RE: 340B Drug Pricing Program Omnibus Guidance HRSA RIN 0906-AB08, (Vol. 80, No. 167, August 28, 2015)

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1 October 26, 2015 Krista Pedley, PharmD, MS Captain, USPHS Director, Office of Pharmacy Affairs Health Resources and Services Administration 5600 Fishers Lane, Mail Stop 08W05A Rockville, MD Via RE: 340B Drug Pricing Program Omnibus Guidance HRSA RIN 0906-AB08, (Vol. 80, No. 167, August 28, 2015) Dear Captain Pedley: The Wisconsin Hospital Association (WHA) appreciates the opportunity to provide comments on the Health Resources and Services Administration s (HRSA) proposed 340B omnibus guidance. The 304B program is an important program for Wisconsin s safety-net providers, including our Disproportionate Share, Critical Access, Sole Community and Children s Hospitals. WHA was established in 1920 and is a voluntary membership association. We are proud to say that we represent Wisconsin s hospitals. Our members include small, mid and large-sized hospitals. We have hospitals in every part of the state from very rural locations to larger urban centers like Milwaukee. In addition, we count close to two dozen psychiatric, long-term acute care, rehabilitation and veterans hospitals among our members. Our member hospitals and health systems are devoted to transforming care consistent with the Triple Aim. Many of members are integrated delivery organizations and are working to innovatively improve health, increase value and better serve our communities. A cross-section of the hospitals we represent qualify for the 340B program and find it an essential component in their ability to help stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services as Congress intended under Section 340 B of the Public Health Services Act. Before moving into our comments on the proposed guidance, WHA would like to provide a sampling of how Wisconsin hospitals utilize 340B saving to further carry out these goals, including: Programs to provide for low-cost prescription drugs for vulnerable patients Providing care for patients in need of behavioral health services (counseling, group therapy and medications) * All references to HRSA s language as represented by [XXXXX] refer to the Federal Register, Vol. 80, No. 167, Friday, August 28, 2015 at:

2 Program providing diabetic medications and supplies for over 1,000 low-income individuals Program providing discounted drugs for multiple diseases (cancer, end stage renal, Crohn s, Multiple Sclerosis and others) Providing clinical services to children with childhood cancers Providing free medication to children in need Providing a clinic for primary health care services and low-cost prescription drugs These examples from our smallest, rural hospitals to our large, urban Disproportionate Share Hospitals demonstrate the commitment 340B covered entities have to utilizing program savings to better serve Wisconsin patients and communities. Beyond this and consistent with program intent, 340B savings allow covered entities to have the capacity to provide more access to more services to patients. With this in mind, WHA would like to offer the following thoughts regarding HRSA s proposed guidance. Positive Program Improvements WHA appreciates the time and effort HRSA put into this guidance and we believe a variety of proposals will help bring more clarity and structure to the program. Those include the following: Hearing and Appeals Process WHA supports HRSA s proposed hearing and appeals process. Under this process, a covered entity would have the opportunity to respond to an adverse audit finding or issue of potential noncompliance without losing 340B eligibility. We believe this is a helpful and appropriate mechanism for covered entities to discuss findings and correct them, if need be, through appropriate corrective actions also outlined in the proposed guidance. The 340B program is an administratively complex program and we believe the proposed hearing and appeals process will help ensure a basic level of due process for covered entities. Contract Pharmacy Arrangements WHA appreciates HRSA s continuing recognition that [t]he 340B statute does not prohibit the use of contract pharmacies [52310]* and therefore, continues to recognize the value of contract pharmacy arrangements, as Congress intended, for the benefits of the 340B Program to accrue to participating covered entities. With this in mind, HRSA reminds covered entities of their responsibilities for ensuring compliance for any/all of its contract pharmacy arrangements. Overall, WHA appreciates HRSA s recognition that these arrangements help to facilitate access to pharmaceuticals for patients at convenient locations. Our only question of this provision relates to HRSA s inclusion of language referring to the Federal anti-kickback statute. We are uncertain what HRSA intends with this language and would encourage its removal. WHA Page 2

