HHS releases 340B Proposed Guidance

Ned MilenkovichOn August 27, the HRSA Office of Pharmacy Affairs released its highly anticipated 340B Drug Pricing Program Omnibus Guidance. It includes two significant changes that would affect covered entities participating in the 340B Program: the revised definitions of a “covered outpatient drug” and an eligible “patient.”

The proposed changes to these definitions, if adopted, will most likely lead to a reduction in the overall volume of drugs eligible for 340B pricing. Burdensome administrative and financial safeguards in the form of dispensing and inventory tracking systems would also follow suit upon implementation of the revised definitions.

Top Pick: Omnibus Guidelines expected to bring changes to the 340B program

Covered outpatient drug

To be eligible for discounted 340B prices, drugs must be classified as “covered outpatient drugs.” Currently, Section 340B of the Public Health Service Act defines “covered outpatient drug” by reference to the Medicaid rebate statute. However, there have been many challenges when the statutory definition is applied to the 340 Program, given its limiting provision.

The newly proposed definition strikes a middle ground that complies with both the limiting Medicaid provision and the more expansive 340B discount model. The limiting definition, which disallows bundling for payment purposes, will apply to drugs paid for by Medicaid, but will not apply to any other payer. Therefore, a drug that is bundled for payment purposes would not be considered a covered outpatient drug eligible for 340B pricing if billed to Medicaid, but would be considered a covered outpatient drug if billed to any other payer.

This distinction may prove burdensome to many covered entities that have categorically classified certain drugs as “covered outpatient drugs.” The task becomes even more burdensome if the payer has not already been identified and the covered entity is unable to determine which drug-purchasing account is appropriate.

Editor's Choice: 340B contract pharmacy arrangements

Eligible patients

The second newly proposed definition, eligible “patient,” expands the current three-pronged definition to a more specific six-part test. The current definition includes the following:

• The covered entity has a patient relationship with the individual, such that it maintains records of the individual’s care

• The individual receives services from a professional who is either employed by or under contract with the covered entity, such that responsibility for the individual’s care remains with the covered entity

• The individual receives care or services from the covered entity consistent with the services or range of services for which the covered entity receives federal funding (this requirement does not apply to hospitals)

The new six-pronged test addresses the government’s concern that in many cases the patient’s relationship with the 340B covered entity was too attenuated. The new criteria would require a stronger nexus between the individual and the covered entity. Patient eligibility would now be determined on a per-order basis and must meet all six criteria:

• The individual receives a healthcare service at a facility or clinic site that is registered for the 340B Program and listed on the public 340B database.

• The individual receives a healthcare service provided by a covered entity provider that is either employed by the covered entity or is an independent contractor for the covered entity, such that the covered entity may bill for services on behalf of the provider.

• An individual receives a drug that is ordered or prescribed by the covered entity provider as a result of the service described in (2). An individual is not considered a patient of the covered entity if their only relationship is the dispensing or infusion of a drug.

• The individual’s healthcare is consistent with scope of the federal grant, project, designation, or contract. (This requirement does not apply to hospitals.)

• The individual is classified as an outpatient when the drug is ordered or prescribed. The patient’s classification status is determined by how the services for the patient are billed to the insurer. An individual who is self-pay or uninsured, or whose cost of care is covered by the covered entity, will be considered a patient if the covered entity has clearly defined policies and procedures that it follows to classify such individuals consistently.

• The individual’s patient records are accessible to the covered entity and demonstrate that the covered entity is responsible for care.  

Public comment

In addition to the two definitions discussed in detail above, the proposed guidance also contemplates changes related to auditable record requirements, dispensing of 340B drugs to Medicaid managed care enrollees, requirements for compliance with the group purchasing organization (GPO) prohibition, and contract pharmacy oversight, along with many more provisions related to 340B Program participation and compliance. HHS encourages interested parties to submit comment through October 27, 2015.