Elevating Patient Care through 340B Partnerships ft. Eric Fromhart
In this episode of The Bottom Line Pharmacy Podcast, hosts Scotty, Bonnie, and Kendell dive deep into the world of 340B with special guest Eric Fromhart from Aventi Health. Get the facts about 340B, covered entities, and independent pharmacies in this informative discussion and discover how Aventi Health is empowering independent pharmacies in the 340B program, ensuring their success, and changing the game for pharmacists everywhere.
If you prefer to read this content, the video transcript is below.
Scotty: Welcome to another episode of The Bottom Line Pharmacy Podcast with your hosts, Bonnie, Kendell, and me, Scotty Sykes. And today we’ve got Aventi Health, Eric Fromhart, on the line with us today. So, Eric, welcome to the podcast here and appreciate you getting on.
Eric: Thank you for having me.
Scotty: So, Eric, I saw you at the Vegas Amerisource tradeshow, and looks like you were busy running around. I sent a couple of guys to talk to you about 340B. Why don’t you give us a little bit background on how that show went for you other than the tables.
Eric: The tables weren’t as hot, but fun, nonetheless. Vegas is always good times. 340B has always had some intrigue behind it amongst pharmacies. I’m still surprised how often when it gets brought up, the misinformation, I guess, about it, or kind of misconceptions about still kind of the old way of thinking about 340B, which is like physical inventory, keeping separate shelves, just cash-paying patients, things like that.
Scotty: Eric, tell us a little bit about just real quickly, Aventi Health, like your background with that and your background with 340B.
Eric: Yeah, so to a little bit of what I was intro-ing there, pharmacies have always been necessary participants in 340B arrangements. So, contract pharmacy, and 340B. And I’ve been doing this for, I don’t know, 10, 12 years now. And I’ve always had an affinity for independent pharmacies in these relationships. And when I was a young lad, at 24, when I got my first job out of college, I was working for a company called Well Partner, just a TPA software and always just felt more comfortable being in and talking with the pharmacists and pharmacy owners. And that just kind of followed through. And what I kind of learned over time was that, like, we talked about the education or the focus was kind of on the covered entity side, which is the one that’s eligible, which makes sense. So, it became clear that pharmacists needed some help and information, primarily data to be successful in the program as well. As my career kind of continued and progressed, it was clear that these vendors in the space, like the Well Partners, there’s like 20 other ones, but the common denominator there is that the covered entity is kind of the primary, if not the only focus. And chains became kind of like the way to go. It’s kind of easier. You have corporate contracts and you get multiple stores with one relationship, but the independents didn’t really have that. And so that’s where Aventi you know, we were like, well, hey, we’re kind of like, hey, the independents are here. They want to get involved, and we think they should get involved. If you look at Walgreens, kind of Walgreens’ playbook has been, they have had their own software that operated the program for two decades. They have obviously their large network of stores, and they kind of go out and build 340B programs. So, they call on them. They have salespeople and marketing. And independents, Walgreens has viewed that as very a business play and so they’ve been very successful at it. So, independents have been kind of left behind a little bit on that. And so, at Aventi, we were like, well, if you have the software that kind of gives you a lot of the tool that you need to be successful in the program and actually do it. And so even if you wanted to be proactive and grow your 340B footprint, there’s just certain things that you’ll need to have in order for it to actually run. And so, independents, even if they were going to go out and build their 340B network and footprint, they would need to have certain things and experience and expertise to be able to be successful in it. So there just wasn’t that, so Aventi just kind of like came out of that to say, hey, look, let’s not only try to get them involved, which they think they should, and if they understand the program, they would want to. And so, let’s find opportunities for them. Let’s be proactive and then let’s have the software that operates it.
Scotty: So, you’re that third-party administrator which typically has been most TPAs out there really so called work for the covered entity. More or less.
Eric: Yeah. And most meaning all.
Scotty: And then you guys have come in and say, well, let’s represent more so on the pharmacy side and be that intermediary between the covered entity and the pharmacy. Is that correct? Is that what you’re doing there?
