The Office of Pharmacy Affairs (OPA) of the Health Resources and Services Administration (HRSA) recently issued a new Program Update that includes new covered entity registration and recertification requirements, as well as enhancements to the 340B Office of Pharmacy Affairs Information System (OPAIS). HRSA may be implementing these new registration requirements in order to identify and potentially take action against covered entities that HRSA believes do not qualify under a 340B covered entity category and to provide additional information to states and drug manufacturers necessary to identify and recoup duplicate discounts.

IN DEPTH

On July 20, 2020, the Health Resources and Services Administration (HRSA), Office of Pharmacy Affairs (OPA) issued a new Program Update with new covered entity registration and recertification requirements, as well as enhancements to the 340B Office of Pharmacy Affairs Information System (OPAIS). The Program Update focuses on documentation necessary for covered entities to demonstrate compliance with statutory 340B Program requirements. Covered entities should familiarize themselves with the Program Update in order to reduce risks of future registration delays, eligibility lapses due to missing documentation during the annual recertification process, or repayment obligations resulting from Medicaid duplicate discounts.

Background

In late 2019 and early 2020, the Government Accountability Office (GAO) published two reports analyzing covered entities’ compliance with certain 340B Program requirements. In the first report, published in December 2019, the GAO concluded that HRSA’s processes do not provide reasonable assurance that participating nongovernmental hospitals meet 340B Program eligibility requirements. Specifically, the GAO found that HRSA’s oversight of both the nonprofit status requirement and government contract requirement was lacking, primarily due to HRSA’s reliance on self-attestations of compliance, as well as limited and inconsistent review of verifiable primary-source documentation. For additional information, please see our On the Subject: 2020 Starts Off with Two Government Publications Critical of 340B Program Oversight.

In the second report, published in January 2020, the GAO concluded that the US Department of Health and Human Services had provided limited oversight of the intersection of the 340B and Medicaid Drug Rebate programs, resulting in an increased risk that drug manufacturers may have paid discounts under both programs (known as “duplicate discounts”). The GAO recommended that the Centers for Medicare and Medicaid Services (CMS) begin requiring state Medicaid agencies to implement policies and procedures to prevent duplicate discounts, and that HRSA assess covered entity compliance with those policies and procedures. For additional information, please see our On the Subject: GAO Recommends CMS, HRSA Improve 340B Duplicate Discount Oversight.

New Registration and Recertification Requirements

Consistent with the findings in the GAO reports, HRSA issued a new Program Update on July 20, 2020, the first in more than six months, implementing certain registration and recertification requirements for covered entities. Beginning August 1, 2020, covered entities must comply with the following requirements. (Note that some requirements will only impact certain entity types.)

1. Hospital Classification

   • Hospitals participating in the 340B Program fall into one of three classifications. Hospitals must be (1) owned or operated by a unit of state or local government; (2) nonprofit corporations that have been formally granted state or local governmental powers; or (3) private, nonprofit hospitals that have contracts with state or local governments to provide healthcare services to low-income individuals who are not eligible for Medicaid or Medicare. HRSA is now requesting documentation to support the hospital classification selected during registration to further verify the eligibility of the registering hospital.

   • For new registrations in OPAIS, the covered entity must upload supporting documentation for the “hospital classification” selected at the time of registration of a parent hospital. Hospitals changing classifications during recertification will be similarly required to upload supporting documents. Such supporting documentation may include IRS forms or letters, state letters, and copies of contracts with state or local governments.

   • This requirement is of particular importance to nonprofit hospitals participating in the 340B Program. Nonprofit hospitals eligible due to a formal grant of governmental powers should prepare documentation to demonstrate the formal grant of such powers. Nonprofit hospitals eligible due to a contract with state or local government should ensure that the required contract is available for submission during the next recertification period, is a valid contract under applicable state law, and includes the statutorily required provision of healthcare services to low-income individuals not eligible for Medicare or Medicaid.

2. Sexually Transmitted Diseases (STD) Clinics, Tuberculosis (TB) Clinics and Ryan White HIV/AIDS (RW) Clinics

   • STD/TB/RW entities will be required to enter information regarding their Notice of Funding Opportunity (NOFO) Number, the data range of their NOFO funding, and, if applicable, the type of in-kind support they are receiving from the federal grant recipient or sub-recipient. These covered entities will be required to enter this information during registration or during the next recertification submission, as applicable.

3. Medicaid Billing Question

   • All covered entity sites must answer the following modified Medicaid billing question when registering new locations: “At this site, will the covered entity bill Medicaid fee-for-service for drugs purchased at 340B prices?” The current question asked on OPAIS is: “Will you bill Medicaid for 340B drugs?” Thus, the modified question makes it clear that OPA is only requesting information regarding Medicaid fee-for-service, not Medicaid managed care.

   • If the covered entity answers “yes” to the Medicaid billing question for a particular location, it must also provide each Medicaid state it plans to bill and the billing number it will list on the bill to the state for services at that location. Billing number(s) may include the billing provider’s national provider identifier (NPI) only, state-assigned Medicaid number only, or both NPI and state-assigned Medicaid number. Information for new locations must be provided during initial registration, while information for currently active locations must be updated in OPAIS by the end of the covered entity’s next annual recertification period.

   • Based on the recent governmental focus on duplicate discount prevention, the information provided in response to the Medicaid billing question may be used to analyze whether drug manufacturers are being subjected to duplicate discounts. It is unclear what actions HRSA or other governmental entities may take if they discover significant instances of duplicate discounts.

   • Covered entities should review current state Medicaid billing rules, as well as state Medicaid enrollment documentation to ensure correct and complete OPAIS information on a location-specific basis.

Analysis and Takeaways

As a general matter, HRSA’s release of a new Program Update is somewhat unexpected, given HRSA’s responses to the GAO’s reports (suggesting that (1) its existing processes are sufficient to ensure covered entity eligibility, and (2) that it lacks regulatory authority over mechanisms to prevent duplicate discounts) and HRSA’s recent public statements regarding its inability to take enforcement action based on its own guidance and that its enforcement authority is limited to clear violations of the 340B statute. We expect that HRSA may be implementing these new registration requirements in order to identify and potentially take action against covered entities that HRSA believes do not qualify under a 340B covered entity category and to provide additional information to states and drug manufacturers necessary to identify and recoup duplicate discounts. These new requirements seem to offer greater clarity regarding the contours of HRSA’s enforcement position as of late; that is, that it intends to enforce clearly defined statutory requirements (such as the covered entity eligibility categories).