[Federal Register Volume 74, Number 168 (Tuesday, September 1, 2009)]
[Notices]
[Pages 45206-45211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-21109]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Resources and Services Administration
Notice Regarding 340B Drug Pricing Program--Children's Hospitals
AGENCY: Health Resources and Services Administration, HHS.
ACTION: Final notice.
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SUMMARY: Section 340B of the Public Health Service Act (section 340B)
and section 1927(a) of the Social Security Act (section 1927(a))
implement a drug pricing program in which manufacturers who sell
covered outpatient drugs to covered entities must agree to charge a
price that will not exceed an amount determined under a statutory
formula. Section 6004 of the Deficit Reduction Act of 2005 (Pub. L.
109-171) (section 6004) added certain qualifying children's hospitals
to the list of covered entities eligible to access 340B discounted
drugs. The purpose of this notice is to inform interested parties of
final guidelines regarding the addition of children's hospitals that
meet certain requirements, specifically: (1) The process for the
registration of children's hospitals to the 340B Program; and (2) the
obligation of manufacturers to provide the statutorily mandated
discount to those children's hospitals.
FOR FURTHER INFORMATION CONTACT: Mr. Jimmy Mitchell, Director, Office
of Pharmacy Affairs (OPA), Healthcare Systems Bureau (HSB), Health
Resources and Services Administration (HRSA), 5600 Fishers Lane,
Parklawn Building, Room 10C-03, Rockville, MD 20857, or by telephone
through the Pharmacy Services Support Center at 1-800-628-6297.
DATES: Effective Date: September 1, 2009.
SUPPLEMENTARY INFORMATION:
(A) Background
Proposed guidelines for children's hospitals were announced in the
Federal Register at 72 FR 37250 on July 9, 2007. A comment period of 60
days was established to allow interested parties to submit comments.
HRSA, HSB, acting through the OPA, received 20 comments concerning the
proposal.
Section 602 of Public Law 102-585, the Veterans Health Care Act of
1992, established section 340B of the Public Health Service Act and
added certain implementation provisions for the 340B Program to section
1927(a) of the Social Security Act. Section 340B contains the majority
of the requirements for covered entities participating in the 340B
Program, while the relevant provisions of section 1927(a) of the Social
Security Act provide primarily for the requirement that manufacturers
provide the statutorily mandated discount to covered entities.
Section 340B contains a list of covered entities that are eligible
to receive discounts through the 340B Program. The list includes
entities such as Federally Qualified Health Centers, State-operated
AIDS drug purchasing assistance programs, and certain disproportionate
share hospitals. Children's hospitals were not included as covered
entities under section 340B in the Veterans Health Care Act of 1992 as
enacted.
Section 6004 of the Deficit Reduction Act (DRA), Pub. L. 109-171,
added certain qualifying children's hospitals as covered entities
eligible to access 340B discounted drugs. Section 6004 did not amend
section 340B (which contains many of the requirements for covered
entities), however, the DRA provision amended section 1927(a) of the
Social Security Act (which primarily contains requirements for
manufacturers' participation) to add children's hospitals to the 340B
Program.
To be eligible for the 340B Drug Pricing Program, section 1927(a),
as amended by section 6004 of the DRA, requires children's hospitals to
meet the requirements of clauses (i) and (iii) of section 340B(a)(4)(L)
of the Public Health Service Act, which contain provisions for State or
local government affiliations and non-participation in group purchasing
organizations. In addition, children's hospitals must meet the
requirements of clause (ii) of such section, which contains
requirements for the provision of indigent care, if such section ``were
applied by taking into account the percentage of care provided by the
hospital to patients eligible for medical assistance'' under Medicaid.
We received several comments in support of the proposal. Supporting
comments agreed with the proposed guidelines and that section 6004 of
the DRA brings eligible children's hospitals into the 340B program.
Several commenters agreed with requiring children's hospitals to
demonstrate their status as defined by the Social Security Act section
1886(d)(1)(B)(iii) and to obtain a Medicare provider number in the 3300
series. Many comments supported obtaining an independent audit to
certify eligibility requirements and to help ensure program integrity.
