Why 340B Matters More Than Ever w/ Scott Seidelmann, CEO, NuvemRx

Federally Qualified Health Centers (FQHCs) care for more than 30 million Americans, yet many people have never heard of them or understand how they stay afloat. 

A major piece of their financial survival is the 340B drug pricing program, which has quietly become one of the most important funding mechanisms in the safety net and it is under growing pressure.

Scott Seidelmann, CEO of Nuvem, joins CareTalk hosts David E. Williams and John Driscoll to discuss how FQHCs serve underserved communities, why 340B has become essential to their operations, and what policy changes could make or break their ability to deliver care.

🎙️⚕️ABOUT SCOTT SEIDELMANN
As Chief Executive Officer, Scott is responsible for overseeing all facets of the organization. Scott has more than 25 years of experience in provider‑oriented healthcare and pharmacy technology and services and brings a wealth of knowledge and experience in the 340B industry, with an emphasis on client success and growth. Most recently, Scott was the EVP and Chief Commercial Officer at Omnicell, a publicly traded pharmacy technology and services company serving primarily health systems. 

🎙️⚕️ABOUT CARETALK
CareTalk is a weekly podcast that provides an incisive, no B.S. view of the US healthcare industry. Join co-hosts John Driscoll (Chairman, UConn Health) and David Williams (President, Health Business Group) as they debate the latest in US healthcare news, business and policy. 

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Transcript

David: 0:00

Federally qualified health centers or FQHCs care for more than 30 million Americans, and a big part of how they keep their doors open is a three 40 B drug discount program. But most people don't know much about FQHCs or three 40 B or why they're both under so much pressure. Welcome to Care Talk America's home for incisive debate about healthcare, business, and policy. I'm David Williams, president of Health Business Group.

John: 0:32

And I'm John Driscoll, the chairman of the Yukon Health System. Well, David, do we have, uh, CEO Scott Seidelmann on the show? Just to explain what you can understand,

David: 0:42

John, that's the usual reason we invite a guest is, I mean, they're eminent in none of them of themselves, but also they can tell us what we should know, but don't. So yes, Scott Seidelmann, he's CEO of Nuvem Rx, and they help community health centers thrive through three 40 b. They have software intelligence. Expertise. Uh, welcome, Scott.

John: 1:02

Thank you. Thanks so much for having me. So, Scott, tell us a little bit about what a federally qualified health center is so that we can understand the important services that your company provides to the health centers.

Scott: 1:14

Sure. FQHCs, they are community health centers that is funded by HRSA or the government under a three 30 grant. There's about. 1500 of them in the United States. And fundamentally, it's a primary care clinic that provides services to an underserved population that that underserved population could be in an urban market. It could be in a rural market, largely heavy Medicaid, quite a bit of Medicare, um, but also a large portion of, of, of uninsured care as well. But fundamentally, it is primary care physicians in a small clinic. That treat roughly 31 million Americans that meet a criteria of some type for being underserved.

John: 1:57

I mean, the, the, the ba the background here, I think David was, it started actually in the Kennedy administration, um, and was one of the early and most effective. Aspects of the war on poverty to really solve the, the, the lack of primary care access in high need areas in rural and urban areas particularly. And then it was expanded and, and supported pretty substantially during Obamacare as a way to solve the problem of, okay, you've got coverage now, where can you get care? And so it is really the critical link for the. Poorest and most vulnerable communities on in rural and urban areas. And it, and it's been and has been over time, proven to be pretty effective. Um. Yeah. Dave, do you wanna do, do you study?

Scott: 2:41

Study To that point, John, I think study after study has shown that every dollar spent on an FQHC by HRSA saves $4 of Medicare, Medicaid, and downstream spent.

John: 2:50

And I mean, just, just, just pause on that. That is the health research. Organization for the federal government that questions and tests and looks at what's the ROI? So every, so it's a four to one correct return, and that's not just in, I mean those dollar savings are material, Scott, but that also means less suffering. Absolutely right. That needs more time with family. I mean, long, longer lives and more healthy childhoods. So it's, it's pretty substantial because to your point, it tends to over, uh, over, over serve the youngest and the eldest, uh, for sure in our communities.

