Drug Discount Monitor

HRSA Administrator Issues Letter Outlining 340B Integrity Efforts

Activities focus mainly on ensuring covered entities' compliance with program requirements.

February 22, 2012—The head of the Health Resources and Services Administration (HRSA) has written an open letter to 340B stakeholders describing actions both underway and in the works at her agency "to eliminate improper payments and reduce the risk of waste, fraud, and abuse" in the drug discount program.

"Two of the most important responsibilities we have are to ensure that our programs are free of fraud, waste, and abuse and that we do everything we can to maximize the positive impact of every dollar we spend," wrote HRSA Administrator Mary Wakefield in the letter, which was posted on the Office of Pharmacy Affairs (OPA) Web site today. "HRSA is fully committed to strengthening 340B program integrity efforts and ensuring that our management and oversight supports the program's continued success."

"HRSA recognizes the importance of strengthening oversight of both participating covered entities and manufacturers to ensure compliance with program requirements," she said.

The letter notes that the Government Accountability Office (GAO) called on HRSA last September to selectively audit 340B entities to deter program violations. HRSA also has been under pressure from influential Republican members of Congress to audit covered entities and otherwise "get a handle on potential abuse" of 340B drug discounts. OPA began auditing an undetermined number of 340B hospitals in January.

In her letter, Wakefield said HRSA is auditing covered entities both selectively and on a targeted basis. "These audits will help HRSA and all participating covered entities identify and mitigate program risk as well as identify best practices regarding program compliance," she said.

Wakefield also noted that HRSA is in the process of recertifying the eligibility of all 340B covered entities. "In addition to providing information for recertification, each participating entity must contact HRSA with any changes or updates to its existing 340B profile to remain in compliance with 340B program requirements," she wrote.

Wakefield said HRSA will be issuing a policy letter "to clarify that covered entities must ensure accuracy of their profiles and comply with eligibility requirements" and two other policy letters on hospital eligibility criteria and use of OPA's Medicaid exclusion file. In late November, her agency issued three policy letters on (1) manufacturer audits of 340B covered entities, (2) procedures for allocating 340B-priced drugs in short supply, and (3) the office's "penny pricing" policy when the statutory 340B ceiling price formula yields a zero or negative price.

Wakefield said HRSA will also continue on a quarterly basis to:

• verify the proprietary status of participating 340B hospitals by matching its list of participating hospitals with CMS's list of hospitals to ensure that ineligible private, for-profit hospitals are not participating;
• monitor disproportionate share hospital (DSH) adjustment percentages and remove hospitals from the program if they fall below the DSH percentage for eligibility; and
• monitor federally qualified health center (FQHC) status to ensure organizations are still eligible to participate in 340B.

With respect to program integrity and drug manufacturers, Wakefield said HRSA will "increase efforts to ensure that covered entities are not being overcharged through additional oversight of manufacturers."

The letter did not address HRSA's plans for issuing revised guidance defining the term "patient" for purposes of 340B drug discounts. HRSA sent a new proposed definition to the Office of Management and Budget (OMB) for review more than a year ago and the office returned it with unspecified changes in April 2011. In its September 2011 report on 340B, the GAO called on HRSA to finalize a new, more specific definition.