OF UNDERSTANDING
BETWEEN
CITY OF MIAMI BEACH
AND
MOUNT SINAI MEDICAL CENTER OF FLORIDA, INC.
THIS MEMORANDUM OF UNDERSTANDING is made this ~ It day of
j)i<CMlJtfl, 2006 by and between the undersigned representatives of the City of Miami
Beach, Florida ("COMB"), located at 1700 Convention Center Drive, Miami Beach,
Florida 33139, and Mount Sinai Medical Center of Florida, Inc. ("HOSPITAL"), a non-
profit corporation organized and existing under the laws of the State of Florida, located at
4300 Alton Road, Miami Beach, Florida 33140.
WHEREAS, HOSPITAL is a Florida not-for-profit HOSPITAL that provides a
disproportionate share of healthcare services to the Medicare population in addition to
supporting many programs that benefit the indigent, uninsured or underinsured
population in the State of Florida;
WHEREAS, HOSPITAL desires to partIcIpate in the drug discount program
established under Section 340B of the Public Health Services Act (the "340B Program");
WHEREAS, in order to participate in the 340B Program, HOSPITAL must enter
into an agreement with a unit of the state or local government pursuant to which
HOSPITAL commits to provide health care services to low income individuals who are
not entitled to Medicare or Medicaid benefits at no reimbursement or considerably less
than full reimbursement from these patients;
WHEREAS, HOSPITAL desires to make such a formal commitment to COMB,
and
WHEREAS, COMB agrees to accept such commitments on behalf of the citizens
of COMB.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained therein and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, it is mutually agreed and covenanted,
under seal, by and between the parties to this Agreement, as follows:
1
1. Commitment of HOSPITAL to Provide Indigent Care.
During the term of this MOU, HOSPITAL agrees to continue its historic
commitment to the provision of health care to indigent, uninsured and
underinsured residents of COMB. In 2005, this commitment totaled more than
$7.9 Million in foregone charges. Pursuant to this commitment, it is the intention
of HOSPITAL that indigent uninsured care provided during the term of this MOU
will range generally between $5.0 Million and $7.9 Million annually. In any
event, HOSPITAL will assume that all patients will receive necessary care, as
required by law, regardless of ability to pay.
2. Acceptance and Acknowledgements of COMB
(a) COMB accepts the commitment of HOSPITAL set forth above;
(b) COMB hereby acknowledges that the healthcare services provided by
HOSPITAL hereunder are in the public interest and are being provided to
individuals who are not entitled to benefits under Title XVIII or eligible
for assistance under any State plan pursuant to Title XIX of the Social
Security Act; and
(c) COMB acknowledges that HOSPITAL is providing these services at no
reimbursement or considerably less than full reimbursement from the
patients.
3. Representations of HOSPITAL
HOSPITAL represents that as of the date hereof:
(a) HOSPITAL constitutes a corporation duly organized and validly existing
in good standing under the laws of the State of Florida with the corporate
power and authority to enter into and perform its obligations under this
MOU; and
(b) HOSPITAL is a tax-exempt corporation of under Section 501 (c)(3) of the
Internal Revenue Code of the United States, as amended and under
applicable laws of the State of Florida.
4. Term and Termination. The term of this MOU shall commence on the date first
above written and shall continue until terminated by either party upon not less
than sixty (60) days prior written notice to the other.
5. Notice. All notices required or permitted to be given under this MOU shall be
deemed given when delivered by hand or sent by registered or certified mail,
return receipt requested, addressed as follows:
2
Sent to:
City of Miami Beach
Attention: Jorge M. Gonzalez
City Manager
Office of the City Manager
1700 Convention Center Drive
Miami Beach, Florida 33139
Sent to:
Mount Sinai Medical Center of Florida, Inc.
Attention: Alexander A. Mendez
Senior Vice President & Chief Financial Officer
4300 Alton Road
Miami Beach, Florida 33140
With a copy to:
Arnold Jaffee
General Counsel
Mount Sinai Medical Center
4300 Alton Road
Miami Beach, Florida 33140
6. Governing Law. This MOD shall be governed by and construed in accordance
with the laws of the State of Florida (excepting any conflict of laws provisions
which would serve to defeat application of Florida substantive law).
3
IN WITNESS WHEREOF, HOSPITAL and COMB have executed this
Agreement as of the day and year first written above by their duly authorized
representatives.
Mount Sinai Medical Center of Florida, Inc.
Name: Steven D. So enreich
Title: President & EO
Witnesses:
City of Miami Beach
~;~eM~
. Ie: lty Manager
Attest:
~ttClA-cL-
4
APPROVED AS TO
FORM & LANGUAGE
& FOR CUTION
"~
DRAFT VERSION
ublic Health Service (PHS)
3408 Drug Pricing Program
e Richardson, Pharm.D.
This document is adapted from Booklet 2 of the nine booklet ACU Resource Series on Comprehensive Pharmacy Services for the Medically
Underserved Practice, developed in 2001-2002 by the Association ofClilllcians for the Underserved. Support for this series came lrom a grant
with the Health Resources and Services Administration. The entire series is available through the HRSA Pharmacy Services Support Center
(PSSC) by calling 1-800-628-6297 or by requesting the series through the PSSC website at http://pssc.aphanetorg.