Scott: 3:25

And like you. Look, I've spent my entire career in healthcare and have served every little nook and cranny of the healthcare market and, and. This is truly an inspiring portion of healthcare. These are mission driven. These are, these are social workers that have essentially identified a need in a market that wasn't being served by a hospital, and they've applied for a grant. They don't, they don't make a lot of money. They're, by definition not for profit. They can't even put balance sheet. They can't even put cash in their balance sheet. They're literally there just to ensure that these people who can't get care are treated properly. And it's, uh, it's, it's, it's, it's great to watch them work.

David: 4:04

John, you know, it's funny that people don't know so much about these and, and partly what happens, you think, well, it's a, you know, it's safety net. It's kinda like poor person's clinic. But when you actually take a look at what they do, it has a lot of the characteristics that you describe in healthcare, primary care, access, coordination, holistic care, cost-effective, and really serving the community. I do know a lot about it actually, 'cause my. Brother who's a primary care physician and trained in the Harvard system, runs an fq a rural FQHC. And the, uh, some of the patients, you know, some of the wealthy patients actually try to get themselves in there once they see what's what's happening. So they really are quite a gem.

John: 4:42

Uh, and, and so David, maybe you, you and Scott could explain what the three 40 B program is. It sounds like an IRS problem, like what is, what is the three 40 B program and why is it so important?

David: 4:56

When you say you'll let Scott and me do it, I think let's do that. And emphasis on the Scott. So what, what the heck is three 40 B and why? Why is it important for FQHCs in particular? Yeah.

Scott: 5:05

I'd love to say it's this nichey little thing, but it, it just isn't any longer. Right? So the three 40 B is a, you know, the eight page legislation that was, that is 30 years old, that essentially allows providers, hospitals, and clinics that see. A large percentage of Medicaid patients, uh, in order, it allows them to buy drugs at a, at a substantial discount direct to the drug manufacturer. And when they do that, they can take any savings for, for dispensing those drugs and reinvest it back in care delivery. So it's only not-for-profit providers. It is, um, and you have to qualify by treating a large percentage of, of Medicaid patients. Now to your point. Fundamental to FQHCs and becoming a grantee, um, one of the biggest benefits is that 100% of your patients qualify for three 40 B.

John: 6:01

So, uh, uh, just just and just to clarify for folks, the FQHC gets to buy the, the, the, the drugs for their needy patients. At the lowest possible price direct from manufacturer. But the reason why it's so important to the FQHCs financials and it's, is that they can then charge a more commercially reasonable rate to the folks who are covered. So they're actually making a, a margin Correct. That subset, that effectively big pharma is subsidizing care for the, under the, the, the neediest in in society. And that was the intent. Of the original legislation. And, and as far as, as far as I can tell Scott, it's kind of worked pretty darn well for the FQHCs because it's not that they are over reimbursed. To your point, they are thinly staffed, mission driven, and providing kind of critical last mile care. How, how has that program worked for. FQHCs And how important is it to the FQHCs Health?

Scott: 7:05

I, I think it's, I mean, I think the program itself and what it's become is fascinating, but I think it's a common misconception that the FQHC are no hospitals charging any more for that medication. They're getting reimbursed what the commercial rate is. And particularly in FQHCs case, you know, for someone who has no insurance, they're just passing on that savings directly. So there's no spread pricing there. Um, I think if you take a look at the program. What is crazy and you'll appreciate is that I don't think anyone thought that the three 40 B program 30 years later would become a. Major financing program for all providers in the United States. It's, it's probably $80 billion subsidy to hospitals and clinics in the United States today. That is zero taxpayer funding. It's, it's completely a, a subsidy provided by pharma. But when you put that in context for, we can talk about FQHCs in a second, but even the large health systems, every major health system, not-for-profit health system, it is literally the only thing that they do that generates a profit. It funds the rest of their care delivery, which is just insane from a healthcare policy perspective. But we are where we're at and until someone decides to restructure the payment model, I don't know what anyone's going to do about it. Right. From an,

John: 8:21

the tricky thing about three 40 B is you're taking from the most profitable part of that US healthcare system a, a system as a country, you know? David May think that we should just let prices go up at any level and not negotiate them, but I would think that we could negotiate prices. But if we're not, and, and big Pharma is in the position to raise its prices by the month and they're fabulously profitable, it doesn't strike me as a bad trade to have some of, some modest amount of those profits. Reinvested in nonprofits, uh, to keep them providing primary care and getting, getting folks the drugs they need. David, I don't know whether you disagree with that, but that's sort of the policy trade that we've got, uh, that sort of sits beneath all of the acronyms and the numbers that big Pharma is effectively, um, paying, uh, a modest tax to make sure that we have the. In a very, in a very, in, in a, in a healthcare system that's very expensive, um, that the system can provide the care they need to people who need it.

