Healthcare Business News

Expected 340B drug discount rule may tighten program

By Jaimy Lee
Posted: May 15, 2014 - 7:15 pm ET

New federal rules are expected soon that may narrow the reach of the drug discount program for hospitals that serve lots of low-income and uninsured patients.

The Health Resources and Services Administration is expected to release a proposed rule in June that will clarify requirements for participation in the decades-old program offering hospitals, clinics, and outpatient facilities discounts up to 50% on certain outpatient drugs.

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The purpose of the 340B program is to help safety net providers stretch their resources. But the number of participating providers has grown sharply in recently years, and drug companies argue that some providers are not using savings and revenue from the program to improve care for the low-income populations the program was designed to help.

Millions of dollars are at stake as HRSA revises hospital eligibility criteria, requirements for contract pharmacies and the program’s definition of patient, which is currently described as a patient with an "established relationship" with the provider. Only those patients are supposed to receive the discounted drugs. The rule is currently under review at the Office of Management and Budget.

“Signals point to a reining in of the program and the most visible way for HRSA to do that is through the definition of ‘patient,’ ” said Billy Wynne, a partner at the lobbying firm Thorn Run Partners in Washington.

In 2007, HRSA issued proposed changes to the program but never finalized them after receiving critical public comments. At that time, the Safety Net Hospitals for Pharmaceutical Access, a trade group for hospitals enrolled in 340B, expressed concern about a provision that required hospitals to document whether they expected covered patients to come back within a year.

“It could be that (HRSA) will come out again with something similar,” said Maureen Testoni, general counsel for the group.

Hospital enrollment in the 340B program has nearly doubled, from 1,143 participating hospitals in April 2007 to 2,111 as of last month. Much of that growth stems from a provision in the Patient Protection and Affordable Care Act expanding 340B eligibility to children’s hospitals, free-standing cancer hospitals, critical access hospitals and rural referral centers, and sole community hospitals.

The drug industry-backed Alliance for Reform and Integrity is lobbying for a tighter definition of “patient” that would require 340B providers to use savings directly for low-income and uninsured patients. Those providers would have to “demonstrate that the benefits of the program are going to the patients and not to other spending issues,” says Stephanie Silverman, the alliance’s spokeswoman.

Hospitals note, however, that the 340B law allows them to use savings from the program to improve their overall financial and operational health to better serve all patients.

Follow Jaimy Lee on Twitter: @MHjlee

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