On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (PPACA), which was subsequently amended by the Health Care and Education Reconciliation Act of 2010 (signed by President Obama on March 30, 2010). Among other important changes, the PPACA expands access to the Section 340B Drug Pricing Program (340B Program) to certain critical access hospitals, freestanding cancer hospitals, rural referral centers, sole community hospitals, and children’s hospitals. The changes permit newly eligible entities to access significant discounts on drugs purchased through the 340B Program.
This Legal News Alert provides a brief description of the 340B Program, including an overview of eligible entities and the enrollment process. Given the cost savings available to 340B Program participants, newly eligible entities are strongly encouraged to explore participation in the 340B Program.
What Is the Section 340B Drug Pricing Program?
The 340B Program is a federally mandated drug pricing program that requires pharmaceutical manufacturers participating in the Medicaid program to provide front-end discounts on covered outpatient drugs purchased by certain “covered entities.” The 340B Program resulted from the enactment of two federal laws:
Through the 340B Program, covered entities enjoy substantial discounts on covered outpatient drugs. The 340B price is at least as low as the price that state Medicaid agencies pay. In addition, while the 340B Program sets a ceiling or cap on the price manufacturers can charge, covered entities may be able to negotiate additional discounts. Surveys of 340B Program participants indicate high satisfaction with the 340B Program, and participants frequently report paying 30 percent less than the covered entity otherwise would have paid for covered pharmaceuticals. Other studies have reported that the 340B Program price for pharmaceuticals may be 25 percent to 50 percent less than the average wholesale price (AWP).
The 340B Program is administered by the Office of Pharmacy Affairs (OPA), which is part of the HHS Health Resources and Services Administration (HRSA) and is supported by its government contractor, the Pharmacy Services Support Center (PSSC).
What Types of Entities Are Eligible to Participate?
Only those entities that qualify as covered entities under the PHSA or SSA are eligible to participate in the 340B Program. Prior to the PPACA, eligible covered entities included (among others):
The PPACA expands the PHSA definition of eligible covered entities to include certain:
How Do Eligible Entities Enroll in the 340B Program?
An eligible covered entity must notify the OPA of its intent to participate in the 340B Program. The process and type of information that must be submitted differs based upon the type of entity seeking to participate. In order to allow sufficient time for verification and processing of registration information, covered entities must submit required information at least one month before the quarter during which the covered entity wishes to commence participation (prior to the first of December, March, June, or September).
Once the OPA receives, verifies, and processes the registration information, the covered entity is eligible to purchase pharmaceuticals at the 340B price commencing at the start of the next calendar quarter (the first of January, April, July, or August). Each covered entity then determines how it will order and receive the discounted drugs. A covered entity may do so by contacting drug manufacturers directly, working with a wholesaler, or participating in the Prime Vendor Program (PVP) described below.
Eligible covered entities may refer to the PSSC Web site at http://pssc.aphanet.org/ for detailed registration information. Guidance for enrollment by children’s hospitals is available at http://www.hrsa.gov/opa/children.htm. For other newly eligible entities, at the time of publication of this alert, the PSSC had not yet identified the recommended registration form. Although the changes to the PHSA became effective January 1, 2010 and apply to drugs purchased on or after January 1, 2010, the PSSC is currently unable to provide guidance regarding the enrollment process for newly eligible entities other than children’s hospitals.
What Is the Prime Vendor Program (PVP)?
The PHSA contained a special requirement mandating the development of the PVP. The PVP is a voluntary supplementary program for entities covered by Section 340B and is intended to benefit 340B Program participants by:
In addition, the PVP provides “the only legal means for eligible hospitals to conduct group purchasing and leverage their outpatient drug purchases to secure sub-340B discounts” (see https://www.340bpvp.com/public/faq/faq_general.asp#Q3). The PVP is currently managed by Apexus under contract with the HRSA. Covered entities that seek to participate in the PVP must first be actively registered in the 340B Program (see above). Once eligible to purchase drugs through the 340B Program, the covered entity must submit a separate participation agreement to Apexus. There are no costs associated with enrollment in the PVP; the PVP is funded through fees charged to pharmaceutical distributors and suppliers.
Are There Other Issues That Newly Eligible Entities Need to Consider?
Entities that participate in the 340B Program must familiarize themselves with applicable requirements and prohibitions. This section provides a brief overview of some important aspects of the 340B Program, but should not be considered a comprehensive description of applicable requirements.
For More Information About the 340B Program
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Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our health care clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following members of our Critical Access Hospital and Rural Provider Team:
Kevin J. Egan