On August 28, 2015, the Health Resources and Services Administration (HRSA) and the Department of Health and Human Services (HHS) issued the long-awaited omnibus guidance regarding administration of the 340B Drug Pricing Program (340B Program).  The most significant effect of the omnibus guidance will be to place greater restrictions on the patients that will be eligible under the program, thus resulting in likely reductions to discounted drugs available to program participants.

The 340B Program permits certain hospitals and other providers qualifying as “covered entities” to purchase discounted drugs for use with respect to individuals receiving outpatient care.  Prior to today’s omnibus rule, an individual qualified as a “patient” eligible for discounted drugs only if: (1) the covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual’s health care; (2) the individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g., referral for consultation) such that responsibility for the care provided remains with the covered entity; and (3) the individual receives a health care service or range of services from the covered entity (excluding hospitals qualifying for the 340B Program as a disproportionate share hospital) which is consistent with the service or range of services for which grant funding or Federally-qualified health center look-alike status has been provided to the entity.  The omnibus guidance expands the criteria establishing patient eligibility from the three noted above to six; it also makes qualification substantially more difficult.

Going forward, covered entities may only obtain discounts on drugs for patients qualifying on a per-prescription basis.  In other words, a patient may be eligible for discounted drugs on one occasion, based on the circumstances of a particular prescription, but may not be eligible on prior or subsequent occasions.  In order to qualify, each patient must meet the following six criteria for each discounted prescription.

  1. The individual must receive a health care service at a facility or clinic site which is registered for the 340B Program and listed on the public 340B database.  HRSA and HHS have clarified that “an individual who sees a physician in his or her private practice which is not listed on the public 340B database or any other non-340B site of a covered entity, even as follow-up to care at a registered site, would not be eligible to receive 340B drugs for the services provided at these non-340B sites.” Further, “an individual will not be considered a patient of the covered entity if the individual’s health care is provided by another health care organization that has an affiliation arrangement with the covered entity, even if the covered entity has access to the affiliated organization’s records.”
  2. Importantly, the individual must receive a health care service provided by a healthcare provider who is either employed by the covered entity or who is an independent contractor for the covered entity, such that the covered entity may bill for services on behalf of the provider.  Going forward, HRSA and HHS have indicated that “simply having privileges or credentials at a covered entity is not sufficient to demonstrate that an individual treated by that privileged provider is a patient of the covered entity for 340B Program purposes.”
  3. An individual must receive a drug that is ordered or prescribed by the provider described in criterion number 2 above.  HRSA and HHS clarify that an individual will not be considered a patient of a covered entity to the extent that the only relationship between the individual and the covered entity is the dispensing or infusion of a drug.
  4. Except for individuals receiving care at a hospital, the individual’s health care must be consistent with the scope of the covered entity’s federal grant, project, designation, or contract.
  5. The individual’s drug must be ordered or prescribed as part of a health care service that is classified as an outpatient service.  HRSA has indicated that it will look to the covered entity’s billing records to establish that discounted drugs have been provided only to those patients having received outpatient services at the covered entity (e., services that have been billed as outpatient services).
  6. The individual’s patient records must be accessible to the covered entity and demonstrate that the covered entity is responsible for care.

This guidance establishes that health care services that have been previously performed under certain arrangements (e.g., consultation) will no longer serve to qualify individuals as patients eligible for 340B Program discounts.  The omnibus guidance makes clear that only those services for which the covered entity may bill will establish the individual’s status as a patient under the 340B Program.

The practical effect of this guidance is that covered entities will need to revisit their 340B Program contractual arrangements in order to ensure continued 340B Program eligibility.  To the extent that a discounted drug is provided to an individual not qualifying as a “patient” under the 340B Program, the covered entity will be liable to the drug manufacturer for the amount of any discount.

A copy of the 340B Program omnibus guidance is available here.