2016 Expected to Be Monumental Year for 340B Drug Discount Program

07 December 2015 Health Care Law Today Blog
Author(s): Anil Shankar

The 340B Program continues to be an area of focus from federal policymakers, and recent activity and publications indicate that 2016 could be a monumental year for the program. Below is a breakdown of the recent and upcoming key initiatives related to the 340B Program.

2016 Regulatory Agenda: 340B Program Rules

The recently released U.S. Department of Health and Human Services (HHS) regulatory agenda for 2016 includes several planned publications that will affect 340B Program covered entities and drug manufacturers:

  • HRSA plans to publish its final 340B Program “mega-guidance” in September 2016. HRSA released the long-awaited “mega-guidance” in August 2015 and received over 800 comment submissions, many of which raised significant legal and operational concerns related to HRSA’s proposal. In addition to these comments, HRSA must also consider the impact of a recent federal court decision, which vacated HRSA’s orphan drug rule, calling into question HRSA’s rulemaking authority.
  • HRSA plans to issue a final rule related to the implementation of civil monetary penalties for drug manufacturers that overcharge 340B Program covered entities. The regulatory agenda indicates that this final rule is scheduled for publication in May 2016. These rules were first proposed in June 2015.
  • HRSA plans to propose a rule regarding the 340B Program administrative dispute resolution process that would be available to covered entities and drug manufacturers. According to the regulatory agenda, this proposed rule is scheduled to be issued in May 2016 as well. This rule was originally scheduled to be issued in 2015, but has been delayed.

OIG Focus on 340B Program Issues

In November 2015, the HHS Office of Inspector General (OIG) issued a detailed report that analyzes the potential impact of reducing Medicare Part B payments for drugs purchased through the 340B Program, as well its annual Work Plan that includes specific components focused on the 340B Program.

The OIG’s report on Medicare Part B payments was provided in response to policymakers who have questioned whether some of the savings that covered entities participating in the 340B Program currently retain should be passed on to the Medicare program and its beneficiaries. Prior OIG reports found that Medicare payments to covered entities for 340B Program drugs substantially exceeded the covered entities’ costs; however, 340B Program and Medicare rules allow these savings to be retained in full by the covered entities, thereby allowing them to stretch their scarce resources to serve their patients. The OIG’s report finds that shared savings arrangements between the Medicare program and 340B covered entities would result in substantial savings to the Medicare program, while still providing covered entities with incentives to purchase drugs through the 340B Program. The OIG offers three potential alternative payment methodologies under which the Medicare program, Medicare beneficiaries, and 340B Program covered entities could share 340B Program cost savings.

The OIG’s Work Plan for fiscal year 2016 identifies an additional area of focus with regard to the 340B Program. The OIG plans to assess the risk of duplicate discounts for drugs purchased through the 340B Program that are paid through Medicaid managed care organizations (MCOs), and will describe states’ efforts to prevent them. The Affordable Care Act required states to start collecting rebates for drugs paid through MCOs and prohibited duplicate discounts under the 340B Program for these drugs. The OIG points out in its Work Plan that existing tools and processes used to prevent duplicate discounts in fee-for-service Medicaid may not be sufficient to prevent duplicate discounts for drugs paid through Medicaid MCOs. This report from the OIG is expected in 2016.

For more information on recent 340B Program changes and those expected in 2016, contact Elizabeth Elson at eelson@foley.com or Anil Shankar at ashankar@foley.com.

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