Federal Register / Vol. 72, No. 8 / Friday, January 12, 2007 / Notices 1543 

ensure that drugs purchased under the 

340B Drug Pricing Program are not 

diverted to individuals who are not 

patients of the covered entity. Such 

records can include: prescription files, 

velocity reports, and records of ordering 

and receipt. These records will be 

maintained for the period of time 

required by State law and regulations.’’

(3) ‘‘Prior to the contract pharmacy 

providing pharmacy services pursuant 

to this agreement, the covered entity 

will have the opportunity, upon 

reasonable notice and during business 

hours, to examine the tracking system. 

For example, such a tracking system 

may include quarterly sample 

comparisons of eligible patient 

prescriptions to the dispensing records 

and a six (6) month comparison of 340B 

drug purchasing and dispensing records 

as is routinely done in other 

reconciliation procedures. The contract 

pharmacy will permit the covered entity 

or its duly authorized representatives to 

have reasonable access to contract 

pharmacy’s facilities and records during 

the term of this agreement in order to 

make periodic checks regarding the 

efficacy of such tracking systems. The 

contract pharmacy agrees to make any 

and all adjustments to the tracking 

system which the covered entity advises 

are reasonably necessary to prevent 

diversion of covered drugs to 

individuals who are not patients of the 

covered entity.’’

(4) ‘‘The pharmacy will dispense 

covered drugs only in the following 

circumstances: (a) Upon presentation of 

a prescription bearing the covered 

entity’s name, the eligible patient’s 

name, a designation that the patient is 

an eligible patient of the covered entity, 

and the signature of a legally qualified 

health care provider affiliated with the 

covered entity; or (b) receipt of a 

prescription ordered by telephone or 

other means of electronic transmission 

that is permitted by State or local law 

on behalf of an eligible patient by a 

legally qualified health care provider 

affiliated with the covered entity who 

states that the prescription is for an 

eligible patient. The covered entity will 

furnish a list to the pharmacy of all such 

qualified health care providers and will 

update the list of providers to reflect 

any changes. If a contract pharmacy is 

found to have violated the drug 

diversion prohibition, the contract 

pharmacy will pay the covered entity 

the amount of the discount in question 

so that the covered entity can reimburse 

the manufacturer.’’

Dated: December 22, 2006. 

Elizabeth M. Duke, 

Administrator. 

[FR Doc. E7–334 Filed 1–11–07; 8:45 am] 

BILLING CODE 4165–15–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Health Resources and Services 

Administration 

Notice Regarding Section 602 of the 

Veterans Health Care Act of 1992 

Definition of ‘‘Patient’’

AGENCY: Health Resources and Services 

Administration, HHS. 

ACTION: Notice. 

SUMMARY: Section 602 of Public Law 

102–585, the ‘‘Veterans Health Care Act 

of 1992,’’ enacted Section 340B of the 

Public Health Service (PHS) Act 

‘‘Limitation on Prices of Drugs 

Purchased by Covered Entities.’’ Section 

340B provides that in order to obtain 

Medicaid reimbursement for its covered 

outpatient drugs, a manufacturer must 

sign a pharmaceutical pricing agreement 

with the Secretary of Health and Human 

Services in which the manufacturer 

agrees to charge a price to covered 

entities for outpatient drugs that will 

not exceed an amount determined under 

a statutory formula. Section 340B is 

administered as the ‘‘340B Drug Pricing 

Program’’ and is commonly referred to 

as ‘‘the 340B Program.’’

Section 340B states that it is illegal for 

covered entities to sell medications 

purchased under the 340B Program to 

persons who are not considered 

‘‘patients’’ of the covered entity. The 

purpose of this notice is to inform 

interested parties of proposed 

clarifications to the definition of 

‘‘patient’’ for whom the covered entity 

can purchase discounted 

pharmaceuticals under the 340B 

Program. This clarification is necessary 

to protect the integrity of the 340B 

Program and to assist covered entities 

and other participants in their 

compliance efforts. 

DATES: The public is invited to submit 

comments on the proposed guidelines 

by March 13, 2007. After consideration 

of the comments submitted, the 

Secretary will issue final guidelines. 

