states that services rendered by the covered entity to the patient must be more
than the mere prescription of a 340B drug (except in the case of state-operated
More controversial is the use of referrals in the 340B Program. The 1996
definition requires the medical provider to be employed by, or in some “other
arrangement” with, the covered entity.108 Understandably, there has been
confusion about what entails a permissible “other arrangement.” On one
hand, if a community health center refers its patient to a nearby cardiologist
who then prescribes outpatient prescription medication for a heart condition
and refers the patient back to the community health center for follow-up care,
it was arguable that this medication was – and deserves to be – 340B eligible.
Pharmaceutical companies have taken the position that HRSA should require
a direct care standard for patient eligibility, whereby the provider would have
to be employed by or a direct independent consultant to the covered entity.
This direct care standard was adopted in the proposed MegaGuidance.109 If
this standard survives and is reflected in the final MegaGuidance, it will
result in any prescriptions arising out of a referral relationship being beyond
the scope of the 340B Program.
The newly proposed MegaGuidance redefined patient to reign in the 340B
Program.110 Indeed, the proposed MegaGuidance deleted the “other
arrangement” language used in the 1996 guidance and required the covered
entity and prescribing individual to have either an employment or
independent contractor relationship “such that the covered entity may bill for
services on behalf of the provider.”111 In a less controversial move, the
proposed MegaGuidance stated that the 340B Program “does not serve as a
general employee pharmacy benefit or self-insured pharmacy benefit.”112 In
other words, the proposal clarified that it is not sufficient for an individual to
be an employee of a covered entity to be a 340B eligible patient, but rather
that individual must be a patient.113
The proposed MegaGuidance would require “that the covered entity
maintains access to auditable health care records which demonstrate that the
covered entity has a provider-to-patient relationship, that the responsibility
for care is met for each 340B drug.”114 This proposed restriction was in
response to HRSA’s concern that organizations were claiming 340B
107. Id. at 55158.
108. 72 Fed. Reg. 1543, supra note 102.