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Federal Register / Vol. 72, No.

8 / Friday, January 12, 2007 / Notices 1543

ensure that drugs purchased under the Dated: December 22, 2006. FOR FURTHER INFORMATION CONTACT: Mr.
340B Drug Pricing Program are not Elizabeth M. Duke, Jimmy Mitchell, Director, OPA, HSB,
diverted to individuals who are not Administrator. HRSA, 5600 Fishers Lane, Parklawn
patients of the covered entity. Such [FR Doc. E7–334 Filed 1–11–07; 8:45 am] Building, Room 10C–03, Rockville, MD
records can include: prescription files, BILLING CODE 4165–15–P
20857, or by telephone through the
velocity reports, and records of ordering Pharmacy Services Support Center at 1–
and receipt. These records will be 800–628–6297.
maintained for the period of time DEPARTMENT OF HEALTH AND SUPPLEMENTARY INFORMATION:
required by State law and regulations.’’ HUMAN SERVICES
Introduction
(3) ‘‘Prior to the contract pharmacy Health Resources and Services Section 340B(a)(4) of the PHS Act and
providing pharmacy services pursuant Administration section 1927(a) of the Social Security
to this agreement, the covered entity Act list the various types of
will have the opportunity, upon Notice Regarding Section 602 of the organizations eligible to participate in
reasonable notice and during business Veterans Health Care Act of 1992 and purchase discounted drugs under
hours, to examine the tracking system. Definition of ‘‘Patient’’ the 340B Program. Eligibility for
For example, such a tracking system AGENCY: Health Resources and Services participation in the 340B Program is
may include quarterly sample Administration, HHS. strictly limited to the specific categories
comparisons of eligible patient ACTION: Notice.
of entities specified in these statutes.
prescriptions to the dispensing records Section 340B(a)(5)(B) of the PHS Act
and a six (6) month comparison of 340B SUMMARY: Section 602 of Public Law prohibits entities from selling (or
drug purchasing and dispensing records 102–585, the ‘‘Veterans Health Care Act otherwise transferring) drugs purchased
as is routinely done in other of 1992,’’ enacted Section 340B of the under the 340B Program to anyone who
reconciliation procedures. The contract Public Health Service (PHS) Act is not a patient of the covered entity.
pharmacy will permit the covered entity ‘‘Limitation on Prices of Drugs Responsibility for ensuring compliance
or its duly authorized representatives to Purchased by Covered Entities.’’ Section with this provision rests with the
have reasonable access to contract 340B provides that in order to obtain covered entity. Congress did not define
Medicaid reimbursement for its covered the term ‘‘patient’’ in Section 340B, and
pharmacy’s facilities and records during
outpatient drugs, a manufacturer must initial HRSA guidelines implementing
the term of this agreement in order to
sign a pharmaceutical pricing agreement the 340B Program directed covered
make periodic checks regarding the
with the Secretary of Health and Human entities to ‘‘develop and institute
efficacy of such tracking systems. The adequate safeguards to prevent the
Services in which the manufacturer
contract pharmacy agrees to make any transfer of discounted outpatient drugs
agrees to charge a price to covered
and all adjustments to the tracking to individuals who are not eligible for
entities for outpatient drugs that will
system which the covered entity advises the discount’’ in order to prevent
not exceed an amount determined under
are reasonably necessary to prevent a statutory formula. Section 340B is diversion. To accomplish this, entities
diversion of covered drugs to administered as the ‘‘340B Drug Pricing were encouraged to utilize a separate
individuals who are not patients of the Program’’ and is commonly referred to purchasing account and separate
covered entity.’’ as ‘‘the 340B Program.’’ dispensing records (See 59 FR 25110).
