The 340B Discount Program: Outpatient Prescription Dispensing Patterns Through Contract Pharmacies In 2012

Abstract

Section 340B of the Public Health Service Act provides qualified organizations serving vulnerable populations with deep discounts for some outpatient medications. A 2010 regulatory change widely expanded the 340B program’s reach, allowing these organizations to contract with retail pharmacies to dispense medications for eligible patients. Little is known about which medications are dispensed by contract pharmacies under the expanded program. We provide the first comparison of 340B prescriptions and all prescriptions dispensed in contract pharmacies. We used 2012 data from Walgreens, the national leader in 340B contract pharmacies. Medications used to treat chronic conditions such as diabetes, high cholesterol levels, asthma, hypertension, and depression accounted for an overwhelming majority of all prescriptions dispensed at Walgreens as part of the 340B program. A higher percentage of antiretrovirals used to treat HIV/AIDS were dispensed through 340B prescriptions than through all prescriptions dispensed at Walgreens. The majority of 340B prescriptions dispensed at Walgreens originated at tuberculosis clinics, consolidated health centers, disproportionate-share hospitals, and Ryan White clinics. Our results suggest that 340B contract pharmacies dispense medications used to treat Americans’ chronic disease burden and disproportionately dispense medications used by key vulnerable populations targeted by the program.

Section 340B of the Public Health Service Act provides qualified medical care providers in the United States with access to deep discounts on some outpatient drugs. The 340B program’s intent is to allow these providers to extend the resources they have to serve low-income and uninsured patients. The Health Resources and Services Administration (HRSA) administers the 340B program. HRSA assesses the eligibility of medical providers who apply for the program and ensures that pharmaceutical manufacturers who participate in the Medicaid Drug Rebate Program extend 340B discounts to qualified providers (“covered entities”).

Covered entities include federally qualified health centers; institutions that participate in Medicare’s disproportionate-share hospital program; Ryan White clinics (Ryan White HIV/AIDS Program grantees that receive federal funding to treat under- or uninsured patients with HIV/AIDS and to provide AIDS testing and education); and state AIDS Drug Assistance Programs.[1] With some exceptions, a medication qualifies for the 340B discount if a physician prescribes it for or administers it to an eligible patient in an outpatient clinic of a covered entity.[2] Eligible patients are defined as those who receive regular medical care at covered entities or who participate in an AIDS drug purchasing assistance program and who are not insured by Medicaid, although there are some exceptions here, too.

In 2001 the 340B program created Alternative Methods Demonstration Projects, which allow certain covered entities to contract with retail pharmacies (“contract pharmacies”) to dispense 340B medications to eligible patients on a trial basis.[3] The purpose of the demonstration was to provide access to the 340B program to eligible covered entities that did not have in-house pharmacies.

Covered entities that applied to create an Alternative Methods Demonstration Project had to agree to be audited annually by an independent auditor for drug diversion to noneligible patients and for the provision of Medicaid duplicate discounts. None of the eighteen covered entities that created an Alternative Methods Demonstration Project showed evidence of drug diversion after five years.

As a consequence of the perceived success of the Alternative Methods Demonstration Project, HRSA made a regulatory change in 2010 that expanded the 340B program’s reach. Covered entities were now allowed to make arrangements with multiple contract pharmacies without going through the Alternative Methods Demonstration Project process.[4]

Under the new regulation, all covered entities have the option of dispensing 340B prescriptions via an in-house pharmacy, a single contract pharmacy, multiple contract pharmacies, or some combination of the above. Contract pharmacies may contract with one or more covered entities. One important difference between the Alternative Methods Demonstration Project and the 2010 expansions is that current contract pharmacy arrangements are not subject to required annual audits by an independent auditor.

