Situation
Orphan drugs are used to treat, prevent, or diagnose an orphan disease, which is a rare disease or condition that affects fewer than 200,000 people in the United States. These diseases are often serious or life-threatening.
In 1983, the U.S. government passed a law, called the Orphan Drug Act, to give drug companies certain financial benefits for developing orphan drugs that are safe and effective. While the percentages vary depending on the hospital and patient mix, these orphan drugs account for roughly one-third of all high-cost medications a hospital uses.
A 49-bed hospital in the Northeast, designated as a Sole Community Hospital, serves a primarily rural and elderly population of approximately 15,000 people. With an average daily census (ADC) of 25, this hospital faced limitations in its ability to purchase orphan drugs under the 340B program.
While orphan drugs were primarily used in the hospital’s oncology and infusion departments, the application extended beyond these areas. The restriction on purchasing these drugs at discounted rates impacted the hospital’s ability to maximize 340B savings across multiple departments.
The goal was to determine if the hospital qualified to switch from Sole Community status to DSH status with HRSA, allowing them to purchase orphan drugs under the 340B program and achieve significant savings while remaining a Sole Community Hospital with Centers for Medicare and Medicaid Services (CMS).
Solution
The team at CompleteRx performed a thorough review of the hospital’s Disproportionate Share (DSH) percentage, a key metric indicating the proportion of low-income or indigent patients. They discovered the hospital met the required DSH percentage of 11.75%, making it possible to be eligible for DSH status with HRSA under the 340B program, while remaining a Sole Community Hospital with CMS.
After confirming the hospital’s eligibility, CompleteRx proposed transitioning the hospital’s designation from Sole Community to DSH. This involved complex regulatory work, including submitting the necessary documentation and ensuring compliance throughout the process.
The team assisted the hospital in re-registering its status with HRSA (Health Resources and Services Administration), helping to reduce downtime during the transition. The hospital was also guided through the steps to begin purchasing orphan drugs at discounted 340B rates.
Results
The transition resulted in significant savings for the hospital. By converting to DSH status with HRSA, the hospital saved approximately $500,000 to $750,000 annually through the ability to purchase orphan drugs at discounted prices. This outcome exceeded initial estimates, and with the ability to now access orphan drugs at a reduced cost, the hospital was able to offer critical treatments at lower costs.
CompleteRx provided ongoing support to ensure that the hospital maintained compliance with DSH regulations, including regular monitoring of the DSH percentage and 340B program adherence.
The success of this transition not only enhanced the hospital’s financial health but also improved patient care by expanding access to essential medications.
