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

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.

-----------------------------------------------------------------------

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

[[Page 55157]]

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