Healthcare Alert: Important Changes to 340B Drug Pricing Program

September 03, 2015

On August 28, 2015, the Health Resources and Services Administration ("HRSA") published the 340B Drug Pricing Program[1] Omnibus Guidance (the "Proposed Guidance") in the Federal Register. 

On August 28, 2015, the Health Resources and Services Administration ("HRSA") published the 340B Drug Pricing Program[1] Omnibus Guidance (the "Proposed Guidance") in the Federal Register. The Proposed Guidance will be open for public comment for sixty (60) days before becoming a final rule. In the interim, it is important for stakeholders to familiarize themselves with the Proposed Guidance and its likely impact on 340B program compliance. The areas of change highlighted below are only a portion of the changes expected to be finalized by the end of October. However, they are significant enough to warrant a close look at your 340B Program administration and arrangements with other providers.

New 340B Definition of "Eligible Patient"

HRSA proposes a new six-part test (which is significantly stricter than the 1996 three-part test) to establish whether an individual is a "patient" eligible for 340B drugs. If any of the elements are not met, the patient will not be eligible to receive 340B drugs. Under the Proposed Guidance, an individual will be a patient of the covered entity if the following conditions are met (bold and underlined provisions represent new requirements under the Proposed Guidance):

  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 (this narrows the previous requirement, which stated the health care professional could provide services "under contractual or other arrangements");
  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 a Federal grant, project, designation or contract, if applicable;
  5. The individual's drug is ordered or prescribed pursuant to a health care service that is classified as outpatient; and
  6. The individual's patient records are accessible to the covered entity and demonstrate that the covered entity is responsible for care.

Prohibiting Duplicate Discounts for Medicaid Managed Care Patients

The Affordable Care Act extended Medicaid drug rebate eligibility to certain Medicaid Managed Care Organization ("MCO") drugs. Therefore, in order to prevent duplicate discounts, covered entities must elect to either "carve-in" or "carve-out" Medicaid MCO patients in addition to FFS patients.[2] The Proposed Guidance indicates that covered entities must have an appropriate process to identify 340B claims.

Increased Oversight of Contract Pharmacies

A contract pharmacy must be registered on the 340B database prior to dispensing drugs to eligible covered entity patients. The Proposed Guidance states that covered entities must now attest that the contract pharmacy arrangement complies with certain 340B Program requirements prior to the contract pharmacy being listed on the 340B database.

In the Proposed Guidance, HRSA emphasizes that it expects covered entities to conduct quarterly reviews and independent annual audits of each of its contract pharmacy locations. The covered entity should then report any violations found through such investigations. Further, HRSA maintains its position that it may remove non-compliant contract pharmacies from the 340B Program.

Additionally, the Proposed Guidance places an emphasis on the possibility of duplicate discounts increasing for contract pharmacy arrangements. HRSA has taken the stance that "it will be presumed that the contract pharmacy will not dispense 340B drugs to Medicaid FFS or MCO patients." Therefore, if a covered entity wishes to purchase 340B drugs for its Medicaid FFS and MCO patients and use a contract pharmacy to dispense those drugs, the covered entity must "provide HHS a written agreement with its contract pharmacy and State Medicaid agency or MCO that describes a system to prevent duplicate discounts."


[1] 340B Drug Pricing Program was created in 1992 and requires pharmaceutical manufacturers to provide a substantial discount on certain outpatient drugs to qualifying covered entities.

[2] Covered entities may choose whether to dispense 340B drugs to Medicaid fee-for-services ("FFS") patients and bill state Medicaid the reduced price ("carve-in") or dispense non-340B drugs to Medicaid FFS patients and bill state Medicaid non-340B prices ("carve-out"). When a covered entity chooses to "carve-in" its Medicaid billing number and/or NPI number is listed on the Medicaid Exclusion File in a way that alerts the State program not to request a rebate from the manufacturer for those drugs.

For additional information, please contact:

Matthew P. (Matt) Utecht

Andrea H. Brisbin

J. Harvey Cleveland IV

Meghan G. Riordan

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