After July 1, 2017, optometrists and ophthalmologists (“Ophthalmic Providers”) in Virginia will be able to practice through telehealth. Va. Code § 54.1-2400.01:2 permits Ophthalmic Providers to establish a bona fide provider-patient relationship “by an examination through face-to-face interactive, two-way, real-time communication” or through “store-and-forward technologies.” Licensed Ophthalmic Providers may establish a provider-patient relationship so long as the provider conforms to the in-person standard of care.  To the extent that an Ophthalmic Provider actually writes a prescription, the Ophthalmic Provider must also obtain an updated patient medical history and make a diagnosis at the time of prescribing.  However, like most telehealth laws in other states, the Virginia law prohibits issuing a prescription solely by use of an online questionnaire.

By comparison to other telehealth laws, the Virginia law is progressive not only because it permits Ophthalmic Providers to establish a valid provider-patient relationship through store-and-forward technologies, but that it addresses the need for telehealth laws that specifically apply to Ophthalmic Providers. As of July 1, Ophthalmic Providers in Virginia can begin prescribing eyeglasses or contact lenses using real time and store-and-forward telehealth modalities. Since Virginia already has remote prescribing and parity laws in place, Ophthalmic Providers should feel free to immediately begin using these technologies to prescribe in accordance with the new law.  While it is hard to say how many Ophthalmic Providers are ready to immediately incorporate these technologies into their practices, telehealth optometry will most certainly expand patient access to eye care services in Virginia.

This post was written with assistance from Lauren Farruggia, a 2017 Summer Associate at Epstein Becker Green.

Recently, Judge Robert T. Conrad, Jr. of the United States District Court for the Western District of North Carolina (Charlotte Division), rejected efforts by The Charlotte- Mecklenberg Hospital Authority, doing business as the Carolinas Health Care System (“CHS”), to dismiss, at the pleadings stage, a complaint filed by the United States’ Antitrust Division of the Department of Justice, and the State of North Carolina, asserting that CHS’s anti-steering provisions in its payer contracts unreasonably restrain trade in violation of section 1 of the Sherman Act. Recognizing the Court’s limited review of preliminary motions, Judge Conrad, in the matter styled as United States of America et al v. The Charlotte-Mecklenberg Hospital Authority d/b/a Carolinas Health Care System, Civil Action No.3:16-cv-00311-RJC-DCK (W.D. N.C., Mar. 30,2017), ultimately concluded that the allegations of the Complaint, taken as true for purposes of ruling on the motion, asserted a claim that was “plausible,” meeting the pleading standards established by the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544,570 (2007).

The complaint alleges that CHS is the largest hospital system in the Charlotte, North Carolina area, operating ten acute-care hospitals and garnering a market share of fifty percent (50%). CHS’s next closest competitor is alleged to have only half the number of acute-care hospitals, and less than half of CHS’s annual revenue. The complaint also alleges that “[a]n insurer selling health insurance plans to individuals and employees in the Charlotte area must have CHS as a participant in at least some of its provider networks, in order to have a viable health insurance business in the Charlotte area.” Based on these purported facts, the Complaint alleges that CHS maintains “market power” for the sale of acute care hospital services in the Charlotte area.

The complaint goes on to assert that CHS maintains anti-steering provisions in many of its payer contracts including those that collectively insure up to eighty-five percent of the insured residents in the Charlotte area. Furthermore, it is alleged that CHS is able to demand these provisions as a result of its market power.

Finally, the Complaint alleges that these anti-steering provisions impose an unreasonable restraint on competition. Among other things, these provisions have the effect of preventing payers from directing patients to lower cost, higher quality providers, and even prohibit payers from providing its enrollees with information about their health care options. The ultimate effect of these provisions is to allow CHS to maintain its dominant position in the market, and maintain supra competitive prices.