For more information on ACU, please visit www.clinicians.org or call 703-442-5318 in Northern Virginia.
DRAFT VERSION
I. Introduction
This document provides basic information about the Public Health Service Section 340B
Drug Pricing Program and the Health Resources and Services Administration (HRSA)
Prime Vendor Program. Intentionally written in basic language, this booklet presents
introductory information about the programs and their purposes, background, benefits,
eligibility requirements, and prohibitions. Also included are contact information, helpful
tips, a glossary and a section describing how to get started. The Section 340B Drug
Pricing Program and the HRSA Prime Vendor program have been beneficial for health
care centers, hospitals, and patients across the nation in providing much-needed health
care and pharmacy services. The intent of this booklet is to simplify the understanding
and implementation of the basic program components.
II. Program Background
In 1992, Section 340B of the Public Health Service Act was enacted. Section 340B
requires drug manufacturers to provide outpatient drugs to eligible health care centers,
clinics, and hospitals (termed "covered entities") at a reduced price. The 340B price is a
"ceiling price", meaning it is the highest price the covered entity would have to pay for
select outpatient and over-the-counter drugs and minimum savings the manufacturer
must provide. The 340B price is at least as low as the price that state Medicaid
agencies currently pay. After notifying the Pharmacy Affairs Branch (PAB) of their intent
to participate in the Section 340B program, covered entities can begin taking advantage
of these low prices at the start of the next quarter. Each covered entity then determines
how it will order and receive the low-priced drugs. They can do so by either contacting
drug manufacturers directly or working with a wholesaler. Most entities find that working
with a wholesaler not only simplifies the process, but also saves time and allows
personnel to work on other projects.
To further simplify the process for obtaining the 340B drugs, the original legislation
contained a special requirement that mandated the establishment of a "prime vendor." A
prime vendor is a single "preferred" wholesaler that specializes in serving covered
entities in the 340B program. Benefits of the prime vendor program include:
· Familiarity with subtleties of the Section 340B program
· Value-added services
· Sub-340B prices, due to negotiations with drug manufacturers using the collective
purchasing volume of covered entities.
DRAFT VERSION
As a result, the Prime Vendor is able to provide high quality services and low drug
prices for the benefit of the covered entities and their patients.
AmerisourceBergen currently has the exclusive agreement with HRSA to serve as the
official Prime Vendor for covered entities participating in the Section 340B program.
HealthCare Purchasing Partners International (HPPI) is the sub-contractor to the 340B
Prime Vendor and is responsible for the negotiation of pharmaceutical pricing below the
3408 price as well improving access to affordable medications by establishing a
distribution network for pharmaceuticals to covered entities.
III. Program Benefits
Participating entities have reported savings that range between 25-50% for covered
outpatient drugs as a result of the low 340B prices. Using the prime vendor to receive
prices even lower than the 340B ceiling price will further increase these savings.
Covered entities currently using these programs indicate that they have improved
healthcare delivery in their communities by using the savings to:
· Reduce the price of medications for patients
· Expand the number of drugs on formularies
· Increase the number of indigent patients served
· Expand other services offered to patients by the entity
In addition to the savings and dramatic improvement in health care delivery, the value-
added services* provided by the prime vendor can help the pharmacy services of the
covered entities run more smoothly. These value added services include, but are not
limited to:
· Computer support
· Pharmacy management consultation and drug information
· Computerized indigent patient drug assistance programs
*offered on a fee-far-service basis
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DRAFT VERSION
IV. Eligibility
The following is a list of eligible covered entities. To determine the eligibility of specific
entities, please contact the HRSA Pharmacy Services Support Center at 1-800-628-
6291 or via email at pssc.aphanet.org.
These are the only programs authorized by Section 340B of the PHSA to participate in
the outpatient discount drug pricing program. All others are excluded.