ADDRESSES: Address all comments to 

Mr. Bradford R. Lang, Public Health 

Analyst, Office of Pharmacy Affairs 

(OPA), Healthcare Systems Bureau 

(HSB), Health Resources and Services 

Administration (HRSA), 5600 Fishers 

Lane, Parklawn Building, Room 10C–03, 

Rockville, MD 20857. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Jimmy Mitchell, Director, OPA, HSB, 

HRSA, 5600 Fishers Lane, Parklawn 

Building, Room 10C–03, Rockville, MD 

20857, or by telephone through the 

Pharmacy Services Support Center at 1–

800–628–6297. 

SUPPLEMENTARY INFORMATION: 

Introduction 

Section 340B(a)(4) of the PHS Act and 

section 1927(a) of the Social Security 

Act list the various types of 

organizations eligible to participate in 

and purchase discounted drugs under 

the 340B Program. Eligibility for 

participation in the 340B Program is 

strictly limited to the specific categories 

of entities specified in these statutes. 

Section 340B(a)(5)(B) of the PHS Act 

prohibits entities from selling (or 

otherwise transferring) drugs purchased 

under the 340B Program to anyone who 

is not a patient of the covered entity. 

Responsibility for ensuring compliance 

with this provision rests with the 

covered entity. Congress did not define 

the term ‘‘patient’’ in Section 340B, and 

initial HRSA guidelines implementing 

the 340B Program directed covered 

entities to ‘‘develop and institute 

adequate safeguards to prevent the 

transfer of discounted outpatient drugs 

to individuals who are not eligible for 

the discount’’ in order to prevent 

diversion. To accomplish this, entities 

were encouraged to utilize a separate 

purchasing account and separate 

dispensing records (See 59 FR 25110). 

As covered entities, manufacturers, 

and others began to implement the 340B 

Program, it became apparent that 

additional clarification of the patient 

definition was needed and on October 

24, 1996, HRSA issued additional 

guidelines regarding the definition of a 

covered entity ‘‘patient’’ (61 FR 55156). 

These guidelines stated that the 

following definition of patient would 

apply for the purposes of the 340B 

Program: 

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 


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range of services for which grant funding or 

Federally-qualified health center look-alike 

status 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. 

(61 FR 55157–8). 

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., comprehensive hemophilia 

treatment centers, HIV/AIDS programs 

funded through the Ryan White CARE 

Act, black lung clinics, consolidated 

health centers, Disproportionate Share 

Hospitals (DSH), and Title X clinics), it 

was essential that HRSA work closely 

with each Federal program office to 

develop a definition flexible enough to 

describe accurately each covered 

entity’s patients. 

As of October 1, 2005, participation in 

the 340B Program has grown to more 

than 12,000 entities. Through covered 

entity networking, contracting, and 

other arrangements, additional 

questions about the definition of a 340B 

patient have arisen. HRSA believes that 

the existing patient definition provides 

sufficient guidance to answer many of 

these questions. However, it is possible 

that some 340B covered entities may 

have interpreted the definition too 

broadly, resulting in the potential for 

diversion of medications purchased 

under the 340B Program. Therefore, 

HRSA finds it necessary to issue this 

Notice, and to include several examples 

that further illustrate the guidance. 

While similar to the existing patient 

definition, this clarification provides 

covered entities with more explicit 

guidance regarding the relationship 

between a covered entity and an 

individual that makes that individual a 

‘‘patient’’ of the covered entity. 

Related to the definition of a 

‘‘patient’’ is the question of which 

entities are eligible to provide 340B 

drugs. HRSA has been receiving an 

increasing number of questions 

specifically related to which entities 

qualify for inclusion in the 340B 

Program under Section 340B(a)(4)(L) of 

the PHS Act. HRSA invites comments 

with respect to which elements should 

be required in private non-profit 

hospitals’ contracts with State or local 

governments ‘‘to provide health care 

services to low income individuals who 

are not entitled to benefits under Title 

XVIII of the Social Security Act or 

eligible for assistance under the State 

plan * * * ’’ under Section 

340B(a)(4)(L)(i) of the PHS Act. HRSA is 

also seeking comments regarding the 

different situations where private, nonprofit hospitals are formally granted 

government powers under Section 

340B(a)(4)(L)(i) of the PHS Act. 

