HFMA Comments on the HRSA 340B Drug Pricing Program Omnibus Guidance

October 27, 2015  

Mr. James Macrae, MA, MPP
Acting Administrator, Health Resources Services Administration
5600 Fishers Lane, Mail Stop 08W05A
Rockville, Maryland 20857  

RIN: 0906-AB08  

Re: the 340B Drug Pricing Program Omnibus Guidance  

Dear Mr. Macrae,     

The Healthcare Financial Management Association (HFMA) would like to thank the Health Resources Services Administration (HRSA) for the opportunity to comment on the 340B Drug Pricing Program Omnibus Guidance (hereafter the “proposed guidance”). Our members believe the 340B program is an important tool that stretches limited resources to provide care to indigent and at-risk populations. Without this valuable program, economically challenged individuals across the country would find greater difficulty in finding ready access to both care and life sustaining medications.    

HFMA is a professional organization of more than 40,000 individuals involved in various aspects of healthcare financial management. HFMA is committed to helping its members improve the management of and compliance with the numerous rules and regulations that govern the industry.  

Introduction

HFMA would like to commend HRSA for its thorough analysis of the issues addressed in the proposed guidance. Our members have significant concerns regarding the following proposed changes and/or clarifications to the 340B program:  

• Requiring a billable outpatient event for outpatient drugs to qualify for 340B pricing.
• Requiring infused drugs to be (prescribed/administered) by an employed/contracted physician.
• Requiring outpatient clinics to have Medicare costs and charges on the Medicare cost report to be an eligible site to prescribe 340B drugs.
• Excluding drugs bundled into Medicaid payments from 340B pricing.
• Excluding discharge prescriptions from 340B pricing if the order was written in connection with an inpatient stay.
• Increasing audit requirements for contract pharmacies.
• Requiring reporting of any breach, not just material breaches.  

Requiring a Billable Outpatient Event for Outpatient Drugs to Qualify for 340B Pricing

The proposed guidance states that drugs will only qualify for 340B pricing if they are ordered or prescribed when the patient has a billable outpatient event. As a result, drugs prescribed as a result of a service provided during the global period for an inpatient admission (e.g., Medicare three-day payment window) would no longer qualify for 340B pricing. HFMA strongly opposes this provision as it would significantly increase administrative costs for managing the 340B program.  

This requirement will effectively require 340B hospitals to establish replenishment systems for all drugs. Currently, there are situations in which outpatient-only departments are 100 percent 340B eligible under existing guidelines. These departments will no longer be able to keep a 340B physical inventory that is separately maintained if there is a potential that a patient could be admitted later and for the payer to require the outpatient service to be rolled into the inpatient stay. This presents a significant financial impact in terms of paying for the software as well as being subject to additional Group Purchasing Organization (GPO) or Wholesale Acquisition Cost (WAC) purchasing requirements inherent in replenishment systems.  

This rule also raises logistical challenges for determining the 340B eligibility of prescriptions filled from retail pharmacies. For example, due to the Medicare 72-hour rule, a hospital is required to bundle all related non-diagnostic services (e.g., therapeutic) with the claim for the inpatient stay. Prescriptions written in an outpatient clinic in the days prior to an inpatient admission would be considered ineligible for 340B due to the lack of an outpatient billed service. This is clearly contrary to the intent of the program to provide 340B discounted drugs to patients for outpatient use.  

If HRSA finalizes the requirement as proposed, it also needs to clarify whether these drugs are precluded from GPO pricing. HFMA believes that it is not HRSA’s intent to require WAC pricing for drugs provided during an outpatient service that is subsequently included in the global inpatient billing window. Therefore, HFMA asks HRSA to clearly state in the final rule that GPO pricing is allowable for drugs provided during non-billable outpatient services if it finalizes the outpatient billable event requirement.  

Prohibiting 340B Pricing for Drugs Infused but Not Ordered by a Covered Entity

The guidance proposes that an individual will not be considered a patient of the covered entity if the only health care received by the individual from the covered entity is the infusion of a drug or the dispensing of a drug.  

In many communities, oncologists are not employed by 340B eligible hospitals and refer their indigent patients to the hospitals specifically so that they can receive chemotherapy on the basis of charity care.  

Therefore, finalizing this misguided requirement will drive two unintended consequences. First, it will limit access to cancer care for indigent patients. In the current payment environment, hospitals have limited resources to fulfill their community benefit missions. Given the high cost of chemotherapy agents, prohibiting the 340B discount in instances where the hospital only infused the drug will require hospitals to reconsider who qualifies to receive chemotherapy on a charity care basis. Further, given the economics of running an independent physician practice, it is unlikely that independent physicians in the community will be able to provide the level of charity care necessary to meet the need created among the indigent by this change in policy.  

Second, requiring the oncologist who orders a service to be employed by the 340B-eligible hospital that ultimately infuses the drug to receive 340B pricing could trigger acquisitions of independent oncology practices by 340B-eligible hospitals. Coupled with the provider based requirement for child sites, this may not reduce costs for all purchasers or gain additional new capabilities for the community.  

Requiring Outpatient Clinics to Have Medicare Costs and Charges on the Medicare Cost Report to Qualify as an Eligible 340B Site

The proposed guidance generally retains HRSA’s current policy that requires hospital clinics to be listed on a reimbursable line of a filed Medicare cost report prior to being eligible to register for the 340B program as a child site. Also, the proposed guidance appears to add a second requirement to the child site registration test, stating that offsite facilities or clinics must have “associated outpatient Medicare costs and charges” in order to be eligible to register for the 340B program.  

