April May Image 1 - April 340Buzz: Thanks to contract pharmacy exclusions, 340B growth may be slowing

April 340Buzz: Thanks to contract pharmacy exclusions, 340B growth may be slowing

They say April showers bring May flowers, which is something we could all desperately use in 340B specifically and, following a long and grueling public health pandemic, healthcare’s safety net in general. But April was relatively merciful on 340B, where we’ve already been fighting back rising waters. In the judicial system, the wheels continued to turn slowly around the conflict over contract pharmacies, while a pair of surveys painted instructive portraits of the 340B program at a time of major contention.

Speaking of contract pharmacy exclusions, we learned this month that, for covered entities that agree to its demands to submit claims data, Sanofi will cap consideration of retroactive claims for 340B eligibility at 45 days. There are several other manufacturers that have such back-dating restrictions in place as part of their contract pharmacy restrictions, and we can probably expect more to follow suit. It’s another big change that illustrates the complexity of the various manufacturer exclusion policies and how hard it’s making things for 340B entities.

In a bit of good news, Health and Human Services Secretary Xavier Becerra has extended the COVID-19 Public Health Emergency another 90 days to July 15. That’s important to covered entities because it keeps the window open to apply to register new sites or contract pharmacies as 340B-eligible on a rolling basis.

April 14 was the deadline for hospitals that had already lost their 340B status because of pandemic-related changes in their patient mix to apply for reinstatement. But thanks to the federal spending bill that passed last month, covered entities that lose their disproportionate share status in the remainder of 2022 due to COVID-19 can apply for reinstatement within 30 days of losing the DSH requirement.

Appeals take shape

There were a few updates to some of the legal cases centering on manufacturer contract pharmacy restrictions.

  • A federal appeals court is set to hear the cross appeals by Eli Lilly and the federal government of a mixed lower-court ruling. The former has until May 25 to file its opening brief, while the government has until June 24, according to 340B Report.
  • The Justice Department is appealing a federal judge’s ruling in the AstraZeneca Former U.S. District Judge Leonard Stark ruled in February that HRSA violated the Administrative Procedure Act when it told the company it was in violation of the 340B statute. The case now moves to the U.S. Third Circuit Court of Appeals in Philadelphia.
  • That’s the same court hearing appeals in the enjoined case of Sanofi and Novo Nordisk. In that case, the Pharmaceutical Research and Manufacturers of America (PhRMA), AstraZeneca and drug-industry rebate platform Kalderos have all filed friend of the court briefs supporting the drugmakers. The three manufacturers’ appeals could well be consolidated, as an appeals court in Washington D.C. did with the Novartis and United Therapeutics

Legislative action

The U.S. House this month passed a bill to limit monthly co-payments for insulin to $35 or 25% of a plan’s negotiated price, whichever is less. That’s both good news and notable, since many of the big insulin manufacturers are now restricting 340B access at contract pharmacies, keeping desperately needed medication out of reach for many patients. Unfortunately, the bill’s chances in the narrowly divided Senate appear less rosy.

At the state level, we’re seeing continued momentum toward passing laws prohibiting pharmacy benefit managers and insurers from discriminating against 340B covered entities via special fees, lower reimbursement or other actions. Virginia Gov. Glenn Youngkin signed such a law earlier this month, and the Illinois Legislature on March 30 sent a similar bill to Gov. J.B. Pritzker for his signature. Michigan and Nebraska recently enacted their own anti-discrimination laws, joining a growing list of states.

These laws are particularly important considering the growing number of manufacturer contract pharmacy exclusions and what they portend for lower reimbursement. Why? Manufacturers are enacting the exclusions in part to limit the use of 340B in commercial insurance plans. Now that covered entities are starting to fork over data to maintain access to 340B contract pharmacy pricing, we expect that manufacturers will use that data as leverage to fight with insurers over reimbursements and to withhold rebates from PBMs. Lacking those rebates, PBMs will in turn target contract pharmacies that are doing a swift trade in 340B by lowering their reimbursement — unless of course you’re in a state that has enacted a 340B anti-discrimination law.

As I’ve been saying, we’re caught in a chess game being operated by the manufacturers. Covered entities need to be thinking all the time about their next moves.

Snapshots of the 340B program

Two new surveys shed new light on 340B and the contract pharmacy standoff. I’ll start with the annual member survey from 340B Health. The report notes that in addition to the financial strain from COVID-19 and staffing issues — KauffmanHall projected that U.S. hospitals would lose a combined $54 billion in net income in 2021 — hospitals felt the pinch from contract pharmacy exclusions.

The report separated its findings by small, mostly rural critical access hospitals on one side, and disproportionate share hospitals, rural referral centers and sole community hospitals, which tend to be larger and are mostly urban, on the other. Some tidbits of interest:

  • On average, the DSH, RRC and SCH facilities have lost 23% of their contract pharmacy savings, while critical access hospitals have lost an average of 39%.
  • Translated into dollars, critical access hospitals lost a median $220,000, with 10% of the responding CAHs having lost at least $700,000. For the mostly urban facilities, the median loss was $1 million, with 10% reporting losses of $9 million or more.
  • Not surprisingly, losses in 2022 are expected to be higher, with more manufacturers enacting restrictions. Hospitals of all stripes say that could mean fewer service offerings, diminished access for low-income and rural patients, and reductions in treatment for patients with cancer and diabetes, among other conditions.
  • Nearly two thirds of critical access hospitals said more widespread contract pharmacy restrictions could threaten their ability to keep their doors open.

The other report came from IQVIA, which publishes annual estimates of the 340B program’s size and growth. It estimated 340B sales at $93.6 billion in 2021, about 14% of the overall drug market and an increase of 15.9% over 2020. But that’s less than the 18.1% increase IQVIA found in 2020, and the organization said that 340B sales of diabetes drugs fell 7.4%, compared to a 22% increase in 2020, attributed largely to the contract pharmacy restrictions.

Overall 340B sales through the big retail chain pharmacies were down 5%.

In its methodology, IQVIA explained that it “dollarized” sales “using WAC pricing at the product/pack level” using supplier sell-in data and excluding rebates. The concern with that method is that it’s not how any covered entity would purchase products or what a manufacturer would sell to a covered entity (think group purchasing and other negotiated rates if not for 340B prohibitions). So, it overinflates the number, making 340B seem larger than it is.  By contrast, HHS in its fiscal 2023 budget request estimated that 340B sales in 2020 were approximately $38 billion, about 7.2% of the overall drug market.

It’s also important to note that both surveys were conducted when the number of manufacturers restricting 340B contract pharmacy pricing was smaller than it is today. And because the current number (16) is likely to climb before the year is over, the picture for 340B could be uglier this time next year. Sigh.

Don’t miss our webinar

Meanwhile, next month I’ll be hosting another webinar to help covered entities make sense of the different data models and other policies of manufacturers regarding contract pharmacy exclusions, sharing lessons learned from our industry relations team. Manufacturer Mayhem Marches On takes place Wednesday, May 25 at 2 p.m. ET and is open to customers and non-customers alike. Register here.

In the meantime, make sure you keep the mops and buckets handy and keep bailing. We’re on the righteous path, and together we will forge through this deluge.