BETHESDA, MD 16 February 2010—Pharmacists at children`s hospitals that are participating in the federal 340B drug-pricing program hope that it will reap big savings on expensive medications used in outpatient clinics.
"We`re thinking that we can save up to 2 million dollars in drug costs a year," said Diane Alexander, director of pharmacy at Children`s Hospitals and Clinics of Minnesota. "It`s worth the effort that we`re putting in if we can actually save that much."
Alexander said her clinics will probably gain the greatest benefits from 340B pricing on i.v. cancer chemotherapy products, palivizumab, and infliximab.
The 340B program was created in 1992 to provide discounted pricing on the cost of covered outpatient drugs to certain federal grantees, health centers, and disproportionate share hospitals that care for poor populations. Proposed guidelines for adding children`s hospitals to the list of 340B-eligible entities were published July 9, 2007, to fulfill a requirement of the Deficit Reduction Act of 2005. The guidelines were finalized September 1, 2009.
The first pediatric hospital to register as a 340B entity was Children`s Hospital of Michigan, according to the Health Resources and Services Administration (HRSA), whose Office of Pharmacy Affairs manages the 340B program.
The 211-bed hospital is part of the Detroit Medical Center, an eight-hospital system that includes four 340B-participating adult hospitals.
Eight of the pediatric hospital`s outpatient programs were granted 340B status effective October 1, 2009, one month after the regulations were finalized.
"We`d been waiting for the last couple years for this date to arrive," said Dennis Gates, director of pharmacy at Children`s Hospital of Michigan. "I`m glad that we`re first...because we really need 340B."
David Bach, the medical center`s executive director of pharmacy, said the 340B paperwork was initially prepared for HRSA shortly after the passage of the 2005 legislation. He said the documentation was consistent with that used to register the health system`s other 340B programs.
But HRSA did not formally accept children`s hospitals into the 340B program until September 2009. Seventeen days after HRSA`s announcement, Bach said, Michigan submitted the paperwork for several sites, including the emergency department, infusion and hematology-oncology clinics, and an ambulatory care surgery center.
"Pharmacy was the lead for this from the beginning," Bach said. "We basically looked at the previous proposals, made sure we were updated, and we sent it ahead."
Children`s Hospitals of Minnesota was registered effective January 1.
Alexander said the hospital hired a consultant to help with the registration process for sites in Minneapolis and St. Paul. Previously, the same consultant had helped the hospital register its hemophilia treatment center in the 340B program.
Even with that help, Alexander said, registration was a major effort involving the hospitals` pharmacy, finance, and information technology staffs.
"This was a huge, huge initiative for us," she said, adding that the hospital`s management strongly supported the registration efforts.
"Probably our biggest headache was training, to get people really to understand the program," she said two weeks after the hospital went live with the 340B program. "I`ve been living and breathing this for the past three months. But now we`re to the point for implementation, and so it`s easing up a bit."
To register as a 340B entity, children`s hospitals must comply with federal requirements. These include meeting ownership and operational criteria, having a disproportionate-share adjustment percentage of 11.75 or greater, registering as a children`s hospital under Medicare, and proving that drugs purchased at 340B prices are used only in designated outpatient settings.
Alexander said the hospital`s computer system tracks and reports all outpatient medication doses, a necessity for 340B participation. She said the pharmacy staff has had to do some "cleanup" to ensure that the correct National Drug Codes and billable units are entered into a newly purchased computer system for drug purchasing.
Drug purchases that are reported to state Medicaid agencies and used by them to obtain rebates from manufacturers cannot also garner 340B pricing. Hospitals must ensure that their processes prohibit such double discounts.
Alexander said a major push is under way to seek retroactive reimbursement from manufacturers for 340B drugs purchased as far back as 2006.
Under HRSA`s guidelines, hospitals have 30 days from the time they are first listed in the 340B database to contact manufacturers from whom retroactive rebates are sought.
"We`ll submit, and we`ll see," she said. "We know that we won`t get everything. But we`re hoping to get a small percentage back. And even a small percentage is better than nothing."
Gates estimated that Children`s of Michigan will save up to $700,000 a year on drug costs through the 340B program. As in Minnesota, large savings are expected on palivizumab and infliximab. He said some enzyme-replacement products will also cost less, though not all manufacturers offer 340B pricing on enzyme therapies.
Bach said increasing the number of children`s hospitals in the 340B program could change that.
"It`s really critical to get as many children`s hospitals as possible involved," he said. "The more we have, the better for everybody, because we can learn from each other and perhaps have a little bit more influence with some drugs that we really need to be placed on this list."
Gates said that he has worked closely with staff at Apexus, the operator of HRSA`s Prime Vendor Program, which negotiates sub-340B prices on behalf of 340B participants. He said Apexus has used his hospital`s purchasing data in negotiations with manufacturers, and he hopes that the data will help reduce drug costs for other 340B children`s hospitals.
Sixty outpatient programs at 11 children`s hospitals were listed in HRSA`s 340B database in late January. The list is updated quarterly.
HRSA`s list of registered 340B entities of all types surpassed 14,000 at the start of the year, and the agency expects the program to encompass more than 16,000 sites in 2012.
