HRSA Updates 340B Covered Entity Registration and Recertification Requirements

A Message from Publisher and CEO Ted Slafsky: We are excited that the 340B Coalition Conference has started and 340B Report will be sending out a special edition later today covering the remarks of Rear Admiral Krista Pedley, the Director of HRSA’s Office of Pharmacy Affairs. In today’s sponsored content article, you will see part two of Jerry Buller’s series on overcoming barriers to gain payor specialty pharmacy network access. Buller, a veteran in the 340B health system specialty pharmacy area, is Chief Pharmacy Officer of 340B Report sponsor Trellis Rx.

Speaking of the 340B conference, I hope covered entity attendees will join me and my long-time colleague Bill von Oehsen in “Bill and Ted’s Excellent Adventure, a fun virtual happy hour tomorrow at 4 PM ET hosted by 340B Report sponsor PSG. Ty Barnett, the pharmacist-turned-comedian who is a contestant on this year’s America’s Got Talent, will join us!  To register, go to

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HRSA Updates 340B Covered Entity Registration and Recertification Requirements

The U.S. Health Resources and Services Administration (HRSA) yesterday updated registration and recertification requirements for 340B covered entities. It also announced enhancements to the 340B program database, 340B OPAIS. The requirements take effect Aug. 1.

Changes include:

  • HRSA reworded a Medicaid billing question to help clarify—again—that its Medicaid Exclusion file “only applies to fee-for-service Medicaid.” When entities register and recertify, they have to tell HRSA if they and their sites will bill Medicaid FFS for 340B-purchased drugs (carve in) or not (carve out). HRSA lists those that carve in in the exclusion file. State Medicaid agencies are supposed to use the file to prevent duplicate 340B discounts and Medicaid FFS rebates on the same drugs. Despite HRSA’s repeated statements that the exclusion file is for Medicaid FFS only, some states persist in using the exclusion file to screen for duplicate Medicaid managed care rebates. In a related change, entities that tell HRSA they carve Medicaid FFS in now “must also provide each Medicaid state it plans to bill and the billing number(s) it will list on the bill to the state.”
  • Upon registration, hospitals now must upload documents supporting how they classify themselves for 340B purposes. Six types of hospitals can participate in 340B: children’s hospitals, critical access hospitals, disproportionate share hospitals, free standing cancer hospitals, rural referral centers, and sole community hospitals. Program requirements vary among the types.
  • When they register, sexually transmitted disease clinics, tuberculosis clinics, and Ryan White HIV/AIDS clinics will have to supply (1) their Notice of Funding Opportunity (NOFO) number, (2) the date range of their NOFO funding, and (3) they type of in-kind support they get, if any.

HRSA also made six changes to 340B OPAIS. It revamped the database’s contract pharmacy termination feature; renamed the “My Entities” page “Participant Dashboard” and gave it two tabs (My Tasks and My Entities); updated the hospital and child site reinstatement process; updated the parent hospital recertification process; will warn hospitals during recertification about overdue Medicare cost report filings; and instituted a daily email for entities undergoing recertification.

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How Covered Entities Can Overcome Barriers to Gain Payor Specialty Pharmacy Network Access

This commentary is part two of a series on identifying and overcoming obstacles to payor relationships. Read part one of the series here.

In a recent market research study, Trellis Rx found that pharmacy leaders from health systems and health plans agree greater collaboration is needed to enhance the value of specialty medications for patients.

Yet, even as the challenges posed by specialty medications mount for their organizations, these stakeholder groups struggle to work together to develop mutually-beneficial solutions.

Why is this? Through blinded interviews with 20 pharmacy leaders from health systems and health plans and 10 industry thought-leaders, we identified three barriers that currently stand in the way of patient-centered partnerships:

  1. Health system and health plan pharmacy leaders view each other antagonistically
  2. Most health plans do not recognize the potential value health system pharmacies can deliver to their members, customers and organizations
  3. Health systems struggle to demonstrate the value of their specialty pharmacy services

Overcoming Barriers to Partnership: Strategies for Covered Entities

In addition to uncovering barriers, our market research study revealed steps both stakeholder groups can take to promote greater collaboration. In this article, I highlight three strategies covered entities should leverage to establish specialty pharmacy partnerships with payors.

