[Federal Register: July 9, 2007 (Volume 72, Number 130)]
[Notices]
[Page 37250-37252]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jy07-83]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Resources and Services Administration
Notice Regarding the 340B Drug Pricing Program; Children's
Hospitals
AGENCY: Health Resources and Services Administration, HHS.
ACTION: Notice.
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SUMMARY: Section 340B of the Public Health Service Act (section 340B)
and section 1927(a) of the Social Security Act (section 1927(a))
implement a drug pricing program in which manufacturers who sell
covered outpatient drugs to covered entities must agree to charge a
price that will not exceed an amount determined under a statutory
formula. Section 6004 of the Deficit Reduction Act of 2005 (Pub. L.
109-171) (section 6004) added children's hospitals to the list of
covered entities eligible to access 340B discounted drugs. The purpose
of this notice is to inform interested parties of proposed guidelines
regarding the addition of children's hospitals that meet certain
requirements, specifically: (1) The process for the addition of
children's hospitals to the 340B Program; and (2) the obligation of
manufacturers to provide the statutorily mandated discount to
children's hospitals. These proposed guidelines will not take effect
until final guidelines are issued.
DATES: The public is invited to comment on the proposed guidelines by
September 7, 2007. After consideration of the submitted comments, the
Health Resources and Services Administration (HRSA) will issue the
final guidelines.
ADDRESSES: Address all comments to Mr. Bradford R. Lang, Public Health
Analyst, Office of Pharmacy Affairs (OPA), Healthcare Systems Bureau
(HSB), HRSA, 5600 Fishers Lane, Parklawn Building, Room 10C-03,
Rockville, MD 20857.
FOR FURTHER INFORMATION CONTACT: Mr. Jimmy Mitchell, Director, OPA,
HSB, HRSA, 5600 Fishers Lane, Parklawn Building, Room 10C-03,
Rockville, MD 20857, or by telephone through the Pharmacy Services
Support Center at 1-800-628-6297.
SUPPLEMENTARY INFORMATION:
(A) Background
Section 602 of Public Law 102-585, the Veterans Health Care Act of
1992, enacted section 340B, Limitation on Prices of Drugs Purchased by
Covered Entities and added certain implementation provisions for the
340B Program to section 1927(a) of the Social Security Act. Section
340B contains the majority of the requirements for covered entities
participating in the 340B Program, while the relevant provisions of
section 1927(a) of the Social Security Act provide primarily for the
requirement that manufacturers provide the statutorily mandated
discount to covered entities.
Section 340B contains a list of covered entities that are eligible
to receive discounts through the 340B Program. The list includes
entities such as Federally Qualified Health Centers, State-operated
AIDS drug purchasing assistance programs, and certain disproportionate
share hospitals. Children's hospitals were not included as covered
entities under section 340B in the Veterans Health Care Act of 1992 as
enacted.
Section 6004 added children's hospitals as covered entities
eligible to access 340B discounted drugs. To accomplish this, section
6004 did not amend section 340B (which contains many of the
requirements for covered entities). Section 6004 amended section
1927(a) of the Social Security Act (which primarily contains
requirements for manufacturers' participation) to add children's
hospitals to the 340B Program.
To be eligible for the 340B Drug Pricing Program, section 1927(a),
as amended by section 6004, requires children's hospitals to meet the
requirements of clauses (i) and (iii) of section 340B(a)(4)(L) of the
Public Health Service Act, which contain
[[Page 37251]]
provisions for State or local government affiliations and non-
participation in group purchasing organizations. In addition,
children's hospitals must meet the requirements of clause (ii) of such
section, which contains requirements for the provision of indigent
care, if such section ``were applied by taking into account the
percentage of care provided by the hospital to patients eligible for
medical assistance'' under Medicaid.
