The federal government is rolling back a pandemic-era waiver that lowered the bar for 340B hospitals to dispense discounted drugs across additional outpatient sites, a decision hospitals said will “stifle” future efforts to expand access to underserved communities.
In a notice published Friday in the Federal Register, the Health Resources and Services Administration (HRSA) announced that it would be ending the waiver implemented in June 2020 so that it may “more effectively administer the [340B] program and support program integrity efforts.”
That waiver had removed the requirement that safety-net hospitals participating in the program list a new offsite location on a hospital’s most recent Medicare Cost Report and register it in the 340B Office of Pharmacy Affairs Information System (OPAIS) to qualify for discounted drugs.
HRSA is giving covered hospitals 90 days, starting Friday, in which to bring any off-site, outpatient facilities using 340B drugs into compliance with these two reinstated requirements.
“After the 90-day grace period, non-compliant covered entities may be subject to audit and compliance action,” HRSA wrote in its notice. “HRSA is allowing for a 90-day grace period for affected hospitals to come into compliance and does not believe that any undue burden would be caused by reverting back to its original program guidelines, which have been in place since 1994.”
About a third of the country’s hospitals participate in the 340B drug discount program, which requires manufacturer discounts on most drugs administered in the outpatient setting to help safety-net providers.
The program has recently come under scrutiny from drugmakers and policymakers alike, who contend that it has swelled beyond its original intent to become a vehicle for hospitals to pad their margins.
Purchases through the program have grown substantially in recent years. Data released last month by HRSA indicated that discounted prescription drugs purchased wholesale under the 340B program grew 22.3% to $53.7 billion from 2021 to 2022. These wholesale purchases make up the majority, but not all of, the program’s buying.
In its notice, HRSA said that when it first outlined the now-struck pandemic permissions, it communicated that “the waiver was implemented in recognition of the need for hospitals to quickly respond to the rapidly evolving conditions of the COVID-19 pandemic and assist in creating efficiencies for hospitals to adjust operations in that response.” Covered hospitals were still expected to later register and list any added offsite locations, HRSA said.
Recent audits of 340B hospitals suggested widespread, and now unnecessary, use of the waiver, HRSA continued, as well as little apparent attempts on the part of the hospitals to register their sites as outlined in the FAQ.
“For example, in FY 2023 audits of hospital-covered entities, HRSA found that more than one-third of those hospital-covered entities were using 340B drugs in unregistered sites, and those hospital-covered entities reported that the unregistered sites would be listed on a future Medicare Cost Report,” HRSA wrote.
“However, as of May 11, 2023, those off-site, outpatient facilities were not registered in OPAIS, causing significant challenges for HRSA to determine compliance for these participating sites, as it was unclear whether the unregistered sites would ever be eligible and an integral part of a 340B hospital. … Although these covered entities made representations to HRSA that those offsite, outpatient sites would be registered on the next filed Medicare Cost Report, HRSA has found that despite these representations, those covered entities did not attempt to bring those sites into compliance with HRSA requirements,” HRSA wrote.
Bringing these entities into compliance is necessary to maintain the integrity of the 340B program, HRSA said. The government agency said that the 90-day period outlined in the notice should be sufficient as the burden of registration and filing a facility “does not take significant resources,” especially if hospitals had been keeping records of when 340B drugs were being dispensed.
In a statement released ahead of the notice’s publication in the Federal Registrar, America’s Essential Hospitals’ Senior Vice President of Policy and Advocacy Beth Feldpush said her group was disappointed with the reversal.
HRSA’s waiver had “corrected a longstanding barrier to access by allowing hospitals to use 340B drugs at offsite outpatient locations as soon as they began serving patients,” she said.
“We appreciate HRSA’s flexibility in allowing a transition period for locations opened before publication of the guidance, but the new notice will stifle essential hospitals’ ability to expand access to discounted drugs and other services through new locations in the future,” Feldpush said.