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January 22, 2014

Health Resources and Services Administration’s latest update to 340B and implications

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UPDATE: U.S. District Court Ruling Vacates HRSA’s 340B Program Orphan Drug Exclusion Rule Casts Uncertainty on Forthcoming "Mega-Rule"

On January 9, 2014, the Health Resources and Services Administration ("HRSA") issued its latest update to the 340B drug pricing program ("340B"). The program update includes a report on the results from 51 compliance audits of 340B-covered entities, and new information on the much-anticipated 340B regulations expected later this year. It is important for 340B-covered entities to conduct self-audits and to monitor key issues on an ongoing basis.

Audit Results

Final results from audits for 51 340B-covered entities conducted in Fiscal Year 2012, including review of 410 covered entity sites, are now available on the HRSA website. The audit findings vary from minor violations involving incorrect covered entity entries in the 340B database, to findings of statutorily prohibited practices of diversion and duplicate discounts. According to this latest update, 16 covered entities diverted 340B drugs to non-eligible patients, and 18 covered entities obtained duplicate discounts. In addition, 7 of these covered entities were found to have violated both the diversion and duplicate discount prohibitions. In 16 instances, covered entities that violated either the diversion or duplicate discount prohibitions, or both, are being sanctioned by means of repayment to the manufacturer. Some sanctions are still being determined, and 340B-covered entities with reported violations are continuing to work with HRSA to develop corrective action plans to ensure ongoing compliance. HRSA mentions that it will use the results of the audits to develop best practices for 340B program compliance.

Insight on Forthcoming Regulations

HRSA is also drafting much-anticipated 340B program regulations that are designed to cover a number of aspects of the program and to formalize existing program guidance. The program update indicates that HRSA will address the definition of an eligible patient, compliance requirements for contract pharmacies, hospital eligibility criteria, and eligibility of off-site facilities. HRSA expects to publish the proposed regulation for public comment by June 2014.

Conducting Self-Audits

HRSA’s program integrity efforts will continue into this new year and 340B-covered entities should continue to monitor their compliance with program requirements. Self-audits are a great way for 340B-covered entities to prepare for a potential HRSA audit and to gauge their level of compliance. Key issues to be monitored on an ongoing basis and during any self-audits should include a review of relevant policies and procedures, verification of internal controls to prevent diversion and duplicate discounts, Medicaid exclusion file listing, and contract pharmacy arrangement compliance.

About the Author

Diane Moes

Diane Moes is a partner at Donoghue Barrett & Singal where she provides general business and corporate legal services to healthcare clients including hospitals, physicians and other healthcare providers, faculty practice plans and provider networks.

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