calculated under the Medicaid Rebate Program.” 47 The discount is calculated
using the Medicaid rebate formula and is deducted from the manufacturer’s
selling price rather than paid as a rebate. 48
The 340B price is a calculated “ceiling” price based on a manufacturer’s
“average wholesale price” (AWP) reduced by the statutorily required rebate
percentage. 49 In a 2005 report, the Congressional Budget Office estimated
that 340B ceiling prices are equal to the Medicaid net manufacturer price,
which equals fifty-one percent of the AWP. 50 Although the ceiling price is
calculated by the manufacturer, the underlying AWP data has been
confidential and proprietary. 51 Therefore, historically it has been impossible
for covered entities to determine whether the 340B price they are charged is
the accurate ceiling price.
To assist covered entities, the 340B statute tasked the Secretary of HHS
with establishing a prime vendor program “under which covered entities may
enter into contracts with prime vendors for the distribution of covered
outpatient drugs.” 52 HRSA has identified Apexus as its government-sanctioned group purchasing organization (GPO), which is tasked with
negotiating lower 340B prices with drug manufacturers. 53 The 340B
Program prohibits hospitals from otherwise using GPOs. 54 This hospital-GPO prohibition is a great benefit to community health centers as it forces
hospitals, with their greater market leverage, to collaborate with the smaller
safety net providers in securing more favorable 340B prices. According to
the President of Apexus, hospitals account for over eighty-six percent of all
340B purchases, underscoring the value of the GPO prohibition on 340B
hospitals. 55 Apexus is the exclusive contractor for HRSA’s 340B Prime
Vendor Program and is responsible for securing sub-ceiling discounts on
covered outpatient drugs. 56 To benefit from this program, covered entities
47. Astra USA, Inc. v. Santa Clara Cnty, Cal., 131 S.Ct. 1342, 1346 (2011) (holding that
the 340B “agreement” between HRSA and a manufacturer is not a transactional, bargained-for contract, but rather a means by which drug companies opt in to the 340B statutory scheme,
and does not create third party beneficiary rights in covered entities).
48. See 42 U.S. C. § 256b(a)( 1) (2010).
49. See id. (referring to the maximum price that covered entities may permissibly be
required to pay for the 340B drug as the “ceiling price”).
50. See CONG.BUDGETOFFICE,PRICES FORBRAND-NAMEDRUGSUNDERSELECTED
FEDERAL PROGRAMS 12 (2005), http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/64xx/
51. See id. at 13.
52. § 256b(a)(8).
53. 340B Implementation, HEALTH RES. AND SERV. ADMIN., http://www.hrsa.gov/opa/
implementation (last visited Nov. 9, 2015).
54. See § 256b(a)( 4)(L)(iii).
55. Christopher Hatwig, President, Apexus, Address at AHA 2015 Annual Membership
Meeting: 340B Drug Pricing Program Update (May 3, 2015).