Health Law Advisor

Thought Leaders On Laws And Regulations Affecting Health Care And Life Sciences

Bipartisan Budget Act of 2015 – Potential Impact on Hospitals

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House Republican leaders introduced legislation on Monday, finalizing a two-year budget agreement between Congressional leaders and the White House. This legislation is currently being considered and may be up for a vote as early as Wednesday on the bipartisan budget deal.

Hospitals should note the language in Section 603 (which is on pages 35-39 of the draft bill) codifies the definition of a “provider-based off-campus hospital outpatient department” (PBD HOPD) as a location that is not on the main campus of a hospital and is located more 250 yards from the main campus.  The section defines a “new” PBD HOPD as an entity that executes a CMS provider agreement after the date of enactment of the Act and that any NEW PBD HOPD executing a provider agreement after the date of enactment would not be eligible for reimbursements from CMS’ Outpatient Prospective Payment System (PPS).

Bipartisan Budget Act of 2015

Section-by-Section Summary

We encourage hospitals to reach out to their delegation if they are concerned with any of these provisions.

U.S. District Court Vacates HRSA’s Interpretative Rule on Orphan Drugs

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On Wednesday, October 14, 2015, the U.S. District Court for the District of Columbia (the “Court”), Judge Rudolph Contreras, vacated the Health Resources and Services Administration’s (“HRSA”) interpretive rule on Orphan Drugs (“the Interpretative Rule”) as “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”[1]  As a result of the ruling, pharmaceutical manufacturers are not required to provide 340B discounts to certain types of covered entities for Orphan Drugs, even when the drugs are prescribed for uses other than to treat the rare conditions for which the Orphan Drug designation was given.[2]  This issue has been the subject of long and protracted litigation including a previous court ruling that invalidated HRSA’s Final Rule on Orphan Drugs because HRSA lacked the authority to promulgate the rule.[3] [HRSA Issues Interpretive Rule on 340b Orphan Drug in Response to Court Vacating Final Rule]

By way of background, the Affordable Care Act (“ACA”) amended the Public Health Service Act (“PHSA” or “the statute”) and expanded access to 340B discounts by creating new categories of eligible covered entities including freestanding cancer hospitals, children’s hospitals, critical access hospitals, rural referral centers and sole community hospitals.[4]  For these categories of covered entities only, the amendment also excluded drugs  “designated by the Secretary under section 360bb of Title 21 for a rare disease or condition” (“Orphan Drugs”) from the definition of covered outpatient drugs subject to mandatory 340B pricing requirements (“the orphan drug exclusion”).[5]

In the Interpretive Rule issued on July 24, 2014, HRSA narrowly interpreted the exclusion and required pharmaceutical manufacturers to provide 340B discounts to the new types of covered entities for Orphan Drugs when they are used to treat something other than the rare diseases and conditions they were developed to target.[6] In addition, HRSA sent letters to pharmaceutical manufacturers stating that failure to provide 340B discounts to eligible 340B covered entities for non-orphan uses would be deemed a violation of the statute.[7]  The lawsuit challenged HRSA’s interpretation, arguing that the orphan drug exclusion must apply to Orphan Drugs regardless of their particular use.[8]  The Court denied HRSA’s motion for summary judgment and granted PhRMA’s motion for summary judgment because it determined HRSA’s Interpretive Rule was contrary to the plain language of the statute.[9]

Analysis in the Court’s Opinion

Initially, the Court recognized HRSA’s authority to offer its interpretation of the statute and noted that PhRMA was not challenging HRSA’s authority to issue the Interpretive Rule.  Although the Court determined in the previous litigation that HRSA did not have authority under the statute to promulgate its Final Rule, the Court recognized that HRSA would need to provide interpretation of a pharmaceutical manufacturer’s obligations under the 340B Program.[10]

The Court determined that the Interpretive Rule constituted “final agency action” under the Administrative Procedure Act (“APA”).[11]  The Court focused the majority of its analysis on whether HRSA’s Interpretive Rule was “final.”[12]  Based on the two-part test set forth in Bennett v. Spear, the Court analyzed whether the action was the “consummation of the agency’s decision-making process” and whether “the action must be one by which rights or obligations have been determined or from which legal consequences will flow.”[13]  Since HHS conceded that the Interpretive Rule met the first element, the Court focused on the second element and determined that even prior to enforcement action, there were significant practical and legal burdens for covered entities and pharmaceutical manufacturers in the Interpretive Rule that impacted their business practices.  Additionally, since HRSA sent the manufacturers letters informing them that they were non-compliant with the statute unless the requirements in the Interpretive Rule were followed, potential penalties would accrue until HRSA pursued an enforcement action.[14]  The Court stated that “[h]aving thus flexed its regulatory muscle, [HHS] cannot now evade judicial review.”[15]  The Court concluded that the Interpretive Rule met the second element of the Bennett test.[16]

