Will 2014 Be The Year of the 340B Mega-Reg?

Reposted from Drug Discount Monitor

January 10, 2014—With just one exception, the federal government has always managed the 340B program without formal regulations, setting 340B’s rules of the road instead through guidelines, policy releases, FAQs, and the like.
All of that could begin to shift in 2014 if the Health Resources and Services Administration (HRSA) achieves its oft-stated goal of publishing a far-reaching proposed regulation for 340B, maybe as soon as June.
HRSA’s planned “mega-reg” tops the list of what’s in store for 340B in the year ahead. Other stories the Monitor will be following include: the drug industry’s lawsuit over the very first 340B regulation (on 340B pricing on orphan drugs); HRSA and drug manufacturer audits of 340B covered entities and perhaps the first-ever HRSA audit of a drugmaker; forthcoming government and independent studies that focus or touch on 340B; the long-awaited final regulation to implement the Affordable Care Act’s (ACA) Medicaid average manufacturer price (AMP) provisions; and congressional oversight of 340B and other action with implications for the program.
The 340B Mega-Reg
Just yesterday, in its announcement about 340B provider audits, HRSA’s Office of Pharmacy Affairs (OPA) repeated its intention to publish a 340B proposed regulation for notice and comment in the Federal Register in June. The Department of Health and Human Services’ latest semiannual regulatory agenda, which came out in late November, shows the proposed rule with a June target release date.
OPA’s announcement yesterday said the draft of the regulation currently covers the definition of an eligible patient, compliance requirements for contract pharmacy arrangements, hospital eligibility criteria, and eligibility of off-site facilities. It is unclear if this is an exhaustive list or whether other program elements might be addressed in the final draft.
OPA Director Cmdr. Krista Pedley has said previously that the regulation will not address elements that Congress added to the program in 2010 but did not explicitly fund, presumably including monetary sanctions on manufacturers that intentionally overcharge covered entities and the creation of a mandatory and binding administrative dispute resolution process for 340B.
Before HRSA can publish the rule, the White House Office of Management and Budget (OMB) must clear it first. Under a presidential executive order, OMB review of federal agency regulations should take no more than 90 days. Rules, however, can get stuck in OMB limbo for months or even years. The first sign the 340B regulation remains on track for June release should come between now and early April, when OMB’s Office of Information and Regulatory Affairs notes on its website that it has arrived for review.
Orphan Drug Exclusion Lawsuit
Final filings are due Jan. 17 in the drug industry’s lawsuit challenging the legality of HRSA’s October regulation that lets certain rural and free-standing cancer hospitals buy orphan drugs at 340B pricing when prescribed for non-orphan indications. Pharmaceutical Research and Manufacturers of America (PhRMA) and HRSA jointly asked the judge hearing the case to rule expeditiously.
340B Audits
HRSA conducted 51 audits of 340B covered entities in fiscal year 2012, 94 in fiscal 2013, and has launched an unannounced number of new audits in fiscal 2014, which began Oct. 1.
Now that HRSA has reported the findings of all of its 2012 audits, it may begin reporting its findings from the 2013 group.
HRSA is developing recommendations for covered entities based upon what it has learned from its audits and other program oversight activities. It’s possible we could see the first of those best practices this year.
Manufacturers have also been auditing 340B covered entities. In December, Pedley said OPA had received six final audit reports from drugmakers and was reviewing them to decide how to engage the audited entities in compliance. It is not known whether it will publish information from the audits by manufacturers. Other drugmakers might want access to the findings to find out if program violations occurred and, if so, whether they too are owed refunds.
Finally, 2014 could see the first HRSA audit of a manufacturer. Pedley has said on several occasions that HRSA is “reviewing an issue” with a manufacturer that may result in an audit. 340B covered entities, advocacy groups, and some key lawmakers have been urging HRSA to begin auditing drugmakers.
Forthcoming Reports
The Government Accountability Office (GAO) will be issuing a congressionally mandated report very soon examining the causes of drug shortages and offering recommendations on how to prevent or alleviate them. Among many other topics, the report might address whether 340B drug discounts make certain drug products vulnerable to shortages.