CHS filed an Answer to the Complaint, and a motion on the pleadings which is governed by the same standards as a motion to dismiss filed under Federal Rule of Civil Procedure 12 (b) (6). The essence of CHS’s motion is that the Plaintiff’s allegations were conclusory, and, in particular, the Complaint lacked factual allegations that show “actual competitive harm” resulting from the anti-steering provisions. In addition, CHS argued that: the steering restrictions were beneficial and procompetitive; CHS’s prices were higher due to superior product and consumer loyalty; payers were still able to steer and no payer had ever asked to remove the steering provisions. CHS also relied upon the recently issued Second Circuit decision in United States v. American Express Co., 838 F. 3d 179 (2d. Cir 2016), which ultimately rejected a lower Court’s finding, after a bench trial, that similar steering provisions were unlawful.

Judge Conrad ultimately concluded that while many of the allegations in the Complaint were conclusory, and not factual, the Plaintiff had sufficiently alleged anticompetitive harm. In particular, the Complaint contains plausible allegations that CHS maintains market power, and that as a result of this market power CHS is able to force the anti-steering provisions on payers resulting in CHS’s ability to charge supra-competitive prices. Judge Conrad rejected CHS’s additional factual arguments concluding that these were not appropriate arguments to address on a preliminary motion.

Finally, Judge Conrad rejected the invitation to compare the case before him with that of United States v. American Express. In doing so, Judge Conrad noted: 1) he was not bound by a decision of the Second Circuit; 2) the health care industry is different from the credit card industry; and 3) the case before him was still in the preliminary stages while United States v. American Express was decided after discovery and a full trial on the merits.

Our colleagues Joshua A. Stein and Frank C. Morris, Jr., at Epstein Becker Green have a post on the Health Employment And Labor blog that will be of interest to many of our readers: “The U.S. Access-Board Releases Long-Awaited Final Accessible Medical Diagnostic Equipment Standards.”

Following is an excerpt:

As part of a flurry of activity in the final days of the Obama Administration, the U.S. the Architectural and Transportation Barriers Compliance Board (the “Access Board”) has finally announced the release of its Accessibility Standards for Medical Diagnostic Equipment (the “MDE Standards”).  Published in the Federal Register on Monday, January 9, 2017, the MDE Standards are a set of design criteria intended to provide individuals with disabilities access to medical diagnostic equipment such as examination tables and chairs (including those used for dental or optical exams), weight scales, radiological equipment, mammography equipment and other equipment used by health professionals for diagnostic purposes. …

Read the full post here.

On Monday, January 23rd, Senators Bill Cassidy (R-LA) and Susan Collins (R-ME) introduced the Patient Freedom Act of 2017 (“PFA”), the first of what may be many Republican Affordable Care Act (“ACA”) “replacement” alternatives. The PFA is notable for several reasons. It is the first replacement plan to be introduced in the 115th Congress, it is sponsored by Senators who are considered comparatively moderate on health issues, and thus its content may represent an opportunity for compromise in the future, and, perhaps most interestingly, does not actually repeal the ACA. The overarching feature of the PFA is that it allows states to control which course they chart for health reform.

The ACA: What Stays and What Goes  

If enacted, the PFA would eliminate the majority of the provisions contained in Title I of the ACA. This includes the individual and employer mandates, the community rating provision, essential benefits requirements, and the establishment of the health benefit exchanges. However, the ACA provisions the PFA retains are just as notable as the provisions it removes. The PFA maintains the bans on lifetime and annual coverage limits, maintains the ACA ban on coverage exclusions based on preexisting conditions, continues to permit dependents to remain on their parents’ plan until age 26, keeps in place the ACA non-discrimination requirements, and maintains the ACA mental health parity coverage requirements. The PFA also does not repeal any provisions outside of Title I, leaving many features in place, such as Medicaid expansion and Medicare prescription drug plan provisions.

State Options

The PFA would shift the decision of how to implement health reform to individual states. The PFA allows states to choose between three options: 1) maintain the current ACA model using subsidies and health benefit exchanges to provide insurance coverage; 2) enact a market-based option or “state alternative;” or 3) select to design its own health system without federal funding. If a state fails to select one of the options by a certain date they will be deemed to have selected the market based option.

