20211229 Dec 340Buzz 1 - December 340Buzz: What will 2022 bring us in 340B?

December 340Buzz: What will 2022 bring us in 340B?

As those of you reading this blog know all too well, we are living through highly eventful, challenging times in 340B, and with the new omicron wave of the pandemic, there’s been no relief for hospitals during what is ordinarily a time of holiday cheer, gatherings and a break from the grind. So with the calendar winding down in 2021, we’ll take stock of the biggest stories in a momentous year for the 340B program. We’ll also sprinkle in a dash of what could be in store in the year ahead. 

But first, a few updates.

The latest Buzz

  • By now you’ve heard the news that Build Back Better, and its efforts to rein in drug prices, has been left for dead after Sen. Joe Manchin said he could not vote for it, leaving Democrats short of votes in an evenly divided Senate, where it enjoys no support from Republicans. In reality, expecting a big, complex package like BBB to pass through the Senate before Christmas was always wishful thinking even in the best of circumstances. Our best guess? There will be more negotiations on individual elements of the package in the new year, as Democrats look to resurrect it in more scaled-back, piecemeal measures. Drug pricing could very well survive as a priority; the U.S. House Oversight and Reform Committee issued a report this month that found pharmaceutical companies raised the prices of brand-name drugs by almost four times the rate of inflation between 2016 to 2020. 
  • Former White House COVID-19 testing coordinator Carole Johnson will become the new head of the U.S. Health Resources Services Administration, replacing acting administrator Diana Espinosa effective next month. Johnson is a longtime Democratic health policy expert who worked in the Obama administration, including on the Affordable Care Act, and later as the head of the New Jersey Department of Human Services.
  • There’s another U.S. Supreme Court case with ramifications for 340B. The Court heard arguments in Becerra v. Empire Health Foundation over how to calculate Medicare disproportionate share payments to hospitals. The six conservative justices appeared to side with the hospitals, which could result in a higher DSH percentage for many hospitals and more of them becoming eligible for 340B. A decision is expected by mid-2022.
  • There’s been no real updates to the various federal court cases involving drug manufacturers and contract pharmacy exclusions — more on that below — as both sides debate whether to appeal the mixed rulings that have so far been issued. In a notable development, Eli Lilly now says it will grant 340B pricing to an unlimited number of contract pharmacies so long as covered entities agree to provide them all claims data associated with those purchases. Covered entities are not amused and largely view the announcement as a PR stunt. 

Looking back and peering ahead

If we had to summarize the year in 340B, we’d say 2021 was all about the drug manufacturers flexing their muscle and skewing the playing field in their favor. They added more fuel to the fire that began in 2020 with Eli Lilly’s announcement that it would place restrictions on 340B pricing for its drug Cialis at contract pharmacies. 

From there, the floodgates were open; at last count, 10 manufacturers (including Lilly) are currently restricting or have announced plans to restrict 340B ceiling prices at contract pharmacies. That has caused lots of headaches and had very real financial implications for covered entities, compounding the mounting losses from the pandemic and the declining reimbursements from pharmacy benefit managers. If manufacturers appear to have the upper hand, 340B entities are definitely losing the battle right now. The pharmaceutical industry and PBMs are also the lone stakeholders in the entire 340B drama that didn’t stand still in 2021.

In May, HRSA struck a glancing blow against the empire when it sent cease-and-desist letters to six scofflaw manufacturers. Seeing no corrective actions from the drug makers, the agency followed up later with letters threatening to levy civil monetary penalties. 

Predictably, the drug makers sued the Department of Health and Human Services in federal courts. Three judges have issued rulings in cases involving five of those manufacturers that represent a decidedly mixed bag for covered entities. While we await word of appeals in those cases, U.S. District Judge Dabney Friedrich has issued stays in lawsuits by Boehringer Ingelheim and drug industry software firm Kalderos to give the government time to decide whether to appeal her ruling in the enjoined lawsuits by Novartis and United Therapeutics. Friedrich in that ruling struck down and vacated HRSA’s May 17 enforcement letters and said the 340B statute does not prohibit drug makers from attaching conditions to drug discounts.