(4) ‘‘The pharmacy will dispense Section 340B states that it is illegal for As covered entities, manufacturers,
covered drugs only in the following covered entities to sell medications and others began to implement the 340B
circumstances: (a) Upon presentation of purchased under the 340B Program to Program, it became apparent that
a prescription bearing the covered persons who are not considered additional clarification of the patient
entity’s name, the eligible patient’s ‘‘patients’’ of the covered entity. The definition was needed and on October
purpose of this notice is to inform 24, 1996, HRSA issued additional
name, a designation that the patient is
interested parties of proposed guidelines regarding the definition of a
an eligible patient of the covered entity,
clarifications to the definition of covered entity ‘‘patient’’ (61 FR 55156).
and the signature of a legally qualified These guidelines stated that the
health care provider affiliated with the ‘‘patient’’ for whom the covered entity
can purchase discounted following definition of patient would
covered entity; or (b) receipt of a apply for the purposes of the 340B
pharmaceuticals under the 340B
prescription ordered by telephone or Program:
Program. This clarification is necessary
other means of electronic transmission
to protect the integrity of the 340B An individual is a ‘‘patient’’ of a covered
that is permitted by State or local law Program and to assist covered entities entity (with the exception of State-operated
on behalf of an eligible patient by a and other participants in their or funded AIDS drug purchasing assistance
legally qualified health care provider compliance efforts. programs) only if:
affiliated with the covered entity who DATES: The public is invited to submit
1. The covered entity has established a
states that the prescription is for an relationship with the individual, such that
comments on the proposed guidelines the covered entity maintains records of the
eligible patient. The covered entity will by March 13, 2007. After consideration individual’s health care; and
furnish a list to the pharmacy of all such of the comments submitted, the 2. The individual receives health care
qualified health care providers and will Secretary will issue final guidelines. services from a health care professional who
update the list of providers to reflect ADDRESSES: Address all comments to is either employed by the covered entity or
any changes. If a contract pharmacy is Mr. Bradford R. Lang, Public Health provides health care under contractual or
found to have violated the drug Analyst, Office of Pharmacy Affairs other arrangements (e.g., referral for
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diversion prohibition, the contract consultation) such that responsibility for the
(OPA), Healthcare Systems Bureau care provided remains with the covered
pharmacy will pay the covered entity (HSB), Health Resources and Services entity; and
the amount of the discount in question Administration (HRSA), 5600 Fishers 3. The individual receives a health care
so that the covered entity can reimburse Lane, Parklawn Building, Room 10C–03, service or range of services from the covered
the manufacturer.’’ Rockville, MD 20857. entity which is consistent with the service or

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1544 Federal Register / Vol. 72, No. 8 / Friday, January 12, 2007 / Notices

range of services for which grant funding or the PHS Act. HRSA invites comments 3. The outpatient health care services
Federally-qualified health center look-alike with respect to which elements should the individual receives from the covered
status has been provided to the entity. be required in private non-profit entity that result in the use of, or
Disproportionate share hospitals are exempt hospitals’ contracts with State or local prescription for, 340B drugs are:
from this requirement. a. Part of a health care service or range
An individual will not be considered a
governments ‘‘to provide health care
‘‘patient’’ of the entity for purposes of 340B services to low income individuals who of services for which grant funding or
if the only health care service received by the are not entitled to benefits under Title Federally-Qualified Health Center look-
individual from the covered entity is the XVIII of the Social Security Act or alike status has been provided to the
dispensing of a drug or drugs for subsequent eligible for assistance under the State covered entity; or
self administration or administration in the plan * * * ’’ under Section b. Provided by a Disproportionate
home setting. 340B(a)(4)(L)(i) of the PHS Act. HRSA is Share Hospital (DSH) or by a location
An individual registered in a State also seeking comments regarding the that qualified as a provider-based
operated or funded AIDS drug purchasing different situations where private, non- facility within a DSH under 42 CFR
assistance program receiving financial 413.65. If the individual received care
assistance under Title XXVI of the PHS Act
profit hospitals are formally granted
government powers under Section from such DSH or qualifying provider-
will be considered a ‘‘patient’’ of the covered
340B(a)(4)(L)(i) of the PHS Act. based facility, then the individual may
entity for purposes of this definition if so
registered as eligible by the State program. Final guidelines will replace all be referred for followup care for the
(61 FR 55157–8). previous 340B Program guidance same condition by such a health care
addressing the definition of a patient, provider to an outside health care
The definition of a ‘‘patient’’ was provider and still remain a patient of the
developed in order to identify those including, but not limited to, the
‘‘Notice Regarding Section 602 of the covered entity for purposes of this rule,
individuals eligible to receive 340B so long as the covered entity (either the
drugs from covered entities. Because of Veterans Health Care Act of 1992
Patient and Entity Eligibility,’’ 61 FR DSH or a qualified provider-based
the large number of covered entities and facility) retains ongoing responsibility
the wide diversity of eligible groups 55156 and any individual
for the outpatient health care service
(e.g., comprehensive hemophilia correspondence issued by HRSA on the
that results in the use of (or prescription
treatment centers, HIV/AIDS programs subject.