Option 1: Keep the ACA

States that elect to continue to operate under the ACA will be treated as if the changes to Title I of the Act in the PFA were never enacted. This will allow states to maintain health benefits exchanges and for eligible enrollees to receive federal subsidies and cost sharing reductions to purchase coverage from qualified health plans (“QHPs”). However, States may see a reduction in the exchange subsidies and costs sharing reductions available to enrollee as the PFA includes an additional provision designed to align federal funding between ACA states and states that elect the new market-based approach.

Option 2: Market-Based Approach

The market-based approach, or “State Alternative” option, will allow states to essentially shift residents enrolled in QHPs and potentially Medicaid into a standard high-deductible health plan containing basic pharmaceutical coverage and some coverage for preventive care and free immunizations. Residents currently enrolled in QHPs will receive Roth health savings accounts (“HSAs”) funded through tax credits.  These tax credits will replace the advanced premium tax credits QHP-enrollees are currently eligible to receive with a tax credit that is similarly advanceable and refundable.  The tax credit is also adjustable based on the age, income, and geographic location of the enrollee.

States may also include the Medicaid expansion population under this market-based alternative, but only enrollees not otherwise eligible for Medicare coverage, and eligibility for federal Roth HSA contributions will be limited to those not enrolled in a federal healthcare or veterans benefit program. States can either administer the market-based solution themselves or they can allow the federal government to administer the system. The total amount of the tax credits available under the market based approach will be equal to 95 percent of the total projected ACA premium tax credits and cost-sharing subsidies that the state would have otherwise received.

What’s Next and What to Watch?

The PFA is the first of what may be many Republican plans to replace the ACA. Reports indicate other members of Congress, including Senator Rand Paul, are expected to release alternative plans in the near future. It is unlikely that any one plan will be enacted in the form that it is introduced. However, significant insight into what ultimate changes may occur can be gained by monitoring how stakeholders- such as members of Congress, the administration, and governors- respond to the various provisions contained in these proposals. Health care entities should closely monitor the provisions that appear to have support among the various stakeholders to ensure that there is sufficient time to react and adapt to the changing health care environment.

As the transition in Washington moves into high gear this month, it’s not just the new Administration and Congress that are putting in place plans for policy and legislation; stakeholders are busy creating agendas, too.

Many stakeholder agendas will seek to affect how government addresses such prominent health care issues as the Affordable Care Act, Medicare entitlements, fraud-and-abuse policies, FDA user fees, and drug pricing. There will be a myriad of stakeholder ideas, cutting a variety of directions, all framed with an eye to the new political terrain.

But whatever policies a stakeholder advocates, ideas must be translated into a form that that the political system can digest. For this to occur, an important technical conversion must take place; words must be conjured and organized so that desired policy can become legal reality.  This is no easy task, and stakeholders should proceed thoughtfully.

Here are five takeaways for making proposals concrete and workable:

1. Butterfly Effect

A “simple” contract (to buy a house, say) can end up getting pretty complicated, even when the stated rights and obligations apply to no more than two parties. In contrast, a policy proposal typically seeks to set arrangements for a broad array of parties (perhaps a whole economic sector) and thus will usually involve substantial complexity.

The large number of parties potentially affected means that even the most minor-seeming policy adjustment can have large, unintended, and unpredictable results – not dissimilar from how the proverbial flap of a butterfly’s wings can start the chain reaction that leads to a distant hurricane.

2. Pre-Drafting Steps

Taming the butterfly effect should begin before putting pen to paper. It starts with a clear view of the problem to be solved and the ways to solve it.  Notably, the legislative drafters available to Congress place some considerable emphasis on the steps that precede actual drafting.

For example, the House Legislative Counsel’s Office recommends use of a pre-drafting checklist that includes questions like these:  What is the planned policy’s scope (expressed as populations or subjects)?   Who will administer the policy?  Who will enforce it?  When should the policy take effect (and are transition rules needed)?  Each of these questions contains multiple sub-questions.

