More Evidence That 340B Program Guidance Is Unenforceable

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More Evidence That 340B Program Guidance Is Unenforceable

The U.S. Health and Human Services (HHS) Department yesterday launched a searchable public database that links to “all of HHS’s guidance documents currently in effect,” including those for the 340B program. All its pages, including the 39 tagged with the keyword “340B,” bear this disclaimer:

The contents of this document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.

The database’s debut represents the latest and perhaps most explicit and widely disseminated admission by the U.S. Health Resources and Services Administration (HRSA) to date “that its guidance documents—which govern much of the 340B program—are non-binding,” says Stephen Kuperberg, counsel with Powers Law, a 340B Report sponsor.

HHS and all federal departments and agencies are creating online program guidance repositories pursuant to an executive order President Trump issued last October. The order says departments and agencies must “treat guidance documents as non-binding both in law and in practice, except as incorporated into a contract,” and “may impose legally binding requirements on the public only through regulations and on parties on a case-by-case basis through adjudications, and only after appropriate process, except as authorized by law or as incorporated into a contract.’

A federal court ruled in 2014 that HRSA has statutory authority to make rules with the force of law for 340B in just three places: (1) the establishment of a mandatory and binding administrative dispute resolution process, (2) the “regulatory issuance” of precisely defined standards of methodology for calculation of ceiling prices, and (3) the imposition of monetary civil sanctions. HRSA published a combined 340B ceiling price and manufacturer civil monetary penalties final rule that took effect Jan. 1, 2019. Last March, the agency told 340B Report it did not plan to propose a final rule to create the dispute resolution system “until such time that HRSA receives regulatory authority for the issues that would be addressed” in such a process. “It would be challenging to put forth rulemaking on a dispute resolution process when many of the issues that would arise for dispute are only outlined in guidance,” the agency said.

HRSA has said publicly several times since the start of the year that it is not pursuing new 340B program guidance and is evaluating its audit processes and other program integrity efforts. The reason, it says, is because the 340B program is administered primarily by guidance and guidance does not give HRSA adequate enforcement capability. It has coupled the statements with an appeal for authority from Congress to issue binding and enforceable regulations for all aspects of 340B.

We asked HRSA yesterday which, if any, of its 340B guidance documents were enforceable; which of its non-guidance 340B documents were enforceable; and whether under the president’s executive order it has rescinded any 340B guidance. We received this reply:

HRSA’s program integrity efforts focus on ensuring that 340B stakeholders comply with 340B statutory requirements. With regard to guidance documents, HRSA’s current authority to enforce certain 340B policies is limited unless there is a clear violation of the 340B statute. Without comprehensive regulatory authority, HRSA is unable to develop enforceable policy that ensures clarity in program requirements across all the interdependent aspects of the Program. HRSA’s website and the HHS Guidance Repository list all of the 340B Program’s guidance documents.

For the 340B Program, HRSA has authority to issue regulations in the following areas: (1) establish and implement a binding Administrative Dispute Resolution process for the resolution of certain disputes related to compliance with 340B requirements; (2) provide for the imposition of civil monetary penalties against manufacturers that knowingly and intentionally overcharge a covered entity for a 340B drug; and (3) issue precisely defined standards of methodology for the calculation of 340B ceiling prices. Regarding the 340B Administrative Dispute Resolution Rule, HRSA issued a notice of proposed rulemaking in August 2016 and received public comment. However, given that concerns were raised about the policies set forth in the proposed rule, in addition to the burdens associated with it, the rule was withdrawn from the regulatory agenda. HRSA issued the 340B Ceiling Price and Civil Monetary Penalty final rule in 2019.

To establish regulations on all other aspects of program policy, HRSA has requested regulatory authority in every President’s Budget since fiscal year (FY) 2017 and has again requested this authority in FY 2021.

Although most of the 39 guidance documents tagged “340B” in HHS new repository are from HRSA, seven are from the Centers for Medicare & Medicaid Services (CMS) and one from the HHS Office of Inspector General (OIG).

Absent are documents from HRSA’s contracted 340B Prime Vendor Program, which runs HRSA’s toll-free 340B call center and has more than 300 published 340B program FAQs and an unknown number of unpublished ones. Apexus, the subsidiary of group purchasing organization Vizient that runs the prime vendor program, says it provides HRSA-aligned answers to over 2,000 questions a month.

Jason Reddish, Partner at Feldesman Tucker whose 340B practices focuses mainly on grantee 340B covered entities, says the president’s executive order “re-iterates a long-standing principle of administrative law, which is that laws and regulations are legally binding, but interpretive guidance is only given deference from courts to the extent the interpretation has the ‘power to persuade.’ Agencies should not use interpretive guidance to make law, but that is precisely what the [HRSA] Office of Pharmacy Affairs has done for more than 25 years.”

Donna Lee Yesner, Senior Counsel at Morgan Lewis who frequently represents drug and biotech companies, said “treating sub-regulatory guidance as binding law has been a problem for a long time.”

“HRSA seemed to think if it went through the notice and comment process it could make guidance binding, but its delegation of rulemaking authority is very limited…and it has not finalized or incorporated its proposed guidance in its statutory agreements,” she said. “I would hope that the agency would now look hard at some of its substantive program requirements that are not set forth in a regulation and make it clear that compliance is not binding.”

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Keeping Track of Your Compliance and Accreditation Obligations

All 340B covered entities would agree that program compliance is critical to their organizations. Loss of 340B savings would mean significant reductions in staffing, community services, and care provision. However, many 340B providers, including large health systems and community-based clinics, may not understand the day-to-day requirements of the various rules and regulations that govern 340B programs. And, others may not invest in sufficient resources to update procedures and audit performance against the rules.

