340B Compliance with External Compounding and Repackaging Service Providers

As a 340B covered entity (CE), can I use external service providers for compounding and repackaging drugs, and what account would those purchases appear on in order to comply

These are common questions, and as with many topics within the 340B space, the answers are dependent on several factors which are rooted on both sides of the process, including:

• Internal 340B policies and statutes
• The service providers procedures

Let’s look at some of the details.

Consider the GPO Prohibition

If a CE must abide by the prohibition on the purchase of covered outpatient drugs at GPO or GPO-like pricing, it is important to understand the outsourced service provider’s procedures and how they may impact the GPO prohibition. This can get messy.

If the service provider has the CE’s purchase against accumulations through a bill-to/ship-to arrangement, you can be confident of maintaining compliance. The CE is purchasing drugs for the service provider to compound or repackage and send back to the CE. However, many of these service providers do not use this type of arrangement. The CE still cannot purchase GPO or GPO-like priced covered outpatient drugs, so it is critical to know what the service provider is purchasing and what the service provider is doing with that drug.

Compounding and/or Repackaging

The second consideration focuses on the service provider purchasing the drugs to compound or repackage and then selling them to your covered entity. It is possible but unlikely that the service provider is purchasing the drugs at the non-GPO/WAC price, so it is important to determine what is being done with the drugs. When compounding occurs, the manufacturer’s original drug product is altered to produce a new dose formulation (e.g., a vial is altered to become a premixed bag or syringe for administration). Many times, this new formulation has a new NDC number that is not part of the pharmaceutical pricing agreement (PPA) filed with HRSA and is not considered a covered outpatient drug.

The Repackager

This can get a little tricky. The service provider is removing the drug from the original packaging but is not likely altering the drug in any way, only placing the drug into a new unit of use type of packaging.
The repackaged drug may or may not be assigned a new NDC number. Whether there is a new NDC number assigned or not, the CE must determine whether the drug has been manipulated and whether there is justification to purchase a GPO or GPO-like priced product under the GPO prohibition requirements. Consider obtaining legal counsel review to ensure compliance.

No GPO Prohibition

For CEs not required to comply with the GPO prohibition, the decision to use one of these service providers is a little easier. Since you may “cherry pick” and purchase drugs at the GPO price, your decisions to do so should be represented in your policy and procedure.
All CEs should address these decisions in policies and procedures, whether 340B policies or other hospital/health system policies.

Key considerations:

• Compliance with the GPO prohibition
• The service provider’s drug acquisition procedures
• The service provider’s manipulation of the purchased product
• Covered entity policies and procedures