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Is 340B in Jeopardy?


Following House approval of the American Health Care Act of 2017, all eyes are on the Senate as the Trump Administration looks to make good on its commitment to replace the Affordable Care Act. One of the casualties of new healthcare legislation could be the 340B Drug Discount Program (340B), which has been in place since 1992. While the program will likely not go away in its entirety, it could be subject to significant changes that will undoubtedly impact the financial operations of Federally Qualified Health Centers (FQHCs) and other healthcare providers.
 
Background
 
The 340B Drug Discount Program requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices. Through this program, FQHCs and other providers are able to stretch their limited federal resources to provide more comprehensive services and assist many more eligible patients.
 
However, despite the benefits of 340B, the program is not without its detractors. One of the key criticisms of 340B is the lack of clarity pertaining to certain aspects of the program. These include patient eligibility, the use of contract pharmacies, and the requirement for an external audit. To address this, “mega-guidance” was released on August 28, 2015. The guidance has gone through the comment process, was then updated, and final approval was anticipated in December 2016. 
 
What Will the New Administration Do?
 
Just nine days after Donald Trump was sworn in as president on January 21, 2017, the pending 340B mega-guidance was pulled from the Office of Management and Budget (OMB). Some stakeholders attribute the withdrawal of the Guidance to the Trump Administration’s January 20, 2017 memorandum directing agencies to immediately withdraw all unpublished regulations pending before OMB. But regardless, it is widely thought that the Trump Administration will not support or finalize any healthcare policies developed under President Obama. If a version of 340B were to move forward, it is widely assumed throughout the healthcare industry that the Trump Administration and Republican Congress will support the drug companies instead of the providers as it relates to the program. 
 
In general, many Republicans believe that the 340B program has gotten too big and taken on a life of its own. This belief relates more to 340B’s implementation in hospitals rather than FQHCs, but Republicans still may look to scale back the program. In doing so, it is possible that they would remove some types of providers that became eligible to participate in the program as part of the Affordable Care Act.  Another option would be to more strictly define what an eligible patient is.
 
The healthcare industry largely expects Republicans to challenge the contract pharmacies’ role in the 340B program and whether the pharmacies are exploiting the program for their own gain. Limiting the number of contract pharmacies is one way to mitigate this risk. Another is to regulate administration and dispensing fees.
 
What Should You Be Doing Now?
 
Although the Trump Administration’s impact on the 340B Drug Discount Program remains uncertain, CohnReznick offers the following suggestions to FQHCs regarding the program as the country’s approach to healthcare evolves:
 
  1. Regularly visit the Office of Pharmacy Affairs website to stay abreast of any changes in the program.
  2. Begin to incorporate some of the better practices of the mega-guidance, despite the fact that the guidance is not final and these practices are not required.
  3. Initiate an internal audit program and test it quarterly.
  4. Engage an external auditor to perform an annual 340B audit.
  5. Keep in mind that using a contract pharmacy does not relieve an FQHC from its responsibility for compliance.  
  6. Contact Apexus – the Health Resources and Services Administration (HRSA)-designated prime vendor for the 340B program – at 1-888-340-2787 (Monday – Friday, 9:00 a.m. – 6:00 p.m. ET) if you have any questions or concerns.
  7. If you are unsure of any eligibility issues, take a conservative approach when leveraging the program.
  8. Work with your primary care associations and lobbyists to advocate for continuation of the program.
  9. Be mindful that sweeping change in 340B is possible in the future. It is essential that FQHCs don't solely rely on the income from 340B to operate.
 
What Does CohnReznick Think?
 
The 340B Drug Discount Program will undoubtedly face changes with the new administration. Health centers should be proactive in looking at 340B as a supplement to their program income, rather than as a means to exist.
 
Contact
 
For more information, please contact James LaCroix, Partner, Healthcare Industry Practice, at james.lacroix@cohnreznick.com or 959-200-7262, or Peter Epp, Partner and Community Health Centers Practice Leader, at peter.epp@cohnreznick.com or 646-254-7411. 
 
Visit our webpage to learn more about CohnReznick’s Healthcare Industry Practice. 
 
This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
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