Hospital Association of Pennsylvania > Advocacy > Federal Advocacy > HAP Comment Letter to HRSA on 340B Drug Pricing Program


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HAP Comment Letter to HRSA on 340B Drug Pricing Program

October 27, 2015

Krista Pedley, PharmD, MS, CDR, USPHS
Director, Office of Pharmacy Affairs
Health Resources and Services Administration
5600 Fishers Lane, Mail Stop 08W05A
Rockville, MD  20857

RE:  Regulatory Information Number (RIN) 0906–AB08
        Proposed Guidance: 340B Drug Pricing Program

Dear Commander Pedley:

On behalf of The Hospital & Healthsystem Association of Pennsylvania (HAP), which represents approximately 240 member institutions, we appreciate the opportunity to comment about the Health Resources and Services Administration’s (HRSA) proposed guidance for covered entities enrolled in the 340B drug pricing program.

The 340B drug pricing program is critical in supporting hospitals in serving the most disadvantaged in our society and building healthy communities, particularly in the face of increasingly high costs of pharmaceuticals. The original intent of the program is to stretch scarce federal resources as far as possible to expand and improve access to comprehensive health care services for our nation’s most vulnerable patients.

Pennsylvania hospitals are good stewards of the program—using 340B savings to increase patient access to prescription drugs, enhance services for the uninsured or underinsured, and support cost-effective and patient-focused pharmacy services such as medication therapy management, disease management, and patient assistance programs.

HRSA specifies that the proposed guidance is intended to assist 340B covered entities and drug manufacturers to comply with the provisions related to the 340B program under the Public Health Service Act (PHSA).

While HAP appreciates HRSA’s efforts in the proposed guidance to provide 340B hospitals and other covered entities with greater clarity, we have serious concerns regarding certain provisions, including proposed changes to patient eligibility and policies that will restrict access to 340B drug pricing. HAP offers the following comments to this proposed guidance:

Definition of Qualifying Patients

Under the proposed guidance, an individual will be considered a patient of a covered entity, on a prescription-by-prescription or order-by-order basis, if all of the following conditions are met:

  1. The individual receives a health care service at a facility or clinic site which is registered for the 340B program and listed on the public 340B database.
  2. The individual receives a health care service provided by a covered entity provider who is either 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).
  4. The individual’s health care is consistent with the scope of the federal grant, project, designation, or contract.
  5. The individual’s drug is ordered or prescribed pursuant to a health care service that is classified as outpatient.
  6. The individual’s patient records are accessible to the covered entity and demonstrate that the covered entity is responsible for care.

Under this guidance, HRSA has moved away from defining an eligible 340B patient in terms of his or her relationship with the hospital. The proposed guidance would limit 340B pricing to drugs ordered or prescribed to the patient when the patient has an outpatient billable event. HAP has serious concerns that requiring a prescription to be the result of a billable outpatient event in order to qualify for 340B drug pricing will inappropriately limit the use of the program in serving the disadvantaged.

HAP opposes this approach, and believes all outpatient drugs should be considered for purposes of the 340B program, regardless of the method under which these drugs or their associated services are billed or reimbursed.

Of specific concern, patients receiving treatment in outpatient observation or the emergency department (ED) that leads to an inpatient admission no longer would qualify as an eligible patient, even if that patient receives drugs while in the outpatient setting. Medicare’s 72-hour billing rule requires that all diagnostic or outpatient services furnished to a Medicare patient in the three days prior to an inpatient admission be bundled in the inpatient bill for reimbursement. Hospitals document in the medical record whether a drug was administered in the outpatient or inpatient setting. That documentation mechanism is sufficient to ensure that these drugs are for outpatient use, and therefore, should be considered for the purposes of the 340B program.

Under the guidance, inpatients discharged from hospitals with prescriptions would not qualify as 340B eligible patients for purposes of getting their prescriptions filled by the hospital pharmacy or in a retail pharmacy setting. Current policy allows for 340B drug pricing to apply to discharge prescriptions to the extent that the drugs are for outpatient use and requires hospitals to maintain appropriate documentation. Pennsylvania hospitals are making significant strides in tackling readmissions and promoting care transitions; current policy under the 340B program has supported hospitals in creating programs to reduce avoidable readmissions for their low-income patients. The proposed guidance would inhibit the positive use of the 340B program toward shared goals of achieving the triple aim.