Comments supported HRSA's position that current Pharmaceutical Pricing
Agreements (PPAs) are already broad enough to include children's
hospitals as covered entities.
Additional comments challenged HRSA's legal authority and
compliance with the Administrative Procedure Act as well as contractual
authority with existing PPAs. Other comments raised issues of
retroactive discounts, prevention of duplicate discounts, and
alternative eligibility criteria such as using disproportionate patient
percentages and independent audits. All comments discussed the
potential impacts on covered entities, patients, and manufacturers.
The following section presents a summary of all major comments,
grouped by subject, and a response to each comment. All comments were
considered in developing this final notice and changes were made to
content when appropriate.
(B) Comments and Responses
(1) HRSA's Legal Authority
Comment: HRSA lacks authority to add children's hospitals to the
340B program through guidelines.
Response: HRSA disagrees. The Department publishes guidelines in
the Federal Register providing a public comment period to obtain input
into guidance development. Congress did not prescribe the process by
which children's hospitals would be added into the 340B program. HRSA
has authority to provide guidelines interpreting the statute and its
intended administration of the 340B program. The guidelines are not
subject to the
[[Page 45207]]
Administrative Procedure Act's notice and comment requirements;
however, the Department chose to solicit and respond to public
comments. These guidelines help to fulfill the Secretary's obligation
to provide for the operation of the program under section 340B.
Comment: It is unclear that Congress has authorized the Secretary
to enter into PPAs that include children's hospitals. Contractual
obligations of the PPA are directly tied to section 340B, which has not
been amended to include children's hospitals as covered entities.
Response: HRSA acknowledges that section 6004 of the DRA did not
amend section 340B to include children's hospitals as covered entities.
However, Congress did add children's hospitals to the 340B program by
amending section 1927(a) of the Social Security Act which requires that
manufacturers provide the statutorily mandated discount to covered
entities. Congress specifically defined the term covered entity as
including certain qualifying children's hospitals. Considering the
statutory scheme as a whole, it is clear that the Secretary has been
authorized to include children's hospitals within the program.
Comment: Since the appropriate legislative changes were not made,
it is out of the scope of authority of the Secretary and HRSA to read
the current PPA as including children's hospitals.
Response: The existing PPAs do not need to be amended to include
children's hospitals. The PPAs require manufacturers to extend 340B
pricing to all covered entities listed by HRSA in its database. The PPA
also requires that it be interpreted in a manner that best effectuates
the underlying statutory scheme. As previously discussed, including
children's hospitals as covered entities for purposes of the PPA best
effectuates the statutory scheme and therefore children's hospitals are
covered entities for purposes of the PPA.
(2) Certification of Eligibility
Comment: Clarify the Social Security Act definition of children's
hospitals to mean that in any fiscal year or calendar year, no less
than 80 percent of patient days involve patients under 18 years of age.
Response: We disagree with a suggestion that HRSA utilize an 80
percent figure. It is unclear on what basis such a figure would be
determined. The statute indicates that section 1886(d)(1)(B)(iii) of
the Social Security Act defines the term children's hospital for
purposes of 340B eligibility. This section defines a children's
hospital as ``a hospital whose inpatients are predominantly individuals
under 18 years of age.'' In using the statutory definition, HRSA has
taken into account the CMS interpretation of this provision and the
context of the 340B Drug Pricing Program.
Comment: The guidelines should require participating children's
hospitals to demonstrate that the entity is a children's hospital as
defined by the Social Security Act and obtain a Medicare provider
number in the 3300 series identifying it as a children's hospital.
Response: We agree. The statute defines ``children's hospitals'' by
reference to section 1886(d)(1)(B)(iii) of the Social Security Act. CMS
has reserved the 3300 series of Medicare Provider Numbers for
children's hospitals that meet the statutory definition. The guidelines
have been changed accordingly to make this clearer.
