The long-awaited “mega-guidance” recently proposed by the Health Resources and Services Administration (HRSA) attempts to clarify several important aspects of the 340B Drug Pricing Program. 

The guidance addresses several important aspects of the 340B program, such as enrollment requirements for outpatient facilities and locations (so-called “child sites”) located at a different physical address than the “parent” hospital and the scope of the group purchasing organization prohibition and requirements for contract pharmacy arrangements. The proposed guidelines follow mounting criticism from regulators, lawmakers, and interest groups that existing HRSA guidance and regulations leave the 340B Program vulnerable to misuse.

Of importance, HRSA’s proposal includes tests for who constitutes a “patient” eligible to receive drugs purchased at 340B prices. Only patients of a participating covered entity are eligible to receive 340B drugs, and HRSA is proposing a new six-part test to determine patient eligibility.  The test would limit patient eligibility to outpatients who receive an order for a 340B drug from an employee or independent contractor of the covered entity. 

In addition, the covered entity must have access to the patient’s records and be able to demonstrate responsibility for the patient’s care. Notably, HRSA acknowledged patients receiving outpatient services via telehealth may be eligible for 340B drugs so long as the services are provided in accordance with state law.

Several aspects of this proposal could restrict nonprofit and safety net hospitals’ use of the 340B Program:

Outpatient Status of Patients.  340B pricing is available only for outpatient drugs, and many covered entities have taken the position that a patient’s status as an outpatient should be determined at the time the drug is administered.  HRSA proposes to clarify, however, that “an individual is considered [an outpatient] if his or her health care service billed as outpatient to the patient’s insurance or third party payor.”

Thus, the patient eligibility requirements would prevent pre-admission and discharge medications from qualifying for 340B pricing. Covered entities may find this standard challenging to implement with patients’ statuses subject to recharacterization and, in some cases, pre-authorization requirements.

Patient of the Covered Entity.  In addition to being responsible for the patient’s care, the proposed patient eligibility criteria require that the patient receive an order or prescription for a 340B drug from an outpatient service provided by or on behalf of the covered entity.  This requirement would preclude, for example, coverage of infusion drugs, unless the infusion therapy is ordered in connection with an outpatient service provided by a covered-entity provider. 

Outpatient Services Provided by Covered Entity.  In order for the service to be provided by or on behalf of the covered entity, HRSA proposes that service must be provided by an employee or independent contractor of the covered entity, such that the covered entity may bill for the provider’s services.  Accordingly, patients would not be eligible for drugs purchased at 340B prices if, for example, their care was provided by a member of the covered entity’s medical staff or an organization that is an affiliate of the covered entity, such that the covered entity cannot itself bill for the services. Previous guidance issued by HRSA required only that the provider be employed by, contracted with or have “other arrangements (e.g., referral for consultation)” with the covered entity such that the covered entity remained responsible for the patient’s care. 

The proposed guidance is not yet final, and HRSA has requested comments by October 27, 2015.  In the meantime, we expect many hospitals will face questions regarding existing practices in light of proposed guidance and uncertainty surrounding what changes, if any, will appear in HRSA’s final guidance. We should expect many comments before the final guidance is issued sometime in 2016.