The 340B program is a massive legislation passed in the 90s that allows safety net providers to profit from prescriptions they were having filled for clients and patients. On this week’s episode, find out from two experts how that has helped millions of patients and what it looks like in practice today.
340B… Let It Be!
Unfiltered perspectives from two inspiring AHF leaders on the 340B drug pricing program
GUEST BIOs:
Donna Tempesta is a senior manager at AHF who serves as both the Northern Bureau Chief and the VP of Finance for the pharmacy business line. LinkedIn
Scott Carruthers is the Chief Pharmacy Officer at AHF, overseeing the organization's entire national pharmacy program. LinkedIn
CORE TOPICS + DETAILS:
[2:17] - How 340B Works
Complex legislation, important results
Why is legislation allowing service-based organizations to profit off prescriptions a good thing? Because it allows these entities to purchase pharmaceuticals at a substantial discount over what a typical pharmacy would have to pay the wholesaler for the same medication. Then they can bill insurance plans and other entities, organizations, or plans that cover the insurance or the prescription part of insurance for patients and make a profit. This means that they can serve more patients and provide more services, all without using taxpayer money or government funding of any kind.
[5:42] - Pharmacy Benefit Managers & 340B
Manipulating the system
PBMs have become enormous organizations that control the pharmacy market through their relationships with pharmacies and even providers— sometimes all owned by the same company. They see 340B as an opportunity to turn more significant profits, even though it was actually intended to help organizations like AHF and their patients.
[14:42] - The Best Way to Help 340B: Leave It Alone
A simple answer for a complex issue
340B has allowed countless entities to provide services to the underserved that otherwise never would have gotten them. By allowing it to morph into yet another means for corporations to enhance their margins and profits, we would be stripping it of its effectiveness for that purpose. That’s why AHF advocates so passionately for it to be left as-is. After all, it doesn’t cost taxpayers a thing.
[27:58] - Getting Involved with Advocacy
Advice for those inside and outside AHF
Want to get started with advocacy? Scott and Donna’s advice is simple— just do it. Start somewhere— anywhere. Start with what you’re most passionate about, where there’s the greatest need, or just with what’s available to you. Do what you can, then do a little more, and eventually, you’ll see your efforts snowball into something truly meaningful.
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Lauren Hogan is the Communications Manager for the AIDS Healthcare Foundation and has been working in a series of roles with the Foundation since 2016. She’s passionate about increasing the public visibility of AIDS, the Foundation's critical work, and how everyday people can help join the fight to make cutting-edge medicine, treatment, and support available for anyone who needs it.
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Lauren Hogan:
Get unfiltered lessons from our leaders at AHF as we uncover real, raw stories of where we came from and where we are going. Join us for an unscripted look at the connections our senior leadership have to our mission, core values, and hot initiatives. AHF is the world's largest HIV/AIDS service organization, operating in 45 countries globally, 16 states domestically, including D.C. and Puerto Rico. Our mission is to provide cutting-edge medicine and advocacy, regardless of ability to pay.
Lauren Hogan:
Hello and welcome to the AHFter Hours Podcast. I'm your host, Lauren Hogan, serving as your liaison to take you through this journey to learn more about AIDS Healthcare Foundation. Before we start the show, please make sure to remember to check out the show notes so you can follow along. Now, let's get started.
Lauren Hogan:
Well, hello everyone, and welcome to another episode of the AHFter Hours Podcast. As always, I'm your host, Lauren Hogan here, and today, we have two special guests with us. We're going to be talking about a very interesting topic, and that is all things 340B. I'm excited to be talking about this today because I think that, one, it's obviously vital for our organization here at AHF, but people need a broader understanding of what it is, so go ahead and introduce our host really quickly. We have Donna Tempesta as well as Scott Carruthers. Before we get started, though, quickly, Donna, can you just introduce everybody to who you are and your role here at AHF?
Donna Tempesta:
Sure. Hi, Lauren. Thank you so much. I really appreciate you inviting me to this call. Like you said, I'm Donna Tempesta. I am a senior manager at AHF and I wear two hats for AHF. One is I'm the northern bureau chief and the second one is I'm also the VP of finance for the pharmacy business line.
Lauren Hogan:
Scott, can you let us know who you are?
Scott Carruthers:
Sure. I'm Scott Carruthers. I am a pharmacist, although I'd be very dangerous in a drugstore these days, but I'm a senior manager, and I am the chief pharmacy officer, so I oversee the whole national pharmacy program.