NOTE: PHSA refers to the Public Health Service Act
SSA refers to the Social Security Act
(A) Federally-qualified health center (as defined in section 1905(1)(2)(B) of the SSA)
This category includes:
- FQHC Look-alikes
- Consolidated Health Centers (Sec.330(e) PHSA)
- Migrant Health Centers (Sec.330 (g) PHSA)
- Health Care for the Homeless (Sec.330(h) PHSA)
- Healthy Schools/Healthy Communities
- Health Centers for Residents of Public Housing
(Sec. 330(i) PHSA)
- Office of Tribal Programs or urban Indian organizations
(P.L. 93-638 and 25 USCS 91651)
(B) A family planning project receiving a grant or contract under Sec. 1001 PHSA (42
USCS93001 )
(C) An entity receiving a grant under subpart II of part C of Title XXVI of the Ryan White
Care Act (RWCA) (relating to categorical grants for outpatient early intervention
services for HIV disease) - Early HIV Intervention Services Categorical Grants (Title III
of the RWCA)
(D) A State-operated AIDS Drug Assistance Program (ADAP) receiving financial
assistance under the RWCA
(E) A black lung clinic receiving funds under Section 427(a) of the Black Lung Benefits
Act (30 USCS9901)
(F) A comprehensive hemophilia diagnostic treatment center receiving a grant under
section 501 (a)(2) of the SSA
(G) A Native Hawaiian Health Center receiving funds under the Native Hawaiian Health
Care Act of 1988 (42 USCS911701)
3
DRAFT VERSION
(H) An urban Indian organization receiving funds under title V of the Indian Health Care
Improvement Act (25 USCSS1601)
(I) Any entity receiving assistance under title XXVI of the SSA (other than a State or unit
of local government or an entity described in subparagraph (D)), but only if the entity is
certified by the Secretary
(J) An entity receiving funds under section 318 (42 USCS S247c) (relating to treatment
of sexually transmitted diseases) or section 3170)(2) (42 USCSS247bG)(2)) (relating to
treatment of tuberculosis) through a State or unit of local government, but only if the
entity is certified by the Secretary
(K) A disproportionate share hospital (as defined in section 1886(d)(1 )(8)) of the SSA -
(i) is owned or operated by a unit of State or local government, is a public or private
non-profit corporation which is formally granted governmental powers by a unit of State
or local government, or is a private non-profit hospital which has a contract with a State
or local government to provide health care services to low income individuals who are
not entitled to benefits under title XVIII of the Social Security Act or eligible for
assistance under the State plan under this title;
(ii) for the most recent cost reporting period that ended before the calendar quarter
involved had a disproportionate share adjustment percentage (as determined under
section 1886(d)(5)(F) of the Social Security Act) greater than 11.75 percent or was
described in section 1886(d)(5)(F)(i)(II) of such Act; and
(iii) does not obtain covered outpatient drugs through a group purchasing organization
or other group purchasing arrangement.
4
DRAFT VERSION
V. Requirements and Prohibitions
This section briefly explains specific issues that have been areas of confusion involving
the Section 340B Drug Pricing Program. The requirement or prohibition statement is
included in bold, followed by a short explanation. These issues are meant to ensure
that only specific patients and facilities have access to drugs purchased at the 340B
price, and that each drug is not subject to multiple discounts and rebates.
Prohibition on "Double-dipping"
Covered entities shall not request 3408 prices for the same drug for which
Medicaid will request a rebate. Think of this from the manufacturer's perspective: it
would not be practical for the manufacturer to give the covered entity a discount on the
price of the drug (a 340B discount) and also give Medicaid a discount (in the form of a
rebate) for the same drug. In other words, the covered entity can receive a discount
through the 340B program or Medicaid can receive a discount via rebate, but both may
not occur for the same drug. In order to help drug manufacturers and Medicaid
programs ensure there is no overlap on drug discounts and rebates, the Pharmacy
Affairs Branch will request the Medicaid billing status of the covered entities.
Prohibition on resale of Drugs
With any covered outpatient drug purchased using 3408 prices, a covered entity
shall not resell or transfer the drug to a person who is not a patient of the entity.
The Pharmacy Affairs Branch has developed a definition of a patient to clarify this issue.
In general, a patient has to be under the entity's responsibility for care. Therefore, it
would not be permissible to use drugs purchased at the 340B price in dispensing a
prescription written by a prescriber who is not affiliated with the covered entity.
Official definition of a patient:
An individual is considered a patient of a covered entity (with the exception of
state operated or funded AIDS drug assistance programs) only if:
(1) The covered entity has established a relationship with the individual, which
includes maintaining records of the individual's health care;
(2) The individual receives health care services from a health care
professional who is either employed by the covered entity or provides health care
under contractual or other arrangements (e.g., referral for consultation) such that
responsibility for the individual's care remains with the covered entity;
5
DRAFT VERSION
(3) The individual receives a health care service or range of services for
which grant funding or federally-qualified health center look-alike status has been
provided. (Disproportionate share hospitals are exempt from this requirement.)
An individual will not be considered a patient of the entity for purposes of the
3408 program if the only health care service received by the individual from the
covered entity is the dispensing of a drug or drugs for subsequent self-
administration or administration in the home setting. An individual registered in a
state operated or funded AIDS drug assistance program receiving financial
assistance under Title XXVI of the PHS Act will be considered a patient of the
covered entity for purposes of this definition if so registered as eligible by the
state program.
Audit ReQuirement
Covered entities must maintain accurate records documenting that the entities
are not double dipping or reselling, or transferring drugs to persons who are not
patients of the entity. An entity must present records in the case of an audit by the
manufacturer or the federal government. An entity that fails to comply with these
requirements will be liable, after notice and hearing, to the manufacturer in an amount
equal to the reduction in price of the drug provided in the Section 3408 agreement.
Prime Vendor
The PHS 3408 Drug Pricing Program mandates the establishment of a prime
vendor. As previously mentioned, the prime vendor serves the covered entities by
streamlining the ordering and delivery of 3408 drugs, negotiating with drug
manufacturers for prices below the 3408 prices, and providing value-added services to
further simplify participation in the 3408 program. To learn more about the benefits of
the prime vendor, visit the HPPI website at http://www.hppi340bpv.com or visit the
PSSC web site at http://pssc.aphanet.org.
6
DRAFT VERSION
VI. Getting Started
Step 1 .
Determine if the entity is eligible
to participate in the 340B
program by contacting the PSSC
at 1-:800-628-6297 or by visiting
http://pssc .aphanet.org.
Step 2.
