This month, we take a look at the 2021 proposed budget from the White House, new reports about the 340B program from MedPAC and GAO, and review where we stand on several lawsuits, including those regarding the Affordable Care Act and site-neutral payments. From lawsuits to government reports to state legislation, government continues to exert its influence on 340B as political debates about healthcare rage on.
White House budget targets 340B
On February 10, the White House unveiled its proposed budget for the fiscal year 2021.”Similar to previous years, the budget proposes several changes to the 340B Drug Pricing Program. The administration proposes to give HRSA general regulatory authority over the program to ‘allow for clear, enforceable standards of participation and will help ensure covered entities maintain compliance with 340B program requirements and the program benefits low-income and uninsured patients.’ Additionally, the budget would implement a new user fee of 0.1% of total 340B drug purchases from covered entities to improve operations and oversight. It would also require covered entities to report on how they use the savings generated from the program,” reports the Association of American Medical Colleges.
We always anticipate that 340B will be part of the budget submission process, and are always eager to understand the message the Administration seems to be sending, because it enables us to see where policymakers and policies may shift. Sentry will continue to monitor suggested changes to the program that come from the White House, including the appropriations language that we expect to see next month.
340B at the state level
As legal battles around 340B continue at the federal level, many lawmakers continue to push for change at the state level as well.
As we’ve previously reported, states from California to Wisconsin to South Dakota have attempted to influence 340B, many of them to prevent pharmacy benefit managers (PBMs) from establishing different contract terms for covered entities than for non-covered entities. Now, just two months into the new year, several more states are joining the fray.
In Ohio, for example, lawmakers are promoting a bill that would stop pharmacy benefit managers from imposing additional charges or reducing reimbursements for prescription drugs for hospitals and clinics in the 340B drug-pricing program. And in Washington state, legislators are considering a rule change that would mandate that covered entities carve out Medicaid Managed Care plans from 340B contract pharmacies.
Additional laws to watch are creeping up in Kentucky, Vermont, and other states as well. Covered entities should remain aware of any potential state laws on the horizon, so that when changes come – for better or for worse – hospitals are not caught unaware.
MedPAC finds 340B hospitals don’t use more expensive drugs
A Medicare Payment Advisory Commission (MedPAC) study “found spending on cancer drugs at hospitals participating in the 340B drug discount program was only 2% to 5% higher than non-340B hospitals,” according to Healthcare Dive.
The slightly higher rates at 340B hospitals could be due to the fact that covered entities are more likely to treat certain, more expensive types of cancer, including lung and prostate cancer, the report said. Additionally, “Participating hospitals, including many academic medical centers, are more likely than non-340B hospitals to care for younger patients that are candidates for more aggressive cancer treatments,” reports Modern Healthcare. Differences in social determinants of health and socioeconomic status could also play a part, the report said.
The MedPAC findings contradict the results of a report commissioned by the Pharmaceutical Research and Manufacturers of America (PhRMA) last month, which found that 340B hospitals were getting reimbursed three times the amount they initially paid for the drugs.
The MedPAC report is “one of the few from a non-pharma or non-provider funded angle,” Healthcare Dive notes.
ACA decision still on hold
In December, federal appeals court struck down the individual mandate—the portion of the Affordable Care Act (ACA) that legally required people to have health insurance—ruling the requirement unconstitutional. The question of whether this invalidated the rest of the law will likely be left up to the Supreme Court.
“The justices will consider whether to take up the case and on what schedule,” in a closed-door session on February 21, according to The Hill.
The ACA expanded the types of hospitals that were eligible to participate in the 340B program to include critical access hospitals, rural referral centers, and sole community hospitals, so If the entire ACA is repealed, this could impact these health centers and have a ripple effect that would be detrimental to patients.
Another GAO report released
A new report from the Government Accountability Office (GAO) released January 21 found that “poor oversight of the 340B Drug Discount Pricing Program and the Medicaid Drug Rebate Program may allow the discounts to be received twice for the same drug,” says Healthcare Dive. According to the law, pharmaceutical manufacturers are not required to offer a drug at the 340B discount rate to covered entities and pay rebates to state Medicaid programs for the same drug – it must be one or the other.
“CMS does not track or review states’ procedures for preventing duplicate discounts, according to the report. Additionally, procedures that states use to exclude 340B drugs from Medicaid discounts are not always documented or effective at identifying these drugs,” Healthcare Dive notes.
This report comes on the heels of an informational bulletin from CMS published last month that outlined seven regulatory strategies state Medicaid agencies may consider when developing policies for preventing the occurrence of duplicate discounts in Medicaid Fee-for-Services (FFS) and Medicaid Managed Care Organization (MCO) programs. It also comes on the heels of a January GAO report that recommended HRSA increase oversight of the 340B program.
It is clear from the flurry of reports, surveys, and other notices regarding 340B in recent months that the 340B program will continue to be top-of-mind in the ongoing debates about drug prices and healthcare in general.
Updates on site-neutral payment and Part B lawsuits
As we previously reported, the finalized 2020 OPPS ruling revealed that CMS planned to push ahead with both site-neutral payments (the agency’s planned $380 million in cuts to Medicare payments for hospital outpatient services provided in off-campus provider-based departments) and the 22.5% payment rate cuts to 340B drugs, despite court rulings that vacated the former and declared the latter unlawful.
Now, the American Hospital Association (AHA) has filed a lawsuit against HHS over the 2020 site-neutral payments. “The hospitals are asking the court vacate the 2020 Outpatient Prospective Payment System final rule, bar CMS from enforcing it and require the agency to provide immediate payments of any amounts withheld,” says Healthcare Dive.
“The 2020 Final Rule is no less an impermissible flex of regulatory authority than the 2019 Final Rule, and should meet the same fate,” AHA argued in the filing.
Medicare Part B cuts
CMS’ appeal regarding the court decision that ruled the 2019 Medicare Part B cuts unlawful is still pending, and the agency has gone ahead with the plan to continue the cuts in 2020.
In response to this, last month, a large group of hospitals moved to enjoin the identical Part B reimbursement cuts for 2020 before they take effect in Advocate Bromenn Regional Medical Center v. Azar, the National Law Review reported.
As we previously reported, CMS has been preparing for the best-case scenario on its appeal, devising a survey that would collect information from covered entities on the acquisition costs of 340B drugs. If the agency wins its appeal, an article from Modern Healthcare explains, “CMS will need information on the actual prices that hospitals pay for drugs under the 340B program to calculate average sales prices and make the cuts.”
On February 7, CMS published a notice on the survey in the Federal Register, calling for comments through March 9.
“Today’s announcement is part of a continuing effort by CMS to slash Medicare payments to 340B hospitals,” said 340B Health president and CEO Maureen Testoni about the survey in a statement. “Instead of undermining the health care safety net, the agency should withdraw this plan, restore Medicare payments to their statutory levels, and reimburse all affected hospitals for the revenue they have lost since January 2018.”
We urge covered entities to submit a comment before March 9 at OIRA_Submission@omb.eop.gov (include reference to ‘‘OGE Form 201 paperwork comment’’ in the subject line of the message).