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Contract Pharmacy
Model Contract (pdf)
» California's Discount Programs

» Glossary

Contract with an Outside Pharmacy

340B eligible clinics can contract with a community pharmacy to dispense medications purchased through the PHS 340B Drug Pricing Program. Contracted Pharmacies are pharmacies that are licensed, owned, or operated by chain or independent drug stores rather than by the health center. The pharmacy signs a contract with the health center to provide all of the pharmacy services for the health center. The health center purchases and maintains overall responsibility for the 340 B drugs but contracts with the pharmacy for the services related to ordering, dispensing, and pharmaceutical care.

Only one pharmacy site per covered entity may be used for 340B contract pharmacy services.

Current Opportunities for Contracting With a Retail Pharmacy to Dispense 340B Drugs

In California, community clinics and County Health Systems outpatient clinics have developed contract pharmacy arrangements with both independent and chain pharmacies. For example, one county uses a third party adjudicator to transfer patient eligibility information to the pharmacies, to provide the county with claims information and to pay the dispensing fee. The county has assumed responsibility for tracking patient eligibility, monitoring pharmacy dispensing history and ordering drugs.

From the chain pharmacy perspective, one such company has developed a purely electronic model that fully meets the 340B statutory regulations. Features of this model include electronic inventory separation and a choice of co-payments.

Contract Pharmacy FAQs

Medpin, working with attorney Cary Adams of Murphy, Austin, Adams, Schoenfeld LLP, has developed the following questions and model contract for clinics considering taking advantage of this new California law. Click here for our Sample Model Contract.

Who owns the 340B drugs?

The drugs are owned by the eligible clinic which is responsible for paying for the drugs when purchased from the distributor, and is entitled to receive any unused inventory at the end of the contract. The clinic is also responsible to make sure that the drugs are not diverted to ineligible patients and that, if dispensed to Medicaid patients, that Medicaid is charged only the cost plus dispensing fee.

What is a ship to / bill to arrangement?

The order submitted to the supplier will indicate that the drugs should be shipped to the pharmacy and billed to the clinic.

How does the clinic establish its initial inventory?

If a separate physical inventory of 340B drugs is to be maintained, the clinic and pharmacy should agree at the outset as to what volume of which drugs to maintain as a standing inventory, and the first order will establish this inventory. If an electronic inventory is to be maintained, the clinic and pharmacy may determine not to build an initial inventory, and instead to order replacements each day/week/month for the 340B drugs dispensed. Or a combination of these is possible, but an accurate inventory is essential at all times. The costs will depend entirely upon the volume of pharmaceuticals covered, but the costs under the 340B Program should be lower than prices otherwise available.

Sample Model Contract »

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