Notify the Pharmacy Affairs Branch
of the intent to participate and
provide the Medicaid billing status,
by submitting acknowledgement of
the entity participation form.
Step 3.
Notify the prime vendor or wholesaler of
entity's eligibility for the
PHS Section 340B Drug Pricing Program.
Step 4.
Decide how to use the savings
from the Section 340B program to
further provide excellent health
care and pharmacy services to
your community.
7
DRAFT VERSION
VII. Acknowledgement of Entity Participation Form
The following is a reproduction of the actual form used to notify the Pharmacy Affairs
Branch of entity participation in the Section 340B Drug Pricing Program. To request
forms, please contact the PSSC at 1-800-628-6297. Links to the forms in PDF format
can also be found at http://pssc.aphanet.org.
8
DRAFT VERSION
VIII. Helpful Hints
Section 3408 Drua Pricina Proaram
1. The Section 340B Drug Pricing Program has been referred to by many names.
All of the following terms refer to the same program: PHS price, 602 discount, PHS
discount, DSH price, Section 340B drug, Section 602 price, 340B program, 340B price,
and 340B drugs.
2. Because word of month is not always reliable, it is best to trust information
provided in the form of written material from credible sources who are closely involved
with the 340B program. Representatives of the Pharmacy Affairs Branch and the PSSC
are readily available to answer questions and provide timely, accurate information.
3. In order to maximize the benefits of the Section 340B program and avoid any
complications, pay close attention to the established requirements and guidelines. If any
confusion about the Section 340B program exists, please contact the PSSC for
cia rification.
4. This program has been shown to save money and improve health care delivery
in communities nationwide and is well worth the initial time and effort to establish.
5. Do not get discouraged! After the initial steps in determining eligibility and
participation in the Section 340B program, it becomes relatively easy to maintain,
especially with the PSSC available to provide assistance.
HRSA Prime Vendor Proaram
1. Wholesale drug companies are highly competitive and it may be confusing to
determine which wholesaler offers the best overall package. The prime vendor has
negotiated over 2700 prices that are lower than the 340B-ceiling price.
2. The greater the number of covered entities that take advantage of the prime
vendor program, the greater the collective benefit to other entities nationwide.
3. The prime vendor is working closely with the covered entities across the country
and understands the unique issues these entities face. They will continue to provide
covered entities with valuable, cost-effective services.
9
DRAFT VERSION
IX. Glossary
Average Manufacturer's Price (AMP) a price resulting from a complex formula that
defines the average price (calculated quarterly) charged by the manufacturer to
wholesalers for its drug.
Best Price Medicaid (BPM) a price resulting from a complex formula that determines
the best price charged by manufacturers to Medicaid.
Ceiling Price a maximum price that cannot be exceeded. The 340B price is a ceiling
price, and lower prices may be negotiated.
Covered Drug an FDA approved prescription drug, an over the counter (OTC) drug that
is written on a prescription, a biological product that can only be dispensed by a
prescription (other than a vaccine) and FDA approved insulin.
Covered Entity an entity that is eligible to participate in the Section 340B Drug Pricing
Program.
Covered Patient a patient that is eligible to receive drugs through the Section 340B
Drug Pricing Program.
Discount with respect to the Section 340B Drug Pricing Program, the discount for
brand name drugs is the lower of 15.1 % of AMP or BPM. The discount for generic and
prescribed OTe products is 11 % of AMP.
Medicaid Rebate an amount of money that Medicaid receives from manufacturers after
the sale of certain drugs.
Prime Vendor the single preferred wholesaler that provides order, delivery, negotiation,
and other pharmacy services to covered entities.
Wholesaler a company that serves as a bridge between the drug manufacturer and
covered entity.
10
DRAFT VERSION
X. Resources
Handbook of PHS Drug Pricing Program Policy and Guidance and Technical Assistance
Information. Developed by Freda Mitchem for the National Association of Community Health
Centers, October, 1997.
Pharmacy Affairs Branch website http://www hrsa.gov/opa
HRSA Pharmacy Services Support Center website http://pssc.aphanet.org
Federal Registers:
Federal Register Doc. 93-10816 Filed 5-6-93; 8:45 am. Health Resources arid Services
Administration Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992
Limitation on Prices of Drugs Purchased by Covered Entities
Federal Register Doc. 93-14767 Filed 6-22-93; 8:45 am. Health Resources and Services
Administration. Final Notice Regarding Section 607 of the Veterans Health Care Act of 1992
Duplicate Discounts and Rebates on Drug Purchases
Federal Register. May 13, 1994 (Volume 59, Number 92) [Notices] Health Resources and
Services Administration Final Notice Regarding Section 602 of the Veterans Health Care Act of
1992
Entity Guidelines:
Federal Register October 24, 1996 (Volume 61 Number 207) [Notices] Health Resources and
Services Administration Notice Regarding Section 602 of the Veterans Health Care Act of 1992
Patient and Entity Eligibility
Federal Register December 12, 1996 (Volume 61 Number 240) [Notices] Health Resources and
Services Administration Manufacturer Audit Guidelines and Dispute Resolution Process
Federal Register: March 15, 2000 (Volume 65, Number 51) [Notices] Health Resources arid
Services Administration Notice Regarding the Section 340BDrug Pricing Program--Program
Guidance Clarification.