When analyzing the merits, the Court held that the Interpretive Rule “conflicts with the statute’s plain language.”[17]  Because of the conflict, the Court afforded the Interpretive Rule no deference.[18]   The Court relied on how Congress used the Orphan Drug terminology in other parts of the U.S. Code.[19]  Previously, in other contexts Congress included additional language to specify that the applicability was limited to occasions when the designated drug was used to treat the rare disease or condition, rather than the use of the Orphan Drug in general.  The Court noted that if it adopted the narrow meaning HRSA intended under the Interpretive Rule, the identified phrases elsewhere in the Code would be rendered superfluous based on the principle of statutory construction to give effect to every word in the statute.  Because of its conflict with the plain language of the statute, the Court held that the Interpretative Rule was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”[20]

Implications from the Decision

This decision means that pharmaceutical manufacturers are not required to provide 340B discounts on Orphan Drugs, whatever their use, to the types of covered entities added by the ACA. The Court acknowledged concerns that the amount of lost savings for these drugs could impact a covered entity’s decision to participate in the 340B Program.[21]

Additionally, this decision has implications for HRSA’s proposed Omnibus Guidance published on August 28, 2015, the comment period for which is open until October 27, 2015.  The Omnibus Guidance provides comprehensive guidance for the 340B Program. [HRSA Issues Proposed “Omnibus Guidance”].  While the Court recognized HRSA’s ability to issue interpretive guidance,[22] such guidance could be vulnerable to challenge if HRSA, after consideration of the comments submitted, finalized an Omnibus Guidance that is not consistent with the 340B statute.  Industry stakeholders should consider highlighting these types of inconsistences in the proposed Omnibus Guidance as they formulate comments for submission next week.

Finally, the recent decision might provide impetus for Congress to take legislative action.  The Court noted that it “would not rewrite the statute,” suggesting that Congress needs to take action if its intent was to limit the orphan drug exclusion.[23]  Given Congress’ recent focus on the 340B Program, it is possible that Congress could either amend the statute to clarify the orphan drug exclusion or to provide HRSA with additional rulemaking authority to allow it to address this issue and other oversight issues.

[1] 5 U.S.C. § 706(2)(A).  Pharm. Research & Mfrs. of Am. v. U.S. Dep’t of Health & Human Servs, No. 1:14-cv-01685-RC at 38 (D.D.C October 14, 2015) (hereinafter “PhRMA”).

[2] PhRMA at 36-8. HRSA may appeal the District Court’s decision within 60 days of the decision date.

[3] Pharm. Research & Mfrs. of Am. v. U.S. Dep’t of Health & Human Servs., 43 F. Supp. 3d 28 (D.D.C. 2014).

[4] Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 7101(a), 124 Stat. 119, 821–22 (codified as amended at 42 U.S.C. § 256b(a)(4)(M)–(O)).

[5] 42 U.S.C. § 256b(e).  The orphan drug exclusion does not apply to disproportionate share hospitals.

[6] HHS HRSA, Interpretive Rule: Implementation of the Exclusion of Orphan Drugs for Certain Covered Entities Under the 340B Program, (July 21, 2014),

[7] PhRMA at 10.  Additionally, the HRSA website explained that manufacturers could be subject to statutory penalties, refunds of overcharges, or termination of their Pharmaceutical Pricing Agreements. Id.

[8] Id.  at 1-2.

[9] Id. at 1-2.

[10] Id. at 12-13.

[11] The APA mandates that judicial review is permitted only when there is “final agency action.”

[12] Id. at 14, 15-27.

[13] Id. at 14.

[14] Id. at 22-26.

[15] Id. at 27.

[16] Id. at 23-27. 

[17] Id. at 2.

