Changes to registration requirements for the offsite clinics of 340B-eligible hospitals represent the latest clash between providers, regulators and drugmakers amid the program’s exponential growth.
The federal government on Thursday reversed a policy that streamlined 340B certification during the COVID-19 pandemic.
The stricter registration policy is one of many legal and regulatory obstacles that may limit providers' access to the discounts, which save hospitals, physicians groups and outpatient facilities that treat low-income and uninsured patients an estimated 25% to 50% on outpatient drugs. The 340B battles pit providers against drug manufacturers seeking to rein in the number of 340B-eligible entities, which grew six-fold from 2000 to 2020, according to data from the University of Southern California Schaeffer Center.
“The [policy] reversal is a gut punch to hospitals hoping for more permanent flexibility,” said Susan Banks, a healthcare attorney at the law firm Holland & Knight.
Here’s what to know about the latest development in the 340B program.
What are the new registration requirements?
Hospitals participating in the drug discount program must now register offsite clinics with the Health Resources and Services Administration and list them on Medicare cost reports in order for those clinics to participate in 340B.
Hospitals that have already listed an offsite clinic in a Medicare cost report can immediately regain access to the program if they enroll in the Office of Pharmacy Affairs Information System during the next registration period in early January.
But offsite clinics that weren't included in a cost report may have to wait 18 months to participate in the program, given the staggered nature of Medicare cost report releases. If a hospital shows HRSA by Jan. 24 that it has started the process, it will essentially be grandfathered into the program.
Why did HRSA make the change?
The expedited certification process created to respond to the COVID-19 pandemic is no longer necessary, HRSA said. In the notice published in the Federal Register, the agency said more than one-third of hospitals were using 340B drugs in unregistered sites as of their May 11 audit, making them harder to police.
Who will be most affected by the new policy?
340B-eligible hospitals that have significantly grown their offsite clinic networks since HRSA expedited the registration process in June 2020 will likely experience the biggest financial impact. It could amount to tens of millions of dollars in lost 340B discounts because the registration process can be lengthy, legal experts said.
Many health system have continued to expand their offsite outpatient networks, including infusion centers for cancer patients, imaging facilities, cardiology sites, obstetrics clinics and orthopedic facilities. Infusion therapy treatments are often expensive, and hospitals that lose access to discounts for that medication may take the biggest financial hit, Banks said.
How are hospitals and 340B advocacy groups reacting?
Hospitals argue that if offsite clinics cannot provide discounted drugs, patients may have to travel farther to get the medications. Also, hospitals claim, the lost revenue stemming from a potentially long registration process could limit hospitals’ ability to serve low-income patients and provide low-margin services that other hospitals may not provide.
“HRSA’s restated position that 340B drugs cannot be used at hospital locations that are eligible under the 340B statute to use 340B drugs is plainly unlawful,” said Emily Cook, an attorney at law firm McDermott Will & Emery who advises hospitals and health systems.
Maureen Testoni, president and CEO of 340B Health, which represents 340B-covered hospitals, said the organization is pleased that HRSA offered ways to reenroll in the program, but the policy change could require hospitals to forego months of 340B discounts.
“This would have significant financial consequence, potentially millions in 340B savings, for those hospitals. We have always opposed HRSA’s policy requiring registration of offsite clinics prior to use of 340B, as it conflicts with Medicare’s policy of recognizing these locations as part of the hospital before the cost report is filed,” Testoni said in a statement.
What other challenges do 340B-covered entities face?
The 340B program continues to face a variety of legal and regulatory obstacles. Some of the legal challenges stem from drugmakers' concern that the program has grown too much and has strayed from its purpose of serving low-income communities.
A Third Circuit Court of Appeals’ ruling in January largely favored three drug companies seeking to limit discounts dispensed through contract pharmacies. Since the ruling, more than 20 drugmakers have said they will only offer 340B drug discounts to hospitals and their affiliates registered as 340B-covered entities.
The proportion of retail pharmacies participating in the 340B program has increased significantly over the past decade, a peer-reviewed research letter published in August in JAMA Health Forum found. More than 40% of the 25,775 pharmacies enrolled in 340B in 2022 were retail pharmacies, up from 1.3% of 789 pharmacies in 2009, according to the analysis from University of Minnesota researchers. In 2022, 16% of all the pharmacies enrolled did not have contracts with any safety-net facilities, researchers found.
Meanwhile, hospitals are awaiting a final rule that would offset cuts to the 340B program that the Supreme Court deemed unlawful. Under the proposed rule issued in July, hospitals would receive $9 billion in remedy payments. A Modern Healthcare analysis found that hospitals receiving the biggest remedy payments tended to provide proportionally less uncompensated care.
The final rule may spark a legal fight if it includes budget-neutral provisions that hospitals have lobbied against. Under the proposed rule, the federal government would reduce reimbursement for other outpatient services over a 16-year period to ensure that Medicare spending remains the same.