3. Other Purchasing and Dispensing Cost-Containment Strategies
This chapter presents additional cost-saving strategies that AIDS Drug Assistance Programs (ADAPs) use either independently or in conjunction with the Section 340B Drug Discount Program. The chapter concludes with a description of other pharmacy providers that ADAPs can coordinate with to assure a seamless service delivery system for clients receiving HIV/AIDS medications.
This chapter will also discuss HHS Secretary’s Demonstration Projects to Expand Access to Prescription Drugs for Persons Living with HIV and AIDS.
State ADAPs have developed a variety of drug purchasing and dispensing systems to respond to the needs of their individual populations and build on local systems and strengths. In addition to the Section 340B Drug Discount Program, ADAPs have utilized the cost-saving strategies described below to create efficient and effective systems for providing drugs to ADAP clients.
Additional Discounts Under the Section 340B Drug Discount Program TOP
Nothing in the Section 340B program legislation or guidelines prohibits covered entities from seeking deeper discounts beyond the 340B ceiling price on any given drug. Therefore, ADAPs that purchase at 340B prices may negotiate on their own behalf, or through a purchasing agent, for additional discounts from the manufacturer.
Pharmacy-Based Discounts Off the Average Wholesale Price (AWP) TOP
A State ADAP that utilizes a retail pharmacy network to purchase drugs and then reimburses the retailer can negotiate an across-the-board lower retail cost for all drugs on its formulary. The starting retail cost of a drug is the AWP price. The State ADAP in negotiating this type of contract will typically specify that the retail pharmacy network may only charge AWP minus some percentage (e.g., AWP minus 10 percent). The discount off the AWP can range from around 5 percent to 13 percent off AWP for brand name drugs, and 25 percent to 30 percent for generic drugs.
Other Cost-Saving Strategies TOP
Some State ADAPs limit the amount or number of days' supply of all or certain types of drugs that may be dispensed to an ADAP client. For example, an ADAP client may receive only a 30-day supply of prescribed drugs and may not receive a refill of those drugs until a specified number of days (e.g., 25 days) have passed. There is some concern that dispensing a larger supply of a given drug (e.g., a 2- or 3-month supply) at one time may lead to excessive waste if the client discontinues using the drug or transitions from ADAP to Medicaid. In a similar manner, some State ADAPs require prior authorization for certain high cost drugs on their formularies.
HRSA Prime Vendor Program TOP
HRSA established the Prime Vendor Program on September 9, 1999. This program implements the last part of the 340B statute. The Prime Vendor Program is designed to maximize the benefits of the Prescription Drug Program to clients and State ADAPs. The 340B Prime Vendor Program was established to improve and expand State ADAP pharmacy services and enhance the effective management of pharmacies, while saving money on the purchase of pharmaceuticals.
A prime vendor is an organization that provides distribution services for a single health care facility or network of facilities. Typically, prime vendors provide consolidated drug purchasing and frequent deliveries so that hospitals and clinics do not need to maintain large drug inventories. Healthcare facilities use prime vendors to lower distribution costs, reduce response times for making critical drugs available, and reduce inventory costs.
In general, the HRSA Prime Vendor Program is designed to provide the following benefits to Section 340B covered entities, particularly the Public Health Service grantees (PHS):
Purchasing pharmaceuticals through the 340B Prime Vendor Program may result in additional discounts of 20 to 50 percent off of regular drug market prices. The benefit to all participants will be greatest when the largest number of eligible health providers register with the Office of Pharmacy Affairs and become Prime Vendor customers.
The 340B Prime Vendor contract was awarded to Bergen Brunswig in September 1999. The agreement was for two years with an option to extend the agreement to three additional one-year periods (which have been optioned). This Prime Vendor agreement is for all eligible entities. State ADAPs are one of the four largest groups in addition to hospitals, hemophilia treatment centers, and the community health centers. The Prime Vendor Program contractor is responsible for achieving lower product costs and negotiating with manufacturers to establish discounts below existing 340B prices. The largest savings for which the Prime Vendor is able to negotiate below existing 340B prices are for multi-source generic drugs (e.g., drugs to treat opportunistic infections).
Because State ADAPs are required to implement a cost-saving mechanism to purchase medications to ensure a continuous supply of current and emerging therapies for their clients throughout the year, these programs should conduct a cost-benefit analysis to determine the most cost effective mechanism for purchasing medications. This analysis should not only include the costs of the medication (s), but also all administrative costs and fees associated with purchasing and distribution. The three options available under the 340B Drug Discount Program are point of purchase, rebate, and the Prime Vendor Program.
Alternative Methods Demonstration Projects TOP
On June 18, 2001, the Secretary of the Department of Health and Human Services, announced the Alternative Methods Demonstration Projects Initiative. This initiative was partially in response to continued requests for increased flexibility among existing 340B Program participants. The new initiative allows organizations that participate in 340B Drug Discount Program to take actions to reduce administrative cost and make buying drugs for patients easier. More specifically, project administrators will be able to:
Benefits of the program to participating grantees include:
The Alternative Methods Demonstration Projects Proposal TOP
Although Alternative Methods Projects are still in the demonstration phase, this program is an excellent option for grantees wishing to transition to the 340B Direct Purchase Option. The criteria for submitting a proposal includes the following:
1. Grantees should describe why they feel it is necessary to step outside the current guidelines and test alternative methods. Grantees should include a description of their patient population and a summary that explains how this population currently receives medications. A thorough discussion describing how the proposed alternative method will alleviate barriers to care should be included.
2. Grantees should include documentation of the following areas:
If a pharmacy benefits manager (PBM) is involved, the following information should also be included:
3. If applicable, grantees should document each participating pharmacy and benefits manager, and provide documentation for an auditing firm.
4. Programs should be no longer than two years.
For more information on Alternative Methods Demonstration Projects, contact the Office of Pharmacy Affairs by calling (301) 594-4353, (800) 628-6297.
Sources Used for This Chapter
The Drug Pricing Program Established by Section 340B of the Public Health Service Act. A Report to the House and Senate Appropriations Committees, 1998.
HRSA, HIV/AIDS Bureau, Division of Service Systems. Ryan White CARE Act, ADAP Technical Assistance Conference Call, "The Prime Vendor Program," 2000.
HRSA, HIV/AIDS Bureau, Division of Service Systems. Drug Pricing, Purchasing, and Distribution Systems. Rockville, MD: U.S. Department of Health and Human Services, 1997.
For Further Discussion of Topics in This Chapter
For additional information about the Section 340B Drug Discount Program, contact the Office of Pharmacy Affairs by calling (301) 594-4353, (800) 628-6297.