What recommendations can you provide regarding ensuring the information our entity has received regarding 340B policy is accurate?
Covered entities should refer to the 340B statute, HRSA published guidance, and HRSA policy releases to confirm the accuracy of 340B policy. HRSA establishes 340B policy and communicates via policy releases, its website and through email communication. In addition, HRSA uses the HRSA contracted 340B Prime Vendor Program, managed by Apexus, to assist in communicating that policy.
HRSA cannot ensure the accuracy of information provided by other sources beyond Apexus. Covered entities that are either unsure of past HRSA guidance or information received beyond HRSA or Apexus should contact the Apexus Answers Call Center to validate the information. Covered entities should also use their own legal counsel to assist in ensuring compliance with 340B program requirements. Liability for compliance with 340B program requirements resides with the covered entity.
May a manufacturer require only 340B entities to purchase covered outpatient drugs through specialty distribution channels?
The 1994 guideline (59 Fed. Reg. 25110 (May 13, 1994)) states that “manufacturers may not single out covered entities from their other customers for restrictive conditions that would undermine the statutory objective” and that “manufacturers must not place limitations on the transactions (e.g., minimum purchase amounts) which would have the effect of discouraging entities from participating in the discount program.” This policy is consistent with section 340B(a)(1) of the Public Health Service Act which requires manufacturers to “offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price.” HRSA has also provided additional information that 340B providers are treated the same as non-340B providers (Clarification of Non-Discrimination Policy. Release No. 2011-1.1 (May 23, 2012)). Therefore, in the case of specialty distribution, manufacturers must ensure that they are not discriminating against 340B providers and that other non-340B providers are also going through the specialty distribution channel. In addition, the manufacturer must always ensure they are providing the drug at or below the ceiling price. Manufacturers should work with HRSA regarding specialty distribution channels to ensure compliance and to ensure that entities are aware of the appropriateness of the distribution channel in order to be transparent and limit any disputes.
Are 340B prices available when purchasing inpatient drugs?
No. 340B pricing applies to covered outpatient drugs only.
What is the Prime Vendor Program (PVP)?
As part of the original 340B legislation, the government was required to establish a prime vendor program (PVP). The PVP serves its participants in three primary roles:
1.Negotiating sub-340B pricing on pharmaceuticals; 2.Establishing distribution solutions and networks that improve access to affordable medications; and 3.Providing other value-added products and service. The PVP is a voluntary program for 340B covered entities. All covered entities may participate in the PVP including those hospitals that are prohibited from purchasing in a group purchasing arrangement. The PVP negotiates discounts for all participating entities.
What does HRSA consider as the 340B unique identifier?
HRSA considers the 340B ID the unique identifier. While HRSA does not use Health Industry Numbers (HIN) as a method of identifying 340B covered entities, we recognize that HIN and DEA numbers may be used by certain stakeholders, in addition to the 340B ID, to operationalize the 340B Program.
How does the Medicare and Medicaid anti-kickback statute, 42 U.S.C. 1320a-7b(b), apply to 340B covered entities?
Covered entities should always ensure they are adhering to all federal, state, and local laws. Covered entities contracting with pharmacies to dispense 340B drugs should be aware of the federal anti-kickback statute and the way in which such requirements could apply to their arrangements with contract pharmacies. Cases of suspected violations of the anti-kickback statute should be directly referred to the Office of the Inspector General (OIG) who oversees this provision. The OIG can be reached at:
Online, Phone: 1-800-HHS-TIPS (1-800-447-8477) Fax: 1-800-223-8164
*Note: While you may remain anonymous, in order to accept submissions for review via facsimile, the OIG Hotline requires a complaint to include a formal cover letter or the use of the downloadable complaint submission form, available
Hotline Complaint Submission Form (PDF - 34 KB)
Hotline Complaint Submission Form (MS Word - 178 KB)
Can the receipt of in-kind contributions through section 317 or 318 of the Public Health Service Act (PHSA) qualify an entity for participation in the 340B Drug Pricing Program? What are in-kind contributions for purposes of 340B Program eligibility?
