Covered entities continue to battle financial strain caused by the pandemic. Two significant 340B updates will continue to impact covered entities, one aimed to protect and one to diminish those entities.

In March, Congress established a mechanism to remain eligible for 340B even if your DSH threshold dropped below the required rate.

Moreover, the 340B Program remains under pressure as manufacturers continue to seek to restrict 340B pricing and to limit the opportunities afforded safety net hospitals. On May 17, 2021, HRSA sent letters to six drug manufacturers notifying them that their actions placing restrictions on 340B pricing provided to contract pharmacies have resulted in overcharges in violation of the 340B statute. In response to the letters, some of the drugmakers filed federal lawsuits arguing that they are entitled to restrict 340B pricing to contract pharmacies under the 340B statute. Federal courts have provided conflicting decisions, with some courts siding with HRSA, and others with the drug manufacturers. However, litigation is on-going and is not expected to be resolved for some time.

So, the burning question is:

Do you submit data?

The potential financial impact cannot be understated. It’s the compliance risks, however, that remain largely unknown.

Maintain 340B Eligibility

On March 15, 2022, the spending bill known as the Consolidated Appropriation Act of 2022 was signed into law by President Biden. The $1.5 trillion congressional spending bill includes funding to restore access to the 340B program for hospitals that lost eligibility to the program due to COVID-19 related changes in patient mix and volume. Pursuant to Section 121 of the law, hospitals that did not meet the applicable requirement disproportionate share adjustment percentage (DSH Percentage) because of COVID-19 related issues will be eligible to apply for reinstatement into the 340B Program if they meet each of the following requirements:

• The hospital must be classified as a: (1) disproportionate share hospital; (2) sole community hospital; (3) rural referral center; (4) children’s hospital; or (5) a free-standing cancer hospital.
• The hospital must have been terminated from the 340B Program due to an inability to meet the DSH Percentage during Medicare cost reporting periods beginning October 1, 2019, and ending no later than December 31, 2022.
• The hospital’s program termination must have resulted from actions taken in response to or as a result of the COVID-19 public health emergency or by other related impact on the hospital
• Hospitals must have been a covered entity on January 26, 2020.

Hospitals that meet the above eligibility requirements can provide attestation to the Secretary of HHS about the actions they took and impacts they faced because of the pandemic, and the pandemic’s impact on the ability to meet the disproportionate share adjustment percentage requirement.

Advis can help your organization if it has lost eligibility as a result of a reduced DSH rate that may have been caused by the impact of COVID-19. Advis assists covered entities seeking to provide attestation to the Secretary of HHS to obtain reinstatement into the 340B program.

Manufacturer Restriction of 340B Pricing for Contract Pharmacies

In 2020, three drug manufacturers began restricting 340B drug pricing to contract pharmacies. As of April 30, 2022, this number had swelled to sixteen drug manufacturers.

As described below, some manufacturers have limited 340B pricing to one or two designated contract pharmacies per covered entity, except where the covered entity has submitted data to the controversial third-party portal—340B ESP. A few other manufacturers have come forward with the intent to limit 340B pricing to one or two designated contract pharmacies per covered entity, regardless of whether the covered entity submits data to 340B ESP.

Covered entities should be aware of the risks associated with submitting data to 340B ESP. The biggest risk: manufacturers requiring sensitive claim data, including Rx Number, prescribed date, fill date, NDC, quantity, pharmacy ID, prescriber ID, wholesaler invoice number, and 340B covered entity ID. The submission of claims data on a bi-monthly basis is not only a significant burden upon the covered entities, but potentially it could also subject the covered entity to HIPAA violations.

Additionally, to enter the portal to submit data covered entities must accept non-negotiable terms. This click-wrap agreement that covered entities must sign when submitting data, via the third-party portal, raises significant concerns regard how uploaded claims data are and can be used.

For example, covered entities are required to agree to grant a “non-exclusive, royalty-free, perpetual, irrevocable” license to the third-party vendor to collect, process, disclose, or create derivative works of the covered entities’ claims data. According to the agreement, this license to covered entities is also sublicensable to other third parties. Moreover, the data license survives the termination of the agreement and remains applicable to any claims data provided by covered entities after termination of the agreement. Covered entities should view these matters as ‘flashing red lights.’

While the recent manufacturer restrictions severely limit the use of contract pharmacies to dispense 340B drugs, covered entities can and should, if possible, consider designating single contract pharmacies to receive 340B pricing while the health system considers the submission of data. Covered entities should be selective and strategic in selecting contract pharmacies to designate. They should review the current contract pharmacy designations every 6 months to ensure that the designated contract pharmacies allow the CE to realize the most savings.

Advis also recommends that legal and finance teams coordinate and come to an appropriate decision as regards submitting data to 340B ESP. The potential risks must be weighed against the need for additional savings afforded by 340B contract pharmacy opportunities.