5 Steps Critical Access Hospitals Can Take to Save on Orphan Drugs

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Drugs used to treat rare diseases fall outside a federal program that helps rural hospitals afford them. But with the right approach, their pharmacy departments can potentially acquire these specialized pharmaceuticals at a discount from the manufacturers.

Rural hospitals have been under enormous financial strain for years. Serving dwindling populations and often located far from patients and other businesses, many struggle to survive. A University of North Carolina study reports that at least 160 rural hospitals across the country have shut their doors since 2005.

Congress recognized the crisis as far back as 1997 when it created the Critical Access Hospital (CAH) designation for eligible rural hospitals. The objective of the designation is to reduce financial vulnerability for rural hospitals and improve access to healthcare in their communities. Among the many benefits CAHs receive is cost-based reimbursement for Medicare services.

As of January 31 of this year, there are 1,349 CAHs in the United States.

One of the most important benefits for CAHs is eligibility for the 340B drug pricing program which allows them to purchase “covered outpatient drugs” at lower cost. But there’s a hitch: The Health Resources & Services Administration (HRSA), which administers the program, excludes “orphan drugs.” These are products used to treat a rare disease or condition.

Obviously, that position can present a burden for CAHs. But within the HRSA's stance on orphan drugs, a small workaround exists. “A [drug] manufacturer may, at is sole discretion, offer discounts on orphan drugs to these hospitals.”

Therein lies great opportunity for CAHs. By knowing each national drug code (NDC) designated as an orphan drug and the associated manufacturers, CAHs can inquire directly to manufacturers about voluntary discounts. Many CAHs are aware of this tactic already and in fact have obtained discounts in writing. But to make the most of cost saving potential, it pays to be able to capitalize on each NDC or each manufacturer that offers a discount.

That’s no easy task. And, it can be further complicated by trying to identify the right point of contact within a manufacturer that understands the HRSA’s ruling on voluntary discounts.

To streamline the process and improve outcomes, the CAH, or its affiliated health system, might want to look to its pharmacy department to lead the way. Often times, pharmacy is a missing piece in a health system’s focus on reducing costs and improving margins.

The following infographic provides a methodology for the pharmacy department to pursue savings of 340B-like voluntary pricing from pharmaceutical manufacturers of orphan drugs.

Drug Discount

By turning over the duty of directly contacting drug manufacturers to the pharmacy department, the CAH will continue a trend many health system executives are following. That is, empowering pharmacy with more organizational decision-making responsibilities. As part of that, many health systems have promoted their pharmacy leader to a C-suite role. The trend has helped move the pharmacy department beyond a cost containment role and into one that is essential to improving patient care and increasing outpatient revenue with specialty pharmaceuticals.

© Copyright 2019. The views expressed herein are those of the authors and do not necessarily represent the views of FTI Consulting, Inc. or its other professionals.

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