(B) Obligation of Manufacturers To Provide 340B Discounts to Children's
Hospitals
Section 1927(a)(5)(A) of the Social Security Act requires
manufacturers to enter into agreements with the Secretary that meet the
requirements of section 340B with respect to covered outpatient drugs
purchased by a covered entity. Section 1927(a)(5)(B), as amended by
section 6004, defines covered entities for purposes of section
1927(a)(5) as those covered entities listed in the Public Health
Service Act and certain children's hospitals. As section 1927(a)(5)(A)
requires manufacturers to enter into agreements ``with respect to
covered outpatient drugs purchased by a covered entity,'' and covered
entity is defined as including children's hospitals for purposes of
section 1927, manufacturers are required to extend 340B pricing to
eligible children's hospitals.
The Pharmaceutical Pricing Agreements (PPA) between the Secretary
and each manufacturer require manufacturers to provide 340B discounted
covered outpatient drugs to covered entities. Given the clear
congressional intent in Section 6004 to expand the category of covered
entities, the PPAs currently in place effectively require manufacturers
to provide 340B discounts to children's hospitals without need for
further amendment to currently existing PPAs.
(C) Process for Admission of Children's Hospitals to the 340B Program
(1) Children's Hospitals Participation
Children's hospitals participation in the 340B Drug Pricing Program
is voluntary. Consistent with the participation of other covered
entities, once a children's hospital has elected to participate in the
program, it must wait to enter or withdraw from the program until the
next official updating of the 340B covered entity database. OPA will
update this list two weeks before the beginning of each calendar
quarter. Participating children's hospitals must comply with all
program guidelines for covered entities until the date they are removed
from the 340B covered entity database. OPA will accept applications
from children's hospitals for entry into the 340B Program as of the
date of publication of the final notice of these guidelines.
(2) Certification by Children's Hospitals Prior to 340B Drug Pricing
Program Entry
As with other covered entities, prior to entry into the 340B Drug
Pricing Program, children's hospitals will be required to provide OPA
with a certification regarding several different program requirements.
As a threshold matter, a hospital wishing to qualify for the 340B
Program as a children's hospital must demonstrate that the hospital is
a ``children's hospital'' as defined by section 6004. Section 6004
requires that a hospital wishing to qualify as a children's hospital
covered entity must (1) satisfy the definition of ``children's
hospital'' contained in section 1886(d)(1)(B)(iii) of the Social
Security Act; and (2) meet minimum requirements for the receipt of an
additional payment under Medicare pursuant to section 1886(d)(5)(F)(i)
of the Social Security Act (if such clause were applied by taking into
account the percentage of care provided by the hospital to Medicaid
patients). Given the reliance of section 6004 on Medicare payment
provisions for the definition of ``children's hospital,'' a hospital
will need to demonstrate that it has been provided a Medicare provider
number identifying the hospital as a ``children's hospital'' (i.e., a
hospital with a 3300 series Medicare provider number).
Prior to entry into the 340B Program, a children's hospital must
certify that it will abide by all the requirements of section 340B that
all other covered entities abide by (e.g., prohibition on resale of
covered outpatient drugs; prohibition on duplicate discounts or
rebates). While children's hospitals are not explicitly mentioned in
section 340B, it is implicit in section 1927(a) of the Social Security
Act that children's hospitals abide by the requirements of section
340B. Section 1927(a) provides that manufacturers must have entered
into agreements with the Secretary that meet the requirements of
section 340B and several of the provisions contained in these
agreements concern covered entities' compliance with provisions of
section 340B. Furthermore, it is within the Secretary's authority under
section 340B to create guidelines necessary for the implementation of
the program. Unless children's hospitals are subject to all of the same
rules as other covered entities, the inclusion of children's hospitals
in the 340B Program would be difficult, if not impossible.
Prior to entry into the 340B Program a children's hospital must
certify compliance (along with the date of compliance) with clauses
(i), (ii), and (iii) of section 340B(a)(4)(L) (in accordance with
section 1927(a)(5)(B) of the Social Security Act). To comply with
section 340B(a)(4)(L)(i), a children's hospital will have to certify
(and include such supporting documentation as requested by OPA) that
the children's hospital is:
(1) Owned or operated by a unit of State or local government;
(2) a public or private non-profit corporation which is formally
granted governmental powers by a unit of State or local government; or
(3) A private non-profit hospital under contract with State or
local government to provide health care services to low income
individuals who are not eligible for Medicare or Medicaid.
