process ensures against paying excessive costs and, therefore, is an effective
way for Section 501(c)( 3) organizations to show that their vendors are
Third, as mentioned previously, Section 330 prohibits a community health
center from providing discounts to third party payers. A community health
center must make “every reasonable effort” to collect payments from third
party payers (without application of any discounts).230 Additionally, a
community health center is restrained in how they use revenue generated
based on their Section 330 status. It is a community health center’s Section
330 status that makes it eligible for the 340B Program, therefore 340B funds
need to benefit the community health center project. Procurement of services
at fair market value often benefits community health center projects, but there
is little argument for how procuring pharmacy services for above fair market
value would benefit a community health center project.231 Accordingly, a
340B contract with fees greater than fair market value could jeopardize a
community health center’s Section 330 grant.232
Once fees have been successfully negotiated, a community health center
has the added burden of convincing pharmacies to apply the center’s sliding
fee scale discount for patients who earn less than two-hundred percent of the
Federal Poverty Level.233 There are many pharmacies unfamiliar with this
community health center requirement, and they often resist the administrative
work involved in implementing the discount at the counter with individual
patients. That said, it is not the pharmacies’ obligation to absorb the patient
discount, but rather the community health center’s, so it is a relatively light
lift from the pharmacies to apply patient discounts. Pharmacies can rely on
vouchers or a similar document provided by the community health center to
the patient that would indicate the level of discount to be applied.
(vi) Records and Audits Section
As a covered entity remains liable for any noncompliance, it is
extraordinarily important to include contract provisions that allow a covered
entity to audit the pharmacy.234 As stated earlier, the proposed
MegaGuidance imposes a requirement for covered entities to conduct annual
vendor) can constitute the provision of a private, as opposed to a public, benefit, disqualifying
the organization for tax exemption.
230. 42 U.S. C. § 254b(k)( 3)(F) (2010).
231. See 45 C.F.R. § 74. 44(c) (2004).
232. Notice Regarding 340B Drug Pricing Program, supra note 206, at 10279 (discussing
the importance of complying with the Anti-Kickback Statute in negotiations).
233. HRSA Health Center Program, Program Requirements, U.S. DEPT. OF HEALTH AND
HUMAN SERV., http://bphc.hrsa.gov/programrequirements/index.html (describing the HRSA
program requirements including the sliding fee discounts).