During the period 2010–14 the number of covered entities that have an arrangement with at least one contract pharmacy has risen 29.1 percent, from 3,655 to 4,719. In addition, the number of unique pharmacies that serve as 340B contract pharmacies has grown by 154 percent.[4] By August 31, 2014, nearly one in four retail pharmacies (22.6 percent of approximately 73,548 pharmacies) in the United States were acting as 340B contract pharmacies.

There has been no national peer-reviewed analysis of the drugs dispensed through 340B contract pharmacy arrangements and the types of medical care providers writing prescriptions for such drugs. Yet statistics about the drugs and the providers would be useful for policy makers’ assessments of the 340B program as it is currently implemented.[5, 6]

This study was the first to compare national 340B qualified prescriptions dispensed by Walgreens—the market leader in 340B contract pharmacies and the largest national pharmacy chain—and all prescriptions dispensed by this vendor.[7] We correlated 340B-qualified prescriptions and the medical facilities that originated them.

Study Data And Methods

This was a retrospective cross-sectional study. We analyzed all prescriptions that were dispensed at Walgreens pharmacies in 2012. The sample included approximately 500 million dispensed prescriptions for patients of all ages and with all types of insurance coverage in the fifty states, the District of Columbia, and Puerto Rico.

The primary variable fields in the Walgreens claims data are medication name and classification as a brand-name or generic drug. Prescriptions were categorized as eligible or not for 340B discounts according to a variable required by HRSA. Medications were categorized into therapeutic classes by primary indication using the system of Medi-Span, a provider of prescription drug information. Medications were categorized as specialty drugs if they were generally considered to be high value; high-touch—for example, medications that require temperature control or other special handling, and medications that require ongoing management by a physician or pharmacists specialized in the relevant condition; or complex—for example, biotechnology products or orphan drugs; or some combination of the above.[8, 9]

Prescriptions were stratified by 340B eligibility and then ranked by volume of prescriptions per therapeutic class. The relative distributions of each therapeutic class and medication were determined using proportions of total dispensing. The relative distribution of prescriptions was stratified by type of covered entity.

Chi-square tests were used to determine the significance of differences between 340B prescriptions and all prescriptions for medications by therapeutic class, those categorized as specialty drugs, and those categorized as brand-name or generic drugs. We further characterized dispensed specialty medications by drug name and by whether they were brand-name or generic. Statistical analyses were performed using the statistical software SAS, version 9.3.

Study Results

340B prescriptions amounted to less than 0.5 percent of the approximately 500 million prescriptions dispensed by Walgreens in 2012. The top ten therapeutic classes of 340B medications shown in Exhibit 1 accounted for 59.6 percent of all 340B prescriptions dispensed by Walgreens. Eight of these classes were also in the top ten for all medications dispensed.

Exhibit 1.

Prescriptions For The Top-Ten 340B Therapeutic Classes Of Medications, By Number Of Prescriptions, 2012

Therapeutic class	Rank order among:		Rx as percent of all:		Generic dispensing rate (%)a
	340B Rx	All Rxb	340B Rx	Rx	340B Rx	All Rxb
Antivirals	1	31	10.6	0.9	10.6	74.6
Anti-asthmatic and bronchodilator agents	2	6	9.7	3.2	5.9	18.5
Antidiabetics	3	5	6.9	3.6	24.9	58.8
Antihyperlipidemics	4	4	6.1	5.3	48.4	70.2
Antihypertensives	5	3	6.0	6.3	67.9	82.5
Antidepressants	6	2	5.1	6.3	75.4	87.3
Analgesics, opioid	7	1	5.0	8.7	88.4	94.3
Ulcer drugs	8	7	3.9	3.2	63.0	79.6
Dermatologicals	9	10	3.3	2.9	75.7	77.2
Anticonvulsants	10	11	3.0	2.9	81.2	88.9
All classesa	—c	—c	—c	—c	53.8	82.3

SOURCE Authors’ analysis of data from the Walgreen Co. 340B database (2012). NOTE We used t-tests for comparisons between 340B prescriptions and all prescriptions (p < 0.0001 for all comparisons).