The proposed guidance states that a patient receiving only infusion services would not be an eligible 340B patient. HAP strongly opposes this proposal and urges HRSA to allow patients receiving infusion services provided at 340B hospitals or their outpatient sites to continue to qualify for 340B drug pricing.

This limitation contravenes the intent of the program. In the face of skyrocketing drug prices, particularly for critical oncology drugs, 340B hospitals that provide these costly infusion services rely on 340B pricing to ensure access to services for vulnerable patients. This proposal may jeopardize access to care for this patient population, and also create complications for hospitals in managing appropriate inventory to ensure timely access.

Moreover, these patients have a defined relationship with the hospitals where they are receiving infusion services. Hospitals providing infusion services assume clinical and legal responsibility for the patient and also provide other health care services including laboratory, nursing, and monitoring.

The proposed guidance also will more narrowly define eligible patients by requiring that a patient receive health care services from a provider who is either an employee or independent contractor of a hospital, such that the covered entity may bill for services on behalf of the provider. This limitation does not reflect the many types of relationships hospitals have with physicians providing health care services to hospital patients. HAP urges HRSA to continue to base the definition of qualifying patients based on the relationship between the patient and the hospital—not on arbitrary provider billing, employment, or contractual statuses.

HAP supports HRSA’s recognition of the increasing use of telemedicine and urges HRSA to maintain provisions that support the advancement and use of telemedicine.

Scope of Drugs Eligible for 340B Pricing

In the proposed guidance, HRSA proposes that, for the purposes of the 340B program, drugs reimbursed under Medicaid as part of a bundle be excluded from the definition of covered outpatient drug

HAP opposes HRSA’s proposal to exclude from 340B pricing outpatient drugs that are reimbursed as part of a bundled Medicaid payment. Contrary to the express intent of the program, this proposal will limit 340B pricing for health care services provided to vulnerable patients. It will place additional burdens on hospitals in ensuring proper tracking and compliance. Moreover, as Pennsylvania entrenches value-based purchasing principles in the state Medicaid program, this proposed policy will conflict or impede movement to payment and delivery system reform.

The guidance suggests that hospitals affected by the Medicaid bundled payment provision may possibly be able to use their group purchasing organization (GPO) in purchasing outpatient drugs. Pennsylvania hospitals request greater clarity regarding the permissibility of using GPOs to purchase outpatient Medicaid drugs if a hospital is affected by the Medicaid bundled payment provision.

Group Purchasing Organization Prohibition Exceptions

The 340B statute prohibits the participation of disproportionate share hospitals (DSH), children’s hospitals and free-standing cancer hospitals in the 340B program if they purchase drugs through GPOs. The proposed guidance clarifies three exceptions to the GPO prohibition: 1) an off-site outpatient facility of a 340B covered entity which is not participating in the 340B program; 2) GPO drugs provided to an inpatient whose status is subsequently changed to outpatient by a third party; and 3) hospitals that cannot access a drug at the 340B price or at wholesale acquisition cost to prevent disruptions in patient care.

HAP appreciates that HRSA has provided greater clarity regarding exceptions to the GPO prohibition.

Consistent with comments submitted by the American Hospital Association (AHA), HAP encourages HRSA to consider two additional exceptions to the GPO prohibition:

  1. Allow a clinic within the four walls of a hospital to opt-out of the 340B program with appropriate documentation
  2. Implement a monetary “materiality standard” that any GPO violations would be required to meet in order for program expulsion to be considered

Types of Providers that Could Prescribe Drugs

The proposed guidance states a criterion that contracts between private nonprofit 340B hospitals and state or local governments “should create enforceable expectations for the hospital for the provision of health care services, including the provision of direct medical care.” HAP urges HRSA to provide greater clarity regarding what constitutes an “enforceable expectation” and how HRSA will apply this new criterion.