  1. Facilitate Meaningful Dialogue. The research found that many health plan pharmacy leaders have significant misunderstandings about the capabilities and goals of health system specialty pharmacies. Likewise, many health system pharmacy leaders said they don’t understand health plans’ challenges and goals.

As one health system respondent explained: “I don’t understand their picture of the world. Many times, I’m surprised because they don’t understand what we’re doing on our side of the world. We don’t talk. Usually the patient is the ping-pong ball in all this.”

Overcoming these misunderstandings to build patient-centered partnerships will require communication and education. Both stakeholder groups must set aside negative preconceptions in favor of listening and learning. As one industry thought leader shared: “The first thing that needs to happen is health systems need to have more meaningful conversations with the payors and look at it as more of a partnership than it is an adversarial role.”

In my experience, partnering with your health system’s managed care team is the best way to begin facilitating meaningful dialogue. However, these colleagues may not have expertise in specialty pharmacy. As such, you should be prepared to provide them with information and support.

  1. Offer differentiated value to payors. To achieve this, health systems must first build a specialty pharmacy service that offers unique benefits to payors. This requires taking a strategic, system-wide approach and investing in the personnel and technology required to establish a clinically-integrated care model.

Ultimately, the clinically-integrated care model is what sets health system specialty pharmacy services apart from other alternatives. Having direct access to patients and providers, as well as the EHR, allows health systems not only to promote a more coordinated experience, but also to better monitor the appropriateness and effectiveness of specialty medications. This translates into better outcomes and fewer adverse events like ED visits and hospitalizations.

As one health plan respondent shared, health systems have “the advantage of looking at the big picture and making an integrated decision on pharmaceuticals.” Another explained that health system specialty pharmacies “have a much stronger influence over individual provider behaviors than do health plans by far.”

To prove value to health plans, health systems must also move beyond collecting operational, volume-based measures to track disease-specific clinical outcomes metrics. Although not easy, using tools like the RAPID-3 assessment to track disease severity in patients with rheumatoid arthritis enables specialty pharmacy teams to ensure therapy effectiveness, improving care quality and costs.

  1. Be prepared to negotiate. Finally, health systems must be prepared to give and take. Often, health system specialty pharmacies must initially accept parity pricing, or better, to gain access.

Health systems in risk-based contracts have leverage in contracting discussions. Because health systems are fully responsible for cost-of-care and outcomes in these contracts, they need full control of patients across the care continuum, including their medication journey.

Pharmacy leaders should work with their health system’s managed care teams to understand how to approach negotiations but should work to begin educating payors about the benefits of their specialty pharmacy services well in advance of contracting conversations.

Ultimately, by leveraging these strategies, covered entities can take steps towards establishing patient-centered specialty pharmacy partnerships that will benefit their patients and organization but also create value for payors.

Download the market research report on Trellis Rx’s website for additional insights building specialty pharmacy partnerships with payors. If you have questions, please contact or (615) 600-6864.

Court’s Site-Neutral Payment Decision Could be Unpleasant for Both Hospitals and Drug Companies

A federal appeals court three-judge panel has upheld a U.S. Centers for Medicare & Medicaid Services’ (CMS) rule that significantly lowered Medicare reimbursement for services in certain off-campus hospital outpatient departments to more closely match lower payments for services rendered in physician offices. The American Hospital Association, which sued U.S. Health and Human Services (HHS) Secretary Alex Azar over the rule together with the Association of American Medical Colleges (AAMC) and several individual hospitals, said it was “carefully reviewing the decision to determine our next steps.”

The July 17 decision doesn’t affect the 340B program directly. Nor does the case involve Medicare Part B drug reimbursement. However, if the full U.S. Court of Appeals for the D.C. Circuit or the U.S. Supreme Court ultimately uphold the decision, “there is a very real risk that CMS will now exercise authority in ways that hospitals consider problematic,” said Andrew Ruskin, Partner at K&L Gates. “Manufacturers as well should be concerned,” he continued. “If CMS decides that a particular drug is being overutilized, then CMS can now simply throw out the [average sales price plus 6 percent reimbursement] formula and pay less for it, meaning that manufacturers will have to charge less. We should expect that there will be a lot of unpleasant surprises resulting from this decision.”

