OIG Issues Report on Contract Pharmacy Arrangements Under the 340B Program


According to a recently posted report by the Department of Health and Human Services Office of Inspector General (OIG), covered entities utilizing contract pharmacies to dispense drugs under the 340B Drug Pricing Program (the “340B Program” or the “Program”) do not conduct all oversight activities recommended by the Health Resources Services Administration (HRSA), which may lead to inconsistent determinations of 340B eligibility as well as duplicate discounts between the 340B Program and state Medicaid programs. Generally, under the 340B Program, drug manufacturers participating in Medicaid must provide discounted covered outpatient drugs to certain eligible health care entities, known as “covered entities,” which may dispense the 340B-purchased drugs to “eligible patients.”  The 340B Program permits covered entities to use “contract pharmacies” to dispense 340B-purchased drugs on their behalf; however, the covered entities must provide appropriate oversight of these arrangements with contract pharmacies to prevent diversion of 340B-purchased drugs to ineligible patients and duplicate discounts, both of which are statutorily prohibited.

The OIG also found that some covered entities included in the study do not offer the discounted 340B price to uninsured patients in any of their contract pharmacy arrangements, and some covered entities are not dispensing 340B drugs to Medicaid beneficiaries due to complexities in avoiding duplicate discounts.       

The OIG based its findings on its interviews of thirty covered entities—fifteen community health centers and fifteen disproportionate share hospitals—to learn about their operation and oversight of contract pharmacy arrangements.  To read the full report of the OIG’s findings, please click here.  Note that HRSA recently announced its intention to issue formal regulations to address contract pharmacy arrangements.  That announcement is available by clicking here

Reporter, Kerrie S. Howze, Atlanta, +1 404 572 3594, khowze@kslaw.com.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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