An entity receiving in-kind contributions through section 317 or 318 may qualify for the 340B Drug Pricing Program provided all the remaining 340B requirements are met. Qualifying in-kind contributions must be paid for by section 317 or 318 grant funds to qualify a site as 340B eligible. In-kind contributions may be in the form of real property, equipment, supplies and other expendable property, and goods and services directly benefiting and specifically identifiable to the project or program.
If an entity learns it may no longer be 340B eligible, must it notify HRSA?
Yes, it is the covered entity’s responsibility to notify the HRSA Office of Pharmacy Affairs immediately if the entity learns it may no longer be 340B eligible.
What is a “Pickle” hospital, and is it true that the "greater than 11.75% DSH Adjustment percentage" requirement is waived for them?
What does HRSA use to verify 340B Program eligibility of offsite outpatient facilities outside of the main hospital?
HRSA emphasizes that offsite facilities containing multiple clinics or services must be registered as individual clinics or services, versus single registrations for entire locations.
Eligibility of offsite outpatient facilities is based on information in the hospital’s most recently filed Medicare cost report (59 Fed. Reg. 47884 (Sept. 19, 1994)), as received via a data feed from the Centers for Medicare & Medicaid Services (CMS). The online 340B registration process requires hospitals to confirm the cost reporting period, disproportionate share adjustment percentage (if applicable), and ownership status received from CMS. Registrants must also identify the cost center line(s) containing expenses and outpatient charges for each of the clinics, services, or facilities being registered. Finally, registrants must provide the specific expenses and outpatient revenues for those clinics, services or facilities (from the working trial balance corresponding with the listed cost report).
Hospitals are encouraged to have their most recently filed Medicare cost report and trial balance available during the registration process. If the information received from CMS is outdated or incorrect, registrants must submit Worksheet S, Worksheet S-2, Worksheet A, Worksheet C and the corresponding trial balance per the instructions provided at the end of the registration process. Children’s hospitals must additionally submit Worksheet S-3; Disproportional Share, Freestanding Cancer, Rural Referral Center and Sole Community Hospitals must also submit Worksheet E, Part A.
May an outpatient facility that is reimbursed by CMS as a provider based facility, but not included on the most recently filed cost report, access 340B Drugs under the final guidance published in 1994?
How should a covered entity determine if an off-site outpatient facility is eligible for 340B as a child site and should be added to the 340B database?
Off-site outpatient facilities are eligible child sites of a 340B covered entity in the following circumstances:
An off-site outpatient facility meeting one of these criteria must register and be listed on the 340B database before it can purchase or use 340B drugs for eligible patients. For hospitals, all clinics located off-site of the parent hospital, regardless of whether those clinics are in the same building, must register as child sites of the parent 340B-eligible hospital if the covered entity purchases and/or provides 340B drugs to patients of those facilities. For example, if the off-site outpatient facility is a hospital, all clinics/departments within that off-site location that plan to purchase and-or provide 340B drugs to its patient must register as a child site.
Do clinics/departments located within the four walls of a registered 340B hospital have to be registered in the 340B database?
If a covered entity has physician clinics, do they need to be registered as child sites?
Can a covered entity list in-house pharmacy as a child site?
Which health care delivery sites must our 340B covered entity (a non-hospital) register on the 340B database?
All sites that purchase and use 340B drugs for their eligible patients must be listed on the 340B database. In order for non-hospital health care delivery sites to purchase 340B drugs or provide 340B drugs to their patients, they must first be authorized through the (non-hospital) covered entity’s grant and listed on the 340B database. Clinics located off-site of the parent covered entity, regardless of whether those clinics are in the same building, must register with OPA as outpatient facilities of the parent 340B covered entity if the covered entity purchases or provides 340B drugs to patients of those facilities.
Does HRSA authorize covered entities to retroactively change previous quarters’ transactions from a non-340B transaction into a 340B price transaction, or to convert from a GPO purchase into non-GPO purchase, through credit and rebill process arranged between the covered entity and the wholesaler?