11
DRAFT VERSION
XI. Booklets Available in the Resource Series
1 Comprehensive Pharmacy Services
2 The Public Health Service (PHS) 340B Drug Pricing Program
3. Decision Analysis To Pharmacy or Not to Pharmacy
4. Pharmaceutical Assistance Programs
5. Pharmacy Management: in the Community Health Center
6. Clinical Pharmacy Services
7. The Role of the Pharmacist
8. Contracted Pharmacy Services
9. Following Federal Guidelines when Conducting Health Outcomes Evaluations
This document was adapted by the PSSC from Booklet 2 of the nine booklet ACU
Resource Series on Comprehensive Pharmacy Services for the Medically Underserved
Practice, developed in 2001-2002 by the Association of Clinicians for the Underserved.
Support for this series came from a grant with the Health Resources and Services
Administration. For more information on ACU, please visit www.clinicians.org or call
703-442-5318 in Northern Virginia.
The entire series is available through the HRSA Pharmacy Services Support Center
(PSSC) by calling 1-800-628-6297 or requesting them through the PSSC website at
http://pssc.a pha net. orQ.
XII. About PSSC
The HRSA Pharmacy Services Support Center (PSSC) is a unique collaboration
between the HRSA Pharmacy Affairs Branch and the American Pharmacists
Association (APhA) to bring comprehensive pharmacy services to patients who receive
care at 340B-eligible health care delivery sites, such as community health centers and
other HRSA grantees, disproportionate share hospitals, and others. By offering a full
range of information and technical assistance, PSSC helps entities maximize the value
of the 340B Program and create new ways to promote access to affordable drugs and
bring comprehensive pharmacy services to traditionally underserved populations.
PSSC Vision:
A society where all patients have access to affordable, comprehensive pharmacy
services.
PSSC Mission:
PSSC provides information, expert assistance, and policy analysis to help eligible health
care entities optimize use of the 340B program to provide affordable comprehensive
pharmacy services that improve medication use and advance patient care.
12
DRAFT VERSION
XIII. About the Pharmacy Affairs Branch
The Pharmacy Affairs Branch (PAB), a component of the Health Resources and
Services Administration's Bureau of Primary Health Care, has three primary functions:
. Administration of the 340B Drug Pricing Program, through which certain federally
funded grantees and other safety net health care providers may purchase
prescription medication at significantly reduced prices.
. Development of innovative pharmacy services models and technical assistance.
. Service as a federal resource about pharmacy.
In all of its activities, PAB emphasizes the importance of comprehensive pharmacy
services being an integral part of primary health care. Comprehensive pharmacy
services include patient access to affordable pharmaceuticals, application of "best
practices" and efficient pharmacy management and the application of systems that
improve patient outcomes through safe and effective medication use.
XIV. About the Author
Katheryne Richardson is a pharmacist consultant presently working to develop
educational material regarding various activities of the Pharmacy Affairs Branch. She
received her PharmD from the University of Kentucky College of Pharmacy and has
worked for the Bureau of Prisons and the Department of Defense. She is also currently
involved with the Pharmacy Affairs Branch Clinical Pharmacy Demonstration Projects, a
grant opportunity for networks of PHS qualified sites intended to promote innovative
pharmacy practice. She lives and works in Charleston, SC.
13
.>4U.t1 vvervlew
rage 1 or J
An Overview of The Section 340B Drug Discount Program
Background:
To understand the genesis of the 340B program, one must begin in 1990 when Congress created
the Medicaid rebate program to lower the cost of pharmaceuticals reimbursed by state Medicaid
agencies. The Medicaid rebate program requires drug companies to enter into a rebate agreement
with the Secretary of the Department of Health and Human Services (HHS) as a precondition for
coverage of their drugs by Medicaid. The rebate agreement specifies that, for each brand name
outpatient drug covered under the Medicaid plan, the manufacturer of the drug must pay a rebate to
Medicaid based on the manufacturer's "best price" for that drug. As a result of the Medicaid
rebate law, many pharmaceutical companies had a disincentive to continue giving deep discounts
on drugs because they would have to pay larger rebates to Medicaid if they gave deeper discounts
in the non-Medicaid market (establishing even better "best prices"). When manufacturers began'
raising their prices, the Medicaid savings achieved through the rebate program were offset by
increased government spending on drugs purchased by other federal- and state-supported
providers. To correct this situation, Congress, in November 1992, enacted Section 340B of the
Public Health Service Act (created under Section 602 of the Veterans Health Care Act of 1992),
which requires pharmaceutical manufacturers participating in the Medicaid program to enter into a
second agreement-called a pharmaceutical pricing agreement (PP A)-with the Secretary under
which the manufacturer agrees to provide front-end discounts on covered outpatient drugs
purchased by specified government-supported facilities, called "covered entities," that serve the
nation's most vulnerable patient populations.
Who is eligible to participate in the 340B program?