3 Manufacturer Requirements WHA appreciates that HRSA s proposed guidance includes provisions related to manufacturers, including to require recertification, that they retain auditable records, submit timely updates on pharmaceutical pricing agreements (PPA), allow for Department of Health & Human Services (HHS) audits, and explicitly restate that manufacturers entering into PPAs are required to provide all covered outpatient drugs at no more than the ceiling price, may not condition those ceiling prices and must sign a PPA within a reasonable time frame. Further, WHA appreciates the guidance requirement that a drug manufacturer must obtain HHS approval in order to audit a covered entity. We believe this is an important check and balance if an audit is requested by a manufacturer. GPO Prohibition Exceptions In general, WHA appreciates HRSA s restatement of three current exceptions to the Group Purchasing Organization (GPO) prohibition. These exceptions allow covered entities to utilize GPOs in appropriate situations. This restatement of policy largely tracks past guidance, but there is one area we believe needs clarification in order to not needlessly disadvantage covered entities from appropriate GPO usage. Clarification Needed. The proposed guidance states that the GPO prohibition applies to covered entities, including any pharmacy owned or operated by the covered entity unless the entity meets one of the exceptions [52318]. Under the first exception listed, HRSA restates past guidance on off-site outpatient clinics. However, in restating the first GPO exception, the new language removes language previously used in its 2013 guidance referring to outpatient facilities and instead replaces it with outpatient clinic only. WHA is concerned that HRSA s language adjustment will impact a covered entity s appropriate use of a GPO for drug purchases for non-340b patients at a non-340b location, as HRSA guidance had previously allowed. Therefore, WHA recommends returning to the general thrust of the previous GPO exception by including the following language: (1) An off-site outpatient clinic or entity owned pharmacy if the entity is located at a separate physical address from the 340B parent covered entity, is not participating in the 340B program, or listed on the 340B database, and purchases drugs through a separate account from the 340B parent covered entity." Recognition of Telehealth as a general comment, WHA appreciates HRSA s recognition of the use of telehealth for purposes of the 340B program. We believe telehealth can provide greater access to care in many communities, including more remote, rural areas where access may be limited for many patients. Areas of Concern WHA is concerned with several key areas of the proposed guidance because we believe it will unnecessarily reduce the ability of covered entities to provide broader access to a broader range of services for patients. WHA s concerns will largely focus around the three following areas: WHA Page 3

4 definition of a patient; definition of a covered outpatient drug; and assorted provisions. Each of these are discussed in detail below. DEFINITION OF A PATIENT New Proposed Definition of a Patient General Comments In the proposed guidance, HRSA suggests moving from the current three-pronged definition of a patient to a new six-pronged approach. The six-pronged test will be done on a prescription-byprescription or order-by-order basis [52319] and includes new criteria that must each be met in order for a covered entity to utilize the 340B program. The largest changes within this definition of a patient revolve around the following three requirements which may, at times, be interrelated: the individual receives care by a provider employed by or is an independent contractor for the hospital such that the hospital may bill for services on behalf of the provider [52319]; An individual will not be considered a patient of the covered entity if the only health care received by the individual from the covered entity is the infusion of a drug or the dispensing of a drug [52319]; the individual is classified as an outpatient when the drug is ordered or prescribed. The patient s classification status is determined by how the services for the patient are billed to the insurer. [52319]. While WHA appreciates the time and effort HRSA took to provide for more clarity around the definition of a patient, we are concerned by and oppose the addition of these new requirements. We urge HRSA to remove these unnecessary barriers in the 340B Program. We believe the new six-pronged test fundamentally restructures the definition in a way that will significantly limit a covered entity s ability to utilize the program, thereby reducing the ability to provide as many services to as many patients as possible. WHA is concerned by HRSA s reversal of guidance long-held by the agency and long-followed by covered entities. Further, in some instances the proposed guidance fundamentally conflicts with how hospitals and health care systems may be structured and, therefore, may inappropriately limit the program benefits for these 340B covered entities. While WHA recognizes HRSA s intention of trying to provide for more clarity between the various parts of this program the prescription/order, the patient, the provider, the outpatient setting, and the covered entity the linkage it creates is at times inappropriate, belies the complexity of health care organizational structures and the policies impact in practice. WHA is opposed to the following three key areas of the patient definition which are discussed in detail below. WHA Page 4

