HHS Reissues Contested 340B Policy on Orphan-Drug Discounts

In spite of an adverse court judgment, the federal government is retaining its stance on how safety-net healthcare providers may obtain discounts on drugs that might have "orphan" uses.

On July 21, HHS published a document it called an interpretive rule on the exclusion of orphan drugs from the 340B discount program. The policy takes effect without delay. The announcement follows a May court verdict which shot down the HHS's authorization to release a substantive rule regarding whether or not pharmaceuticals with a rare-disease or orphan classification could be attainable at a rebate to health centers for non-orphan uses.

The HHS stated in the document it has been notified by safety-net healthcare providers or covered entities "that some of the newly-eligible covered entities are significant purchasers of drugs with an orphan designation, and if these drugs were excluded from the 340B Program entirely, it is not clear if there would be sufficient financial benefits to participate.".

The pharmaceutical sector has contested the Obama administration's interpretation of a provision in the Patient Protection and Affordable Care Act, asserting that the administration didn't possess the jurisdiction to publish the legislative rule in 2013. The Pharmaceutical Research and Manufacturers of America, the pharmaceutical industry's lobbying organization, filed a claim against HHS in 2013, and a federal judge ruled against HHS in May. The government, however, took the stance that the ruling authorized it to reissue the exact same policy in a different framework.

The new version of the rule, posted to the Federal Register on July 21, requires drug companies to offer markdowns between 20 % and FIFTY % on orphan drugs used for non-orphan ailments or diseases to freestanding cancer hospitals, critical-access hospitals, rural referral centers and sole community hospitals that take part in the 340B program.

A spokesperson for PhRMA stated the organization's stance hasn't changed and it continues to think that the Health Research and Services Administration, which oversees the 340B program, doesn't possess the jurisdiction to issue rulemaking with regard to the regulation.

Meanwhile, the regulation is considered a victory for safety net hospitals that participate in the 340B drug pricing program. Orphan pharmaceuticals are among the most expensive pharmaceuticals on the market and discounts on these types of treatments may be a contributing reason why several health centers sign up in the 340B program.

"The agency's position on this issue has been correct all along," said a spokesman for Safety Net Hospitals for Pharmaceutical Access, a trade organization that stands for healthcare facilities that take part in the 340B program. "Orphan drug discounts are essential to helping these healthcare providers treat underserved patients.".

The intent of the 340B program is to provide reduced rates on covered outpatient drugs to health centers that service a large number of uninsured or indigent patients. The health centers may then keep the financial benefits, or revenue, from the discounts. Read More

As the Health Resources and Services Administration (HRSA) continues to increase their role in the 340B Program oversight, they have made three modifications which will certainly affect covered entities. Even though the overall procedure continues to be mostly unchanged, recently-announced improvements to post-audit procedures will impact how covered entities learn about and reply to audit results.

In a July 2014 update, HRSA announced that it will not issue preliminary reports to CEs after an audit. Instead, covered entities will learn of audit findings when HRSA provides its Final Report.

Furthermore, are presently obligated to present HRSA a letter describing findings related to diversion and/or duplicate rebates. This letter will be posted on the HRSA web site, in conjunction with the audit findings, and is intended to notify any affected suppliers and wholesalers of potential payment they might be due. Instances of letters are currently published along with FY12 audit findings on the HRSA website.

Finally, all CEs whose results include payment will promptly be subject to a follow-up audit the next year. As HRSA continues to enhance the audit process, they will likely publish additional updates here.

More information from CenterRx

HHS Does Not Want Judge to Revisit Lawsuit - Even Though the Ruling Was Against Them

The Obama government and the pharmaceutical drug sector are still battling in court about HHS' jurisdiction to compel drugmakers to provide 340B rebates on orphan pharmaceuticals in some cases.

In the most recent battery, HHS is urging a federal judge to decline to revisit his May judgment that the government exceeded its rulemaking authority. HHS asserts that the ruling-- despite the fact that the administration technically lost-- allows administrators to reissue the same policy in a different form. The pharmaceutical manufacturers are requesting the court to clarify that he genuinely meant to prevent the policy.