The case revolves around CMS’s 2018 decision to reduce Medicare hospital outpatient prospective payment system (OPPS) reimbursement for common off-campus provider-based department services to lower rates applicable to physician practices. These reductions were for existing hospitals outpatient departments that Congress protected from a 2016 round of cuts that applied prospectively to new outpatient departments. CMS estimated extending the cuts to all outpatient departments would save the government $380 million in 2019 and $760 million this year. A federal judge ruled in September 2019 that CMS overstepped its authority. The appeals court ruled that CMS’s regulation was a reasonable method of reducing the volume of services provided in hospitals.

AHA, AAMC, America’s Essential Hospitals, and several individual hospitals have separately sued CMS over its nearly 30 percent cut in hospitals’ Medicare Part B reimbursement for 340B-purchased drugs. A federal district court struck down the cuts for 2018 and 2019. The same appeals court that decided the “site-neutral payment” rule case could hand down its ruling in the 340B drug reimbursement cuts case at any time.

CMS, meanwhile, will soon be releasing its calendar year 2021 hospital OPPS proposed rule. In that rule, CMS may announce how it will respond to the district court decision—including whether it will base repayments for the 2018 and 2019 cuts and/or reimbursement going forward on the results of its controversial survey of hospitals’ average net costs for 340B-purchased drugs billed to Medicare Part B.

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Case Before U.S. Supreme Court Has Implications for State 340B Discriminatory Reimbursement Laws

The U.S. Supreme Court will hear arguments in October about states’ ability to regulate pharmacy benefit managers (PBMs). Its decision Rutledge v. Pharmaceutical Care Management Association could have implications for the recent string of state laws prohibiting PBMs from discriminating in reimbursement, fees, or network access on the basis of a pharmacy’s participation in 340B.

The high court agreed to hear the case in January and scheduled it for argument in April, but it postponed the session due to the Covid-19 pandemic. It announced the new Oct. 6 date for arguments last week. It could hand down its decision in early 2021.

The case centers on a 2015 Arkansas law requiring PBMs to reimburse pharmacies for generic drugs at or above the pharmacies’ wholesale acquisition cost. The law also bars PBMs from paying affiliated pharmacies more than others for the same drugs. PCMA, the national trade association for the PBM industry, argued that the Arkansas law was preempted by the federal Employee Retirement Income Security Act (ERISA). Federal district and appeals courts ruled in PCMA’s favor about ERISA’s applicability. Thirty-six states have laws similar to Arkansas’ “intended to curb abusive prescription drug practices,” the state of Arkansas said in its brief filed with the Supreme Court.

Nine states have passed laws over the past two years to stop PBM discriminatory reimbursement against 340B entities and their contract pharmacy. Georgia became the latest to do so in late June.

“If the federal insurance law known as ERISA preempts states from regulating PBMs, all bets are off on 340B covered entities fighting at the state level to prevent PBMs discriminatory practices,” said Peggy Tighe, legislative counsel for Ryan White Clinics for 340B Access (RWC-340B).

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PBM-Owned Specialty Pharmacies Have A Growing Footprint in 340B, Analyst Says

Specialty pharmacies owned by pharmacy benefit managers “have dramatically increased their participation in the 340B program,” especially with hospitals enrolled in 340B, Drug Channels Institute CEO Adam Fein writes in his Drug Channels blog this morning.

Fein says “specialty pharmacy dispensing accounted for nearly one-third of PBMs’ total gross profits in 2019. Consequently, the 340B program is a significant and growing component of profitability for these large, for-profit, publicly traded companies.”

“Specialty locations” associated with CVS Health, Cigna (Express Scripts), Walgreens Boots Alliance, and UnitedHealth Group (OptumRx) operate a combined 224 locations that act as 340B contract pharmacies, and CVS and UnitedHealth operate 78 infusion sites that function as 340B contract pharmacies, he says. These 302 locations have more than 17,000 contract pharmacy relationships with 340B covered entities, mostly with disproportionate share hospitals and children’s hospitals, Fein reports.

“Given this growth, manufacturers should demand contractual carve-outs in their PBM agreements,” Fein says. “Otherwise, specialty prescriptions will have 340B discounts on top of commercial and Part D rebates.”

Drug manufacturer Merck recently began asking 340B covered entities for their contract pharmacy claims data so they can match its against their Medicaid, Medicare Part D, and commercial rebate claims to identify discounts and rebates on the same drugs. Medicaid duplicate discounts are prohibited by law, Part D and commercial duplicates are not.

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