On August 27th, HRSA published its proposed omnibus rule changes for the 340B Drug Discount Program, aka the “Mega-Guidance” or (MG). As expected, many components of the 340B Program were clarified and modified, including the patient definition, audit requirements and handling of prescriptions covered by managed Medicaid plans.
Because specialty drugs represent the largest savings opportunity available under the Program, how does the MG impact hospitals’ ability to capture these prescriptions?
1. The MG changes the patient definition to include only patients receiving care from a health care professional employed by or contracted with the covered entity. Prescriptions written by referral providers will no longer qualify, unless the covered entity is billing for their services and has a record of the care provided by that provider. For academic hospitals with specialty clinics, this change is probably not going to have much of an impact. But, for those smaller hospitals and community health clinics (CHCs) that use community-based providers for specialty care there may be a significant reduction in their Program savings. A question that arises is, will this lead to an increase in hospital purchases of community-based specialty clinics, as happened with oncology care?
2. Another change in the patient definition deals with prescriptions received after an inpatient stay (i.e. discharge prescriptions). The issue is that in order to be eligible, the patient has to be classified as an outpatient when the prescriptions are written (not dispensed or delivered). Obviously, this excludes nearly all patients laying in hospital beds when the discharge prescriptions are written. The financial impact of this change could be substantial, especially for smaller hospitals without outpatient clinics where discharge prescriptions account for the majority of their Program. Will this requirement cause hospitals to place more patients in “observation” status in order to classify them as outpatients? And, what will the impact be on drugs such as oral oncology, which are often started after an inpatient stay?
3. Under the initial legislation, patients coming to a covered entity solely for the purpose of getting a prescription were not eligible for inclusion in the 340B Program because they did not receive any care from a health care provider. The MG extends this exclusion to patients coming to a covered entity solely for the purposes of an infusion. Again, the impact of this change will be mixed. Some covered entities have already established a procedure wherein patients referred from community-based providers are seen by an eligible provider before their infusion. This establishes an entity-provider-patient relationship that seems to fit within the patient definition. If this does not exist, the impact of the “infusion-only” exclusion could be significant.
4. The MG includes new requirements for audit and compliance oversight by covered entities. In the past, entities had total responsibility for the performance and compliance of their contract pharmacies. They were expected to review each pharmacy at least annually to ensure it was following the rules. (Most covered entities worked with their program administrators to perform these reviews.) The MG states that covered entities are now expected to perform quarterly reviews of each contract pharmacy location (including mail order-based specialty pharmacies), and independently audit performance and compliance of each pharmacy annually. No guidelines or definitions are given for these “reviews” and “independent audits,” nor has it been detailed who can or should perform them. However, we can presume that it’s more than a cursory check of claims by an internal staff member. Also, although not part of the formal guidance, HRSA expects that covered entities will compare prescriptions written by its providers to prescriptions included in the Program, presumably to ensure that inappropriate substitutions or “cherry picking” have not occurred.
So, what does this mean for specialty pharmacy programs? Here are a few observations.
1. Hospitals and CHCs will start to explore opportunities to bring specialty services in-house. Pharmacists could play a role in optimizing specialty drug prescription capture through clinic-based MTM programs. (In its opening narrative, the MG specifically mentions MTM as an eligible service, as long as it’s performed by an employed or contracted provider and prescriptions are written by an eligible provider associated with the MTM service.)
2. Now that covered entities are expected to independently audit every contract pharmacy location, some hospitals may choose to end their relationships with external specialty pharmacies and bring as much specialty pharmacy business in-house as possible. Entities will need to work quickly to gain access to payer networks and pharma limited-distribution drug programs, possibly through affiliations with national consortia such as UHC or Excelera, for example.
3. Exclusion of discharge prescriptions will be challenging to overcome. If possible, some entities may choose to delay new prescription orders until the patient is seen in an eligible outpatient clinic or department. Because many specialty drugs are not acute treatments, this approach may have only a small clinical impact, but a significant financial one.
All of the rule changes included in the MG are only proposals, and HRSA is taking comments through October 27, 2015. Publication of the final guidance, if done, is expected in early 2016. It is important to note that because these are interpretive rules, they are not legally binding. However, given HRSA’s position and approach with the orphan drug exclusion (also an interpretive rule), covered entities should expect that these changes will be treated as binding.