Policy Background

Another policy option for increasing savings and expanding access to prescription drugs is for states and clinics to maximize participation in 340B pricing under the federal Public Health Act. The 340B price is 19% below the average Medicaid “best price” net or rebates, 39% below the average insurance reimbursement, and 51% less than average wholesale price (AWP). One obvious strategy to maximize savings even in a pilot program is to target the most costly aspects of the pharmacy program. The largest individual cost drivers for a state Medicaid program include such populations or disease states as mental health patients, transplant recipients, hemophiliacs, People Living With HIV/AIDS, or other categories of patients with expensive and chronic disease states. 340B programs are ongoing in several states, including Oregon, Texas, California, and Connecticut. Some examples of different approaches:

  • Targeting high-cost medications: An Oregon pilot project creates an unfunded eligibility category for HIV positive Medicaid beneficiaries in the state AIDS Drug Assistance Program. This will allow the Medicaid programs to, in effect, gain access to 340B pricing for those patients, resulting savings of approximately 10%. The actual dollars saved will be greater due to the high morbidity and high costs of the patient population. In addition, the state will realize greater indirect savings due to an increase in prescription adherence and the resulting improvement in outcomes. This same model can be used for HIV positive prisoners to create savings for the State Corrections Department. Utah passed legislation in 2005 creating a five-year pilot program within the Comprehensive Health Insurance Pool Act for disease and pharmaceutical management of bleeding disorders. Enrollees in the pilot program may participate in a federal 340B discounted drug pricing program; requires the Pool to report pharmaceutical costs under the pilot program (HB 33, Session Law Chapter: 273, Effective Date: May 2, 2005).
  • Corrections programs: The Texas prison system has a contractual relationship with two hospitals that are 340B eligible providers; the prisons have been deemed outpatient clinics and the State corrections system has been able to access drugs for inmates at “dramatically reduced prices.” 2005 legislation authorized the California Department of Corrections to establish a pilot project to determine whether the department may reduce the cost of providing health care to inmates, including the furnishing of prescription drugs to inmates at the 340B discounted price, by contracting for the provision of those health care services from certain covered entities (AB 77, Chapter 503, 10/4/05).
  • Expanding access through clinics and hospitals: California passed legislation in 2001 to expand dispensing options for California safety net clinics by authorizing 340B eligible clinics to contract with a community pharmacy to dispense 340B drugs. As of January 2004, 59 clinics have contract pharmacy agreements. Also in California, a 2005 requires the state Department of Health Services to develop a standard contract for private nonprofit hospitals whereby a hospital agrees to provide medical care to indigent patients, as a condition of participation in the 340B drug discount program established under federal law (SB 708). Connecticut passed legislation in 2003 to provide loans to federally qualified health centers for the cost of establishing a pharmacy facility or a partnership with a community pharmacy to serve as a centralized prescription drug distributor.
  • Maximizing Medicaid savings: New York passed a law in 2005 that prohibits state Medical Assistance payments to 340B covered entities or to contracted pharmacies for drugs that are eligible for purchase through 340B by outpatients (A 7298, Chapter 63, signed 4/13/05).
Search The Site:
Join NLARx Today
arrow Membership Details
arrow Member News Page