The U.S. Department of Health and Human Services’ Health Resources and Services Administration and Office of Pharmacy Affairs are responsible for administering the 340B Drug Pricing Program. Since the inception of periodic audits in 2012, HRSA has increased its scrutiny over covered entity compliance with 340B regulations and has consistently audited 200 entities each year since 2015. Staying up to date with evolving regulations and audit findings is crucial for healthcare organizations to remain compliant with 340B Program requirements.
Since 2012, HRSA has posted more than 2,000 audit results. Below is a summary of recent developments related to HRSA audit findings and HRSA fiscal year 2024 audit results as of January 2025. In addition, we’ve included an update on the latest legal and legislative battles affecting the 340B Program and their potential impact on your organization.
HRSA 340B Program integrity audit news
Since 2012, HRSA has communicated its approach for implementing its authority to audit 340B Program stakeholders through policies, guidance documents, and regulations. In 1996, HRSA published “Patient Definition Guidelines,” which contain its interpretation of several key statutory requirements that guide its audit activities. FY 2024 HRSA audit results appear to reflect changes in the enforcement of the “Patient Definition Guidelines.”
For example, “340B drugs dispensed at contract pharmacies for prescriptions written at ineligible sites” is listed as the top “Diversion” finding related to FY 2024 HRSA program integrity audits. In addition, HRSA is staying consistent with choosing hospitals and healthcare facilities from a variety of states to audit. Critical access hospitals and disproportionate share hospitals make up most of the audits performed and the total number of findings. Grantees continue to be audited with similar frequency in FY 2024 compared to previous years. In addition, “Incorrect 340B OPAIS Record” continues to be the top HRSA audit finding in FY 2024, followed by “Diversion” and “Duplicate Discounts.”
Following is a summary of FY 2024 HRSA program integrity audit activity
HRSA last updated FY 2024 program integrity audit findings on its website Dec. 20, 2024. The following findings are from the audit results posted to date:
HRSA posted 111 audit results from FY 2024, with 54% of the audits completed resulting in no adverse findings.
HRSA audited covered entities from 40 states.
Hospitals made up 81% of the FY 2024 audits; CAHs made up most of the covered entity types audited (38%), followed by DSHs (32%).
Grantees, including Community Health Centers, Ryan White HIV/AIDS Program grantees, and Sexually Transmitted Disease Clinics, made up 19% of the CEs audited in FY 2024.
There are 66 audit findings currently posted for FY 2024 with “Incorrect 340B OPAIS Record” listed as the most common finding (62%), which is consistent with FY 2023 audit findings. “Incorrect entry in 340B OPAIS for Medicare Cost Report filing date” is the most common “Incorrect 340B OPAIS Record” finding.
“Duplicate Discount” and “Diversion” are tied for the second most common finding at 17% each. “340B drugs dispensed at a contract pharmacy for prescriptions written at ineligible sites” is listed as the top finding (82%) in the “Diversion” findings category. It appears that HRSA views contract pharmacy prescriptions written from locations that are not registered as part of the 340B Program to be ineligible to purchase under the 340B Program.
“Inaccurate” or “Incomplete Medicaid Exclusion File (MEF)” is listed as the most common (91%) of the “Duplicate Discount” findings.
Of the FY 2024 audits, 18% required repayment to manufacturers due to a “Duplicate Discount” or “Diversion” finding.
And 4% of audits required termination of contract pharmacies from the 340B Program due to an “Incorrect 340B OPAIS Record” finding.
Audit prevention strategies
Considering these FY 2024 HRSA 340B Program audit findings, organizations should keep the following prevention strategies in mind heading into 2025.
Prevent an “Incorrect 340B OPAIS Record” finding by confirming:
Contract pharmacy locations registered on the 340B Office of Pharmacy Affairs Information System match the locations listed in the pharmacy service agreement.
Closed or terminated contract pharmacies are removed from OPAIS.
Only eligible sites are registered on OPAIS.
Duplicate registrations are removed.
Hospital control type is consistent with eligibility documents.
The Medicare Cost Report filing date, cost reporting period, and employer identification number on OPAIS are accurate.
There is accurate physical and ship-to/bill-to address documentation on OPAIS for off-site outpatient facilities, grant-associated sites, and entity-owned pharmacies.
In response to the restrictions, eight states have passed legislation to prohibit drug companies from restricting access to 340B Program pricing through contract pharmacies (Arkansas, Kansas, Louisiana, Maryland, Minnesota, Mississippi, Missouri, and West Virginia). Meanwhile, 340B contract pharmacy legislation is pending in two states (Michigan and Ohio). Below is a summary of the current legal and legislative battles affecting the 340B Program.
