340B Rules Remain in Flux

Rules surrounding implementation of 340B Drug Pricing, a government program that allows certain qualifying healthcare organizations to purchase reduced price outpatient medications, are in flux, according to a presentation at the recent Association of Community Cancer Centers 41st Annual Meeting in Arlington, VA.

Offered through the US Department of Health & Human Services Health Resources and Services Administration (HRSA), the program is aimed at facilities such as Medicare/Medicaid Disproportionate Share Hospitals, children’s hospitals, safety net providers, and entities that help to treat a high number of uninsured or indigent patients. Although the program has been active for more than 20 years, it continues to try to navigate the cross-currents between key stakeholders and clearly define parameters and requirements.

“HRSA has really struggled to provide clear instructions,” said Leah Ralph, Manager, Provider Economics and Public Policy, Association of Community Cancer Centers. “We need clear definitions about what a patient is, what a covered entity is, to be sure that our members can remain compliant with the 340B program.”

The program was created by Congress in 1992 and has grown rapidly ever since, rising by 2013 to 23,745 participating hospitals and other covered entities. Current problems stem from the fact that the program does not have a requirement that a person be uninsured to access discounted drugs, explained Ms Ralph. A provider with covered-entity status can provide discounted drugs to any patient in the outpatient setting.

In 2010, HRSA attempted to narrow the patient definition, but it withdrew the revised definition under pressure from covered entities, she said. Next, guidance was expected from HRSA in July and then November 2014 that would have clarified the definitions of eligibility of patients, hospitals, and off-site facilities, and also spelled out compliance requirements for contract-pharmacy arrangements. However, HRSA thus far has not released a ruling, said Ms Ralph.

The delay has been due to court battles between covered entities, Congress, and proponents of the Patient Protection and Affordable Care Act (ACA), which have sought to expand access to 340B, versus pharmaceutical companies, which are seeking a more limited definition of patients covered by the program, explained Ms Ralph. She said this push–pull is best illustrated by the orphan drug exclusion in legislation that enacted the ACA.

When the ACA was passed into law it added to the 340B program 4 new covered-entity types, including certain freestanding cancer hospitals, and also exempted orphan drugs from having to be provided by manufacturers at the 340B discount. HRSA then ruled that this exclusion applies only to orphan drugs when they are used for the drugs’ orphan-disease indications, which severely limited the exemption, said Ms Ralph.

The Pharmaceutical Research and Manufacturers of America (PhRMA) fought this limitation of the exemption and won; in May 2014, a judge in a US District Court in Washington, DC, invalidated it on the grounds that HRSA lacks the authority to issue a regulation on the treatment of orphan drugs in the 340B program. That called into question HRSA’s authority to issue regulations on the implementation of the 340B program, said Ms Ralph. As a result, the agency withdrew a mega-guidance it was preparing. HSRA is now expected to release this guidance in June 2015.

Meanwhile, HRSA in July 2014 issued an interpretive rule that adopted the orphan drug exclusion. However, the Department of Justice quickly filed a brief saying the interpretive rule is not binding, and, in October 2014, PhRMA filed a lawsuit challenging the interpretive rule, Ms Ralph recounted. What lies ahead is unclear, she said. Congress could codify HRSA’s interpretive rule and pass it as law, although this is unlikely to happen, according to Ms Ralph. Furthermore, a Government Accountability Office report on the 340B program is expected in mid-2015 and may prompt some action.

HRSA is continuing to develop proposed rules to implement minor provisions required by the ACA. These include rules for establishing manufacturer penalties for knowingly overcharging covered entities, and for the calculation and validation of the 340B ceiling price—both originally expected in April 2015 but not yet released at the end of that month—as well as for processes to resolve claims by manufacturers and covered entities, and to have manufacturers issue refunds to covered entities for overcharges.

Ms Ralph said, “What really needs to be done for this program” is for HRSA to provide clearer definitions of eligible patients and covered entities and also methods to improve the program. Tracking of trends in the healthcare system that impact the 340B program would also be helpful, she noted.

“We’ll compare that to what will probably [actually] happen,” she concluded. “There will be continued litigation by PhRMA, more audits to verify the eligibility of covered entities—and hopefully more clarity.”

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