Comment: Clarify how the disproportionate share adjustment
percentage eligibility criteria can be applied to children's hospitals
since children's hospitals do not receive Medicare disproportionate
share hospital (DSH) payment adjustments. Children's hospitals should
be permitted to rely on its disproportionate patient percentage (DPP)
as defined by CMS for purposes of Medicaid. The DPP formula
demonstrating a percentage of greater than 27.32 percent is just as
reliable as the required greater than 11.75 percent disproportionate
share adjustment percentage.
Response: HRSA agrees with the comment that children's hospitals
that do not receive Medicare DSH payment adjustments may have
difficulty in showing their disproportionate share adjustment
percentage. As an alternative, children's hospitals can show compliance
with this requirement if they provide independent verification that if
the disproportionate share adjustment percentage were calculated, it
would be greater than 11.75 percent. Under current law, one method for
reaching such a conclusion would be to have a DPP greater than a
threshold amount that equates to a disproportionate share adjustment
percentage greater than 11.75 percent. DPP for this purpose is defined
at 42 CFR 412.106 and is used in the current applicable statutory
formula to calculate the disproportionate share adjustment percentage
for DSHs.
Comment: Many children's hospitals do not file any or full Medicare
cost reports. If no cost report exists, children's hospitals should be
permitted to rely on their own independent auditors to confirm their
DPP.
Response: If a children's hospital does not file a Medicare cost
report, HRSA agrees that children's hospitals can confirm eligibility
through the findings of an independent auditor and certification by the
covered entity as to the appropriate value of the hospital's
disproportionate share adjustment percentage, as based upon the DPP.
Comment: In addition to requiring verification from independent
auditors from children's hospitals that the entity meets 340B
eligibility requirements, a comment was made to require this
verification to OPA annually because the data used in the calculation
to meet the requirements of section 340B(a)(4)(L)(ii) are subject to
change.
Response: HRSA agrees that there is a need for ongoing verification
as to whether this eligibility requirement continues to be met over
time. After enrollment, children's hospitals, as do all covered
entities, have an ongoing responsibility to immediately notify the OPA
in the event of any change in eligibility for the 340B Drug Pricing
Program. No less than on an annual basis, children's hospitals will
need to demonstrate that the children's hospital continues to have the
required disproportionate share adjustment percentage or DPP. The OPA
will provide additional guidance as it develops its plans to annually
certify covered entities. To the extent that the OPA is able to obtain
periodic documentation of data similar to that provided by CMS with
respect to DSHs, it may notify the covered entity that information need
not be provided.
(3) Eligibility for Rebates Back to February 8, 2006
Comment: The eligibility criteria for receiving retroactive
discounts are overwhelming and confusing to both manufacturers and
covered entities. HRSA should remove the ability to receive retroactive
discounts from the final rule or, at a minimum, clearly define these
criteria.
Response: Although the statute can be complex, we disagree that it
is overwhelming or that unilaterally disallowing any ``retroactive''
discounts is appropriate. The parties are in the best position to
understand and resolve claims over these issues. In this guidance, HRSA
believes it has provided an appropriate level of detail as to its view
on how covered entities can qualify for rebates on purchase back to
February 8, 2006, the date of enactment of the DRA.
Comment: HRSA should post on its on-line database the date when a
children's hospital satisfied the 340B eligibility criteria for
manufacturers to
[[Page 45208]]
verify if and when the children's hospital was entitled to receive
retroactive discounts.
Response: HRSA does not currently plan to provide the eligibility
date on its Web site for purposes of retroactive rebates. HRSA intends
to follow the current practice of listing the date of eligibility for
direct purchase under the 340B Drug Pricing Program as is consistent
with the purpose of that database. The addition of retroactivity dates
would be outside the established purpose of the database and lead to
potential confusion. If a covered entity and manufacturer are unable to
agree on the date that the covered entity complied with program
requirements or otherwise disagree, HRSA believes that it is most
appropriate to follow its published dispute procedures that require the
parties to resolve any disputes in good faith. HRSA's first priority is
to have eligible children's hospitals register for the 340B Drug
Pricing Program. HRSA has concluded that this approach is the most
efficient and that HRSA will assist parties to resolve disputes through
the published dispute resolution process to the extent resources
permit.