Manufacturer updates
Oct. 25, 2024: UCB imposes further restrictions on accessing 340B Program pricing
Per a communication from AstraZeneca dated Oct. 25, 2024, “Under UCB’s modified policy, a covered entity without an in-house pharmacy is allowed to designate a single contract pharmacy location to receive 340B-priced drugs only when the following conditions are satisfied: 1) the covered entity submits claims data to substantiate the purchase, and 2) the designated contract pharmacy is located within 40 miles of the covered entity parent site. (A covered entity with an in-house pharmacy is not eligible to designate a contract pharmacy.)”
In addition, the communication stated that federal grantees will be subject to the same policy requirements as hospitals noted in the Oct. 25, 2024, letter but will not be required to submit claims data.
Effective Dec. 2, 2024, BI will require all covered entities to submit claims data for drugs they received at 340B pricing and distributed at contract pharmacies. Claims data must be uploaded to the 340B ESP platform within 45 days of the dispensing date to continue accessing 340B pricing. In addition, BI communicated that covered entities replenishing BI drugs must ship the 340B products directly to the same contract pharmacy location where the drug was dispensed to an eligible patient.
Avoid an “Incorrect 340B OPAIS Record” finding by promptly updating 340B OPAIS with relevant information after submitting a new Medicare Cost Report.
To help prevent an “Inaccurate MEF” finding, add billing numbers to OPAIS for not only the CE’s “home” state but for each state you intend to bill Medicaid fee-for-service for drugs purchased through the 340B Program. In addition, confirm that every child site that chooses to carve-in Medicaid has the appropriate National Provider Identifier and Medicaid Provider Number—and the associated state—listed on the MEF. A complete MEF with accurate billing numbers, NPI, and MPN will also aid in the prevention of a “Duplicate Discount” finding.
Comply with all state Medicaid laws that mandate billing requirements for 340B-purchased medications by developing a process to regularly review claims data from the parent and all child site locations where Medicaid is a primary, secondary, or tertiary payor. This may include billing the drug ingredient cost and/or claim modifiers. States may also determine whether the Medicaid billing requirement includes 340B-purchased medications billed to Medicaid Managed Care Organizations.
Avoid a “Diversion” finding by confirming contract pharmacy prescriptions are written from locations that are registered as part of the 340B Program. For 340B eligible prescriptions, confirm there is documentation in the electronic medical record that demonstrates the patient received services at an eligible location of the covered entity. The CE must own or have access to the EMR that documents care related to the eligible prescription.
Work with your registration and IT teams to confirm the patient’s status (inpatient versus outpatient) is accurately captured at the time of drug administration. This is fundamental to determining 340B eligibility in your organization’s split-billing software. Status changes that affect 340B eligibility should be sent to the split-billing software on a real-time basis to confirm compliance with the 340B patient definition.
Legal and legislative battles affecting the 340B Program
The dispute between safety-net hospitals and drug manufacturers has officially entered its fourth year, and we continue to see additional manufacturers fall in line with revising their policies to restrict 340B Program pricing for drugs dispensed through contract pharmacies.
Currently, there are 39 drug manufacturers that have imposed distribution limitations on covered outpatient drugs dispensed through the 340B Program:
Nov. 12, 2024: Johnson & Johnson sues HHS over 340B rebate plan
Following the August 2024 J&J communication making the 340B discount on the drugs Stelara and Xarelto available to DSH covered entities through a rebate, HRSA had threatened to cut off Medicaid and Medicare coverage for J&J drugs. On Sept. 30, 2024, in response to HRSA’s letter denouncing its new rebate model, J&J announced it would cease implementation of a 340B rebate model for DSH hospitals intended to begin October 2024.
In a suit filed Nov. 12, 2024, with the U.S. District Court in Washington, D.C., against HRSA and HHS, J&J aims to prevent HRSA from rejecting its proposed rebate model. Per a statement from J&J, “Johnson & Johnson is taking action to bring much needed transparency essential to helping the 340B Program achieve its original intent to support prescription drug access for vulnerable patients.”
Nov. 12, 2024: Sanofi announces 340B rebate model
Beginning Jan. 6, 2025, Sanofi will only offer 340B discounts through a rebate model (340B Credit Model) for 25 of its drugs. To receive 340B pricing for drugs dispensed through contract pharmacies and drugs administered to outpatients, covered entities must submit healthcare encounter data to Sanofi through the Beacon platform.
Per a Sanofi communication dated Nov. 12, 2024, “Sanofi shall utilize the appended healthcare encounter data to validate that the patient to whom the drug was dispensed for the specific 340B pharmacy claim is a patient of the covered entity.” The rebate model applies to critical access hospitals, disproportionate share hospitals, rural referral centers, sole community hospitals, and consolidated health centers.
Nov. 14, 2024: Eli Lilly sues HHS over 340B rebate plan
Eli Lilly filed a lawsuit in federal court over the company’s plan to use a rebate model for 340B drugs. Eli Lilly’s lawsuit asks the court to declare that the company’s 340B rebate plan is lawful and to set aside HRSA’s position that a rebate model violates 340B law and administrative procedure laws. The lawsuit also asks the court to permanently block HRSA from taking enforcement actions against the company for its rebate plan.