for) 340B drugs. To demonstrate the
funded through the Ryan White CARE Definition of a Patient necessary retention of ongoing
Act, black lung clinics, consolidated responsibility for the health care it is
health centers, Disproportionate Share Under these proposed guidelines, the
expected that, at a minimum, the
Hospitals (DSH), and Title X clinics), it criteria determining whether an
covered entity will provide health care
was essential that HRSA work closely individual is a ‘‘patient’’ of a covered
to the individual in the DSH or the
with each Federal program office to entity (with the exception of State-
qualified provider-based facility of the
develop a definition flexible enough to operated or funded AIDS drug
DSH within 12 months after the time of
describe accurately each covered purchasing assistance programs) are:
referral.
entity’s patients. 1. The covered entity has established The individual’s health care
As of October 1, 2005, participation in responsibility for the outpatient health relationship with the covered entity is
the 340B Program has grown to more care services it provides to the the most important factor in
than 12,000 entities. Through covered individual, such that the covered entity determining whether an individual
entity networking, contracting, and maintains ownership, control, satisfies the criteria above. For a
other arrangements, additional maintenance, and possession of records prescription to qualify under 340B, the
questions about the definition of a 340B of the individual’s health care, covered entity must be primarily
patient have arisen. HRSA believes that including records that appropriately responsible for the health care which
the existing patient definition provides document health care services that results in the use of, or prescription for
sufficient guidance to answer many of result in the use of, or prescription for, 340B drugs. An individual will not be
these questions. However, it is possible 340B drugs; considered a ‘‘patient’’ of the entity for
that some 340B covered entities may 2. The individual receives outpatient purposes of 340B if the only health care
have interpreted the definition too health care services that result in the service received by the individual from
broadly, resulting in the potential for use of, or a prescription for, 340B drugs the covered entity is the dispensing of
diversion of medications purchased as part of the diagnosis and treatment a drug or drugs for subsequent self
under the 340B Program. Therefore, from a health care provider who is administration or administration in the
HRSA finds it necessary to issue this employed by the covered entity, or home setting. An individual registered
Notice, and to include several examples provides health care to patients of the in a State operated or funded AIDS drug
that further illustrate the guidance. covered entity under a valid, binding, purchasing assistance program receiving
While similar to the existing patient and enforceable contract. If the financial assistance under Title XXVI of
definition, this clarification provides individual received health care services the PHS Act will be considered a
covered entities with more explicit from a health care provider employed ‘‘patient’’ of the covered entity for
guidance regarding the relationship by or under contract with the covered purposes of this definition if so
between a covered entity and an entity, then the individual may be registered as eligible by the State
individual that makes that individual a referred for followup care for the same program.