Eric: I wouldn’t say we necessarily represent one side over the other. I think, one is necessary to have they’re both necessary to have this program. I think our mentality is just more of hey, let’s treat the pharmacy like a customer also since in any 340B program the pharmacy is where the money originates from, they are the ones that deal with the inventory, they see the patients at the door. So, it’s kind of like they’re very important parts. So, if something goes wrong let’s say a pharmacy doesn’t get a drug that they were supposed to get or some issue, if they aren’t viewed as a customer, that becomes what should be the really small problem, can grow into something big. So that always created an issue with contracting and created an issue with operations. So, obviously we’re not abandoning it’s not like we’re not considering the covered entity as a customer too and meeting their needs. I think when we looked at, you know, building the infrastructure of the software I had my experience working at two different TPAs in the past. My co-founder worked at Walgreens, again, who has their own software. So, a breadth of different experiences of how things are done in terms of qualifying scripts for covered entities and the compliance aspect, the flow of inventory, there was just a lot of things that were in real need of improvement, not only on the pharmacy side, but also on the covered entity side.
Scotty: That third-party administrator is the key intermediary, if you will, between the two. Tell me how the contracting, you know, we had Amanda Gaddy on here with Secure340B a few episodes ago and she shared a lot of great information on 340B. So, I guess we’ll just kind of expand into that. But tell us how the 340B contracting comes into play with that third-party administrator and why that’s important.
Eric: Yeah, I think for pharmacies in any contract, you got your agents. When you have representatives that kind of like tip the scales a little bit. Again, my standpoint is that there is a position, a contract, that will be successful for all parties and such that there’s no question that everyone will be okay in terms of the economics of the program. That’s what our goal is. I’ve been doing this for long enough that I know what that is. So again, it’s not really about like saying, hey, I’m with the pharmacy, we need to go get them. It’s just more of I’ve been seeing chains just sit there, make the rules, dictate the terms of the contracts, dictate which vendor you’re using, software you’re using, control the whole thing. And I’m just sitting there like, well, why are they able to do it? But independents have to seemingly go with companies that are owned by large PBMs that are actively trying to put them out of business on the commercial side or large wholesalers that they don’t work with. So that was really our focus was to, hey, we want there to be an ability to have a little bit more control over the whole thing, just like other large companies in the space are able to do.
Kendell: Wow. And I have a couple of questions. I mean, you have an experience with the TPA starting out to kind of get into the mind of Eric and kind of help our viewers a little, listeners or viewers a little bit about the competition between the independents and those big box chains. So, for a covered entity, all things being equal generally, from your experience, would they go with a big box chain or an independent, all things being equal? If they had a choice. If they had a choice and then why?
Eric: Yeah, that’s a great question, Kendell. Yeah, so I think if I’m putting my covered entity hat on again, there are variations. So, it’s kind of like the bell curve. Obviously, there’s going to be outliers that can think differently. But I’d say in general, a covered entity is going to look at, well, where is their value out there in the community? Where are my prescriptions going that would qualify for 340B that I could contract with those pharmacies that will produce value for me, or where are my patients going that produce value for the patient. So generally, chain pharmacies have a lot of locations nearby and so if they have the ability to contract with all of those locations very easily, they’re going to say, okay, that’s the easiest, path of least resistance. Let’s do that. Again, to the independent space, if it is easy for them and they know their patients are going to the independent pharmacies, there should be no reason that they would not contact with them as well. It’s just that it might be a little bit more difficult for them to do that.
Scotty: Walgreens of the world, make it a cookie-cutter, turnkey thing. Like, sign this line, you’re done.
Eric: Exactly. Boom, boom.
