[Federal Register Volume 61, Number 207 (Thursday, October 24, 1996)]
[Notices]
[Pages 55156-55158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27344]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Resources and Services Administration
[0905-ZA92]


Notice Regarding Section 602 of the Veterans Health Care Act of 
1992 Patient and Entity Eligibility

AGENCY: Health Resources and Services Administration, HHS.

ACTION: Final Notice.

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SUMMARY: Section 602 of Public Law 102-585, the ``Veterans Health Care 
Act of 1992,'' enacted section 340B of the Public Health Service Act 
(``PHS Act''), ``Limitation on Prices of Drugs Purchased by Covered 
Entities.'' Section 340B provides that a manufacturer who sells covered 
outpatient drugs to eligible entities must sign a pharmaceutical 
pricing agreement with the Secretary of Health and Human Services in 
which the manufacturer agrees to charge a price for covered outpatient 
drugs that will not exceed an amount determined under a statutory 
formula.
    The purpose of this notice is to inform interested parties of final 
guidelines regarding a definition of covered entity ``patient.''

FOR FURTHER INFORMATION CONTACT: Annette Byrne, R.Ph., Attn: Drug 
Pricing Program, Bureau of Primary Health Care, 4350 East-West Highway, 
10th Floor, Bethesda, MD 20814, Phone (301) 594-4353.

EFFECTIVE DATE: October 24, 1996.

SUPPLEMENTARY INFORMATION:

(A) Background

    Proposed guidelines were announced in the Federal Register at 60 FR 
39762 on August 3, 1995. A period of 30 days was established to allow 
interested parties to submit comments. The Department received 15 
letters including comments concerning legal authority for developing 
the proposed guidelines and a need for a more specific definition. 
Comments were received on issues not within the scope of the definition 
of covered entity ``patient'' and were not addressed.
    The following section presents a summary of all major comments 
relevant to the definition of ``patient'' and a response to each 
comment. The guidelines are adopted as proposed.

(B) Comments and Responses

    Comment: The Federal Register notice was not promulgated in 
accordance with the Administrative Procedure Act (APA) and contains 
procedural irregularities. The Department has issued eight Federal 
Register notices containing drug pricing program guidelines and has not 
proposed a single regulation pursuant to APA requirements. Because of 
this, the program guidelines are invalid.
    Response: During the early months following enactment, it became 
clear that there were many gaps in the legislation and some form of 
program structure was necessary to move the program forward. There were 
approximately 11,500 eligible entities, 500 participating 
manufacturers, numerous wholesalers and many Federal programs affected 
by this legislation and all seeking guidance. It was incumbent upon the 
Department, acting through the Health and Resources and Services 
Administration, Bureau of Primary Health Care, Office of Drug Pricing 
(ODP), to implement this difficult congressional mandate in an 
expeditious manner.
    Interpretive rules and statements of policy were developed to 
provide necessary program guidance. The Department has published these 
guidelines in the Federal Register, used a Federal review process 
(including review by the Office of Management and Budget) and provided 
a public comment period to obtain both Federal as well as public input 
into guideline development. The Department considered all comments in 
developing these final guidelines.
    The guidelines explain how the Department intends to administer the 
340B program, further explain the statutory language by clarifying the 
meaning given by the Department to particular words of phrases, and do 
not exceed the purpose of 340B or conflict with any of its provisions. 
We believe that these guidelines create no new law and create no new 
rights or duties; therefore, they are not subject to the Administrative 
Procedure Act's requirement of notice and comment. Nevertheless, the 
Department chose to solicit and respond to public comment.
    Comment: The Federal Register notice has not complied with the 60 
day comment period required by the Social Security Act, 42 U.S.C. 
1395hh(b).
    Response: Section 340B is part of the Public Health Service Act, 
and its implementation is not subject to the provisions of the Social 
Security Act.
    Comment: The definition of a ``patient'' is ambiguous and difficult 
to

