Guidance Change Threatens Hospital 340B Drug Discounts

From Healthcare Dive

HRSA is once again requiring hospitals to register outpatient clinics and list them on Medicare cost reports, setting a higher bar for eligibility in the drug discount program.

Dive Brief

  • Hospitals are up in arms over new guidance issued by the Health Resources and Services Administration on Thursday that could restrict the eligibility of their outpatient clinics for drug discounts in the 340B program.
  • During the thick of the COVID-19 pandemic in 2020, regulators waived longstanding 340B eligibility requirements for participating hospitals’ offsite locations to help streamline hospital operations. Now, HRSA is once again requiring hospitals to register outpatient clinics and list them on Medicare cost reports, according to a Thursday notice in the Federal Register.
  • Many hospitals had expected the 2020 waiver to become permanent, so a number have yet to register their offsite clinics. Hospital association America’s Essential Hospitals said the change will “significantly harm essential hospitals” and their ability to care for patients.

Dive Insight

The 340B drug discount program requires pharmaceutical companies to give discounts on outpatient drugs for providers serving low-income communities. The discounts, which can range from 25% to 50% of the cost of the drugs, can be a big financial aid to those providers, which generally operate under very thin margins.

Yet under the new guidance, even if a hospital is eligible for 340B, its care sites may no longer qualify for the drug discount program.

Hospitals with large outpatient networks could pay more for prescription drugs as a result of the change, said Maureen Testoni, CEO of 340B Health, a trade group representing providers in the program, in emailed comments.

Many hospitals relied on HRSA’s prior language to invest in developing new offsite locations that have yet to start using 340B, according to Testoni.

“This change could require those hospitals to forego months of 340B discounts, pending the filing of the Medicare cost report,” Testoni said. “This would have significant financial consequence, potentially millions in 340B savings.”

But the change is just returning to standards that regulators have used to determine 340B eligibility for decades, HRSA said in the notice.

Regulators said hospitals have largely returned to business as usual coming out of the pandemic, and the waiver has made it harder for HRSA to oversee 340B compliance — a hot-button issue for pharmaceutical companies and lawmakers critical of how hospitals use 340B discounts.

In the notice, HRSA said recent audits of hospital-covered entities found more than one-third of hospitals were using 340B drugs in unregistered sites. Though those hospitals said they would register those locations in a future Medicare cost report, they had not done so as of May.

Now, in order to continue buying 340B drugs, hospitals’ outpatient sites need to either comply with registration requirements or notify HRSA that they’ve started the registration process within three months.

Hospitals that don’t comply could face “audit and compliance action,” HRSA said.

The 340B program has existed since the 1990s, but faces recent upheaval on multiple fronts. A number of major drugmakers are feuding with hospitals and the government, refusing to pay 340B discounts and sparking multiple lawsuits.

Drugmakers say the program doesn’t require hospitals to account for their savings or ensure they’re reinvested in patient care, a complaint shared by some legislators.

Hospitals are also not pleased with recent decisions from the Biden administration regarding 340B, with many airing concerns about regulators’ solution to repay 340B hospitals for years of alleged underpayments.

Click here for the 340B program guidance.