Kendell: And all of their patients can go to all these different Walgreens and get that 340B and then the covered entity can get the profits from that. So, it’s just easy. Yeah. So as an independent, if you put your independent hat on and you say, hey, there’s a covered entity right in my backyard, and I want that opportunity. And you go to sit down at the table and you got an inkling or an itch that hey, maybe there’s a Walgreens or something that’s going to be coming to the same table right after I leave. What’s the play for the independent pharmacy? To actually have an opportunity of sealing that deal. What is the argument that the independent needs to bring to the table to say, hey, I know they have that cookie-cutter turnkey, but I have-
Eric: Well right nowadays it’s like, hey, we actually have staff and pharmacists that can actually fill your prescriptions.
Bonnie: We don’t have to close down for lunch.
Eric: That’s like number one. But yeah, no, our goal was to level the playing field in terms of the technology and being able to operate a 340B program from there, we know, everyone knows that the service level, the attention in the community.
Scotty: Patient care.
Eric: There’s no question, independent pharmacies have that over a chain. There’s not even an argument. And so, the great part about that is that our approach is just like in a marriage or friendship, communication is never a negative thing to any relationship. Can we agree on that?
Kendell: We’re getting deep, Scotty. I’m about to get some life advice, I’m about to take some notes now Eric.
Eric: Everybody sit down on the couch, let me just tell you, no *laughter*. So, our whole thing is like, hey, we are a software processor of transactions. We’re not living there in the community. Our kids don’t go to school together. We don’t see you at baseball games, volleyball games, church. You do. And so especially in these rural communities where a lot of this 340B is and a lot of independents are kind of the pillars of the community and so too are the health centers and the hospitals there. But it’s just like, hey, you guys are serving the same subset, the same population and your mutual shared patients. So, you guys are going to be the ones dealing with these same patients once the 340B program starts, the software runs in the background. We’re not going to be in there talking to them. So, the more communication that they have with one another, we encourage, because it just builds that relationship. And again, what I think every independent’s goal should be, and I think is nowadays, is to educate the community, just the general consumer, the providers, the administration at a covered entity hospital to say pharmacy is not just taking pills, counting them up and putting them in a bottle. We do so much more than that. And you need to understand and know what those things are. Because as we know, we go to these tradeshows and these conferences and we’re talking to pharmacists all over doing cool things, they really innovate and really progressive. And so I think there’s just a general thinking of like it’s just a commodity still. What’s the difference of doing 340B and retail? It’s just still putting pills in a bottle and it’s just like that’s one aspect it does. But as we know, it’s the most accessible healthcare profession. Nowadays, you have to do more than just putting pills in a bottle, as you see Walgreens, I mean, CVS is unfair because they can pay themselves as much as they want through their PBM, so they could survive a little better. But we know that there’s things that you have got to be doing to kind of just stay in business and be in this environment.
Bonnie: To set yourself apart.
Scotty: I will say that those relationships, the clients we have with significant 340B contracts and patients, those relationships are vital. The community relationship with that covered entity is key to the success of that program long term.
Eric: One hundred percent. And that is kind of the secret weapon, I guess is that the chain pharmacies, they don’t have that personal community relationship. And so, the independent pharmacy does typically, and if not with the administration, then with the provider. And so, they have a lot of influence. And again, we’re just trying to kind of like arm them with information to say hey, you have a lot of opportunity and influence here. If you know how to kind of wield that, then you can kind of cultivate your success there. And so again, we’re just trying to bring a tool in order for them to level set with, to your point Kendell, the chain, because they have the technology and the infrastructure to do that. So, we’re just trying to say, hey, look, all things equal, now you can go and educate about what you’re doing in the community.
Kendell: So, like going through the life of trying to closing a deal. So, you first sat down, you’ve explained the value you bring in the community, right. Let’s say the covered entity gets it, you get the contract, so you’re starting to serve the clients or the patients with no program in place. What is that like for someone the day after if they don’t have a program in place, what are the headaches they run into? Like what are the challenges if you just sign the contract and start servicing patients.
Eric: Like with just a brand new 340B?