Lauren Hogan:
Really quickly, we are just going to dive right in, what is 340B, and why is this so important? Scott, how about you start with this?
Scott Carruthers:
The 340B program, really, the 340B signifies a section of massive legislation that was passed in, oh, the mid-'90s or so, and the idea of the 340B section was to allow safety net providers to make a profit on the prescriptions that they were having filled for their clients or patients. The idea was to allow these entities, as they're called, to purchase pharmaceuticals at a substantial discount over what a typical pharmacy would have to pay the wholesaler for the same medication. Then they could bill insurance plans and other entities or organizations or plans that covered the insurance or the prescription part of insurance for patients and make a profit. This meant that they could serve more patients, provide more services, all without using taxpayer money or government funding of any kind, so it was very simple, straightforward, and there are several kinds of entities that qualify, and it's all in statute. It's just a simple way to buy drugs at a major discount, sell them at the usual and customary price and use that money to treat more patients and provide more services.
Lauren Hogan:
Donna, you want to jump in?
Donna Tempesta:
Sure. Scott, you really nailed it. Just a couple of things to add. It is 30 years, actually. It came out in 1992, so happy birthday to 340B. AHF gets it because of our Ryan White grants and our STD grants. That's what qualifies AHF to be considered. What's called a "covered entity." Really, how Scott mentioned that the discount and that discount is determined because pharmaceutical manufacturers, in order for them to participate in Medicaid, the federal government said, "Okay, we'll let you participate in Medicaid, but you have to get of us the best price. You can't charge us what you charge everybody else."
Donna Tempesta:
Then when the 340B statute came around, that's what the 340B statute required, the same or similar best price to be offered then to covered entities. We then, us as a covered entity, gets a similar price to the Medicaids, if that helps and to understand it a little better. It was really created to stretch scarce federal resources as far as possible and for the underserved, the covered entities, to be able to use those services and resources to really help reach other communities and cover those non-grant-funded or unfunded jobs that needed to be done by us.
Lauren Hogan:
My next question, I think, Scott, this is actually going to go to you first, or actually, let me start with, what are pharmacy benefit managers, and why are they against 340B?
Scott Carruthers:
"PBM" is the term that's often used, but it's pharmacy benefit manager, and they really were designed originally to be a clearinghouse, if you will, for pharmacy claims. A pharmacy would bill a prescription. That clearinghouse would then mainly electronically determine if the patient was eligible, if the pharmacy was eligible to dispense for that particular insurance plan, and nothing more, but they have morphed into a gigantic organization that really controls the market.
Scott Carruthers:
I don't know that the PBMs actually hate 340B, it's just they would like to get a piece of it, and so they've been manipulating, and really, we think, in many illegal ways, to really get into the 340B discount, if you will. It wasn't intended for them. One of the ways that they're doing that is they give us a contract for the insurance plans that they have contracted for and are representing. What they do is they give us a take-it-or-leave-it contract.
Scott Carruthers:
Let's say CVS, for example, they're the largest PBM in the country. They have hundreds of insurance plans that they contract with, so you have to use CVS, or Caremark, that they call their PBM, the Caremark PBM to adjudicate a claim, so if we want to use the patient's insurance plan, we'll electronically send the claim to Caremark. They do all of these internal checks electronically to see is the patients qualified under that insurance plan. Is the pharmacy qualified with a contract with Caremark? There's so many plans that they can contract with. If we don't accept it, then there's hundreds and thousands of our patients we cannot serve. Our patients would have to pay cash, for example, not use their insurance.
Scott Carruthers:
Back to the point that they give us these contracts, they then reimburse us at a cost of the ingredient that is far less than what we actually would pay without 340B. The fact that we have 340B, and then we can buy at the discount and to continue to serve those patients, then we are sort of giving up that 340B because the contract is at a lower reimbursement rate than what we would normally receive, so they're digging into the profit that the regulation actually was intended for us to receive. They like it in one way and they don't like it in another because we have it, they don't, but they're finding and weaseling their way into a way to eat at those profits that we normally would. That just means we can't provide as many services or treat as many patients.
Lauren Hogan:
Donna, do you want to add anything?
Donna Tempesta:
I guess just to start out, it's clear as mud, right, I'm sure everybody is saying. Scott did a great job explaining it, but it is still so complicated, and they do that on purpose. They are so not transparent in everything the PBMs do. 70% of the PBM market is owned by three companies. It's Express Scripts, it's Optum, it's CVS. I guess your question was why don't they like 340B. In simplest terms, I say it's nepotism and it's greed. Those are the two things I would really come down to.
