(RIN) 0906-AB08; 340-B

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1 October, 2015 Ms. Krista Pedley Director, Office of Pharmacy Affairs (OPA) Health Resources and Services Administration (HRSA) 5600 Fishers Lane, Mail Stop 08W05A Rockville, Maryland Re: Regulatory Information Number (RIN) 0906-AB08; 340-B Drug Pricing ; Notice (Federal Register, Vol. 80, No. 167, August 28, 2015) Dear Ms. Pedley: On behalf of our more than 200 member hospitals and 50 health systems, the Illinois Hospital Association (IHA) is taking this opportunity to formally comment on the proposed 340B Drug Pricing issued on August 28, IHA commends the Health Resources and Services Administration (HRSA) for its thorough analysis in the development of this guidance: The intent of the 340B Program: It is important to note that the guidance starts with a reminder that the intent of the 340B program is to permit covered entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. This highly laudable goal is critical in the decision to participate in the program by many covered entities, such as hospitals. The program comes with numerous limitations, reporting requirements and audit considerations and concerns. The current rules require careful consideration and evaluation prior to enrollment by an eligibly entity in this voluntary program. While IHA appreciates the efforts of HRSA to provide clarity to a complicated program, the proposed guidance appears to add operational burden and further limitations on covered entities to achieve the intent of the program, to stretch scarce federal resources. As noted in Part E Contract Pharmacy, Congress intended the benefits of the 340B Program to accrue to participating covered entities. Our comments are based on the guiding principle that the program should be constructed and administered to provide the greatest possible flexibility to covered entities, allowing benefits to accrue to covered entities, and most importantly, to the recipients of care. The goal should not be to make the program operationally unmanageable or highly limited in applicability, resulting in lower financial participation in the program by the manufacturers of pharmaceutical products, who have exercised very little product price controls as recently noted in the national news.

2 Page 2 Part A Program Eligibility and Registration Implementation Date: The guidance as presented is a new clarification on an existing program. There does not appear to be a clear effective implementation date for new interpretations provided in the guidance. While HRSA may believe that many of the interpretations included have been in place for some time, the practical reality for many covered entities is that this guidance offers new interpretations never previously articulated. Such new interpretations may in some cases require covered entities to re-evaluate participation, modify current financial reporting structures or partnership arrangements and make other changes to key operational items which are typically only amended or updated annually. Recommendation: After the close of the current comment period, HRSA should issue an additional notification with an effective date of implementation at least 24 to 36 months after publication in the Federal Register. Part C Individuals Eligible To Receive 340B Drugs The current program applicability as outlined in a three pronged eligible individual test has provided the necessary safeguards to assure that covered entities are not misapplying the discounts. As the healthcare delivery community is transforming and aligning in new and different ways to provide healthcare at the right time, right place and in the most cost efficient manner, covered entities should be permitted to adopt the ownership models most conducive to success. The provided guidance, which would now provide more restrictive relationship characteristics, seems to serve as an additional barrier to qualified entity participation: (Prong 2) The individual receives a health care service provided by a covered entity provider who is either employed by the covered entity or who is an independent contractor for the covered entity, such that the covered entity may bill for services on behalf of the provider. (Emphasis added to indicate new language) The new employment interpretation, which requires that the relationship between the prescribing professional and the covered entity extend to billing services, will likely require a number of covered entities to change the contractual and financial arrangements currently in practice. These changes will very likely serve to disrupt the current delivery of healthcare. The intent of the program is to stretch scarce Federal resources, but such increases in the barriers to participate in the program seem contradictory. Specifically, this new interpretation will negatively affect cancer treatment infusion outpatient centers operated by covered entities. In many cases it is impractical for hospitals to fully employ an oncologist to create a billing relationship. This specialty

3 Page 3 enjoys a great deal of independence in the development of their practice ownership and affiliate relationships. As advances in cancer treatment continue and the goal of treating patients outside institutional settings expands, oncologists will refer this medical administration service to infusion centers closer to the patient. Ignoring the medical service associated with infusion therapy, and prohibiting the use of 340B drugs simply because the prescribing oncologist is not employed by the administering covered entity will clearly have negative implications. For covered entities which contract with infusion centers to administer drug therapies through referral arrangements, this option of care will be diminished. This is especially concerning for smaller rural, critical access hospitals, which can purchase 340B drugs to be dispensed by a contracted infusion center. Currently, this arrangement allows multiple qualified covered entities to utilize a common infusion center, lowering costs and allowing for the administration of chemotherapy in a site which specializes in such medical care. Permitting hospitals to contract with oncologists and permitting the oncologists to bill for themselves recognizes both infusion therapy as an associated medical service (delivered by infusion therapy specialists) and the relationship between the patient and the infusion center. This relationship is regular, and repetitive in many cases, demonstrating a clear relationship. Under this new employment interpretation, referral arrangements will be also be greatly diminished. Such arrangements offer a covered entity the ability to expand its service coverage specialties, without incurring the overhead cost of full employment and billing, while simultaneously offering lower cost pharmaceuticals to low income individuals. The above examples will result in either reduced access to care as covered entities reduce delivery sites to only those under their billing control, or an increase in the overhead cost of covered entities to secure such billing and full employment arrangements with an increasing number of medical professionals. Such changes will result in increased healthcare costs. Recommendation: Remove the billing requirement linkage to employment or contracting for covered entities. Currently, covered entities must be able to demonstrate either employment or an active contracting arrangement with prescribing physicians. At a minimum, infusion therapy should be granted an exemption. It is important to note that future models of healthcare delivery could be similar to the infusion therapy model which would necessitate further exemptions. So, the most effective modification would be the elimination of the billing language to permit innovative health care delivery models in the future.