Comment: HRSA should clarify ``appropriate'' documentation to
demonstrate that drugs did not generate Medicaid rebates.
Response: This is a fact-specific inquiry that may vary from case
to case and State to State. The children's hospital should demonstrate
that the covered outpatient drugs for which it seeks retroactive
discounts were not subject to Medicaid rebates because they were not
billed to Medicaid or it can otherwise show the State did not seek a
rebate on the drugs for which a retroactive claim is sought.
Comment: Children's hospitals lack access to Medicaid drug rebate
invoices/claims data needed to establish the requirement that covered
outpatient drugs did not generate Medicaid rebates during retroactive
periods.
Response: HRSA believes it appropriate to require that children's
hospitals seeking refunds provide sufficient factual evidence to
demonstrate compliance with statutory requirements. Children's
hospitals seeking retroactive discounts should have access to records
of which drugs were billed to Medicaid and which drugs were not billed
to Medicaid. HRSA suggests that children's hospitals consider
contacting State Medicaid agencies for supporting documentation as is
appropriate.
Comment: HRSA should coordinate with CMS to provide guidance
regarding monthly Average Manufacturer Price (AMP) and quarterly
Average Sales Price (ASP) calculations already submitted, if
retroactive discounts are given.
Response: HRSA will do what it reasonably can to assist in the
process; however, the issue of resolving whether retroactive discounts
are appropriate should be resolved to the full extent possible by the
covered entities and manufacturers. Manufacturers will need to consult
with CMS with respect to the separate issue on how to handle
calculations reported to CMS.
Comment: Children's hospitals should not be penalized for use of
Group Purchasing Organizations (GPOs) during the long interval that has
elapsed since enactment of section 6004. Initially, HRSA allowed DSHs
to use GPOs and to receive 340B retroactive discounts as long as
discounts were not for drugs obtained through the GPO. Similarly,
children's hospitals should be eligible to receive retroactive
discounts for covered outpatient drugs that were not purchased through
a GPO.
Response: HRSA disagrees and finds the proposed treatment of
retroactive rebates to be inconsistent with the applicable standards
for DSHs. The statute makes clear that children's hospitals must meet
the same criteria applicable to DSHs. In 1994, final guidance was
published on the GPO exclusion that expressly provides that any
participation in a GPO or other group purchasing arrangement for
covered outpatient drugs by a DSH results in loss of eligibility as a
covered entity. HRSA believes that under the statute and under current
guidance it should exclude from eligibility for retroactive rebates any
purchases while the children's hospital purchased covered outpatient
drugs through a GPO or other purchasing arrangement.
The guideline for retroactive rebates published in 1994 (59 FR
25110) was consistent with the GPO exclusion guideline in place for the
period of retroactivity. Likewise, this guideline for retroactive
rebates is consistent with the GPO exclusion guideline in place for the
period of retroactivity.
Comment: Retroactive discounts should only apply to children's
hospitals that comply with statutory prohibition against use of a GPO.
Furthermore, a comment was received stating that children's hospital
should not be able to request retroactive rebates on a covered
outpatient drug that was not purchased under a GPO contract if the
entity used a GPO contract for other covered outpatient drugs during
that same time period.
Response: HRSA agrees and has changed the guidelines to make this
issue clear.
Comment: HRSA should be required to establish a process to document
the eligibility and compliance of these new entities for any time
period of eligibility, including retroactive periods. HRSA should
create an audit or certification process to determine the actual date
that the facility met all requirements. Manufacturers should be allowed
to audit the processes and documentation before they are obligated to
provide the retroactive discounts.
Response: HRSA believes that the process outlined in the guidelines
provides enough safeguards to ensure program integrity. To the extent
that a manufacturer has a specific concern about a covered entity's
status, the manufacturer should bring those concerns to HRSA's
attention. Manufacturers also have the option of bringing a dispute
through the dispute resolution process as addressed in previous
guidance (61 FR 65406). The issue of manufacturer audits has also been
previously addressed in finalized guidance (61 FR 65406).
