What is a 340B contract pharmacy?

Overview

A 340B Contract Pharmacy is a retail entity that provides prescription drugs to patients of 340B-eligible covered entities under the 340B Drug Discount Program. To determine if your health system is 340B-eligible, visit the HRSA.gov site, or click here for our post — “Understanding The 340B Program Requirements.”

According to a Fact Sheet by the American Hospital Association (AHA.org), “In order to expand the reach of the 340B program, the Health Resources and Services Administration (HRSA) allows 340B participants (also known as “covered entities”) to contract with outside pharmacies to dispense drugs to eligible patients. Contract pharmacies serve as an extension of the 340B provider and provide patients access to prescription drugs outside of the four walls of the hospital or community clinic.”

Covered entities choose contract pharmacies to dispense 340B drugs to patients for a number of reasons. Many hospitals, for instance, prefer their in-house or on-campus retail pharmacies to be operated independently. Some hospitals reach 340B contract pharmacy agreements with multiple pharmacies in their communities, offering their patients more convenience, access and options when filling prescriptions written by their providers.

Since the 340B program was developed to help low-margin, negative-margin and non-profit healthcare entities fill revenue gaps common to their business models, contract pharmacies should never cost a health system more in fees and charges than they generate in prescription savings.

What are the requirements for becoming a 340B contract pharmacy?

In order to become a 340B contract pharmacy, eligible to dispense drugs on a covered entity’s behalf, a pharmacy must register for the 340B Program, and be listed on the 340B Office of Pharmacy Affairs Information System (OPAIS). Moreover, 340B contract pharmacies must not use 340B drugs for Medicaid patients unless the covered entity has an arrangement in place with the state Medicaid agency to prevent duplicate discounts.

At the same time, covered entities are responsible for ensuring compliance of their contract pharmacy arrangement(s) with all 340B Program requirements. 340B contract pharmacies must be approved by the Office of Pharmacy Affairs (and listed on the 340B OPAIS) before participating in the 340B Program.

How do I register contract pharmacies to serve my entity’s patients?

First, it’s important to remember that covered entities may register 340B contract pharmacy arrangements ONLY during open registration periods, and ONLY after written contracts with the pharmacies are in place.

NEW 340B-PROGRAM REGISTRATION PERIODS

   —October 1-15
   —January 1-15
   —April 1-15
   —July 1-15

340B Registration process (In House)

1) First, you’ll need to set up the covered entity’s Authorizing Official (AO) and Primary Contact (PC) account in the 340B OPAIS.
2) Next, review the 340B OPAIS User Guide for Contract Pharmacies. (NOTE: In order to review the User Guide, you’ll need to log into the 340B OPAIS).
3) Then, you must register the contract pharmacy online. (Again, to register a 340B contract pharmacy online, you’ll need to log into the 340B OPAIS).
4) Finally, you’ll need to coordinate the registration of your 340B contract pharmacy.

If your Primary Contact creates the registration, your Authorizing Official will receive emails instructing them to authorize your contract pharmacy registrations, and submit to them HRSA. Your AO must complete this step within 15 calendar days after submitting your online registration request. Otherwise, the request will be canceled, and you’ll have to wait until the next open registration period to register the contract pharmacy.

Important registration tips to remember:

• Registrations must be completed in single sessions. Incomplete registrations cannot be saved for later submission.
• Only AOs and PCs can register contract pharmacies.
• You’ll need to know each pharmacy’s Drug Enforcement Agency number and its physical address before beginning the registration process.
• If your 340B contract pharmacy is changing ownership, contact the Prime Vendor Program (PVP) for assistance in ensuring a smooth transition.
• The PVP can answer many of the questions you may have about preparing for registration. It can also offer you assistance during the registration process.
• You’ll need to verify that your 340B OPAIS records reflect the most current information about the contract pharmacy. (As a covered entity, it’s your responsibility to ensure that your 340B OPAIS information is current at all times).
• If there are changes to your any of your contract pharmacy arrangements, notify HRSA immediately.

340B Registration process (VytlOne)

First, if your health system is 340B eligible, VytlOne can build, register and manage (entirely at our own expense) an in-house or on-campus 340B contract pharmacy.

If you’d like register multiple contract pharmacies in your community, offering your patients more convenience, access and choice, VytlOne will work with you to identify the best prospective 340B contract pharmacy partners, then manage the registration process turn-key.

Our standard for 340B contract pharmacies

As we stated earlier, contract pharmacies should never cost your health system more in fees and charges than they generate for you in prescription savings. It’s the standard we hold ourselves to, and the standard we’ll expect all of your 340B contract pharmacies to uphold.

Any contract pharmacies unwilling to meet that standard shouldn’t be in your network. Simple as that. To learn more about how to evaluate your contract pharmacies, and your contract pharmacy network as a whole, please refer to our article on the topic.

340B Audit Requirements

In order to fulfill the ongoing obligations of 340B compliance, your health system is required to provide oversight of all contract pharmacies and maintain auditable records. You’re also expected to conduct annual audits of your contract pharmacies, completed by an independent auditing firm.

Once again, when you authorize VytlOne to manage and/or oversee your contract pharmacy agreements, we’ll provide you with full support in maintaining auditable records and conducting annual audits.

How many 340B contract pharmacies should I have in my network?

The short answer is: As many as can benefit your patients, your 340B revenue goals, and your health system’s mission in the community. While it’s true that an on-campus pharmacy offers you the most opportunities to generate 340B savings and maintain patient support within your continuum of care, having contract pharmacies throughout your community increases patient convenience and access — particularly among patients loyal to their existing pharmacies.

That said, VytlOne has supported the 340B programs of more than 100 health systems and health centers since 2019. And the simple truth is, we’ve never served (or seen) a 340B health system with adequate in-house resources to optimize the quality and number of its 340B eligible contract pharmacies. The typical number of quality 340B contract pharmacies we’ve added to the networks of health systems we serve is five to ten. In countless instances, we’ve identified solid contract relationships with pharmacies located within walking distance of hospitals.

What about 340B contract specialty pharmacies?

It goes without saying, specialty pharmacies are entirely different from, and significantly more complex than, retail pharmacies. At the same time, with the added complexity comes significant additional benefits to your health system’s 340B savings and revenue — as well as your overall quality of care for the community you serve. Which is why we cannot recommend more strongly that your 340B health system consider the option of building its own on-campus specialty pharmacy.

The first specialty pharmacy VytlOne helped build, fund and open began generating a monthly net income of $1 million within six months of its launch. More importantly, that pharmacy began positively impacting the quality and scope of its health system’s patient care months before it opened; an impact that has increased even more since then.

Since then, we’ve been contracted to develop new specialty pharmacies for seven additional health systems, and several FQHCs. To learn more about how you can fund, build and manage your own specialty pharmacy, please refer to the resources below.

The Case for Onsite Specialty Pharmacies in 340B Hospitals

What Is The Process For Building A Specialty Pharmacy?

How Can Your 340B Hospital Pay For Its Own Specialty Pharmacy?

Implement Best Practices To Ensure Your Specialty Pharmacy’s Success

Specialty Pharmacy Resource Guide (Download)

VytlOne is here to help, if you have questions.