HRSA Issues Guidance on Children’s Hospital 340B Drug Pricing Program

By Michelle L. Butler –

On September 1, 2009, the Health Resources and Services Administration (“HRSA”) issued a Final Notice regarding qualified children’s hospitals and the 340B Drug Pricing Program.  See 74 Fed. Reg. 45,206 (Sept. 1, 2009).  Section 340B of the Public Health Service Act (“PHS Act”) lists the types of entities (i.e., Covered Entities) to which manufacturers of covered outpatient drugs are required to extend 340B Ceiling Prices.  See 42 U.S.C. § 256b(a)(4).  Children’s hospitals are not on this list.  Section 6004 of the Deficit Reduction Act of 2005 (the “DRA”) amended the statutory provisions related to the Medicaid Drug Rebate Program to include certain qualified children’s hospitals as Covered Entities for purposes of the Medicaid Drug Rebate Program.  See 42 U.S.C. § 1396r-8(a)(5)(B).  There was no similar change to section 340B of the PHS Act to include children’s hospitals on that list of Covered Entities.  In July 2007, HRSA published in the Federal Register proposed guidelines for children’s hospitals and requested comments on those proposed guidelines.  In the September 1, 2009 Federal Register Notice, HRSA addresses the comments and issues its guidance.

HRSA has determined that despite the fact that qualified children’s hospitals were not listed in the section 340B list of Covered Entities, such hospitals are Covered Entities by virtue of their inclusion in the definition of Covered Entities in the Medicaid Drug Rebate statute.  74 Fed. Reg. at 45,206-07, 45,209.  Accordingly, manufacturers are required to extend 340B Pricing to children’s hospitals that the meet the statutory qualifications.  HRSA has also determined that the terms of the Pharmaceutical Pricing Agreements between manufacturers and the Secretary of the Department of Health and Human Services are broad enough to include qualified children’s hospitals.

The final guidelines describe the process for admission of children’s hospitals into the 340B Drug Pricing Program.  74 Fed. Reg. at 45,209-11.  Prior to entry into the 340B Drug Pricing Program, a children’s hospital will need to provide certifications of compliance with a number of requirements, including the requirement that it will not participate in a group purchasing organization as of the effective date of its entry into the program.  Once a qualified children’s hospital has satisfied the enrollment criteria, HRSA, acting through the Office of Pharmaceutical Affairs (“OPA”), will list any such qualified children’s hospitals on the 340B Drug Pricing Program Database in its standard quarterly updates. 

The final guidelines also state that section 6004 of the DRA authorized entry of qualified children’s hospitals into the 340B Drug Pricing Program as of the effective date of the DRA, which was February 8, 2006.  According to the guidelines, therefore, qualified children’s hospitals are eligible for 340B Drug Pricing back to February 8, 2006, once they are admitted to the 340B Program and listed on the 340B Drug Pricing Program Database.  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 Drug Pricing Program back to the date discounts are requested.  The guidelines specify that children’s hospitals may request retroactive discounts directly from pharmaceutical manufacturers when the following requirements are satisfied:

1. The children’s hospital is listed on the 340B Covered Entity Database as eligible to purchase under 340B within one year of publication of this notice;
2. The children’s hospital sent a request in writing to each manufacturer of the drug(s) for which retroactive discounts are sought within 30 days of the children’s hospital having been listed as eligible to purchase under 340B on the Covered Entity Database;
3. The covered outpatient drugs must have been purchased on or after February 8, 2006;
4. The covered outpatient drugs must not have generated Medicaid rebates (the children’s hospital must have appropriate documentation to demonstrate this);
5. The covered outpatient drugs must not have been sold or transferred to a person who was not a patient of the children’s hospital; and
6. 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 [the guidance].

74 Fed. Reg. at 45,211.