United States: The Proposed 340B Guidance: Who Is The Biggest Loser?

Last Updated: October 12 2015
Article by Ellyn Sternfield and Lauren M. Moldawer

We have now had more than 30 days to digest HRSA's proposed 340B Drug Pricing Program Omnibus Guidance ("Proposed Guidance"), intended to clarify expectations and provide guidance on key issues in the 340B Program. There are several weeks remaining in the comment period on the Proposed Guidance, and there has already been much handwringing over some of the specific provisions. Does HRSA really intend to prohibit the use of 340B drugs to fill discharge prescriptions? Will HRSA really stand by its position that employees of covered entities do not become eligible to receive 340B drugs solely by being employees? Will HRSA actually limit access to 340B drugs to individuals who meet all of the components of the definition of "patient?"

Given that the D.C. District Court has yet to rule on HRSA's authority to issue interpretive rules in the pending 340B orphan drug litigation, whether certain provisions in the Proposed Guidance will even be enforceable is an open question. But before the comment period closes, stakeholders may want to consider some of the clear winners, and just who is the biggest loser, under the Proposed Guidance.

Winner: Contract Pharmacies

Over the last few years, increasesin the number of contract pharmacy arrangements have outpaced the explosive growth in the number of 340B covered entities. Other than registration requirements, HRSA historically placed few compliance responsibilities on the 340B contract pharmacies. Instead, HRSA made covered entities responsible for their contract pharmacies' 340B compliance. As noted in our February 2014 post, HHS-OIG has been critical of the lack of compliance and oversight inherent in 340B contract pharmacy arrangements.

In the interest of reducing the risk of federal program recipient fraud/abuse, HHS has been open to the concept of limiting beneficiaries to the use of just one pharmacy to fill their prescriptions. But 340B covered entities have been free to enter multiple different 340B contract pharmacy arrangements.

Through the Proposed Guidance, HRSA continues to place the responsibility for contracting pharmacy compliance not on those pharmacies, but on the covered entities. The Proposed Guidance sets an expectation that covered entities will audit each of their contract pharmacies quarterly, and will report uncovered legal violations to HRSA. The Proposed Guidance places no limits on the number of contract pharmacy arrangements entered into by a single covered entity.

Winner: Hospital Off-Site Eligibility

One of the reasons for the explosive growth in the number of 340B covered entities is the registration of off-site out-patient facilities and clinics. Under the Proposed Guidance, HRSA continues to allow hospitals covered entities to register such facilities as eligible to utilize 340B drugs. This includesfacilities at different physical locations, as long as the hospital's most recent Medicare cost report demonstrates that (a) each of the facilities or clinics is listed on a line of the cost report that is reimbursable under Medicare and (b) that the services provided at the facility or clinic have associated outpatient Medicare costs and charges. The Proposed Guidance also indicates HRSA is actively seeking comments on alternatives to demonstrating the eligibility of an off-site facility, which may further streamline the registration process.

Loser: State Medicaid Programs

Some covered entities and contract pharmacies deal with the duplicate discount prohibition by excluding Medicaid patients from receiving 340B drugs. But as state Medicaid programs struggled to cope with rising costs, attention turned to the potential cost savings in 340B. Thus, multiple state Medicaid Programs now prohibit Medicaid providers who have 340B covered entity status from excluding Medicaid recipients from receiving 340B drugs. These states may also require covered entities to bill the Medicaid program or Medicaid Managed Care Organizations (MCOs) for those drugs at the 340B acquisition cost with special codes that designate them as exempt from Medicaid drug rebate invoicing.

In its 340B covered entity audits, HRSA has frequently cited covered entities for duplicate discount violations involving Medicaid. In its 340B Contract Pharmacy Report, HHS-OIG stated that the risk of duplicate discount violations was heightened in contract pharmacy arrangements.

In a December 2014 Policy Clarification, HRSA acknowledged the ongoing problems with duplicate discounts, especially when dealing with Medicaid managed care members, and encouraged covered entities to work closely with states on procedures to comply with state regulations or expectations and the duplicate discount prohibition. In theProposed Guidance, HRSA expands on that statement, encouraging "covered entities, States and Medicaid MCOs to work together" to establish compliant practices for Medicaid claims, including state specific billing or reporting requirements.

But when it comes to contract pharmacies, HRSA ignores the states' role altogether, stating that due to the heightened risk of duplicate discounts, "it will be presumed that the contract pharmacy will not dispense 340B drugs for its Medicaid fee-for-service (FFS) or MCO patients." The contract pharmacy can dispense 340B drugs to Medicaid patients only if the covered entity "wishes" to make those drugs available to Medicaid members and provides HRSA with a written agreement describing compliant procedures. HRSA disregards the very real possibility that the state has prohibited the covered entity, and thereby its contract pharmacy, from the conduct HRSA prescribes in excluding Medicaid recipients from receiving 340B drugs.

Loser: Clarity on Program Purpose and the Uninsured Individual

In the Proposed Guidance, HRSA states that one purpose of the Proposed Guidance is to "provide increased clarity in the marketplace for all 340B Program stakeholders."

But in the Proposed Guidance, HRSA dodged one of the issues underlying the ongoing controversy about 340B that we have noted in previous posts: what is the purpose of the 340B Program? Is the Program intended to provide uninsured safety-net patients with access to needed outpatient drugs, or is it intended to provide safety-net providers with enhanced revenue to increase the health services it provides to needy and uninsured patients? And no matter which side you are on, the Proposed Guidance does little to provide clarity.

The Proposed Guidance states that manufacturers must make qualifying 340B drugs available to covered entities at the 340B ceiling price. And while the Proposed Guidance goes on to address when a patient may be provided a 340B drug, there is nothing about when that patient must be provided a 340B drug.

So if the 340B Program is intended to provide uninsured safety-net patients with access to needed outpatient drugs, the Proposed Guidance does nothing to ensure that access. An uninsured individual may meet all the standards of the enhanced definition of a 340B program "patient," yet there is no requirement, or even a recommendation, that a 340B covered entity actually provide that uninsured individual with access to a 340B drug at the 340B ceiling price. And there is no requirement that any billing to that uninsured patient for that drug be at a price no more than the 340B ceiling price

In the alternative, if the 340B Program is intended to provide covered entities with revenue to increase health services provided to needy and uninsured patients, there is no requirement or even a recommendation that the covered entity actually do so, let alone any transparency requirements, reporting requirements, or any oversight to ensure the generated revenue is being used in compliance with the purported purpose.

Biggest Loser: The Needy, Uninsured Individual

In fact, the biggest loser in HRSA's 340B Program Guidance may be that needy, uninsured patient. No matter which side you come down on as to the purpose of the 340B Drug Discount Program in providing outpatient drugs, or health services, to needy uninsured patients, nothing in the Guidance will help those needy uninsured patients receive the benefits of the program purpose.

*Lauren is admitted in New Jersey only. Practicing under the supervision and guidance of Members of the Washington, D.C. office.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Ellyn Sternfield
Similar Articles
Relevancy Powered by MondaqAI
Ostrow Reisin Berk & Abrams
Foley & Lardner
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Ostrow Reisin Berk & Abrams
Foley & Lardner
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions