Hospitals unexpectedly cut off from discounted drugs in outpatient clinics

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Illustration of question marks made of money pattern.

Illustration: Eniola Odetunde/Axios

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An unexpected policy change has left some hospital outpatient clinics potentially excluded from the government’s drug discount scheme, shaking up healthcare systems with many poorer patients who are used to buying cheaper medicines and keeping savings.

Because matter: The change means healthcare systems can bear higher drug costs at a time when many are looking to push more care out of the hospital walls, to offsite clinics.

Drive the news: The Health Resources and Services Administration, part of HHS, reversed guidance in May outlining how hospitals had the flexibility to tap into the program to treat some patients at offsite clinics, trade publication 340B first reported. Reports.

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  • The guidance was issued at the start of the pandemic in a question-and-answer session, but was not explicitly linked to the COVID-19 public health emergency. It disappeared around the time the PHE expired on May 19, when a number of other health payments and pandemic-era regulatory flexibilities expired.
  • This caught the industry off guard, as hospitals assumed they would continue to operate under the existing interpretation of the 340B rules.
  • Hospitals say they now run the risk of being audited and violating federal rules if discounted drugs are used at the clinics that have not yet appeared in their most recent Medicare cost reports.
  • Hospitals that misuse 340B drugs may be forced to recoup the discount from drug manufacturers.

Zoom in: Essential Hospitals and 340B Health, which represent hospitals using the program, wrote letters to HRSA ahead of the public health emergency deadline asking for clarity on the policy, but said they have not yet received responses.

  • “I can’t say if they’ve changed their policy,” Maureen Testoni, CEO of 340B Health, told Axios.
  • HRSA directed Axios to the agency’s website, which notes that the agency’s COVID-19 webpage has been taken down and entities covered by 340B must comply with “all applicable regulations, guidelines, and policies” . HRSA directs hospitals to send applications to HRSA’s primary 340B program contractor, Apexus.
  • The stakes are especially high for healthcare systems looking to open or acquire new outpatient clinics, because the drug discount can range from 13 to 50 percent off the manufacturer’s price, depending on whether it’s a generic or not, Jeff Davis, an attorney with Bass, Berry & Sims, which represents hospitals and other 340B entities, told Axios.
  • “Costs could go up if you don’t use 340B drugs; it could drive up costs significantly,” Davis said.

Recover fast: The 340B program has long been a source of controversy, with drug industry groups and some independent bodies charging hospitals for overtaking the program when the savings are supposed to be passed on to low-income patients.

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What’s next: Some health systems say they may be forced to close clinics if they can’t access discounted medicines.

  • An unnamed essential hospital has invested $16 million in specialty clinics, including an infectious disease clinic to treat HIV and hepatitis, counting on using $340 billion in rebates for eligible patients, according to the letter. Essential Hospitals group at HRSA.
  • If that policy is no longer in effect, the hospital would have to wait until January 2024 to use drug rebates at that clinic, with an “estimated impact of $2.5 million a month and the loss of discounted drugs to patients outcasts of these clinics”.
  • For other hospitals in similar situations, they’d probably have to wait until their outpatient clinic appears on their Medicare cost reports, which could take up to two years depending on when they opened that clinic.

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