On Monday, February 3, 2014, the Office of Pharmacy Affairs (OPA) posted a letter to its 340B drug pricing program website discussing 340B rebates paid to AIDS Drug Assistance Programs (ADAPs). OPA is part of the Health Resources and Services Administration (HRSA) and administers the 340B program. The letter, which is not dated, is signed by the HRSA Administrator, Dr. Wakefield.

The Wakefield letter addresses the ability of ADAPs, a type of 340B-covered entity, to claim 340B rebates from manufacturers when the ADAP does not itself purchase the drug but rather covers some amount of insurance-related cost sharing for the drug, in the form of an insurance premium, copayment, or deductible expenditure. Notably, this letter appears to be the first time that the 340B program itself has addressed this issue. 

ADAPs are the only type of covered entity that can access the 340B discount via a rebate, an option created by HRSA in 1998 through a notice in the Federal Register. In 2005, the HIV/AIDS Bureau within HRSA issued a letter to ADAPs indicating that ADAPs could claim “full [340B] rebates on partial pay claims” where the ADAP pays the copayment or deductible for a drug. The 2005 letter also states that payment of the patient’s insurance premium alone is not sufficient to claim a 340B rebate. It is important to note that the 2005 letter was not issued by OPA, but rather the HIV/AIDS Bureau, and was not sent to manufacturers but rather to ADAPs alone. In fact, the 2005 letter has never been included on the 340B program website to our knowledge and, of course, by its nature the letter was never subject to any sort of 340B stakeholder input through the notice and comment process. It is our understanding that ADAPs nevertheless have relied on the 2005 letter to claim full 340B rebates on these types of partial pay claims.

OPA has never addressed how to reconcile these “full rebate on partial pay” rebate claims with a manufacturer’s obligations under the 340B statute or the Pharmaceutical Pricing Agreement, both of which frame the manufacturer’s obligation in terms of providing discounts on actual purchases so that the covered entity’s purchase expenditure does not exceed the ceiling price. The 2005 letter therefore raises two substantive issues:

  1. Whether a copayment or deductible expenditure should be viewed as a purchase transaction that is eligible for a 340B discount, and
  2. Even if a copayment or deductible expenditure can be viewed as a purchase, why a 340B rebate would be due if that expenditure does not exceed the ceiling price.

The Wakefield letter appears to address, at a minimum, the procedural infirmities of the 2005 letter. It notes that HRSA has reviewed its policies on ADAP 340B rebates and intends to issue a proposed rule that will address the extent to which ADAPs can claim rebates based on insurance-related expenditures. The Wakefield letter notes that the rule will be subject to notice and comment prior to implementation and encourages manufacturers to continue their current ADAP rebate operations in the interim “to maintain stability in the ADAP program.”

As you may know, HRSA is in the process of drafting a proposed rule for the 340B program, which is expected to address a multitude of topics. The Wakefield letter does not indicate whether the ADAP rebate issue will be addressed by this “mega-rule,” or instead be the subject of its own distinct proposed rule. OPA’s most recent statement about the contents of the mega-rule, however, does not include the ADAP rebate issue as one of the topics to be included. In a January 9, 2014 update posting entitled “340B Drug Pricing Program: Important Benefit, Significant Responsibility,” OPA identifies the topics to be included in the mega-rule as the definition of an eligible patient, compliance requirements for contract pharmacy arrangements, hospital eligibility criteria, and eligibility of off-site facilities.