The Department of Health and Human Services (HHS) Office of Inspector General (OIG), meanwhile, has been looking at 340B contract pharmacy programs and is expected to release its first observations shortly. Requested by members of Congress, the study is being prepared by OIG’s Office of Evaluation and Inspections. In its statement on audits yesterday, HRSA noted that the vast majority of 340B providers (82 percent) dispense 340B purchased drugs through an in-house pharmacy. It said only 18 percent of covered entities contract with pharmacies to dispense 340B drugs to eligible patients, and of those, 75 percent use fewer than five contract pharmacy arrangements.
Finally, the RAND Corp.’s new 340B research initiative might release its first white paper as soon as late February. RAND says it will be a factual description of the program, including its history, evolution, and current status.
Long-Awaited AMP Rule
The Centers for Medicare and Medicaid Services (CMS) is due to issue its final Medicaid covered outpatient drug regulation in May. CMS has postponed its release several times since publishing the regulation in proposed form in early 2012. Among other things, the rule will implement legislative changes made in 2010 to the definition of a drug’s AMP. That metric is basic to the calculation of the 340B ceiling price. The rule also will address the definition of “covered outpatient drug” (a term also used in the 340B statute); state Medicaid plans’ provisions regarding reimbursement of 340B drugs; 340B drugs for Medicaid managed care patients; how manufacturers are to treat orphan drugs sold to new covered entities types for purposes of calculating Medicaid best price; and exclusion from best price of certain nominal-price sales to providers that meet 340B criteria but are not enrolled.
Congress and 340B
A big story to watch will be which party controls the Senate following the elections in November. Democrats currently hold the majority with 53 seats (plus two independents who caucus with the party, for a total of 55) to the Republicans’ 45 seats. If the GOP picks up six seats and assumes the majority, and if it retains control of the House as now seems likely, there probably will be a big push to scale back or repeal the ACA.
Sen. Tom Harkin (D-Iowa) is in his last year as chairman of the Health, Education, Labor, and Pensions (HELP) Committee, which has primary jurisdiction over 340B, and the Labor-HHS-Education Appropriations Subcommittee. It is not immediately clear who on the Democratic side might succeed Harkin at the helm of HELP. Sen. Lamar Alexander (R-Tenn.) is the HELP Committee’s ranking Republican and would take over as chairman if his party assumes the majority. It is unclear whether Senate Judiciary Ranking Member Charles Grassley (R-Iowa) will continue his inquiry into the 340B program.
Rep. Fred Upton (R-Mich.) appears securely in place, now and for the foreseeable future, as chairman of the other committee with primary jurisdiction over 340B, the House Energy and Commerce Committee. Rep. Henry Waxman (D-Calif.) is the ranking Democrat.
Congress passed a two-year budget agreement in December that included an amendment that prevented a scheduled Medicare physician payment cut from taking place on Jan. 1. Congress has until the end of March to come up with a permanent solution. A major drugmaker has floated a proposal to require 340B covered entities to give Medicare all of their savings on 340B-purchased drugs provided to Medicare patients. Many in the drug industry do not support the idea, however.
The budget agreement delayed until fiscal 2016 Medicaid disproportionate share hospital (DSH) payment cuts under the Affordable Care Act slated to begin last October. The development was welcome news for safety-net hospitals, especially in states that did not expand Medicaid.
The budget deal, however, also kept in place the 2 percent sequestration on Medicare reimbursement, including Medicare Part B payments to hospitals and doctor’s offices, and retained ACA’s Medicare DSH cuts.
The government is currently funded under a temporary funding bill called a continuing resolution that expires Jan. 15. Lawmakers are working on an omnibus spending bill for the remainder of fiscal 2014 that might contain a newly written, compromise version of the Labor-HHS-Education appropriations bill passed by the full Senate Appropriations Committee last summer.
The Obama administration is expected to release its budget request for fiscal 2015 in February. It might once again include a proposal to finance the 340B program through a 0.1 percent user fee on all 340B drug sales. The idea has gained traction in the Senate in the past but not in the House.


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