Donna Tempesta:
To explain it is, some may have heard us discuss in meetings vertical integration. What does that mean? What does vertically integrated mean? It just means that the insurance company, the PBM, the pharmacy, and sometimes even the provider, they're all owned by the same company. That's what we mean by nepotism. Of course, the PBM isn't going to like the 340B because the manufacturers are making less money. Like Scott said, they want to bite into some of that profit.
Donna Tempesta:
A, the manufacturers are making less money. B, they feel that the covered shouldn't be making this money and these resources, they want to keep it to themselves. They've tried to come up with these very unfair ways, and creative, they're really very intelligent, of things that they've tried to do to manipulate. In fact, one of our billboard says "Pharmacy Benefit Manipulators, PBM." That's what they do. They've done clawbacks. DIR, many people have heard about that, is they basically take money off of every single one of our scripts. They say that's supposed to be based off of some arbitrary quality review, but that money just goes back into their pocket. That's the greed. It's called "discriminatory reimbursement."
Donna Tempesta:
The insurance companies want us to tell them, every single 340B client we have, they want us to put a little code on every single adjudication. It's very challenging for pharmacies, and especially these small, independent pharmacies, to be able to create workflow, to be able to do that. But they don't care, you have to put this on. They dictate mail order and closed networks, so you can't use the pharmacy you want to use, which means look at AHF. AHF, we have so many that are told our clients can't use our pharmacy, but we know our healthcare providers, our case management, our pharmacy, our full service of care, the best interest is in the farm is for the client for what we do. But they don't care about that, they just care about lining their pockets.
Scott Carruthers:
Yeah, and this DIR fee that Donna spoke of, they say that it's to encourage quality care. Well, they take money away from our ingredient cost, and then if we meet certain standards, they give it back to us, but they don't give it all back. They still have a minimum. Let's say 2% is about the normal, so no matter how hard we try to meet these so-called "arbitrary quality standards" that they set, we still don't get all our money back. They've already discounted at below what it would normally cost us for the drug because they're eating into our 340B profits and they take more of that. They don't give us anything for dispensing, for the bottle, the label, for delivery. There are no fees involved at all, it's just reimbursing the drug cost, so they discount that, and now, they're taking back on these DIR fees, so they really have put community pharmacies across this country out of business. Community pharmacy in the very near future will not be the same. All you'll see are CVS, Walgreens, the chains, and hopefully, more AHF pharmacies, but it's criminal. It really is criminal. As Donna said, it's greed. It's just pure greed.
Donna Tempesta:
Yeah. Lauren, we can go on forever on this. They're acting like they're the doctors. They're creating drug formulary. They're saying which drugs. A doctor and a pharmacist is saying, "No, my client needs this," but no, they create the drug formulary. Then in the contracts, they have gag clauses, so we can't even go out and make noise about it. They have arbitration clauses that we can't sue, so they've really created this system so they thought that we couldn't push back, but at AHF, we don't go down lightly, so we're making some headway there.
Lauren Hogan:
Going back to 340B then, we know it's very important and vital to our pharmacies here at AHF. How does HF participate in the fight to keep 340B from being touched?
Donna Tempesta:
Yeah, I mean, we've done a lot. I think everybody knows let it be, right? What a great slogan. I think we all know it, we understand it. Basically, what we've asked is leave it alone. It's been around for 30 years. Let it be. Leave this program alone. It's done great things. Organizations, covered entities have been able to provide so many services to the underserved that wouldn't have gotten it, so let it be. AHF has done a wonderful job marketing that. We've had advocacy events. We have lobbyists. We have litigated and have done our voice there. I think it's one of our core values. We fight for what's right. We're not going to back down from the big guys.
Lauren Hogan:
I just want to add really quick. I think the thing that I found most interesting about 340B is that it actually doesn't cost taxpayers anything, so it's not bothering anybody. It's not a problem. It's really only helping people, so the fact that there's so much resistance in people trying to take away this funding is quite mind-boggling. Scott, I'll let you go ahead and answer as well.
