December 9, 2018

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Two Recent 340B Developments: New Hospital Registration Guidance and Proposed Rules Under Review at OMB (Office of Management and Budget)

Earlier this week, the much-anticipated 340B Drug Pricing Program (340B Program) proposed rule arrived at the Office of Management and Budget for review.  Publication of this proposed rule is expected in June and will likely cover patient eligibility and contract pharmacy requirements, among other issues.  In a separate release this week, the Health Resources and Services Administration of the Office of Pharmacy Affairs released updated guidance on 340B Program hospital registration that includes a requirement to separately register each service at off-site outpatient locations.

New Hospital Registration Guidance: Service Specific Off-Site Location Registration Required

On April 8, 2014, the Health Resources and Services Administration of the Office of Pharmacy Affairs (OPA) released updated guidance regarding the process and requirements for registration of eligible hospitals in the 340B Drug Pricing Program (340B Program).  While the updated instructions provide new information regarding the process and timing for submission of documents supporting eligibility, of significant importance is new guidance regarding registration for off-site outpatient services. 

While OPA staff have previously indicated that service-specific registrations are recommended, prior guidance and common practice was that hospitals registered each eligible off-site location, but not necessarily each service at an eligible location.  The new hospital registration instructions state that each service within an off-site location must be separately registered.  As an example, OPA instructs that a covered entity wishing to use or purchase 340B drugs for all eligible patients at a single off-site location that provides radiology, physical therapy and pediatric services must complete three separate 340B registrations for the single site—one for each service at the location.  The new guidance does not provide instruction on how the service-specific enrollment policy will be applied to currently enrolled multi-service locations.

Much-Anticipated Proposed Rules Under Review at OMB

As of April 9, 2014, the Office of Management and Budget (OMB) website reflects that a long-awaited 340B proposed rule (often referred to in the 340B stakeholder community as the 340B Mega-Reg) is under review at OMB.  OPA has previously stated that the proposed rule will address the definition of patient, contract pharmacy compliance requirements, hospital eligibility criteria and eligibility of off-site outpatient locations.  Review by OMB is often the last step in the federal regulatory review process before a rule is published in the Federal Register.  OMB does not have a formal deadline for review of the proposed rule, but arrival of the proposed rule at OMB now suggests that the June release target that has been publicly announced by OPA is not implausible.  While the forthcoming rule will be a proposed rule and, therefore, not an authoritative statement of program requirements, the preamble to the proposed rule may include discussion of current OPA policy, including some policy positions that could be considered new or clarified guidance.  Further, the proposed rule will provide an indication of the direction that OPA intends to take with the final rule.

These recent developments again underscore the rapidly changing 340B Program compliance environment and current uncertainty regarding 340B Program requirements.  If finalized, the forthcoming regulatory package will mark only the second time in the 340B Program’s more than 20-year history that regulations have been issued related to the 340B Program, following the 340B Orphan Drug Rule in 2013.  OPA has also publicly indicated that it intends to issue additional proposed regulations in the near future that cover administrative penalties for manufacturer and covered entity non-compliance with 340B Program requirements and a mandatory dispute resolution process.

Although OPA appears to be moving towards rulemaking as a method of establishing 340B Program requirements and guidance, the release of the updated guidance regarding off-site service registration suggests that OPA may continue to release material program requirements through informal and sub-regulatory guidance.  Entities participating in or contemplating participating in the 340B Program should remain alert to 340B Program developments in the coming months and should be prepared to implement changes to 340B Program operations as necessary to remain compliant with changing requirements.  All 340B stakeholders should carefully monitor the status of forthcoming proposed rules related to the 340B Program and be prepared to provide substantive comments to OPA during open comment periods.

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About this Author

Emily J. Cook, McDermott Will Emery Law Firm, Health Care Attorney
Partner

Emily J. Cook is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Los Angeles office.  She focuses her practice on Medicare provider certification, reimbursement and regulatory compliance.

310-284-6113
Partner

David S. Ivill is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s New York office.  He is the partner-in-charge of the Health Industry Advisory practice in New York.  David has extensive experience in statutory and regulatory issues affecting the provision of health care services, particularly with respect to New York State; his practice includes counseling with respect to operational and management issues, fraud and abuse, Medicaid Managed Care, compliance programs, as well as reimbursement matters, corporate practice of medicine issues and not-for-profit/tax-exempt matters.  David also has significant experience working with federally qualified health centers and advising clients with respect to the 340B Federal Drug Pricing Program.  He represents a range of health care providers including hospitals, physicians and rehabilitation agencies, as well as other health care entities including clinical laboratories and medical device manufacturers.  David represents Patient Safety Organizations (PSO) and has developed some of the first PSOs in the country.  He also has private equity and mergers and acquisitions experience.

David is listed in Best Lawyers in America and has been recognized by Chambers USA as one of the leading lawyers in his field.  He is a member of the American Health Lawyers Association and the Bar of the City of New York.  

Prior to practicing law, David was a podiatric surgeon specializing in foot and ankle reconstruction with a subspecialty in oteomyelitis of the lower extremity.

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