The definition of "covered entities" includes certain hospitals (including large urban hospitals,
small urban hospitals, and certain rural hospitals other than critical access hospitals) that are owned
or operated by--or under contract with-state or local government and meet other criteria related
to the number of Medicaid patients they serve. The other categories of covered entities are
specified federal grantees, including federally qualified health centers (FQHCs), FQHC "look-
alikes", state-operated AIDS drug assistance programs, the Ryan White CARE Act Title I, Title II,
and Title III programs, tuberculosis, black lung, family planning and sexually transmitted disease
clinics, hemophilia treatment centers, public housing primary care clinics, homeless clinics, Urban
Indian clinics, and Native Hawaiian health centers. In addition, after passage of a recent law that
grants covered entity status to certain children's hospitals that are exempt from the Medicare
prospective payment system, the government is evaluating enrollment procedures for such
hospitals. Guidelines regarding children's hospitals' enrollment in the program are anticipated
within the year. According to the government, approximately 12,000 participating covered entity
sites and 700 pharmaceutical companies participate in the program.
Who administers the 340B program?
The Office of Pharmacy Affairs (OPA), which is located within the Health Resources and Services
Administration (HRSA) within HHS, administers the program. HRSA and OP A are located in
http://www . phpcrx. org/ drugdi sovr. html
11/28/2006
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Rockville, Maryland, and are responsible for interpreting and implementing Section 340B. You
may contact OPA through its government contractor, the Pharmacy Services Support Center
(PSSC), at 1-800-628-6297 or (202) 429-7518. The office e-mail address is opdsta ff(cl'hrsa.gov.
The OPA Web site is located at http' /wwvv.hrsa.gov/opa.
What is the Pharmacy Services Support Center (PSSC)?
PSSC is a federal contractor that HRSA funds to provide guidance and technical assistance to 340B
covered entities and to enhance the staffing resources available to OP A. PSSC is a non-profit
organization based at the American Pharmacists Association (APhA). PSSC's Web site is located
at http://pssc.aphanct.org and they can be reached at 1-800-628-6297 or bye-mail at
pssc((IJaphanct.org.
How does the Program operate?
Facilities that believe they meet the criteria of a "covered entity" can apply to participate in the
340B program by submitting their applications at least one month in advance of the beginning of
the next quarter, which is when OP A updates the list of covered entities on its Web site. Facilities
are enrolled in the program and eligible for 340B discounts as soon as their name and other
requested information are posted on the OPA Web site and their listed start dates have passed.
Once admitted into the program, covered entities are entitled to receive 340B discounts on all
covered outpatient drugs, regardless of the patient's payer status and whether the drug is intended
for self-administration or administration by a clinician. The 340B discount is the average
manufacturer price (AMP) reduced by a minimum rebate percentage of 15.1 percent for brand
name prescription drugs and 11 percent for generic and over-the-counter drugs. Manufacturers and
wholesalers must offer additional discounts on brand name drugs if the manufacturer's best price
for a drug is lower than AMP minus 15.1 percent for that drug and/or the price of the drug has
increased faster than the rate ofinf1ation. (This is also true for innovator, multi-source drugs, i.e.,
brand name drugs that now have generic competition.) In addition, covered entities are free to
negotiate discounts that are lower than the maximum allowable statutory price.
How do covered entities go about obtaining discounts?
Upon enrollment in the program, a covered entity should contact its wholesaler to set up its 340B
account and to request a 34GB price list. The entity also may request a 340B pricing file from a
manufacturer. Manufacturers should check the OPA Web site each quarter to identify the
providers that are participating in the program. The manufacturer may not charge more than the
340B ceiling price to those entities regardless of whether the covered entity purchases
pharmaceuticals through a wholesaler or directly from the manufacturer. If a covered entity
suspects that it is not receiving the 340B price for a given outpatient drug, it should immediately
notify its wholesaler, the manufacturer and/or OP A. In many cases, the absence of a 340B price is
a result of human error and is resolved when the mistake is identified and, if necessary, brought to
OP A's attention. HRSA has implemented a provision of Section 340B mandating the creation of a
prime vendor program by entering into an agreement with HealthCare Purchasing Partners
International (HPPI) to help with negotiating discounts below the mandatory 340B ceiling price. A
covered entity does not have to join the prime vendor program in order to participate in the 340B
program and may negotiate subceiling discounts on its own. Since the prime vendor can negotiate
prices for a large volume of pharmaceuticals, it has been able to negotiate favorable prices and
develop a national distribution system that may not be possible for some covered entities to obtain
individually. To learn more about the prime vendor program, go to http://w\\'w.340Bpvp.colll or e-
http://www. phpcrx.org/drugdisovr.html
11/28/2006
340B Overview
Page 3 ot5
mail 340b _primcvclldor(a)40bpvp.coll1.
To whom may the covered entities dispense the discounted drugs?
Section 340B prohibits the resale or transfer of discounted outpatient drugs to anyone other than a
patient of the covered entity. HRSA has defined a covered entity "patient" for purposes of the
program through Federal Register notices available on OPA's Web site and through informal
guidance. The penalty for failing to comply with the program's anti-diversion provision is
forfeiture of the discounts back to the manufacturer or disqualification from the program. If an
individual intentionally diverts 340B drugs, he or she may be criminally liable under the
Prescription Drug Marketing Act. Manufacturers have the right to audit the records of covered
entities to protect against diversion.
Are there billing restrictions?
