Ohio Legislators Stand up to Predatory PBM Fees in 340B Drug Pricing Program

Ohio legislators have introduced bipartisan Senate and House bills aimed at curbing excessive fees charged by insurers and Pharmacy Benefit Managers to pharmacies and providers participating in the 340B Drug Pricing Program.

The 340B Program, created in 1992 by the federal government, aims to provide certain safety net health providers with funding through a system whereby outpatient drug savings are passed along to the provider. Drug manufacturers participating in Medicaid agree to supply outpatient drugs to these entities at considerably reduced cost, typically at a discount of 25-50% off of normal acquisition costs. The covered entity or its contract pharmacy purchases the drugs at 340B prices, dispenses the drug to a qualifying recipient, and collects the usual amount from the payor, producing an inflated gross margin. The covered entity then may use that additional revenue to subsidize unfunded programs or may pass the savings on to its patients. If a contract pharmacy is involved, the contract pharmacy will pass along that margin to the covered entity, less a dispensing fee.

Unfortunately for the covered entities, Pharmacy Benefit Managers (PBMs) and insurers have been more frequently assessing fees on these transactions, such as Direct and Indirect Remuneration (DIR) fees. Effectively, PBMs may capture most or all of the 340B revenue generated, entirely undermining the program statutorily-designed to support the most underserved patient population. 

The bills introduced in Ohio’s state legislature would prohibit PBMs and insurers from assessing additional fees or cutting reimbursements for 340B drugs. The legislation was prompted by a 2018 report by Ohio’s Medicaid Managed Care Pharmacy Services which found that the “spread” was growing between what pharmacies pay PBMs and what PBMs report back to Medicaid.

How Frier Levitt Can Help
Contract Pharmacies and Covered Entities must be especially vigilant of this scheme when entering into 340B contracts because the dynamics of the 340B Program are changing. Frier Levitt attorneys have considerable experience with structuring and negotiating 340B contracts on behalf of Contract Pharmacies and Covered Entities. If your pharmacy or entity is considering the 340B program or is already involved, contact Frier Levitt to see how we can serve you.

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