5 1. New Proposed Definition of a Patient Classified and Billed as an Outpatient Proposed Language: the individual is classified as an outpatient when the drug is ordered or prescribed. The patient s classification status is determined by how the services for the patient are billed to the insurer. [52319]. WHA is concerned by HRSA s focus on services being classified as outpatient and billed as an outpatient in order to utilize the 340B program. In general, we oppose use of this criteria and we specifically have concerns that it may limit the rightful use of the 340B program for situations such as Emergency Department visits, use of discharge prescriptions, and compliance with Medicare s 72 hour rule to name a few. WHA believes all drugs should be considered appropriate for the 340B program and should not be contingent upon how items are billed. For example, currently a patient may be seen in the Emergency Department and the hospital can (per HRSA guidance) utilize 340B savings; however, upon being admitted as an inpatient to the hospital, the hospital would no longer utilize the 340B program. Under HRSA s new guidance, this situation would likely result in a hospital being barred from using 340B savings at all. This is because Emergency Department services are often subsequently incorporated and billed as inpatient, even though those services were rendered when the patient was an outpatient. Under a similar scenario, Medicare has a policy known as the 72 hour rule which mandates inclusion of the technical component of outpatient diagnostics services and outpatient nondiagnostic services to be bundled with the inpatient claim when those services are provided to a Medicare beneficiary within three days of the inpatient admission. In other words, hospitals are forced by Medicare reimbursement policy to bundle and to bill outpatient care as inpatient, even though those services were delivered (and documented) as outpatient. One of WHA s largest areas of concern is the apparent limitation on the use of discharge prescriptions. We do not understand the benefit of prohibiting discharge prescriptions, which are currently allowable under the 340B program, and we strongly urge HRSA to remove this language. In fact, the Centers for Medicare and Medicaid Services (CMS) has focused its policies and payments on reducing readmissions and hospitals across the country are working diligently to improve in this area. To do so many hospitals have worked on discharge prescription programs for this very reason to ensure patients have appropriate drugs upon discharge from the hospital as a means to helping insure medication adherence and reduce readmissions. With respect to readmissions, once a patient leaves the hospital, they are often responsible for their own care and the complexity of this issue requires strong education and partnerships with patients. Most patients are already taking multiple medications when they arrive at the hospital and receive new medications while at the hospital. When most patients leave the hospital they will need to continue taking multiple medications, some of which they may have never taken before. Coordinating all of these medications with the changes that may occur during the hospital stay is complicated and can lead to adverse drug events and readmissions if it is not performed well. Oftentimes, discharge prescriptions programs help bridge that gap. WHA Page 5

