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April 17, 2017

GAO340B Contract Pharmacy Study: Time for Covered Entities to Take a Close Look at Contract Pharmacy Arrangements

Author: Russ Barron, Associate Director
With the Government Accountability Office’s (“GAO”) study of 340B contract pharmacies currently under way, covered entities should take this time to conduct a thorough review of their contract pharmacy arrangements to understand the key elements, financials, and governance associated with their current and pending contract pharmacy relationships. Building on recommendations from a 2014 OIG report and a previous 2013 GAO review of 340B program oversight, the GAO is conducting a follow up review into the management of 340B contract pharmacies, which have been previously sighted as a high risk area for 340B diversion due to complicating factors. Specifically, the review will focus on the covered entities use of contract pharmacies. Areas such as audit and compliance of the contract pharmacies, contract pharmacy Professional Services Agreements (PSAs) outlining contractual terms and conditions regarding 340B risk, management, responsibilities of involved parties, and the financial arrangements between the covered entities, contract pharmacies, and third party administrators (if applicable) will undergo an in-depth analysis by the GAO. In working closely with covered entities, assisting in the development of 340B contract pharmacy relationships, Alinea often identifies areas for improvement in the implementation of processes and critical monitoring activities necessary to ensure compliant 340B qualification and replenishment. Covered entities may also fall victim to inequitable terms and conditions within the PSAs, further exposing the covered entity to risk (with no shared risk platform) and inflated or unfavorable fees related to 340B replenishment rules stipulated by, and benefitting, the contract pharmacy. Consequently, Alinea recommends that covered entities engage a team with strong contract negotiations background, 340B operations expertise, and legal counsel with experience and understanding of 340B tenets and contemporary “best practices” to ensure a sustainable contract pharmacy program.

About Russ Barron

Russ Barron is an Associate Director with The Alinea Group and is a subject matter expert in 340B, health system medical record systems, pharmacy technologies and operations, with over 10 years of experience in the healthcare industry. Prior to joining Alinea, Russ worked with a service line consulting subsidiary of Zimmer, Inc., where he was a member of the orthopedics consulting unit. He has also provided management consulting expertise for technology matters to several Pittsburgh-based firms, including several Fortune 1000 companies.