HRSA has not authorized the use of a credit/rebill, banking, or similar process to re-characterize previous transactions. Covered entities participating in the 340B Program are responsible for requesting 340B pricing at the time of the original purchase. If a covered entity wishes to reclassify a previous purchase as 340B, covered entities should first notify manufacturers and ensure all processes are fully transparent with a clear audit trail that reflects the actual timing and facts underlying a transaction. The covered entity retains responsibility for ensuring full compliance and integrity of their use of the 340B Program.
Can 340B drugs be used for discharge prescriptions?
The 340B Program is an outpatient drug program. Enrolled covered entities have the responsibility to ensure that drugs purchased under the 340B Program be limited to outpatient use and provided to individuals who meet the requirements of the current patient definition. 340B drugs can be used for discharge prescriptions to the extent that the drugs are for outpatient use. Whether a drug qualifies as outpatient and the individual meets the definition of patient depends upon the factual circumstances surrounding the care of that particular individual. If a covered entity uses 340B drugs, it should be able to explain why the covered entity is responsible for the use of the drugs on an outpatient basis and have auditable records that demonstrate compliance with 340B Program requirements.
May a hospital use 340B-priced drugs in "mixed-use" settings, such as a surgery department, where both inpatients and outpatients are treated? If so, what if the hospital cannot track which drugs are used for inpatients and which ones are used for outpatients?
If a disproportionate share hospital, children’s hospital, or freestanding cancer hospital registers to participate in the 340B Program, when does their participation become effective and the GPO prohibition apply?
The hospital’s authorizing official upon enrollment, attests that the hospital “...will not participate in a group purchasing organization or group purchasing arrangement for covered outpatient drugs as of the date of this listing on the OPA website.”
Our hospital isn’t subject to the GPO prohibition. Does the GPO Policy Release impact our hospital?
The GPO prohibition applies to all disproportionate share hospitals, children’s hospitals, and freestanding cancer hospitals enrolled in the 340B Program. The GPO Policy Release does not apply to entities registered as any other type of covered entity.
May a Hemophilia Treatment Center (HTC) that is part of a hospital participate in a GPO for outpatient drugs?
The answer depends on how the HTC is registered with respect to the hospital. If the HTC is within the four walls of a parent hospital subject to the GPO prohibition and not separately registered for the 340B Program with a 340B ID beginning with “HM”, the HTC may not use an outpatient GPO. If the HTC is registered as an off-site outpatient clinic of a hospital subject to the GPO prohibition, the HTC may not use an outpatient GPO. If the HTC is an off-site outpatient facility of a hospital subject to the GPO prohibition, but is not registered for the 340B Program (as a child site of the hospital) and meets all of the following, if may use a GPO for covered outpatient drugs: 1. Is located at a different physical address than the parent; 2. Is not registered on the OPA 340B database as participating in the 340B Program; 3. Purchases drugs through a separate pharmacy wholesaler account than the 340B participating parent; and 4. The hospital maintains records demonstrating that any covered outpatient drugs purchased through the GPO at the HTC are not utilized or otherwise transferred to the parent hospital or any outpatient facilities registered on the OPA 340B database. If the HTC is otherwise an eligible entity and registered as such (340B identification number beginning with “HM”), then it is not subject to the GPO prohibition with respect to its own patients. In no circumstances may the HTC’s permitted use of a GPO be used to circumvent the GPO prohibition for a hospital and its outpatient clinics subject to the GPO prohibition.
When a covered entity is unable to purchase a covered outpatient drug at a 340B price, may the covered entity subject to the GPO prohibition buy via a GPO?
