March 19, 2018

March 16, 2018

Subscribe to Latest Legal News and Analysis

Mother Nature Axes 340B Hearing, But Written Testimony Survives

Mother Nature claimed another victim this week.  The U.S. House of Representatives Energy and Commerce Subcommittee on Health was scheduled to hold a hearing on March 5, 2015 – Examining the 340B Drug Pricing Program But with another winter storm aimed at Washington, the hearing was cancelled.  The cancellation came after witnesses had submitted their written testimony to subcommittee staff.


The submissions came from Diana Espinosa, Deputy Administer of HRSA; Debbie Draper, Director of Health Care at the GAO; and Anne Maxwell, Assistant Inspector General for Evaluations and Inspections, HHS-OIG. Several common themes appeared in the HRSA and GAO testimony:

  1. The explosive growth in the 340B program continues. In July 2011 there were 7,000 340B contract pharmacies; as of January 2015 there were 36,000.  In 2005 there were 591 hospitals enrolled as participating covered entities; in 2011 there were 1,673, and as of January 2015 there were 2,170.  HRSA estimates that as of FY 2013, $7.5 billion was spent by covered entities to purchase 340B drugs, representing a savings of $3.8 billion.

  2. In response to the GAO’s 2011 report critical of HRSA’s 340B oversight, HRSA implemented two of GAO’s recommendations: (i) instituting audits of covered entities, and (ii) clarifying non-discrimination policies. But two other GAO recommendations: (i) clarifying hospital eligibility requirements, and (ii) clarifying the definition of a 340B “patient” have yet to be acted on by HRSA.

  3. HRSA planned to address the two unimplemented recommendations in an omnibus regulation that it had intended to issue in June 2014. But confirming prior speculation, the HRSA testimony admits that last summer’s federal court ruling striking HRSA’s orphan drug rule is what caused HRSA to pull back the omnibus regulation and reexamine its regulatory authority.

The HRSA and GAO testimony also give a preview of things to come:

  • HRSA is developing protocols for conducting audits of pharmaceutical manufacturers, which it plans to issue in 2015.

  • By the end of 2015, HRSA expects to operationalize a system which will allow 340B covered entities to access information verifying 340B ceiling prices.

  • There are three areas where, statutorily, HRSA has explicit regulatory authority: (i) calculation of 340B ceiling price; (ii) imposition of manufacturer civil monetary penalties; and (iii) implementation of a dispute resolution system. HRSA expects to issue a notice of rulemaking in these three areas during 2015.

  • Because HRSA has no explicit regulatory authority beyond those three areas, HRSA intends to issue “omnibus guidance” in 2015 to address multiple areas, including the two remaining recommendations from the 2011 GAO report: (i) clarifying hospital eligibility standards, and (ii) the definition of a 340B “patient.”

The intended HRSA actions will not fully satisfy the OIG, whose written testimony focused not only on a need for regulatory clarity, but also on needed HRSA action in other areas.  Drawing on its 2014 report critical of 340B contract pharmacy operations, the OIG testimony highlights:

  • The difficulty posed by the lack of clarity in the definition of a 340B “patient” in the context of contract pharmacies, where there is often no reliable process to determine 340B patient eligibility at the retail level.

  • The difficulty in identifying 340B patients in the context of Medicaid managed care. All of HRSA’s processes are admittedly only applicable in the context of Medicaid fee for service, increasing the risk for unlawful duplicate discounts.

  • The fact that some covered entities, and their contract pharmacies, do not make 340B pricing available to uninsured patients.

  • The fact that there is no requirement that the reported billions of dollars in savings garnered by 340B covered entities and their contract pharmacies be used to provide services to needy individuals.

  • The fact that many State Medicaid Programs, which mandate that covered entities bill 340B drugs provided to Medicaid beneficiaries at actual acquisition cost, have no means to access 340B ceiling prices to verify the accuracy of Medicaid billings and payments, and protect against duplicate discounts.

For the most part, the HRSA written testimony is silent on the issues raised by the OIG.  We will have to await the rescheduled hearing to see if they are addressed in oral testimony, or in intended future HRSA action.



©1994-2018 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.


About this Author

Ellyn Sternfield, Government Health Care Attorney, Mintz Levin, Law firm
Of Counsel

Ellyn has more than 30 years of legal experience, with an extensive background in the field of government health care enforcement.

Ellyn’s experience enables her to provide valuable insight to clients facing potential state or federal investigations, or who have general compliance concerns. Ellyn currently represents a variety of health care product and service providers in federal and state administrative, civil, and criminal matters around the country. She conducts internal reviews and investigations for clients concerned about potential compliance issues. Ellyn advises clients on...