Case 13340B Drug Pricing
43 Implementation of Strategy
Healthcare organizations require astute handling of strategy implementation. The processes must be followed with a contingency plan in place for failed strategic objectives leading to the goal.
- Review the stages of implementation in Chapter 13 of your textbook.
- Review “340B Drug Pricing Program Oversight” case in your textbook (Chapter 13).
- Provide a written analysis of the implementation phases that were used/excluded in the “340B Drug Pricing Program Oversight” case.
- Explain what the literature (external scholarly source) suggest(s) regarding health implementation strategy regarding drug pricing.
- Conclude with a summary of your research.
- Must be four to six double-spaced
Section 602 of the Veterans Health Care Act of 1992 was titled “Limitations on Prices of Drugs Purchased by Certain Clinics and Hospitals.” It amended the Public Health Services Act by adding a new section, Section 340B, to that act. Section 602 of the Veterans Health Care Act read in part:
Part D of title III of the Public Health Service Act is amended by adding the following subpart: “SUBPART VII – DRUG PRICING AGREEMENTS” LIMITATION ON PRICES OF DRUGS PURHASED BY COVERED ENTITIES “Sec. 340B (a) Requirements for Agreement with Secretary – “(1) In general. The Secretary shall enter into an agreement with each manufacturer of covered drugs under which the amount required to be paid … to the manufacturer for covered drugs … does not exceed an amount equal to the average manufacturer price for the drug under title XIX of the Social Security Act in the preceding quarter, reduced by the rebate percentage described in paragraph (2). “Rebate percentage defined. – (A) In general. For a covered outpatient drug … the ‘rebate percentage’ is the amount equal to – “(i) the average total rebate required under Section 1927(c) of the Social Security Act … for a unit of the dosage form and strength involved during the preceding quarter divided by “(ii) the average manufacturer price for such a unit of the drug during such quarter….”
Section 340B applied Medicaid drug discounts to drugs purchased for clinics that served many outpatients who were not eligible for Medicaid at qualified safety-net institutions. For the most part, eligible clinics were associated with hospitals receiving disproportionate share payments under Medicare, pediatric hospitals, and community health centers. Also included were specialized clinics and projects for HIV/AIDS, hemophilia, black lung, tuberculosis, and family planning, as well as those serving Native Americans and Native Hawaiians. Hospitals were required to be governmental or nonprofit with a contractual commitment to provide services supported by governments, have a disproportionate share percentage greater than 11.75, and not obtain the covered drugs through a group purchasing agreement. The drugs had to be used for patients of the covered entity and could not be resold.
A key provision of Section 340B read “(10) No prohibition on larger discount. Nothing in this subsection shall prohibit a manufacturer from charging a price for a drug that is lower than the maximum price that may be charged under paragraph (1).” The Patient Protection and Affordable Care Act (ACA or PPACA) increased the 340B discount to 13% on generic drugs and 23.1% on branded drugs. Specific discounts have been reported to range from 15–60% on prescription drugs. The law prohibits getting both a state Medicaid rebate and a 340B discount on a drug.