‘‘patient’’ of the covered entity. condition by that health care provider, The first criterion of the patient
Related to the definition of a to an outside health care provider and definition above requires covered
‘‘patient’’ is the question of which still remain a patient of the covered entities to establish a relationship with
entities are eligible to provide 340B entity for purposes of this guidance, so each individual such that the covered
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drugs. HRSA has been receiving an long as ongoing responsibility for the entity maintains records of the
increasing number of questions outpatient health care service that individual’s health care. The covered
specifically related to which entities results in the use of (or prescription for) entity will document in the individual’s
qualify for inclusion in the 340B 340B drugs, remains with the covered health care records the health care
Program under Section 340B(a)(4)(L) of entity; and service provided and the drugs

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Federal Register / Vol. 72, No. 8 / Friday, January 12, 2007 / Notices 1545

prescribed or used in the covered entity prescription of other health care Example 1: Certain Case Management
for this individual. A shared electronic providers, they must exercise their own Constructs
record where several parties have access judgment in taking responsibility for HRSA has become aware that some
and ability to add/edit the records from their own patients. covered entities may be using case
their physical location would satisfy the management arrangements that
The third criterion of the patient
requirements of the 340B Program inappropriately expand their ‘‘patient’’
definition above requires that 340B
guidelines, as long as the covered entity populations, diverting 340B drugs to
maintains control, ownership, drugs be prescribed only in conjunction
with outpatient services. Furthermore, individuals who are not eligible patients
maintenance, and possession of the
subsection (a) clarifies that the of the 340B covered entity. In some
individual’s health care record. Mere
provision of 340B drugs must fall within cases, the covered entities claim to
contractual right to obtain records from
the scope of the grant funding or provide the requisite ‘‘health care
a health care provider, without actual
Federally Qualified Health Center look- services’’ through a third party that
control and maintenance of the record,
alike status which forms the basis for operates through a case management
would not satisfy the requirements of
the eligibility of the covered entity to construct or call center. Although the
the 340B Program.
The second criterion of the patient covered entity may retain records of the
participate in the 340B Program.
definition requires that the encounters, supervise personnel,
Subsection (b) of the third criterion oversee billing, payment, and other
responsibility for the health care likewise provides clarification for DSHs
services that result in the use of, or administrative tasks in the program, the
that the use of, or prescription for, 340B covered entity is not providing the
prescription for, 340B drugs remains
drugs must be within the scope of the actual outpatient health care services
with the covered entity. Where a referral
is utilized for specialty health care, in basis for including such institutions in that can be linked to the prescriptions
order to result in a valid 340B the 340B Program. In order for an written for the individuals in question.
prescription, the referral must be for outpatient facility of a DSH to be An individual whose sole relationship
followup care for the same condition eligible for the 340B Program, it must be with a covered entity is through case
and must originate from a health care demonstrated that the outpatient facility management services or other
provider who is employed by or under is an integral part of the DSH. HRSA has administrative measures, not
a valid, binding, and enforceable chosen to rely on the category of accompanied by actual medical services
contract with the covered entity which provider-based facilities as set forth by from a health care provider that meets
retains ongoing responsibility for the the Centers for Medicare and Medicaid criterion 2, would not be considered a
health care and treatment of the Services (CMS) under Title XVIII of the patient of the covered entity eligible to
individual. Social Security Act (Medicare). This receive 340B drugs.
For the purpose of this guidance, the decision has been made because HRSA Example 2: Loose Affiliation Networks
provision of administrative services believes that the requisite integration of
alone, such as case management Some DSHs have been contracting
facilities necessary to demonstrate that with health care providers to create a
services from someone other than a the secondary facility is functioning as
health care provider, is not sufficient to loose affiliation model for outpatient
part of the DSH under 42 CFR 413.65 is health care services. The individuals,
demonstrate the necessary health care
appropriate for facilities eligible under receiving services from affiliated health
services set forth in the definition
the 340B Program. Compliance with the care providers, have been filling
above. The statute requires that 340B
drugs be provided for the patients of the rule for provider-based facilities would prescriptions written by these health
covered entity, as opposed to offering provide clear guidance to DSHs that care providers with 340B drugs. The
other services to individuals who are wish to prescribe 340B drugs to patients ‘‘contracts’’ are often simple, one-page
patients of health care providers who at these outpatient facilities and ensure documents that do not create
are not part of a covered entity as that the individuals are truly patients of contractually enforceable duties or
defined in the statute. In cases where an the DSH. Ultimately the facility’s obligations for either the health care
individual has received health care provider-based status must be reflected provider or covered entity. These
services from a non-covered entity in the covered entity’s Medicare Cost affiliation models claim to meet the
resulting in a prescription, the Report. The covered entity may provide patient definition by specifying that the
administrative act of recording such a copy of the attestation provided to its individual’s health care records would
information, incorporating it into the fiscal intermediary pursuant to 42 CFR be available at the covered entity, that
health record, and filling the 413.65 to demonstrate compliance with ‘‘responsibility for the patient’’ would
prescription does not constitute health this guideline until such time as the also reside with the covered entity, and
care services for the patient’s health care facility is listed on the DSH’s Medicare that in some instances, individuals
for purposes of the 340B Program. Cost Report. The DSH shall retain the would be seen by a case manager at the
To demonstrate responsibility for the responsibility to promptly notify the covered entity at specified intervals.
health care that results in the use of, or Under this model, the services being
OPA in the event that the outpatient
prescription for 340B drugs, health care provided directly by the covered entity
facility’s provider-based status is
must be provided by the covered entity are often more appropriately
rejected or otherwise called into
through health care providers who meet characterized as administrative services
the second criterion and who have the question. rather than health care services.
capacity and authority to issue the 340B Examples Ultimately, the treatment plan followed
prescription. Mere acceptance pro forma is determined by the affiliated health
or rubberstamping of an outside health The following examples describe the care provider and not the covered
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care provider’s diagnosis or medical issues that HRSA has identified as entity. The ongoing responsibility for
opinion does not demonstrate such problematic and the relationships that the individual’s health care resides with
responsibility. While the health care do not meet the definition of ‘‘patient’’ the affiliated health care provider and
providers of the covered entity can take for purposes of compliance with the not the covered entity. The individuals
into account the diagnosis and 340B Program guidelines. enrolled in these programs are treated

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1546 Federal Register / Vol. 72, No. 8 / Friday, January 12, 2007 / Notices

by health care providers too loosely the 340B database with the implication 340B Program. Rather, the covered
affiliated with the covered entity for the that they are provider-based, HRSA will entity must provide health care to these
ongoing responsibility to rest with the request the covered entity to provide the individuals that results in the use of, or
covered entity for the patient’s health relevant portions of the Medicare Cost prescription for, 340B drugs.
care resulting in the use of, or Report and/or attestation within 45 days Furthermore, employees who merely
prescription for, 340B drugs. to verify the facility’s provider-based receive required health physicals as a
This model improperly seeks to status and to verify that such health care condition of their employment by a
expand the definition of a patient services are being provided on an covered entity with no other health care
beyond that envisioned by Congress in outpatient basis. If HRSA does not provided are not patients of the covered
prohibiting the resale of 340B drugs receive appropriate documentation to entity.
outside the eligible covered entity verify provider-based status within this
limits. In particular, HRSA is concerned time period, it will remove the facility Example 5: Indian Tribes and Tribal
that the affiliation model extends the from the 340B covered entity database. Organizations
ability of covered entities to purchase The covered entity shall be required to In the case of Indian tribes or tribal
340B drugs for individuals who are not notify HRSA immediately if its organizations, any attempt to serve non-
receiving healthcare from a health care provider-based status has been rejected Indian Health Service beneficiaries must
provider employed by or having a valid, or questioned by CMS or its fiscal receive prior formal approval by the
binding, and enforceable contract with intermediary. In cases where provider- Indian Health Service.
the covered entity. In the DSH context, based status has been rejected, the
since such affiliated healthcare Example 6: Grantee Subgrantees and
facility will be removed from the 340B
providers may have privileges without Subcontractors
covered entity database immediately.