A covered entity that is subject to the GPO prohibition may not use a GPO for covered outpatient drugs at any point in time. If a covered entity is unable to purchase a covered outpatient drug at the 340B price, written notification should be sent to OPA immediately detailing the covered outpatient drug(s) involved, the manufacturer, and the process by which the entity was notified that the purchase could not be made. HRSA reviews all allegations brought to its attention to ensure compliance with program requirements. If you are not able to obtain the drug at a 340B price, here is the suggested process: Contact the manufacturer and request 340B pricing. If they refuse, ask for their reasoning in writing. Forward a cover letter describing the situation and the collected explanations to: Health Resources and Services Administration, Office of Pharmacy Affairs, 5600 Fishers Lane, 08W05A, Rockville, MD 20857
If a product does not have a 340B price, does that mean it is not considered a covered outpatient drug for the purposes of the 340B Program?
The definition of covered outpatient drug is found in section 1927 (k) of the Social Security Act. The availability of a 340B price is not dispositive in determining whether that drug meets this definition of a covered outpatient drug.
Can our 340B hospital, subject to the GPO prohibition, use a GPO for outpatient drugs at a non-reimbursable clinic within the four walls of the parent hospital?
Can a hospital subject to the GPO prohibition use a GPO to purchase drugs that do not meet the definition of covered outpatient drug (as defined by section 1927(k) of the Social Security Act)?
Yes. Covered entities should have clear documentation demonstrating how the covered entity applies the definition of covered outpatient drug with respect to GPO use.
If my critical access hospital enrolls and participates in the 340B Program, will we have to stop participating in our group purchasing organization (GPO)?
No. Under section 340B(a)(4)(N) of the Public Health Service Act, as amended by the Affordable Care Act, the prohibition against participation in GPO arrangements does not apply to critical access hospitals, rural referral centers, or sole community hospitals. The GPO prohibition only applies to 340B-enrolled disproportionate share hospitals, children's hospitals, and free-standing cancer hospitals.
Our mixed-use area has only inpatients or 340B eligible outpatients. We do not have any 340B ineligible patients. In this setting where the status of a patient (inpatient vs. outpatient) is not known until replenishment occurs by the split ordering software, and our accumulator splits orders into inpatient GPO and 340B, is it required to start with a WAC inventory?
The hospital must keep auditable records demonstrating that accumulation occurs for inpatient GPO or outpatient 340B for eligible patients (as defined by current patient definition guidelines (61Fed. Reg. 55156 (Oct. 24.1996)). A non-GPO outpatient account should be available for replenishment for covered outpatient drugs in the event a 340B product is not available.
A DSH with an in-house pharmacy would like to serve 340B and non-340B eligible patients. May we use a GPO to purchase drugs for our non-340B eligible patients that receive services at sites registered on the 340B Database?
A hospital system owns and controls many hospitals, some of which are 340B participating hospitals. The 340B participating hospitals each have their own 340B Program identification number. The hospital system would like to negotiate prices for drugs used at their hospitals, including those that participate in the 340B Program. Does the above scenario violate the 340B GPO prohibition? That is, does it constitute a group purchasing arrangement?
The 340B participating hospitals within the hospital system in this scenario have separate 340B registrations. For the hospitals registered for the 340B Program as a DSH, children’s hospital or freestanding cancer hospital, conducting price negotiations for covered outpatient drugs with any other hospital would create a prohibited group purchasing arrangement. The hospital system may negotiate prices for inpatient drugs only.
When does HRSA consider covered entities in violation of the GPO Prohibition?
HRSA published Policy Release 2013-1 (PDF - 227 KB) on February 7, 2013 to clarify its policy regarding this 340B Program statutory prohibition. If a covered entity is not in compliance with the GPO prohibition, the covered entity must immediately notify HRSA, and will be terminated from the program. The covered entity may reapply during the next quarterly registration period once it determines that it is in compliance with all 340B Program requirements and can attest to such during the enrollment process. If HRSA determines that a covered entity participating in the program is not in compliance with the GPO prohibition, HRSA will terminate such entity from the 340B Program. In addition, all participating 340B hospitals must attest that they are in compliance with all 340B program requirements, including compliance with the GPO prohibition as detailed in Policy Release 2013-1 (PDF - 227 KB).
Can Community Health Centers participate in the Prime Vendor Program (PVP) and a group purchasing organization (GPO)?