Scott: 9:34

And I think to that end, John, you know, I think when you even look at it, the average reimbursement or the average price paid for a drug under three 40 B is still higher than the average price that Canada pays for that same drug. And so, and so, I, I think that it is, um. And then again, I think that's the fascinating thing about three 40 B. No one's saying it's good or bad. I just think that where we're at today, you know, every hospital in the United States is subsidized by the program, and it's not paid for by taxpayers. Right? So I think your question about FQHCs, it's absolutely critical to an FQHC. So federally Qualified healthcare Centers, they have three sources of funds. Fund number one is their three 30 grant from hrsa. That hasn't increased in 10 years in terms of absolute dollar amount. Um, two is going to be any professional component reimbursement they get from providing care on insured patients. Medicaid, Medicare, commercial. Um, most of these FQs, the average FQ has less than 20% to their payer mix in Medicare and commercial. So most of it is Medicaid, and, and we know what the, the margins on that look like for most providers. The third source of funds is any savings generated from the three 40 B program. And what's what's happened over the last decade is that, um, HRSA has not increased reimbursements from Medicaid will continue to decrease. Um, the three 30, the three, um, the three 40 B program is now anywhere from 30 to 70% of the source of funds from every, for every FQHC in the United States. So you literally, mass General Brigham would have a tough time, very, very tough time, but the FQs would just disappear if the program went away. Wow.

David: 11:20

So let, let's talk about, let's talk about the FQs a little bit more before getting into how the big hospitals have, uh, invited themselves to the party and eaten a lot of the, uh, the cake. Um, and you mentioned the FQHCs and the role, and John, you mentioned sort of the origin of them, but there are some differences. So you've got some. That are rural. You've got some that are actually in urban centers. You've got some that are more specialized in certain areas. What kind of differences do you see, Scott, between FQHCs they, they do vary a lot.

Scott: 11:53

Absolutely. I think, um. You know, you're gonna see some FQHCs, which are extremely large. They function like little health systems in many respects. So, um, they can see a hundred, 150,000 unique patients, which should be 300,000 annual visits in an urban center. They could have, we have, we have, you know, I'm sure we have many, but, but one, um, very large FQHC, that's a client of ours has 25 locations in the Philadelphia market. Employs hundreds of primary care physicians. They employ, um, psychiatrists, they employ a rheumatologist, they employ infectious disease docs, et cetera. I think what you see in the urban centers is the patient population. Um. You know, is, is diverse socioeconomically, um, diverse culturally tends to be very heavy Medicaid. And, and in, in sort of what corresponds and they tend to be very heavy in is, is behavioral health problems, STI, chronic disease management, et cetera. You can see in a rural market where there is no other provider of care, an FQ could have as few as 5,000 patients, and it could be 25,000 patients. You know, rural Nebraska could have 20 locations scattered across a 200 mile area. Those populations tend to be, um, a bit more Medicare with substantial chronic disease. But back to your point, they essentially become a medical home for those folks.

John: 13:17

So, so Scott, before we get into your origin story about how you got here, maybe describe what your company Nuvem RX does and how you became such an expert in FQHCs because of it.