HFMA is deeply concerned about the apparent additional requirement. Requiring a child site to have Medicare outpatient charges and related costs will foreclose the use of 340B drugs in indigent pediatric and prenatal clinics. HFMA does not believe it is HRSA’s intent to prohibit the provision of 340B drugs to indigent children and expecting mothers. Therefore, HRSA must drop the additional requirement to qualify an outpatient clinic as a child site. The existing requirement for child sites to be listed on the Medicare cost report in a reimbursable cost center is sufficient to ensure that 340B drugs are not being diverted for other purposes.  

Excluding Drugs Bundled into Medicaid Payments from 340B Pricing

The proposed guidance would exclude outpatient drugs provided to Medicaid beneficiaries that are bundled into the service payment. HFMA is strongly opposed to this provision. First, Medicaid pays less than the cost to provide a service. Prohibiting 340B drug usage will increase the losses hospitals incur providing outpatient services to Medicaid beneficiaries. These losses will decrease the resources available to provide charity and discount care to the indigent and near-indigent in communities served by 340B hospitals.  

Second, this provision would significantly increase the administrative burden foisted on hospitals in order to comply with the requirements of the 340B program. Hospitals would be required to track drugs bundled into payments for Medicaid services to ensure that 340B is not used.  

Excluding Discharge Prescriptions from 340B Pricing if the Order Was Written in Connection with an Inpatient Stay

The proposed guidance would prohibit hospitals from using 340B pricing for drugs that are billed (and used) as outpatient drugs if the prescription/order was written in connection with a discharge from an inpatient stay. Using 340B priced drugs for discharge prescriptions has been a longstanding practice that allows 340B eligible hospitals to reduce readmissions for their patients, is easy to administer and audit and is consistent with the purpose of the 340B program.  

Tracking discharge prescriptions that tie to an inpatient service/discharge so they could be excluded from 340B would be operationally challenging and burdensome because hospitals don’t have a systematic/IT-driven solution to track in their retail pharmacies whether a prescription resulted from an inpatient encounter. Compliance with the proposed change would require significant modifications and subsequent costs to hospital systems.  

Under the 340B statute, 340B pricing is available for “covered outpatient drugs.” There is no requirement under the 340B statute that covered outpatient drugs must also pertain directly to an outpatient service. Many hospitals are able to participate in the 340B program only by demonstrating that they provide inpatient services to a disproportionate number of low income patients. It would be inconsistent with the statute to deny 340B pricing for outpatient prescriptions needed by those low income patients upon discharge.  

Increasing Audit Requirements for Contract Pharmacies

Hospitals, according to the proposed guidance, would be responsible for ensuring that their contract pharmacies are in compliance with the 340B program rules. In addition to annual audits, the guidance adds a requirement for hospitals to conduct quarterly reviews of each contract pharmacy location and disclose any non-compliance found regardless of its materiality (see below for additional comments on materiality).   

Based on feedback from our members, requiring quarterly reviews that compare prescribing records for 340B hospitals and clinics with contract pharmacy dispensing records (in addition to annual audits) would significantly increase the expense related to external resources required to manage the program. In addition, it would require more staff time to coordinate the process. This use of resources detracts from those available to provide care to indigent patients and does not improve the quality of care provided to patients in the community. HFMA believes that HRSA should limit oversight requirements to annual audits.  

Requiring Reporting of Any Breach, Not Just Material Breaches

In multiple sections of the proposed guidance, covered entities are required to self-disclose any 340B program violation as opposed to the “material breach” standard that previously existed.  

HFMA strongly encourages HRSA in the final guidance to reassert the material breach standard for self-disclosure. Under the proposed guidance, our members have interpreted that all errors will need to be reported, even if they are immaterial and corrected. Not only will this drive unnecessary administrative expense for 340B hospitals, but also overwhelm HRSA, requiring additional staff to handle reports of immaterial errors while not improving the integrity of the program.  

HFMA looks forward to any opportunity to provide assistance or comments to support HRSA’s efforts to refine and improve administration of the 340B program, which is invaluable to helping our members’ further their missions to support at-risk populations. As an organization, we take pride in our long history of providing balanced, objective financial technical expertise to Congress, the Centers for Medicare & Medicaid Services, HRSA, and advisory groups.  

We are at your service to help HRSA gain a balanced perspective on this complex issue. If you have additional questions, you may reach me or Richard Gundling, Vice President of HFMA’s Washington, DC, office, at (202) 296-2920. The association and I look forward to working with you.  

Sincerely,

     
Joseph J. Fifer, FHFMA, CPA
President and Chief Executive Officer
Healthcare Financial Management Association  

cc: Krista Pedley, Director, Office of Pharmacy Affairs  

About HFMA

HFMA is the nation’s leading membership organization for more than 40,000 healthcare financial management professionals. Our members are widely diverse, employed by hospitals, integrated delivery systems, managed care organizations, ambulatory and long-term care facilities, physician practices, accounting and consulting firms, and insurance companies. Members’ positions include chief executive officer, chief financial officer, controller, patient accounts manager, accountant, and consultant.  

HFMA is a nonpartisan professional practice organization. As part of its education, information, and professional development services, HFMA develops and promotes ethical, high-quality healthcare finance practices. HFMA works with a broad cross-section of stakeholders to improve the healthcare industry by identifying and bridging gaps in knowledge, best practices, and standards.