Current policy provides that hospital outpatient facilities must be listed on their hospital’s Medicare cost report in order to qualify for the 340B program. HAP appreciates HRSA’s consideration of alternative approaches to determining eligibility for off-site outpatient clinics. Pennsylvania hospitals have reported experiencing a delay in eligibility for entering a hospital outpatient off-site clinic as a result of the reliance on the Medicare cost report filing. Additionally, HAP urges HRSA to remove the new requirement under the guidance that hospital off-site clinics must have associated outpatient Medicare cost and charges.

Contract Pharmacies

Existing guidance under the 340B program allows that a covered entity may contract with one or more licensed pharmacies to dispense 340B drugs to eligible patients. In the proposed guidance, HRSA vests the complete compliance responsibility for contract pharmacy compliance with the 340B program requirements on the covered entity. HRSA proposes to add the expectation that the covered entity conduct oversight, including quarterly reviews and annual independent audits, of each contract pharmacy location.

HAP recommends that HRSA provide further clarification of the proposed compliance mechanisms for 340B hospitals with contract pharmacy arrangements, and urges HRSA to allow for a single annual audit and quarterly review of each contract rather than each site. Auditing each site individually will not provide significant program integrity value.

Duplicate Discounts

The 340B program prohibits duplicate discounts whereby a state obtains a rebate on a drug provided to a Medicaid patient when the same drug was discounted under the 340B program. Under the proposed guidance, a covered entity will be listed on the public 340B database if it notifies HRSA at the time of registration whether it will purchase and dispense 340B drugs to its Medicaid fee-for-service (FFS) patients (carve-in) and bill the state, or whether it will purchase drugs for these patients through other mechanisms (carve-out). For Medicaid managed care, HRSA has proposed that the covered entity may make a different determination regarding carve-in or carve-out status for managed care organization (MCO) patients than it does for FFS patients.

Duplicate discounts occur when a manufacturer provides a 340B drug to a Medicaid patient for which the state will seek a rebate on that same drug. The Medicaid rebate statute maintains that states, not 340B covered entities, are legally responsible for protecting manufacturers from having to pay both a 340B discount and a Medicaid rebate on a managed care claim. HAP urges HRSA to engage with states and MCOs to identify avenues to avoid duplicate discounts.

Program Integrity and Administrative Compliance

HAP shares HRSA’s commitment to ensure the 340B drug pricing program remains strong, and embraces program integrity efforts, including the annual recertification process and annual audits. In all elements of the program, HAP appreciates HRSA’s attention to the operational realities of administering the program.

For instance, HAP is concerned that HRSA’s proposed changes in the patient definition would require information tracking systems and software that do not currently exist. For example, hospitals would need to determine if a patient is eligible for a 340B drug at the time the prescription is written, rather than at the time the 340B drug is dispensed. HRSA should consider the burden new information systems would impose as well as the time necessary to implement changes of this magnitude.

The proposed guidance requires hospitals to maintain five years of auditable records. In alignment with that requirement, HAP encourage HRSA to limit audits to a five year look-back period.

HAP supports the effort to reduce burden on covered entities by ensuring that only one 340B program audit of a covered entity is conducted or ongoing at any time; and requiring drug manufacturers to follow government auditing standards when conducting audits and provide adequate notice.

Under the proposed guidance, HRSA is proposing a notice and hearing process with an opportunity to respond to adverse audit findings and other instances of purported noncompliance. Additionally, covered entities will have the opportunity to submit a corrective action plan subject to review and approval by HRSA. HAP further recommends that HRSA provide greater structure to the hearings and appeals process, as well as promote the use of an informal dispute resolution process.

Effective Date

HAP recommends that HRSA establish an effective date for the 340B omnibus guidance that is no less than 12 months after the date the final guidance is published in the Federal Register.

In the proposed guidance, HRSA does not speak to an effective date. An explicit effective date as recommended above would provide Pennsylvania hospitals with the necessary time to make appropriate internal policy changes to ensure compliance with the new guidance.

HAP appreciates the opportunity to submit these comments to HRSA’s proposed guidance. If you have any questions regarding HAP’s comments, please feel free to contact me at (717) 561-5325.


Jeffrey W. Bechtel, JD
Senior Vice President, Health Economics and Policy

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