Eric: Well, it can be an interruption to your workflow a little bit and most of what you encounter is some interruption to cash flow. So, say you start, program goes live and all of a sudden you’re used to as a pharmacy saying, hey, I need a Xarelto, I’m going to log in and buy a Xarelto and it ships the next day. Then I get invoiced and I pay for that Xarelto. Right. So 340B, the software vendor is what determines what items get to be reordered. And so, a lot of times the software will just, hey, if it becomes we owe you a bottle of Xarelto, we’re going to ship it to you. Especially nowadays with brand name drugs being so expensive and the fact that the reimbursements are and margins are almost none on margins. Pharmacies cannot survive by just housing inventory, especially brand name drugs on their shelves for any length of time. There’s whole InventoryIQ, a little plug there. I know their whole business is to help clean that up and help pharmacies with their cash flow. And so, the time value of money again, if that Xarelto, you have one patient on the Xarelto again, just using this as an example, that costs $500, you’re going to buy it the day before after you call the patient. A lot of MedSync these days saying, hey, are you coming in to get your Xarelto? Yes, okay, I’m going to buy it now. That way I can buy it, get it out. And I’m not holding $500 of cash and inventory on my shelf for a length of time. So, the problem with 340B is that they’ll dispense that and then here it comes shipped from the 340B program and now you got that $500 bottle of Xarelto on your shelf and you get an invoice that you got to pay the hospital or health center. And so now you’re in that cash crunch of now it’s like, well, I didn’t want to do that. I wouldn’t have done that if I didn’t have 340B. But now I got my $500 in my cash tied up, in terms of operations of the program, a huge thing for especially independents because the business model is so different. So going back to chains, they have combated this issue because they have obviously warehouses of central fill. And so, the local stores don’t actually even get the inventory replenished. It goes to a central fill and then they disseminate to their network with chain. Independents just simply don’t have that size and ability to do that. And so, they’re having to deal with that inventory. And so that creates not only an inventory issue but more importantly a cash flow issue. Those are things that again, going to the differentiator of, well, we can help with a contract, but without a software, you can’t help with that reality of the program. But yeah, that’s one of the things. There’s ways you could structure the contract now to make that a little bit easier to manage, but that’s still one of those things.
Kendell: No, that’s a real challenge and I’ve seen it in the numbers. Yeah, you see the profit looks good, but the cash looks the opposite. So, I could definitely see it. And then a program can alleviate that pain point?
Kendell: Software, yeah.
Eric: Yeah. Again, if a pharmacy has control over their inventory, they have control of their cash. So, what they’re used to doing when there no 340B is, again, like I said, buying the drugs they need right when they need them and that’s that. So, if you can give that same control on a 340B program to say, hey, look, we’re going to keep track of the 340B scripts and then tell you what drugs you can order, but we’re going to give you the option. We can have them just ship to you right when they’re owed, just like everybody else if you want. But if you want a little bit of control, then we allow that. We display those items as available that they can pick and choose what they want, when they want them. And they see right there on the screen how much that’s going to cost them in terms of their contract with that covered entity.
Kendell: Oh wow.
Eric: It gives them everything they need to look and feel just like what they’re used to doing with their wholesaler. So, it’s like, I see a Xarelto, I see it’s going to cost me $500. I buy that Xarelto ships to me the next day, I got an invoice for $500. That’s what they’re used to doing. So, if you have a software that says based on your 340B contract with this entity, you have a Xarelto here that you could order and it’s going to cost you $400, then it’s really easy for me to say, look, if I order that Xarelto from the 340B account or my 340B program, it’s going to come the next day. I’m going to get an invoice for $400. That’s $100 less than $500. I’m making money, right? So, it’s just like duh, just make it or display it in such a way that you’re familiar. So again, this requires an understanding of the business of pharmacy, the workflow of pharmacy, what a pharmacy is looking at, how they make money, where they don’t make money, and then kind of constructing your software off of that. Again, going back to the TPA, I love this program. I love covered entities. I love pharmacies, of course, too. What really has been the motivator and I tell pharmacies this or anybody this of doing Aventi is to see these other vendors in the space for so long, just treat the pharmacy as a second-class citizen, almost like a necessary evil is kind of how you feel. And then make a lot of money from that, while on the backs of these pharmacies and it’s just like and build their software for the hospital and the health center, which again, is fine, there is a need for that, but it’s almost like alienating the pharmacy. And so, it’s like if a pharmacy was to complain about, hey, I’m getting these drugs, it’s like, too bad. And so, our whole thing was just like, well, you can satisfy both.