Yes. All covered entities may participate in the PVP, although disproportionate share hospitals, children's hospitals, and freestanding cancer centers that participate in the 340B Program are prohibited from purchasing covered outpatient drugs through a GPO. 340B Prime Vendor participation is voluntary, and there are no restrictions placed on covered entities electing to participate. Most alternative purchasing groups serving 330 grantees and other entities encourage participation in the 340B PVP to ensure members have access to best pricing on pharmaceuticals while offering members their own contract portfolios of medical/surgical, dental, office, and other non-pharmacy supplies, which tend to be complementary to the 340B PVP pharmacy portfolio. On occasion, there may be an alternative purchasing group that does not permit a member to simultaneously access their own contracts and 340B PVP contracts due to existing business relationships with a supply partner. In this situation, the covered entity may be required to notify the alternative purchasing group to cancel its membership before the selected pharmacy wholesaler will load the 340B PVP pricing available to the entity's pharmacy account.
Can a covered entity use 340B drugs for patients with private insurance?
The 340B Program does not prohibit covered entities from providing 340B drugs to individuals with private insurance as long as the individual is a qualifying patient of the covered entity and the drug is not subject to a duplicate discount under Medicaid.
Are employees of a covered entity eligible to receive 340B drugs?
Covered entities may only distribute 340B drugs to their employees that meet the patient definition guidelines set forth under the 340B Program. For current patient definition guidelines, see 61 Fed. Reg. 55156 (Oct. 24, 1996). The 340B Program is limited to patients of the covered entity and has never been a general employee pharmacy benefit or self-insured organization pharmacy benefit. Evidence of an employer relationship or insurer relationship alone is insufficient to determine 340B patient eligibility.
Can non-Medicaid patients receive 340B drugs?
Yes, as long as they are patients of the covered entity.
Are 318A grantees (STD grantees) that participate in the 340B Program permitted to purchase contraceptives and other 340B drugs for use by grantee patients?
STD (318A grantee) clinics that participate in the 340B Program may purchase 340B drugs (including prescribed contraceptives), for grantee patients that meet the patient definition criteria (61 Fed. Reg. 55156 (Oct. 24, 1996)). If an individual meets all of the requirements of the definition of patient, including the third requirement that the individual receives a healthcare service or range of services sufficient to establish a provider-to-patient relationship under the 340B Program from the 318A grantee that are consistent with screening, preventing, or treating sexually transmitted diseases, then the covered entity may purchase and dispense any 340B drugs for which the covered entity is responsible, including contraceptives, to that patient.
No. Covered entities are free to choose how they will provide 340B pharmacy services to their patients, subject to federal and state laws. Options include contracting with a retail pharmacy, providing in-house pharmacy services, administering drugs to patients, etc. For more information, including tools and technical assistance in providing 340B pharmacy services, contact Apexus Answers at 888-340-2787, or ApexusAnswers@340bpvp.com.
What is a “ship to bill to” arrangement?
The “ship to bill to” procedure refers to an arrangement set up by the covered entity who is responsible for purchasing 340B drugs from wholesalers and/or manufacturers and directs those 340B drugs to be shipped to the contract pharmacy. In other words, the covered entity maintains title of the 340B drugs as required, but the contract pharmacy(ies) houses the drugs and provides dispensing services to patients of the covered entity.
What are the audit and compliance requirements under the contract pharmacy guidelines?
The covered entity must have sufficient information to ensure ongoing compliance and the timely recognition of any 340B Program compliance problem at all contract pharmacy locations. The covered entity remains responsible for the 340B drugs it purchases and dispenses through a contract pharmacy. All covered entities are required to maintain auditable records and provide oversight of their contract pharmacy arrangements. HRSA expects that covered entities will utilize independent audits as part of fulfilling their ongoing obligation of ensuring 340B Program compliance. 340B Program violations found during internal or independent audits must be disclosed to HRSA along with the covered entity’s plan to address the violation. This information should be mailed to: Health Resources and Services Administration, Office of Pharmacy Affairs, 5600 Fishers Lane, Mail Stop 08W05A, Rockville, MD 20857. Additionally, HRSA audits of covered entities include a covered entity’s contract pharmacies. A contract pharmacy will be removed from the 340B Program if the covered entity is not providing oversight of its contract pharmacy arrangement.
