340B Drug Pricing Program Mega-Guidance: A quick summary of key changes and 4 ways hospitals can prepare


Daniel Neal

Director of 340B Product and Service Marketing

The Federal 340B Drug Pricing Program was created by Congress in 1992.

According the Health Resources and Services Administration (HRSA), the program was created to help a diverse group of hospitals, federal grantees and other safety-net providers stretch scarce federal dollars further, to provide more care to more patients. The program, which was expanded under the Affordable Care Act, requires pharmaceutical manufacturers to provide certain hospitals and clinics with discounted pricing on outpatient medications prescribed to eligible patients. 

In August 2015, amid pressures to provide greater oversight for the 340B program, HRSA released an Omnibus Guidance, often called the ‘Mega-Guidance,’ to further clarify the agency’s interpretation of program requirements for all stakeholders, including covered entities and manufacturers. The formal comment period for this guidance is now over, and the final guidance is expected to be published in September 2016.

In the meantime, it’s important for hospitals to understand the key changes described in the Mega-Guidance, and to start preparing for the potential impact of this proposed ruling.

A quick guide to key changes

Whether your hospital is considering implementing and enrolling in the 340B program, is currently managing participation in the program, or is searching for ways to grow its 340B savings, the recently released 340B Mega-Guidance has potential implications that could have significant impact on your plans and operations. While it’s worth the investment in time to read the full 90-page document, here’s an overview of key proposed changes:

1. In order to be eligible to receive medication purchased at 340B prices, a patient would be required to meet six conditions – an increase over the current three eligibility requirements.

This new definition of eligibility retains some elements of the old definition, narrows other elements, and adds some new criteria. As currently written, the new definition of patient eligibility would likely disqualify a significant number of prescriptions that currently qualify. Here are a few of the most important changes in the new definition:

  • In order for a prescription to be eligible for 340B discounts, a patient would need to receive related clinical care from a provider who is directly employed by or has a contract with a 340B covered entity, such that the covered entity can bill for services rendered by the provider. This change, if implemented, would likely have the most financial impact on hospitals that rely primarily on “credentialing” provider relationships and referral networks, versus directly employing the majority of the physicians and providers working in their hospitals. Because payment and billing processes among payers and states may vary, there are also possible inconsistencies with how this part of the rule could be applied.
  • Medication orders written while a patient is classified as an inpatient will not qualify. This proposed change would disqualify so-called discharge prescriptions (written during an inpatient stay but filled by outpatient or retail pharmacies), which today often qualify for 340B pricing. The impact would likely be most significant for hospitals that operate their own outpatient pharmacies, but it could also disqualify many prescriptions filled through contract pharmacy networks.
  • Medications prescribed to patients who receive only an infusion service from a covered entity would explicitly not qualify for 340B pricing. This is a change, as many covered entities view infusion therapy as potentially qualifying under the current definition. Rural hospitals that provide infusion services for patients receiving care from local specialists may find that this new element of patient eligibility disqualifies many of the infusion medications prescribed to their patients.

2.Criteria for qualifying sites of care would change.

Under the proposed changes, otherwise-eligible outpatient clinics belonging to covered entities will only qualify for 340B enrollment if they have at least some Medicare charges.

3. A drug that is ‘bundle-billed’ to Medicaid would no longer be considered a covered medication – therefore these drugs would be ineligible for 340B pricing.

By extension, non-Medicaid bundle-billed drugs would be covered outpatient drugs. This change would likely add a layer of complexity in the way disproportionate share, children’s and free-standing cancer hospitals administer the program, due to the requirements of the Group Purchasing Organization (GPO) prohibition, which prohibits some hospitals from using GPO or GPO-like pricing to purchase outpatient drugs, as long as they are enrolled in the 340B program.

4. Compliance issues need to be detected and reported to manufacturers more quickly.

For example, covered entities would need to alert manufacturers of issues like duplicate discounting or diversion of 340B medications to ineligible patients, within 90 days of discovering them. Similarly, covered entities would need to correct GPO prohibition errors through credit and rebilling within 30 days – a timeframe many might find challenging.

5. Additional requirements have been imposed on contract pharmacies where 340B drugs are intended for use for patients covered by Medicaid managed care plans.

Today, these medications are broadly included in 340B, depending on state-level requirements. The Mega-Guidance requires that these drugs instead be carved out of 340B, unless the covered entity can establish HRSA-reviewed and -approved agreements with the state and/or managed care plans.

4 steps every hospital should take as a result of the Mega-Guidance

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1. Assess the potential impact of the proposed program changes. For example, if you already have a strong network of contract pharmacies, or if you are considering creating one, carefully review the current projected prescription volume that would flow through those channels. If prescriptions filled at those sites could no longer qualify for 340B pricing, what would be the financial impact?

Similarly, if you operate your own outpatient pharmacy, assess the financial impact of the proposed 340B eligibility changes. If discharge prescriptions written during inpatient stays no longer qualify for 340B pricing, what would be the financial impact?

For disproportionate share, free-standing cancer, and pediatric hospitals, be sure to assess the financial impact of drugs that may have to be purchased on a non-GPO wholesale acquisition cost (WAC) basis. Some dispensations that the Mega-Guidance would disqualify for 340B eligibility could still meet the definition of a covered outpatient drug, and therefore could still be subject to the GPO prohibition.

2. Develop contingency plans for each risk area. For example, if your facility would be significantly impacted by the rule’s proposed changes to ‘managed Medicaid’ prescriptions, determine what kind of agreements would need to be developed for those prescriptions to continue to qualify for 340B pricing. Consider meeting with your state Medicaid office to get their insight on how best to develop your related contingency plan.

Similarly, consider what administrative changes need to be made to your program, should HRSA require covered entities to more quickly identify and remedy compliance problems. Make sure you’re prepared to make the necessary changes to meet those new reporting timeframes.

3. Conduct an audit of your 340B program – not just measuring against current standards, but also by the proposed Mega-Guidance. Now more than ever, 340B covered entities recognize the significance of maintaining a compliant program. Regardless of which facets of the proposed rule get implemented, the ability to navigate complex and evolving guidelines is key to protecting critically important program savings. Whether you conduct an internal audit or partner with an external auditor, be sure to ask for a picture of where you are today when it comes to compliance, versus where you would be if all aspects of the proposed Mega-Guidance were to be implemented. This important step can improve the speed with which you’re able to compliantly implement new program requirements.

4. Make your voice heard. HRSA’s official comment period for this proposed Mega-Guidance is over, but it’s important for all stakeholders to share their perspectives on these proposed changes. Sharing your perspective with your congressional representatives, other elected officials and advocacy groups is critical to ensuring HRSA fully understands the potential impact the proposed changes may have on the way covered entities provide patient care.

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The Federal 340B Drug Pricing program provides vital cost savings to enable hospitals to continue to care for underserved populations. Even so, the complexity of implementing and managing the program, especially amid proposed changes of this scope and magnitude, can seem overwhelming.  As with any worthwhile initiative – especially in today’s evolving healthcare landscape – creating a strong 340B program for your hospital is best viewed not as a destination, but as a journey. When managed correctly, including appropriate oversight, planning and preparation, this program can continue to be a cornerstone of an eligible hospital’s ability to improve access to care and sustain their community mission.

Editor’s note: This is the first in a series of stories through which Essential Insights plans to explore various journeys hospitals take when implementing, managing or expanding their 340B programs.