The law says that a drug purchased under Section 340B shall not be subject to both a 340B
discount and a Medicaid rebate. HRSA has established a mechanism for covered entities to
comply with this provision. In general, participating covered entities may not bill Medicaid more
than acquisition cost (plus a dispensing fee) for covered outpatient drugs purchased with 340B
discounts. This rule does not apply, however, if (a) the drug is dispensed to a Medicaid recipient
enrolled in a capitated managed care plan and the drug is paid for by Medicaid as part of the
capitation rate, (b) the provider and state Medicaid agency agree on a different reimbursement
arrangement, (c) the entity elects to purchase its Medicaid outpatient drugs outside the 340B
program (often referred to as the Medicaid "carve-out") or (d) the drug is administered or
dispensed by a physician and the state does not request rebates for such drugs. There are no billing
restrictions applicable to drugs dispensed to non-Medicaid patients.
What if a covered entity facility lacks an "in-house" pharmacy?
HRSA has developed guidelines to allow such facilities to contract with a local community
pharmacy or other outside pharmacy to act as a dispensing agent. Under these guidelines, the
covered entity is required to purchase the pharmaceuticals, and the contractor provides all
pharmacy services. Covered entities with contract pharmacies should use a "ship to-bill to"
procedure in which the covered entities purchase the drugs and manufacturers and wholesalers bill
the covered entities but ship the drugs directly to the contract pharmacy. A contractor must
provide its affiliated covered entity quarterly financial statements, a detailed status report of
collections, and a summary of receiving and dispensing records. The contractor also must establish
and maintain a tracking system to prevent diversion of drugs to individuals who are not patients of
the covered entity. Under HRSA's guidelines, covered entities that have multiple sites are entitled
to have either an in-house pharmacy or a contract pharmacy at each site, but not both. HRSA has
stated it plans to publish a Federal Register notice shortly seeking comments on a proposal to allow
covered entities to contract with multiple pharmacy sites. Currently, a covered entity may contract
with only one pharmacy per site unless it obtains approval from HRSA for the use of multiple
contract pharmacies through an alternative methods demonstration project. OP A accepts
applications for AMDPs at any time.
How much do Section 340B participants save in the program?
Pharmaceutical prices available under Section 340B are significantly lower than both retail and
wholesale prices. 340B prices are, on average, 51 percent of average wholesale prices (A WP),
http://www . phpcrx. org/ drugdisovr. html
11/28/2006
340B Overview
Page 4 of5
according to a report released by the Congressional Budget Office (CBO). Another survey found
340B prices to be 24 percent lower than prices available to group purchasing organizations.
Hospital participants have experienced an average of about $2 million in savings annually.
How do you receive the latest information on the Program?
OP A disseminates information through its Web site to those participating in the program. This
information includes the names of participating covered entities and manufacturers, Federal
Register notices and current program guidelines, as well as other 340B program-related
information. To access the site, log on to http://V,'w\V.hrsa.gov/opa. Other helpful information is
available at the Public Hospital Pharmacy Coalition's Web site, located at http://www.phpcrx.org,
as well as the 340B Prime Vendor Web site, located at http://WW''i.340Bpvp.eolll and the PSSC
Web site at http://pssc.aphanet.org. Each month, the Public Hospital Pharmacy Coalition and the
law firm of Powers, Pyles, Sutter, and Verville publish and distribute a newsletter on the 340B
program called the Federal Drug Discount and Compliance Monitor, which can be found online at
http://www .drugd iscountlllon itor.eolll.
For questions about the Public Hospital Pharmacy Coalition please contact Laurinda Dennis
at lallrinda.dcnnis@phpcrx.or~ or 202-872-6747.
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Who Is Eligible?
These are the only programs authorized by Section 340B of the PHSA to participate
in the outpatient discount drug pricing program. All others are excluded. NOTE:
PHSA refers to the Public Health Service Act. SSA refers to the Social Security Act.
(A) Federally-qualified health center (as defined in section 1905(1)(2)(B) of the SSA)
This category includes:
. FQHC Look-alikes
. Consolidated Health Centers (See.330(e) PHSA)
. Migrant Health Centers (Sec.330 (g) PHSA)
. Health Care for the Homeless (Sec.330(h) PHSA)
. Healthy Schools/Healthy Communities
. Health Centers for Residents of Public Housing (See. 330(1) PHSA)
. Office of Tribal Programs or urban Indian organizations (P.L. 93-638 and 25
uses g1651)
(B) A family planning project receiving a grant or contract under See. 1001 PHSA
(42 USCSg3001)
(C) An entity receiving a grant under subpart II of part C of Title XXVI of the Ryan
White Care Act (RWCA) (relating to categorical grants for outpatient early
intervention services for HIV disease) - Early HIV Intervention Services Categorical
Grants (Title III of the RWCA)
(D) A State-operated AIDS Drug Assistance Program (ADAP) receiving financial
assistance under the RWCA
(E) A black lung clinic receiving funds under Section 427(a) of the Black Lung
Benefits Act (30 USCSg901)
(F) A comprehensive hemophilia diagnostic treatment center receiving a grant under
section 501(a)(2) of the SSA
(G) A Native Hawaiian Health Center receiving funds under the Native Hawaiian
Health Care Act of 1988 (42 USCSgl1701)
(H) An urban Indian organization receiving funds under title V of the Indian Health
Care Improvement Act (25 USCSg1601)
(I) Any entity receiving assistance under title XXVI of the PHSA (other than a State
or unit of local government or an entity described in subparagraph (D)), but only if
the entity is certified by the Secretary
(J) An entity receiving funds under section 318 (42 USCS g247c) (relating to
http://pssc.aphanet.org/about/whoiseli gib 1 e .htm
I . f II -' ~, 1" J
340B Program Statute
What is the "340B Program
Who. is "Eligible"?