What are the record-keeping requirements for contract pharmacies?
The covered entity must have fully auditable records that demonstrate compliance with all 340B Program requirements, including drugs dispensed through a contract pharmacy arrangement. The contract pharmacy will provide the covered entity with reports consistent with customary business practices (e.g., quarterly billing statements, status reports of collections and receiving, and dispensing records). The contract pharmacy, with the assistance of the covered entity, will establish and maintain a tracking system suitable to prevent diversion of 340B drugs and duplicate discounts on the drugs. Customary business records, which must be readily retrievable, may be used for this purpose. The covered entity will establish a process for a periodic comparison of its prescribing records with the contract pharmacy's dispensing records to detect potential irregularities. Such records can include: prescription files, velocity reports, and records of ordering and receipt of drugs. These records will be maintained for a period of time required by State law and regulations (75 Fed. Reg. 10272 (Mar. 5, 2010)).
No change request form will be required if all information in the 340B database is accurate.
Once a covered entity submits a change request form, must the covered entity do anything else to recertify?
Yes. A change request form only updates the covered entity’s 340B database information. Recertification requires the covered entity’s Authorizing Official to (1) update 340B database information if necessary and (2) certify compliance with 340B Program requirements.
HRSA strongly recommends that the covered entity review and update its 340B database entry using the change request form prior to recertification. Once recertification starts, the listed Authorizing Official will receive a user name, password, and recertification user guide to perform annual recertification and attest to the covered entity’s 340B Program compliance.
The Authorizing Official is responsible for ensuring 340B Program compliance for the covered entity. Recertification covers the parent covered entity and all registered child sites in the 340B Program database.
In the HRSA Medicaid Exclusion File (MEF), what does the “start date” and the “term date” mean? What is the effective date of the quarterly MEF?
The date in the “start date” column is the first date that the entity began participating in the 340B Program. The date in the “term date” column is the effective date the entity is no longer participating in the 340B Program. These dates DO NOT relate to the covered entity’s MEF determination as carve in or carve out. To download the MEF for a specific quarter, on the MEF homepage in the 340B Database, a quarterly date range must be selected and those dates reflect the effective dates of the selected MEF download. As a reminder, the quarterly MEF reflects the decisions of covered entities that have chosen to “carve-in” Medicaid effective for a given calendar quarter and captures a snapshot of carve-in decisions at 12:01am ET on the 15th day of the month prior to the start of each quarter, irrespective of weekends or holidays.
What changes may be made to the Medicaid Exclusion File (MEF) from one quarter to the next?
The quarterly MEF reflects the decisions of covered entities that have chosen to “carve-in” Medicaid effective for a given calendar quarter and captures a snapshot of “carve-in” decisions at 12:01am ET on the 15th day of the month prior to the start of each quarter, irrespective of weekends or holidays. The quarterly MEF includes for each covered entity listed at least one Medicaid provider number (MPN) or one National Provider Identifier (NPI) registered with OPA as of the snapshot for that quarter. Covered entities may request changes to their “carve-in” decision and/or the specific identifiers listed at any time; however, these changes only take effect the following quarter, when published on the MEF, and only if the change request is received, approved and processed by OPA before the time of the snapshot (i.e., the 15th day of the month prior to the start of the quarter). HRSA generally does not make retroactive changes to the quarterly MEF once it is published. If retroactive changes are necessary, HRSA will communicate this to the 340B Program stakeholders.
Does HRSA retroactively make changes to the Medicaid Exclusion File (MEF)?
HRSA generally does not make retroactive changes to the quarterly MEF once it is published. On rare occasion, a technical system issue may warrant an immediate modification. If retroactive changes are necessary, HRSA will communicate this to the 340B Program stakeholders.
