DSCSA Meets 340B

Some significant confusion appears to be making landfall around 340B covered entities and contract pharmacies as the requirements of the DSCSA (Drug Supply Chain Security Act) come into full enforceable effect for most of the US prescription drug supply chain on November 27th, 2024.  The foundation of the problems related to 340B products existed well before the passage of DSCSA in 2013 but the requirements of the law require the industry to make difficult decisions to understand and ensure compliance without negatively impacting drug distribution.   For an approved 340B covered entity that dispenses product from their owned facilities, DSCSA appears to have less impact on the flow of 340B product.  The challenges are complex when a contract pharmacy is utilized  and requires an understanding of how product is distributed, replenished, and how title of the product moves in the related transactions.

The correct approach for handling contract pharmacies is a difficult position to seek consensus across the industry.  For most front-line hospital systems, the 340B program has greatly expanded coverage to impoverished and other underserved populations while creating economic viability for rebuilding and expanding healthcare.  For many manufacturers, 340B serves this role but also creates challenging situations. Manufacturers must balance a desire to help serve those populations with financial viability challenges due to difficulty  in predicting and managing uptake and impacts on operating margins. In addition, cases are emerging of clear abuse of the programs that are now being highlighted in the media causing manufacturers to feel that 340B is a risky endeavor that can pose direct risks to stewarding a company. The result has been manufacturers implementing controls on contract pharmacy expansions while state/federal legislation passes laws and policies looking to hold or expand access.

Some Difficult Decisions Unfolding

For a covered entity using a contract pharmacy model, these requirements eventually lead to a covered entity having to determine if they are performing a distributor role according to DSCSA in moving or replenishing product to or at contract pharmacy locations.  This decision involves a deep understanding of where DSCSA waivers, exceptions, or exemptions may apply and carries significant risks in how trading partners, as well as state or federal agents may interpret such a decision.  This can also impact trading partners in supplying distributors to operate as they may have closed distribution agreements that limit how product is distributed. When you take a step back, it begins to become difficult to see a pathway forward or understand whether DSCSA will "break" or "fix" 340b distribution? 

We will take a deeper look to understand:

1. What is 340B and what is DSCSA?
2. Understanding the Challenges
3. Finding Pathways Forward

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What is 340B?

AHA provides the following summarized definition:

“For more than 30 years, the 340B Drug Pricing Program has provided financial help to hospitals serving vulnerable communities to manage rising prescription drug costs.  Section 340B of the Public Health Service Act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to healthcare organizations that care for many uninsured and low-income patients. These organizations include federal grantee organizations and several types of hospitals, including critical access hospitals (CAHs), sole community hospitals (SCHs), rural referral centers (RRCs), and public and nonprofit disproportionate share hospitals (DSH) that serve low-income and indigent populations.”

The savings that entities can receive from this program can make a substantial difference in the viability of not only the pharmacy but for entire healthcare sites serving the impacted patient populations.  AHA further points out that “Hospitals use 340B savings to provide, for example, free care for uninsured patients, offer free vaccines, provide services in mental health clinics, and implement medication management and community health programs.”

While the spirit of this program is to make a significant impact on expanding access to medicine, it does have some challenges that open the door for crossing into what some see as abuses.  The challenges seem to expand when organizations look to leverage the program beyond expanding access to medicine and towards it being an industry price control mechanism.

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What is DSCSA?

FDA provides the following summarized definition: “The Drug Supply Chain Security Act (DSCSA) outlines steps to achieve an interoperable and electronic way to identify and trace certain prescription drugs at the package level as they move through the supply chain. This helps prevent harmful drugs from entering the U.S. drug supply chain, detect harmful drugs if they do enter the supply chain and enable rapid response to remove harmful drugs from the supply chain to protect patients.”  

DSCSA is intended to create a clearer picture of what related roles an organization is fulfilling in ownership movement of prescription drug product which may include: manufacturer, repackager, distributor, dispenser, 3PL.  DSCSA was passed to help prevent counterfeit and other harmful product incidences that were highlighted in events in the past 30 years and continue to happen while stakeholders continue to implement the related requirements of labeling, capturing, and sharing saleable unit and related serialized information.  Each stakeholder must review these roles as they are defined in the law and ensure they are complying with all aspects of any related roles they are performing.  The FDA has generated significant guidance documents to help understand what roles may apply and there is a wealth of resources for self or guided compliance assurance.

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We Value Your Thoughts or Questions:

We recognize that no one person or even organization has all the answers and often doesn’t see issues from the alternate stakeholder points of view.  These are complicated topics and we find almost every client and stakeholder has variations on the scenarios with different perspectives on issues and solutions.  We welcome any information or thoughts you have on how leaders can help resolve gaps, build trust, and continue to help evolve the US Rx Supply Chain.

In our next blog posts, we will explore some of the challenges that have unfolded when the 340B program meets the requirements of DSCSA.   We will then share some of the approaches that we have learned are being taken and add some thoughts on potential pathways to better align the industry.

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Ten Count continues to offer a free consultation to help trading partners of any size or sector understand their requirements, comply and have processes independently pressure tested while minimizing wasted spend.

Reach out to us through info@tencountconsulting.com

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