Comment: HRSA should shorten the proposed 120-day period allowed to
submit requests for retroactive discounts to 30 days, similar to its
Federal Register notice dated May 13, 1994, following the enactment of
section 340B in 1992, where HRSA permitted eligible covered entities to
request retroactive discounts within 30 days of publication of
guidelines.
Response: While HRSA understands that after enactment of the 340B
statute and the implementation of the initial guidances, there was only
a 30-day retroactivity period, there are materially different
circumstances between the situations in 1994 and today. HRSA must take
into account the potential time necessary to obtain sufficient evidence
to demonstrate eligibility (requirements which did not exist in 1994)
as well as the delay between the time of application to the 340B Drug
Pricing Program and listing in the Covered Entity Database at the
beginning of the quarter. Upon further review, taking into account
changes to this final guidance, HRSA has determined that in order to
ensure that all eligible hospitals have reasonable time they should
have three full calendar quarters after publication during which they
must get registered and officially listed on the 340B Covered Entity
Database. To be eligible a children's hospital must register and be
listed on 340B Covered Entity Database within one year of publication
of this notice. This amount of time will
[[Page 45209]]
ensure that all eligible children's hospitals will have reasonable time
to obtain the necessary documentation, enroll, and be listed on the
340B Drug Pricing Program Database as eligible to purchase under 340B.
Children's hospitals will need to abide by all applicable deadlines for
registration and will only be added to the list at the time of standard
quarterly updates. Once listed on the 340B Drug Pricing Program
Database, a children's hospital will have 30 days to notify
manufacturers in writing to preserve their claims.
(4) Eligibility of Off-site Facilities of Children's Hospitals
Comment: HRSA did not address how off-site locations of children's
hospitals may participate in 340B. The DSH requirement states that the
off-site location be an ``integral'' part of the hospital and be
reimbursable on the Medicare cost report. HRSA should be partially
guided by Medicare provider-based standards to establish an alternative
to the cost report for off-site facilities of children's hospitals to
be eligible for 340B.
Response: To the extent possible, eligibility for off-site
locations will be determined through the same method applied for DSHs
in the 340B Program. Additional clarification on this issue has been
provided in the final guidance.
(5) Hemophilia Treatment Centers
Comment: Several commenters asked that HRSA require, as
prerequisite, that children's hospitals agree to maintain Hemophilia
Treatment Centers as independent purchasers under 340B.
Response: HRSA does not find that such a requirement is necessary
to ensure against duplicate discounts or diversion, and does not find
sufficient basis to issue such a requirement in this guidance.
(6) Miscellaneous Comments
Comment: There should be a dispute resolution process if a
manufacturer has reason to believe that HRSA's determination of
eligibility period for a children's hospital is incorrect.
Response: HRSA is not initially making such a determination. HRSA
does have guidance on its dispute resolution process.
Comment: HRSA should require explicitly that children's hospitals
abide by program guidance relating to the patient definition.
Response: HRSA agrees and finds that the guidance as proposed
already makes that explicit.
(C) Obligation of Manufacturers To Provide 340B Discounts to Children's
Hospitals
Section 1927(a)(5)(A) of the Social Security Act requires
manufacturers to enter into agreements with the Secretary that meet the
requirements of section 340B with respect to covered outpatient drugs
purchased by a covered entity. Section 1927(a)(5)(B), as amended by
section 6004, defines covered entities for purposes of section
1927(a)(5) as those covered entities listed in the Public Health
Service Act and certain children's hospitals. As section 1927(a)(5)(A)
requires manufacturers to enter into agreements ``with respect to
covered outpatient drugs purchased by a covered entity,'' and covered
entity is defined as including children's hospitals for purposes of
section 1927, manufacturers are required to extend 340B pricing to
eligible children's hospitals.
The PPAs between the Secretary and each manufacturer require
manufacturers to provide 340B discounted covered outpatient drugs to
covered entities. Given the clear congressional intent in section 6004
to expand the category of covered entities, the PPAs currently in place
effectively require manufacturers to provide 340B discounts to
children's hospitals without need for further amendment to currently
existing PPAs.