Scott: 13:31

Yeah. No, no, no, no, no. Um, I think whether you are a hospital or you're an FQHC to fully optimize a pharmacy care delivery program as so if, if, if you are even before you get to three 40 B, but if you want to. Provide better care to your patients through a, you know, access to pharmacy, which because of three 40 B also generates savings you've gotta be good at, at a number of things. So there are several locations and ways to fill a script for a patient. Uh, that has implications for three 40 B. You could, patient could present at the clinic or the hospital, and the employed physician could write a script and that script qualifies for three 40 B, but the patient could go pick it up at CVS. And the clinic would have a contractual relationship with CVS, where CVS dispenses the medication and you close the, the clinical loop and then you can still capture the savings that's known as a contract pharmacy relationship. You could, your employed physician could write a script and fill it in a pharmacy that is actually in your building, that you run and operate

John: 14:43

the scripts effectively. The scripts could go everywhere, correct. That are, that would qualify for, for low cost drugs that are be, should be dispensed or an

Scott: 14:55

FQHC, which is largely primary care treating a population of patients with heavy chronic disease. A lot of what they're doing is referring that patient off to a, a specialist dermatologist, a rheumatologist, a psychiatrist. As long as you can close the clinical loop in your EMR and prove that it was your referral, then you can capture the three 40 B savings if it's eligible. And so what do you do? So everything I just described is incredibly complex and it is, it is. It requires a knowledge of three 40 B. It requires a knowledge of rev cycle. It requires a knowledge of pharmacy operations. It requires a knowledge of medical records. It's just really hard to do well. And so what our company does is, is we have developed a comprehensive service that helps optimize. A program holistically across all those settings of care or places of dispense. So we combine software and experts. And we will partner strategically with a community health center to say, Hey, look, pharmacy touches every patient in every setting of care. You know, these places are not providing, you know, they're not performing surgery, they're not, you know, treating cancer, you know, they. Pharmacy is a incredibly important service for them that they can use to treat their patients better, and it generates savings for them, which they can reinvest in other services, dental translation, et cetera. But doing it well and getting it right is hard, and so we partner with them and say, look, we'll, we'll partner with you over the next four or five, six years. We'll combine software and experts to help you fully optimize that. So whether or not that's filling a script through CVS, and then we'll manage, you know, are you purchasing the drug correctly? Are you getting reimbursements correctly?

John: 16:43

You're basically an outsource services layer. Correct. To help them optimize three 40 b. If they don't have, you are, aren't they fine?

Scott: 16:52

They're gonna do two things. They're gonna use, uh, a bunch of different vendors to do this and have to manage through a bunch of different vendors. Uh, or two, they're gonna do it in-house and they're gonna try and do it on their own. And for a large, large health system, like, uh, you know, a major health system that already employs 300 pharmacists and knows how to run these programs and invest in it. Community health center, they're social workers. They don't employ a single pharmacist. And so we come in as a, as a, as a comprehensive service and say, look, we'll operate the entire program for you. And, um, you know, we'll ensure that wherever that script is getting filled, that you are, if you're able to capture the savings you can, and more importantly, that you're getting a patient on an adherence program, that your primary care physician knows that the patient picked up the script, that it's refilled, et cetera. So.

David: 17:38

S Scott, let me come at it from a different angle.'cause there's a lot that's changed in the pharma market. So there's been a big growth in specialty drugs in particular. There's been a lot of talk about, you know, what the PBMs are doing differently. What's the impact of changes in the drug market on FQHCs and then on into the three 40 B program?

Scott: 17:56

Yeah, I think, look, as I described it before, if you think about. FQHCs as primary care clinics that treat 31 million Americans. Well, those 31 million Americans have an incredibly high incident of chronic disease, um, largely, uh, at a, at a higher incident rate than the rest of the American population and treating patients with heavy chronic disease, whether it's dermatologic, rheumatologic, infectious disease, um, behavioral. Um, you, you need medicines that are largely more expensive, and those are, you know, if you wanna call it the term of art, a specialty medication or just a high cost medication. And so the good and the bad of that is that the good is, is that community health centers, if they can get those patients on therapy. Uh, are going to provide far better care, but also those are higher cost medi medicines that are driving more savings. Um, the bad of it is that it's, it's just a, it's a, it's a n next level of complexity. And so we certainly are positioning ourselves to help with that.

David: 19:08

Now Scott, another area, and I think it ties in, is value-based care. John and I are about to release our predictions for 2026, and the growth of value-based care is one of the things that we're looking at. Are FQHCs well positioned there or are they likely to be left behind?

