The 340B Drug Pricing Program Omnibus Guidance (Mega-Guidance) was published for public comment August 28, 2015. You can find it HERE. Part B beginning on page 21 reviews drugs eligible for purchase under 340B or covered outpatient drugs. While this section only makes up 2 pages of the 90-page guidance, the subject matter can have an extensive impact on 340B covered entities.
What is Being Proposed
A covered outpatient drug is defined in section 1927(k)(2) and (3) of the Social Security Act and for the purposes of the 340B program, a drug will not be considered a 340B covered outpatient drug if it meets two parts.
First, a drug will not be considered a covered outpatient drug if the drug is “provided as part of, or as incident to and in the same setting as:
- Inpatient hospital services;
- Hospice services;
- Dental services, except that drugs for which the state plan authorizes direct reimbursement to the dispensing dentist are covered outpatient drugs;
- Physicians’ services
- Outpatient hospital services;
- Nursing facility services & services provided by an intermediate care facility for the mentally retarded;
- Other laboratory & x-ray services;
- Renal dialysis.”
Second, if the drug receives a bundled payment from Medicaid as part of a service in the settings described above and is not directly billed to and reimbursed by Medicaid or another third party, the drug will not be considered a covered outpatient drug.
The Mega-Guidance is proposing that IF a drug meets BOTH of the two conditions above, IT WILL NOT be qualified as a covered outpatient drug for the 340B Drug Pricing Program.
What This Means for Covered Entities
The current practice used by most 340B covered entities is to consider all drugs (“FDA-approved prescription drug, an over-the-counter (OTC) drug that is written on a prescription, and a biological product that can be dispensed only by a prescription (other than a vaccine) or FDA-approved insulin”) as potential 340B drugs. The 340B covered entity will typically make a determination to exclude drugs that are commonly bundled and difficult for the covered entity to track, such as IV solutions, anesthesia gases, contrast media, etc.
HRSA has accepted this method as long as the reason for exclusion is reasonable, applied consistently throughout the covered entity and well-documented in policies and procedures.
The Mega-Guidance appears to be clarifying when an outpatient service is provided to a Medicaid patient and Medicaid DOES NOT PAY separately for a drug, the drug is not considered a covered outpatient drug under 340B. The Mega-Guidance specifically states that “the limiting definition... to exclude covered outpatient drugs for purposes of the 340B Program only applies when the drug is bundled for payment under Medicaid”.
The problem with using Medicaid’s payment method of bundling drugs to determine a 340B covered outpatient drug is that State Medicaid payment methods vary from State to State. A drug that is bundled in one State may not be bundled in others. It is unclear if covered entities will also have to keep track of the bundling rules in all the different Medicaid Managed Care Organizations to determine if a drug is considered a 340B covered drug. Pharmacy inventory and accumulation systems are currently based on tracking drugs not payment plans and how a patient is ultimately billed.
Typically, the covered entities that participate in the 340B program treat a large population of Medicaid patients. For a hospital to qualify for the 340B program, they must demonstrate they provide a disproportionate amount of care to Medicaid and low-income Medicare patients. This change in the 340B covered drug definition alone could turn into a very challenging operational burden for facilities.
Don't forget the comment deadline is October 27th, 2015!