^aIncluding all therapeutic classes. There are ninety classes according to Medi-Span classifications.

^bBased on prescription dispensing volume, and including both medications covered by 340B and those not covered.

^cNot applicable.

However, the rankings differed substantially for some classes. For example, antivirals accounted for 10.6 percent of 340B prescriptions, where they ranked first, but only 0.9 percent of all prescriptions, where they ranked thirty-first (Exhibit 1). In contrast, analgesics were more frequently dispensed among all medications, where they ranked first, than among 340B prescriptions, where they ranked seventh.

Generic medications accounted for 53.8 percent of 340B prescriptions and 82.3 percent of all prescriptions (Exhibit 1). Among the top ten 340B therapeutic classes, the greatest differences in generic dispensing rates between 340B drugs and all drugs were between antivirals (10.6 percent versus 74.5 percent), antidiabetics (24.9 percent versus 58.8 percent), and antihyperlipidemics (48.2 percent versus 70.2 percent). We present possible explanations for these differences in the Discussion section.

Specialty medications accounted for 9.0 percent of 340B prescriptions and 0.4 percent of all prescriptions (p < 0.0001). Antivirals were the most dispensed therapeutic class among 340B specialty medications and accounted for 89.8 percent of all 340B dispensing (Exhibit 2). In contrast, among all specialty medications dispensed by Walgreens, antivirals accounted for 24.9 percent, and the top-six therapeutic classes combined accounted for 88.9 percent.

Exhibit 2.

Prescriptions For The Top-Ten 340B Therapeutic Classes Of Specialty Medications, By Number Of Prescriptions, 2012

Therapeutic class	Rank order among:		Rx as percent of all:a		Generic dispensing rate (%)b
	340B specialty Rx	All specialty Rxc	340B specialty Rx	Specialty Rx	340B specialty Rx	All specialty Rxc
Antivirals	1	2	89.8	24.9	2.3	7.4
Assorted classesd	2	1	4.5	25.5	74.5	84.3
Anticoagulants	3	4	1.5	13.0	87.6	93.6
Analgesics, anti-inflammatory	4	5	0.9	6.7	0.0	0.0
Digestive aids	5	6	0.8	4.0	3.4	0.0
Endocrine and metabolic agents	6	3	0.8	14.8	24.9	60.0
Antineoplastics and adjunctive therapies	7	7	0.6	2.3	2.7	6.4
Psychotherapeutic and neurological agents	8	10	0.2	1.4	0.0	0.0
Hematopoietic agents	9	11	0.2	0.9	0.0	0.0
Antipsychotics and antimanic agents	10	9	0.1	1.4	10.6	35.6
All specialty classes	—e	—e	—e	—e	7.1	33.3

SOURCE Authors’ analysis of data from the Walgreen Co. 340B database (2012).

^aWe used chi-square tests for comparisons between 340B prescriptions and all prescriptions (p < 0.0001 for all comparisons).

^bWe used t-tests for comparisons between 340B prescriptions and all prescriptions (p < 0.0001 for all comparisons except for the therapeutic classes of analgesics, psychotherapeutic and neurological agents, and hematopoietic agents, for which p = 1.0).

^cBased on prescription dispensing volume, and including both medications covered by 340B and those not covered.

^dTypical specialty drugs in this class are Mycophenolate, Tacrolimus, Azathioprine, and Prograf.

^eNot applicable.

Generic medications accounted for a smaller percentage of specialty 340B prescriptions, compared to all specialty prescriptions: 7.1 percent versus 33.3 percent (Exhibit 2). The greatest generic prescribing disparity existed in the categories of endocrine and metabolic agents and of antipsychotics and antimanic agents.

All of the top thirteen 340B specialty medications were antiretrovirals indicated for HIV/AIDS (Exhibit 3). Combined, they accounted for 78.2 percent of all specialty medications dispensed through the 340B program.

Exhibit 3.

