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

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 https://s3.amazonaws.com/public-inspection.federalregister.gov/2015-21246.pdf.  The notice is scheduled to be published in the Federal Register on August 28, 2015 and will be available at https://www.federalregister.gov/articles/2015/08/28/2015-21246/guidance-340b-drug-pricing-program-omnibus.

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

Diversion

  • 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] Id.at 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 http://www.bna.com/opportunities-obstacles-preparing-m17179930152/
  2. Click on “add to cart.”
  3. Sign in to your bna.com account – if you do not have a bna.com 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.

 

 

SCOTUS Upholds Exchange Subsidies – King v. Burwell

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firm_sgersonIn a split decision announced today, June 25, the U.S. Supreme Court, in King v. Burwell, ruled in upholding the tax credits to individuals in all states, including those with only a federal exchange.  In a 6-3 decision, Chief Justice Roberts delivered the opinion of the Court.

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt.”

This is one of the rare times that my prediction (6-3 with Chief Justice Roberts and Justice Kennedy joining the liberals, affirming the 4th Circuit) has been accurate.  I note that the case was decided on statutory construction grounds and so is much more important as an statutory interpretation and administrative law case than it is as a health care case. In sum, the subsidies were upheld as to economically-eligible persons in all states, whether their exchanges are State exchanges or Federal exchanges. The Court held that the term “State” in the provision at issue was, in context, ambiguous. It declined Chevron deference but held that in the total context of the statute and what Congress was trying to establish, the whole ACA scheme would collapse if the subsidies/tax credits were not available. This is an important win for the Administration and for health insurers and their customers because the decision in King won’t, in itself, require rate increases and open season can go forward without a hitch. Context wins over text.

DOJ Further Delays Release of Highly Anticipated Proposed Website Accessibility Regulations for Public Accommodations

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Joshua A. Stein, a Member of the Firm in the Labor and Employment practice at Epstein Becker Green, has a Hospitality Labor and Employment Law blog post that will be of interest to many of our readers: “DOJ Further Delays Release of Highly Anticipated Proposed Website Accessibility Regulations for Public Accommodations.”

Following is an excerpt:

For those who have been eagerly anticipating the release of the U.S. Department of Justice’s proposed website accessibility regulations for public keyboard-4x3_jpgaccommodations under Title III of the ADA (the “Public Accommodation Website Regulations”), the wait just got even longer.  The recently released Spring 2015 Unified Agenda of Federal Regulatory and Deregulatory Actions reveals that DOJ’s Public Accommodation Website Regulations are now not expected until April 2016.  This delay moves back the release date nearly a year from what most had previously anticipated; this summer in advance of July’s 25th Anniversary of the ADA.  While there was no public statement explaining the release, most insiders believe it has to do with the difficulty of appropriately quantifying the costs and benefits of complying with any promulgated regulations – a necessary step by DOJ for such a rulemaking.

Read the full original post here.

A “Mixed Bag” from SCOTUS – Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter

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In a unanimous decision announced May 26, the U.S. Supreme Court, in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 2015 BL 163948, U.S., No. 12-1497, 5/26/15, ruled that the Wartime Suspension of Limitations Act (“WSLA”) applied only to criminal charges and not underlying civil claims in times of war. Thus, the WSLA – which suspends the statute of limitations when the offense is committed against the Government – cannot be used to extend the statute of limitations in cases such as those brought under the False Claims Act (“FCA”). This ruling reversed a decision of the Fourth Circuit which had previously held that WSLA applied to both criminal and civil claims.

In the same decision, the Court offered some clarity around the FCA’s “First to File” bar. Under the statute, “[w]hen a person brings an action . . . no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U. S. C. §3730(b)(5) (emphasis added). Affirming the Fourth Circuit in interpreting the definition of the word “pending,” the Court held that it’s meaning was intended to be consistent with its general meaning – “remaining undecided” or “awaiting decision.” Thus, once a decision is reached and the case is no longer active, it is no longer “pending” within the meaning of the statute and does not operate as a bar to a subsequent suit – although the Court noted that doctrines such as claim preclusion might be available in the defense of a later filed suit, depending on the circumstances of the case.

