June 2015 - Office of Pharmacy Affairs Update

Office of Pharmacy Affairs UpdateJune 2015

Under the 340B Drug Pricing Program, eligible covered entities have the opportunity to purchase covered outpatient drugs at discounted prices in an effort “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”  However, covered entities provide or dispense such drugs to patients through a variety of drug distribution systems. The use of contract pharmacies is one such distribution or dispensing arrangement.   Covered entities that utilize contract pharmacy arrangements must ensure those arrangements meet the requirements of the 340B statute.   The Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs (OPA) has guidance in place from 2010 that provides additional information regarding compliance with these arrangements and the responsibility of the covered entities. This update provides insights into the common questions received regarding contract pharmacy arrangements in addition to the common issues we find during audits.  

Written Contract

Covered entities may contract with multiple pharmacies, but must have a written contract in place with each specific pharmacy organization being used under a contract pharmacy arrangement, including a full listing of all pharmacy locations in that organization that may be utilized. This contract must be finalized and signed prior to registering the contract pharmacy with OPA and beginning the implementation of the contract pharmacy arrangement.

Contract Pharmacy Registration

Covered entities are responsible for ensuring the contract pharmacies they are using are registered with OPA prior to the implementation of the contract pharmacy services. Both the covered entity and the contract pharmacy(ies) have to sign the online “Contract Pharmacy Registration Form” in order for the contract pharmacy to be recognized in the OPA database. The covered entity must be approved to participate in the 340B Program and have a 340B ID; it can then register contract pharmacies online during an open registration period. However, if a covered entity is in the process of becoming registered itself and does not yet have an assigned 340B ID, or if the covered entity is converting from one type of entity to another, then that covered entity should reach out to OPA for assistance prior to attempting to register any contract pharmacies. A contract pharmacy may not dispense 340B drugs on behalf of the covered entity until it has been registered, certified and the pharmacy is listed on the OPA 340B database record for the covered entity.

It is important that the timing of contract pharmacy registration aligns with the effective date of the signed contract and the covered entity 340B registration (i.e. should follow the contract and the registration dates). On those occasions where there is the need for an off-cycle registration, this may be facilitated by OPA on an individual case-by-case basis.

Contract Pharmacy and Medicaid

According to the contract pharmacy guidelines, contract pharmacies may not dispense 340B drugs to Medicaid patients unless the covered entity, the contract pharmacy and the State Medicaid agency have established an arrangement to prevent duplicate discounts. Any such arrangement shall be reported to OPA by the covered entity.

Contract Pharmacy Changes

When a contract pharmacy changes ownership, the covered entity is required to submit a new contract pharmacy registration to OPA if the contract pharmacy arrangement is to be continued. This requires the termination in the database of the old contract arrangement and a new registration using the new ownership. Additionally, the covered entity is required to update the contract pharmacy database information when there is a change in the pharmacy address, and also when there are additions or deletions of pharmacy locations included in the contract pharmacy arrangement.

Contract Pharmacy Oversight

For covered entities with contract pharmacy arrangements, vigilant oversight is critical and is the responsibility of the covered entity. This includes ensuring that all their contract pharmacies meet statutory obligations and are compliant with all 340B Program requirements to prevent diversion, prevent duplicate discounts, and maintain auditable records. To accomplish this, covered entities are expected to perform some oversight through periodic review of transactions at its contract pharmacies and to conduct independent audits of all their contract pharmacies, at least on an annual basis.

Covered Entity Audits and Contract Pharmacy

When a covered entity undergoes a HRSA audit, the following elements pertaining to contract pharmacies are checked:

  • A written contract pharmacy agreement(s) reflecting all contract pharmacy locations;
  • Evidence the covered entity utilized a contract pharmacy prior to the effective date shown on the OPA database, or prior to the pharmacy being listed on the OPA database;
  • Lack of evidence that the covered entity had performed any oversight of its contract pharmacy since registering the pharmacy(ies);
  • Written policies and procedures for the contract pharmacy arrangements, including actions the covered entity is taking to ensure 340B Program compliance and oversight activities of their contract pharmacies;
  • Evidence the contract pharmacy is actually being utilized by the covered entity and that appropriate oversight is being provided.

HRSA appreciates the cooperation of the 340B community on the compliant use of contract pharmacies. We welcome feedback on ways to continue improving the experience of using contract pharmacies for all stakeholders. The team at ApexusAnswers, a service of the 340B contracted Prime Vendor Program, stands ready to assist with any questions or concerns by email to ApexusAnswers@340bpvp.com or  phone 888-340-2787.

Date Last Reviewed:  April 2017