Must a covered entity submit its Medicaid provider number or NPI to HRSA for inclusion in the 340B Medicaid Exclusion File?
Covered entities must choose whether they will use 340B drugs for their Medicaid patients. If they choose to use 340B drugs for Medicaid patients (carve-in), they must provide the HRSA Office of Pharmacy Affairs (OPA) with the Medicaid provider number and/or NPI used to bill Medicaid to be listed on the 340B Medicaid Exclusion File. The 340B Medicaid Exclusion File is available to state Medicaid agencies and manufacturers to prevent duplicate discounts, as prohibited by statute. If an outpatient facility or sub-grantee/sub-contractor bills under a different Medicaid provider number or NPI than the parent site, that information must be appropriately listed for each outpatient facility.
How does a covered entity carve out Medicaid?
To carve out Medicaid, a covered entity chooses to forego the 340B discount drugs for Medicaid patients. In this arrangement, 340B drug inventory is dispensed only to non-Medicaid patients. The covered entity would not be included on HRSA’s 340B Medicaid Exclusion File.
Which Medicaid provider number and NPIs should a covered entity submit to HRSA Office of Pharmacy Affairs?
The covered entity should submit Medicaid provider numbers/NPIs that are used to bill 340B drugs to Medicaid patients in any state. This is most often the pharmacy’s Medicaid provider number/NPI, but could also be the clinic Medicaid provider number/NPI or a combination of both, depending on the services at the clinic. For more information, contact the 340B Prime Vendor at 1-888-340-2787 or via email at ApexusAnswers@340BPVP.com.
May 340B drugs be used for Medicaid patients as part of a 340B contract pharmacy?
340B drugs may not be used for Medicaid patients at a contract pharmacy, absent an arrangement between the contract pharmacy, covered entity, and state Medicaid agency to prevent duplicate discounts. Any such arrangement shall be reported to the HRSA Office of Pharmacy Affairs by the covered entity. For additional information, see the Federal Registry notice.
On July 21, 2014, HHS issued an interpretive rule which describes HHS’s interpretation of section 340B(e) of the Public Health Service Act (PHSA), “Exclusion of Orphan Drugs for Certain Covered Entities.” HHS interprets section 340B(e) of the PHSA as excluding from the 340B Drug Pricing Program (“340B Program”) drugs that are transferred, prescribed, sold, or otherwise used for the rare condition or disease for which the drug was designated under section 526 of the Federal Food, Drug, and Cosmetic Act (FFDCA). However, section 340B(e) of the PHSA does not exclude from the 340B Program drugs that are transferred, prescribed, sold, or otherwise used for conditions or diseases other than for which the drug was designated under section 526 of the FFDCA
What is orphan designation?
A drug is designated by the FDA as "a drug for a rare disease or condition" pursuant to section 526 of the FFDCA at the request of the sponsor, if FDA finds that the drug is being or will be investigated for a rare disease or condition and, if approved by FDA, the approval will be for that disease or condition. 21 U.S.C. 360bb(a)(1). This designation is referred to as orphan-drug designation. 21 CFR 316.24.
Which orphan drugs are exempt from the 340B Program under HRSA's interpretation?
A drug with an orphan designation is excluded from the 340B Drug Pricing Program when used for the indication for which it has received an orphan designation but not when the drug is used for an indication other than for which the drug received the orphan designation. HRSA will publish on its public website FDA’s section 526 list of drugs on the first day of the month prior to the end of the calendar quarter to assist in the identification of the following quarter’s purchases that may be subject to the orphan drug exclusion. HRSA’s published orphan drug list will assist manufacturers and covered entities to determine whether a drug is designated under section 526 of the FFDCA and, if so, the rare indication for which it is designated.
Who does the orphan drug exclusion apply to?
