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340B Drug Pricing Program: The Withdrawal of Mega Guidance and the Future of Patient Definition

Payment Matters

In the wake of a recent directive issued by the Trump administration to halt pending regulations and guidance while the new leadership conducts its own review, the Department of Health and Human Services, on January 30, 2017, withdrew the proposed 340B Program Omnibus Guidelines. Those guidelines, issued by the Health Resources and Services Administration (HRSA) in August 2015, set forth the long-awaited clarification on the definition of "patient" – a key question for covered entities participating in the 340B Federal Drug Discount Program. Now, with the Proposed Omnibus Guidelines withdrawn, 340B Program stakeholders are left in a state of uncertainty regarding not only the status of the patient definition, but many other aspects of the 340B Program, including its future.

The threshold question in any analysis of 340B Program patient eligibility is whether the recipient of the 340B drugs meets the definition of a "patient of a covered entity." There has been a long history of fits and starts with respect to any formal guidance from HRSA as to who is considered a "patient" of a covered entity for purposes of receiving 340B drugs. The only definitive guidance relating to the patient definition was issued as a "final notice" by HRSA in October 1996 (1996 Patient Definition). This is the earliest, and currently the only official, guidance on the patient definition, despite multiple attempts by HRSA to promulgate meaningful and effective guidance.

The 1996 Patient Definition indicates that an individual will be considered a "patient" of the covered entity if: (1) the covered entity has established a relationship with the individual, such that it maintains records of the individual's health care; and (2) the individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under a contractual or other arrangement (e.g., referral for consultation), such that responsibility for the care provided remains with the covered entity. This definition has been largely criticized for being overly broad and difficult to interpret. In fact, the organization and operations of the health care and drug industry have evolved so significantly over the past 20 years that the 1996 Patient Definition has been rendered outdated and, in the views of many, largely unworkable – particularly in light of ongoing HRSA enforcement efforts, including audits of covered entities.

The Proposed Omnibus Guidelines had been the most detailed guidance regarding the patient definition ever offered by HRSA. While it has been officially withdrawn prior to adoption by the agency (leaving stakeholders once again redirected to the 20-year-old guidance), covered entities may consider the guidance as instructive as it is likely that HRSA will seek to apply at least some of the components of the patient definition as it continues to monitor compliance by covered entities and contract pharmacies with 340B Program requirements.

The basic premise of the six-prong definition of "patient," as described in the Proposed Omnibus Guidelines, is that there must be a very strong nexus between the covered entity, the nature and location of the service provided to the patient, the health care professional who provides the care and the drug that is ultimately prescribed by the health care professional.

Specifically, as set forth in the Proposed Omnibus Guidelines, an individual would not be considered by HRSA to be a patient of a covered entity unless the following criteria are met:

  1. The individual receives a health care service at a covered entity site which is registered for the 340B Program and is listed on the public 340B database;
  2. The individual receives a health care service from a health care provider employed by the covered entity or who is an independent contractor of the covered entity, such that the covered entity may bill for services on behalf of that provider;
  3. An individual receives a drug that is ordered or prescribed by the covered entity provider as a result of the service described in paragraph 2. An individual will not be considered a patient of the covered entity if the only health care received by the individual from the covered entity is the infusion of a drug or the dispensing of a drug;
  4. The individual receives a health care service that is consistent with the covered entity's scope of grant, project or contract. [Note: this does not apply to hospital covered entities];
  5. The individual is classified as an outpatient when the drug is ordered or prescribed. The patient's classification status is determined by how the services for the patient are billed to the insurer (e.g., Medicare, Medicaid, private insurance). An individual who is self-pay, uninsured or whose cost of care is covered by the covered entity will be considered a patient if the covered entity has clearly defined policies and procedures that it follows to classify such individuals consistently; and
  6. The individual has a relationship with the covered entity such that the covered entity has a provider-to-patient relationship, that the responsibility for care is with the covered entity and that each element of this patient definition in this section is met for each 340B drug.

While HRSA had in the past taken positions during audits of covered entities that are consistent with some aspects of the Proposed Omnibus Guidelines including the site-of-service requirement, several other restrictive interpretations were not anticipated, catching the industry somewhat off guard. These include the second prong – requiring that the covered entity be able to bill on behalf of the health care professional – and the fifth prong – that the patient must be classified as an outpatient – which effectively precludes the use of 340B drugs for discharge prescriptions. While the withdrawal of the Proposed Guidelines leaves uncertainty about whether HRSA will apply all of these proposed restrictive criteria in its audits of covered entities, it is likely that HRSA will continue to interpret the patient definition in a manner that is largely consistent with the Proposed Omnibus Guidelines.

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