HAP Comment Letter to HRSA on 340B Drug Pricing Program
Krista Pedley, PharmD, MS, CDR, USPHS
Director, Office of Pharmacy Affairs
Health Resources and Services
5600 Fishers Lane, Mail Stop 08W05A
Rockville, MD 20857
RE: Regulatory Information Number (RIN) 0906–AB08
Guidance: 340B Drug Pricing Program
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.
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.
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).
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:
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:
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
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.
individual receives a drug that is ordered or prescribed by the covered
entity provider as a result of the service described in (2).
individual’s health care is consistent with the scope of the federal grant,
project, designation, or contract.
individual’s drug is ordered or prescribed pursuant to a health care service
that is classified as outpatient.
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.
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
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
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
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
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
supports HRSA’s recognition of the increasing use of telemedicine and urges
HRSA to maintain provisions that support the advancement and use of telemedicine.
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
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
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.
comments submitted by the American Hospital Association (AHA), HAP encourages
HRSA to consider two additional exceptions to the GPO prohibition:
a clinic within the four walls of a hospital to opt-out of the 340B program
with appropriate documentation
a monetary “materiality standard” that any GPO violations would be required to
meet in order for program expulsion to be considered
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.
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.
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.
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.
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.
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.
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.
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.
President, Health Economics and Policy