Consolidated Service Centers (CSCs) centralize many pharmacy services along with the inventory of a health system and capture significant savings through processes such as strategic buys, standardization, and low units of measure distribution, just to name a few. But the most frequently asked question by health systems implementing a CSC is: “How can I compliantly ship medications to my 340B covered entities and make it so they can still utilize their available 340B and GPO accumulations?
It becomes increasingly difficult to distribute drugs from a central location when the health system includes one or more 340B covered entities (CEs). Those of us who have worked in the 340B world understand that this is due to the complex rules and regulations covered entities must abide by along with the associated risks if found non-compliant. It is critical for health systems to tackle this problem because the advantages of a consolidated service center are drastically reduced if they are not able to ship products to their CEs.
For those of you evaluating the options surrounding central distribution and CEs, or for those of you looking to optimize, please allow us to share some of the observations and lessons learned along the way to becoming the leading team in the industry:
Should I just have a separate inventory?
Most who consider maintaining separate inventories quickly recognize space will be an issue. There are also serious concerns that multiple inventories would be more difficult to manage and pose a risk that orders will be picked from the wrong inventory, exposing you to 340B compliance violations. A combined inventory is more optimal.
Can I just purchase everything at my CSC on WAC?
You can purchase all your CSC inventory at WAC both initially and ongoing. The advantage of this approach is that you can compliantly ship to both CE and non-CEs and avoid additional tracking at the CSC. However, purchasing strictly at WAC would significantly increase the cost to the health system, limiting the number of products stocked, services offered, and value of your CSC.
What if I purchased everything at GPO?
You can choose to just have your CSC purchase strictly at GPO. This inventory could be provided to non-CEs and those CEs that are not subject to the GPO prohibition without additional tracking at the CSC. However, CEs subject to the GPO prohibition would only be able to purchase from the CSC if they have GPO accumulations. For any CE to take advantage of their 340B accumulations and purchase at the lowest cost, they would be required to place orders with their wholesaler or another direct vendor, bypassing the CSC. With this option, the CSC would not be the sole supplier of a product which would impact inventory turns and potentially the product dating.
A WAC or GPO based inventory that utilizes the accumulations of the covered entities for replenishment, rather than ignoring them, further reduces overall costs to the health system. Although maintaining a GPO based inventory is clearly the lowest cost, it requires a complex tracking process to maintain compliance. The upside of this approach is that the entire health system can utilize the centralized services and the products stocked at the CSC. CSCs are also able to function as the sole supplier of a product resulting in increased inventory turns, improved product dating, and less waste due to expiration.
Everyone who has started down the path of having a GPO inventory with accumulation-based replenishment ends up developing complex manual processes to maintain the compliance of their several CEs. The highest value is with this approach, but the tracking is tedious and next to impossible to manually manage compliance or the inventory levels at the CSC.
What is the best solution?
Trulla has developed a patent pending procurement solution that enables CSCs to compliantly distribute medications to your CEs while utilizing available 340B and GPO accumulations to maximize their savings. Utilizing a robust 340B compliance engine inside Trulla’s pharmacy procurement software, health systems can maximize savings and ensure compliance when shipping medications from their CSC.
Contact us at firstname.lastname@example.org to schedule a demo and learn more.
Hospitals subject to the GPO Prohibition can define drugs as NCODs and purchase them strictly at GPO. However, the steps involved in creating a NCOD drug list are not always clear. Below you will find a simplified approach that will guide you through the process.
First, consider whether the manufacturer has entered into a Pharmaceutical Pricing Agreement (PPA) or if the product is classified by the FDA as a device or a vaccine. If the manufacturer has NOT entered into a PPA (i.e., does not offer a 340B price) or the product is either device or a vaccine, then the drug is clearly a NCOD and can be purchased at GPO. These categories of products should be defined as NCODs in policy/procedure and prevented from accumulating and being purchased at 340B.
Drugs that are part of/incident to another service and payment is not made as direct reimbursement of the drug (“bundled drugs”) might be interpreted by a covered entity as NCODs under section 1927(k) of the Social Security Act and can be purchased at GPO (see Apexus FAQ 1355). This is based on the statutory limiting “covered outpatient drug” definition under section 1927(k), which might be interpreted by the covered entity as exempting bundled drugs.
Therefore, when there is a PPA in place and the product is NOT a vaccine or device, the next step is to determine whether the drug is directly reimbursed. If a drug NOT directly reimbursed and therefore commonly bundled, it can also be considered for inclusion on the covered entity’s defined NCOD list. This evaluation should include a review of several billing claims to determine if the drug appears on claims and whether the NDC is included. When the drug is NOT found on claims or appears as a line item without an NDC, the drug could be considered for inclusion on the NCOD list as this would be considered commonly bundled. If the drug appears on claims along with its NDC, work with your billing department to determine if payors are directly reimbursing. Those products that are directly reimbursed would be difficult to defend as commonly bundled.
Work closely with your billing department to align charging practices and NCOD determinations. Furthermore, clearly define NCODs in policy/procedure and provide a defensible position based on the covered outpatient drug and limiting definition of section 1927(k) of the Social Security Act. When operationalizing, be certain to consistently apply the NCODs definition across all registered sites, including clean sites and ensure auditable records are maintained. Don’t forget to adjust your third-party administrator settings to prevent them from accumulating and being purchased at 340B. If your health system has a consolidated service center (CSC), ensure that they have mechanism to track, manage, and purchase the drugs on each covered entity’s NCOD list correctly.
Disclaimer: The information provided in this article does not constitute legal advice and should not be construed as such. Readers of this document are encouraged to contact their attorney to obtain advice with respect to any particular legal matter. The views expressed in this document are those of the author and not those of the Trulla LLC. All liability with respect to actions taken or not taken based on the contents of this document are hereby expressly disclaimed. The content in this document is provided “as is;” no representations are made that the content is error-free.