How Covered Entities and Pharma Companies Can Better Collaborate on Drug Discount Programs

The 340B drug discount system, created to ensure that manufacturers could continue to provide low-cost drugs to safety net providers — called Covered Entities (CEs) — is broken. 

Created in 1992, the 340B Drug Discount Program mandates that manufacturers provide outpatient drugs at reduced prices to CEs. But the program, which has grown every year for the past decade, today bears little resemblance to what Congress envisioned in the early ‘90s. 

Confusion about the interaction between the 340B program and Medicaid Drug Rebate Program (MDRP) and lack of accountability among stakeholders have led to duplicate discounts in the billions of dollars.

Further, stakeholders are concerned that the 340B program could expand exponentially in the wake of a U.S. District Court ruling in the Genesis case. While the holding narrowly applied to one CE, the CE community has interpreted the ruling broadly as to what constitutes a “patient” under the 340B program. The inevitable outcome of making more people eligible “patients” that can be identified to capture 340B discounts will be a sharp rise in claims generally, as well as a growth in instances where multiple CEs claim the same patient. This will lead to multiple 340B purchases by multiple CEs for a single claim. 

Left undetected, multiple claims for a single dispense add up to millions of dollars of non-compliant claims for manufacturers through duplicate discounts, both within the 340B program and between 340B and MDRP or commercial rebates. As these programs continue to expand, these non-compliant discounts will only increase, further undermining the policy goals of government and commercial discount programs.  

Fixing these programs will require a higher level of collaboration than currently exists between drug manufacturers, CEs, state Medicaid agencies, and other stakeholders. Indeed, without greater collaboration and better alignment of incentives, the existing mistrust among stakeholders could make the drug discount system even more dysfunctional. American consumers deserve better. 

Here are three things drug manufacturers and CEs can do to build trust and enable effective collaboration.

Make transparency the priority

Collaboration is virtually impossible when you don’t trust your partners, and lack of transparency arguably is the major reason drug manufacturers and CEs struggle to trust one another. Indeed, lack of transparency can be tempting for bad actors and has led to abuse of the 340B program. 

Inadvertent noncompliance, however, also can result in costly duplicate discounts. Uncertainty about program rules among CEs and state Medicaid agencies is a common contributor to noncompliance.  

Archaic tools (such as Excel spreadsheets) that can’t handle the volume of claims as discount programs expand compound the transparency problem. 

Ensure equal access to data

Effective collaboration requires shared facts and a shared reality. These can’t be attained if one partner is unable to access data regarding a discount claim or dispute. So, when a CE submits data for a rebate claim, it is imperative that the manufacturer sees that data. 

This doesn’t always happen if CEs, manufacturers, and state Medicaid agencies all are using different tools to track and detail discount claims. 

Reduce likelihood of disputes

Transparency and a shared set of facts go a long way toward reducing the confusion that breeds mistrust and disputes over duplicate discounts. Nonetheless, in a system where millions of rebate claims are filed, disputes inevitably will arise over 1) a specific set of facts and/or 2) which standards are being applied to specific facts. 

A recently released update to the 340B program’s Administrative Dispute Resolution (ADR) process, an administrative complaint process that establishes a formal way for the Health Resources Service Administration (HRSA) to resolve claims disputes between CEs and manufacturers, sets new rules for how CEs and manufacturers can file complaints. 

The goal of the new guidelines should be to shorten the dispute process and create more trust between CEs and drug manufacturers. This is important because if disputes aren’t resolved within a short time frame, a manufacturer may have to launch a HRSA-approved audit of the CE, which must be completed within three years. Reducing disputes can help CEs and manufacturers avoid this arduous process.  

Conclusion

Drug discount programs are intended to provide CEs and, ultimately, consumers with lower-cost pharmaceuticals for treating and managing health conditions. Unfortunately, a lack of collaboration between CEs, manufacturers, and state Medicaid agencies has contributed to a lack of trust and an increase in costly duplicate discounts. By increasing transparency, ensuring equal access to data, and striving to reduce disputes over duplicate drug dispenses, CEs and manufacturers can become more collaborative and cooperative. These stakeholders and the healthcare industry will benefit.

Photo: Irina_Strelnikova, Getty Images

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