Meanwhile, a chastened HRSA has yet to issue cease-and-desist letters to the remaining four manufacturers. Last week, more than 850 hospitals signed onto a letter from 340B Health asking the government to appeal Friedrich’s ruling and urging “further enforcement” on other manufacturers denying 340B discounts at contract pharmacies. 

Whatever the outcome, we can almost certainly expect much more of the same. Seeing the largely favorable (or at least consequence-free) results of the judicial rulings so far, manufacturers are likely licking their lips at the prospect of enacting yet more barriers to 340B contract pharmacies in 2022. Some may use the restrictions to tease their shareholders about increased returns in the next fiscal year, with announcements likely coming in the second quarter and the new restrictions starting to take effect in July.

Finally, there is American Hospital Association v. Becerra, the Supreme Court case over reimbursement cuts to covered entities for Medicare Part B outpatient drugs. Signs point toward this being a positive outcome when the decision comes, likely in the spring. But it may be a limited win.

Our sense is that SCOTUS will reprimand the federal government over procedural matters, arguing that while CMS has the ability to make changes to prices and reimbursements, it failed to be transparent in how it arrived at its arithmetic and did not give adequate time for notice and public comment, having instead relied on a rushed survey sent to affected hospitals. In essence, it will tell CMS to go back to the drawing board and start over. And if that prediction is accurate, then expect drug manufacturers to press hard for the same treatment with Medicare Part D.

Turning to congressional activity, the collapse of Build Back Better provided a fitting cap to 340B activity in 2021. Members of Congress introduced some good bills in 2021 — such as the “PROTECT 340B” bill in the House — and a smattering of anti-340B bills. None have gone anywhere.

What about the Biden administration, you ask? With the new year, we can look forward to a new administrative dispute resolution (ADR) rule, which we previously covered. And with a new administrator in town and a new director coming soon for the Office of Pharmacy Affairs, which runs 340B, our bet is on HRSA issuing some kind of new directive or administrative rule in the new year. In-house lawyers who have been pouring over the federal court decisions will offer plenty of advice to Johnson and others regarding what to do next. Hopefully it will be something with some teeth. 

After such a wearisome year, we wish we had a cheerier message to deliver, but unfortunately, 2022 is shaping up to be another tough one for 340B covered entities, and the fight for the finish continues. If there’s a bright spot, it’s on the state legislative level. In West Virginia, the state insurance commissioner has ruled that Express Scripts’ 340B claims resubmission and claims identification requirements violate the state’s law regulating pharmacy benefit managers because it forces covered entities to incur costs not levied on other providers. Meanwhile, state lawmakers in both Missouri and Florida have introduced bills to bar PBMs from discriminating against 340B entities. 

It’s further evidence that states are taking the lead on this issue. Interestingly, of the 21 states that have now passed anti-discriminatory legislation, 14 of them are led by Republican legislatures and governors. Here’s to hoping more states follow their leads.

Here’s another silver lining: With more exclusions likely to come from manufacturers, change spurs innovation. The changes will force us at Sentry to think creatively and strategically about how we provide value to our stakeholders and offer customers new ways of doing things. New complexity will require new tools and new strategies for covered entities to succeed. Our cause is just and noble. Onward and upward!

On a final note, the 340B Coalition Winter Conference is still slated to take place from Jan. 31 to Feb. 2 as an in-person event in San Diego (organizers were reportedly weighing whether to offer it as a hybrid live/remote event). Sentry will hold its annual customer appreciation event on Tuesday, Feb. 1 at Rustic Root in the Gaslamp Quarter. More information on that is coming soon, but we hope to see you there.

From all of us at Sentry, happy holidays and may your 2022 be bright!