The exclusion of drugs with orphan indications applies to free-standing cancer hospitals, rural referral centers, sole community hospitals, and critical access hospitals. The exclusion does not apply to covered entities that meet the 340B Program eligibility requirements and are enrolled under sections 340B(a)(4)(A) through 340B(a)(4)(L) of the PHSA or to a children’s hospital described in section 340B(a)(4)(M). Furthermore, if a hospital potentially qualifies under more than one section, such as a 340B(a)(4)(L) disproportionate share hospital and 340B(a)(4)(O) sole community hospital, the hospital selects under which enrollment type it chooses to qualify. During the registration and annual recertification processes, a covered entity certifies that it meets the requirements for such an enrollment type.
How does the HRSA’s interpretation change the definition of covered outpatient drug?
The interpretive rule interprets but does not change the statutory definition of “covered outpatient drug.” HRSA interprets section 340B(e) of the PHSA to exclude those orphan drugs which are transferred, prescribed, sold, or otherwise used for the rare condition or disease for which that drug was designated under section 526 of the FFDCA from the definition of covered outpatient drug only for the covered entity types to which the exclusion applies.
There have been press reports that HRSA considers the July 21, 2014 Interpretive Rule binding in the same manner as the 2013 Orphan Drug Regulation. Does HRSA consider the Interpretive Rule binding on manufacturers and covered entities?
The Orphan Drug Interpretive Rule issued by HRSA is not binding on manufacturers and covered entities. An interpretive rule does not create or establish any binding norms. However, the statute is binding on manufacturers and covered entities and does establish binding norms and requirements. A manufacturer’s or covered entity’s failure to comply with the statutory requirements could subject a manufacturer or covered entity to an enforcement action by HRSA, which could include refunds to covered entities in the case of overcharges, as well as termination of a manufacturer’s Pharmaceutical Pricing Agreement (PPA). In deciding whether and in what circumstances to take enforcement action, HRSA will necessarily be required to interpret the statute. In accordance with the Administrative Procedure Act, HRSA has provided its interpretation of the statute to stakeholders in the 340B community by issuing the Orphan Drug Interpretive Rule. If a manufacturer or covered entity with a different interpretation of the statute is ever subject to such an enforcement action, it would have the opportunity to advocate for a different interpretation of the statute in defending against the enforcement action.
What if I cannot track a drug by indication?
HRSA will maintain a list of all covered entities for which the exclusion of drugs with an orphan indication applies that cannot or do not wish to maintain auditable records sufficient to track the use of drugs by orphan indication. These covered entities would purchase all orphan drugs outside of the 340B Program because they are unable to demonstrate compliance with statutory requirements, as interpreted by HRSA. Once a hospital is enrolled in 340B, it may change its decision to purchase all orphan drugs outside of the 340B Program on a quarterly basis by notifying HRSA. This documentation will be made public. This information will also be verified during the annual recertification process.
Can a free-standing cancer hospital use a GPO for orphan drugs when they are used for a rare disease or condition?
The 340B statute prohibits a free-standing cancer hospital from using a GPO for covered outpatient drugs. When an orphan drug is used for the rare condition or disease for which that orphan drug was designated under section 526 of the FFDCA, it is not considered a covered outpatient drug for purposes of the 340B Program. Therefore, under the 340B statutory GPO prohibition, a free-standing cancer hospital may use a GPO when an orphan drug is used for a rare disease or condition if the free-standing cancer hospital is able to track drug use by indication. When an orphan drug is used for a non-rare condition or disease, it is considered a covered outpatient drug and a free-standing cancer hospital may not use a GPO. If the free-standing cancer hospital is unable track by indication, it would not be able to demonstrate compliance with statutory requirements, as interpreted by HRSA. Therefore, if it does not have this capability, a free-standing cancer hospital would be unable to ensure that drugs purchased would not violate the GPO prohibition unless all drugs, regardless of the indication for which they were used, were purchased outside of a GPO.
An enrolled critical access hospital, rural referral center, or sole community hospital is not subject to the GPO prohibition and is therefore able to use a GPO for covered outpatient drugs. Thus, these types of covered entities may use a GPO to purchase a drug whether or not it is used for an orphan rare disease or condition.