Holding that the WSLA does not extend the statute of limitations in FCA cases is good news. However, the first to file holding will provide an opportunity for relators to bring more troublesome cases after early filers’ cases have been rejected by the government and abandoned by relators or dismissed by courts. In other words, the ruling will afford time that can allow “the cream to rise to the top.” Thus, this decision allows for complex and sophisticated lawsuits that are not recognized at first blush but which can be brought at any time when there is nothing else relevant pending.

Health Care Industry: OSHA Is Quietly Gunning for You – Is Your Workplace Ready?

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On April 2, 2015, Thomas Galassi, Director of the Directorate of Enforcement for OSHA, sent a memorandum to all Regional Directors announcing that the agency’s National Emphasis Program on Nursing and Residential Care Facilities would be extended until replaced by updated guidance or removed by the agency.  Mr. Galassi went on to state that, because the health care industry reports more work-related injuries and illnesses than any other general industry,

the Agency will continue to use both enforcement and collaborative efforts to address hazards such as musculoskeletal disorders from lifting patients or residents, exposures to tuberculosis, bloodborne pathogens, workplace violence, and slips, trips and falls. We are advising you of the Agency’s intent to soon issue updated guidance that instructs OSHA offices to allocate enforcement and other resources to additional inpatient healthcare facilities, such as nursing homes and hospitals that have occupational illness and injury rates above the industry average.

For the full blog post by our colleague Valerie Butera, please visit the OSHA Law Update blog.

House Energy and Commerce Committee Proposes, then Drops, 340B Reform Language to 21st Century Cures Legislation

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By Alan J. Arville, Constance A. Wilkinson and Selena M. Brady

The House of Representatives Energy and Commerce Committee (“the Committee”) circulated draft language to include in its 21st Century Cures legislation earlier this week to reform the 340B drug discount program (the “340B Program”). Although the draft 340B language was pulled from the legislation yesterday, the language proposed provides insight into what future legislative reform may include. The draft language, if adopted, would have a substantial impact on all 340B Program stakeholders, including, covered entities, contract pharmacies, 340B technology vendors, and drug manufacturers.

The draft language addressed the concerns of several Committee members during the Health Subcommittee hearing on March 24, 2015 (discussed here), including the lack of clarity surrounding the patient eligibility definition, the lack of transparency on how hospital-based covered entities use 340B savings to benefit underserved patients, and the Health Resources and Services Administration’s (“HRSA”) limited authority to issue regulations and enforce 340B Program requirements. In addition, the draft language would impose several new requirements on 340B contract pharmacy arrangements. The following summarizes several key provisions included in the draft language.

Patient Eligibility Definition

The proposed language defining “patient” did not significantly deviate from the existing definition set forth in HRSA’s 1996 guidance, but added a requirement that the patient have an “in-person” clinical or medical visit at the covered entity.

New Obligations for Covered Entities

The draft language proposed several new requirements of covered entities in order to participate in the 340B Program, including the following:

  • Covered entities would pay a user fee not to exceed 0.1 percent of covered outpatient drug purchases.
  • Covered entities with high volume purchases would be required to conduct an annual independent audit of the entities’ 340B Program compliance, and provide the results to the Department of Health and Human Services (“HHS”).
  • Hospital-based covered entities (except for critical access hospitals) would be subject to substantial new reporting requirements, including the submission of an annual report detailing the following: (1) patient breakdown by payor and the aggregated amount of acquisition cost and reimbursement for covered outpatient drugs by payor, (2) the use of its 340B Program revenue relating to the access and provision of health care for the uninsured, underinsured, underserved and medically vulnerable, (3) its prevention of duplicate discounts, (4) the number of covered outpatient drugs dispensed by each of its contract pharmacies, (5) the amount of uncompensated care, and (6) the name of any third parties or vendors that administer its inventory management system or contract pharmacy arrangement.

Guidance on Contract Pharmacies

The proposed language also addressed contract pharmacies and imposed some potentially onerous obligations for covered entities and contract pharmacies. The contract pharmacy language required covered entities utilizing contract pharmacies to:

  • Have a contractual agreement in place with each contract pharmacy;
  • Register the contract pharmacy agreement and the contract pharmacy’s “distance” from the covered entity with HRSA;
  • Ensure compliance of each contract pharmacy agreement with the requirements to prevent drug diversion and duplicate discounts;
  • Develop a mechanism to track the income of the patients of the covered entity and the amount such patients pay to receive covered outpatient drugs from the contract pharmacy;
  • Maintain and ensure that each contract pharmacy maintains, auditable records;
  • Develop a process and conduct review of prescribing and dispensing records to identify irregularities; and
  • Provide annual audits of the contract pharmacy to be conducted by an independent auditor.