[18] Id. at 29.  The Court explained that if the statute were ambiguous, the Interpretive Rule was entitled to Skidmore deference, which means the Court would only follow the Interpretive Rule to the extent it is persuasive. HRSA’s Interpretive Rule would not receive Chevron deference because HRSA lacked the authority to promulgate regulations related to the orphan drug exclusion (as decided in the prior litigation).  Id.

[19] Id. at 30.

[20] Id. at 38.

[21] Id. at 36-37.

[22] Id. at 12-13.

[23] Id. at 37.

340B Program and Mega-Guidance Webinar

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Constance Wilkinson, Member of Epstein Becker Green, will co-present on a webinar on “340B Program and the Proposed Mega-Guidance” on October 22, 2015, from 2:00 – 3:00 p.m. ET.

With recent publication of the long-awaited proposed “Mega-Guidance,” the federal 340B Drug Discount Program (“the 340B Program”) is poised for significant changes. This webinar describes the 340B Program’s historical background, practices, and challenges that resulted in the proposed policies and goals reflected in the Mega-Guidance. In addition to learning about the history of the 340B Program, participants will be educated on how it works—what manufacturers and providers must do to participate in and comply with the Program, how to navigate the 340B website and database maintained by the Health Resources and Services Administration (HRSA), and what specific reforms have been proposed for public comment.

This webinar is free and is being hosted by ACI. To register, please click here.

More Time Given To Stakeholders to Respond to CMS’ Request for Information on Physician Payment Reforms

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On September 28, 2015, the Centers for Medicare & Medicaid Services (“CMS”) issued a request for information (“RFI”) seeking comments on two key components of the physician payment reform provisions included in the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), the law enacted on April 16, 2015, repealing the sustainable growth rate formula used to update payment rates under the Medicare Physician Fee Schedule.  The RFI was originally open for a 30-comment period.  However, CMS has announced that it is extending the comment period for an additional 15 days.  Comments to the RFI are now due to CMS on November 17, 2015.

The RFI included an extensive list of questions related to the implementation of the Merit-Based Incentive Program System (“MIPS”), as well as adoption and physician participation in Alternative Payment Models (“APMs”) and Physician-Focused Payment Models (“PFPMs”).  More details on the questions that CMS has raised and the areas where CMS is seeking input in the RFI are discussed in the Epstein Becker Green Client Alert, “New Opportunity to Comment on Key Components of Medicare Physician Payment Reform: CMS Issues 30-Day Request for Information on MIPS and APMs.”

Importantly, in the CMS announcement extending the public comment period released on October 15, 2015, CMS identified sections and questions in the RFI that are of higher priority to the agency.  For example, CMS has ranked questions about how physicians should be identified to determine eligibility, participation, and performance under the MIPS performance categories, and what measures and reporting mechanisms should be used for each of the four MIPS performance categories (quality, resource use, clinical practice improvement activities, and meaningful use of certified electronic health record technology), above questions about public reporting requirements, use of measures from other payment systems, and the weighting of performance categories and the determination of performance scores and thresholds.  Similarly, for questions related to the adoption of APMs, CMS has prioritized questions about how to define the amount of services furnished through an eligible APM entity, how to determine the Medicare and other payer payment thresholds used to identify qualifying and partial qualifying APM participants, and how to compare state Medicaid medical home models to medical home models expanded under Section 1115A(c) of the Social Security Act.  Given the short period of time to provide comments to CMS, stakeholders should consider the priority rankings that CMS has assigned to the various topics that it is seeking input on.

All stakeholders, not just physicians, should consider how the fundamental shift in Medicare physician payments, from traditional fee-for-service to value-based models, will impact them.  It is important to engage with CMS now by submitting comments to the RFI, in order to shape how these new payment mechanisms are implemented in the years to come.  For additional information about the physician payment reforms implemented in MACRA, or if you are interested in submitting comments to CMS, please contact Lesley Yeung or the Epstein Becker Green attorney who regularly handles your legal matters.

CMS Progress Note Template for Home Health Patients: Comments due by October 13

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In January 2015, CMS announced that it was considering developing voluntary clinical templates to help physicians adequately document their encounters with Medicare patients who receive home health services.[1] CMS initially proposed a sample paper template progress note and suggested clinical template elements for an electronic progress note. CMS hosted three Special Open Door Forums to solicit feedback on the proposed templates from physicians, home health agencies, and other interested stakeholders to provide feedback on the proposed templates.