Final guidelines will replace all 

previous 340B Program guidance 

addressing the definition of a patient, 

including, but not limited to, the 

‘‘Notice Regarding Section 602 of the 

Veterans Health Care Act of 1992 

Patient and Entity Eligibility,’’ 61 FR 

55156 and any individual 

correspondence issued by HRSA on the 

subject. 

Definition of a Patient 

Under these proposed guidelines, the 

criteria determining whether an 

individual is a ‘‘patient’’ of a covered 

entity (with the exception of Stateoperated or funded AIDS drug 

purchasing assistance programs) are: 

1. The covered entity has established 

responsibility for the outpatient health 

care services it provides to the 

individual, such that the covered entity 

maintains ownership, control, 

maintenance, and possession of records 

of the individual’s health care, 

including records that appropriately 

document health care services that 

result in the use of, or prescription for, 

340B drugs; 

2. The individual receives outpatient 

health care services that result in the 

use of, or a prescription for, 340B drugs 

as part of the diagnosis and treatment 

from a health care provider who is 

employed by the covered entity, or 

provides health care to patients of the 

covered entity under a valid, binding, 

and enforceable contract. If the 

individual received health care services 

from a health care provider employed 

by or under contract with the covered 

entity, then the individual may be 

referred for followup care for the same 

condition by that health care provider, 

to an outside health care provider and 

still remain a patient of the covered 

entity for purposes of this guidance, so 

long as ongoing responsibility for the 

outpatient health care service that 

results in the use of (or prescription for) 

340B drugs, remains with the covered 

entity; and 

3. The outpatient health care services 

the individual receives from the covered 

entity that result in the use of, or 

prescription for, 340B drugs are: 

a. Part of a health care service or range 

of services for which grant funding or 

Federally-Qualified Health Center lookalike status has been provided to the 

covered entity; or 

b. Provided by a Disproportionate 

Share Hospital (DSH) or by a location 

that qualified as a provider-based 

facility within a DSH under 42 CFR 

413.65. If the individual received care 

from such DSH or qualifying providerbased facility, then the individual may 

be referred for followup care for the 

same condition by such a health care 

provider to an outside health care 

provider and still remain a patient of the 

covered entity for purposes of this rule, 

so long as the covered entity (either the 

DSH or a qualified provider-based 

facility) retains ongoing responsibility 

for the outpatient health care service 

that results in the use of (or prescription 

for) 340B drugs. To demonstrate the 

necessary retention of ongoing 

responsibility for the health care it is 

expected that, at a minimum, the 

covered entity will provide health care 

to the individual in the DSH or the 

qualified provider-based facility of the 

DSH within 12 months after the time of 

referral. 

The individual’s health care 

relationship with the covered entity is 

the most important factor in 

determining whether an individual 

satisfies the criteria above. For a 

prescription to qualify under 340B, the 

covered entity must be primarily 

responsible for the health care which 

results in the use of, or prescription for 

340B drugs. 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. 

The first criterion of the patient 

definition above requires covered 

entities to establish a relationship with 

each individual such that the covered 

entity maintains records of the 

individual’s health care. The covered 

entity will document in the individual’s 

health care records the health care 

service provided and the drugs 


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prescribed or used in the covered entity 

for this individual. A shared electronic 

record where several parties have access 

and ability to add/edit the records from 

their physical location would satisfy the 

requirements of the 340B Program 

guidelines, as long as the covered entity 

maintains control, ownership, 

maintenance, and possession of the 

individual’s health care record. Mere 

contractual right to obtain records from 

a health care provider, without actual 

control and maintenance of the record, 

would not satisfy the requirements of 

the 340B Program. 

