February 8, 2013—Hospitals that use 340B covered outpatient drugs in departments that treat both inpatients and outpatients cannot buy drugs for such units at group purchasing organization (GPO) prices and then replenish their inventories with drugs bought at 340B prices, the Health Resources and Services Administration (HRSA) said yesterday.
Hospitals have used this drug-purchasing model in so-called “mixed-use” settings such as emergency, surgical, and radiology departments for many years and its invalidation by HRSA’s Office of Pharmacy Affairs (OPA) is expected to cause considerable disruption.[ms-protect-content id=”2799″]
OPA announced the policy in a guidance document the morning of Feb. 7. That evening, OPA said on its website’s frequently asked questions page that it is giving hospitals until April 7, which is 60 days after the guidance document’s publication, to comply with the new policy.
Under the 340B statute, as a condition of participation, disproportionate share (DSH), children’s, and free-standing cancer hospitals cannot obtain covered outpatient drugs through a GPO or other group purchasing arrangement. Until yesterday, HRSA had offered limited guidance on the parameters of the exclusion.
Hospital pharmacy experts say that, as a practical matter, until recently hospitals wishing to access 340B pricing in mixed-use settings had little or no choice but to buy drugs for such settings at GPO prices and then replenish products that went to 340B-eligible patients with drugs purchased through 340B. The reason, they say, is threefold: (1) Under practice models used in today’s hospitals, there is no way to keep 340B and non-340B drugs separated in a mixed-use setting; (2) hospitals cannot initially buy all their mixed-use inventory at 340B prices because 340B-purchased drugs cannot be given to inpatients; and (3) until the past few years, drug distributors did not offer hospitals an alternative to a GPO account, such as a wholesale acquisition cost (WAC) purchasing account.
In the policy release, OPA said it became aware of this longstanding 340B hospital drug purchasing practice through its recent covered entity oversight activities. Some hospitals subject to the GPO prohibition, it said, “have been purchasing covered outpatient drugs through a GPO and subsequently either (1) “replenishing” through accounting by “replacing” the GPO purchased drug with a drug purchased under 340B; or (2) otherwise reclassifying the method of purchase after dispensing.”
“HRSA has not authorized this GPO replenishment model,” the policy release said. “The GPO prohibition is violated upon use of a GPO to obtain covered outpatient drugs and cannot be fixed or cured by subsequently changing the characterization through accounting or other methods. Hospitals using such models should immediately cease this practice or be found in violation of the GPO prohibition. If a covered entity violates the GPO prohibition, it will be removed from the 340B program as it will no longer be eligible for participation.”
“A 340B covered entity subject to the GPO prohibition should purchase using a non-GPO account and only replenish with 340B drugs once 340B patient eligibility is confirmed and can be documented through auditable records,” the policy release states. “Covered entities electing to use this or any other replenishment model must be able to demonstrate compliance with the GPO prohibition through auditable records.”
Hospitals determined to be in violation of the prohibition will be removed from the 340B program, including all of their enrolled outpatient sites and contract pharmacies, OPA said. They might also be required to repay manufacturers. To be considered for reinstatement, they would first have to demonstrate their ability to comply with the requirement.
The policy release also touched on the following matters:
340B price unavailability. If a hospital cannot buy a covered outpatient drug at the 340B price, it should send OPA a letter detailing the drug involved, the manufacturer, and the process by which the hospital was notified that the purchase could not be made.
Off-site facilities. Certain hospital off-site outpatient facilities may use a GPO for covered outpatient drugs if they (1) are at a different physical address than the parent; (2) are not listed in the OPA 340B database; (3) buy drugs through a separate pharmacy wholesaler account than the 340B participating parent; and (4) the hospital maintains records demonstrating that any covered outpatient drugs purchased through the GPO at these sites are not utilized or otherwise transferred to the parent hospital or any outpatient facilities registered on the OPA 340B database.
Contract pharmacy. Organizations that are not part of the 340B covered entity are not subject to the GPO prohibition; however, the 340B covered entity is still prohibited from having organizations purchase covered outpatient drugs through a GPO on its behalf or otherwise receive covered outpatient drugs purchased through a GPO. A 340B covered entity purchases and maintains title to the drugs, not a contract pharmacy. Therefore, a hospital subject to the GPO prohibition cannot use a GPO for covered outpatient drugs, even if the drugs are dispensed at a contract pharmacy.
Implementation timeline. 340B covered entities subject to the GPO prohibition must stop obtaining covered outpatient drugs through a GPO before the first day the covered entity is eligible to purchase 340B drugs and listed on the OPA 340B database. If a covered entity has GPO-purchased drugs remaining in inventory once enrolled in the 340B program, those drugs may be used until expended; however, purchasing from a GPO should cease.
HRSA issued a separate policy release on Feb. 7 regarding 340B covered entities’ use of OPA’s Medicaid exclusion file to avoid subjecting 340B-discounted drugs to duplicate Medicaid rebates. The Monitor will report on this release in a separate article.[/ms-protect-content]