(This story was updated Aug. 28, 2015)
Federal regulators released their long-awaited “mega-guidance” for the 340B Drug Pricing Program clarifying who is eligible to participate. The guidance comes amid mounting criticism that the program has become overly broad with insufficient oversight.
In the draft omnibus guidance, the Health Resources and Services Administration proposed several changes that could limit the types of care delivery that would trigger a patient's eligibility to have his or her drugs covered under the program.
The document seeks to clarify a variety of gray areas in the increasingly contentious program that HRSA concluded it may not have statutory authority to address in formal rulemaking. The Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry's trade group, successfully sued HRSA over a previous rule that a judge agreed was out of bounds.
The new proposed guidance increases the number of conditions from three to six that must be met for someone to be considered a patient of a 340B-covered entity and therefore eligible for discounted drugs.
For example, an individual would not be considered a 340B provider's patient if his or her care was provided by another organization that “has an affiliation arrangement with the covered entity, even if the covered entity has access to the affiliated organization's records.”
A patient whose drugs qualify for a discount would have to obtain services from a provider who is employed by a 340B member organization or who can bill for services on the provider's behalf.
Having privileges or credentials with a 340B hospital would no longer be “sufficient to demonstrate that an individual treated by that privileged provider is a patient of the covered entity for 340B program purposes," HRSA said in the guidance.
Drugs prescribed to a patient at a non-340B organization would not qualify for discounts based on a referral from a 340B provider.
The proposed guidance also clarifies rules concerning an individual's outpatient status. A patient's drugs are considered eligible for 340B discounts if those they are billed as outpatient prescriptions to an insurer. By that measure, a hospital that orders prescriptions for a patient being discharged from the hospital to fill at a pharmacy would not be eligible for a discount.
Some experts believe such limits could negatively impact access to the program for smaller and more rural hospitals.
Public comment on the proposed guidance will be accepted over the next 60 days.
Congress created the 340B Drug Pricing Program in 1992 to help hospitals that serve disproportionately large numbers of low-income patients. The program was expanded under the Affordable Care Act.
The program requires drug companies to provide discounts of 20% to 50% to hospitals and clinics for outpatient drugs. The program has since seen a stark rise in the number of covered organizations over the past decade. One-third of all hospitals now participate, and the Government Accountability Office has estimated that 40% of hospitals are eligible.
The widespread inclusion of contract pharmacies in the 340B program under the Affordable Care Act drew criticism that it was inappropriately benefiting providers serving relatively small numbers of low-income patients.
That charge has become a matter of fierce debate. A 2014 analysis by Avalere Health found roughly two-thirds of hospitals participating in the 340B program provided less charity care than the average U.S. hospital. But a report commissioned by 340B Health, an alliance of providers participating in the program, countered that 340B hospitals provide nearly twice as much care to Medicaid and low-income Medicare beneficiaries as hospitals not participating in the program.
House Republicans held a hearing in March airing criticisms of the program, and the GAO fueled the controversy in July with a report concluding that 340B hospitals prescribe more drugs than non-340B hospitals.
HRSA estimates the program saved providers $3.8 billion in drug costs in 2013.
But drug companies question whether those savings go toward caring for the low-income patients the program is intended to benefit, and the industry has aggressively challenged the Obama administration's efforts to expand its reach.
PhRMA successfully sued HRSA over regulations that allowed providers to get discounts on orphan drugs if they are prescribed for non-orphan indications. The judge agreed that the agency lacked the statutory authority to issue the rule. HRSA later re-issued the policy in a different form and a new lawsuit is pending.
340B Health issued a statement Thursday saying the proposed guidance may help clarify the program's ambiguities. “This is an important process, and it is our hope that safety net healthcare providers will not find themselves limited in their ability to meet their mission to treat the underserved," the alliance stated.