The second criterion of the patient 

definition requires that the 

responsibility for the health care 

services that result in the use of, or 

prescription for, 340B drugs remains 

with the covered entity. Where a referral 

is utilized for specialty health care, in 

order to result in a valid 340B 

prescription, the referral must be for 

followup care for the same condition 

and must originate from a health care 

provider who is employed by or under 

a valid, binding, and enforceable 

contract with the covered entity which 

retains ongoing responsibility for the 

health care and treatment of the 

individual. 

For the purpose of this guidance, the 

provision of administrative services 

alone, such as case management 

services from someone other than a 

health care provider, is not sufficient to 

demonstrate the necessary health care 

services set forth in the definition 

above. The statute requires that 340B 

drugs be provided for the patients of the 

covered entity, as opposed to offering 

other services to individuals who are 

patients of health care providers who 

are not part of a covered entity as 

defined in the statute. In cases where an 

individual has received health care 

services from a non-covered entity 

resulting in a prescription, the 

administrative act of recording such 

information, incorporating it into the 

health record, and filling the 

prescription does not constitute health 

care services for the patient’s health care 

for purposes of the 340B Program. 

To demonstrate responsibility for the 

health care that results in the use of, or 

prescription for 340B drugs, health care 

must be provided by the covered entity 

through health care providers who meet 

the second criterion and who have the 

capacity and authority to issue the 340B 

prescription. Mere acceptance pro forma 

or rubberstamping of an outside health 

care provider’s diagnosis or medical 

opinion does not demonstrate such 

responsibility. While the health care 

providers of the covered entity can take 

into account the diagnosis and 

prescription of other health care 

providers, they must exercise their own 

judgment in taking responsibility for 

their own patients. 

The third criterion of the patient 

definition above requires that 340B 

drugs be prescribed only in conjunction 

with outpatient services. Furthermore, 

subsection (a) clarifies that the 

provision of 340B drugs must fall within 

the scope of the grant funding or 

Federally Qualified Health Center lookalike status which forms the basis for 

the eligibility of the covered entity to 

participate in the 340B Program. 

Subsection (b) of the third criterion 

likewise provides clarification for DSHs 

that the use of, or prescription for, 340B 

drugs must be within the scope of the 

basis for including such institutions in 

the 340B Program. In order for an 

outpatient facility of a DSH to be 

eligible for the 340B Program, it must be 

demonstrated that the outpatient facility 

is an integral part of the DSH. HRSA has 

chosen to rely on the category of 

provider-based facilities as set forth by 

the Centers for Medicare and Medicaid 

Services (CMS) under Title XVIII of the 

Social Security Act (Medicare). This 

decision has been made because HRSA 

believes that the requisite integration of 

facilities necessary to demonstrate that 

the secondary facility is functioning as 

part of the DSH under 42 CFR 413.65 is 

appropriate for facilities eligible under 

the 340B Program. Compliance with the 

rule for provider-based facilities would 

provide clear guidance to DSHs that 

wish to prescribe 340B drugs to patients 

at these outpatient facilities and ensure 

that the individuals are truly patients of 

the DSH. Ultimately the facility’s 

provider-based status must be reflected 

in the covered entity’s Medicare Cost 

Report. The covered entity may provide 

a copy of the attestation provided to its 

fiscal intermediary pursuant to 42 CFR 

413.65 to demonstrate compliance with 

this guideline until such time as the 

facility is listed on the DSH’s Medicare 

Cost Report. The DSH shall retain the 

responsibility to promptly notify the 

OPA in the event that the outpatient 

facility’s provider-based status is 

rejected or otherwise called into 

question. 

Examples 

The following examples describe the 

issues that HRSA has identified as 

problematic and the relationships that 

do not meet the definition of ‘‘patient’’

for purposes of compliance with the 

340B Program guidelines. 

Example 1: Certain Case Management 

Constructs 

HRSA has become aware that some 

covered entities may be using case 

management arrangements that 

inappropriately expand their ‘‘patient’’

populations, diverting 340B drugs to 

individuals who are not eligible patients 

of the 340B covered entity. In some 

cases, the covered entities claim to 

provide the requisite ‘‘health care 

services’’ through a third party that 

operates through a case management 

construct or call center. Although the 

covered entity may retain records of the 

encounters, supervise personnel, 

oversee billing, payment, and other 

administrative tasks in the program, the 

covered entity is not providing the 

actual outpatient health care services 

that can be linked to the prescriptions 

written for the individuals in question. 

