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 email@example.com 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.
Are you considering a pharmacy CSC (consolidated services center) for your health system? This recorded webinar dives into what you need to know when considering a pharmacy CSC. Learn what services you should consider, challenges o watch out for, 340B complexities, licensure, and more!
This webinar is presented by Angela Whitney, RPh and Curtis McEntire, who have been integral in the planning and operations of multiple pharmacy CSC's around the country.
Click here to access the webinar.
Formulary management. There are few words found within the pharmaceutical lexicon that elicit as much joy and exuberance as “formulary management”. If you think that’s even remotely true, you must be new to formulary management. With the (thankfully) increasing opinion that a health system should operate more like an actual system, the dire need for proper and auditable formulary management is becoming increasingly evident. We can’t run a diverse health system with a one-size fits all approach and we also can’t efficiently serve our patients if we persist in the historical “every facility an island” approach. Across the industry, we just don’t see good auditing tools to ensure that we’re purchasing the correct, optimized pharmaceuticals. We’ve spoken previously about the unsung hero, the pharmacy buyer, and we can really give them and their clinic counterparts a leg up by handing them a tool that ensures proper formulary management and compliance.
There are lots of reasons why system-wide formulary management is complicated: hospital vs. clinic, patient populations, the 340B Drug Pricing Program, different regional needs, supplier access, and so on. The list of why there hasn’t been a good solution to this is much shorter: no one that truly understands the industry has built a comprehensive tool for the industry, until now. Trulla enables users to operate from the broadest sense (all active medications for an entire health system) to the absolute most narrow sense (the 15 medications that a seasonal shack on the backside of a mountain might need access to).
The way that Trulla approaches formulary management is novel in a few ways, not the least of which is that we recognize and respect that there are medications that a health system may need that they don’t want everyone purchasing at will and that the pharmacy buyer can never be replaced; they need the freedom to be able to purchase beyond machine-driven logic. Trulla operates as a funnel to present a buyer with the optimized product, specific to their department and health system, but we don’t lock them into that product. At the widest point of the funnel, we have access to all active medications with the FDA so that those managing the formulary don’t have to build each medication profile from scratch. The next step in the narrowing funnel includes on formulary and off formulary medications, restricted medications, and so on. As we narrow the funnel even more, Trulla allows for the restriction of a visible sub-formulary as it pertains to each buyer and their location.
Let’s say there’s a system-level decision made by the P&T Committee, or the 340B team has new information about where to purchase X medication from to realize the best compliant price, Trulla allows for the operationalizing of that information. A 340B clean site will see only those medications that they should have rights to purchase. A non-340B clinic may see a broader sub-formulary but still doesn’t have access to everything an inpatient pharmacy would have access to, and so on. Proper formulary management, coupled with a tool to operationalize it, creates an environment where even the administrative assistant at a clinic who’s thrown into a one time only purchasing situation can see the same results as the most experienced hospital buyer.
Your goal is to save time and money while keeping patient safety at the forefront of every decision. Formulary management may not be the first thing that comes to mind when thinking about saving time and money, but let Trulla show you a new angle that’s afforded by our software. With the Trulla software you’ll have access to a ready-to-go, customizable medication list to begin building a broad formulary that serves as a source for any number of sub-formularies for those who purchase pharmaceuticals. With our tools, you’ll have a united front all the way across your facility or health system, working together towards the same goals.
Centralized Services Centers have been implemented or are being considered by numerous health systems to improve efficiency, reduce medication errors, and for the potential cost savings that can be captured. However, inventory management is extremely challenging when the Centralized Services Center (CSC) provides medications to both non-covered and covered entities (CEs). Ensure that the inventory management model selected does not expose the CEs to a GPO prohibition violation if they are required to comply with this requirement.
For example, some health systems have centralized the sterile compounding of products such as TPN and various antibiotics. If any of these products are administered to covered outpatients and purchased on GPO by the CSC, the CE could be at risk for a GPO prohibition violation unless a strategy is in place to prevent this from happening. The 2013 HRSA 340B Drug Pricing Program Notice Release No. 2013-1, Statutory Prohibition on Group Purchasing Organization Participation states, “Organizations that are not part of the 340B covered entity are not subject to the GPO prohibition; however, the 340B covered entity is still prohibited from having organizations purchase covered outpatient drugs through a GPO on its behalf or otherwise receive covered outpatient drugs purchased through a GPO.”
One of several strategies to consider is to place these compounded products on a non-covered outpatient drug list. With this approach, they can be excluded from the 340B program and will not be subject to the GPO prohibition. The downside to this approach is that the individual ingredients cannot be purchased on 340B which could result in lost savings. If your health systems needs help determining a compliant approach, you can find a team of experts at Trulla (www.trullarx.com) or reach out to them directly by emailing firstname.lastname@example.org.
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.