On August 12, 2015, CMS announced that a suggested clinical template had been submitted to the Office of Management and Budget (OMB) for review.[2] Although CMS had initially proposed the creation of separate paper and electronic templates, the proposed progress note template that was submitted to OMB combines the information into one template.

The proposed template is designed as a paper progress note that includes a list of clinical elements that will allow electronic health record vendors to create prompts to assist physicians when documenting eligibility and the face-to-face encounter. The template is intended to help physicians and allowed non-physician practitioners capture necessary information, to increase compliance with Medicare requirements, and to reduce the possibility that home health claims will be denied for failure to meet Medicare requirements. CMS estimates that it will take approximately 10 minutes to complete the electronic template and approximately 15 minutes to complete the paper template.

Use of the proposed template will be completely voluntary. Physicians and home health agencies must still ensure that the patient’s medical record supports certification of the home health benefit, as the Progress Note Guidance specifies that “completion of this Progress Note alone will not substantiate eligibility for the Medicare Home Health Benefit.” However, the elements included in the proposed template do provide an indication of what CMS may consider adequate documentation of the face-to-face encounter and of a patient’s eligibility for home health services.

Public comments on the proposed template are due by October 13, 2015 and may be submitted electronically via, or by mail.

[1] Home Health Medical Review and Home Health Electronic Clinical Template.

[2] 80 Fed. Reg. 48,321 (Aug. 12, 2015).

BNA Webinar: Opportunities and Obstacles: Accountable Care Organizations and Other Provider Risk Sharing Arrangements — a Legal and Regulatory Overview

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Epstein Becker Green’s Lynn Shapiro Snyder, Senior Member of the Firm, and Tanya Vanderbilt Cramer, Of Counsel, will present “Accountable Care Organizations and Other Provider Risk Sharing Arrangements — a Legal and Regulatory Overview,” a webinar hosted by Bloomberg BNA.

While the federal government has encouraged the growth of accountable care organizations (ACOs) through the Affordable Care Act, the regulation of ACOs and other provider risk sharing arrangements remains a patchwork of federal and state requirements that span many different areas of law. This webinar will explore some of the regulatory issues faced by ACOs, integrated delivery systems, and other provider organizations that assume some or all of the financial risk for providing covered health care benefits to patients through reimbursement arrangements such as capitation or shared savings.

Epstein Becker Green would like to offer you a 25% discount off the registration fees for this program.  To sign up at this discounted rate, please follow the steps below:

  1. Go to
  2. Click on “add to cart.”
  3. Sign in to your account – if you do not have a account, please click “create an account & continue”
  4. On the checkout screen you will see a box on the right side labeled “promotion code”.  Please enter the code FIRMDISC25 in this box and click submit.  Then click proceed to checkout.

2012 Breach and Lacking Compliance Program Results in $750,000 Settlement for Radiation Oncology Group

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By Arthur J. Fried, Patricia M. Wagner, Adam C. Solander, Evan Nagler, and Jonathan Hoerner

On September 2, 2015, the U. S. Department of Health and Human Services (“HHS”) announced a $750,000 settlement with Cancer Care Group, P.C. (“CCG”), a radiation oncology practice in Indiana, for Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules violations. The alleged violations occurred in 2012, but a subsequent HHS Office for Civil Rights (OCR) investigation led to allegations from OCR that there was a lack of compliance with HIPAA Privacy and Security Rules requirements dating back to 2005.

CCG notified OCR on August 29, 2012 of a data breach of electronic protected health information (ePHI) resulting from the theft of a laptop bag that was left unattended in an employee’s car.  The bag contained a laptop computer and unencrypted backup storage media.  OCR estimated that the stolen data included the names, addresses, dates of birth, Social Security numbers, insurance information, and clinical information of approximately 55,000 current and former patients.

After receiving notification of the breach, OCR conducted an investigation that OCR alleged revealed CCG was in “widespread non-compliance with the HIPAA security rule.”  Specifically, OCR determined that CCG failed to conduct an enterprise-wide risk analysis at any time between April 21, 2005 (the compliance date of the Security Rule) and November 5, 2012, almost 5 months after the data breach.  OCR also determined that CCG also failed to have in place a written policy covering the removal of hardware and electronic media containing ePHI from CCG facilities.  OCR noted that an enterprise-wide risk analysis would have determined that removal of unencrypted media was a high risk to the group’s ePHI security.

