The 340B drug discount program came about from a section of the Veterans Health Care Act of 1992. The way the program works is pharmaceutical manufacturers provide drug discounts to public service agencies, such as Indian Health Services, children's hospitals, cancer centers and inner city hospitals. In return, these organizations participate in the government's Medicare and Medicaid programs. The discounts provided to these vulnerable Medicare and Medicaid covered populations assure service to patients who otherwise may not be able to access healthcare.
The 2010 Health Care Reform Act, under President Obama's administration, expanded the 340B program to include Critical Access Hospitals. Most of these hospitals are smaller rural facilities, many of which are located in the Upper Peninsula. What does this program mean for our area? As summarized above, these hospitals will now be allowed to purchase their drugs from the pharmaceutical manufacturers at the 340B discounted rates. This process will allow these smaller rural hospitals to stabilize their financial position. This process will be a significant benefit for the Critical Access Hospitals in our area and across the country. The Critical Access Hospitals located in our region are all participating in the program.
As with most governmental programs, many regulations need to be in place in order to participate in the program. Most, if not all of the facilities who participate, purchase software programs designed to facilitate the purchase of drugs and maintain a detailed history of the purchase and inventory. These records assist in keeping the facilities in compliance with the regulations of the program. The 340B program is administered through the Office of Pharmacy Affairs, which along with the drug manufacturers, have the right to conduct compliance audits of the participating facilities.
Most of these smaller rural hospitals are utilizing the 340B program to purchase discounted drugs to fill prescription needs for qualified outpatients. The program enables the hospitals to purchase expensive brand name drugs at the 340B discounted cost, enhancing their pharmacy operations, and therefore reducing their drug expenses and inventories. This process obviously will assist many of these struggling, smaller rural hospitals in maintaining a stronger financial position.
Another section of the 340B program allows these hospitals, called "covered entities," to contract with retail pharmacies to further expand their revenue capabilities. The hospitals and the retail pharmacies negotiate an agreement beneficial to both parties. This is accomplished by the hospital purchasing 340B discounted medications, and the retail pharmacy dispensing them for an agreed upon fee. This process is also regulated by the Office of Pharmacy Affairs, and is monitored very closely to ensure compliance.
So what does this program mean for small, financially challenged, rural hospitals? It means our local hospitals will have a new source of revenue to help maintain financial stability. The Health Care Reform Act enables smaller rural hospitals to participate in the 340B program to assist them financially, which helps them to remain open to serve their rural communities.
You may ask, "What can I do to assist my local hospital which participates in this new program?" First and foremost, we all need to utilize our local hospitals for our basic health care needs. In addition, utilizing the contracted pharmacies of local hospitals will help maintain the hospital's financial stability. The bottom line is - utilize your local hospital or there is a potential to lose it. Patients vote with their feet, so please walk into your local hospital and support it in any way you can.
Editor's note: Mike Drew is a contracted pharmacist for Baraga County Memorial Hospital.