GPHA Clouds

340B Mega Guidance: A Tough Pill to Swallow for Some

HHS published its much anticipated Omnibus guidance (“Mega Reg”) on August 28, 2015. The full document, which includes 90 pages of information is located here.

Upon reading of this document, discussion with colleagues in the 340B space, and reading of multiple blog posts, I thought I would take a stab at summarizing some of what is included in the guidance.

Perhaps the biggest change, which is always good water cooler discussion in the 340B community, is further clarification, or in this writer’s opinion “narrowing” of the “Definition of a Patient”. The existing definition of a patient is found here on the OPA website. Sparing you the details of the existing definition, let’s jump right into what the proposed new definition of a patient is, and how it might change your program.

Part 1

The individual receives a health care service at a covered entity site which is registered for the 340B Program and listed on the public 340B database;

The keyword here is “a” and does not necessarily mean the health care service that resulted in the prescription being written. This at first appeared “contentious”. However, keep reading….

Part 2

The individual receives a health care service from a health care provider employed by the covered entity or who is an independent contractor of the covered entity such that the covered entity may bill for services on behalf of the provider.

The keywords here are “such that the covered entity may bill for services on behalf of the provider”. You’ll also notice as you read the new proposed definition, the keywords “e.g. referral for consultation” no longer exist.

This is where the rubber meets the road on how things are done currently, versus how things may be done in the future if this definition is approved. Rarely, in this scenario does the Covered Entity actual bill for the services rendered by a consultant they do not employ.  This would most certainly disqualify any prescription written by a Consultant or Specialist in a Clinic that is not a registered Clinic site of the 340B Covered Entity. Say goodbye to the “Extended”, “Privileged”, “Credentialed” providers concept and philosophy. If you do not employ or at least bill for the doctors seeing patients in a clinic that you own(find a consultant if you are uncertain), there is a high likelihood the prescriptions filled at your contract pharmacies will not pass the litmus test of this definition.

Part 3

(1) An individual receives a drug that is ordered or prescribed by the covered entity provider as a result of the service described in (2). An individual will not be considered a patient of the covered entity if the only health care received by the individual from the covered entity is the infusion of a drug or the dispensing of a drug.

For item (1), of this part the keywords here are “ordered or prescribed by the covered entity provider as a result of the service” . This is a contentious portion of the definition, that is wrought with interpretation. In this writers opinion, relating a specific drug order, one-to-one, with a specific billable service, borders on the interpretation of medical practice decisions. Perhaps this is best explained in an example. If a patient is started on a blood thinner, they are often also prescribed an Anti-acid medication to help prevent stomach ulcerations because the risk is higher for stomach ulcers for patients taking blood thinners. Does this mean, that the prescription for the Ant-Acid medication, would not qualify, because the patient does not have a history of ulcer, and/or no notes are written as to the rational behind “why” the patient was prescribed this medication? Will HHS auditors have the ability to see the forest through the trees based on this?

For item(2) of this part, it gets heavy. The whole statement is the key. “An individual will not be considered a patient of the covered entity if the only health care received by the individual from the covered entity is the infusion of a drug or the dispensing of a drug.”

So how might this translate to your practice? Many believe this is targeted at Covered Entities who provide infusion services such as for Chemotherapy, but do not have a provider-patient encounter at the time of infusion. As an example, you may receive an order from an Oncologist, for infusion of a medicine. If that Oncologist is not seeing the patient at one of your registered 340B facilities, and you do not employ or contract with the Oncologist, such that you can bill on his or her behalf, AND the only thing you are doing is infusing the drug, that drug order would not qualify for purchase at 340B pricing.

Given the cost of drugs given in this scenario (biologics, chemotherapy, biosimilars), this portion of the patient definition will most certainly impact a lot of Covered Entities providing infusion only services.

Part 4

(4) The individual receives a health care service that is consistent with the covered entity’s scope of grant, project, or contract;

This is sort of a carry over from the original definition and addresses specific Covered Entities. No new news on this one.

Part 5

5) The individual is classified as an outpatient when the drug is ordered or prescribed. The patient’s classification status is determined by how the services for the patient are billed to the insurer (e.g., Medicare, Medicaid, private insurance). An individual who is self-pay, uninsured, or whose cost of care is covered by the covered entity will be considered a patient if the covered entity has clearly defined policies and procedures that it follows to classify such individuals consistently; and

The key words here are “individual is classified as an outpatient when the drug is ordered or prescribed.” . Many believe that this will disqualify prescriptions written during hospital discharge, if the visit is determined to be an inpatient visit. Said another way, just because a patient visits your hospital, has a stay, and leaves with discharge prescriptions, does not mean that you can lay claim to those prescriptions at the contract pharmacy relationship when they are filled. Currently, many Covered Entities would claim any discharge prescriptions, and frankly in prescriptions filled within a proximal time period or as matched by a diagnosis code as eligible for 340B at the contract pharmacies.

Part 6

(6) The individual has a relationship with the covered entity such that the covered entity maintains access to auditable health care records which demonstrate that the covered entity has a provider-to-patient relationship, that the responsibility for care is with the covered entity, and that each element of this patient definition in this section is met for each 340B drug.

This expounds on the existing definition. One key term change is the word “auditable” health care records. HHS has proposed a few different things regarding tracking. Namely, HHS has proposed that auditable records be maintained for a period of at least 5 years. HHS has also indicated that failure to maintain auditable records, or produce them in the event of audit, would imply non-compliance and can result in removal from the program and repayment to manufacturers.

HHS was also strong in its language, citing its expectation that Covered Entities should perform internal compliance reviews of ALL contract pharmacies quarterly and have an independent audit done annually for all contract pharmacies. These audits and internal reviews serve to ensure the patient definition is being met, and diversion and duplicate discounts are not occurring.

In a nutshell this means…

Realizing, I will not hit every scenario identically, in a nutshell here is what the new patient definition might mean to you.

If the majority of your 340B prescription savings from contract pharmacies, is driven by provider clinics, for which you employ or contract with your providers, and bill on behalf of them, your program will not change that much.

If the majority of your 340B prescription savings is driven off of referral prescriptions, “open” IV infusion centers using prescriptions from non-employed or non-contracted prescribers, or hospital-based discharge prescriptions from inpatients, your program stands to change significantly.

Auditable records, internal compliance reviews, and independent audits will be a mainstay of documenting your program is running with integrity.

Some final thoughts…

This guidance is simply proposed guidance, and this post does not cover the entire proposal. You should take advantage of the time to read and comment on this guidance. Please share how this guidance might impact your program, and ways in which this guidance might limit your ability to care for the under-served. Submit comments via using the Federal eRulemaking portal or via email at and be sure to include RIN 0906-AB08 in the subject of the email.

Finally, if you are uncertain as to how these changes might impact your program, please reach out to me. We have a great network of consultants who can help navigate you through this period, assess your program, and assist you during this change.



Tim Kerr



Tim Kerr is Vice President of Pharmacy Services for Great Plains Health Alliance. If you have questions for Tim on how to reduce the costs of prescriptions, or navigating other Pharmacy Services issues like 340B contract negotiations; give him a call or send him an email at

Posted by Aaron Miller on September 15, 2015 in Healthcare Improvement, Pharmacy Services.


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