About This Month's AIR Mail
This month's edition of AIR Mail provides an overview and analysis of the Health Resources and Services Administration's (HRSA) highly-anticipated guidance addressing the administration and oversight of the 340B Drug Pricing Program. In the coming weeks, AIR 340B will be hosting a number of briefings to provide interested stakeholders on Capitol Hill and in the patient community with a more in-depth review of the draft guidance and its impact on patients.
Strengthening the Patient Definition
The heart of the draft guidance addresses a lack of clarity about how HRSA has interpreted the definition of a 340B-eligible patient. As the Government Accountability Office (GAO) has stated, "HRSA's current guidance on the definition of a 340B patient is sometimes not specific enough to define the situations under which an individual is considered a patient of a covered entity for the purposes of 340B."
The proposed guidance offers an encouraging first step toward creating a defined link between a medically underserved, vulnerable patient and a 340B covered entity. Specifically, the guidance illustrates scenarios for when a patient would be eligible for 340B discounts, including:
- A referral from a covered entity to an outside provider is no long sufficient to qualify the drugs prescribed by the outside provider for a 340B discount.
- The dispensing or infusion of outpatient drugs to a patient at a covered entity must be accompanied by an auditable accounting of the health services provided that resulted in the dispensing of the drug.
- A patient who sees a physician at a non-340B site, even if receiving follow-up care to care initially provided at a 340B site, would not be eligible to receive 340B drugs at the non-340B site.
- Simply having privileges or credentials at a covered entity would not be enough to demonstrate that a patient treated by that provider is a patient of the covered entity.
These conditions are proposed in the guidance as an expansion of the current three-part eligibility conditions, and would be evaluated on a prescription-by-prescription basis.
A Good First Step, but Major Gaps Remain
The draft takes important initial steps to develop better metrics for oversight and accountability; however, it does not adequately address a number of issues that are critical to ensuring the long-term sustainability of the 340B program, chief among which are:
- The lack of proposed program integrity tools to address the rapidly expanding and unchecked contract pharmacy arrangements between 340B entities and retail pharmacies. These arrangements, which now total more than 30,000, have been highlighted in numerous independent reports - including one published by the Office of the Inspector General of the Department of Health and Human Services - as areas lacking appropriate oversight and guidance to prevent vulnerabilities in the program. 
- The relatively short time period within which 340B eligible entities that have violated 340B program rules would be allowed back into the program. The draft guidance would allow entities that have violated program rules to re-enter the program during the next regular enrollment period after the covered entity can show its ability to comply with all 340B Program requirements. It is questionable whether such limited restriction acts as a deterrent to those covered entities violating program rules.
- The absence of needed safeguards to address the increased acquisition of community-based outpatient treatment facilities by 340B hospitals, which are more likely to engage in this type of provider consolidation according to a recent study. These acquisitions may be partially fueled by 340B hospitals' ability to gain additional revenue through 340B discounts.
More Transparency and Oversight Needed to Sustain 340B Program
Without addressing these important issues, the ability to provide medically underserved and vulnerable patients access to the care they need through the benefits of the 340B program is compromised. HRSA should use its authority to establish stronger oversight mechanisms to maintain the integrity of the 340B program.
 U.S. Government Accountability Office. (2011). Drug pricing: manufacturer discounts in the 340B program offer benefits, but federal oversight needs improvement: Report to Congressional committees. (GAO Publication No. GAO-11-836). Retrieved from U.S. Government Printing Office: http://www.gao.gov/assets/330/323702.pdf
 Berkeley Research Group analysis for the Alliance for Integrity and Reform of 340B. Analysis excludes contract pharmacy arrangements between a child site and a contract pharmacy if the parent site also has an arrangement with that same pharmacy.
 U.S. Department of Health and Human Services, Office of Inspector General, Memorandum Report: Contract Pharmacy Arrangements in the 340B Program.
 Avalere Health. Hospital acquisitions of physician practices and the 340B program. White paper. http://avalere.com/expertise/lifesciences/insights/avalere-white-paper-hospital-acquisitions-of-physician-practices-and-the-34. Published June 8, 2015.