340B Drug Pricing Program Developments in the New Year

13 January 2014 Publication
Author(s): Anil Shankar Judith A. Waltz

Legal News Alert: Health Care

On January 9, 2014, the Health Resources and Services Administration (HRSA) posted an update on its current and anticipated 340B drug pricing program (340B) program integrity efforts.1 The update includes a discussion of HRSA’s recent enhanced compliance oversight activities, including final results of HRSA’s audits of 340B covered entities. HRSA also provides an update on the status of its long-awaited 340B regulations. Based on this update from HRSA, it appears 2014 will be another active year with respect to HRSA’s 340B program integrity efforts and may result in critical clarification and/or changes to the 340B program.

340B Audit Results

HRSA’s recent 340B program update includes a report on its final results from 51 compliance audits conducted of covered entities, which included a review of 410 covered entity sites.2 The audits were conducted randomly, with a focus on covered entities that posed a higher risk of non-compliance based on several factors, including program type, volume of 340B purchases, complexity of program administration, and use of contract pharmacies, as well as on a targeted basis, such as through responses to specific complaints, self-reports, or whistleblowers. Examples of violations include findings of the diversion of 340B drugs to ineligible patients, inaccurate records in the 340B program database, and the claiming of duplicate discounts.

The final audit findings range from minor problems with covered entities’ 340B database entries, where no sanction was imposed and the corrective action required was simply a database correction. Other audit findings included violations of 340B program requirements, such as the diversion of 340B drugs to non-patients, and resulted in covered entities working with HRSA to develop a corrective action plan to ensure ongoing compliance, as well as sanctions listed by HRSA as repayment to drug manufacturers. HRSA’s report indicates that manufacturers may contact audited entities regarding the listed sanctions once HRSA has approved the entity’s corrective action plan and posted it on the HRSA website.

Forthcoming 340B Actions and Guidance

On January 8, 2014, HRSA provided an update on its upcoming recertification activities for certain covered entities.3 Recertification for Tribal and Urban Indian entities, HRSA grantees, and CDC STD/TB grantees will begin in early February 2014. These entities will need to recertify their compliance with 340B program requirements at this time.

HRSA’s 340B program update also provides notice that HRSA is in the process of drafting regulations that will formalize its existing program guidance. HRSA indicates that the regulations will address the definition of an eligible patient, compliance requirements for contract pharmacy arrangements, hospital eligibility criteria, and eligibility of off-site facilities. The proposed regulations are expected to be released for public comment by June 2014.

Additionally, last year the Office of the Inspector General (OIG) within the Department of Health and Human Services (DHHS) undertook a study of 340B contract pharmacy programs. The study was initiated at congressional request and will describe covered entities’ arrangements and their oversight of those arrangements to ensure compliance with 340B program compliance. The OIG report is expected in the near future and may have implications for how HRSA addresses contract pharmacies in its impending regulations.


The recent HRSA update reflects continued intense scrutiny on program integrity issues related to the 340B program. 340B Covered Entities and manufacturers should carefully monitor their participation in the 340B program to ensure compliance with all program requirements, and should carefully track the anticipated guidance from HRSA, which, when finalized, may materially modify those requirements in ways that affect the availability of 340B program drugs.

1 http://www.hrsa.gov/opa/update.html

2 http://www.hrsa.gov/opa/programintegrity/auditresults/results.html

3 http://opanet.hrsa.gov/opa/  

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this Alert or would like to discuss the topic further, please contact your Foley attorney or the following:

Elizabeth S. Elson
Los Angeles, California

Anil Shankar
Los Angeles, California

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