340B Contract Pharmacy Services Agreement: Some Rules and Many Pitfalls
by Elizabeth “Issie” Karan, Legal Counsel

Controversy abounds in use of contract pharmacies in the 340B Discount Drug Pricing Program with 22 manufacturers restricting their use and/or requiring extensive data reporting from most covered entities. Luckily, and with some hard work from the Alliance team, HTCs have been exempted from these challenges. However, contract pharmacies still do not mean a free lunch. Some concrete rules exist from the 2010 Contract Pharmacy Services Guidance. Perhaps more importantly, however, is ensuring that the operational realities of the relationship work for your HTC.

The Contract Pharmacy Guidance outlines ten requirements for a Pharmacy Services Agreement (PSA) in the 340B Program. Given the long history of this guidance, most PSAs include these components. Therefore, it’s important for your legal counsel to ensure they are included but that is not the end of the story.

Operational components of PSAs should be closely reviewed. These often are codified in addenda to the agreement and describe how the program actually works. Importantly, these indicate when and how the parties will be paid. Additionally, in a virtual replenishment model, the description of operations will delineate that process for HTCs getting credit for their 340B prescriptions. HTCs should review these descriptions closely. Oftentimes, the operations will leave out concrete timelines for replenishments which could be a disadvantage for HTCs. For example, HTCs should get credit for prescriptions ordered by its program, regardless of when the contract pharmacy or its vendor actually wants to accrue those prescriptions to HTC accounts. We have heard of problems arising in the field when the pharmacy or its vendor sits on replenishments or fails to account for them entirely. This problem can significantly negatively impact the financial benefits of the relationship and may create significant work for the HTC.

HTCs have the most leverage to ensure operations work for them prior to entering into an agreement. After the agreement is signed, few incentives exist for contract pharmacies to accommodate the HTCs’ requests. Make sure you are imagining how the steps of the relationship will proceed and get the agreements reviewed by legal counsel BEFORE signing them.