Scott Carruthers:
Sure. It is really the drug manufacturers that are providing the discount, but you're talking about a drug that our wholesale costs might be, a particular HIV drug, about $1300 for a month's supply, 30 pills. The manufacturer probably can put out that bottle of pills for a few dollars, so there are enormous profits there. It's not like we're putting drug companies out of business either with this program. Really, if you look at over 1.5 million patients that AHF serves around the world, for us to show that we're treating more patients is almost laughable because we do. Our global program is, those patients don't pay anything. They have no insurance. It's not like the United States. We go into remote, rural areas, where the need is greatest. Even domestically, that's our mission. We go into areas that are underserved, the Deep South. Patients do not leave our pharmacy or our healthcare center without being treated or without their medication. Period.
Scott Carruthers:
That's what we use 340B money for, to treat more patients, provide more services. We have experts in the healthcare centers that focus on infectious disease and HIV in particular. We have experts in our pharmacies that are certified in HIV care, as well as all the comorbidities that these patients have now. We treat all of that without reference to whether they have insurance or not. Yes, we try to collect every penny that we can, and we do, but on the other hand, as I said, a patient will not leave the pharmacy without their medicine, regardless. We have easily demonstrated we treat more patients and provide more services and that's what it was intended for.
Donna Tempesta:
Lauren, we're not alone in this fight. We've created, we're part of a bunch of coalitions. There's lots of allies and friends that have also had a large voice in this that we're all up there. Each state and each region, each bureau has become parts of coalitions. It's interesting. I'm from New York, if those listening to this podcast couldn't tell, but we've made some strange friends that we really probably would never have had joined forces had it not been for what the PBMs and the manufacturers are doing and have shared ideas and have marched together. We were up in Albany pre-COVID. It was March 3rd. We were up in New York. There had to be 200 of us marching on in Albany with signs fighting against the PBMs. It was a great event. We spoke our voice because the PBMs are not regulated either and we were fighting for PBM regulation.
Lauren Hogan:
Then I have to ask, do we have a growth strategy? Or what's the process? As AHF, we make sure that acquisition is a part of our model. We have affiliates and different entities that are a stakehold named maybe in a certain market. We want to make sure that they are able to keep their doors open. What is the process that we take at AHF to acquire other pharmacies? How do we choose? What does that look like?
Scott Carruthers:
Well, our growth strategy is really multipronged, if you will, but simply put, the best acquisition we could make is a physician with a practice that perhaps is at a point where, because of reimbursement, it's not just for pharmacies, it's everybody in healthcare, reimbursement is shrinking, so there are a lot of physicians that are struggling financially, and yet they want to stay in the field. Acquiring those practices brings us patients and it brings us a provider, so that's really our number one target, if you will.
Scott Carruthers:
A second target would be, I think, these ASOs. Again, many of them over the years, we have found that grants and other donations have shrunk, and so they, too, have either had financial issues, or the legacy administration, if you will, is ready to retire, and they want to make sure that their legacy lives on, and so we've partnered with them, and actually acquired them. We call them affiliates, but we've actually acquired them. Again, that brings several thousand in some cases, patients, to AHF, so that over time, we typically will go in and put a clinic in and a pharmacy in those ASOs, and so those patients now have provider, a pharmacy, they have testing services. We're able to increase the services that they provide and keep the patients or the clients that they have still receiving those services and we typically will increase that. That's probably the second best.
Scott Carruthers:
Thirdly, then, we might look at pharmacies. Pharmacies are a little more problematic in terms of acquisitions than the first two, but there have been situations where, for one reason or another, the stars align and we've made acquisitions. The MOMS is a good example of that. It was a small chain, but their focus was on HIV. That literally put us in Seattle, that put us in New York, it put us in San Diego, so pharmacy has led an expansion in some ways, but it's not the best and or the easiest. Physician practice, ASO, then pharmacy, kind of in that order.
Scott Carruthers:
Then we look at, we have folks out there, Tony Luna is really leading that charge, but we're looking in those areas that we know where the services are below standard, or there's a lack of services for one reason or another, whether it's state county, or just a denial that HIV is a problem in their communities, so underserved populations is certainly an area that we look at. Sometimes we just go in and set up a clinic and a pharmacy, and next thing you know, an out-of-the-closet testing. It's all connected. As you may know, we are currently moving to a model that we call "four-in-one," out of the closet, wellness, testing, pharmacy, and healthcare center, all under the same roof. There's a variety of ways that we expand, some of it just we get a phone call, and other times we have people out turning over rocks, looking for things.
Donna Tempesta:
Yeah, Scott, I think you've definitely seen the growth, at least since I've been here, right?