Expanded HHS Authority

The proposed changes would have provided HHS with the authority to establish limits on what the uninsured pay for 340B drugs and allowed HHS to impose new penalties on covered entities for non-compliance with the 340B Program. Perhaps, most significantly, the proposed language would have given HHS the authority to issue regulations addressing several areas of the 340B Program including, but not limited to, covered entity eligibility, patient definition, contract pharmacy arrangements, covered entity reporting requirements, duplicate discounts, limits on amounts charged to uninsured patients, and penalties for non-compliance.

Positive Change for the Home Health Community in New Jersey

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On March 3, 2015, the New Jersey State Board of Nursing (“Board”) issued a comprehensive set of proposed amendments, repeals and new rules pertaining to Delegation and Certification; Homemaker-Home Health Aides.  The changes broaden the authority of registered professional nurses (“RNs”) and permit RNs to train, and then delegate tasks to licensed practical nurses (“LPNs”), certified home health aides (“CHHAs”) and other assistive persons (collectively “assistants”).  This certainly seems like a positive step for the Home Health industry and its patients.  Nurses will be able to serve a broader patient base by maximizing the talents of more caregivers who are, perhaps, being under-utilized in the current model.

Currently New Jersey limits those tasks which an RN can delegate.  Those restrictions were understandable.  Delegation of nursing duties is a delicate and complex process.  An RN must fully assess and understand a patient’s needs and the potential for complication before feeling secure enough to assign another responsibility for that care.  The law change seems to embrace the fact that RNs have always had this key competency, the art of assessment and delegation, but were lacking the necessary assurances that their assistants were able to accept higher levels of responsibility, or that their license would be protected if something were to go wrong. Thus, the new law tightens the screening and training processes employed by HHAs to ensure that the assistants are “equal to the task” of accepting delegation.

It would certainly seem that New Jersey has made changes to benefit the Home Health Industry’s clients.  Among those benefits:

  • Safe and efficient care is delivered with highly skilled RNs able to devote significant time and attention to those patients in need of specialized care;
  • Duplication of services is minimized;
  • More care givers are empowered and more patients treated;
  • A “team” is established to effectuate goals and problem-solve;
  • Care is administered in a more efficient and cost-effective manner.

As with any changes, however, we have to be on the lookout for unintended consequences.  There are legal and ethical consequences to delegation.  Those nurses who master the art of delegation are still responsible for the care rendered and supervision is key.  The RNs must be certain they are delegating to people who are properly trained, understanding of their role, and capable of administering safe nursing care.  The delegates must be comfortable with this increased reliance on their skills.  Any hiccup in the link between the delegator and the delegate could create patient safety issues.  Thus, if any other states are inclined to follow New Jersey’s lead, attention not only to the benefits of delegation, but also to the attendant training and supervision requirements is essential for success.

Members of House Subcommittee Express Support for the 340B Program, but Need for Clarity, Oversight and Transparency

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On March 24, 2015, the House of Representatives Energy and Commerce Health Subcommittee[1] (the “Subcommittee”) held a 340B Program hearing with testimony from the Deputy Administrator of Health Resources and Services Administration (“HRSA”), the Director of the Office of Pharmacy Affairs (“OPA”) of HRSA,[2] the Director of Health Care of the Government Accountability Office (“GAO”), and Assistant Inspector General of the Office of Evaluation and Inspection of the U.S. Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”).

The purpose of the hearing was to assess the functionality of the 340B Program, and, in particular, HRSA’s activities to address the findings in the GAO report, issued in September 2011, titled “Manufacturer Discounts in the 340B Program Offer Benefits, but Federal Oversight Needs Improvement,”[3] and OIG report, issued in February, 2014, titled “Contract Pharmacy Arrangements in the 340B Program.”[4]

The GAO issued a follow-up report on March 24, 2015, titled “Drug Discount Program, Status of GAO Recommendations to Improve 340B Pricing Program Oversight.”  The follow-up report stated that HRSA had implemented two of the GAO’s four recommendations and that HRSA plans to address the remaining two recommendations to clarify the patient definition and hospital criteria for eligibility.  The OIG also recommended that HRSA clarify patient definition, particularly in to the context of contract pharmacies.  The OIG provided examples of how eligibility determinations in the contract pharmacy setting can result in diversion based on the lack of clarity in the patient definition.  Additionally, the OIG stated that HRSA could increase 340B Program transparency by sharing 340B ceiling prices with providers and Medicaid state agencies (though the OIG acknowledged that HRSA lacked the authority to share 340B prices with Medicaid state agencies).