Scott: 19:23

No, I think for a Medicare population, managed Medicaid, I think these are, they're exactly what you'd want from a, a value-based care provider, right? They're a primary care physicians. They're comprehensive. They are a, a, a a, um, you know, they're, they're a comprehensive provider, and so I think you're starting to see them enter into VBC contracts start to take risk again, also very complicated. Um. I in a former life, spent a bunch of time in the health system world trying to connect the dots between pharmacy and downstream spend. There is an absolute linkage. It's, it's, it's critical. You can bend the curve downstream, but you need a very clinically integrated pharmacist. You need a pharmacist that is integrated with that care team, managing medications, and oftentimes what you see is that the pharmacy benefit, pharmacy spend increases, but medical cost declines. Which is when you get patients on the right meds, you keep 'em on those meds, you get them off the wrong meds. And so I think we're pretty interested in the idea that pharmacy could play a much bigger role in helping them manage this population much more effectively. And, and what would that look like, Scott? You know, effectively if they're taking risk on a patient that has, you know, multiple comorbidities, complex disease, that FQHC and those primary care physicians and their care coordinators are trying to engage that patient to figure out, were, we're getting you access to the right specialists. Are we keeping you out of the hospital? All of the things that VBC needs to do. Well, what's often correlated is that that patient is a polychronic. They're also a poly meed. They're taking eight to 10 different medications and those medications are complicated, and so do we have you on a med sync program? Are you on the right meds? Are you on the right? Why are you on this high cost med? When there's a generic? What that requires is a pharmacist that is very engaged doing things that is. Is very different than filling Amber vitals. It is talking with Mrs. Smith, doing med reconciliation, getting Mrs. Smith onto med synchronization, which means that she can pick up all of her meds on the third Thursday of the month and, and, and, and then coordinating with the clinicians in the background to say, Hey, wait, you know that she has the following complications, should we switch this? Et cetera, et cetera.

David: 21:42

So your company's been, uh, raising your public profile quite a bit lately. I've seen the rebranding as Nuvem rx. You're leaning into thought leadership. What are the sort of questions or concerns that you're hearing most from FQHC leaders and how are you trying to address those?

Scott: 21:57

Look, I would say top of mind for them right now is, is all about, um. Growing revenue and finding new opportunities and new ways to support their customers. I think very much top of mind is Medicaid cuts. What impact is that going to have to them? Um, is certainly any changes or, or perceived risks or concerns with the three 40 B program, that's top of their mind. And so I think the way we try to address those is to say, which is something they already know is just leaning into the fact saying that, look. If you, that pharmacy can enable you to touch more patients, to provide better care to fulfill your mission, and it is also the one thing that you can do, which will generate savings that allows you to hire more. Behavioral health therapists and hire more, more, um, translation services and pay for, you know, the ability for your patients who don't have insurance to get medications, you can cover those medications. And so, um, I think we've just been kind of communicating and leaning into that Really.

David: 23:03

John, last question to you,

John: 23:05

I guess. If you have one wish, Scott, for policy makers as we go into the new year, there's a new administration. CMS is looking for lots of things to do, places to cut costs, improve technology. What's your one policy recommendation for, what's the one thing you want the administration to make sure they get right?'cause all the FQHCs or all of this is tied to regulation and reimbursement for the feds. I mean, 80% of it, um. And what is the one thing you don't you want them not to do?

Scott: 23:36

I, I think to your point, I think that the spirit and the intent of the three 40 B program is to really support these safety net providers, these true safety net providers. It's, it's not in any way funded by taxpayers. And so I think that what's a, what's happening is, is that it's a big program. There's multiple, you know, pharma doesn't like it for obvious reasons, and as a result, there was a lot going on in that program. I think the unintended consequence of that is that. Um, you know, FQHCs in particular are getting hurt by some of the, the changes in the, the, the administration policy. My one request to policymakers would simply be, um, you know, decide to, to take up the program and clarify it and, and clean up some of the ambiguities and just be mindful of the fact that. It is a critical financing mechanism to providers that all of us want to remain where they're at and doing a great job.

David: 24:33

Well, that's it for another episode of Care Talk. We've been discussing FQHCs and the three 40 B program with Nuvem RX CEO, Scott Seidelmann. I'm David Williams, president of Health Business Group.

John: 24:45

And I'm John Driscoll, the chairman of Yukon Health. If you liked what you heard or you didn't, we'd love you to subscribe on your favorite service. And thanks for joining us, Scott. Thank you very much. Great to see both of you. Have a great holiday.