Similarly, the Senate Legislative Counsel’s Office points out that most legislated policies build on prior statutes. As such, it is important to know how new provisions will harmonize with — or will override — previously adopted language.  Making these judgments requires a solid grasp of existing legal authorities and ways these authorities have been interpreted.

3. Words on the Page

Translating concepts into words is a specialized task, for ultimately the words must be “right” – they must be technically sufficient to effectuate the policy intended.

It is not news that Congresses, Presidents, and courts sometimes have different views on the meaning of statutes, regulations, and other types of policy issuances. In theory, the drafting curative is to make the words so clear that only a single meaning is possible.  But realistically, legal contention often comes with the territory of a controversial policy, and so stakeholders should at a minimum avoid such unforced errors as these:

  • Obvious mistakes – e.g., purporting to amend a U.S. code title that has not been enacted into positive law;
  • Wrong law – e.g., confusing the statute that enacts new language with the statute that the new language amends;
  • Wrong time – e.g., getting the words right but putting them into effect for an unintended time period;
  • Imprecise labels – e.g., referring to concepts or parties via shorthand phrases similar to, but not identical to, defined terms; and
  • Vague references — e.g., omitting enough key details to confer unintended discretion on an agency or administrative official.

4. Document Silos

Today’s integrated world doesn’t look kindly on silos, but, in the specialized context of Washington policy development, they can be a helpful check on the temptation to combine technical drafting with political messaging.

The desire to combine these two forms of communication is understandable, for it is an appealing notion that policy proposals be “user friendly” so they can be quickly scanned for substantive gist. In fact, however, the practice is dilutive and dangerous; it can put the wrong words on the page and undermine policy intent.

A better course is for stakeholders to manage separately siloed sets of documents that, while consistent, operate at different levels of specificity. One silo should be reserved for the technically rigorous proposals that effect legal authority and a separate silo for “plain English” issue briefs, fact sheets, and other materials that summarize the authority.

5. Plug & Play

Washington policy debates are less often set battles, more often fast-moving skirmishes. Such places a premium on ability to adapt as new ideas emerge, political signals morph, and coalitions shift.  For the task of converting ideas into policies, there are at least two implications.

First, stakeholders should be prepared to think and draft in modules – in discrete chunks of policy that can be embedded in one or more larger proposals. In Congress, stakeholder-originated ideas are more likely to emerge as legislative amendments than as free-standing bills.

Second, stakeholders should be ready to iterate quickly as debate advances. Feedback from reviewers will often focus on proposal summaries because they are easier to read and understand.  But changes in response to comments must also be reflected in the technical proposals themselves.  Tight deadlines are the norm, so separately siloing the two types of documents (see above) will help speed an effective response when political opportunity strikes.

On December 31, 2016, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction that prohibits the U.S. Department of Health and Human Services (HHS) from enforcing certain provisions of its regulations implementing Section 1557 of the Affordable Care Act that prohibit discrimination on the basis of gender identity or termination of pregnancy. This ruling, in Franciscan Alliance v. Burwell (Case No. 7:16-cv-00108-O), a case filed by the Franciscan Alliance (a Catholic hospital system), a Catholic medical group, a Christian medical association, and eight states in which the plaintiffs allege, among other allegations, that the Section 1557 regulations force them to provide gender transition services and abortion services against their religious beliefs and medical judgment in violation of the Religious Freedom Restoration Act (“RFRA”).

By way of background, the Section 1557 regulations prohibit discrimination on the basis of gender identify, which regulations define to mean “an internal sense of gender, which may be male, female, neither, or a combination of male and female, and which may be different from an individual’s sex assigned at birth.”[i] The regulations prohibit a categorical insurance coverage exclusion or limitation for all health services related to gender transition and requires providers to provide transition-related procedures if the provider performs an analogous service in a different context. The plaintiffs also alleged that because they perform certain procedures for miscarriages, the Section 1557 regulations will require them to perform such procedures for abortions to avoid discriminating on the basis of termination of pregnancy.