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administer from a drug diversion standpoint.
    Response: The definition of a ``patient'' was developed in order to 
identify those individuals eligible to receive 340B drugs from covered 
entities. Because of the large number of covered entities and the wide 
diversity of eligible groups (e.g., hemophilia, HIV, black lung, 
migrant health, and family planning services), it was essential that we 
work closely with each Federal program office to develop a definition 
flexible enough to describe accurately each covered entity's patient 
while at the same time not excluding eligible patients. In addition, 
not only comments received in response to this notice but also comments 
from prior Federal Register notices (59 FR 25111, May 13, 1994, and 59 
FR 47886, September 19, 1994) were incorporated into the definition. By 
using such input, we are confident that the definition will assist 
covered entities and manufacturers in determining which individuals are 
eligible to receive 340B drugs.
    Comment: Covered entities should be required to restrict purchases 
to drug products that are directly related to the provision of services 
for which Federal funding has been provided.
    Response: We do not consider a limitation on which drug products a 
covered entity may purchase to be a reasonable component of the 
definition of covered entity ``patient.'' To the extent that purchasing 
certain drugs would contravene a Federal or State law or certain PHS 
grant principles (and this information is brought to the Department's 
attention), the Department reserves the right to take such action as it 
deems appropriate.
    Comment: The definition of a ``patient'' establishes a requirement 
that a State must register eligible individuals who may then receive 
services for which funding has been provided under Title II of the Ryan 
White Act of 1990.
    Response: The proposed patient definition does not impose a new 
requirement that States register individuals as eligible for benefits 
under the Ryan White Act. Instead, the definition reflects the States' 
current practice of recording and verifying patient eligibility through 
a registration mechanism. An individual listed in a State Ryan White 
Title II drug assistance program will, for purposes of the patient 
definition, be considered a patient of the entity.
    Comment: The definition would permit a patient to obtain one 
medical treatment from a covered entity at any time in his or her 
lifetime and then continue (forever) to purchase drugs through 
prescription refills by using such services as mail order. The proposed 
patient definition should require that a covered entity patient be 
currently receiving care, and an additional section should be added to 
address the frequency of medical care.
    Response: All covered entities must establish a relationship with 
their patients such that the entity will maintain records of the 
individuals' health care. The entity will document in the record the 
care provided and, when appropriate, the prescriptions written. It 
would be inappropriate for the Department to proceed further and 
dictate to health care providers guidelines regarding the 
appropriateness of certain prescriptions. We understand that States 
typically regulate the refilling of prescriptions.
    Comment: Employees of covered entities should be either 
specifically precluded or included as eligible patients to receive 
discounted drug products.
    Response: Any employee of a covered entity who meets the criteria 
of the definition of covered entity ``patient'' would be eligible to 
access 340B pricing.
    Comment: Private patients of a physician who is under a contract to 
provide services to a covered entity should be considered patients of 
the entity.
    Response: Entity health record documentation (section one of the 
patient definition) and responsibility for care provided (section two 
of the patient definition) must remain with the covered entity. A 
physician, under contract with a covered entity, may see an individual 
and provide care for a medical indication. However, if care is provided 
outside of the contractual arrangement with the covered entity, the 
individual would not be considered a patient of the entity.
    Comment: The pharmacy of a covered entity should be required to 
have access to the records of the individual's health care maintained 
by the entity.
    Response: This type of requirement deals with the professional 
practice of pharmacy and not with the issue of identification and 
clarification of who is or is not a patient.
    Comment: The phrase in section one of the patient definition is not 
clear as to if ``records of the individual's health care'' is 
equivalent to the term ``medical record(s).''
    Response: The phrase ``records of the individual's health care'' 
was specifically used to avoid the term ``medical record,'' as the 
latter term may have different meanings in various locations. In 
addition, some covered entities may not, at the present time, use 
health records that comply with certain legal definitions of the term 
``medical record.'' The wording permits the use of health care 
documentation presently contained in a ``medical record,'' if such is 
the current health record system maintained by an entity.
    Comment: The requirement in section one of the patient definition 
that ``the covered entity maintain records of the individual's health 
care'' could establish a requirement that such health records be 
centralized at one location.
    Response: The requirement that covered entities maintain the 
records of an individual's health care does not establish a requirement 
that such health records be centralized in one location.
    Comment: The exclusion of individuals who receive no health care 
services from the covered entity other than the dispensing of a drug 
for subsequent self-administration or administration at home may 
exclude otherwise legitimate patients from receiving ``refills'' of 
prescribed medications previously authorized by the covered entity's 
health care provider.
    Response: A ``refill'' of a medication previously prescribed by an 
authorized entity health care provider, as part of the health care 
services provided by the covered entity, would meet the requirements of 
the patient definition. The ``refill'' would be a continuation of 
responsibility for the health care services provided by the covered 
entity. The covered entity would document the initial prescription for 
treatment in the record of health care, and the ``refill'' would be 
part of the range of health care services provided.

(C) Definition of a Patient

    An individual is a ``patient'' of a covered entity (with the 
exception of State-operated or funded AIDS drug purchasing assistance 
programs) only if:
    1. the covered entity has established a relationship with the 
individual, such that the covered entity maintains records of the 
individual's health care; and
    2. the individual receives health care services from a health care 
professional who is either employed by the covered entity or provides 
health care under contractual or other arrangements (e.g. referral for 
consultation) such that responsibility for the care provided remains 
with the covered entity; and
    3. the individual receives a health care service or range of 
services from the covered entity which is consistent with the service 
or range of services for which grant funding or Federally-qualified 
health center look-alike status

[[Page 55158]]

has been provided to the entity. Disproportionate share hospitals are 
exempt from this requirement.
    An individual will not be considered a ``patient'' of the entity 
for purposes of 340B if the only health care service received by the 
individual from the covered entity is the dispensing of a drug or drugs 
for subsequent self-administration or administration in the home 
setting.
    An individual registered in a State operated or funded AIDS drug 
purchasing assistance program receiving financial assistance under 
title XXVI of the PHS Act will be considered a ``patient'' of the 
covered entity for purposes of this definition if so registered as 
eligible by the State program.

    Dated: October 21, 1996.
Ciro V. Sumaya,
Administrator, Health Resources and Services Administration.
[FR Doc. 96-27344 Filed 10-23-96; 8:45 am]
BILLING CODE 4160-15-P