(D) Process for Admission of Children's Hospitals to the 340B Program
(1) Children's Hospitals Participation
Children's hospitals participation in the 340B Drug Pricing Program
is voluntary. Consistent with the participation of other covered
entities, once a children's hospital has elected to participate in the
program, it must wait to enter or withdraw from the program until the
next official update of the 340B covered entity database. Participating
children's hospitals must comply with all program guidelines for
covered entities until the date they are removed from the 340B covered
entity database. The OPA will accept applications from children's
hospitals for entry into the 340B Program as of the date of publication
of the final notice of these guidelines. Hospitals that submitted
documentation seeking recognition as a children's hospital eligible for
the 340B Drug Pricing Program prior to the publication of the guidance
should apply again in accordance with the procedures described in this
guidance.
(2) Certification by Children's Hospitals Prior to 340B Drug Pricing
Program Entry
As with other covered entities, prior to entry into the 340B Drug
Pricing Program, children's hospitals will be required to provide OPA
with a certification regarding several different program requirements.
As a threshold matter, a hospital wishing to qualify for the 340B
Program as a children's hospital must demonstrate that the hospital is
a ``children's hospital'' as defined by section 6004. Section 6004
requires that a hospital wishing to qualify as a children's hospital
covered entity must satisfy the definition of ``children's hospital''
contained in section 1886(d)(1)(B)(iii) of the Social Security Act; and
meet minimum requirements for the receipt of an additional payment
under Medicare pursuant to section 1886(d)(5)(F)(i) of the Social
Security Act (if such clause were applied to the children's hospital
while taking into account the percentage of care provided by the
hospital to Medicaid patients).
(i) Certify That the Hospital Is a Children's Hospital as Defined by
Statute
Given the reliance of section 6004 on Medicare payment provisions
for the definition of ``children's hospital'' and the requirement that
a children's hospital must demonstrate that they would meet the same
requirements as a DSH, if they were eligible for DSH payments, a
hospital will need to demonstrate that it has been assigned a Medicare
provider number identifying the hospital as a ``children's hospital''
(i.e., a hospital with a 3300 series Medicare provider number).
(ii) Certify That the Hospital Will Abide by All Requirements of
Section 340B of the Public Health Service Act
Prior to entry into the 340B Program, a children's hospital must
certify that it will abide by all the requirements of section 340B that
all other covered entities abide by (e.g., prohibition on resale of
covered outpatient drugs; prohibition on duplicate discounts or
rebates). While children's hospitals are not explicitly mentioned in
section 340B, it is implicit in section 1927(a) of the Social Security
Act that children's hospitals abide by the requirements of section
340B. Section 1927(a) provides that manufacturers must have entered
into agreements with the Secretary that meet the requirements of
section 340B and several of the provisions contained in these
agreements concern covered entities' compliance with provisions of
[[Page 45210]]
section 340B. Furthermore, it is within the Secretary's authority under
section 340B to create guidelines necessary for the implementation of
the program. Unless children's hospitals are subject to all of the same
rules as other covered entities, the inclusion of children's hospitals
in the 340B Program would be difficult, if not impossible.
(iii) Certify Compliance With 340B(a)(4)(L) as Modified by Section 6004
of the DRA
Prior to entry into the 340B Program, a children's hospital must
certify compliance (along with the date of compliance) with clauses
(i), (ii), and (iii) of section 340B(a)(4)(L) (in accordance with
section 1927(a)(5)(B) of the Social Security Act) in the following
manner:
(A) Meets the requirements of section 340B(a)(4)(L)(i).
To comply with the requirements of section 340B(a)(4)(L)(i), a
children's hospital will have to certify (and include such supporting
documentation as requested by OPA) that the hospital is (1) owned or
operated by a unit of State or local government; (2) is a public or
private non-profit corporation which is formally granted governmental
powers by a unit of State or local government; or (3) is a private non-
profit hospital under contract with State or local government to
provide health care services to low income individuals who are not
eligible for Medicare or Medicaid.
