340B bill would levy various restrictions on participating hospitals

Legislative language overhauling the 340B Drug Pricing Program faces a long and uncertain path in Congress but would have significant implications if some of the provisions become law.

A preliminary bill draft released by Sen. Bill Cassidy (R-La.) would tighten oversight of hospitals and contract pharmacies, increase transparency and require 340B discounts to be transferred to patients. Stakeholder feedback will be considered before the draft potentially moves forward as a formal bill.

“Clearly, there are real transparency and oversight concerns that prevent 340B from translating to better access and lower costs for patients,” Cassidy, chair of the Senate Health, Labor, Education and Pensions (HELP) Committee, said in a news release. “Congress needs to take action.”

It remains to be seen whether Cassidy has the influence to advance the draft’s key provisions during the remainder of the 119th Congress, having lost this year’s GOP primary for his Senate seat.

Rebate authority would extend beyond HRSA’s expected pilot

One provision in the bill draft would codify rebates as a valid form of 340B discounts, allowing manufacturers to choose whether to transmit discounts up front or via a rebate. The Health Resources and Services Administration (HRSA) is expected to formally propose a 340B rebate pilot model for 25 drugs, but the draft legislation would expand the concept to all drugs.

“If choosing to provide retroactive rebates, manufacturers must pay all rebates for undisputed claims within 10 days,” a summary of the bill draft states.

Covered entities (i.e., 340B providers) could choose to receive savings as an upfront discount if they pass along all 340B savings, minus a “nominal” dispensing fee, to patients.

Patient discounts would be tied to a fee scale

A sliding fee scale would require hospitals, child sites and in-house and contract pharmacies to pass down 340B savings to patients. For example, patients with incomes below the federal poverty level (FPL) would owe nothing out-of-pocket for 340B drugs.

Patients with incomes between 100% and 200% of FPL would owe the lesser of 20% of their standard cost-sharing amount or $35. Those with incomes above 200% of FPL would owe 30% of normal cost-sharing or $50, whichever is less.

The penalty levied against hospitals that violate those provisions would be $2,500 per instance.

Hospital advocates argue that even when 340B savings are not directly transferred to patients, the program helps patients by allowing hospitals to provide more charity care and other examples of community benefit.

Narrower definitions could affect 340B eligibility

To address manufacturer concerns about diversion of 340B discounts to ineligible patients, the bill draft would define a 340B patient as one who has received outpatient care within the last two years from the covered entity and maintained an ongoing relationship. The prescription would have to be written by one of the covered entity’s practitioners.

This definition appears to align with the preference of manufacturers, including AbbVie Inc., which is contesting the traditional definition in federal court.

Off-campus outpatient departments (i.e., child sites) would be eligible for 340B discounts by meeting certain criteria. The site would have to:

• Be wholly owned by the 340B covered entity
• Meet Medicare provider-based standards
• Offer outpatient services beyond drug administration
• Be located in a shortage area
• Meet minimum charity care standards

“We have serious concerns with provisions that would narrow the definition of a 340B patient, impose eligibility limits on hospital off-site outpatient facilities, and authorize a harmful 340B rebate model, among other changes,” Maureen Testoni, president and CEO of the provider advocacy group 340B Health, said in a written statement. “Put together, these restrictions would result in far fewer opportunities for hospitals to access key 340B savings that they need to care for their patients.”

Contract pharmacy limits could alter access strategies

The bill draft attempts to settle ongoing disputes between 340B providers and drug manufacturers concerning contract pharmacies. On one hand, manufacturers would be formally required to provide 340B discounts at contract pharmacies if statutory conditions are met.

However, disproportionate share hospitals, cancer hospitals and rural referral centers would be limited to five contract pharmacies (not including mail-order pharmacies). In addition, contract pharmacies would need to be located within the covered entity’s service area, defined as the entity’s Public Use Microdata Area (PUMA) and neighboring contiguous PUMAs.

Mail-order pharmacy usage in 340B generally would be limited to non-hospital entities and would be an option only for patients who live within the entity’s service area. Critical access hospitals and sole-community hospitals could access mail-order pharmacies for patients who live in rural communities (i.e., outside a metropolitan statistical area).

Providers using contract pharmacies would have to implement structured compliance programs to prevent duplicate discounts (i.e., 340B and Medicaid discounts for the same drug) and diversion (the furnishing of 340B-discounted drugs to ineligible patients). Required controls would include auditable records, annual certifications, and contract pharmacy registration with HHS.

Contract pharmacies that violate the requirements would have to repay the discounted amount and interest on first violation. Subsequent violations would carry penalties of $3,000 per claim, and a third violation also would banish the pharmacy from 340B for at least two years.

Compliance requirements would increase operational risk

The draft legislation would bring intensified reporting requirements by covered entities. Among the required data to be posted in a publicly searchable format would be the covered entity’s margin on 340B drugs.

Hospitals with more than $200 million in net patient revenue (NPR) also would have to disclose contract terms with their state or local government to cover low-income care.

Hospitals for which NPR exceeds $1 billion would have to provide details on the number of patients receiving 340B drugs, along with information on their payer mix and their charity care spending.

America’s Essential Hospitals, which represents safety-net hospitals, said it looks forward to working with Cassidy to “ensure no burdensome requirements are placed on 340B hospitals, favoring drug manufacturers that have continually sought to undercut this vital program and increase profits at the expense of patients,” according to a statement from Beth Feldpush, senior vice president for advocacy and policy.