Throughout the hearing, several members of the Subcommittee expressed their support for the Program and acknowledged that the 340B Program is necessary for hospitals, health centers, and other Covered Entities to serve underserved populations.  At the same time, Subcommittee members expressed concerns that the 340B Program needs greater clarity, oversight by HRSA, and transparency.  Subcommittee Chairman Joseph R. Pitts’ (R.-PA) opening statement sums up the message delivered by Congress:

“This program, designed to stretch scarce federal dollars, is critically important for indigent and low-income patients who may otherwise be unable to access needed drugs or afford treatment. . . . One thing I hope we can all agree on, is that to preserve the 340B program and ensure that it is serving those who most need help, greater oversight and transparency is needed to increase the program’s accountability. Today’s hearing marks the first step in that direction.”[5]

The following are several themes that were discussed during the hearing:

  • Chairman Pitts suggested that Medicaid expansion as a result of the Affordable Care Act may lead to more hospitals meeting the disproportionate share hospital (“DSH Hospitals”) percentage, and thus, becoming Covered Entities under the 340B Program. Chairman Pitts questioned whether the DSH percentage was an appropriate proxy for determining the extent to which a hospital serves low income populations and whether a different methodology would be more appropriate.
  • A few Subcommittee members expressed concern that DSH Hospitals have no obligation to report how 340B savings are used to benefit underserved patients. One member expressed the more specific concern that there was no transparency to determine the extent to which the 340B discount is passed on to uninsured individuals.   The Subcommittee members contrasted this with HRSA grantees, such as health centers, which are required to reinvest proceeds to advance grant purposes. HRSA’s Deputy Administrator noted that such reporting and use of 340B savings by DSH hospitals is not required by the statute and, in response, a member of the Subcommittee suggested that this was an issue being discussed among the members that could potentially require a legislative fix.
  • A few Subcommittee members broached the topic whether, in light of HRSA’s limited rulemaking authority, whether HRSA’s issuance of guidance was a “long term solution” and whether HRSA needed more expansive rulemaking authority. Although HRSA’s Deputy Administrator acknowledged that enforcement of rules would strengthen HRSA’s oversight, the Deputy Administrator did not explicitly request rulemaking authority or other legislative change and stated simply that HRSA would use all the tools at its disposal to enforce 340B Program compliance.
  • Certain Subcommittee members expressed concern over the lack of clarity surrounding the patient eligibility definition; noting that compliance cannot be enforced if the definition is unclear.
  • Several Subcommittee members expressed concern and asked questions regarding the transparency of 340B ceiling prices to Covered Entities and the length of time it has taken HRSA to implement the pricing database. HRSA noted that the secure website would be operational later this year. Other Subcommittee members posed questions regarding whether the ceiling prices needed to be shared with state Medicaid agencies, even though HRSA does not have such authority.

Based on the Subcommittee’s questions and the testimony, it appears that the Subcommittee is intent on “preserving” the 340B Program, and exploring whether legislative “fixes” are needed.  The Subcommittee discussed some areas that can only be addressed through the legislative process, such a change of methodology to 340B hospitals, and transparency requirements with respect to the utilization of 340B savings.

However, there currently does not appear to be any consensus on the scope of such legislation, or even whether legislation is needed.  Ultimately, legislation will likely depend on HRSA’s ability to ensure 340B Program compliance with its current tools, including Covered Entity and manufacturer audits, limited rulemaking authority, and the issuance of guidance.

[1] The full Energy and Commerce committee has primary jurisdiction over the 340B Program in the House of Representatives.

[2] The Office of Pharmacy Affairs is tasked with Administratoring the 340B Program.

[3] http://www.gao.gov/products/GAO-11-836

[4] http://oig.hhs.gov/oei/reports/oei-05-13-00431.pdf

[5] Opening Statement of Subcommittee Chairman Joseph R. Pitts, available at http://energycommerce.house.gov/hearing/examining-340b-drug-pricing-program.