Deciphering Medication Pricing Strategies: Understanding WAC, GPO, and 340B Pricing
- Ravi Parekh
- Sep 1, 2023
- 3 min read
Updated: Jan 16, 2024
Greetings, fellow healthcare enthusiasts and future healthcare leaders! Embarking on this journey to unveil the intricacies of medication pricing, I'm excited to share insights gained from my first IPPE rotation at Duke University Hospital, guided by Dr. Jeff Carter, PharmD. Together, we'll unravel the complexities of drug pricing and its impact on healthcare institutions.
Unraveling Medication Pricing:
Navigating Three Strategies: Think of medication pricing as a puzzle with three distinct pieces: Wholesale Acquisition Cost (WAC), Group Purchasing Organization (GPO) pricing, and 340B pricing:
Wholesale Acquisition Cost (WAC): WAC is akin to the manufacturer's sticker price on a product. It's the initial cost without any discounts or negotiations – the starting point for pricing discussions.
Group Purchasing Organization (GPO) Pricing: Imagine GPO pricing as a collective purchasing power. Healthcare institutions unite to secure negotiated, discounted prices, enhancing both quality and cost savings.
340B Pricing – Public Health Service (PHS): Picture 340B pricing as a VIP membership. Eligible healthcare entities, like government institutions and qualifying hospitals, access medications at significantly reduced prices. However, the inclusion of the 340B program for institutions like Duke primarily stems from their role in providing care to patients who lack reimbursement, resulting in net financial losses.
Customized Strategies for Care:
A Closer Look: To apply these strategies effectively, institutions tailor their purchasing to patient care contexts:
Inpatient Settings: Medications administered to inpatients qualify for GPO pricing when restocked. This approach maximizes pricing benefits for drugs commonly used within hospital walls.
Outpatient Settings: Medications prescribed for outpatient care can be purchased at 340B pricing under certain institutional conditions. This approach optimizes cost savings for treatments delivered outside the hospital environment.
Leveraging Data for Informed Decisions:
Cutting-edge tools like Verity serve as compasses in the pricing landscape. Verity interfaces with electronic health records (EHR) systems like Epic, analyzing patient data and administration contexts to identify opportunities for GPO or 340B pricing, guiding prudent purchasing decisions.
Empowering Cost-Cutting:
Pros: Healthcare institutions and pharmacists wield powerful tools to streamline expenses within this framework:
Formulary Magic: Collaborate with clinical teams to create formularies that highlight cost-effective medications without compromising patient care.
Therapeutic Alternatives: Utilize therapeutic interchange programs to swap expensive medications for equally effective, budget-friendly alternatives.
Waste Reduction Wizardry: Employ technology and best practices to minimize medication waste and optimize inventory management.
Cons: While these strategies offer solutions, they also present challenges:
Administrative Complexity: Managing pricing tiers and eligibility criteria can create administrative complexity, demanding meticulous attention and resources.
Eligibility Criteria Complexity: Not all institutions qualify for GPO and 340B pricing, resulting in limitations.
Contract Compliance Considerations: Adhering to pricing agreements is paramount to avoid contractual pitfalls.
Insights from Renowned Institutions:
Leading healthcare organizations like Johns Hopkins Hospital and Cleveland Clinic also navigate these pricing strategies. Sharing insights fosters collaboration, refining medication procurement practices for the benefit of all.
Illustrating the Impact:
A Cost Comparison Example: Let's delve into a real-world case to grasp the tangible impact of 340B pricing on medication costs. Consider the widely prescribed cholesterol-lowering medication, "Lipitor" (Atorvastatin). This example sheds light on how 340B pricing can transform the financial landscape for healthcare institutions.
Lipitor (Atorvastatin):
Wholesale Acquisition Cost (WAC): For a standard 30-day supply of Lipitor (20 mg), the manufacturer's initial price stands at approximately $275.
340B Pricing: Thanks to the 340B Drug Pricing Program, qualifying healthcare institutions can acquire the same 30-day supply of Lipitor for a mere $50 – a substantial reduction from the WAC price.
This real-life scenario exemplifies the monumental cost-saving potential of 340B pricing. By embracing the 340B strategy, healthcare facilities can access vital medications like Lipitor at a fraction of the WAC cost. The financial relief derived from such pricing strategies enables institutions to allocate resources more efficiently, nurturing both financial sustainability and high-quality patient care.
In Conclusion/Demystifying Medication Pricing Strategies:
As we unlock the intricacies of medication pricing tiers, we illuminate the balance between prudent financial decisions and exceptional patient care. Within the complex world of healthcare, our strategic choices steer us towards a realm where care quality and financial responsibility coexist harmoniously.
By delving into insights from institutions like Duke University Hospital, Johns Hopkins Hospital, and Cleveland Clinic, healthcare leaders collaboratively refine medication pricing strategies, navigating the complexities of healthcare economics to ensure financial sustainability while prioritizing patient well-being.
In which setting are medications administered to patients eligible for GPO pricing when restocked?
A) Outpatient Setting
B) Ambulatory Care Center
C) Urgent Care Facilities
D) Inpatient Settings
References:
Duke Health News. (n.d.). The 340B Drug Pricing Program. Retrieved from https://www.dukehealth.org/for-health-professionals/duke-340b-program
Johns Hopkins Medicine. (n.d.). 340B Drug Pricing Program. Retrieved from https://www.hopkinsmedicine.org/office-of-johns-hopkins-physicians/policies_forms/340b/
Cleveland Clinic. (n.d.). 340B Drug Pricing Program. Retrieved from https://my.clevelandclinic.org/health/articles/17477-340b-drug-pricing-program
Pfizer. (2022). Lipitor (Atorvastatin Calcium). Retrieved from https://www.pfizer.com/products/product-detail/lipitor_atorvastatin_calcium
Disclaimer: The information provided in this blog post is intended for educational purposes only and should not be considered financial or medical advice. Seek guidance from qualified professionals for personalized advice.
cool blog! Dr. Carter is very nice!
This is very enriching! Thanks Ravi!