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The 340B Program Omnibus Guidance: Not Ready for Prime Time

On January 30, 2017, the proposed 340B Drug Pricing Program (the “340B Program”) Omnibus Guidance (the “Guidance”) first issued by the Health Resources and Services Administration (HRSA) in August of 2015 was withdrawn from the Office of Management and Budget (OMB) review process.  It is widely believed that the “cause of death” for the Guidance was the Trump Administration’s January 20, 2017 Memorandum (the “Memorandum”) directing agencies to immediately withdraw all unpublished regulations pending before OMB.[1]

The 340B Program.  In short, the 340B Program, first promulgated in 1992 as Section 340B of the Public Health Services Act, requires drug manufacturers to offer outpatient drugs to eligible health care centers, clinics, and hospitals (termed “covered entities”) at significantly reduced prices.  Covered entities include HRSA-supported health centers, Ryan White HIV/AIDS Program clinics and State AIDS Drug Assistance Programs, Medicare/Medicaid Disproportionate Share Hospitals, children’s hospitals and other safety net providers.   Under the 340B Program, the discounts received by the covered entities are to be passed along to “eligible patients” – patients of a covered entity.  As described by HRSA, the purpose of the 340B Program is to allow covered entities to “[s]tretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”[2]

The Guidance.  HRSA first issued the Guidance in August of 2015.  As proposed, the Guidance was sweeping in its scope and was interpreted by many as an attempt to dramatically scale back the 340B Program.  For example, new requirements were added to the definition of “eligible patient” which, if implemented, would have limited the number of patients eligible to receive the benefits of discounted drugs under the 340B Program.   In addition, the Guidance included proscriptive language limiting the dispensing of discounted drugs to outpatient prescriptions, excluding the same drugs prescribed for inpatient use.  Not surprisingly, these proposed changes were met with negative reactions from safety net providers who depend in large part on the 340B Program to furnish enhanced services to low-income individuals.

Largely because of comments received by HRSA after the original issuance of the Guidance in 2015, HRSA revised the Guidance and resubmitted it to OMB for review in 2016.  The Guidance remained in the OMB review process during the final months of the Obama Administration, prior to its withdrawal by the Trump Administration last month.

The Withdrawal.  As noted above, the withdrawal of the Guidance most likely stems from the Memorandum directing agencies to immediately withdraw regulations that were pending before OMB but had not yet been published in the Federal Register.

Many 340B Program participants and stakeholders have welcomed the Guidance’s withdrawal. For example, American Hospital Association Executive Vice President Tom Nickels has written that, “[w]e are pleased that the Administration chose not to finalize the Health Resources and Services Administration’s guidance, which, if enacted would have jeopardized hospitals’ ability to serve vulnerable populations, including low-income and uninsured individuals and patients receiving cancer treatments.”[3]

Implications.  At this point, it is unlikely that the Guidance will reappear in its prior form.   If President Trump’s first month in office has shown anything, it is that his Administration is not particularly interested in advancing the healthcare policies developed by the Obama Administration. Still, it is worth noting that the withdrawal of the Guidance gives HRSA an opportunity to send new guidance to OMB or take other actions consistent with the Trump Administration’s position on the 340B Program.

One additional consideration to note is what impact the Executive Order issued by President Trump on January 30, 2017, “Reducing Regulation and Controlling Regulatory Costs” may have on the 340B Program and the future issuance of new guidance by HRSA.  This Executive Order requires that for every new regulation proposed, there must be two regulations repealed.  Certainly, this creates a complicating factor that could affect when and if HRSA can attempt to proceed with new 340B Program-related guidance or regulations.


[1] See Memorandum for the Heads of Executive Departments and Agencies; Regulatory Freeze Pending Review, 82 Fed. Reg. 8,346 (Jan. 24, 2017).

[2] 340B Drug Pricing & Pharmacy Affairs, available at http://www.hrsa.gov/opa/

[3] AHA News Now, Feb 1, 2017, available at http://news.aha.org/article/170201-340b-omnibus-guidance-withdrawn

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

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Kenneth Yood Healthcare Attorney SheppardMullin
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Ken is a partner in the Corporate practice group in the firm's Los Angeles office. Chambers USAranks him highly for Healthcare, where he was commended for his "broad-based ability in the regulatory area." Clients appreciate that "his explanations are clear, and he understands the business side of things," notes Chambers 2016.

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Ken represents a wide range of healthcare providers and healthcare companies, including specialty and general acute hospitals (including local district, nonprofit and...

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Jordan Grushkin, Attorney, Sheppard Mullin Law Firm, Health Care
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Jordan Grushkin is an associate in the Corporate Practice group in the firm's Century City office.

  • J.D., Georgetown University Law Center, 2015

  • B.A., Georgetown University, 2015, magna cum laude

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