A few years ago, I performed an external 340B program audit for a large academic health system. They had been audited before without any material findings. Yet even a cursory review of their program identified deficiencies, ranging from contract pharmacy agreements missing key compliance elements to ineligible providers being included as eligible. Reviews of individual prescriptions and medical services uncovered several qualified prescriptions that were, in fact, ineligible because of poor provider list updates. Having a routine internal-audit process driven by an application that scheduled, tracked, and documented compliance reviews and tasks would have prevented most, if not all of these deficiencies.

LicenceTrak’s Core and Accreditation module supports 340B program audits, along with requirements for accreditation programs, grants, quality assurance activities, and regulatory reviews. Tasks can be customized for any type of facility: For 340B, LicenseTrak can:

  • Schedule policy and procedure reviews and updates, and store completed documents for future audits
  • Schedule system updates and file reviews
  • Store contract pharmacy agreements and remind users to perform annual reviews against the 12 essential compliance elements
  • Schedule 340B program training and store completion records for each staff member
  • Document completion of HRSA file updates with reminders of future reviews.

If 340B is strategically important to your organization, don’t let a weak process derail program performance or value. Let LicenseTrak streamline compliance of your 340B program (and other regulatory or operational rules and requirements).  Visit for more information and to schedule a demo.

Tony Zappa, Pharm.D, M.B.A., is CEO of ZAA Technologies, LLC, makers of LicenseTrak. He has 35 years of executive experience in pharmacy and health care, including 10 years with 340B-related businesses. You can reach him at or on 844-542-8725.

Georgia Lawmakers Vote to Shield 340B Providers from PBM Discrimination

Georgia lawmakers have passed and sent to Gov. Brian Kemp (R) legislation prohibiting pharmacy benefit managers (PBMs) from discriminating in reimbursement on the basis of a pharmacy’s participation in the 340B program. SB 313 also stops PBMs, effective July 1, 2021, from assessing discriminatory fees or adjustments against such pharmacies or excluding them from the PBM’s network. Kemp is expected to sign the bill.

The bill’s passage breaks a slump for advocates of state laws prohibiting PBM discriminatory reimbursement against 340B entities and their contract pharmacies. Legislation was shelved in Tennessee last month and reportedly has stalled in Ohio. Before those setbacks, advocates got laws passed in eight states over two years.

State Rep. Sam Park (D) explained that SB 313, which addresses PBM licensure and regulation generally, was introduced without 340B provider protections. Park, who works as an attorney for Positive Impact Health Centers, one of Georgia’s largest providers of care to people living with HIV/AIDS, said in response he introduced a 340B discriminatory reimbursement bill in the House “modeled on the successful West Virginia legislation from a few years ago but crafted with our state political realities in mind.” Republicans control the office of the governor, the state House, and the state Senate in Georgia, he said, and his bill “had to be something a Republican political majority could accept.”

Working across the aisle and across chambers, and with the Georgia Hospital Association and others, Park said GOP support was secured in the Senate to add his bill’s provisions to SB 313.

“I was very heartened that, with bipartisan support, we were able to pass these protections,” he said. Park encouraged 340B providers in other states “to talk to your state legislators and do the same. The underlying intent of 340B is something we can all get behind.”

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HHS Expects to Extend COVID-19 Emergency, Spokesperson Says

U.S. Health and Human Services (HHS) Department spokesperson Michael Caputo said this week that HHS expects to renew the COVID-19 national public health emergency due to expire on July 25. Caputo made the announcement in a June 29 tweet.

The American Hospital Association, the National Association of Community Health Centers, the American Association of Medical Colleges, and other provider groups whose members include 340B entities have urged Azar to extend the emergency declaration. HHS has relaxed some 340B and other program requirements to help providers respond to the epidemic, but many of the flexibilities are for the duration of the emergency only. U.S. Health Resources and Services Administration (HRSA), for example, has temporarily relaxed recordkeeping requirements pertaining to the 340B patient definition and 340B group purchasing organization prohibition.

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Third Quarter 340B Registration Is Underway

The third quarterly 340B program registration period of 2020 for health care providers, their contract pharmacies, and any outpatient facilities began yesterday and ends July 15. Details about registration requirements are available on the U.S. Health Resources and Services Administration (HRSA) website. In response to the COVID-19 emergency, HRSA has been letting some providers immediately enroll in 340B outside of its normal quarterly 15-day periods. HRSA also recently clarified that hospitals unable to register outpatient facilities because they are not yet on the most recently filed Medicare cost report may be able to dispense or administer 340B drugs to patients of the new site to the extent they are patients of the hospital. Business consulting firm Moss Adams reported June 30 that the U.S. Centers for Medicare & Medicaid Services (CMS), in light of COVID-19, recently extended cost reporting deadlines for fiscal years ending Oct. 31, Nov. 30, and Dec. 31, 2019 and those ending Jan. 31 and Feb. 29, 2020.

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Hospital 340B Recertification Set for Aug. 17 Through Sept. 14

Annual recertification of eligibility for 340B drug discounts for hospitals will run this year from Aug. 17 through Sept. 14, America’s Essential Hospitals reports. U.S. Health Resources and Services Administration (HRSA) grantees went through the recertification process this year from Jan. 27 through Feb. 24. Failure to recertify results in termination from the 340B program.

Before recertification begins, hospitals’ designated 340B primary contacts might want to log in to their user accounts on the 340B Office of Pharmacy Affairs Information System (340B OPAIS) to ensure that their and their hospital’s 340B authorizing official’s email addresses and other contact information are up to date, to guard against missing recertification notices from HRSA.

The Affordable Care Act required HRSA to begin recertifying providers’ 340B eligibility every year. Although HRSA requires drug manufacturers to keep their contact information in 340B OPAIS up to date, there’s nothing comparable to the annual recertification process for them.

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