Third-party administrators (TPAs) have long been one of the most essential partners for hospitals and health systems participating in the federal 340B Drug Pricing Program. Their tools and support help ensure covered entities (CEs) remain compliant with statutory requirements and the increasingly complex and evolving mandates imposed by drug manufacturers.
Without TPAs’ split-billing software for 340B-eligible claims qualification and inventory management, it would be virtually impossible for any of the more than 2,600 hospitals participating in the program to realize the value afforded by 340B: estimated by 340B Health to range from a median of nearly $565,000 annually for small rural hospitals to nearly $9 million per year for disproportionate share hospitals (bit.ly/4jGPDxc).
With increasing pressure from drug manufacturers, including changes in reporting requirements, CEs need their TPA partners to be nimbler than ever, according to hospital pharmacy 340B administrators.
“We’ve always expected TPAs to provide seamless data integration, improve program compliance and support audits,” said Bibi Wishart, PharmD, MBA, the 340B program director at Atrium Health. “But now, they need to be able to pivot and do a lot more to help CEs function in a new world where some manufacturers are requiring [data] reporting turnaround in as little as 30 days. That has been a big challenge because we make sure that the data we are providing is protected and HIPAA compliant, and that can require a longer runway.”
Some vendors are better able to pivot as changes occur either at the program or manufacturer level, Dr. Wishart noted. That nimbleness is due to real-time functions such as sending data automatically to external platforms, rather than requiring the CE to push its own data, she explained.
Working With Multiple Vendors
Many CEs must work with at least three TPAs, if not more, said Gregory Cobble, RPh, the systemwide coordinator of the 340B program for Missouri-based Freeman Health System. “If you have a fairly robust program with a range of contract pharmacies like ours, then you have to work with the Walgreens-stipulated TPA for those prescriptions, as well as the CVS-stipulated TPA, and then the rest of the contract pharmacies may go with the TPA you choose. We really have to rely on all of them to handle the increasing complexity of the 340B program.”
For example, he noted that in Missouri, CEs that owned retail pharmacies are required to submit the actual cost of each 340B prescription for a state Medicaid recipient for adjudication to Missouri Medicaid. “If you use a conventional TPA, it can take a five- to 10-day window before those claims are deemed eligible or ineligible, and then you have to go back and rebill Medicaid for 340B-eligible prescriptions with the actual 340B cost,” Mr. Cobble said. “Others have almost real-time ability to identify 340B eligibility, allowing the 340B price to be sent at the time of adjudication to Missouri Medicaid, which really streamlines the process and is a very big deal for us.”
Missouri’s approach is likely to spread to other states, said Chris Fitzmaurice, PharmD, the vice president of pharmacy strategy and informatics at ScriptPro, one of a number of leading 340B technology vendors. “States are seemingly being influenced by manufacturers, and they’re asking to ensure that they are not duplicate discounting within their Medicaid programs. As a result, you need to be able to prove very quickly, with a large amount of data, that the scripts that you qualified as 340B truly met your qualification criteria, met the letter of the law per HRSA [Health Resources and Services Administration], and didn’t get billed under 340B and also get a discount on the back end. That means you need software tools to ensure that you’re not double-dipping for those discounts.”
‘Rebate Model’ a Cause for Concern
A major concern for both CEs and the TPAs they work with is a recent concerted push by multiple pharmaceutical manufacturers, including Bristol Myers Squibb, Eli Lilly, Johnson & Johnson, Novartis and Sanofi, to implement a “rebate model” for sales of certain 340B covered outpatient drugs, typically some of the manufacturers’ top sellers (bit.ly/42BrBgb). In such a scenario, the CE would have to purchase the drugs at a commercial price and would only receive the 340B discount as a rebate at a later date—if the manufacturer determines dispense/administration aligns with [its] interpretation of “eligible patient.” The HRSA has issued letters to the manufacturers indicating that these proposals violate their obligations under the 340B statute, and the models have been challenged in court—but if they’re implemented, compliance challenges will be enormous (bit.ly/4jIfgxR).
“It would take anywhere from a week to multiple weeks to get that rebate, and meanwhile CEs will have all this expensive inventory on their shelves, or even dispensed,” Dr. Fitzmaurice said. “If they don’t get reimbursed for that difference fast enough, it could damage the pharmacy’s financial sustainability.”
Mr. Cobble echoed those concerns. “Not only would the rebate model be a huge cash-flow problem, but it would be a major administrative burden as well,” he said. “What platforms will they use for these rebates? What requirements will there be? We already have huge issues with the 340B ESP platform they require us to submit to [bit.ly/4ipwvmg]; we’re given 45 days to get the claim in to them, but then they will say that they didn’t receive a claim that we did submit within that window. If we have multiple platforms with those same challenges, it’s going to be even more difficult.”
The 340B ESP website’s “about” section states that it “allows 340B covered entities and pharmaceutical manufacturers to work collaboratively to resolve duplicate discounts.” However, a majority of the manufacturers that participate in 340B ESP have sought to restrict discount pricing in the contract pharmacy area—a move that has garnered significant pushback from community and specialty pharmacy partners of 340B CEs (bit.ly/3YFnRJq-SPC).
Technology Lag
Some vendors have not invested in upgrading their technology and expanding customer support as they should. “People who are looking for the lowest-cost option in 340B technology are going to get burned because the lowest-cost options can cost your CE significant dollars by not being able to perform the necessary functions to support 340B compliance,” said Kristin Fox-Smith, MPA, a managing director for the hospital and health systems services division at Visante. “But if you are in a position to pay more, be sure to take the time to customize; most of the current vendors do allow customization. It is critical to get your systems set up correctly and maintain them.”
Dr. Wishart stressed the importance of finding a TPA that will adapt to meet your system’s needs. “Every hospital is different. One CE might have just one person in their 340B program, while another might have a dozen on their team,” she said. “Your TPA needs to understand your program and shouldn’t just try to fit everything in a box.”
During your vendor search, “look for responsive customer service, with quick turnaround,” Dr. Wishart added. “Scalability is also essential because hospital systems are growing and opening up their own pharmacies in response to some major retail pharmacy chain closures, as well as moving into specialty and clinically managing different patient populations. Your TPA needs to be able to adjust as the landscape changes.”
The sources reported no relevant financial disclosures.
This article is from the June 2025 print issue.