On June 15, 2022, the U.S. Supreme Court ruled unanimously in favor of the American Hospital Association (AHA) to reverse a 2020 court of appeals decision that preserved the HHS’s authority to significantly cut payments to participants in the 340B Drug Pricing Program. This recent ruling has spotlighted 340B and whether it remains a beneficial program for lowering costs. In this blog, we will take a closer look at the origins and history of 340B, recent legislation that has affected which entities are eligible for the program, and how to get started if you are eligible.
The Origin of 340B
In 1990, Congress created the Medicaid Drug Rebate Program (MDRP), intending to lower the cost of pharmaceuticals reimbursed by state Medicaid agencies. The MDRP requires drug companies to sign a rebate agreement with HHS for their drugs to qualify for coverage by Medicaid and Medicare Part B. This program requires drug manufacturers to pay rebates to state Medicaid programs for “covered outpatient drugs.” The rebate amount for a covered brand name drug is partially based on the manufacturer’s “best price” for that drug.
Fast forward to 1992, when Congress expanded the program to include safety-net providers by enacting Section 340B of the Public Health Service Act. Like MDRP, Section 340B requires drug companies to sign an agreement with HHS, this one called a Pharmaceutical Pricing Agreement (PPA) to be able to have their drugs covered by Medicaid and Medicare Part B. The PPA states the drug company agrees to provide front-end discounts on covered outpatient drugs purchased by specified providers, called “covered entities,” that serve vulnerable patient populations.
The Consolidated Appropriations Act of 2022
The Consolidated Appropriations Act of 2022 has changed or reinstated certain eligibility requirements. The following information comes from the U.S. Health Resources & Services Administration (HRSA) website:
The Consolidated Appropriations Act of 2022 was signed into law on March 15, 2022. Section 121 of the law permits certain hospitals to be reinstated into the 340B Drug Pricing Program if they meet the following conditions:
- The hospital must be classified as a:
- disproportionate share hospital,
- sole community hospital,
- rural referral center,
- children's hospital, or
- free-standing cancer hospital.
- The hospital must have been terminated from or at risk of losing eligibility for the 340B Program due to an inability to meet the statutorily required disproportionate share adjustment (DSH percentage) during Medicare cost reporting periods beginning October 1, 2019, and ending no later than December 31, 2022.
- The hospital's termination or risk of losing eligibility must have been due to actions taken by or other impacts on the hospital in response to, or as a result of, the COVID-19 Public Health Emergency (PHE).
- The hospital must have been a covered entity on January 26, 2020 (i.e., the day before the first day of the COVID-19 PHE).
How to Get Started With 340B
To get your facility started with the 340B Drug Pricing Program, perform the following steps:
- Determine your eligibility
- Register for 340B on the HRSA website
- Register any off-site outpatient facilities that wish to purchase 340B drugs or provide 340B drugs to their patients
After registration, you will be recognized as part of the program on the first day of the next quarter (so if you register in July 2022, you will become active on October 1, 2022).
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