The court held that the Section 1557 regulations failed to incorporate the exceptions for religious institutions and abortions services that Congress provided in Title IX. The court also found that Title IX, which is incorporated by Section 1557 statute, only prohibits discrimination on the basis of biological sex. The court further noted that “the government’s own health insurance programs, Medicare and Medicaid, do not mandate coverage for transition surgeries; the military’s health insurance program, TRICARE, specifically excludes coverage for transition surgeries. . .”[ii]

Specifically, the court concluded that “the regulation violates the Administrative Procedure Act (“APA”) by contradicting existing law and exceeding statutory authority, and the regulation likely violates the [RFRA] as applied to Private Plaintiffs.” The court also agreed that the plaintiffs would likely suffer irreparable harm without the injunction as “one of the State Plaintiffs is already undergoing investigation by the HHS’s OCR, and entities similarly situated to Private Plaintiffs have already been sued under the Rule since it took partial effect on May 18, 2016″ (emphasis added). Conversely, the court found that HHS will not suffer any harm by delaying implementation of this portion of the Section 1557 regulations. It should be noted that this is a ruling granting a preliminary injunction and a final ruling on the merits of a permanent injunction is still to come.

While an HHS appeal of this order would normally be expected, the impending change of Administration—including new leadership at HHS and an expected early Congressional push to repeal and replace the Affordable Care Act—makes it very uncertain whether an appeal will be filed, or ruled upon, prior to any possible changes in the regulatory scheme or underlying statute.

Health care entities should take note, however, that the remaining provisions of the Section 1557 regulations, including those that prohibit discrimination on the basis of disability, race, color, age, national origin, or sex (other than gender identity), are not impacted by the nationwide injunction and HHS can still enforce such provisions. Indeed, HHS has issued a broadcast email specifically stating that:

“[OCR] will continue to enforce the law—including its important protections against discrimination on the basis of race, color, national origin, age, or disability and its provisions aimed at enhancing language assistance for people with limited English proficiency, as well as other sex discrimination provisions—to the full extent consistent with the Court’s order.”

Health care entities should closely monitor this area of law for further developments and ensure that their operations are compliant with the remaining provisions of the Section 1557 regulations.

Further information regarding Section 1557 and its accompanying regulations can be found in EBG Client Alerts and Webinars.

[i] 45 C.F.R. § 92.4

[ii] The court cited Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751, 2780 (2014). The Supreme Court will consider whether Title IX covers gender identity in Gloucester Cty. School Bd. V. G.G., Sup. Ct. No. 16-273, during the current term.

Telemental/telebehavioral Health SurveyEpstein Becker Green has just released the 50-State Survey of Telemental/Telebehavioral Health (2016), a groundbreaking, comprehensive survey on the laws, regulations, and regulatory policies impacting telemental health in all 50 states and the District of Columbia.

While other telehealth studies exist, this survey focuses solely on the remote delivery of behavioral health care.

Compiled by attorneys in Epstein Becker Green’s Telehealth practice, the survey details the rapid growth of telemental health—mental health care delivered via interactive audio or video, computer programs, or mobile applications—and the increasingly complex legal issues associated with this trend. Additionally, the survey provides one source for state-by-state coverage of legal issues related to telemental health, such as:

  • Definitions of “telehealth” or “telemedicine”
  • Licensure requirements
  • Governing bodies
  • Reimbursement and coverage issues
  • The establishment of the provider-patient relationship
  • Provider prescribing authority
  • Accepted modalities for delivery (e.g., telephone, video) to meet standards of care

Read the firm’s full announcement and click here to download the complimentary survey.

2016 is poised to be a major year in network adequacy developments across public and private insurance markets.  Changes are ahead in the Medicare and Medicaid managed care programs, the Exchange markets and the state-regulated group and individual markets, including state-run Exchanges.  The developing standards and enforcement will vary significantly across these markets.