6 In Wisconsin, WHA has worked with the vast majority of our hospitals on improving quality and patient safety, including reducing readmissions, through our Partners for Patients initiative. Therefore, we do not understand HRSA s move away from allowing 340B savings to be used for these important discharge prescriptions, and believe this language is contrary to CMS s stated goals in this area and will work contrary to the overarching goals of the 340B program to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. Further complicating this situation is that many hospitals that qualify for 340B are also prohibited from using a GPO in the hospital and, therefore, this language not only restricts their ability to access 340B savings, but then will likely lead to significant medication costs increases since those facilities will not be able to utilize GPO garnered savings for these discharge prescriptions either. In a time when drug costs are growing exponentially, financially penalizing hospitals and patients under this situation is problematic. 2. New Proposed Definition of a Patient Employment Relationships Proposed Language: the individual receives care by a provider employed by or is an independent contractor for the hospital such that the hospital may bill for services on behalf of the provider [52319]. WHA has concerns that HRSA is reversing past guidance that allowed for services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements [52306]. In that previous guidance, HRSA specifically included examples of what those arrangements could include, such as referrals for consultation. HRSA s new language diverges from past guidance and does so with language that may inappropriately penalize some covered entities due to their organizational structure as well as simultaneously limiting the program s use. We are especially concerned with the language s impact on our smaller and more rural hospitals and patients. We oppose inclusion of this language and recommend HRSA continue to base its definition on the relationship between the patient and the hospital. HRSA s proposed language would require that patients receive care from providers who are employed by or serve as an independent contractor so that the covered entity can bill for services on behalf of the provider. While Wisconsin is a state where there is strong alignment between hospital and physicians, including many employed physicians, this is not always the case in many communities across our state or in many states across the country either. We are concerned HRSA does not fully recognize the complexity of how health care organizations are structured and that its proposed language could inappropriately limit the use of the 340B Program in many situations. For example, physicians from a larger community hospital (not a covered entity) come into a rural community on certain days of the weeks to provide certain services which would not be available without those physicians. There is an affiliation agreement between the physicians and the local community hospital (a 340B covered entity), but the local hospital does not directly employ those physicians. Would such an arrangement qualify under HRSA s language? WHA Page 6

7 Overall, WHA does not feel HRSA s proposed guidance recognizes the statutory requirements and/or organizational complexity in play with modern physician-hospital relationships, nor do we feel HRSA should impose program requirements that will disproportionately impact certain types of covered entities likely small and rural providers potentially more than others. Again, we recommend HRSA return to its previous guidance to base its definition on the relationship between the patient and the hospital, not on employment or contractual status. 3. New Proposed Definition of a Patient Infusion-Only Prohibition Proposed Language: An individual will not be considered a patient of the covered entity if the only health care received by the individual from the covered entity is the infusion of a drug or the dispensing of a drug. WHA is concerned by HRSA s specific language prohibiting the administration of drugs, such as infusion-only drugs, and that this could limit a patient s access to life-saving drugs in their local community. WHA recommends HRSA remove this language. We believe the proposed prohibition disregards the fact that many hospitals serve as access points for patients in their communities who are required (eg: by health plan coverage, need for a specialist) to seek out care at larger tertiary care centers. In these situations, those patients and covered entities would not be able to benefit from 340B pricing. For example, take a small, rural community hospital that provides infusion services. Some patients may receive their initial care at a larger hospital (perhaps one even across the state border) related to their cancer diagnoses, but then those patients want to receive their chemotherapy at a location close to home. Under HRSA s proposed guidance, it would appear 340B program savings would not be allowed if infusion-only was provided by the small, local hospital. While the above example is in a rural community, this language is also problematic for Disproportionate Share Hospitals. DSH covered entities are often the tertiary care center that receive referrals from providers in a surrounding community or region. In this instance, the referral would not qualify under HRSA s proposed definition unless those referring physicians were also employed by the DSH hospital. We believe HRSA s language will negatively impact access to important drugs at a time when patients and hospitals are less able to offset increasingly higher drug costs. We recommend HRSA withdraw this language. DEFINITION OF A COVERED OUTPATIENT DRUG Many of the mechanisms for how the 340B program intersects with state Medicaid programs have largely, and WHA believes, rightfully, been left under the province of each respective state Medicaid program. Several of HRSA s proposed changes appear to diverge from this approach and HRSA creates significant confusion around what is meant by the new definition of a covered outpatient drug. WHA Page 7