To comply with section 340B(a)(4)(L)(ii), a children's hospital
will have to certify (and include such supporting documentation as
requested by OPA) that the children's hospital:
(1) Is located in an urban area, has 100 or more beds, and can
demonstrate that its net inpatient care revenues (excluding any of such
revenues attributable to Medicare), during the cost reporting period in
which the discharges occur, for indigent care from State and local
government sources and Medicaid exceed 30 percent of its total of such
net inpatient care revenues during the period; or
(2) for the most recent cost reporting period that ended before the
calendar quarter involved, had a disproportionate share adjustment
percentage (as determined under section 1886(d)(5)(F) of the Social
Security Act) greater than 11.75 percent.
To comply with section 340B(a)(4)(L)(iii), a children's hospital
will have to certify that the children's hospital will not participate
in a group purchasing organization or group purchasing arrangement for
covered outpatient drugs as of the effective date in the 340B covered
entity database.
Prior to entry into the 340B Program, OPA requires certification of
a children's hospital's compliance with section 340B(a)(4)(L)(ii). In
addition to having a 3300 series Medicare provider identification
number, initially, OPA will seek verification of compliance based on
the Medicare cost report submitted by the children's hospital to the
Centers for Medicare and Medicaid Services (CMS). Given that children's
hospitals are not eligible for the
[[Page 37252]]
prospective payment system, the materials submitted by any particular
children's hospital may not provide the required verification. To the
extent that OPA is unable to obtain independent verification, a
children's hospital will be expected to verify that the children's
hospital meets the requirements of section 340B(a)(4)(L)(ii) if
requested by OPA.
OPA is considering whether it would be appropriate to require a
statement from an independent auditor certifying that a children's
hospital meets the requirements of section 340B(a)(4)(L)(ii) in those
cases where there is no established method of verification analogous to
that utilized to annually certify DSH eligibility in the 340B Drug
Pricing Program. OPA invites comments from stakeholders on the
feasibility of an independent auditor to verify eligibility of
children's hospitals. OPA also seeks comments from children's hospitals
as to the relative burden that an independent auditor statement may
entail and welcomes alternate proposals as to how to best ensure the
integrity of the 340B Drug Pricing Program while minimizing costs.
(3) Eligibility for Retroactive Discounts
Section 6004 indicates that the amendment authorizing entry of
children's hospitals into the 340B Program ``shall apply to drugs
purchased on or after the date of the enactment of this Act.'' Section
6004 was enacted on February 8, 2006. Therefore, once they are admitted
to the 340B Program, children's hospitals are eligible for 340B drug
pricing retroactive to February 8, 2006. However, a children's hospital
will be eligible for retroactive discounts only to the extent that it
has satisfied all requirements for participation in the 340B program
back to the date discounts are requested.
Similar to when the 340B Program was first started, children's
hospitals that participate in the program will be eligible for
retroactive discounts. Until 120 days after publication of the final
notice, children's hospitals which have been included in OPA's database
of covered entities may request retroactive discounts (discounts,
rebates, or account credit) from pharmaceutical manufacturers for
covered outpatient drugs that satisfy all the following conditions:
(1) The covered outpatient drugs must have been purchased on or
after February 8, 2006;
(2) The covered outpatient drugs must not have generated Medicaid
rebates (the children's hospital must have appropriate documentation to
demonstrate this); and
(3) The covered outpatient drugs must have been purchased on or
after the date on which the children's hospital satisfied all
requirements for participation in the 340B Program as outlined in
section (C)(2) of this notice.
In order to satisfy the last condition listed above, a children's
hospital must be able to demonstrate, at a minimum, that as required by
section 340B(a)(4)(L)(iii) of the Public Health Service Act the
children's hospital did not have a group purchasing agreement for
covered outpatient drugs and satisfied the requirements of section
340B(a)(4)(L)(i) and 340B(a)(4)(L)(ii) at the time the covered
outpatient drugs for which rebates are requested were purchased.
Dated: June 29, 2007.
Elizabeth M. Duke,
Administrator.
[FR Doc. E7-13239 Filed 7-6-07; 8:45 am]
BILLING CODE 4165-15-P