Now that we’ve all endured one of the most difficult years in recent memory, we welcome 2021, complete with a new president, administration and Congress. As we move past a violent and tumultuous transition, what will these changes mean to our healthcare system and to the 340B program we all know and support?
In this month’s 340Buzz, we examine an administration in transition – what are the potential changes we might see as a new administration reconfigures, reorganizes and restaffs an old one? How will President Biden and his appointees handle the host of late-term, last-minute activity from HHS, HRSA, drug manufacturers and covered entities as his administration positions itself to govern and launch its own agenda? When can we realistically expect to see confirmations completed and new policies enacted, either through executive order or legislation? There’s plenty to unpack as we turn the page and transition from what was to what will be.
Feet on the street
As administrations transition between election cycles, so do the administrators who staff them. By now, most staff members in political patronage positions have departed the bureaucracy, aware that their replacements will be named shortly by the new administration. The latest and most prominent leaders to vacate their posts were Surgeon General Jerome Adams, who resigned at the Biden team’s request prior to a Senate confirmation hearing on his proposed successor, Dr. Vivek Murphy. U.S. Secretary of Health and Human Services (HHS) Alex Azar also resigned, effective January 20.
A Senate hearing to confirm Azar’s successor, California Attorney General Xavier Becerra, remains unscheduled, along with almost a dozen other cabinet-level nominees. Becerra’s Senate confirmation hearing promises to be an entertaining one, as Republican senators consider him a controversial choice. A liberal, 12-term congressman from California, Bacerra lacks the traditional credentials one would typically see in a healthcare administrator. Apparently, his aggressive advocacy for the Affordable Care Act and his reputation as a savvy attorney and politician, familiar with navigating the complexities of the legislative process, won him Biden’s favor and likewise inflamed the passions of Republicans, who plan to question him carefully.
In other late developments, U.S. Sen. Rob Portman (R-Ohio) announced on January 25 that he will not run for reelection in 2022. Portman is widely considered a dependable Senate Republican ally of 340B-covered entities, and his support will be missed starting in 2023.
Legislative and legal matters
On his first day in office, President Biden issued a memorandum that freezes for 60 days or more the approval of any “midnight” regulations passed in the last month of the Trump presidency until they are reviewed, revised or possibly rescinded by President Biden’s department and agency heads. The freeze applies primarily to rules that have not yet gone into effect and is a familiar tactic used by new administrations as they assume power. Somewhat unusually, some of President Trump’s new rules took effect immediately, rather than being implemented over a phased-in period, as is typical. Should it choose, Congress has the option of repealing these new rules also (and any rules finalized since mid-August) through the Congressional Review Act.
With dozens of healthcare rules potentially impacted by the freeze, which are the most prominent among them, and which opinions, mechanisms and rules will receive the most scrutiny? More importantly, what will be the likely result?
HHS advisory opinion on 340B drug discounts for contract pharmacies
In an advisory opinion issued on December 30, 2020, the HHS Office of the General Counsel stated that drug manufacturers are obligated to deliver discounts under the 340B Drug Pricing Program on covered outpatient drugs when contract pharmacies are acting as agents of 340B covered entities. A final opinion from an outgoing administration, this advisory opinion carried no force or effect of law but merely conveyed the opinion of the HHS Office of the General Counsel.
Quite naturally, covered entities were thrilled with the opinion, with some going so far as to threaten drug manufacturers with lawsuits for damages after being denied their 340B discounts for months. Seeking to preserve their ability to restrict offering 340B discounted drugs to contract pharmacies, drug companies AstraZeneca, Eli Lilly and Sanofi filed separate lawsuits almost immediately, arguing that HHS had exceeded its authority and went beyond the 340B statutory language. Since January 1, these same drug manufacturers hiked prices on 645 brand-name medicines, with more hikes expected.
Sentry believes that multiple covered entities employing the binding administrative dispute rule (below) may create a mass of favorable judgments and resulting Department of Justice engagement which, at $5,000 an incident, will add up quickly against drug manufacturers. A legislative solution may be sought by these drug companies and we believe that 340B covered entities will ultimately prevail in maintaining that “contract pharmacies” are subject to 340B statutory language that dictates discounts. This will not be an expeditious process, and we will certainly not see any significant movement or results until later this Spring at the very earliest. Drug manufacturers will fight tooth-and-nail to preserve and increase their profits – and they have the resources to do so. Whether a legislative solution is the only way to resolve this satisfactorily or needed administrative action, entities must continue to use the existing infrastructure to voice their concerns for the federal government to take action. Why are manufacturers violating the Pharmaceutical Pricing Agreement (PPA)? How long will this be allowed before the incoming HHS Secretary says enough is enough and terminates the PPAs of violating manufacturers? Stay tuned, as this will continue to be a hard-fought struggle, with any victories for either side, well down the road.
Binding administrative dispute rule
In November 2020, ten years after it was required to do so, HRSA sent to the White House for approval, a final rule that would create a binding administrative dispute resolution process for the 340B program. The rule would be used to settle disagreements between covered entities and drug manufacturers (but it did not specifically address contract pharmacies). The White House approved the rule, it was published, and it became effective on January 13, 2021 via a program notice. On January 22, PhRMA filed a lawsuit to vacate the rule as arbitrary and capricious. Although temporarily frozen, this much-needed rule, long in the making, is relatively non-controversial and offers an avenue to pursue disputes for both drug manufacturers and covered entities that does not exist today.
340B insulin pass-through rule
HHS has frozen a final rule that would have blocked community health centers from receiving future grant funding unless the health centers provided a complete pass-through of 340B discounts on insulin and epi-pens to low-income patients.
As insulin prices were already low and generally affordable at the time, the rule seemed contrived to illustrate that the previous administration was working to reduce drug prices to make them more affordable to ordinary Americans. In addition, the new rule placed unfair, make-work requirements on the FQHC that were unnecessary, given the state of insulin prices. Sentry believes this rule is unnecessary and will be allowed to expire with no action taken.
Most-favored nation pricing
In its most sweeping move on drug prices to date, the Trump administration released federal drug pricing regulations to lower what Medicare pays for 50 drugs based on prices paid in other developed nations. The payment model was going to be mandatory for hospital outpatient departments and other Medicare Part B participants, including 340B covered entities. It created exceptions for cancer hospitals, critical access hospitals, children’s hospitals, federally qualified health centers, and Indian Health Service facilities. Just days before it was to be implemented, the courts granted a preliminary injunction halting the demonstration project and admonished the Trump administration for bypassing the notice-and-comment rulemaking process, which requires input and consultation with affected stakeholders.
Options for the Biden administration are to finalize the rulemaking process, rescind the rule or create a new rule. Given the radical change this would impose in Medicare reimbursement policy, Sentry believes this rule will be allowed to expire with no further action taken.
The next 30 — 60 days
At the end of last year, more than 250 members of Congress wrote in with their concerns about protecting 340B. We now have a new Congress, with new leaders, committees and subcommittees. We also have a new president. Democrats will hold positions of leadership, but not all have the level of understanding about our mission as their predecessors. We expect to have a new HHS Secretary who supports our cause and will strive to champion it. Education will be key.
Now more than ever is the time to make your communities and congressional representatives understand the importance of supporting our communal safety net. In these challenging times, we have COVID-19 to defeat, an economy to rebuild and disparate patients who need us right now. It’s time to step up and insist that our government and institutions serve everyone – equally.
We know you’re counting on being the best advocates for your communities, and we’re counting on you. Likewise, we know you’re counting on us, and we will be there every step of the way.
Let’s make 2021 a winning year for 340B – together.