4 Page 4 Prescription-by-prescription basis: Determining a patient s eligibility on a prescription-by-prescription basis, by requiring a documented outpatient service for each prescription, appears to add a new layer of service delivery: (Prong 5) The individual s drug is ordered or prescribed pursuant to a healthcare service that is classified as outpatient. This added specificity/requirement raises several important questions concerning how refills and replacement scripts will be handled. In the event that a patient has a negative reaction to a specific drug, resulting in a replacement script being issued, can the replacement be filled with a 340B purchased drug? How will refills be handled? Can the original outpatient episode of care be tied to the original script and the associated refills? Given the advances in smartphone technology and telehealth, how will application refills requested under either of these two venues be accounted for? Observations, subsequent admission, and 72-hour rules: The guidance seems to direct in the 5 th qualification prong, that episodes of care that begin in an emergency room (ER) or observation setting (OBS) which result in an inpatient stay would not be eligible. Additionally, Medicare 72-hour reimbursement rules prohibit the billing of 340B purchased drugs administered or prescribed in an outpatient setting when combined with an inpatient admission. In the event of an outpatient episode, which results in a subsequent admission within 72 hours, prescriptions issued and filled in good faith under the 340B program should remain eligible. Inpatient Stays: The program has always prohibited the use of 340B purchased drugs as part of an inpatient stay. It is well documented that as drug therapy adherence after discharge improves, inpatient recidivism declines. If a covered entity is permitted to utilize 340B purchased drugs in conjunction with a discharge plan, especially for lowincome individuals, patient compliance will be improved resulting in earlier discharges and reduced lengths of stay. If hospitals are required to extend lengths of stay to assure drug therapy compliance, the overall cost of hospitalizations will increase. Additionally, when patients are discharged and unable to secure the appropriate drugs due to cost, the likelihood of readmission will increase. Recommendations: HRSA should apply a reasonable person rule, which would permit the use of 340B drugs if the administering or prescribing covered entity did so assuming that the episode of care would not be followed by an inpatient stay. Revise the provision, which prohibits the use of 340B drugs as part of an inpatient stay, to clearly state that 340B drugs may only be used in conjunction with an inpatient stay when the prescription is part of a documented discharge plan. This policy will serve to encourage drug therapy adherence and permit continued improvement in hospital lengths of stay and readmissions.

5 Page 5 Operational issues: The guidance notes that participation in the 340B program is voluntary. While this is true at the federal level, a number of state Medicaid agencies are actively pursuing legislation which mandates participation by covered entities eligible for participation. Such mandates on hospitals, coupled with the newer operational requirements, pose a serious financial threat to smaller hospitals. Recommendations: The guidance should restate the importance of the voluntary nature of the program and prohibit state Medicaid agencies from mandating participation. All changes or newly articulated interpretations should be accompanied with specific effective dates, which provide for appropriate implementation timeframes. HRSA should not assume that all covered entities have interpreted the regulations as presented in the new guidance and should recognize that it will take time to implement changes. Part B Drugs Eligible for Purchase under 340B Medicaid Bundled Payments: This provision adds confusion to the duplicate discount provisions of the 340B program. To prohibit the use of 340B discounted drugs when reimbursement is part of a bundled or potentially discounted program, such as the 3 M E-APG systems, would seem to result in an overall increase in the cost of outpatient care for the Medicaid program. It is our understanding that when a drug is reimbursed as part of a bundled payment, the state may not claim a rebate on the drug. If use of 340B discounted drugs is not permitted and rebates are not permitted, then covered entities will be required to purchase drugs through other means, and the state will not receive the associated rebate. This would appear to only serve to increase revenues for pharmaceutical companies as more states move to adopt the E-APG system and employ bundling practices. Recommendation: HRSA should permit the use of 340B drugs when part of the Medicaid bundled reimbursement model. IHA appreciates the work by HRSA to provide guidance on the operation of this critically important program. In summary, IHA recommends: 1. Eliminating the billing requirement component to the determination of employment or contracting physician. 2. Modifying the definition of an outpatient episode to include services rendered in observation and ERs that result in and inpatient stay as well as scripts issued as part of an approved inpatient discharge plan. 3. Specifically including services rendered in an infusion therapy center as a qualified outpatient service and permit infusion drugs administered in such setting to be purchased under the 340B program. 4. Establishing a reasonable effective implementation timeline. The guidance represents significant changes to prior interpretations and will require

6 Page 6 substantial work to implement. The guidance gives the impression that it is a clarification of the current rules, which we do not believe is universally understood. Hospitals should not be held to these clarified standards retroactively by federal auditors. Ms. Pedley, thank you again for the opportunity to comment. If you or your staff has any questions about our comments, they should be addressed to Joe Holler at (217) or jholler@ihastaff.org. Sincerely, Maryjane A. Wurth President & CEO