8 Under this proposed language HRSA states, A covered outpatient drug, as defined in section 1927(k)(2) and (3)of the Social Security Act, is eligible for purchase under the 340B Program. For purposes of the 340B Program, only drugs bundled for and receiving such bundled reimbursement under Title XIX of the Social Security Act described in section 1927(k)(3) will be considered excluded from the definition of covered outpatient drug [52319]. Medicaid is a state-federal partnership program and within that construct each State determines its own approach to Medicaid pricing and policies. We believe HRSA is proposing troubling policy when it applies this one-size-fits-all policy to all states. In this respect, some states and their covered entities may not be impacted at all if they do not bundle drug payments into their Medicaid reimbursement policies. However, other states entirely could be limited in their use of the 340B program under the proposed definitional change. Beyond these concerns, WHA is confused by the language HRSA uses to discuss this provision. In 2013, Wisconsin s Medicaid program moved to Enhanced Ambulatory Patient Groups (EAPGs) for outpatient fee-for-service rates. This EAPG system works to classify and calculate reimbursement for outpatient hospital services based on the amount and type of resources used in various outpatient visits. In general, this system includes the cost of services and many drugs (but not all) in the payment. When billing Medicaid, hospitals include on their Medicaid claims the various services and/or drugs provided. The State runs those through a GROUPER which then arrives at a reimbursement amount that reflects those specific services/drugs for that specific patient. In this context, WHA would argue that Wisconsin s EAPGs are not a bundled payment, which we would consider a predetermined, set rate for a service. In other words, this reimbursed EAPG amount oftentimes does not reflect what our hospitals actually billed for on their Medicaid claims, which is why HRSA s language is even more confusing. That language appears to use terms like billed and reimbursed interchangeably. Take HRSA s explanatory discussion text where it refers to old guidance from 1994 which states that if a covered drug is included in the per diem rate (i.e. bundled with other payments in an all-inclusive, a per visit, or an encounter rate), it will not be included in the [340B Program]. However, if a drug is billed and paid for instead as a separate line item as an outpatient drug in a cost basis billing system, this drug will be included in the program. [52306]. The explanatory text then goes on to state that this limiting definition does not apply when a drug [is] provided as part of a hospital outpatient service which is billed to any other third party or directly billed to Medicaid. Overall, we do not believe HRSA should adjust this policy in a way that may potentially disadvantage some states like ours which have attempted to move from volume to value by implementing new payment mechanisms, such as an EAPG system. While we would argue our approach is not a true bundled payment, we are still very concerned by the proposed change and its potential negative impact on Wisconsin s safety-net hospitals, the very ones who have higher Medicaid volumes. For these reasons, we recommend HRSA remove the proposed outpatient drug language. WHA Page 8

9 ADDITIONAL CONCERNS Contract Enforcement Language [52317] WHA is concerned by HRSA s inclusion of language under the contract requirements with a State or local government that states a contract should create enforceable expectations for the hospital for the provision of health care services, including the provision of direct medical care. We do not understand what this language means, why it is being included or how it would be enforced. We recommend HRSA remove it. Child Sites/Medicare Cost Reports [52317] WHA is concerned by HRSA s requirement that a covered entity and affiliated off-site outpatient facilities have Medicare cost reports which lists each facility or clinic on a line that is reimbursable under Medicare, and demonstrates that the services provided at the facility or clinic have associated outpatient Medicare costs and charges. We are concerned by this language for those Wisconsin covered entities with little to no Medicare patients, primarily our children s hospitals. We do not believe this language is necessary for children s hospitals and recommend an alternative solution for those entities with little to no Medicare. Administrative Burden In general, WHA is concerned by the overarching complexity of the proposed guidance. As it is right now, the 340B program is administratively cumbersome and complex and the proposed guidance overlays an additional cost, resource and time burden onto our covered entities. Those added burdens could include creating new work flows, IT processes or software programming, among others, to accommodate the proposed changes. While we understand the importance of program integrity, we would ask HRSA to limit the administrative complexity of this program. Effective Date WHA recommends HRSA provide for an effective date a minimum of 12 months after the final guidance is published in the Federal Register. We believe Wisconsin s covered entities will need time to digest and adjust to HRSA s final guidance when released. Once again, thank for this opportunity to comment on HRSA s proposed 340B guidance. Please contact WHA s VP-Federal Affairs & Advocacy Jenny Boese at or jboese@wha.org with any questions. Sincerely, Eric Borgerding President & CEO WHA Page 9