A stipulation of the Patient Protection and Affordable Care Act left out orphan drugs from the 340B drug-discount program. HHS, nevertheless, has interpreted this omission to apply just when the costly drugs are used to cure the rare conditions in which they were actually created and certified to target.

The Pharmaceutical Research and Manufacturers of America last year filed a legal action arguing that HHS exceeded its rulemaking power by limiting the exclusion. The court of law conceded. But the Health Resources and Service Administration, the HHS agency that oversees the 340B program, later stated it would certainly maintain its interpretation and continue requiring the rebates.

HHS is now crafting the argument in which it can put out an interpretative policy or guidance that establishes the very same guidelines as the legislative rule that the judge struck down, according to court documents filed July 14 in U.S. District Court for the District of Columbia.

"The agency's position on this issue has been correct all along," said a spokesman for the Safety Net Hospitals for Pharmaceutical Access, a trade group for hospitals participating in the 340B program. "We agree that HHS can legally move forward without additional action by this court.".

The lawsuit is one of just one component of an evolving and controversial battle over how the 340B program is utilized. Quick expansion under the Affordable Care Act has actually been an issue for drug manufacturers that are obliged to provide rebates up to FIFTY % on certain outpatient drugs. Some legislators, meanwhile, have stated that some hospitals are inappropriately making use of profits and savings from the program.

Even as both sides wait for future action from the court associated with the law suit, additional concerns still remain about whether or not the suit will further delay the release of proposed policies that were actually anticipated in June. The so-called mega-reg will most likely clarify other elements of the 340B program. David Ivill, a partner with law firm McDermott Will & Emery, stated he expects that the statutes will not be published before the end of the year.

Read more about this 340B story

Who Qualifies to Receive 340B Discounted Drugs

One of the main restrictions in the 340B discount program is the condition that rebated medications can be dispensed only to patients of a covered entity. Presently there are numerous instances where CE could unintentionally furnish products to a consumer who is not a patient. As an example, a health center that operates an internal pharmacy may have non-patient members of the community buy medications from their pharmacy. Contracted pharmacies will surely serve both CE individuals along with other consumers.

CEs will need to make certain that procedures are in place to guarantee that only patients of the covered entity receive 340B priced medications while others receive non-340B priced medicines.

As indicating by HRSA, an individual is not regarded as a patient of the CE if the only health care services supplied by the health center to the individual is the dispensing of medications. Furthermore, OPA policy is that a covered entity individual is one who has an established affiliation with the covered entity and who obtains typical health care services by a health center provider.

The selling or delivering of a 340B priced drug to a non-patient is described as drug diversion. Covered entities are definitely accountable for making sure this type of diversion does not occur by developing appropriate tracking systems. Covered entities must possess some way to monitor drug buying and distributing separately for their 340B patients and their non-340B patients. Covered entities are required to manage both buying and distributing files and make these records available for audit by HHS. Furthermore, states may place conditions on health centers regarding splitting 340B and non-340B products for record keeping.

To be entitled to obtain 340B-purchased drugs, individuals need to receive medical care services apart from drugs from the 340B covered entity.

A person is a patient of a 340B CE only if:.

•   The CE has developed a relationship with the person, such that the health center maintains records of the individual's medical care; and...
•   The individual obtains medical services from a medical professional that is either employed by the health center or delivers healthcare under legal or other arrangements (e.g. referral for consultation) such that responsibility for the services supplied remains with the CE; and...
•   The person gets a healthcare service or variety of services from the CE that is consistent with the service or range of services for which grant funding or Federally-qualified health center look-alike status has been granted to the CE. 

A patient will not be regarded as a patient of the health center if the only healthcare service received by the patient from the covered entity is the dispensing of a drug or medications for subsequent self-administration or management in the home setting.

The obligation to guarantee compliance with 340B Program requirements stays with covered entities and manufacturers that participate. Information acquired from contractors, consultants and other third parties should not be presumed to be compliant with HRSA policy. Therefore we encourage all information and guidance obtained from external associations is confirmed by HRSA.