In addition to the $750,000 payment, the settlement requires CCG to adopt a robust corrective action plan to correct HIPAA compliance program deficiencies. The entire Resolution Agreement can be viewed here.

This case highlights the need for all covered entities and business associates to conduct regular risk assessments and vulnerability testing.  A proper risk assessment will help organizations to identify vulnerabilities to the ePHI they store. While the Security Rule does not mandate encryption, as it is an addressable implementation specification, this settlement again reinforces OCR’s position that unencrypted computer hard drives, mobile devices, and electronic media will be under intense scrutiny should a breach occur. Thus, in most instances it is advisable for those types of devices to be encrypted.

HRSA Issues Proposed “Omnibus Guidance”

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The Health Resources and Services Administration (“HRSA”) issued a notice proposing guidance under the 340B Drug Pricing Program.  The proposed Omnibus Guidance was issued in pre-publication format and is available online at  The notice is scheduled to be published in the Federal Register on August 28, 2015 and will be available at

HRSA intends to finalize the proposed guidance after consideration of public comments.  The notice is open for a 60-day public comment period, with comments due on or before October 27, 2015.

The proposed Omnibus Guidance notice attempts to clarify current 340B Program requirements for covered entities enrolled in the 340B Program and for drug manufacturers that make their drugs available to covered entities under the 340B Program.  Highlighted below are some of the most notable aspects of the proposed guidance.

A.  340B Program Eligibility and Registration[i]

  • Among other clarifications and areas discussed, HHS is seeking comments on alternatives to demonstrating the eligibility of an offsite outpatient facility or clinic.

B.  Drugs eligible for purchase under the 340B Program[ii]

  • HRSA clarifies that the definition of “covered outpatient drug” excludes only those drugs in the designated sites of service described in the statute that are reimbursed under Medicaid as part of a bundled reimbursement rate for a service (not a drug billed to any other party or reimbursed separately by Medicaid).

C.  Individuals Eligible to Receive 340B Drugs

The proposed guidance clarifies the definition of eligible 340B patients by focusing on the prescriber’s relationship to the covered entity, the patient’s relationship to the covered entity, and the setting of the covered entity.  In HRSA’s interpretation, the criteria that determine if an individual is “a patient of the entity” eligible for the use of 340B drugs must be met on a “prescription-by-prescription or order-by-order basis.”[iii]  An individual is an eligible patient of a covered entity under the proposed guidance if all of the following conditions are met:

  1. The individual receives a health care service at a covered entity site which is registered for the 340B Program and listed on the public 340B database.
  2. The individual receives a health care service from a health care provider employed by the covered entity or who is an independent contractor for the covered entity, such that the covered entity may bill for services on behalf of the provider.
  3. 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 will not be considered a patient of the covered entity if the only health care received by the individual from the covered entity is the infusion of a drug or the dispensing of the drug.
  4. The individual receives a health care service that is consistent with the covered entity’s scope of the grant, project, or contract.
  5. 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 (e.g., Medicare, Medicaid, private insurance). An individual who is self-pay, 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.
  6. The individual has a relationship with the covered entity such that the covered entity maintains access to auditable health care records which demonstrate that the covered entity has a provider-to-patient relationship, that the responsibility for care is with the covered entity, and that each element of this patient definition in this section is met for each 340B drug.[iv]

In the summary of the proposed guidance, HRSA discusses the applicability to the patient definition to the following scenarios.[v]

  • An individual that sees a physician in private practice for follow-up care from a covered entity is not an eligible patient since the private practice is not listed in the 340B database.
  • An individual is not an eligible patient when the health care is provided by an organization that has an affiliation arrangement with the covered entity (even if the covered entity has access to the affiliate’s records).
  • Privileges or credentials at a covered entity are not sufficient to demonstrate that a patient treated by the privileged provider is an eligible patient of the covered entity.
  • The proposed guidance explains that a covered entity’s employees must independently meet the eligible patient definition and are not automatically eligible patients by status of their employment. Even covered entities with self-funded plans, which are financially responsible for employees’ health care, and contract with loosely affiliated health care professionals, must have its employees independently meet the eligible patient definition.

