HHS’ Health Resources and Services Administration (HRSA) is expanding the list of locations that can distribute 340B drugs just as data show that the purchase of these discounted drugs is increasing. The rising proportion of 340B drugs among total drug costs comes in spite of CMS’ efforts to cut reimbursement rates. (The 340B Drug Pricing Program offers certain safety net hospitals and other providers discounted outpatient drugs.)
Earlier this month, HRSA announced in an FAQ that it would allow the offsite clinics of 340B providers to distribute discounted drugs even if these clinics had not yet registered with the agency.
Historically, offsite clinics were registered based on whether they were included on the hospital’s most recently filed reimbursable Medicare Cost Report. However, because of the pandemic, HRSA said that for hospitals that are unable to register their outpatient facilities, “the patients of the new site may still be 340B eligible to the extent that they are patients of the covered entity.”
In these instances, the covered entity must clearly document the situation in its policies and procedures and ensure that auditable records are maintained for each 340B dispensed drug, according to the FAQs.
HRSA is not changing or waiving the eligibility requirements for covered entities or relaxing its standards on the definition of a patient in response to the pandemic.
The increase in offsite clinics able to distribute 340B drugs comes at a time when the program is seeing double-digit growth. An analysis of 2019 340B drug sales conducted by the Drug Channels Institute found a 23% increase in 340B purchases to $30 billion, accounting for 8% of US drug sales. The spending for the program has increased threefold since 2014 for a compound annual growth rate of 27.1%, the group found.
The newly relaxed requirements around offsite clinics are likely to fuel the uptick in 340B drug costs and number of eligible sites.
The number of qualified entities under 340B has swelled. An analysis by the Medicare Payment Advisory Commission (MedPAC) found that while there were fewer than 600 340B hospitals in 2005, that number climbed to 1,365 in 2010 and 2,140 in 2014, with most of the growth coming from critical access hospitals.
The cost of 340B drugs has been on CMS’ radar over the past few years as the agency aims to bring its reimbursement rate of the drugs more in line with the cost that the 340B hospitals pay for the drugs in the first place.
In its 2020 Outpatient Prospective Payment System Rule, CMS said it will reimburse participating hospitals at average sales price minus 22.5%, lower than its traditional average sales price plus 6%.
While providers pushed back via lawsuits, CMS moved forward, keeping the cut in its final language issued in November. Another lawsuit was filed in December, and CMS has implemented the change in the meantime. Additionally, in April, it released a survey for 340B hospitals to collect net acquisition costs for 340B drugs, which CMS has suggested it would use to help determine the reimbursement rate if the provider lawsuits prevail.