Prescriptions For The Top-Fifteen 340B Specialty Medications, By Number of Prescriptions, 2012

Generic name	Rank order among:		Percent of Rx
	340B specialty Rx	All specialty Rx	340B specialty	All specialty
Emtricitabine-tenofovir disoproxil fumarate	1	6	16.38	3.39
Efavirenz-emtricitabine-tenofovir disoproxil fumarate	2	4	14.85	3.66
Ritonavir	3	12	13.70	2.11
Atazanavir sulfate	4	24	7.22	1.07
Raltegravir potassium	5	17	6.43	1.45
Darunavir ethanolate	6	25	4.56	0.98
Abacavir sulfate–lamivudine	7	30	3.31	0.84
Lopinavir-ritonavir	8	28	2.51	0.88
Emtricitabine-rilpivirine-tenofovir	9	47	2.20	0.39
Tenofovir disoproxil fumarate	10	16	2.09	1.50
Darunavir ethanolate	11	40	2.04	0.57
Efavirenz	12	43	1.51	0.56
Lamivudine-zidovudine	13	32	1.43	0.80
Tacrolimus	14	8	1.13	2.93
Etravirine	15	54	1.10	0.34

SOURCE Authors’ analysis of data from Walgreen Co. 340B database (2012). NOTE All drugs were in the antiviral therapeutic class and the antiretroviral or HIV/AIDS subclass except for tacrolimus, which was in the assorted class and the immunosuppressive or transplant subclass. We used chi-square tests for comparisons between 340B drugs and all specialty drugs (p < 0.0001 for all comparisons).

Thirty-one percent of all 340B prescriptions were written by providers practicing in designated tuberculosis clinics. Providers in consolidated health centers wrote 21 percent, those in disproportionate-share hospitals 20 percent, and those in Ryan White clinics 19 percent. The remaining 9 percent of 340B prescriptions came from the following types of covered entities: family planning or sexually transmitted disease clinics; federally qualified health center look-alikes—that is, community-based health care providers that meet the requirements of but do not receive funding from the HRSA Health Center Program; critical-access or children’s hospitals; and urban Indian health centers—that is, facilities owned or leased by urban Indian organizations that provide primary care to American Indians and Alaska Natives.

Discussion

This study was designed to characterize 340B medication dispensing patterns and to compare the patterns to those of overall medication dispensing in an important 340B contract pharmacy setting. No previously published study has attempted such an analysis.

Types Of Drugs Dispensed

We found that prescriptions for 340B medications dispensed by Walgreens amounted to less than 0.5 percent of Walgreens retail pharmacy dispensing in 2012. 340B medications dispensed by Walgreens contract pharmacies, like all dispensed medications, were commonly used to treat chronic conditions such as diabetes, high cholesterol levels, asthma, hypertension, and depression.

We also found that at Walgreens antivirals were ten times more likely to be dispensed through the 340B program, compared to all drugs dispensed at Walgreens, and specialty medications over twenty times more likely to be dispensed via the 340B program, compared to the all specialty medications dispensed by Walgreens. Nearly 80 percent of all 340B dispensed specialty medications were antiretrovirals indicated for HIV/AIDS.

We believe that these results can be at least partially explained by the types of covered entities participating in contract pharmacy arrangements with Walgreens in 2012. Ryan White clinics dedicated to the treatment of HIV/AIDS and consolidated community health centers—that is, federally qualified health centers, federally qualified health center look-alikes, urban Indian health centers, and Native Hawaiian health centers, which also disproportionately treat people with HIV/AIDS and other chronic diseases—are long-standing types of covered entities. Thus, HIV/AIDS and antiviral medications, including some considered to be specialty drugs, are likely to be overrepresented in our 340B dispensing data, compared to HIV/AIDS and antiviral medications in the general population.

