Some hospital outpatient clinics may lose their 340B drug discount status despite pleas by trade groups to the federal government.
On May 11, the Health Resources and Services Administration removed guidance from its website, issued in June 2020 during the COVID-19 pandemic, that allowed 340B-eligible hospitals to prescribe discounted drugs for patients seen at off-site clinics before those clinics were registered with the Office of Pharmacy Affairs Information System and were listed on a Medicare cost report. Hospitals expected the June 2020 guidance to be made permanent rather than tied to the COVID-19 public health emergency, which ended May 11.
The 340B drug discount program gives some 2,600 eligible hospitals that treat low-income and uninsured patients drug discounts as steep as 50%. If guidance is rescinded, hospitals must wait up to two years after an off-site clinic opens to access the discounts.
A change could result in the loss of tens of millions of dollars in expected annual savings for some hospitals with broad outpatient networks, said Emily Cook, a partner at law firm McDermott Will & Emery who advises hospitals and health systems.
“For many of hospitals, 340B is how they are keeping their doors open,” she said. “There would be an impact for all [340B] covered hospitals because if they were to establish a new [off-site] location, they would have a delay of nine to 21 months after it opens to access 340B drugs.”
Cook said she is working with hospital clients on a potential lawsuit if the guidance changes. In a May 11 letter to HRSA, America’s Essential Hospitals CEO Dr. Bruce Siegel wrote that the trade group, which represents 340B-elgibile hospitals, has “serious concerns that the inadequate notice and lack of explanation for this change are unreasonable and inconsistent with requirements under federal administrative law.”
HRSA, a branch of the Health and Human Services Department, did not immediately respond to a request for comment.
HRSA should provide some clarity because it’s unclear whether the agency changed its guidance, said Maureen Testoni, CEO of 340B Health, a trade group that represents 340B-eligible hospitals.
In America’s Essential Hospitals letter to HRSA, Siegel referenced a member hospital that invested $16 million into specialty clinics, one of which was an off-site facility that treats HIV and hepatitis C patients. If the June 2020 guidance has been reversed, the hospital would have to wait until it files its 2023 Medicare cost report to register those clinics, resulting in an estimated $2.5 million financial hit per month because it wouldn’t be able to use and prescribe 340B drugs in the interim, Siegel said, noting the hospital is already operating in the red.
That same hospital is building a clinic set to open later this year, which would have to wait 18 months to use 340B drugs, Siegel said.
The uncertainty is the latest hurdle for the 340B program, which was designed to allow hospitals to reinvest the savings in programs for the poor or to pass the discounts to patients and insurers. Critics of the program contend that some hospitals exploit the drug discounts to generate profits, resulting in a number of lawsuits involving drugmakers, providers and state and federal officials, some of which are pending.
Some hospitals may lose their 340B status as thousands of Medicaid beneficiaries lose coverage as states redetermine their eligibility. Through the COVID-19 pandemic, the federal government allowed people to remain on Medicaid even when their income should have excluded them from the program. The 340B statutes only allow hospitals to buy discounted drugs if they treat a certain percentage of Medicaid and low-income Medicare patients, as measured by the disproportionate share hospital adjustment percentage.
Meanwhile, about two dozen drug manufacturers have limited 340B discounts in recent months on drugs dispensed through contract pharmacies. The Third Circuit Court of Appeals in January ruled in favor of three drug companies that imposed limits on 340B drug discounts provided to hospitals via contract pharmacies.