Author: Bryce Morsello

Friday’s (August 28, 2015) released guidance from HRSA in the Federal Register had a number of points of clarification which would make 340B compliance clearer and therefore easier, but a handful of “guidance” points actually sound like big changes.

Discharge Prescriptions: Part C(5) proposes that a patient must be classified as an outpatient at the time a drug is prescribed, and that such a determination must be made based on insurance billing. On the face of it, this eliminates discharge medications from eligibility. Or does it mean that hospitals will change their policies to re-categorize patients before giving prescriptions clearly intended for outpatient use?

Referrals: OPA has clearly walked back their guidance on this, changing from yes if the “loop” is closed to “nope”: prescriptions written by doctors not at the 340B entity are not eligible.

Fewer Eligible Prescribers: the former “…or other arrangements” has been removed and replaced with “such that the covered entity may bill for services on behalf of the provider”. This might be OPA’s attempt to clarify that hospital privileges don’t grant a doctor 340B status, but it might be an onerous standard that could eliminate doctors otherwise reasonably considered eligible.

We have until October 27 to comment on the proposed guidance.

Yesterday HRSA formally submitted to the Office of Management and Budget (OMB) a review of its omnibus guidelines on the 340B drug discount program.  HRSA had previously promised a review of its new guidelines, but withdrew them in November 2014 after the agency’s rule-making authority was challenged.  The current submission of its guidelines is identified as “interpretative” rather than regulatory.  The OMB has 90 days to review before a public comment period begins.

While the contents of the guidelines are unknown, we are optimistic that any clarification as to the regulations is good for 340B covered entities

We think the 340B program will remain in place, with improvements, at least over the next several years.  In order for the drug discount program to be completely eliminated, Congress would have to revoke or rewrite the existing legislation.  Even a complete overturn of the Affordable Care Act would eliminate several eligibility categories that the legislation created, but would leave Disproportionate Share Hospitals, family planning clinics, STD clinics, and most of the others.  And even in that case, the Supreme Court has not undertaken any cases for which it’s addressing the 340B aspects of the ACA.

There are several pressures for the elimination of the program.  To our view, all the arguments we’ve heard can be distilled to the two questions: “is the program meeting its purpose?” and “who is paying the bill?”

Trade groups who argue that the program is not meeting its purpose conflate the stated purpose of the program: “to stretch scarce Federal resources” with the perceived purpose, which is to directly benefit indigent and vulnerable populations.  This argument is not without merit, since the law doesn’t require covered entities to share or even account for how the savings has been applied to improving health care, and most hospitals don’t.  It’s also true that pharmacy chains and vendors have taken what could be perceived as more than a reasonable share of the hospitals’ savings as fees.  Improved specificity in regulatory guidance would be beneficial in publicizing outcomes, even if a hospital’s use of 340B savings is just to keep their doors open.

Possibly the most compelling argument that the 340B program at large is not at risk is the structure of the funding and the nature of the recipients of the discounts.  Congress, in creating the program, has effectively taxed drug manufacturers, with a huge percentage of the funds going directly to not-for-profit clinics and hospitals.  Removing the program would immediately cost billions of current savings to these hospitals, and replacing the program would likely require subsidies at the taxpayers’ expense.