Scotty: So, everybody should have somebody looking at their contract first and foremost, for sure. Because we’ve seen instances where some pharmacies are signing on the dotted line with these 340B contracts. They don’t really understand it or maybe haven’t had someone give a second opinion on it.
Bonnie: I think a lot of our clients have told us they didn’t realize that they can negotiate these contracts either.
Bonnie: It’s either kind of take it or leave it sort of a thing. We’ve had contracts that we eventually look at because the numbers don’t particularly show us that there’s money being made. And you start to look at it and realize they’re losing money. When you read it, it doesn’t sound that way, but when you start looking into the guts of it and the details of it.
Eric: Yeah, well, you still encounter that. But I feel like there’s been a trend in the right direction over the last few years of pharmacies. Kind of like, wait, before I sign this. And Amanda and the team has done an awesome job in getting that education. So, I think that had really been a keystone in helping pharmacies just kind of say, hey, maybe I don’t need to just take what’s thrown at me on my desk in a contract and look at, like, hey, let’s be smarter about 340B and not just view it as kind of a covered entity program, but more of like, hey, this is good for us too, when it’s done right. And that’s what we really like to see in pharmacy, is that trend of getting more educated. But really what my goal is of doing these webinars and tradeshows is just like educating pharmacies of like, this is 340B today and there are things you need to understand before you get into it.
Scotty: So how would a pharmacy I’m just curious because usually when you’ve got a covered entity and there’s already a TPA so how do I, as a pharmacy owner say, well, I want Aventi to be my, our, TPA? How does that happen?
Eric: Yeah, so we don’t have a pharmacy sign any exclusivity with us or anything, so it’s not like we need to lock them into anything. But again, I go back to, well, if a chain can dictate who they use as their software and by doing that, you have a lot of the control that we just explained is really important in a program, then why should I, as an independent, not have that same opportunity? Again, you’re not going to win that battle every single time if you’re going up against Unity Point in the Midwest, a giant health system, like one little pharmacist is probably not going to squeeze in Aventi when they have this giant health system-wide contract. You never know though. And so if you really feel strongly about that, which
Scotty: You just bring it to the negotiation table.
Eric: Yeah, it’s like, why shouldn’t I be able to have something that I bring to the table as an option, if historically it’s been the other way? And again, if your success relies on that. But one thing I’ll say is that to that point, is that a lot of pharmacies don’t understand a lot. Well, they’re contracted with Walgreens already, or they have an in-house pharmacy, or they’re using CVS. All of that does not matter if you are filling scripts from a covered entity. Like you have an opportunity. And so just every pharmacy who’s listening to this should know that the network, the pharmacies they have, doesn’t matter if you have volume, there’s an opportunity and a reason to contract there. And again, to that point, too, if they’re using a Walgreens, a CVS, and any other chain pharmacy or independent pharmacies, they’re most likely at least having three vendors in there already. So, Walgreens has their own technology, it’s called 340B Complete. CVS bought a company called Well Partner a few years back. So now if you want a CVS in a covered entity network, you’re using Well Partner. And so, generally speaking, if there’s other pharmacies, Walmart, anybody else, or independents, they’re using a third vendor. So, we look at it as you got CVS and Walgreens, you already using two, what’s a third? And a lot of times what you’ll find is that covered entities are kind of like we understand that too. Logging into another software is not as big as a deal, as seeing the value of where their patients are going. And getting the financial value from that and also offering the 340B benefit and discounts to their patients at their community pharmacy where they know they’re going. And so, it’s become less and less of a hurdle. Obviously, you encounter it. And there’s times where we get a call from a pharmacy and it’s like, oh, you’re right next to a McLaren in Michigan. It’s like, yeah, I don’t know if I’ll climb that mountain today. But it’s like, hey, we’ll try it. There is that. But again, I think especially pharmacies that have multiple 340B programs using multiple vendors is just, you’re setting yourself up for a difficult time.
