Update on 340B Rules

Guest Author: Katie Lapins

The long-awaited “Mega” Rule related to the 340B Program may soon be released. In the past, the 340B Program has been primarily administered without formal regulations, establishing the rules that govern the 340B program primarily through policy releases, informal guidance, and FAQs. However, when the Patient Protection and Affordable Care Act (ACA) / Health Care and Education Reconciliation Act (HCERA) was passed, Health Resources and Services Administration (HRSA) was mandated to specifically address certain topics that require clarity or further guidance.

Before any rule can be published, it is submitted to the Office of Management and Budget (OMB) who must first clear it which normally takes about 90 days. The “Mega” Rule was submitted in June, making its release in September likely. Although rules can be held up at OMB for months, or longer, most experts do not expect that to happen with this one. So what are a few of the “hot topics” in the 340B Program?

Orphan Drug Rule
You may remember that HRSA had previously submitted a Proposed Rule regarding Orphan Drugs to the OMB but withdrew it in November 2014 after a court ruled that HRSA had overstepped its authority 1. This rule was later reissued as “interpretive,” PhRMA has challenged it (again), and we still are waiting for a ruling from the courts. This case has been important as the court’s decision implies that an agency must have the specific authority from Congress to issue rules that change those items established through statute. However, this interpretive guidance could ultimately be the foundation for enforcement against manufacturers, creating a conundrum for them since that would mean HRSA’s interpretation would have the same impact as a rule. The next court decision in this matter could clarify this situation, making the procedures of HRSA as important as the content in this case.

The “Mega” Rule
Earlier this year, HRSA issued a Proposed Rule regarding the calculation of 340B ceiling prices and CMPs and public comments are due within 60 days (August 17, 2015). So what’s left for the 340B Program and why is there still a pending “Mega” Rule? Many people believe it will contain components related to the 340B Program that remain vague and require clarity for all stakeholders, including:

1. Definition of a 340B patient
2. Hospital eligibility requirements, including off-site facilities
3. Contract pharmacy arrangements
4. Price reporting/transparency
5. Duplicate discounts and procedures for manufacturer refunds

Many of these topics are related to the overall intent, and potentially unintended outcomes, of the program. In recent years, the growth of the program has been rapid for a few reasons; many hospitals have acquired other facilities that are 340B eligible and also, as of March 2010, covered entities can use multiple contract pharmacies. As this growth has occurred, questions have arisen regarding the intent of the program and the profits of various stakeholders. Congress has issued letters to some of the stakeholders and held special hearings, and the General Accounting Office and Office of the Inspector General have also raised concerns about the program’s integrity. Even without diversion or duplicate discounts, the ability to purchase drugs at deeply discounted prices and administer them to patients who may have health insurance provides a large “spread” or profit to the covered entity. The retail outlets serving as contract pharmacies also have the potential to see significant revenue from this role, beyond what was originally imagined. HRSA’s mission is to, “improve[e] access to health care by strengthening the health care workforce, building healthy communities and achieving health equity.”2. At issue to many is if the way the 340B Program is currently functioning follows the intent of the program.

The “Mega” Rule will be issued as a Proposed Rule, allowing 60 days for comments from stakeholders. It’s important that manufacturers read the entire document and involve the appropriate personnel and departments to determine the potential impact on their own company’s operations and ultimately, their bottom line. This will include not only the legal and policy areas but also the procedural and administrative ones, as well.

Clearly, the 340B Program continues to be one of great change and important considerations must be weighed by all of its stakeholders. The 20th MDRP Summit by IIR is filled with 340B-related topics and includes a full day workshop on this important topic. Hear from colleagues, attorneys, and government officials who have expertise in the 340B Program to find out about the implications for your organization of these impending changes. Download the agenda to see a complete topic list.

Katie Lapins

Katie Lapins has worked in the pharmaceutical and medical device industries in the areas of commercial and government contracting, compliance, finance and sales operations for 15 years. As a consultant, Katie’s areas of primary focus are government programs, corporate compliance and commercial operations. Within these areas, she has developed policies and procedures, assisted manufacturers with voluntary disclosures/restatements, led audits and assessments, calculated and submitted statutory pricing requirements (AMP, BP, ASP, Non-FAMP, PHS and TRICARE), processed Medicaid/ SPAP/ Supplemental invoices, validated PHS eligibility, handled Class of Trade projects with over 100K entities, and created training for onsite and web-based instruction for 2 – 200 employees. Katie’s experience within the industry includes government contract administration, pricing analysis, commercial operations, specialty pharmaceutical distribution agreements and commercial contract management.


1 - In brief, HRSA’s Orphan Drug Proposed Rule said that the free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals purchasing orphan-designated drugs are entitled to purchase those drugs at the 340B ceiling price when they are used for an indication other than the orphan indication.

2 - http://www.hrsa.gov/about/index.html