We know that 340B drugs can only be prescribed and dispensed or administered to eligible outpatients. We also know that HRSA requires us to maintain auditable records demonstrating compliance with all aspects of the 340B program. Well, wasted drug is not associated with a patient — or maybe it is, but it was not administered, so there is no documentation to support the 340B drug use. Maybe only part of the dose was administered. What do you do next in these circumstances?

What is waste?

The short answer: any drug that cannot be associated with patient care based on medical record documentation.

When asking a pharmacy team member about waste, the response typically goes directly to the black and yellow buckets sitting around the hospital where staff is supposed to discard certain types of partially used containers. Sometimes the response focuses on the procedure used to discard partial doses of controlled substances …you know, those boxes that are supposed to make the drug irretrievable?

Drug waste can be characterized in multiple ways. The partial containers requiring a JW modifier, expired drug sitting on the shelf, or the dose of that expensive drug that the patient refused or maybe was dropped on the floor and is now contaminated or was mixed incorrectly in the sterile compounding area all fall under the waste category.

What does HRSA expect?

HRSA does not offer guidance regarding how to manage wasted drugs within a covered entity. But as noted earlier, 340B drug use has to be supported by patient documentation to demonstrate eligibility. Since wasted drug can create significant expense over time, especially for CEs that must abide by the GPO Prohibition, you may wish to spell out some procedures to manage waste and replenish your inventory to help decrease some of that cost. It is possible, but the procedures you use must be defensible for HRSA to accept them.

Is it worth the added work?

Simply, it depends. Review some of the options and determine whether any or all of them are worth the added time. The situations below offer some suggestions to capture waste for replenishment of 340B inventory. Processes are largely manual, so there is risk involved — risk that may lead to manufacturer demands for repayment. Ultimately, you decide the tipping point at which the workload and risk may be worth it.

Separate segregated inventory

For locations that service 100% 340B eligible patients, you may have a separate segregated inventory. That is, inventory is purchased directly on a 340B account within reasonable quantity limits in anticipation of patient use. This inventory is separate from all other pharmacy mixed or neutral inventory.

If the pharmacist or technician is compounding a $6,867 dose of drug and accidentally reconstitutes it with sodium chloride and the drug happens to be incompatible with NaCl, the expensive drug is discarded. You do not have patient documentation to consider that purchase 340B eligible. To replace this drug at the 340B cost, you need to capture the waste dose. If you’re lucky, you can document this in your EHR or sterile compounding software. If not, develop a log and capture all the details, including the patient for whom it was being prepared.

Maybe you purchased a $28,415 dose of the drug for a patient to receive next week, but the patient passed away. You cannot return it, so now it sits. In fact, it sat so long that it expired. Set up a 340B account with your reverse distributor and capture the waste. If you are audited later by a manufacturer, you can demonstrate where the drug went. It would be helpful to attach a patient name to that dose, but don’t provide that to HIPAA.

Replenishment model inventory

We started with the easy scenario. Now you have a mixed inventory and no method to decide which account the drugs were purchased on. You have options to characterize expired inventory.

Treat the underlying cause of expired drugs before you try to capture waste for 340B replenishment.

1. Label it with the invoice label or a color-coded system where is 340B inventory, is GPO inventory and is WAC inventory. The expired packages can be separated for the reverse distributor and captured manually in your accumulator for replenishment later on.
2. Estimate the waste category based on historical use. This requires you to review the percentage purchased on each of your account types (340B, GPO and WAC) and distributing the waste using the same percentage. This approach may be less work than labeling but still a little risky.

If you choose not to classify waste, replenishment will fall to your terminating account (GPO or WAC depending on which type of covered entity you are). Your 340B oversight committee should help you determine whether the risk is worthwhile. You should also stop and think about whether that expired inventory needs to be replenished at all. Maybe it is a slow mover, and you just need to keep a partial package on hand. But sometimes it is a symptom of failure to optimize your automated dispensing cabinet inventory. Treat the underlying cause of expired drugs before you try to capture waste for 340B replenishment!

Partial doses

If you can capture it, you can replace it, but you need those auditable records. Make sure you are using the JW modifier properly and that the modifier appears in all the places necessary to accumulate a full package of that drug.

If the JW modifier is not required, are you capturing the partial package waste somewhere else? Keep a log if you determine it is worthwhile.

Don’t forget to document

Patient-specific waste – maintain records of date, patient, drug, dose as well as any physical manipulation of the split billing software. Audit this process at least quarterly.

Physical labeling – maintain records of auditing the procedure and validation that it is being performed as defined by your policy and procedure.

Purchase history estimations – maintain copies of any documents used to estimate your calculated split between 340B, GPO and WAC, as well as any manipulation of your split billing software.