Access to the Section 340B Drug Pricing Program for Newly Eligible Entities

Our recent alert (http://www.foley.com/publications/pub_detail.aspx?pubid=7039) discussed the expansion of 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 under Section 7101 of the Patient Protection and Affordable Care Act (PPACA).

While the Section 7101 amendments to the 340B Program became effective on January 1, 2010, as of the publication of this alert, the U.S. Department of Health and Human Services (HHS) has not published guidelines describing the enrollment process for newly eligible entities, nor has the Pharmacy Services Support Center (PSSC) (the government contractor that supports the 340B Program) made enrollment information available. However, newly eligible entities should become familiar with the 340B Program and eligibility requirements. In addition, while awaiting additional guidance from the PSSC, newly eligible entities should consider collecting and submitting certain registration information to the Health Resources and Services Administration’s Office of Pharmacy Affairs (OPA) and taking some initial steps to preserve access to retroactive benefits, if such benefits become available.

Possible Access to Retroactive Benefits

In the past, HHS established a mechanism for newly eligible entities that were not immediately able to enroll in the 340B Program to secure retroactive access to 340B drug discounts. In 2006, Section 6004 of the Deficit Reduction Act of 2005 (DRA) added children’s hospitals to the list of covered entities eligible to participate in the 340B Program. The DRA provided that the changes adding children’s hospitals would apply to drugs purchased on or after the DRA enactment date (February 8, 2006). On July 9, 2007, HHS published proposed guidelines regarding the participation of children’s hospitals, followed by final guidelines published on September 1, 2009 (Final Guidelines).

In the Final Guidelines, HHS established the following requirements for children’s hospitals to be eligible for retroactive discounts back to the February 8, 2006 enactment date:

• The children’s hospital must be listed on the 340B Covered Entity Database as eligible to purchase drugs through the 340B Program within one year of publication of the Final Guidelines (i.e., before September 1, 2010)
• Within 30 days of the children’s hospital having been listed as eligible to purchase drugs through the 340B Program on the 340B Covered Entity Database, the children’s hospital must send a request in writing to each manufacturer of the drug(s) for which retroactive discounts are sought
• The covered outpatient drugs must have been purchased on or after February 8, 2006
• The covered outpatient drugs must not have generated Medicaid rebates (the children’s hospital must have appropriate documentation to demonstrate this)
• The covered outpatient drugs must not have been sold or transferred to a person who was not a patient of the children’s hospital
• The covered outpatient drugs must have been purchased on or after the date on which the children’s hospital satisfied all requirements for participation in the 340B Program

What Steps Should Newly Eligible Entities Consider Now?

HHS has not indicated that it will implement a similar mechanism for newly eligible entities to obtain retroactive benefits under the PPACA. However, despite the fact that neither the PSSC nor OPA has published formal enrollment guidance, in order to prepare for participation in the 340B Program and help ensure access to favorable pricing retroactively to January 1, 2010, it may be worthwhile for a newly eligible entity to notify the PSSC and OPA of its intent to enroll by submitting anticipated registration and certification information. Newly eligible entities should consider taking the following steps:

• Evaluate eligibility to participate. Under the PPACA, only certain critical access hospitals, freestanding cancer hospitals, rural referral centers, sole community hospitals, and children’s hospitals are eligible to participate in the 340B Program. Such entities should become familiar with eligibility criteria and determine whether the entity meets such criteria.
• Notify PSSC/OPA of intent to enroll. An entity that meets eligibility requirements should collect relevant certifications and documentation supporting enrollment, notify the PSSC and OPA of the entity’s intent to participate, and provide them with supporting certifications and other documentation. While it may be necessary to resubmit such information at a later date, the collection and submission of such documentation may speed the enrollment process and help ensure access to retroactive benefits, if such benefits become available. Because the information typically required for 340B Program enrollment is not particularly difficult to assemble from an administrative or cost perspective, it may be worthwhile to initiate enrollment even before the entity fully evaluates the pro and cons of participation. Also, enrollment in the 340B Program does not mean that a covered entity must purchase drugs through the 340B Program, it merely means that the covered entity is eligible to do so.
• Initiate financial and strategic planning. Eligible entities should explore implementation options, including contracting with multiple external pharmacies (see below).
• Comply with all 340B Program requirements. Eligible entities should maintain documentation demonstrating compliance with 340B Program requirements. Refer to our past alert (http://www.foley.com/publications/pub_detail.aspx?pubid=7039) for additional information regarding compliance with those requirements..
• Maintain documentation. If retroactive discounts become available, they will likely only be available for covered outpatient drugs that: (1) were purchased on or after January 1, 2010; (2) did not generate Medicaid rebates; and (3) were not sold or transferred to a person who was not a patient of the covered entity. If possible, maintain documentation demonstrating compliance with these requirements.
• Watch for final guidelines and resubmit information. If HHS implements a mechanism for seeking retroactive discounts, HHS may require entities seeking such discounts to enroll in the 340B Program within a certain time period. Eligible entities should continue to watch for guidance from HHS, OPA, and PSSC and ensure that information is submitted or resubmitted to PSSC and OPA as necessary.
• Send written requests to manufacturers. HHS may require entities seeking retroactive discounts to request such discounts from manufacturers in writing within a certain time period after being listed as eligible in the 340B Covered Entity Database. As such, it may be worthwhile for a newly covered entity to maintain records of manufacturers from which the covered entity purchases covered outpatient drugs on and after January 1, 2010.

Contracting With Multiple Outside Pharmacies

Existing and newly eligible entities should be aware that it is not necessary for a covered entity to have an outpatient pharmacy in order to participate in the 340B Program. Covered entities may contract with external retail pharmacies to dispense 340B drugs for the covered entity’s outpatients. In the past, covered entities have been limited to one pharmacy per site and covered entities could either operate an in-house pharmacy or contract with only one external pharmacy. Covered entities seeking to use other types of pharmacy arrangements, or to implement both of the allowable methods of providing pharmacy services, were required to apply to OPA for an Alternative Method Demonstration Project. However, on March 5, 2010, the OPA published a Federal Register Notice (75 FR 10272) to finalize guidelines permitting a covered entity to use more than one pharmacy. The new guidelines, which became effective on April 5, 2010, now incorporate multiple pharmacies as a standard option for 340B-covered entities.

For More Information About the 340B Program

• HRSA Office of Pharmacy Affairs: http://www.hrsa.gov/opa/

Foley's Friday Focus Web Conference on the 340B Program

Foley will help newly eligible entities understand the 340B Program and how to realize the program's benefits during our June 18, 2010 Friday Focus Web conference. Learn more at Foley.com/FridayFocus.

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 Foley’s Critical Access Hospital and Rural Provider Team:

Kevin J. Egan
Chicago, Illinois
312.832.4361
kegan@foley.com  

C. Frederick Geilfuss II
Milwaukee, Wisconsin
414.297.5650
fgeilfuss@foley.com  

Maureen F. Kwiecinski
Milwaukee, Wisconsin
414.319.7325
mkwiecinski@foley.com