D.  Covered Entity Responsibilities


  • In discussing drug inventory/replenishment models in the summary to the proposed guidance, HRSA definitively states that an improper accumulation, even prior to the placement of an order, equals diversion and constitutes a violation.[vi]

Prohibition of Duplicate Discounts[vii]

  • Covered Entities can select whether to use 340B drugs for its Medicaid Managed Care Organization (“MCO”) patients and can vary the selection at different covered entity sites and MCOs as long as such distinction is made available to HHS. In addition, a covered entity should have mechanisms in place to identify MCO patients.
  • The proposed guidance reserves the right to make the covered entity MCO carve-in or carve-out information publicly available through an Exclusion File or other mechanism.
  • With respect to contract pharmacy arrangements, the default position in the proposed guidance is that contract pharmacies will not dispense 340B drugs for Medicaid Fee-for-Service (“FFS”) or MCO patients. The summary to the proposed guidance states that if a covered entity wishes for its contract pharmacy to dispense 340B drugs to Medicaid FFS or MCO patients, the covered entity will provide HHS a written agreement with its contract pharmacy and State Medicaid agency or MCO that describes a system to prevent duplicate discounts.[viii]

Maintenance of Auditable Records[ix]

  • HRSA is proposing a record retention standard of 5 years for manufacturers and covered entities.
  • For covered entities, a systemic failure to maintain records adequate to permit auditing is considered a failure to meet the statutory audit requirements, and constitutes grounds for a loss of eligibility and termination from the program.

E.  Contract Pharmacy Arrangements[x]

  • The proposed guidance does not include any limitation on the number of contract pharmacies permitted (“one or more licensed pharmacies”) to dispense 340B drugs to the covered entity’s patients.
  • HRSA reiterates its long-standing position that a covered entity “retain complete responsibility” for contract pharmacy compliance with program requirements. The proposed guidance contemplates that Covered Entities will conduct quarterly reviews (i.e., a comparison of the covered entity’s prescribing records to the contract pharmacy’s dispensing records) in addition to independent annual audits.

F.  Manufacturer Responsibilities[xi]

  • HRSA includes guidance regarding limited distribution plans, such as specialty pharmacy or restricted distribution networks, and requires advance written notification of such plans to HRSA in advance of their implementation.
  • HRSA proposes to require manufacturer credits or refunds both in routine instances of retroactive adjustment to relevant pricing data as well as exceptional circumstances such as erroneous or intentional overcharging for covered outpatient drugs. Manufacturers would not be allowed to calculate refunds in any manner other than by individual NDC including (but not limited to) aggregating purchases, de minimis amounts, and netting purchases.  This refund or credit is expected to occur within 90 days of the determination by the manufacturer or HHS that an overcharge occurred.
  • HRSA proposes to extend the requirement for an annual recertification to manufacturers, in which case they would be required to review and update their 340B database information, including the NDCs subject to 340B pricing.

G.  Rebate Option for AIDS Drug Assistance Programs[xii]

  • HRSA proposes that AIDS Drug Assistance Programs seeking access to 340B prices  either purchase directly (i.e., at the 340B ceiling price) or, in order to receive a rebate after the purchase, make an election at the time of registration and inform HRSA that the it intends to pursue a rebate mechanism.
  • In addition, AIDS Drug Assistance programs choosing the rebate or hybrid option are expected to make a “qualified payment” and submit claims-level data to the manufacturer to support that payment. A “qualified payment” for a covered outpatient drug includes (i) a direct purchase at a price greater than the 340B ceiling price or (ii) a payment of the health insurance premiums that cover the covered outpatient drug purchases at issue and payment of a copayment, coinsurance, or deductible for the covered outpatient drug.

H.  Program Integrity[xiii]

  • Expanded program integrity provisions clarify HRSA audits of covered entities (including their child sites and contract pharmacies) and manufacturers and their contractors (such as wholesalers). All HRSA audits require the auditee’s provision of auditable records, HRSA’s initiation of notice and hearing procedures prior to making a final determination regarding compliance, and the opportunity to submit a corrective action plan to HRSA to address noncompliance.

In addition to the areas highlighted above, the proposed guidance contains additional clarifications regarding fundamental 340B Program issues, such as covered entity eligibility and registration, annual recertification, the GPO prohibition, and duplicate discounts.


[i] Omnibus Guidance, Section II.A, p.8.

[ii] Id. at Section III.B, p.72.

[iii] Id. at Section III.C(a). p. 72.

[iv] Id. at Section III.C(a)(1)-(6), p. 72-3.