An individual whose sole relationship 

with a covered entity is through case 

management services or other 

administrative measures, not 

accompanied by actual medical services 

from a health care provider that meets 

criterion 2, would not be considered a 

patient of the covered entity eligible to 

receive 340B drugs. 

Example 2: Loose Affiliation Networks 

Some DSHs have been contracting 

with health care providers to create a 

loose affiliation model for outpatient 

health care services. The individuals, 

receiving services from affiliated health 

care providers, have been filling 

prescriptions written by these health 

care providers with 340B drugs. The 

‘‘contracts’’ are often simple, one-page 

documents that do not create 

contractually enforceable duties or 

obligations for either the health care 

provider or covered entity. These 

affiliation models claim to meet the 

patient definition by specifying that the 

individual’s health care records would 

be available at the covered entity, that 

‘‘responsibility for the patient’’ would 

also reside with the covered entity, and 

that in some instances, individuals 

would be seen by a case manager at the 

covered entity at specified intervals. 

Under this model, the services being 

provided directly by the covered entity 

are often more appropriately 

characterized as administrative services 

rather than health care services. 

Ultimately, the treatment plan followed 

is determined by the affiliated health 

care provider and not the covered 

entity. The ongoing responsibility for 

the individual’s health care resides with 

the affiliated health care provider and 

not the covered entity. The individuals 

enrolled in these programs are treated 


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by health care providers too loosely 

affiliated with the covered entity for the 

ongoing responsibility to rest with the 

covered entity for the patient’s health 

care resulting in the use of, or 

prescription for, 340B drugs. 

This model improperly seeks to 

expand the definition of a patient 

beyond that envisioned by Congress in 

prohibiting the resale of 340B drugs 

outside the eligible covered entity 

limits. In particular, HRSA is concerned 

that the affiliation model extends the 

ability of covered entities to purchase 

340B drugs for individuals who are not 

receiving healthcare from a health care 

provider employed by or having a valid, 

binding, and enforceable contract with 

the covered entity. In the DSH context, 

since such affiliated healthcare 

providers may have privileges without 

actually being required to provide 

health care services at the DSH, HRSA 

believes that it is reasonable to require 

that either the prescribing, or the 

referring, health care provider be 

employed by or have a valid, binding, 

and enforceable contract with the 

covered entity to provide outpatient 

medical care to patients of the DSH. 

Example 3: Provider-Based Designations 

HRSA is concerned that a number of 

DSHs may be attempting to expand their 

eligible facilities to include locations 

that are not integrated parts of the 

qualifying DSH. As noted above, HRSA 

has chosen to rely on a location’s status 

as a provider-based facility as provided 

under 42 CFR 413.65 to demonstrate 

that the secondary facility is functioning 

as part of the DSH. While HRSA is 

aware of the 35 mile distance exemption 

that exists for certain 340B-DSHs under 

42 CFR 413.65(e)(3)(i), these DSH 

provider-based facilities remain subject 

to the other requirements as set forth in 

42 CFR 413.65. This requirement also 

applies to nursing home facilities, 

rehabilitation hospitals, hospice, and 

home health agencies. Please note that 

even if these facilities qualify as part of 

the DSH, only patients receiving 

outpatient health care services in these 

facilities would be eligible to receive 

340B drugs. In addition, if HRSA 

suspects that these entities are being 

improperly designated as providerbased facilities, HRSA will decline to 

add the facilities to the HRSA 340B 

database of covered entities until it has 

received portions of the Medicare Cost 

Report demonstrating provider-based 

status and/or the attestation of providerbased status the covered entity provides 

to its fiscal intermediary pursuant to 42 

CFR 413.65. Likewise, if HRSA 

discovers that certain covered entities 

may have improperly listed facilities on 

the 340B database with the implication 

that they are provider-based, HRSA will 

request the covered entity to provide the 

relevant portions of the Medicare Cost 

Report and/or attestation within 45 days 

to verify the facility’s provider-based 

status and to verify that such health care 

services are being provided on an 

outpatient basis. If HRSA does not 

receive appropriate documentation to 

verify provider-based status within this 

time period, it will remove the facility 

from the 340B covered entity database. 