(B) Meets the requirements of section 340B(a)(4)(L)(ii).
To comply with section 340B(a)(4)(L)(ii), as modified by section
6004, a children's hospital will have to certify (and include such
supporting documentation as requested by OPA) that the children's
hospital (1) is located in an urban area, has 100 or more beds, and can
demonstrate that its net inpatient care revenues (excluding any of such
revenues attributable to Medicare), during the cost reporting period in
which the discharges occur, for indigent care from State and local
government sources and Medicaid exceed 30 percent of its total of such
net inpatient care revenues during the period; or (2) for the most
recent cost reporting period that ended before the calendar quarter
involved, had a disproportionate share adjustment percentage (as
determined under section 1886(d)(5)(F) of the Social Security Act)
greater than 11.75 percent.
Supporting documentation must include a signed statement by an
appropriate official (e.g., Chief Financial Officer) of the children's
hospital that he/she is familiar with the requirements under section
340B(a)(4)(L)(ii), has examined the documentation, and certifies that
to the best of his/her knowledge that the children's hospital satisfies
the requirements. In addition, the documentation must include: (1) An
official document from the Department of Health and Human Services
(HHS) or a HHS contractor that is authorized to make official
determinations, showing that the children's hospital meets one or both
criterion listed above; (2) if the organization files a Medicare cost
report, the report filed does not contain a disproportionate share
adjustment percentage, and the report includes sufficient information
to calculate the disproportionate share adjustment percentage, include
a copy of those pages of the filed Medicare cost report with the data
necessary to calculate the disproportionate share adjustment
percentage; or (3) if the organization does not file a Medicare cost
report with sufficient information to calculate the disproportionate
share adjustment percentage, a statement from a qualified independent
auditor certifying that the auditor performed an audit on the records
of the children's hospital, that the auditor is familiar with Federal
rules and regulations relevant to its findings, and found that the
hospital would meet one or both of the criterion in section
340B(a)(4)(L)(ii), as modified by section 6004 (described in the
previous paragraph). The supporting documentation for (1), (2) or (3)
should identify the basis for that conclusion including the actual
percentage value upon which the determination is made (e.g.,
disproportionate patient percentage defined at 42 CFR section 412.106),
a concise description of any mathematical calculations, and the quarter
for which the determination was made. The children's hospital should
notify OPA if (1), (2) or (3) result in different conclusions as to
eligibility of the children's hospital.
(C) Meets the requirements of section 340B(a)(4)(L)(iii).
To comply with section 340B(a)(4)(L)(iii), a children's hospital
will have to certify that it will not participate in a group purchasing
organization (GPO) or group purchasing arrangement for covered
outpatient drugs as of the effective date of participation as listed in
the 340B covered entity database.
(3) Inclusion of Children's Hospitals' Off-Site Outpatient Facilities
Children's hospitals must meet the applicable requirements for DSHs
as described in the guidance published in 59 FR 47884 (Sept. 19, 1994).
(i) Children's Hospitals That File Medicare Cost Reports With CMS
Children's hospitals that file Medicare cost reports will be
required to utilize the same process to add outpatient facilities as
DSHs (59 FR 47884). A children's hospital, eligible for the 340B Drug
Pricing Program, must first request that the OPA include in its covered
entity database the outpatient facilities that are included as
reimbursable in its Medicare cost report. A list of these outpatient
facilities along with Medicare and Medicaid billing status information
must be included with the request. Second, an appropriate official
(e.g., Chief Financial Officer) of the children's hospital must sign a
statement that he/she is familiar with CMS guidelines concerning
Medicare certification of hospital components as one cost center, has
examined the list of outpatient facilities, and certifies that the
facilities are correctly included on the Medicare cost report of the
children's hospital. When these outpatient facilities are added to the
master list of eligible and participating covered entities, the off-
site facilities will be able to access 340B Drug Program pricing.
Outpatient facilities that are not included as reimbursable on the
Medicare cost report or file independent Medicare cost reports will not
be eligible for 340B pricing as part of the children's hospital.
