Friday, February 16, 2024

The Drug Discount Ecosystem Needs Clarity in 2024 and Beyond

Today’s guest post comes from Gavin Magaha, Senior Director of Value Delivery at Kalderos.

Gavin discusses the problems manufacturers face in accessing and standardizing drug discount data. These data are necessary to avoid duplicate discounts and comply with regulatory requirements.

To learn more about how the Inflation Reduction Act adds to challenges of drug discount programs, download Kalderos’ whitepaper:

Operational Complexity and Evolving Challenges: What Drug Manufacturers Need to Know Now About Drug Discount Programs, the Inflation Reduction Act, and 340B.

Read on for Gavin’s insights.

The Drug Discount Ecosystem Needs Clarity in 2024 and Beyond
By Gavin Magaha, Senior Director of Value Delivery, Kalderos

The drug discount market enters 2024 in a state of flux. Legal challenges to the 340B program are working their way through the courts. And, industry awaits further guidance on the Inflation Reduction Act’s (IRA) maximum fair price (MFP) rule and Medicare Part B and Part D inflationary rebate penalties.

Meanwhile, the Centers for Medicare & Medicaid Services (CMS) and other agencies continue to work with drug manufacturers, Covered Entities (CEs), and state Medicaid agencies to build out a system to effectuate implementation of the MFP—which establishes a ceiling price for certain drugs sold to Medicare patients—at or near the point of sale.

CMS also remains in discussions with drug manufacturers and CEs about contract pharmacies. Recent litigation has revolved around contract pharmacies and the roles they play in duplicate and noncompliant discounts. For their part, manufacturers are monitoring ongoing legislation between parties to implement new and updated policies to mitigate the financial impact of duplicate drug discounts. At the same time, they must navigate drug discount policies and regulations from 51 different states and territories, putting even more pressure on their bottom lines.

Consider last November’s Genesis decision. A U.S. District Court in South Carolina prohibited the Health Resources Service Administration (HRSA), which is charged with responsibility for the 340B Drug Pricing Program, from enforcing its narrow definition of what constitutes a “patient” under 340B. Authorized by Congress in 1992, the 340B program was created with the intention of protecting safety-net hospitals (which serve Medicaid beneficiaries and uninsured patients) from rising prescription drug costs by allowing them to buy outpatient drugs from manufacturers at a lower price.

Under the court’s ruling, an ongoing relationship between an individual and a CE isn’t necessary for that person to be considered a patient. This will almost certainly lead to new challenges and considerations for covered entities implementing 340B programs and will lead to an expansion of the 340B program. Multiple covered entities could potentially claim the same patient, which would result in multiple 340B purchases by multiple covered entities for a single claim. There will be a need to decide which covered entity is eligible for the 340B price when multiple entities believe they have the right to the 340B price on the same claim.


However, an expanded 340B program inevitably will make it more difficult to prevent duplicate discounts with MDRP (Medicaid Drug Rebate Program) and commercial rebates. Duplicates raise the risk of increased revenue leakage for manufacturers, particularly those struggling to implement compliant 340B programs because they need the tools and technology to effectively manage drug discounts at scale.

As they await further guidance from CMS, manufacturers are also under pressure to effectuate MFP within 14 days of the point of sale. Under MFP, CEs are entitled to use the 340B price for a particular drug instead of the MFP price, if the 340B price is lower.

While Medicare will pay the cost of the drug up to the negotiated amount, the remaining difference between the MFP and the purchase price of the drug will be paid to the pharmacy or the provider by the manufacturer. What is unclear is whether CMS will require the difference to be based on the actual purchase price or a surrogate.

All signs point to the need for additional technology and data to meet these tight timelines with limited people resources and expanded need with the new patient definition.

A surrogate price is something to be considered. Then it would be a matter of the manufacturer multiplying the number of units by the delta between the surrogate price and the MFP. Such a process would necessitate accurately ingesting and processing that data efficiently at or near the point of sale, a prospect raising concerns from some drug manufacturers. Again, manufacturers without the right technology platform will find it difficult to operationalize and manage MFP requirements within a two-week timeline, introducing additional potential loss of revenue.


The drug discount ecosystem continues to change in response to political forces, regulatory requirements, and the evolving needs of drug manufacturers, CEs, state Medicaid agencies, and other stakeholders. Drug manufacturers impacted by the IRA and changing 340B rules will need to implement solutions that can optimize, if not transform, how the drug discount ecosystem functions.

Problems with accessing and standardizing drug discount data make it exceedingly difficult for manufacturers and other drug discount stakeholders to implement effective solutions. Without the ability to collect and analyze drug discount data, stakeholders lack transparency, thus breeding a lack of collaboration and trust.

Kalderos built its Drug Discount Management platform to address the fundamental data issues behind these challenges. By integrating enhanced data and analytics with the ability to detect 340B noncompliance, the Kalderos platform provides manufacturers with actionable insights into their drug discounts at scale.

The drug discount system should enable consumers to purchase the medications they need at a fair price. We will continue to develop our platform and work with all stakeholders to achieve that goal.

To learn more about the operational complexity and evolving challenges of drug discount programs related to the Inflation Reduction Act, download our whitepaper: Operational Complexity and Evolving Challenges: What Drug Manufacturers Need to Know Now About Drug Discount Programs, the Inflation Reduction Act, and 340B.

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