Differences Between Populations

Another important finding is that generic medications were dispensed more frequently in the general population (82.3 percent) than in the 340B population (53.8 percent). Also, among specialty medications, generics were more likely to be dispensed to the general population served by Walgreens than to the 340B population. The fact that the Walgreens estimated generic dispensing rate of 82.3 percent of all prescriptions dispensed is consistent with the 2012 national generic dispensing rate of 84 percent reported by the IMS Institute for Healthcare Informatics gives us some confidence in the validity of this measure.[10] Further research is needed to understand this result, since previous work suggests that the use of generic medications, when available, can produce substantial savings for payers and patients without detriments in patient health.[11]

Brand-Name And Generic Drug Disparity

We believe that there are several plausible reasons for the documented disparity in dispensing rates of brand-name and generic drugs among 340B prescriptions. First, fewer generic HIV/AIDS medications and antivirals are available in the market, compared to generic medications in most other categories. This partially accounts for the substantially lower percentage of generics among 340B dispensing compared to the generic percentage among overall dispensing.

Second, what medications in a therapeutic class are dispensed may differ between 340B dispensing and overall dispensing because of variations in comorbidity and underlying severity of conditions between the two patient populations. However, we are unaware of any published analysis of the diseases treated by covered entities compared to those treated by non-340B facilities. This is an important topic for future study.

Limitations

One important limitation of our study is that we were unable to provide a description of the payer mix associated with 340B and overall drug dispensing in our sample. According to the IMS Institute for Healthcare Informatics,[10] for all drugs dispensed in 2012 (through both 340B and non-340B entities and relationships), commercial third-party payers were responsible for 58.6 percent of claims, followed by Medicare Part D (23.7 percent), Medicaid (9.4 percent), and cash payers (8.3 percent). The payer mix for 340B contract pharmacies would be valuable information in the current policy debate over whether and how those pharmacies serve the 340B program’s mission to allow eligible health care providers to extend their care of low-income and uninsured patients. This is another important area for future empirical study.

Finally, HRSA’s expansion of 340B contract pharmacy arrangements was intended to increase low-income and uninsured patients’ access to needed medications. Yet we are unaware of any agency that systematically tracks the vulnerability of the patients served by the 340B program. One measure of patient vulnerability is the socioeconomic characteristics of communities served by 340B entities, including contract pharmacies. Future work could examine the national impact of this policy change on the geographic distribution and socioeconomic characteristics of the populations served by covered entities and their contract pharmacies.

A few other limitations of this study are worth noting. First, we examined the 340B distribution patterns of contract pharmacies in only one national retail pharmacy chain. Therefore, we cannot generalize these findings to other pharmacies participating in 340B contracts.

Second, our findings were limited to retail medication dispensing among contract pharmacies. The sample did not include medications that were infused or injected into patients via outpatient clinics or hospital-affiliated specialty clinics. Therefore, our results might not be generalizable to all 340B medications dispensed within and by the covered entities.

Finally, this was a cross-sectional study. Dispensing patterns may change, given the rapid growth in the number of 340B contract pharmacies in the United States and the increasing geographic diversity of the patient populations served. Notably, merger and acquisition activities among hospitals and between hospitals and community outpatient clinics have been significant in recent years.[12, 13] These changes could drive substantial shifts in prescribing patterns among 340B contract pharmacies between our study period and later years.[14]

Conclusion

Our results suggest that 340B contract pharmacies dispense medications that address the general chronic disease burden of the US population. Among 340B prescriptions, contract pharmacies also appear to disproportionately serve a vulnerable population that is targeted by the 340B program: people with HIV/AIDS. These patterns may be partially explained by the types of 340B-qualified medical providers that have their prescriptions dispensed by Walgreens contract pharmacies.

Further empirical work on dispensing patterns among 340B covered entities and contract pharmacies is critical for policy makers considering how best to generate future program savings. Future research is also needed to document the payer mix associated with 340B prescribing patterns. Understanding these prescribing correlates is key to assessing whether the recent expansions of 340B contract pharmacy arrangements are living up to their stated intentions and, if so, how they are managing to do so.