On Friday, August 28, 2015, the U.S. Department of Health and Human Services (HHS) Health Resources and Services Administration (HRSA) proposed its long-awaited “Omnibus” regulation for the 340B Drug Discount Program in the Federal Register (the “Proposed Rule”).  The 340B Drug Discount Program is the program by which drug and biologic manufacturers are generally required to offer their products at potentially steeply discounted prices to certain purchasers, generally “safety net” entities such as certain hospitals (called “covered entities”).  Public comments on the Proposed Rule will be accepted by HRSA until October 27, 2015.  Pharmaceutical and hospital industry stakeholders are encouraged to review the proposals carefully to evaluate whether there are areas of particular concern.


The Proposed Rule is  organized into eight parts:

  • “Part A” addresses 340B Program Eligibility and Registration;
  • “Part B” addresses Drugs Eligible for Purchase Under 340B;
  • “Part C” addresses Individuals Eligible to Receive 340B Drugs;
  • “Part D” addresses Covered Entity Requirements;
  • “Part E” addresses Contract Pharmacy Arrangements;
  • “Part F” addresses Manufacturer Responsibilities;
  • “Part G” addresses Rebate Option for AIDS Drug Assistance Programs; and
  • “Part H” addresses Program Integrity (including a new manufacturer annual recertification process).

Some of the more hotly anticipated topics addressed in the Proposed Rule include:

  • Eligibility of off-site outpatient facilities and clinics for 340B pricing;
  • The group purchasing organization (GPO) prohibition for certain covered entities,
  • The (long-awaited) updated “patient” definition;
  • Covered entity drug inventory/replenishment models;
  • The Medicaid duplicate discount prohibition as applied to Medicaid Managed Care;
  • Manufacturer refunds to covered entities (hint: no de minimus exception permitted);
  • Record-keeping requirements for covered entities (5 years);
  • Clarifying that “no covered entity may obtain 340B pricing (either through a rebate or through a direct purchase) on a drug purchased by another covered entity at or below the 340B ceiling price”; and
  • Updated requirements applicable to manufacturer audits of covered entities

Some topics noticeably absent from the Proposed Rule include:

Furthermore, the Proposed Rule, while addressing certain contract pharmacy parameters, does not attempt to specify the number of contract pharmacies with which a covered entity may contract (something that some manufacturers had hoped to see limited).


While we hope to further explore some of the proposed changes noted above in future blog entries, the proposed changes to the 340B “patient” definition are particularly significant, as they have broad implications for covered entities as well as participating manufacturers.  Under the 340B Drug Discount Program, a covered entity is prohibited from reselling or otherwise transferring a 340B drug to a person who is not a “patient” of the entity.  Accordingly, determining who properly qualifies as a “patient” is critical, with potential operational as well as financial implications.

The table below contrasts HRSA’s current “patient” criteria (all must be met), with the Proposed Rule criteria (all must be met “on a prescription-by-prescription, or order-by-order basis”). We have rearranged the order, but not the text, of the 1996 criteria so as to better align against the proposed definition for comparison purposes:

table 1

table 2


HRSA “encourages all stakeholders to provide comments on this proposed guidance.”  While the entire Proposed Rule is open for comment, HRSA has specifically solicited comments on the following:

  • Eligibility of Outpatient Facilities: “HHS is actively seeking comments on alternatives to demonstrating the eligibility of an off-site outpatient facility or clinic … For those parties proposing forms submitted to CMS, please include information regarding the deadline for submission of the proposed form, the proposed form’s relationship to Medicare reimbursement, and other key factors items for specific comment”.
  • Medicaid Managed Care Duplicate Discounts:
    • “The covered entity may make a different determination regarding carve-in or carve-out status for MCO patients than it does for FFS patients. An entity can make different decisions by covered entity site and by MCO, but must provide to HRSA identifying information of the covered entity site, the associated MCO, and the decision to carve-in or carve-out. This information may be made available on a 340B Medicaid Exclusion file. HRSA seeks comments on the utility of this billing information for other stakeholders, as well as the format through which it is made public.”
    • “HHS is seeking comments regarding alternative mechanisms to supplement the 340B Medicaid Exclusion File to allow covered entities to take a more nuanced approach to purchasing, for example, only using 340B drugs for Medicaid FFS and MCO patients when appropriate for service delivery but maintaining practices that prevent the statutorily prohibited duplicate discounts. HHS seeks information about current state arrangements that could be adapted for use as Federal standards for these supplements or alternatives.”
  • ADAPs:
    • “ADAPs will be expected to submit claims-level data to manufacturers to support the ADAPs’ rebate requests … HHS welcomes public comment regarding this proposed data submission, especially regarding the suitability of the claims-level data elements mentioned above for ADAP submission to manufacturers for purposes of receiving a rebate.”
    • “HHS has determined that the payment by the ADAP of a copayment, coinsurance, or deductible, in the absence of also paying for the health insurance premium, is too attenuated within the context of the 340B Program to constitute a ‘purchase.’ … HHS recognizes that ADAPs can cover the cost of health insurance (g., premiums, co-pays, co-insurance, deductibles, etc.) to ensure access to HIV medications and care. Therefore, we are seeking comments on how this policy may impact those practices.”

 * * *

Pharmaceutical and biologic manufacturers, hospitals, pharmacies, states, managed care organizations and other key stakeholders should take advantage of this important opportunity to provide comments to HRSA on the Proposed Rule. Stakeholders should devote significant attention to the Proposed Rule’s potential impact on costs, operations, systems, policies, and financial projections/budgeting.   Once the public comment period closes, HRSA will consider all comments in issuing a final rule.

For more information about the Proposed Rule, please contact the author or the member of the firm who normally handles your legal matters.

Posted by Kathleen Peterson

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