actually being required to provide In certain circumstances,
health care services at the DSH, HRSA Example 4: Employees organizations may be functioning as
believes that it is reasonable to require HRSA receives many questions about subgrantees to grantees who are eligible
that either the prescribing, or the whether employees of a covered entity to purchase 340B drugs (section
referring, health care provider be are ‘‘patients’’ for purposes of the 340B 340B(a)(4) of the PHS Act). In these
employed by or have a valid, binding, Program. These questions come from situations, subgrantees are reminded
and enforceable contract with the covered entities that provide health care that they must meet the standards set
covered entity to provide outpatient coverage to employees under their own forth in 45 CFR Part 74 and 45 CFR Part
medical care to patients of the DSH. self-insured health plan, and those 92, as applicable. As subgrantees of a
whose employees have third party covered entity’s grant, these
Example 3: Provider-Based Designations health coverage as an employment organizations are eligible to access 340B
HRSA is concerned that a number of benefit. Employees of a covered entity, drugs for only those patients to whom
DSHs may be attempting to expand their regardless of their health care coverage, they are providing health care services
eligible facilities to include locations are not considered patients of the under the scope of their subgrant. In
that are not integrated parts of the covered entity for the purpose of the these instances, individuals may only
qualifying DSH. As noted above, HRSA 340B Program unless they receive health receive 340B drugs for the
has chosen to rely on a location’s status care from a provider employed by or pharmaceuticals utilized under the
as a provider-based facility as provided under contract with the covered entity. scope of the project for which grant
under 42 CFR 413.65 to demonstrate The fact that the person is an employee funds were received by the subgrantee.
that the secondary facility is functioning of the covered entity, or that they Subgrantees must register with HRSA in
as part of the DSH. While HRSA is receive health care benefits from their order to participate in the 340B Program
aware of the 35 mile distance exemption covered entity-employer is not relevant. and must be listed in the HRSA 340B
that exists for certain 340B-DSHs under The relevant circumstance is that the database of covered entities to purchase
42 CFR 413.65(e)(3)(i), these DSH employee is a patient of the covered 340B drugs.
provider-based facilities remain subject entity. If an employee is a patient of Subgrantees must maintain
to the other requirements as set forth in another provider in the community, and information systems that permit them to
42 CFR 413.65. This requirement also is referred to and receives health care segregate the 340B eligible patient
applies to nursing home facilities, from the covered entity, they can population from the rest of their
rehabilitation hospitals, hospice, and receive 340B drugs only if the other patients, and to order 340B drugs only
home health agencies. Please note that provisions of the patient definition are for 340B eligible patients.
even if these facilities qualify as part of met. Where a covered entity operates a If an entity is a subcontractor of a
the DSH, only patients receiving self-insured health plan, the covered covered entity, rather than a subgrantee,
outpatient health care services in these entity retains the requisite responsibility all 340B drugs must be purchased by the
facilities would be eligible to receive for the individual as a patient only if the covered entity. The covered entity, in
340B drugs. In addition, if HRSA individual receives outpatient health turn, must maintain records
suspects that these entities are being care services under the terms of this documenting its purchase of 340B drugs
improperly designated as provider- notice. Responsibility for the patient for its subcontractors. Both the covered
based facilities, HRSA will decline to does not extend to cover the individual entity and the subcontractor would be
add the facilities to the HRSA 340B if the covered entity’s sole responsibility responsible for ensuring the 340B drugs
database of covered entities until it has for the individual is as the administrator were ordered only for the portion of the
received portions of the Medicare Cost of its self-insured plan. Meeting subcontract which is within the scope of
Report demonstrating provider-based administrative requirements for a covered entity’s grant.
status and/or the attestation of provider- maintaining employee health records so
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based status the covered entity provides as to ensure that the employees are Dated: December 22, 2006.
to its fiscal intermediary pursuant to 42 compliant with both State and Federal Elizabeth M. Duke,
CFR 413.65. Likewise, if HRSA health care provider regulations alone, Administrator.
discovers that certain covered entities is not sufficient for the purpose of [FR Doc. E7–335 Filed 1–11–07; 8:45 am]
may have improperly listed facilities on establishing patient eligibility for the BILLING CODE 4165–15–P

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