accountable.194 The contract should, however, clarify the parties’
understanding and act as a platform that allows the pharmacy and covered
entity to hash out details in advance so that all parties are prepared to
implement the 340B Program properly.195
An added complexity to these contracts is the frequent involvement of a
third party benefits manager.196 These administrators aim to help covered
entities implement 340B programs, and community health centers often find
the relationships very useful.197 However, a covered entity may never believe
it has outsourced its responsibility for full compliance under the 340B
Program, as that may breed complacency when, in fact, liability to the
government and manufacturers for all violations of 340B remain with the
covered entity.198 Accordingly, an act of noncompliance by a contracted
vendor may result in penalties against the covered entity.199
Contract pharmacies generally operate in one of two ways: the pre-purchased inventory model or the replenishment inventory model.200 The
latter model appears to be more common. The pre-purchased inventory
model is where the pharmacy has stocked its shelves with the covered entity’s
340B-purchased drugs.201 When that covered entity’s eligible patient
presents a prescription, the contract pharmacy uses the covered entity’s 340B
drugs to fill it.202 Meanwhile, that pharmacy maintains non-340B inventory
with which it fills non-340B prescriptions.203 In a replenishment inventory
model, the pharmacy does not keep 340B-purchased drugs in stock.204
Rather, the pharmacy fills prescriptions for the covered entity’s eligible
patients with its own non-340B drugs, and then notifies the covered entity,
which purchases the quantity of the drug at the discounted 340B price and
has the drugs delivered to the contract pharmacy to “replenish” its stock.205
A typical 340B contract between a covered entity and pharmacy will
include the following sections: ( i) recitals; ( ii) definitions; (iii) obligations of
the covered entity; (iv) obligations of the pharmacy; (v) reimbursement and
billing (vi) records and audits; (vii) term and termination; (viii)
194. See id. at 10279.
195. See id.
196. 72 Fed. Reg. 1543, supra note 102, at 1545 (discussing third party case managers
and provides examples of case management constructs).
197. See id.
198. See id. at 1545-46.
199. Notice Regarding 340B Drug Pricing Program, infra note 206, at 10279 (discussing
penalties for non-compliance with the Anti-Kickback Statute).