Scotty: Oh, man, 340B, because I had a few questions about 340B at the tradeshow, and you happened to be right there I was like, Eric.
Kendell: Come on over here.
Scotty: And then like an hour later, I looked over and y‘all were still talking. I was like, oh, man, 340B.
Eric: Kind of current events, to that end, a lot of the questions I was getting was this DCSCA, the track and trace. And how that’s going to be? And that’s something where I wish so badly, guys, that I could just say has nothing to do with us. Sorry, can’t help you. I wish. But I know come November or whatever it is, we’re going to start getting calls like, hey, I can’t return. What do I do with this?
Scotty: And put a plug on our previous podcast on the track and trace. DC. I don’t know what it is.DCSCA.
Eric: DCSCA. Yeah, I get it.
Scotty: There’s so many acronyms, but yeah, we have a podcast on that, so plug that one.
Eric: There you go.
Scotty: Well, Eric, man, 340B, it’s like, love it or hate it. It’s a beast, man.
Eric: It is. Yeah. It’s like one of those things.
Scotty: I mean, we love 340B because we see the numbers and I’m like, if you got a good contract, man, boom.
Bonnie: We’ve seen clients struggle after losing their contracts, some of their contracts. Yeah. I mean, it’s definitely carrying the pharmacy for sure in a lot of cases.
Eric: And as like a kind of final thought, I think-
Bonnie: It’s his bottom line.
Scotty: He’s jumping to the bottom line here, Kendell.
Kendell: The bottom line. Drop us some knowledge. I got my pen and paper out.
Eric: So, if 340B is this juggernaut that covered entities rely on, of course they do. Pharmacies rely on as a good part of their business that helps them stay relevant in business and patients. Then it’s like, maybe we should stop feeling as stakeholders in this, as a covered entity in a pharmacy, that we’re sitting on opposite sides of the table, butting heads, negotiating over, squabbling over a couple of dollars in dispensing fees. A couple of percentage points in dispensing fees. Wasting time. Maybe we should realize, hey, we’re all together on this, and maybe we should steer our gaze and fight together to save it. And so that’s what we’re trying to do is like, hey, it’s not us versus them. Think of this as a package deal. It’s a program that we’re all in. We’re not just parts here. And so, if we really want to save it, if it’s really that important to us, then we need to band together and fight. I’d say the one true enemy, which is a PBM. But I know the manufacturers are getting a lot of the stuff here, but the core of where that’s coming from, as we know as industry folks, is stemming ultimately from the PBM. I think you’re seeing a lot of enlightenment amongst the general consumer on PBMs, and hopefully things a light will get shown on that business.
Scotty: Well, if there’s one thing pharmacy owners can do, and that is fight and grind it out, man. They will do whatever for patient care.
Eric: That’s right.
Scotty: It’s fascinating to see, I guess my bottom line yeah. I’ll tell you, man, hats off. It’s impressive to see. My bottom line would be the contracts being key in those relationships. I think I’ve seen it time and time again where those relationships are just the fundamental kind of piece once you have the other layers in place.
Bonnie: And my bottom line was communication is key, as Eric pointed out, like a therapy session. Just got to talk it out.
Kendell: My bottom line is we see it where profits look good and sometimes the cash gets tighter and the DIR fee is popping up pretty soon. The whole January 2024 thing. Well, first quarter of January through March, April, May, around that time, we got to really have something to see the visibility of what’s on your shelf and your inventory. You got to be on top of that. So that’s my bottom line, you got to be on top of it. You got to keep an eye on it. It’s not enough to just have the program and let it go.
Scotty: Yeah. Thanks again, Eric. For all those listening in, like, subscribe, do all that good stuff, and stick around for the next episode. And until then, we’re signing off. Thanks, everybody.