Davis Wright Tremaine LLP

The Health Resources and Services Administration (HRSA) is the branch of the U.S. Department of Health and Human Services (DHHS) responsible for administering the federal 340B Drug Discount Program (340B Program). The 340B Program allows certain categories of “covered entities,” mainly non-profit safety net or specialty care providers, to purchase outpatient drugs from manufacturers at deeply discounted prices.

In order to access discounted drugs, covered entities must be formally approved to participate in the 340B Program by HRSA and, once enrolled, must abide by certain requirements in order to maintain good standing with the Program. Like so many state and federal agencies with responsibility of certain health care programs, HRSA has been forced to evaluate 340B Program requirements in light of the COVID-19 pandemic and has recently offered guidance about how the public health emergency may impact 340B Program compliance.

HRSA has announced on its website that while it recognizes the need to afford covered entities greater flexibility in delivering services (including dispensing outpatient drugs) during the COVID-19 pandemic, the agency is limited in terms of how relaxed it can be in enforcing certain 340B Program requirements.

The two primary compliance obligations imposed on 340B covered entities with respect to dispensing discounted drugs are:

  1. Such drugs may only be dispensed to patients of a covered entity, as defined by HRSA; and
  2. Drugs purchased at a 340B discount may not also be subject to a Medicaid rebate or “duplicate discount.”

HRSA has made clear that because these two requirements are created by statute, the agency does not have the power to waive or materially relax these limitations in response to the COVID-19 situation. That said, HRSA also indicated that some measure of leniency will be afforded covered entities during the current public health emergency.

In particular, HRSA has indicated that, with respect to drugs dispensed during the COVID-19 situation, the agency will accept more abbreviated documentation than normal with respect to verifying that 340B drugs go only to patients of a covered entity. HRSA has said that, at present, a covered entity can satisfy documentation requirements with a single page note or form that identifies the patient receiving the drug and the other care being provided to that patient.

Further, during the public health emergency, HRSA will accept records with only self-identifying information from a particular patient, without corroborating information from insurers or detailed health history, etc. HRSA also has indicated that covered entities may use “volunteer” health care professionals to deliver services to patients during the COVID-19 emergency, including dispensing outpatient drugs, so long as the relationship between the volunteer and the covered entity is documented in some form.

Should covered entities have concerns about being able to comply with 340B Program requirements during the pandemic that are not addressed by the more lenient documentation standards HRSA has announced, the agency invites providers to connect the “340B Prime Vendor”, Apexus, who will “coordinate HRSA technical assistance and evaluate each issue on a case-by-case basis.”

Examples of the kind of issues a covered entity might want to contact the 340B Prime Vendor about are, due to the public health emergency, potentially using 340B drugs at additional sites that are not already registered with HRSA or using a group purchasing organization or “GPO” to acquire outpatient drugs because 340B pricing is not available. The 340B Prime Vendor will work with HRSA, based on the specific factual situation presented by a covered entity, to determine if some leniency may be afforded in these areas.

Finally, HRSA has announced that, to date, it does not plan to discontinue routine 340B compliance audits of covered entities. However, HRSA is shifting audit activity to virtual or remotely only for the next several months, while the agency continues to monitor the COVID-19 emergency.

To the extent that a covered entity already has been engage by HRSA about being audited in 2020 and believes that it may have difficulty cooperating fully with the audit due to the current public health emergency, HRSA instructs such entities to contact the Bizzell Group (340Baudit@thebizzellgroup.com), which is the 340B audit contractor, to discuss the situation. The Bizzell Group will work with HRSA on the audit issues based on the specific facts presented by the covered entity.

HRSA has dedicated a page on its website to issues specifically related to the COVID-19 emergency, which can be found on its COVID-19 Resources Page.

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