The covered entity shall be required to 

notify HRSA immediately if its 

provider-based status has been rejected 

or questioned by CMS or its fiscal 

intermediary. In cases where providerbased status has been rejected, the 

facility will be removed from the 340B 

covered entity database immediately. 

Example 4: Employees 

HRSA receives many questions about 

whether employees of a covered entity 

are ‘‘patients’’ for purposes of the 340B 

Program. These questions come from 

covered entities that provide health care 

coverage to employees under their own 

self-insured health plan, and those 

whose employees have third party 

health coverage as an employment 

benefit. Employees of a covered entity, 

regardless of their health care coverage, 

are not considered patients of the 

covered entity for the purpose of the 

340B Program unless they receive health 

care from a provider employed by or 

under contract with the covered entity. 

The fact that the person is an employee 

of the covered entity, or that they 

receive health care benefits from their 

covered entity-employer is not relevant. 

The relevant circumstance is that the 

employee is a patient of the covered 

entity. If an employee is a patient of 

another provider in the community, and 

is referred to and receives health care 

from the covered entity, they can 

receive 340B drugs only if the other 

provisions of the patient definition are 

met. Where a covered entity operates a 

self-insured health plan, the covered 

entity retains the requisite responsibility 

for the individual as a patient only if the 

individual receives outpatient health 

care services under the terms of this 

notice. Responsibility for the patient 

does not extend to cover the individual 

if the covered entity’s sole responsibility 

for the individual is as the administrator 

of its self-insured plan. Meeting 

administrative requirements for 

maintaining employee health records so 

as to ensure that the employees are 

compliant with both State and Federal 

health care provider regulations alone, 

is not sufficient for the purpose of 

establishing patient eligibility for the 

340B Program. Rather, the covered 

entity must provide health care to these 

individuals that results in the use of, or 

prescription for, 340B drugs. 

Furthermore, employees who merely 

receive required health physicals as a 

condition of their employment by a 

covered entity with no other health care 

provided are not patients of the covered 

entity. 

Example 5: Indian Tribes and Tribal 

Organizations 

In the case of Indian tribes or tribal 

organizations, any attempt to serve nonIndian Health Service beneficiaries must 

receive prior formal approval by the 

Indian Health Service. 

Example 6: Grantee Subgrantees and 

Subcontractors 

In certain circumstances, 

organizations may be functioning as 

subgrantees to grantees who are eligible 

to purchase 340B drugs (section 

340B(a)(4) of the PHS Act). In these 

situations, subgrantees are reminded 

that they must meet the standards set 

forth in 45 CFR Part 74 and 45 CFR Part 

92, as applicable. As subgrantees of a 

covered entity’s grant, these 

organizations are eligible to access 340B 

drugs for only those patients to whom 

they are providing health care services 

under the scope of their subgrant. In 

these instances, individuals may only 

receive 340B drugs for the 

pharmaceuticals utilized under the 

scope of the project for which grant 

funds were received by the subgrantee. 

Subgrantees must register with HRSA in 

order to participate in the 340B Program 

and must be listed in the HRSA 340B 

database of covered entities to purchase 

340B drugs. 

Subgrantees must maintain 

information systems that permit them to 

segregate the 340B eligible patient 

population from the rest of their 

patients, and to order 340B drugs only 

for 340B eligible patients. 

If an entity is a subcontractor of a 

covered entity, rather than a subgrantee, 

all 340B drugs must be purchased by the 

covered entity. The covered entity, in 

turn, must maintain records 

documenting its purchase of 340B drugs 

for its subcontractors. Both the covered 

entity and the subcontractor would be 

responsible for ensuring the 340B drugs 

were ordered only for the portion of the 

subcontract which is within the scope of 

a covered entity’s grant. 

Dated: December 22, 2006. 

Elizabeth M. Duke, 

Administrator. 

[FR Doc. E7–335 Filed 1–11–07; 8:45 am] 

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