Scott Carruthers:
Yeah.
Donna Tempesta:
I think when I started back in 2012, when I started 2012, we had, I think there was maybe 30 pharmacies, and now, we're over 60. That growth, as Scott said, we don't really look to purchase pharmacies. Some of it is they're just too expensive. Even though you keep hearing that they're going out of business, they haven't accepted the fact that they're going out of business. Some of the big chains are still offering those independent pharmacies top dollar, but like Scott said, me with my finance hat on, they're breakeven at best, so it is challenging to bring on that. Our return on investment ROI, as many of us have been taught to look at when we do put it to paper, sometimes it's challenging, but then sometimes we do have these great opportunities. I must say MOMS Pharmacy was one of them. Then we just recently had Hillcrest in San Diego, which really worked out well. But like Scott said, it's a better model when we're bringing on ASOs as well as that healthcare practices, the providers, and then last, pharmacies.
Donna Tempesta:
As for how are we growing and where are we finding the other people out there? Tony Luna is wonderful, but as all of us know, we're broken into bureaus, and we have people, like Scott said, uncovering what's out there, their community outreach, our sales folks, our geography, regionals, our tasks with, with finding and helping grow, as well as our organic growth. I think our organic growth has really proven, sometimes it's just easier for Scott, instead of buying a pharmacy, just put one in healthcare center, or build it. In the north, we have several of just brand new builds. Philadelphia and the Bronx, both of them are over 500 in census. They were ground-up. There was no affiliate, there was no purchase. We're doing the same thing in Baltimore, as well as other bureaus have a similar type of growth strategy there.
Scott Carruthers:
Excuse me, there were four pharmacies when I started, so we're over 60, so the four legacy pharmacies in the Los Angeles Area, so the growth has been great. But as Donna said, a lot of it is sometimes we know there's a need and we just go in and put in the clinic and pharmacy and the rest follow. It's a small army of people out there, as Donna said, that are looking to see what's going. That happened in Texas and Texas is a big growth area for us. I think the future, probably Detroit, Michigan area, probably North Carolina, probably more in Georgia, but we got Tennessee that we're looking at, some New Jersey, so there's still some pockets of areas that we feel are underserved that we may have to just go in and start from scratch, but there's still some other of the physician, ASO, and pharmacy locations out there that probably will fall in with AHF over the future. It's just about any kind of opportunity we see sometimes we create the opportunity and sometimes we get a phone call, so it's just, we look at everything.
Lauren Hogan:
We are pretty much at time, so I have one final question for you both, and that is we've gone over 340B, PBMs, we have a lot of advocacy initiatives that we do here at AHF, as we are an advocacy organization. What advice do you guys give to others, whether internal or external, in terms of getting involved?
Scott Carruthers:
Well, I'll start off. I just say that what I tell people, and it's so true, and I mean it from the bottom of my heart, I mean it, we all have tough days. I mean, you can't get away from it. Sometimes it's personal, sometimes it's work. We all have tough days, but I can tell you, driving home, I know that somewhere around the world, we have done some very spectacular things for patients, for communities, sometimes even for countries. I tell you, the tough day that I had that particular day just melts away. I tell people that all you have to do is show up and raise your hand and you'll be involved. Just know that this is the right place. It doesn't end. Every single day, there are things that we know we have done and that we hear and that we've done that our colleagues around the world, people we work with, the computer station that you stand next to. It's not a hard sell. It really isn't. Those of us that are here just have to tell people more about it.
Donna Tempesta:
Yeah, Scott, again, you hit the nail on the head. Just do it. Just do it. I know we're all busy with our lives, but I came here 12 years ago. I had little children back then. Get your family involved. They're different today, as I am, because of AHF. It's just something that you can't teach until you do it, so all I would advise is just do it. Figure out a way. Talk to your managers, talk to your family, and just get out there. It is a great feeling. There's nothing better.
Lauren Hogan:
Well, on that note, I have to say, thank you to both of you. This has been a very informative episode, so I appreciate all of your knowledge and all the information that you provided to us. We'll see you next time.
Donna Tempesta:
Thanks, Lauren.
Scott Carruthers:
Thanks, Lauren.
Lauren Hogan:
Thank you so much for joining us. If you enjoyed this episode and you'd like help support the show, please subscribe, share with your friends, like, post about it on social media, or leave a rating and review. Follow us on Instagram at @AHFterHours. See you next time.