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The 340B PAUSE Act

on Friday, 2 February 2018 in Health Law Alert: Erin E. Busch, Editor

On December 21, 2017, the “340B Protecting Access for the Underserved and Safety-net Entities Act” or the “340B PAUSE Act” (the “Bill”) was introduced in Congress. The Bill includes a moratorium on registration of certain new 340B hospitals and “child sites,” new 340B hospital reporting requirements, and new government reporting to Congress.

The 340B Program, which was established by section 340B of the Public Health Service Act by the Veterans Health Care Act of 1992, allows participating hospitals and other health care providers to purchase certain covered outpatient drugs at discounted prices from drug manufacturers. As of January 1, 2018, CMS adjusted the payment rate for separately payable drugs and biologicals (other than drugs on pass-through payment status and vaccines) acquired under the 340B Program from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. Rural sole community hospitals, children’s hospitals, and cancer hospitals are excluded from this payment adjustment in 2018 and will continue to receive ASP plus 6 percent for 2018. Critical access hospitals are unaffected by the policy change because they are paid 101% of reasonable costs under §1834(g) of the Social Security Act.

Section 2 of the Bill would place a two-year moratorium from the Bill’s enactment on new hospitals entering the 340B Program as disproportionate share hospitals, e.g., hospitals having a disproportionate share adjustment percentage greater than 11.75%. In addition, Section 2 would also place a two-year moratorium on a disproportionate share hospital’s off-site outpatient locations, referred to as a “child sites” in the Bill.

Pursuant to Section 3 of the Bill, beginning on the date that is 14 months after the date of the enactment of the Bill and annually thereafter, disproportionate share hospitals, children’s hospitals, and cancer hospitals would have to report to the Department of Health & Human Services (“DHHS”) the following: (1)(i) for the hospital itself and for each child site, the number and percentage of individuals who are dispensed or administered 340B drugs, organized by form of health insurance coverage of such individuals (i.e., Medicare, Medicaid, commercial insurance, or self-insurance) and (ii) for child sites, the total costs incurred at each such site and the cost incurred at each such site for charity care; (2) the aggregate amount of gross reimbursement received by each such hospital (including child sites of such entity) for all 340B drugs purchased and the entity’s aggregate acquisition cost for such drugs; and (3) for the hospital itself and for each child site, the name of all third-party vendors or other similar entities that the hospital contracts with to provide services associated with the 340B program. In addition to the reporting described in the previous sentence, disproportionate share hospitals would also be required to report on the contract with state or local governments to provide health care services to low income individuals and any modifications to such contract.

With respect to the public reporting, the information in (1), (2), and (3) described in the above paragraph would be made available on a public website of DHHS in an electronic and searchable format. The date described in (1) in the above paragraph would be made available in a manner that would show each category of data reported both in the aggregate and identified by the hospitals and child sites of such covered hospitals.

There are also government reporting requirements to Congress in Section 4 of the Bill. The Office of Inspector General would be required, within two years of enactment of the Bill, to submit to Congress a final report on the level of charity care provided by 340B hospitals, and separately by child sites. Additionally, not later than 1 year after the date of the enactment of the Bill, the Comptroller General would have to submit to Congress a report analyzing the disproportionate share hospital contracts with state or local governments to provide health care services to low income individuals, assessing the amount of care such contracts obligate such hospital to provide to low-income individuals ineligible for Medicare and Medicaid, and analyzing how these contracts define low-income individuals and whether the Secretary reviews such determinations. Not later than 2 years after the date of the enactment of the Bill, the Comptroller General would be further required to submit to Congress a final report on the information regarding the difference between the aggregate gross reimbursement and aggregate acquisition costs received by each such covered 340B hospital (including child sites of such hospital) for 340B drugs.

While it is important to keep in mind that the Bill applies only to disproportionate, children’s, and cancer hospitals, other than the two-year moratorium, it may be optimistic to view the Bill simply as a “pause,” considering the information that would be gathered from the 340B hospitals subject to the Bill and the recent decrease in reimbursement for 340B drugs announced in the Final 2018 Outpatient Prospective Payment System Rule. It is worth noting that the moratorium could result in those 340B hospitals having to reconsider their new planned off-site locations that would be dependent on 340B reimbursement. In a letter to the main sponsors of the Bill, the American Hospital Association expressed its opposition to the Bill, citing the “burdensome” reporting requirements, the focus of the Bill on charity care, a failure of the Bill to target drug manufacturers charging excessive prices under the 340B Program and the effect of the moratorium shutting out newly eligible hospitals.

Joseph “Joe” Loudon

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