miscellaneous. Beyond these contract sections, 340B contract pharmacy
agreements trigger other concerns, which will be address below under (ix).
( i) Recitals Section
As with any contract, recitals are a place to ground the reader in
understanding the identity of the parties entering the agreement. In 340B
contracts, similar to most health care contracts, the intent of the parties is
stated in the recitals to underscore the proper business purposes behind the
agreement. For example, the contracts will often begin with the recitation
that the “covered entity desires to contract with the pharmacy to manage and
dispense covered entity’s 340B drugs pursuant to the covered entity’s 340B
drug program; and the pharmacy agrees to manage and dispense covered
entity’s 340B drugs pursuant to the terms and conditions of this Agreement.”
The recitals section of the contract is a place to recognize the parties’ joint
intentions and respective roles.
( ii) Definitions Section
Given the regulated environment of 340B contracts, a definitions section
is highly advisable. It is surprising how often covered entities must negotiate
the definitions of 340B terms. If the parties cannot agree to the meaning of
a 340B drug or eligible patient, then the arrangement should not go forward.
As discussed above, the statutory definition of an eligible 340B patient is
slim. It is wise to cross-reference the 1996 HRSA guidance in a contract’s
definition of patient, while noting that the contract will incorporate any new
legal definitions of “patient”. Additionally, parties may want to expressly
exclude Medicaid fee-for-service patients from the definition of “eligible
patient” to prevent risk of a duplicate discount.
When reviewing contracts, people all too frequently skim over the
definition section and those provisions in the miscellaneous section (e.g.,
notice, amendment, governing law provisions). Skimming is a mistake,
especially in a private contract – such as a 340B contract pharmacy
agreement – that extends your liability and makes you more vulnerable to
government sanctions. As a covered entity remains liable for the pharmacy’s
and administrator’s actions in implementing that covered entity’s 340B
Program, it is crucial that management understand all of the nuances of what
it is signing up for.
(iii) Obligations of the Covered Entity Section
Obligations of a covered entity include informing the pharmacy of