[v] Id. at Section II.C.(a)(1)-(6), p. 24-8.

[vi] Section II.C Drug inventory/replenishment models, p. 29.

[vii] Id. at Section III.D Prohibition of duplicate discounts (a)(2) and (c), p.74-5; Section III.E at (b)(2), p.78-9.

[viii] Id. at Section II.D Contract pharmacy, p. 35,

[ix] Id. at Section III.D Maintenance of auditable records, p. 76-7.

[x] Id. at Section III.E(b)(3), p. 79.

[xi] Id. at Section III.F Obligation to offer 340B prices to covered entities at (c), p. 81; Procedures for issuance of refunds and credits, p.82; and Manufacturer recertification, p. 82.

[xii] Id. at Section III.G(a)-(c), p. 83.

[xiii] Id. at Section III.H HHS audit of a manufacturer and its contractors (a)-(b), p. 88-9.

BNA Webinar: Opportunities and Obstacles: Preparing for the Transition to the ICD-10 Code Set

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On Tuesday, September 1, 2015, from 1:00 PM to 2:00 PM ET, George BreenChair of Epstein Becker Green’s National Health Care and Life Sciences Practice Steering Committee, will co-present “Opportunities and Obstacles: Preparing for the Transition to the ICD-10 Code Set,” a webinar hosted by Bloomberg BNA.

With the transition to the ICD-10 code set coming in October, the health-care industry is grappling with adopting new technology and making last-minute preparations. The switch to ICD-10 also presents new opportunities to increase productivity and improve patient health.

The International Classification of Diseases is a standardized coding system used by providers for identifying illnesses and treatments, as well as for reimbursement. ICD-10 updates health-care diagnoses and procedure codes from the currently used 13,000 in ICD-9 to 68,000, and will be required for all entities covered under the Health Insurance Portability and Accountability Act.

Providers have several concerns about ICD-10, including how it will affect their reimbursements. Health-care professionals are going to have differences over what constitutes the correct diagnosis code under ICD-10, which might negatively impact reimbursement and also result in fraud and abuse concerns.

Epstein Becker Green would like to offer you a 25% discount off the registration fees for this program.  To sign up at this discounted rate, please follow the steps below:

  1. Go to
  2. Click on “add to cart.”
  3. Sign in to your account – if you do not have a account, please click “create an account & continue”
  4. On the checkout screen you will see a box on the right side labeled “promotion code”.  Please enter the code FIRMDISC25 in this box and click submit.  Then click proceed to checkout.

The DC Circuit Speaks – Proving Condition of Payment is Key To Implied Certification False Claims Act Cases

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By George B. Breen

On July 10, 2015, the U.S. Court of Appeals for the District of Columbia Circuit made clear that in False Claims Act cases brought under an implied certification theory, certifying compliance with the federal statute or regulation at issue must be a condition of payment.

In United States ex rel. Davis v. District of Columbia, No. 14-7060, 2015 WL 4153919 (D.C. Cir. Jul. 10, 2015), a qui tam relator alleged that the District of Columbia had failed to maintain certain records supporting certain cost reports it submitted to the District of Columbia Medical Assistance Administration, purportedly in violation of record-keeping regulations. While principally at issue in Davis was whether the relater proved a knowing violation of these regulations, as part of its analysis the Court made clear its position relative to the implied certification theory of false claims act liability. Stated succinctly, in order to establish liability under an implied certification theory, a defendant must have violated a legal obligation, certifying compliance therewith having been a condition of payment.

The Court noted that “not all failures to comply with a federal statute or regulation expose a provider to liability under the False Claims Act”, stating specifically that a “false certification of compliance with a statute or regulation cannot serve as the basis for a qui tam action… unless payment is conditioned on that certification” (citing United States ex rel. Siewick v. Jamieson Sci. & Eng’g, Inc., 214 F.3d 1372, 1376 (D.C. Cir. 2000)). In other words, a defendant may be held liable under the False Claims Act for falsely certifying it complied with a statute or regulation only if “certification was a prerequisite to the government action sought”.

This is helpful language for FCA defendants. The Government and relators have previously and often argued that proving condition of payment was not a necessity to implied certification liability in this Circuit. The Court in Davis has essentially invalidated that argument and provides another tool for defendants – who often face over reaching efforts to extract FCA settlements and judgments based on little more than a claim that a statute or regulation was not complied with.