Through 2014 and 2015, major news stories discussed concerns over the growing use of narrow provider networks by issuers on the Affordable Care Act’s insurance exchanges (“Exchanges”).  Others reported on enrollees’ frustration with receipt of unexpected charges from out-of-network practitioners when receiving treatment at in-network facilities (often referred to as “surprise bills”).  As a result, calls for improved network adequacy and transparency mounted.  A September 2014 HHS Office of Inspector General (OIG) report was critical of variation in state oversight of the Medicaid managed care market.  An August 2015 Government Accountability Office (GAO) report called for greater CMS network oversight in the Medicare Advantage market.  In response, a series of proposed rules and other changes have accumulated –

Medicare Advantage (MA) – In April 2015, CMS announced in a Call Letter that it will impose more stringent network adequacy requirements in the application process for MA plans.  To address surprise provider terminations, CMS will require 90 days notice of any significant mid-year changes.  Additionally, plans must establish and maintain a process to keep provider directories current in real-time.  CMS intends to monitor compliance and is considering a CY2017 requirement for standardized electronic submission for inclusion in a nationwide provider database.  CMS has also expressed its intent to review network adequacy as part of its regular program audits, as a pilot in 2016 and as a standard feature in 2017.

Medicaid Managed Care – In May 2015, CMS released the first proposed rule to make comprehensive changes to its Medicaid managed care rules in 12 years, including new quantitative network adequacy standards.  Once finalized, states would be required to establish time and distance standards for specific provider types, including primary care (adult and pediatric), OB/GYN, behavioral health, specialists (adult and pediatric), hospital, pharmacy, pediatric dental, and any “additional provider types when it promotes the objectives of the Medicaid program for the provider type to be subject to such time and distance standards.”[1]  Interestingly, CMS suggested in its proposed rule that states look to MA and state commercial standards as models.

Federal Exchanges – In December 2015, CMS, through its Center for Consumer Information and Insurance Oversight (CCIIO), released a proposed rule that featured more prescriptive network adequacy standards for Qualified Health Plans (QHPs) offered on the federal Exchange.  Where CCIIO is satisfied that a state uses “an acceptable quantifiable metric,” it will defer to their review of QHPs.  In other states, a default federal standard would apply.  Starting in 2017, CMS expects to take a similar approach as to MA and apply time and distance standards, with an emphasis on high-utilization specialties.  While CMS says it will not “prohibit certification of plans with narrow networks or otherwise impede innovation in plan design,”[2] it intends to set a floor with the federal Exchange default standards and it seeks greater network transparency.  Toward that end, ratings on QHP network coverage may be a future feature of HealthCare.gov.

State Regulated Group and Individual Markets – In November 2015, the National Association of Insurance Commissioners (NAIC) released a long-awaited network adequacy model act with more detailed requirements than federal and many state standards.  While the act would not impose quantitative standards such as provider number and type requirements, it does include reimbursement parity provisions for emergency and out-of-network facility-based providers.

Looking Ahead

With legislative sessions underway in all but four states this year, there are several important developments to watch for in 2016.  Some states will adopt the NAIC model act, in whole or in part, or use the act as a baseline from which to tailor its own standards.  Other states will decline to adopt it, leaving existing standards intact that range from minimal to highly detailed and prescriptive.  With increasing pressure from CMS across markets, some states may seek to aggressively increase the specificity of their network adequacy standards, adding number and type requirements or legislating that their insurance commissioners do so through an administrative process.  Some states may consider aligning standards across markets to ensure regulatory uniformity.  While there is nothing in the model act that suggests states increase oversight and enforcement activities, CMS is clearly increasing its own oversight and is pushing states to set a floor for state level access standards.  Changes to the landscape will come better into focus as CMS releases its final rules for all of the above proposed changes.

 

[1] 80 Fed. Reg. at 31145.

[2] 80 Fed. Reg. at 75550.

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.

Epstein Becker Green’s recent issue of its Take 5 newsletter focuses on the 25th Anniversary of the ADA and recent developments and future trends under Title III of the ADA.

  1. Website Accessibility
  2. Accessible Point-of-Sale Devices and Other Touchscreen Technology
  3. Movie Theater Captioning & Audio (Narrative) Description
  4. The Availability of Sign Language Interpreters at Health Care Facilities
  5. “Drive By” Design/Construction Lawsuits

Read the full newsletter here.