First-term U.S. Rep. Matt Rosendale (R-Mont.) has introduced a bill to impose a host of new conditions on hospital participation in the 340B drug discount program.

Montana GOP Congressman Proposes a Host of New Conditions on 340B Hospitals

Montana’s at-large Republican U.S. congressman has introduced a bill to impose a host of new conditions on hospital participation in the 340B drug discount program.

First-term U.S. Rep. Matt Rosendale (R-Mont.) isn’t a member of the House Energy & Commerce Committee with primary jurisdiction over the 340B program, much less a majority member, so his Drug Pricing Transparency and Accountability Act, H.R. 5463, faces long odds of passage.

His bill, though, is the latest in a recent string of Republican sponsored 340B-related bills and amendments. The burst of activity signals that if the GOP retakes Congress in the 2022 midterm elections it will try again to move 340B in the drug and insurance industries’ direction, as it did when it was last in power.

In an Oct. 5 news release, Rosendale cited reports of “financial abuses by hospitals where patients are not receiving or seeing a discounted price, despite hospitals receiving savings through the 340B drug pricing program.”

“Hospitals often pocket the savings to cover other expenses they have such as expanding medical facilities,” he said. The bill, he said, would “hold hospitals accountable to their patients.”

He introduced it on Sept. 30 and publicized it yesterday afternoon. Hospital groups are very likely to oppose it vigorously. The pharmaceutical industry is very likely to praise it. The industry has worked before with lawmakers on similar bills.

In a television news interview yesterday in Helena, Mont., Rosendale said he hopes his bill can gain bipartisan support.

“I truly believe that this is … legislation that everyone can support, and say, look, we want to see where these medications are being sold and what they’re being sold for if, they are in fact being purchased through the 340B drug program, which gives the hospitals and the other facilities that are buying them such a dramatic discount,” he said.

If the bill goes nowhere in Congress, he said his ideas can be vetted and presented to his colleagues, who can begin to understand that his approach is one way to reduce drug prices without harming the pharmaceutical industry, according to KTVQ-TV’s story on the bill.

Moratorium and New Child Site Requirements

Rosendale’s bill calls for a two-year moratorium on non-rural disproportionate share (DSH) hospital and child site registration in the 340B program.

During the moratorium, the U.S. Health and Human Services Department (HHS) would have to issue regulations setting standards for 340B DSH, children’s, and free-standing cancer hospital child sites. For the first time, by regulation, these sites would have to be listed on a reimbursable line of the hospital’s most recently filed Medicare cost report, with associated outpatient costs and charges (340B children’s and cancer hospitals would have to attest their sites meet these standards).

Hospitals now must meet these 340B site eligibility requirements under 1994 program guidelines. The Health Resources and Services Administration (HRSA) last year said patients of a new hospital child site not yet on the hospital’s most recently filed cost report might still be 340B-eligible to the extent they are patients of the parent hospital. It is unclear if or how Rosendale’s bill would affect HRSA’s clarification.

Under Rosendale’s bill, 340B DSH, children’s, and cancer hospital sites also would have to be wholly owned by the parent hospital, provide a full range of services in addition to drugs, and adhere to the parent hospital’s charity care and sliding fee scale policies.

If an affected hospital site at any time no longer met any of these new standards, the parent site would have to de-register the facility from 340B.

DSH Hospital Standards

Under Rosendale’s bill, state and local governments would have certify to HHS that 340B private nonprofit DSH hospitals have been formally granted or delegated government powers or have contracts to provide care to low-income patients not covered by Medicare or Medicaid. HHS would have to determine that such contracts obligate hospitals to devote at least 15 percent of their total costs to providing direct medical to low-income patients ineligible for Medicare or Medicaid. This could be a significant challenge in states that have expanded Medicaid or have low-insurance rates.

JG 340B Claims Modifier and Other Reporting Requirements

One section of the bill says DSH hospital claims for 340B purchased drugs would have to be submitted “to public and private payors” using the JG 340B modifier established by CMS under the hospital outpatient prospective payment system.

DSH hospitals would have to report their total annual 340B revenues to HHS broken down by child site, fees paid to contract pharmacies, patient mix data, revenues derived from infusion or injection of physician administered drugs, and the names of 340B vendors and contract pharmacies. The information would be made available on a public HHS website.

A different section of the bill says 340B claims submitted to Medicaid fee for service or a Medicaid managed care organization would have to include the JG modifier or the NCPDP 20 submission clarification code. States would have to make this new 340B claims data available to drug manufacturers for Medicaid fee for service or managed care rebate payment verification purposes. State Medicaid agencies would have to publish an annual report on Medicaid FFS and managed care use of 340B purchased drugs.

Another section of the bill says 340B claims submitted to Medicare Part B would have to include either a JG or TB modifier (depending on the hospital type involved). 340B claims submitted to Medicare Advantage or Part D plans would have to include the JG modifier or NCPDP submission clarification code 20. HHS would have to publish an annual report on Part B use of 340B purchased drugs.

OIG and GAO Reports

The HHS Office of Inspector General would have to issue a report no later than two years after the bill’s enactment on the level of charity care provided by 340B DSH hospitals and their child sites. 340B hospitals say that charity care is an improper metric to determine eligibility since it does not include underpayments from Medicaid and other government payors. They argue that uncompensated care and bad debt are more reflective of their commitment to the underserved.

Congress’s watchdog, the Government Accountability Office, within one year of the bill’s enactment, would have to report on 340B private nonprofit hospitals contracts with state and local government to serve low-income individuals. Within two years of the bill’s enactment, GAO would have to report on the difference between each 340B DSH hospitals’ total 340B acquisition costs and gross reimbursements, broken down by child site.

Medicare Cost Reports

Finally, Rosendale’s bill would require 340B hospitals that participate in Medicare to include their 340B drug acquisition costs and 340B drug revenues from all payors in their Medicare cost reports.

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