Nov. 27, 2024: Bristol Myers Squibb sues HHS over 340B rebate plan
Following J&J, Eli Lilly, and Sanofi, BMS filed a lawsuit in federal court over the company’s plan to use a rebate model for its anticoagulant drug Eliquis. The BMS lawsuit asks the U.S. District Court in Washington, D.C., to declare that HRSA is taking an unlawful position by denying a rebate model and to block any federal enforcement actions against the drugmaker for pursuing rebates.
Dec. 13, 2024: HRSA threatens Sanofi over 340B rebate model
HRSA sent communication to Sanofi regarding its letter dated Nov. 22, 2024, in which Sanofi stated it would be effectuating 340B discounts via a new credit model as of Jan. 6 for disproportionate share hospitals, critical access hospitals, rural referral centers, and sole community hospitals, and as of March 1 for consolidated health centers.
In its communication to Sanofi, HRSA stated, “The Secretary has not ‘provided’ that the credits described in Sanofi’s notice should be ‘taken into account’ in the ‘amount required to be paid’ for select Sanofi Products by certain covered entity types. If Sanofi implements its credit proposal without Secretarial approval, it will violate Section 340B(a)(1) of the Public Health Service Act (PHSA).” The letter concludes, “HRSA expects Sanofi to cease implementation of its credit proposal immediately and to inform HRSA no later than Dec. 20, 2024, in order to provide adequate notice to covered entities.”
Dec. 16, 2024: Sanofi sues HHS over 340B rebate plan
Following communication in which Sanofi stated it would be effectuating 340B discounts via the new credit model as of Jan. 6, 2025, HRSA threatened to cut off Medicaid and Medicare coverage for Sanofi drugs. On Dec. 16, 2024, in response to HRSA’s letter denouncing its new rebate model, Sanofi announced it would cease implementation of a 340B rebate model intended to begin in January. In a suit filed Dec. 16 with the U.S. District Court in Washington, D.C., against HRSA and HHS, Sanofi aimed to prevent HRSA from rejecting its proposed rebate model.
Legislative updates
Following are key 340B-related legislative actions that have occurred since November and considerations for healthcare organizations for how to prepare for and respond to the changes.
Nov. 1, 2024: Medicare finalizes 340B Part B payments for 2025
The Centers for Medicare & Medicaid Services released its final 2025 Medicare Hospital Outpatient Prospective Payment System rule, which includes full 340B drug payment rates. In June 2022, the U.S. Supreme Court ruled unanimously that CMS unlawfully reduced Medicare Part B reimbursement rates for 340B hospitals. CMS distributed $9 billion in lump-sum repayments in early 2024 to 340B hospitals affected by the unlawful Medicare Part B cuts that were in place from 2018 through most of 2022.
Dec. 9, 2024: Supreme Court rejects review of Arkansas contract pharmacy law
The U.S. Supreme Court declined to hear an appeal petition from the Pharmaceutical Research and Manufacturers of America challenging a decision from the 8th U.S. Court of Appeals in St. Louis on an Arkansas law requiring pharmaceutical companies to offer discounts on drugs dispensed by pharmacies that contract with hospitals and clinics serving low-income populations. Other states that have passed laws protecting the use of contract pharmacies for 340B drugs are Maryland, West Virginia, Mississippi, Kansas, and Louisiana.
Dec. 18, 2024: Federal court halts West Virginia contract pharmacy law
The U.S. District Court in Charleston, West Virginia, issued an order to halt West Virginia’s enforcement of a state law that protects covered entity access to 340B pricing through contract pharmacies. The district court ordered the halt until it can consider the constitutional challenges that the pharmaceutical industry has brought against the law, which took effect in June 2024.
Considerations for healthcare organizations
Engage internal and/or external legal counsel to assess legal implications of each manufacturer’s exception policy and the risks associated with sharing data with manufacturers. Assess prescription claims data to determine the impact of these manufacturers’ limited distribution models on your 340B Program savings over the past year.
File overcharge notices with HRSA for manufacturers who charge more than the ceiling price for a covered outpatient drug. Apexus has provided a template for submitting overcharges, which can be found here.
Continue advocacy and education efforts around how your covered entity is meeting the true intent of the 340B Program by using savings generated from purchasing discounted drugs to provide comprehensive care to more patients within your community.
Help raise awareness of the financial impact to your organization from drug company restrictions on contract pharmacies by sharing financial impact data with your elected officials in Washington. Urge them to push for an end to these drug company actions.
Use social media platforms and/or consider working with your local media to create an opinion piece from your organization regarding the impact manufacturer actions have had on prescription drug savings and your organization’s ability to serve patients. Correlate how 340B benefit loss affects patient care and healthcare service offerings.
There’s a lot to keep track of with 340B. If you have questions about the information in this article, or if Kodiak can assist you with managing your 340B compliance program, please reach out to Susan Brankin.
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