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Policy intended to combat abuse of the 340B program
A policy intended to combat abuse of the 340B program could limit access to discounted drugs, hospitals and lawmakers say.
Photo credit: ISTOCK

HRSA delays 340B changes

Policy said to threaten eligibility

By Jaimy Lee
Posted: April 5, 2013 - 8:30 pm ET

After dozens of lawmakers took up the fight, a federal agency on Friday delayed a policy change that hospitals said could unfairly limit their access to deeply discounted drugs in the federal 340B program.

The policy, intended to curb abuse of the system, requires that hospitals ensure they have established three accounts to purchase covered outpatient drugs through the 340B program, group purchasing organizations and at wholesale acquisition cost.

In some instances, hospitals were purchasing those drugs at GPO prices when they weren't available through the 340B program. The program requires covered outpatient drugs that are not available through 340B to be purchased at wholesale acquisition cost, a price point that is traditionally higher than 340B and GPO prices.

The Health Resources and Services Administration announced the new policy in February and set an April 7 deadline for disproportionate-share hospitals, children's hospitals and freestanding cancer hospitals to be in compliance.

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“While we commend HRSA's efforts to increase transparency and combat abuse in the system, the timing of the guidance threatens to unnecessarily limit access to affordable drugs,” 44 lawmakers wrote last week in two identical letters addressed to HRSA Administrator Mary Wakefield.

The agency extended the deadline to Aug. 7 a day later.

The 340B program allows certain clinics and hospitals to purchase outpatient drugs discounted between 20% and 50%.

Participating providers are expected to funnel any savings or revenue achieved through the program back into the services and care they offer to patients, making the program popular among hospitals that are seeking new ways to manage costs in light of declining reimbursement rates.

It has also generated criticism among other lawmakers, notably Sen. Chuck Grassley (R-Iowa), who is concerned that some hospitals that participate in the 340B federal drug discount program are profiting at the expense of private and public payers.

“If 'non-profit' hospitals are essentially profiting from the 340B program without passing those savings to their patients, then the 340B program is not functioning as intended,” he said last week in a news release.

There were 16,500 covered providers as of July 2011, which is nearly double what the program reported in 2001, according to a government report released two years ago. The growth is due in part to a provision in the Patient Protection and Affordable Care Act that expanded eligibility to new entities, including critical-access hospitals and freestanding cancer centers.

In addition, the law mandated new actions to monitor the program's integrity.

The reform law “has driven a lot of this oversight,” said David Ivill, a partner with law firm McDermott Will & Emery. “Many would say that the oversight and sometimes lack of clarity about the program has been an issue in the past.”

Two financial predicaments concerned 340B hospitals about the policy clarification, Ivill said. One, they can lose millions of dollars by having to purchase drugs at the higher wholesale acquisition cost. Two, participating hospitals that don't meet the compliance deadline can be removed from the program, which could be a loss of tens of millions of dollars for some hospitals.

“This is a wake-up call for a number of hospitals,” he said.

In a March 22 letter, the Children's Hospital Association, the National Association of Public Hospitals and Safety Net Hospitals for Pharmaceutical Access requested that HRSA's office of pharmacy affairs extend the deadline for hospitals to comply with the three-inventory model by four months.

They also asked the federal agency to remove a reference to “noncompliance” so providers can request an extension and then submit their implementation plans without being in violation of the rules.

“OPA's characterization of hospitals as noncompliant is the very reason that individual hospitals are wary of stepping forward to explain their challenges—particularly given the heightened scrutiny of the program beyond the agency,” the groups wrote.

The American Hospital Association, which represents about 2,000 hospitals that participate in the 340B program, said HRSA should have allowed for public notice and comment rather than issuing the notice 60 days in advance.

In a statement released late on Friday, HRSA said that it will not grant additional extensions and it expects covered entities to comply with the policy “as soon as possible prior to the Aug. 7 deadline.”

“Any evidence of deliberate delay could result in immediate removal from the 340B program,” the agency said.

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