The 340B drug pricing program requires drug makers to offer covered outpatient drugs to safety net hospitals and certain other designated healthcare providers at discounted prices. A potential shift in how the governing agency interprets 340B eligibility could result in reduced benefits from the program and the necessity to undertake compliance measures.

According to industry sources, the Health Resources and Services Administration (HRSA) has instructed its 340B program auditors to flag discharge prescriptions originating from all inpatient service areas (at parent and child sites alike) as ineligible for 340B pricing. The apparent rationale for this decision is that such prescription types do not meet the statutory definition of “patient” and because inpatient areas are ineligible for 340B registration.

In the event that HRSA enforces such an interpretation, it would signal a policy shift with potentially dramatic impacts on the scope of institutional 340B programs.

It has long been the understanding of many 340B-participating entities that discharge prescriptions are, by default, outpatient drugs. The auditing directive described above would shift the dispositive factor informing eligibility from the setting in which drugs are administered to the setting in which care was provided prior to discharge. Notably, however, discharge prescriptions written for Emergency Department patients would be unaffected because ED services are considered outpatient.

The practical implications of a discharge prescription policy change could be disruptive and far-reaching, potentially requiring 340B-participating hospital and health centers to reconfigure their policies and procedures to reclassify prescriptions written for patients discharged from inpatient service areas as 340B-ineligible. Failure to do so could result in repayment obligations to manufacturers or program termination.

McCarter & English contacted Apexus, private third-party administrator of the 340B Prime Vendor Program and provider of 340B educational resources, for further information. Apexus responded with the following guidance:

340B drugs can be used for discharge prescriptions to the extent that the drugs are for outpatient use. Whether a drug qualifies as outpatient and the individual meets the definition of patient depends upon the factual circumstances surrounding the care of that particular individual. If a covered entity uses 340B drugs, it should be able to explain why the covered entity is responsible for the use of the drugs on an outpatient basis and have auditable records that demonstrate compliance with 340B Program requirements.

Apexus was unable to confirm or deny any change to HRSA’s auditing policy with respect to inpatient discharge prescriptions and instead provided a link to the general auditing information contained on HRSA’s website (http://www.hrsa.gov/opa/programintegrity/index.html). According to HRSA’s website, “auditor statements made during the audit are not considered final and are subject to change.”

McCarter & English will continue monitoring this development for its potential to affect our clients.