(ii) Children's Hospitals That Do Not File Medicare Cost Reports With
CMS
Children's hospitals that do not file a Medicare cost report with
CMS must first request that the OPA include in its covered entity
database the outpatient facilities that are integral parts of the
hospital. A list of these outpatient facilities along with Medicaid
billing status information must be included with the request. Second,
an appropriate official (e.g., Chief Financial Officer) of the
children's hospital must sign a statement that he/she is familiar with
CMS guidelines concerning Medicare certification of hospitals as a cost
center, has examined the list of outpatient facilities, and certifies
that each facility is an integral part of the children's hospital whose
patients are considered patients of the children's hospital, according
to the most current published guidelines on patient definition, and
would have been correctly included on the Medicare cost report if the
hospital filed such a report and that the outpatient facility meets the
requirements of a provider-based facility within a DSH under 42 CFR
413.65.
[[Page 45211]]
(E) Annual Re-Certification by Children's Hospitals To Maintain
Eligibility Status in 340B Drug Pricing Program
Children's hospitals have an ongoing responsibility to immediately
notify OPA in the event of any change in eligibility for the 340B Drug
Pricing Program. No less than on an annual basis, children's hospitals
will need to demonstrate continued maintenance of the required
disproportionate share adjustment percentage or disproportionate
patient percentage. OPA will provide additional guidance as it gains
experience and develops its plans to annually certify covered entities.
To the extent that OPA is able to obtain periodic documentation of such
data similar to that provided by CMS with respect to DSHs, it may
notify the covered entity that such information need not be provided.
(F) Eligibility for Discounts Back to February 8, 2006
Section 6004 of the DRA indicates that the amendment authorizing
entry of children's hospitals into the 340B Program ``shall apply to
drugs purchased on or after the date of the enactment of this Act.''
The DRA provision was enacted on February 8, 2006. Therefore, once
children's hospitals are admitted to the 340B Program and listed on the
Covered Entity Database, they are eligible for 340B drug pricing back
to February 8, 2006. However, a children's hospital will be eligible
for such retroactive discounts only to the extent that it has satisfied
all requirements for participation in the 340B program back to the date
discounts are requested.
Children's hospitals may request retroactive discounts (discounts,
rebates, or account credit) directly from pharmaceutical manufacturers
for covered outpatient drugs when all the following conditions 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 340B 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
section (D) of this notice.
In order to satisfy the last condition listed above, a children's
hospital must be able to demonstrate, at a minimum, that as required by
section 340B(a)(4)(L)(iii) of the Public Health Service Act, the
children's hospital did not have a group purchasing agreement for
covered outpatient drugs and satisfied the requirements of section
340B(a)(4)(L)(i) and 340B(a)(4)(L)(ii) at the time the covered
outpatient drugs for which rebates are requested were purchased.
Participation in a GPO for any covered outpatient drugs would
disqualify a children's hospital for retroactive rebates during any
quarter that the children's hospital purchased any covered outpatient
drug through a GPO or other group purchasing arrangement. Consistent
with section 340B(a)(5)(C) of the Public Health Service Act, children's
hospitals must have auditable records that support claims for
retroactive discounts and permit the Government or manufacturers to
audit those records (in accordance with procedures established by the
Secretary relating to the number scope and duration of such audits (61
FR 65406)).
In fulfilling the conditions listed above, any children's hospital
that believes it is entitled to retroactive discounts may preserve its
rights by sending manufacturers a letter requesting such refunds,
explaining how they meet the requirements in this notice, and providing
adequate documentation of purchases within 30 days being listed on the
340B Covered Entity Database as eligible. Such children's hospitals
should engage in good faith efforts to resolve any disputes with
manufacturers. To the extent they are unable to resolve disputes and
wish to pursue further involvement with the OPA, they are encouraged to
follow the guidance on the dispute resolution process as described in
the Federal Register (61 FR 65406).
Dated: August 26, 2009.
Mary K. Wakefield,
Administrator.
[FR Doc. E9-21109 Filed 8-31-09; 8:45 am]
BILLING CODE 4165-15-P