What Drugs Are Covered?
Registration Process
Contract Pharmacy
Prime Vendor
Databases
Alternative Methods
Comprehensive Pharmacy
Federal. Register Notices
1\ r'l {.., !, ~ I' (; r'" ~ 1
December 2006
ASHP 41st Midyear ('Ii
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treatment of sexually transmitted diseases) or section 317(j)(2) (42 USCS!j247b(j)
(2)) (relating to treatment of tuberculosis) through a State or unit of local
government, but only if the entity is certified by the Secretary
(K) A disproportionate share hospital (as defined in section 1886(d)(1)(B)) of the
SSA -
(i) is owned or operated by a unit of State or local government, is a
public or private non-profit corporation which is formally granted
governmental powers by a unit of State or local government, or is a
private non-profit hospital which has a contract with a State or local
government to provide health care services to low income individuals
who are not entitled to benefits under title XVIII of the Social Security
Act or eligible for assistance under the State plan under this title;
(ii) for the most recent cost reporting period that ended before the
calendar quarter involved had a disproportionate share adjustment
percentage (as determined under section 1886(d)(5)(F) of the Social
Security Act) greater than 11.75 percent or was described in section
1886(d)(5)(F)(i)(II) of such Act; and
(iii) does not obtain covered outpatient drugs through a group
purchasing organization or other group purchasing arrangement.
Who are 3408 Patients?
Any patient of a participating 340B entity is considered a 340B patient provided the
entity maintains control of the patient's medical records and has the primary
responsibility for the patient's care. For more information, see Definition of a Patient.
GET YOUR PSSC IO!!!
Still have questions? Register withthe PSSC and get your User ID
to access the online information request form.
lil Hama JO cant:1lICt: U. "li.~_
HOME I ABOUT THE "340B PROGRAM" I POLICY ISSUES I NEWS & EVENTS I ASK PSSC I RESOURCES I FAQS I CONTACT US I DISCLAIMEB I S
@ 2004 Pharmarcy Services Support Center (PSSC) I All Rights Reserved
http://pssc.aphanet.org!aboutlwhoiseligib I e.htm
11/2812006
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What is the 3408 Program?
The "3406 Program" was established by Section 602 of the Veterans Health Care Act
of 1992 (P.L. 102-585), which put Section 3406 of the Public Health Service Act into
place. Sometimes referred to as "PHS Pricing" or "602 Pricing/' the 3406 Drug
Pricing Program requires drug manufacturers to provide outpatient drugs to certain
covered entities specified in the statute 42 U.S.C. 3406(a)(4)at a reduced price, also
defined in the statute.
These covered entities are Health Resources and Service Administration (HRSA)
grantees, Federally Qualified Health Centers (FQHCs) and FQHC look-a likes, family
planning clinics, HIV/Ryan White clinics, state-operated AIDS drug assistance
programs, black lung clinics, hemophilia treatment centers, urban Indian
organizations, Native Hawaiian health centers, sexually transmitted disease and
tuberculosis clinics, and disproportionate share hospitals.
The 3406 price defined in the statute is a ceiling price, meaning it is the highest
price a covered entity would have to pay for a given outpatient drug. Entities can
negotiate below ceiling prices with manufacturers. As a result, 3406 prices have
been found to be roughly 50% of the Average Wholesale Price (Schondelmeyer, Pnme
Institute, University of Minnesota (2001)).
The following document is one of nine sections taken from the ACU/PSSC 3406
Pharmacy Resource Series and provides an overview of the 3406 Drug Pricing
Prog ra m.
Section 3408 Drug Pncing Program: An Overview by Katheryne Richardson, PharmD
GET YOUR PSSC IO!!!
Still have questions? Register with the PSSC and get your User ID
to access the online information request form.
~. 'Jjft;.-:.-,;.",-
,~:l.l&'
,
I', l.n . '.l (; f1ot<:
3408 Program Statute
What is the "3408 Program
Who is "Eligible"?
What Drugs Are Covered?
Registration Process
Contract Pharmacy
Prime Vendor
Databases
Alternative Methods
Comprehensive Pharmacy
Feder;llRegister Notices
,. f' j r-, ',l" ~ - i
December 2006
ASHP 41 st !\1id~'car ('Ii
Meeting at Anaheim C
('(lI1vention Centcr Dee
3-7.
1
.
~
:.
HOME I ABOUT THE "340B PROGRAM" I POLICY ISSUES I NEWS & EVENTS I ASK PSSC I RESOURCES I FAQS I CONTACT US I DISCLAIMER I s
@ 2004 Pharmarcy Services Support Center (PSSC) I All Rights Reserved
http://pssc.aphanet.org/aboutlwhatisthe340b.h tm
11/28/2006