The first such step is to procure 340B contractor services in a prudent manner. Ironically and importantly, federal law and regulation is such that covered entity procurements (or most of them) of pharmacy or vendor services are actually governed by procurement requirements specified in HHS’s federal “grant” regulations. Although these regulations are generally thought to apply only to grants, in actuality, they apply to awards of “financial assistance,” a term that in these regulations means not only grants, but other forms of assistance. Those forms are defined so broadly as to be at least arguably applicable to all 340B covered entities. And for covered entities that use federal grant funds (in whole or part) to pay the costs of their 340B project, those regulations are likely to apply. Regardless, the specifics of the procurement requirements within those regulations indicate what a prudent procurement process would look like.
Covered entities that are tax exempt organizations under Section 501(c)(3) of the Internal Revenue Code have a special interest in establishing such a prudent procurement process. They risk revocation of their tax exemption if their arrangements with any vendors unreasonably benefit the vendor, such as by paying service fees higher than market rates or disproportionate to their value, or through impermissible revenue sharing arrangements. A prudent procurement process is designed to ensure against paying excessive costs and, therefore, is an effective way for such organizations to show that their vendors are reasonably paid.