340B Arrangements with Community and Specialty Pharmacies Improve Access to Care for Underserved Patients

Background

Congress created the 340B Drug Pricing Program in 1992 for two primary reasons — to reduce the persistent problem of high drug prices and to expand access to care for more Americans. The program works by requiring drug companies to offer discounted pricing for certain outpatient drugs so that hospitals and certain other providers that care for large numbers of underserved patients can purchase these drugs at a discount. As a result, hospitals are able to generate cost savings and use it to stretch scarce resources and reinvest in expanding access to care for more vulnerable patients in the communities they serve. For over 30 years, hospitals have used their 340B savings to expand access to critical patient programs like behavioral health, medication therapy management, and the provision of free or discounted drugs to patients across the country, including the millions of Americans that live in rural areas.

To further enable improved access to care and medicines, the Health Resources and Services Administration (HRSA), which oversees the 340B program, has recognized the need for hospitals to partner with community and specialty pharmacies. Known as “contract pharmacies,” these arrangements between hospitals and community and specialty pharmacies address common barriers to accessing critical medications.

Despite the demonstrated benefits to patients, these arrangements have been criticized by drug companies. Recently, several drug companies, including many of the largest and most profitable drug companies in the world, have targeted 340B arrangements with community and specialty pharmacies by denying the discounted 340B pricing for outpatient drugs dispensed through these arrangements.¹ These actions are only the latest in a series of efforts by drug companies since the program’s inception to curtail it, even though the program is very small relative to their revenues and have resulted in patients in these communities losing access to care and medications.

These actions to deny 340B pricing to community and specialty pharmacies were deemed unlawful by the Department of Health and Human Services (HHS), and the HHS Office of Inspector General (OIG) has attempted to impose civil monetary penalties prompting some drug companies to file lawsuits.² Two federal courts of appeals, however, have bared HHS from punishing drug companies for imposing these harmful contract pharmacy restrictions. Meanwhile, as 340B hospitals and their patients continue to face significant challenges accessing drugs because of the actions of drug companies, some states have introduced or passed legislation that would prohibit drug companies from denying 340B discounts through contract pharmacy arrangements. These state-level actions have prompted a flood of drug company lawsuits that remain before the courts. Meanwhile, patients in these communities continue to face barriers accessing medications, as well as vital programs and services that can improve their health and well-being.

Purpose of 340B Arrangements with Community and Specialty Pharmacies

Hospitals enrolled in the 340B program provide essential services to historically disadvantaged communities. Thus, their partnerships with community and specialty pharmacies are critical to providing high-quality, affordable access to care for these populations. These partnerships not only help 340B hospitals achieve these goals, but they also ensure that:

• Patients unable to travel to the main hospital to get their prescribed drug treatments can access their drugs at their local pharmacy, and hospitals can better ensure that patients receive the drug and provide follow-up care as needed;
• Patients of hospitals that do operate their own in-house pharmacies can access drugs that the hospital is unable to keep in stock and/or are in limited distribution; and
• Hospitals that do not operate their own in-house pharmacies, such as many rural hospitals and those in certain states where the operation of in-house pharmacies is prohibited, can realize 340B savings to reinvest in improving access to care for patients.

In practice, these arrangements serve as an extension of the 340B hospital and allow patients access to their prescribed drug treatments in the convenience of their local community pharmacy or through local and mail-order specialty pharmacies. Initially, HRSA allowed hospitals to contract with a single pharmacy only, but the agency soon recognized the need to expand access to more pharmacies. Several factors led HRSA to expand access to 340B drugs through these arrangements:

• Patients increasingly live in disparate areas far from the main hospital;
• Patients are increasingly more disease-burdened, as evidenced by increases in patient acuity, which requires multiple medications and more extensive follow-up care that can only be accessed through certain channels;
• Retail and specialty pharmacies are expanding operations across the country with certain medications only available through limited distribution channels;
• Specialty drugs are increasingly being distributed through channels like mail-order pharmacies; and
• Reliance on community and specialty pharmacies also grew during the COVID-19 pandemic as some patients avoided hospital pharmacies out of an abundance of caution.

Most importantly, hospitals’ arrangements with community and specialty pharmacies benefit patients. The accessibility of community pharmacies presents a convenient, familiar, and dependable source of care. This is especially true for those living in rural communities or who lack easy access to transportation. Nearly half of all Americans live within one mile of a pharmacy, while 73% live within two miles and 89% live within five miles.³ In comparison, 42% of Americans live more than 5 miles away from a hospital. Rural Americans are the most likely to say access to hospitals is a major problem and live, on average, 10.5 miles away from the nearest hospital.⁴ In fact, patients visit their community pharmacies almost twice as often as they visit their physician or other qualified healthcare professionals.⁵ As a result, these arrangements between 340B hospitals and local pharmacies increase access points for patients to receive care and ultimately benefit underserved communities.

Value of 340B Pharmacies for Rural Communities

Rural communities often encounter barriers to health care, including inadequate supply of services and access to transportation. While 340B arrangements with community and specialty pharmacies has grown, this growth has been particularly important for access to care in rural communities The 340B program and community pharmacy arrangements are particularly important for rural hospitals, which frequently do not have in-house pharmacies. In the absence of an in-house pharmacy, patients in rural areas can rely on a network of contracted community and specialty pharmacies to access much-needed medications.

Rural populations are more likely to be older and to be burdened with multiple chronic conditions, making easy access to drugs even more important. For these reasons, contract pharmacies are used by more than 80% of rural 340B hospitals to ensure patients have access to outpatient drugs.

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Notes

1. proxsysrx.com/2023/05/01/manufacturers-accelerate-pace-and-severity-of-340b-drug-pricing-restrictions
2. hrsa.gov/opa/program-integrity
3. Berenbrok LA, Tang S, Gabriel N, et al. Access to community pharmacies: A nationwide geographic information systems cross-sectional analysis. J Am Pharm Assoc (2003). 2022;62(6):1816-1822.e2. doi:10.1016/j.japh.2022.07.003
4. Pew Research Center. How far Americans live from the closest hospital differs by community. pewresearch.org/short-reads/2018/12/12/how-far-americans-live-from-the-closest-hospital-differs-by-community-type
5. Valliant SN, Burbage SC, Pathak S, Urick BY. Pharmacists as accessible health care providers: quantifying the opportunity. J Manag Care Spec Pharm. 2022 Jan;28(1):85-90.