Entity-owned Retail Pharmacies and the 340B Program

InsightsClient Alert

Many 340B covered entities utilize entity-owned retail pharmacies to assist patients in accessing affordable medications. While there are many considerations to be considered in the operation of a retail pharmacy, one thing is very clear: If the pharmacy is owned by a 340B covered entity (CE), the pharmacy must adhere to the same 340B Program rules and regulations as the CE.

We recently became aware of an industry consultant providing noncompliant purchasing advice to covered entities subject to the Group Purchasing Organization (GPO) Prohibition for non-patients of the hospital (i.e. employees who do not meet the patient definition). Careful consideration of Program requirements should be given to the design, ownership, and compliance requirements for each situation which can, and often do, vary by CE.

The GPO Prohibition applies to covered entities registered as disproportionate share hospitals, free-standing cancer centers, and children’s hospitals and is a statutory requirement of participation in the Program.  These covered entities may not obtain covered outpatient drugs through a GPO or other group purchasing arrangement at their 340B-registered locations.  Violations of the GPO Prohibition have serious compliance implicationsthat can put the entire CE at risk of being terminated from the Program.  Some have even suggested that any violations of the Prohibition, whether by error or intent, invalidates all 340B-purchases during the time of the violation(s).

Any dispenses to patients that do not meet the 340B-qualifying criteria, which could include employees or their families, would need to be purchased at wholesale acquisition cost, or WAC.  Of course, a retail pharmacy in a non-registered 340B location, which would be outside of the four walls of the CE and its registered child sites, with its own purchasing accounts, could purchase GPO drugs for non-patients, but would not be able to purchase drugs through the 340B Program.  Conversely, a non-covered entity owned pharmacy, such as under a parent umbrella organization, would not be subject to the GPO Prohibition and could purchase all of its non-340B drugs through a GPO.  In order to dispense 340B-purchased medications, this non-CE owned pharmacy would need to establish a contract pharmacy relationship with the CE to dispense medications on behalf of the CE.

If you have any questions about your 340B Program, the compliance experts at Draffin Tucker are available to assist you. Please contact our Albany office at (229) 883-7878 or our Atlanta office (404) 220-8494.

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