340B Programs: 10 Factors for the Pharmacy Owner to Consider

By Brad MacLiver   Authorship and Profile at: Google

There is a program run by the U.S. Department of Health and Human Services, which provides discounted prescriptions to qualified health centers. When these facilities don’t have their own pharmacies they are allowed to contract with a local drug store. The discounted prescription program is often referred to as 340B, named after the section of the law that established the program.

The 340B legislation was enacted to provide indigent and uninsured populations access to deeply discounted medications. Since the program was enacted to assist certain populations there are a number of restrictions and regulations.

With many pharmacies across the U.S. seeing the decline of their net profits, many are looking for new opportunities in order to increase the flow of traffic to their retail pharmacy locations. Would being a 340B contract pharmacy help your business?

Factors to consider during your decision making process:

1. Customers entering the store provide additional foot traffic allowing the drug store the opportunity for additional front end sales along with the 340B Rx sales.

2. In the event of an audit the pharmacy needs to have dispensing and inventory records, billing statements, etc., that proves the medications purchased by customers, under the 340B Drug Pricing Program, were not diverted to people who are not part of the program.

3. Along with the additional record keeping a pharmacy owner will need employees who understand the various state and federal rules and regulations that govern the 340B program.

4. The pharmacy will need a location for the 340B inventory that is separate from their normal inventory, or have a software management system to track the separate inventories. Some of the vendors that have software solutions for the 340B Program are CaptureRx, MacroHelix, PSG, Ramsell, RxStrategies, Sentry Data Systems, SunRx, and Talyst.

5. The pharmacy generates income from dispensing fees. The store does not receive income from the profit margin on the inventory because the drug store does not own the inventory the healthcare facility the pharmacy is contracted with owns the inventory. The pharmacy’s accountant will need to be aware of this for tax purposes.

6. A “market niche” is created for the pharmacy because the pharmacy is contracted with the 340B healthcare entity and their customers/patients are directed to the specific contracted pharmacy.

7. With the current economic situation and high unemployment, unfortunately many people will find themselves in a position of needing assistance, which could expand the number oif customers in the participating in the 340B discounted pricing program.

8. When a pharmacy owner is weighing the potential benefits of a 340B program, they should also consider other aspects of their business and the current market conditions of the pharmacy industry.

9. What are the pharmacy’s goals over the next couple years? A younger pharmacy owner with long term objectives can benefit for many years from the added customers. However, a pharmacy owner considering selling the business in the next couple years should be aware that acquisition values are based on the customer files, and many pharmacy buyers are not currently willing to include 340B customer files in their offers. This results in a lower pharmacy business valuation and a lower purchase price for the pharmacy despite the higher volume of business.

10. Due to the current economic conditions there are some 340B customers who despite the deeply discounted prices, have chosen not to purchase medications. Pharmacy owners need to consider the added costs and time of 340B inventory and customer tracking and reporting, may not be completely offset by the additional dispensing fees they receive.

If a pharmacy owner is considering the benefits of participating in a 340B program, or is considering selling the pharmacy in the couple years, it is advisable to discuss the options with the pharmacy industry expert.

Learn more about 340B Discounted Pricing Programs and their effects on a pharmacy’s business valuation by visiting www.PharmacyValuations.com.

Pharmacy Owners can receive a FREE Pharmacy Valuation. No cost. No Obligation.

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